KEY STATISTICS

Corporate and Financial

2003-04 2004-05 2005-06 2006-07 2007-08 Change More 2006-07 information to 2007-08 Financial Performance ($m) Income 15,830 17,448 17,249 18,480 21,085 p Chapter 1, Appendix 13 Expenses 16,362 18,318 17,394 19,147 21,686 p Chapter 1, Appendix 13 Operating result -532 -870 -145 -667 -601 Chapter 1, Appendix 13 Accounts paid 85.3 88.2 90.9 95.4 92.5 q Appendix 13 by due date (%) Net Capital 3,649 4,212 4,980 5,503 5,382 Chapter 6 Investment Program

Staffing Total ADF members 52,034 51,813 51,151 51,504 53,167 p Chapter 4 Recruitment target met (%) 86 80 84 84 77 q Chapter 4 Separation rate (%) 10 11 11 11.2 9.8 q Chapter 4 Female ADF members (%) 13.3 13.2 13.3 13.4 13.6 p Appendix 1 Total APS personnel 18,303 13,390 13,577 14,516 15,087 p Chapter 4 Unacceptable 586 749 685 846 765 q Chapter 5 behaviour complaints Comcare investigations 46 45 34 69 99 p Chapter 4

Corporate Support FOI requests 208 206 171 184 175 q Appendix 6 Video news releases 62 141 67 109 284 p Chapter 8

Operational

Number of operations with 32 14 22 19 19 - Chapter 3 ADF involvement 17 October 2008

The Hon Joel Fitzgibbon Minister for Defence Parliament House

Dear Minister

We present the annual report of the Department of Defence for the year ended 30 June 2008. This report has been prepared in accordance with Section 63 of the Public Service Act 1999. Subsection 63(1) of the Act requires that our report to you be tabled in the Parliament. The report has been divided into two volumes. Volume One is the Department of Defence’s report. Volume Two is the report of the Defence Materiel Organisation, a prescribed agency within Defence. The volumes summarise the performance of Defence for 2007-08 and include all mandatory information required by legislation. In accordance with Section 45 of the Financial Management and Accountability Act 1997 and pursuant to Regulation 19 of that Act, we are satisfied that Defence has prepared fraud risk assessments and fraud control plans and has in place appropriate fraud prevention, detection, investigation, reporting and data collection procedures and processes that meet the specific needs of Defence and comply with the Commonwealth Fraud Control Guidelines 2002.

Yours sincerely

Nick Warner A G Houston AC, AFC Secretary Air Chief Marshal Department of Defence Chief of the Defence Force

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 I Guide to the Report The format and content of this volume reflects the requirements developed by the Department of the Prime Minister and Cabinet and approved by the Joint Committee of Public Accounts and Audit in June 2008 under subsections 63(2) and 70(2) of the Public Service Act 1999. This report addresses the Department of Defence and the (ADF), which are collectively referred to as ‘Defence’. Volume 2 of this report addresses the Defence Materiel Organisation as a prescribed agency. The Department of Veterans’ Affairs and Defence Housing , which are parts of the Defence Portfolio, have separate annual reports. The Australian Strategic Policy Institute, funded substantially by Defence, is a Government-owned company incorporated under the Corporations Act 2001 and has a separate annual report. Annual Reports, Portfolio Budget and Additional Estimates Statements are the principal formal accountability mechanisms between the Government, departments and the Parliament. Portfolio Budget Statements set out performance targets for departmental outputs. Portfolio Additional Estimates Statements may contain revised targets and Annual Reports describe achievement against those targets. In addition, Defence’s Annual Reports are designed to link performance during the year under review with performance forecasts contained in the Portfolio Budget Statements for the following year. STYLE CONVENTIONS The following style conventions are used in the report: –nil n/a not applicable (unless otherwise specified) $m $ million $b $ billion Figures in tables and in the text may be rounded. Figures in text are generally rounded to one decimal place, whereas figures in tables are generally rounded to the nearest thousand or million. Discrepancies in tables between totals and sums of components are due to rounding.

ISSN 1323 5036 ISBN 978-0-642-29690-0

© Commonwealth of Australia 2008 This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to the Commonwealth Copyright Administration, Information and Security Division, Attorney-General’s Department, Robert Garran Offices, National Circuit, Barton ACT 2600 or posted at www.ag.gov.au/cca.

II DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CONTENTS

Letter of Transmittal i Guide to the Report ii Style conventions ii SECTION 1 - EXECUTIVE SUMMARY Chapter 1 Year in review 2 From the Secretary 2 From the Chief of the Defence Force 4 Year In Review 6 Defence’s Financial Performance 11 Chapter 2 Organisational Structure 30 Portfolio Structure 30 Departmental structure 31 Outcome & Output structure 31 SECTION 2 - OUTCOME PERFORMANCE Chapter 3 Outcome performance 38 Outcome 1 Command of operations 42 Outcome 2 Navy capability 54 Outcome 3 capability 66 Outcome 4 Air Force capability 75 Outcome 5 Strategic Policy 80 Outcome 6 Intelligence 90 Outcome 7 Superannuation & housing support services for current & retired Defence personnel 95 SECTION 3 - MANAGEMENT & ACCOUNTABILITY Chapter 4 People 98 Performance against People Priorities for 2007–08 99 Workforce Overview 99 Non–operational training 111 Workplace equity & diversity 111 Occupational health & safety 113 Chapter 5 Justice & fairness in Defence 118 Military Justice Reforms 119

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 III

Chapter 6 Capital investment program 133 Major Capital Equipment Program 135 Major Capital Facilities Program 2007-08 137 Other capital purchases 152 Capital receipts 153 Chapter 7 Enabling our business 154 Defence reform 154 Defence Support Group 156 Joint Logistics Command 158 Defence Science & Technology Organisation 160 Ministerial Support & Public Affairs 161 APPENDICES 165 Appendix 1 Staffing & remuneration 166 Actual staffing 166 Remunerating Defence’s people 176 Appendix 2 Corporate governance 181 Other Governance Structures 183 Appendix 3 Internal audit 184 Ethics awareness & fraud control 184 Defence Whistleblower Scheme 186 Security of Defence weapons, munitions & explosives 187 Appendix 4 External scrutiny 188 Joint Committees 188 Senate Committees 191 House Committees 194 Auditor-General’s Reports 194 Defence Force Ombudsman 195 Decisions of Courts & Tribunals 195 Appendix 5 Defence’s relationships with external organisations 196 Appendix 6 Freedom of information 200 Appendix 7 Ecologically sustainable development & environmental performance 207 Sustainable management of ecosystems 207 Infrastructure development 210 Ozone-depleting substances & synthetic greenhouse gases 210

IV DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 Stakeholder management 210 Business practices 213 Administration of Commonwealth Policy on the management of land affected by unexploded ordnance 217 Appendix 8 Legal expenses 218 Legal services panels 218 Appendix 9 Discretionary grants 220 Appendix 10 Contracts & consultants 226 Contracts 226 Consultancies 226 Advertising & market research 227 Appendix 11 Annual report on the administration & operation of the Defence Force (Home Loans Assistance) Act 1990 233 Appendix 12 Errors & Omissions 236 Appendix 13 Defence’s finances 238 Savings & efficiency measures 238 Asset Management 240 Payment of accounts 240 Financial Statements 241 INDEXES & GLOSSARY 341 Legislation 342 Acronyms & abbreviations 343 Glossary 344 Compliance index 349 Index 352

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 V

Australian Army soldiers from the Townsville-based 5th Aviation Regiment provide the Coalition Forces in the Middle Eastern Area of Operation with a medium lift capability as they transport troops and equipment.

VI DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 SECTION 1 EXECUTIVE SUMMARY CHAPTER 1 Year in review FROM THE SECRETARY

Over 2007-08 the Chief of the Defence Force and I continued to drive long- term and tangible reform to improve Defence’s effectiveness and efficiency and better meet the challenges of the future.

We invested considerable resources into remediating our financial statements and started to mend the backbone of Defence’s business – the financial, inventory and explosive ordnance management and information communication technology systems – that had been overlooked for years. In 2007-08 developing a new White Paper. But this CDF and I recognised we had to focus on hasn’t meant we’ve dropped the reform these less visible but vitally important program. Instead, we’re using the White parts of the business to successfully Paper and accompanying force structure support the future Australian Defence and companion reviews as the vehicle for Force. deepening and hastening reform across We are delighted with the Auditor- the entire organisation. General giving Defence an unqualified The White Paper will provide a strategic audit report for the 2007-08 financial plan to develop Defence out to 2030. The statements. The Auditor-General has force structure and companion reviews acknowledged that Defence’s efforts on will ensure we have the workforce, improving its financial management are logistics, capability, estate, industry returning dividends. capacity, science and technology and Over 2007-08 we also improved our information communication technology governance and accountability, refocused we need to support the security demands and streamlined the senior decision- of the next two decades. making committees, clarified how the In early 2008, our push to improve department works and who manages what Defence’s effectiveness and efficiency at bases and establishments, and gained added impetus, and I am confident significant achievements were made of finding $10b in savings over 10 years to towards implementing the agreed reinvest in higher priority areas. This was recommendations of the Defence an incredibly challenging but important Management Review. exercise. In response to a call for ideas, Since the election of the new we received hundreds of savings Government, our focus has shifted to suggestions from military and APS members across Defence, and many of

2 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 1 YEAR IN REVIEW

these ideas will be adopted. It made us all We supported an extremely high focus on our top priorities and we operational tempo at the same time as identified $477.6m to reinvest for transitioning to a new Government, 2008-09. identified significant savings for the next But it is the budget audit, which began in 10 years, started to develop the White late 2007-08, that will make the most Paper, force structure and companion significant mark on our long-term reviews, and initiated the budget audit. effectiveness and efficiency. The audit This level of activity placed considerable will help us validate the White Paper and pressure on much of the workforce, which savings measures, and enhance our often lasted for months. I’d like to thank budget and financial management and all our Defence members for their great how we do business. work over 2007-08 and for their ongoing 2007-08 also saw major changes to the feedback on how we can continue to senior management team. I’m confident make Defence a better organisation. we’ve now got the right leadership team We’ve started to improve our in place to meet the challenges and effectiveness and efficiency, laying a priorities of the future. But I also want to foundation for deeper reform in Defence ensure we’ve got the right people in 2008-09. performing the right roles at every level. So in 2007-08 I commenced a long-term project to look at how we can better attract and retain a first class APS workforce to ensure Defence becomes a first class adviser and financial and Nick Warner business manager. Secretary 2007-08 presented a range of unique challenges for APS members of Defence.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 3 CHAPTER 1 YEAR IN REVIEW

FROM THE CHIEF OF THE DEFENCE FORCE

It is an immense privilege to command such an experienced and capable Defence Force. During the last year our performance on operations has continued to be impressive.

We have consistently delivered exceptional results in very challenging circumstances. However, the busy operational tempo has also placed significant pressure on members of the ADF and their families. I thank all members of the Defence community for their contribution and commend those elements of Defence focused on the welfare and wellbeing of Defence commanded their Services with great members and their families. distinction and provided me with great Despite the high operating tempo, the advice and support. ADF continues to modernise and innovate. This year the (RAN) My vision is that the ADF will be balanced, confronted its critical trades and networked and deployable, staffed by shortages with innovative sea change dedicated and professional people who initiatives such as multi-crewing, specific operate within a culture of adaptability allowances and enhanced geographic and excel at joint, interagency and stability. This led to a significant increase coalition operations. in the Navy’s retention levels. During my In 2007-08 I was very pleased with our visits with RAN personnel this year, I was continued progression towards this vision. particularly heartened by their We commenced consideration of our enthusiasm with the improved future force structure as part of the White management and increased personal Paper process. This review is an intensely choice offered under the Sea Change vigorous analysis of our strategic program. circumstances, capability and force In 2007-08 the had to structure and has involved significant manage demanding concurrency issues. As input from all three Services. I am a result of having the equivalent of a confident this White Paper will be the brigade deployed and another on high most comprehensive ever compiled. readiness, infantry, cavalry and special Individually, the three Services have forces capabilities were successfully continued to perform strongly in 2007-08. managed through a demanding period. I particularly want to thank the outgoing Towards the end of the year, this was in Service Chiefs for their contribution to part mitigated by the cessation of land the strategic leadership of the ADF. I combat operations in Iraq. thank Vice Russ Shalders, The Royal Australian Air Force (RAAF) also Lieutenant General and Air continued to modernise and innovate. The Marshal for their great C-17 Globemaster III is integral to our service to the ADF and nation. They future airlift capability and was

4 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 1 YEAR IN REVIEW

introduced in an exemplary fashion, on Defence organisation combines to enable time and budget. Since its introduction in our deployments. August 2007, the C-17 has flown almost Sadly, this year we lost four fine young 1,600 hours and been used for short men who were killed while taking the notice operations such as Operation fight to the Taliban in Afghanistan. A Nargis Assist and numerous sustainment number of our people were also wounded flights to the Middle East. The RAAF and continue to undergo rehabilitation. I continues to perform strongly in terms of salute the service of these brave recruiting and retention. individuals. Of course, when the ADF commits personnel to overseas service, it is not only the military facets of Defence that contribute to our success. Our reputation as a world-class fighting force is due, not only to our performance as a Defence Force overseas, but also to our AC AFC performance as a Defence organisation Air Chief Marshal here at home. The Secretary and I are Chief of the Defence Force very pleased with the way in which the

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 5 CHAPTER 1 YEAR IN REVIEW

YEAR IN REVIEW 2007-08 was a year of significant change the Overwatch Battle Group and for Defence, with a new Government, Australian Army Training Team ceased new Ministers and Parliamentary operations in Southern Iraq. Over three Secretaries, new Service Chiefs, the years, the Overwatch Battle Group made withdrawal of combat troops from Iraq, a significant contribution to the transition the establishment of the Australian of security responsibility from Coalition Military Court and the commencement of forces to Iraqi authorities. ADF trainers a new Defence White Paper. These contributed to the individual training of changes have created new opportunities around 33,000 Iraqi Army soldiers. With for Defence to pursue into 2009, as well the conclusion of the ADF deployments in as complex issues and challenges. southern Iraq, a new visa policy was Throughout this period, the men and implemented to enable Iraqis who had women of Defence have consistently worked for the Australian Government demonstrated exceptional drive and skill, and who were consequently at some risk working hard so that Defence is best to permanently resettle in Australia. To placed to ensure Australia’s security and date, Defence and the Department of to contribute to building peace and Immigration and Citizenship have assisted stability in our region and beyond. 118 Iraqis that have worked for the ADF (387 people, including families) to Operations resettle in Australia. Defence personnel During 2007-08, the ADF engaged in 12 remain engaged in Iraq in a range of roles operations around the world. About 3,500 in support of Coalition objectives. personnel are directly involved, both in Regionally, the ADF continued to Australia and offshore. contribute to the support of the Operation Slipper is the ADF’s governments of East Timor (Operation contribution to the international coalition Astute) and Solomon Islands (Operation against terrorism. The majority of our Anode). These operations aim to provide a contribution to the coalition is through secure environment for national efforts to the commitment to addressing security, improve law and order and good reconstruction, governance and economic governance. On 11 February 2008, East development in southern Afghanistan. Timorese President Horta was seriously This year Defence worked strongly on wounded in an assassination attempt. The reconstruction and undertaking tasks to ADF deployed HMAS Perth and a response address provincial needs in the fields of force of around 200 ADF personnel, plus education, health, security and civil Australian Federal Police personnel, by Air infrastructure. Defence continued to build Force C-17 Globemaster III and C-130 the capacity of local Afghans through the Hercules aircraft, to provide additional trade training school in Tarin Kowt, support to Timorese and international Oruzgan. In late 2008, the ADF will efforts to stabilize the country. transition to a mentoring and Defence continued to support United reconstruction role in Oruzgan with the Nations peacekeeping missions in deployment of ADF mentors to train the 2007-08, contributing observers and other Afghan National Army, aligning with the specialist capabilities to missions in broader strategy of establishing a self- Africa, the Middle East, Afghanistan and reliant Afghan National Security Force. East Timor. Operation Catalyst is the ADF’s Defence provided critical airlift support as contribution to the rehabilitation and part of the Australian Government’s relief reconstruction of Iraq. On 1 June 2008, efforts following Cyclone Nargis in

6 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 1 YEAR IN REVIEW

Myanmar (Operation Nargis Assist), and Defence business and budget priorities after flooding in Oro Province, Papua New out to 2030. A public consultation Guinea, following Cyclone Guba exercise seeks to engage community (Operation PNG Assist). views in the White Paper process. Defence contributed to the Australian Development of the Defence White Paper Government’s indigenous community will also be supported by the Defence intervention initiative in the Northern Budget Audit to be undertaken during Territory (Operation Outreach) and 2008-09. The audit will help identify areas continued its long term involvement in in which Defence can improve efficiency, the Army Aboriginal Community accountability and overall resource Assistance Program (AACAP). This management. included providing mobility, communications and sustainment support The Services to police and civilian health teams, as The Services sustained high tempo well as assisting with procurement and operations in the Middle East and the provision of medical stores and region, despite considerable concurrency contracted services. pressure. Army continued to refine the Defence also supported the Asia Pacific Combat Training Centre to ensure Economic Cooperation (APEC 2007) deploying forces experienced the range of meetings held in 2007 under Operation scenarios and threats they face on Deluge, through providing Defensive operation in a realistic training Counter-Air, Counter-Terrorism and environment. The result has been a transport support. world-class training experience that It is with great sadness that Defence notes soldiers report successfully prepares them the losses of Private Luke Worsley, Lance for the events they experience. Corporal Jason Marks, Sergeant Matthew Navy Sea Change initiatives such as multi- Locke and Trooper David Pearce, who died crewing for patrol boats and flex crewing on operations in Afghanistan. Defence for major fleet units have eased the salutes these soldiers and honours their tempo in these critical capabilities, memory. contributing in turn to improved retention rates. Navy will continue to refine its Defence White Paper training throughput to ensure the ratio of On 22 February 2008, the Minister for trained personnel to trainees continues to Defence, the Hon Joel Fitzgibbon MP, improve. announced that work had commenced on The Air Force continues to recruit and a new Defence White Paper. Completion retain strongly. The Air Force has of the White Paper is Defence’s highest integrated the C-17 Globemaster III Heavy non-operational priority. This will be the Lift aircraft into the Air Lift Group and key strategic planning document to almost immediately contributed to develop Defence in the future. Related sustainment operations and aero-medical work includes a Force Structure Review, evacuations to the Middle East and to which will define Australia’s future force operations such as disaster relief in structure and capability needs, and a Myanmar. The Air Force commenced series of Companion Reviews which will adjusting the operational construct for complement the White Paper by analysing the 21st century by establishing a new issues such as information and muster - Air Combat Officer. The Air communications technology, industry Combat Officer will be the link between capability, science and technology the traditional aircrew and the remainder support, logistics systems and personnel. of the air combat system, including the These reviews will underpin the White Wedgetail Airborne Early Warning and Paper and be central to developing Control aircraft.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 7 CHAPTER 1 YEAR IN REVIEW

Strategy The Five Power Defence Arrangements between Malaysia, Singapore, Australia, During 2007-08, Defence continued to New Zealand, and the United Kingdom coordinate non-operational policy on remain a key stabilising element in domestic security as well as arms control, regional security. Joint exercises and including capability and operational activities included a multilateral exercise aspects of the whole-of-Government program to counter conventional and non- policy on cluster munitions. conventional security issues. Priority work included drafting a treaty In total, during 2007-08, Defence and implementing arrangements between supported five successful multilateral Australia and the United States on operations involving 14 regional defence trade cooperation. countries, with support from New There was a strong focus on the Zealand, France and the United States. Proliferation Security Initiatives (including regional outreach), export control and Capability regional counter-proliferation Defence’s future capability program is engagement, missile defence, export reflected in the Defence Capability Plan, control for defence and strategic goods, which sets out Australia’s military and engagement with other Government capabilities for the next decade and is agencies to implement United Nations updated annually to reflect changing sanctions. strategic circumstances and new Defence was also involved in domestic technologies. Major capability security policy development, particularly achievements in 2007-08 included a through the National Counter Terrorism partnership with the United States in the Committee, and contributed to whole-of- Wideband Global Satellite Government efforts to prevent, prepare communications program and obtaining and respond to terrorism, pandemics and Government approval for the acquisition chemical, biological and radiological of an improved counter-mine capability threats. (LAND 144 Phase 1) as well as first-pass approval for a new maritime patrol International engagement aircraft (AIR 7000 Phase 2) and the Defence international engagement in acquisition of additional Chinook 2007-08 maintained a busy pace, helicopters (AIR 9000 Phase 5C). undertaking a broad range of activities in cooperation with partners in our region Air Combat Capability Review and beyond. Security and defence In February 2008, the Minister for Defence milestones included reaching major announced a review into the adequacy of agreements with the United States, plans for the development of Australia’s Indonesia, India, Pakistan, Japan, Air Combat Capability to 2045. Conducted Singapore and the North Atlantic Treaty in two stages, the review gives Organization, while bilateral defence Government a detailed assessment of the cooperation programs increased adequacy of Defence’s air combat engagement in a range of areas. capability plans. Based on the findings of Within our region, Defence focused on the first stage of the review, the increasing its engagement and Government decided to proceed with cooperation with partners in South-East plans to retire the F-111s in 2010 and to Asia, particularly in the areas of counter- continue with the acquisition of the Super terrorism, humanitarian assistance and Hornet. The Government will consider the disaster relief, training and findings of the second stage of the review peacekeeping. Defence cooperation in the context of broader deliberations on programs continued to achieve strong the forthcoming Defence White Paper. outcomes in international engagement across the region.

8 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 1 YEAR IN REVIEW

People Defence establishments and bases, to engage with Defence personnel and The people focus for 2007-08 was on acquire a broad understanding of the consolidation, skilling the APS workforce organisational structure and capabilities and implementing effective ADF retention of Defence. The Minister for Defence also and recruitment initiatives. Defence’s made visits to the Middle East Area of people priorities remain the annual Operations, including a visit to wounded recruitment of around 6,500 new full-time Australian personnel serving with the ADF entrants and reduction of the ADF Special Operations Task Group. Defence separation rate to below ten per cent, in continues to provide support to the order to meet ADF workforce capability offices of the Ministers and the requirements over the next decade and Parliamentary Secretaries in fulfilling beyond. This year saw significant their portfolio responsibilities to the improvements in both areas, with strong Parliament, Cabinet and the public. overall ADF recruitment (including the re-enlistment of people with prior Financial Performance military service and Reservists electing The Auditor-General has provided full-time service). The separation rate Defence with an unqualified audit report was also lower than the overall target, for its 2007-08 financial statements. This averaging 9.8 per cent across the is the first unqualified financial audit for Permanent Force, although this still Defence since 2000-01. The department presents a challenge in some employment has successfully addressed several areas categories. A tight labour market of audit qualification, including general continued to provide competition to stores inventory, explosive ordnance, recruit and retain people with sought- repairable items, infrastructure, plant after professional, technical and trade and equipment assets and leave skills. provisions. Support to Government Management and Following the Federal election in accountability November 2007, the Defence portfolio saw a change in Ministerial structure with Defence’s reform program originates from a new Minister for Defence, the Hon Joel a number of recent reviews, inquiries and Fitzgibbon MP, a Minister for Defence investigations, both internal and external Science and Personnel, the Hon Warren to Defence. It includes the Snowdon MP, and an increase to two implementation of an enhanced Parliamentary Secretaries, with the Hon governance framework, with clearer Greg Combet AM MP the new authority and accountability and more Parliamentary Secretary for Defence rigorous performance management, Procurement and the Hon Dr Mike Kelly assurance and audit processes. AM MP as Parliamentary Secretary for The Defence White Paper and its Defence Support. Defence provided associated Force Structure and comprehensive administrative support to Companion Reviews, the savings and rapidly update and brief the incoming efficiency program, the audit of the Ministers and their support staff. Defence budget and financial During the year, Defence also provided management, and the ongoing program of administrative support for the Ministers Defence reform are complementary and their Parliamentary Secretaries who activities focusing on longer term Defence have conducted a number of visits to governance and reform.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 9 CHAPTER 1 YEAR IN REVIEW

Governance reform significantly improved Defence’s management of inventory and associated Key achievements in 2007-08 included a logistics. Thousands of items of obsolete revised Defence Business Model, which or surplus stock have been disposed of provides a strategic framework for from the Defence National Storage and identifying and implementing Distribution Centre, including fire trucks, improvements in authority and street sweepers, a sonar dome from the accountability, performance management obsolete Oberon class submarines, ships’ and assurance. The Defence authority and propellers, clothing, mobile kitchens, accountability framework has been mosquito nets and millions of paper strengthened through new Group Head towels. During 2008-09, the Accelerated and Service Chief charters and Group Disposals Program will be expanded to organisational performance agreements. include other major Defence warehouses, With new membership, the Defence Audit resulting in greater efficiencies in Committee has a greater focus on inventory management costs and logistics targeted governance and assurance support for operations. processes. A draft enterprise risk management plan has been developed, In April 2008, the Explosive Ordnance along with a new Defence base Management and Policy Branch was management model which separates established to address the findings of the responsibility for capability and force Weapons, Munitions and Explosives generation from support services. The Security Performance Audit, and the model will improve efficiency, Review of Defence Policy and Procedures accountability and transparency in cost for the Management of Explosive and performance outcomes. Ordnance. The audit project plan is scheduled to continue until 2013; 10 of Reforming the organisation the 58 recommendations were completed Reform is not about changing the nature by 30 June 2008. of our business, but the way we do it. During 2007-08, a concerted effort was The savings we generate from reform - made to improve Defence’s information that is, from doing our business more technology systems. The top 10 user efficiently, now and in the future - will irritants were resolved by 30 June 2008, help build both the next-generation ADF and work will continue throughout and a stronger Defence backbone. 2008-09 on improving service delivery, enterprise governance, deliver time for Significant progress has been made across new IT capabilities, and sourcing a wide range of business enablers.The strategies. Accelerated Disposals Program has

With major changes and developments in many areas of Defence, 2007-08 has been a busy and productive year. As well as maintaining our high operational tempo, all of us in the organisation have been working hard to inform the Defence White Paper as it establishes the way ahead for Defence through high- level strategic planning in all areas of business.

10 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 1 YEAR IN REVIEW

DEFENCE’S FINANCIAL PERFORMANCE Departmental Cash Flow The Defence Departmental net cash spend • an underspend in payments to as at 30 June 2008 was $20,221m, employees reflecting the offsetting of representing an underspend to the revised Group Rental Contribution Scheme estimate of $765m. This variation is receipts against employee payments primarily due to: for actual expenditure. • reprogramming of Defence actual underspend in relation to purchase of assets from the DMO Table 1.1 Departmental net cost of service (cash) 2007-08 2007-08 Actual Variation to Budget Revised result revised estimate estimate[1] estimate $’000 $’000 $’000 $’000 Cost of service Supplier payments 7,994,444 8,055,398 7,733,976 -321,422 Employee payments 7,190,091 7,377,270 7,248,681 -128,589 Purchase of specialist military equipment 4,614,166 4,175,308 3,603,107 -572,201 Purchase of inventory 1,186,354 1,395,737 1,446,140 50,403 Purchase of property, plant and equipment[2] 952,887 919,901 878,851 -41,050 Other[3] 469,925 490,533 529,861 39,328 Tot a l c a sh u s ed 22,407,867 22,414,147 21,440,616 -973,531 Own source revenue[4] 1,211,143 1,427,905 1,219,316 -208,589 Net cost of service (cash) 21,196,724 20,986,242 20,221,300 -764,942 Funded by Appropriation Bills 1 & 3 (Price of Outcomes) 19,170,126 19,693,267 19,659,706 -33,561 Appropriation Bills 2 & 4 (Equity Injection) 1,998,630 1,336,512 524,315 -812,197 Other appropriation movements 50,243 50,000 50,000 - Return of contributed equity -22,275 -93,537 -16,582 76,955 Cash holdings from previous appropriations - - 3,861 3,861 Tot a l fu nd in g so u r c e 21,196,724 20,986,242 20,221,300 -764,942

NOTES 1. As published in the Portfolio Additional Estimates Statements 2007-08. 2. Includes purchase of land and buildings, property, plant and equipment and infrastructure and intangibles. 3. Includes grants, GST, finance costs, repayment of debt and other cash used. 4. Includes sale of goods and services, other revenue, and proceeds from sale of assets.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 11 CHAPTER 1 YEAR IN REVIEW

The Departmental net cost of service trend over five years, shows an average compounding growth rate of 8.8 per cent per year based on the historic in-year value.

Figure 1.1 Departmental net cost of service (cash) five year trend[1]

NOTE 1. Departmental net cost of services figures based on in-year dollars.

Departmental Income and Expenses The Defence Departmental deficit as at 30 June 2008 was $601m, representing a variance to the revised estimate of $601m. This variation is primarily due to: • the Government decision to write-off the Sea Sprites Platform which was not reflected in the 2007-08 revised estimate • financial remediation work (specifically stock taking activities) performed throughout the 2007-08 financial year resulting in larger than estimated write-downs (expenses) and reversal of previous asset write-downs (gains) • reprogramming of Defence actual underspend in relation to purchase of assets from Defence Material Organisation which included a component of suppliers expense.

12 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 1 YEAR IN REVIEW

Table 1.2 Departmental income and expenses 2007-08 2007-08 Actual Variation to Budget Revised result revised estimate estimate[1] estimate $’000 $’000 $’000 $’000 Income Revenue from Government 19,170,126 19,693,267 19,693,267 - Other income[2] 916,926 1,280,396 1,391,848 111,452 Tot a l in c o me 20,087,052 20,973,663 21,085,115 111,452 Expenses Suppliers 9,111,987 9,026,308 8,454,080 -572,228 Employees 7,304,628 7,491,807 7,510,296 18,489 Depreciation and amortisation 3,409,595 3,611,350 3,654,874 43,524 Other[3] 260,842 844,198 2,067,254 1,223,056 Tot a l ex pe n se s 20,087,052 20,973,663 21,686,504 712,841 Surplus/(deficit) attributable to the Australian Government - - -601,389 -601,389

NOTES 1. As published in the Portfolio Additional Estimates Statements 2007-08. 2. Includes grants, finance costs, write-down and impairment of assets, losses from sale of assets and other expenses. 3. Includes sale of goods and rendering of services, rental income, other revenue and gains.

Administered Cash Flow The Defence Administered cash spend as at 30 June 2008 was $686m representing an underspend to the revised estimate of $173m. This variation is primarily due to: • superannuation contributions made by members and benefits paid to members were higher than planned • an underestimated tax equivalent payment from Defence Housing Australia.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 13 CHAPTER 1 YEAR IN REVIEW

Table 1.3 Administered cash 2007-08 2007-08 Actual Variation to Budget Revised result Revised estimate estimate[1] estimate $’000 $’000 $’000 $’000 Cost of service Military benefits 1,424,591 1,599,600 1,517,426 -82,174 Subsidies 9,000 11,250 12,200 950 Grants 31,302 31,302 - Cash used 1,433,591 1,642,152 1,560,928 -81,224 Cash received Military superannuation contributions 724,000 724,000 790,924 66,924 Dividends 73,500 58,703 83,604 24,901 Other 868 648 605 -43 Cash received 798,368 783,351 875,133 91,782 Net cost of service 635,223 858,801 685,795 -173,006 Funded by Appropriations Cash from the Official Public Account for appropriations 1,433,591 1,642,152 1,560,929 -81,223 Cash transfer to the Official Public Account -798,368 -783,351 -875,173 -91,822 Cash holdings from previous appropriations - - 39 39 Total appropriations 635,223 858,801 685,795 -173,006

NOTE 1. As published in the Portfolio Additional Estimates Statements 2007-08. Administered cash flows primarily relate to Military Superannuation and Defence Housing Authority dividends. Due to the nature of these activities the Administered net cost of service fluctuates year to year.

Figure 1.2 Total net administered cash used five year trend

14 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 1 YEAR IN REVIEW

Administered Income and Expense As at 30 June 2008 Defence Administered As at 30 June 2008 the Defence Income was $891m representing a $108m Administered Expenses was $2,892m variance to the revised estimate. This representing a $40m variance to the variation is primarily due to: revised estimate. This variation is • superannuation contribution made by primarily due to Military superannuation members were higher than planned benefit payments being higher than planned. • underestimation of the dividend received from Defence Housing Australia, due to a change in the timing of the actual receipt and a tax equivalent payment. Table 1.4 Administered income and expenses 2007-08 2007-08 Actual Variation to Budgete Revised result revised estimate estimate[1] estimate $’000 $’000 $’000 $’000 Income administered on behalf of Government Military Superannuation contributions 724,000 724,000 756,982 32,982 Dividends 73,500 58,703 134,263 75,560 Other 868 1,516 379 -269 Tot a l in c o me 798,368 783,351 891,624 108,273 Expenses administered on behalf of Government Military superannuation benefits 2,751,468 2,766,600 2,818,000 51,400 Military retention benefits 42,000 42,000 31,405 -10,595 Defence home owner subsidies 9,000 11,250 11,284 34 Other[2] 31,302 31,127 -175 Tot a l Ex p en se s 2,802,468 2,851,152 2,891,816 40,664

NOTE 1. As published in the Portfolio Additional Estimates Statements 2007-08. 2. Includes grants and other expenses.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 15 Year in View July 2007

The last Leopard tanks in service for the Australian Army are farewelled by a guard of 1st Armoured Regiment's new M1A1 Abrams tanks from the 1st Brigade parade ground at Robertson Barracks.

On 13 July 2007, a funeral with full military honours was held at the St Christopher’s Cathedral, Manuka, ACT, for former Chief of the Defence Force, General John Stuart Baker AC, DSM. General Baker was Chief of the Defence Force between 1995 and 1998.

The 20th Surveillance and Target Acquisition Regiment deployed an Unmanned Aerial Vehicle detachment to the Australian base in Tarin Kowt, Oruzgan Province, Afghanistan.

16 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 August2007

Captain Adam Loughrey (right) and soldiers of the Overwatch Battle Group (West)-3 visited Al Najem in southern Iraq to officially open a school that had been refurbished.

Plumbing instructor Sapper Nathan Beatson assists an Afghani Trade Training School student on the first plumbing course.

Australian Defence Force Academy (ADFA) Midshipmen and Officer Cadets demonstrate their military training in front of a record crowd at the ADFA Open Day.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 17 September 2007

Major General Tony Fraser and Captain Brad Wheeler prepare to start preflight checks before taking off over Brisbane in the final flight of the ‘Huey’ Iroquois helicopter. The Iroquois, the mainstay of Army Aviation in the Vietnam War era, was decommissioned on 21 September 2007.

HMAS Adelaide Boatswains Mates connect the span-wire to the bell housing during replenishment at sea with HMAS Sirius en-route for Exercise Malabar.

Air movements Training and Development Unit loading a CH47 Chinook helicopter into a C–17 Globemaster III Heavy Lift aircraft.

18 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 October 2007

Platoon signalman Private Leigh Beazley relays information via a radio during his deployment in East Timor.

Governor General Major General speaks during the presentation of a unit citation to the 4th Battalion, Royal Australian Regiment (Commando).

The ‘City of Sydney’ Boeing 707 touches down for the last time at RAAF Richmond.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 19 November 2007

All smiles for Seaman Medic Jodie Schumacher, as HMAS Perth returns to her home port of Fleet Base West after five months away.

Corporal Bianca Greenslade jockeys Corporal Natalie Pinder down the home straight during the Melbourne Cup Day piggy-back race at the Force Level Logistic Asset in the Middle East.

(L-R) Flight Engineer Warrant Officer Ken Flint with fellow crew members Flying Officer Craig Taylor and Flying Officer Chris Jaensch from No 38 Squadron enjoy the company of hundreds of locals that turned out to greet them in the village of Itokama, during Operation PNG Assist.

20 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 December 2007

Captain Ken Golder, keeps an eye on the adventurous Sapper Pat Bear in Afghanistan. Sapper Bear was a gift from the Defence Community Organisation in Townsville, QLD, and features regularly in the pages of the Reconstruction Task Force’s monthly welfare newspaper.

Chaplain Ted Macmillan leads the bearer party for the remains of Lance Corporal John Gillespie who has been returned to Australia after almost 40 years missing in action.

Commanding Officer Robert Slaven with his son Cameron (left) and Lochlan Manderson (right) at the family cruise day on HMAS Adelaide.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 21 January 2008

A Black Hawk helicopter prepares to take off, after dropping a load of fodder to a property in the Clermont area. Due to their lift capability, Black Hawk helicopters are able to transport large loads of hay to areas isolated by flood.

HMAS Adelaide departs for Sydney from Parkes Wharf, Fleet Base West for the final time.

The bowman uses arm signals to guide the coxswain to the beach whilst conducting beach landings at Liquica, west of Dili, East Timor, during water operations training for Assault Pioneers.

22 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 February 2008

Minister for Defence Science and Personnel, the Hon Warren Snowdon MP (right), Mrs Nicole Quinn (centre) and Vice Chief of the Defence Force, Lieutenant General Ken Gillespie (left), at the unveiling of the Defence Families of Australia commemorative plaque in the Sculpture Garden of the Australian War Memorial.

Members of the Maritime Patrol Task Group assigned to the Middle East gather for a photo in front of an AP-3C Orion aircraft at their base in the Middle East. In front is Commander Task Group 633.2 Wing Commander Stephen Hanrahan.

Corporal Daniel Lobascher in the teeth of a blizzard at an Observation Post in the Chora Valley, Afghanistan.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 23 March 2008

(L-R) The Hon Kevin Foley MP, Parliamentary Secretary for Defence Procurement, the Hon Greg Combet AM MP, and the Hon Mark Butler MP being shown around the Common User Facility at the Techport ship-building hub in Adelaide, SA.

Two Northern Territory conduct first-aid training for fractures under the supervision of Lance Corporal Jamie Akers (centre) at Robertson Barracks, Northern Territory, in preparation for the Chief of Army's Challenge.

ADF members conducting post blast exploitation on a Vehicle Borne Improvised Explosive Device during Weapons Intelligence Team training delivered at Wide Bay Training Area, Queensland.

24 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 April 2008

Vietnam veteran Lindsay Burton helps a cadet Ensign bearer from 409SZN AAFC, after he became light–headed on parade at the East Sale Memorial Hall on . (Photograph by Corporal Bennet Duhig)

Darwin rail workers guide an M1A1 Abrams tank from the 1st Armoured Regiment onto purpose-built rolling stock at Berrimah Rail Yard in the Northern Territory during final trials of the tank's new rail transport cart. The utilisation of rail transport will provide another efficient and timely means of transporting 1st Brigade's Abrams tanks south for exercises during the Top End’s ‘Wet Season’.

Sapper Luke 'Spike' Milligan from the 3rd Combat Engineer Regiment is interviewed by Hamish Blake and Andy Lee during their live broadcast from Camp Holland in Tarin Kowt, Afghanistan.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 25 May 2008

HMAS Waller enters Sydney Harbour for Exercise RIMPAC preparations at , prior to departing for Hawaii.

The Minister for Defence, the Hon Joel Fitzgibbon MP, turns the first sod at Lavarack Barracks to mark the commencement of approximately $80 million in new facilities for the 3rd Combat Engineer Regiment. More than $207 million will be invested in the Lavarack Barracks Redevelopment Stage 4 Project. Also pictured is Commander of the 3rd Brigade, Brigadier John Caligari.

Sergeant Paul Judges shows the Parliamentary Secretary for Defence Support, the Hon Dr Mike Kelly AM MP, some of the equipment used by the ADF Investigative Service. Dr Kelly officially opened the new ADF Investigative Service headquarters in Canberra on 15 May 2008.

26 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 June 2008

General Sir Francis Hassett AC KBE CB DSO NVO passed away on 11 June 2008. General Hassett was the Chairman, Chiefs of Staff Committee from 24 November 1975 to 8 Feburary 1976, then Chief of the Defence Force Staff from 9 Feburary 1976 to 20 April 1977.

Private Lauren Maude sits with a group of Afghan girls during her time on the front line with the Reconstruction Task Force in Afghanistan.

(L-R) Building International relationships, Royal Thai Air Force Wing Commander Visut, Royal Australian Air Force Flying Officer Martin Alderette, Republic of Singapore Air Force members, Major Yeow Wei Pang and Lieutenant Chris Quek, German NATO Captain Peter Verlande and Royal Malaysian Air Force Major 'Hulk' Mohdnasir Mohddin, share a feed of the Northern Territory's Barramundi & Chips at Darwin's Stokes Hill Wharf.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 27 CASE STUDY Finding HMAS Sydney II

On 11 November 1941, under the command of Captain J. Burnett, RAN, HMAS Sydney II sailed from Fremantle on escort duty for the troop ship Zealandia. Both ships proceeded to the Sunda Strait where Sydney handed over her charge to the British cruiser HMS Durban at midday on 17 November. The Australian cruiser should have returned to port on 20 November, but was never seen again. What happened to Sydney was thereafter largely reconstructed from the interrogations of German seamen, some of whom were rescued from lifeboats, while others made it ashore to remote parts of the Western Australian coast. It was learned from these men that they were survivors from the German auxiliary cruiser HSK Kormoran. According to the German account, on 19 November Kormoran encountered Sydney approximately 120 nautical miles west of Steep Point, Western Australia. The cruiser immediately challenged the unknown vessel’s identity, but configured as the Dutch ship Straat Malakka, Kormoran feigned innocence while Sydney continued to close. With the distance reduced to approximately one nautical mile, and not satisfied with the mysterious vessel’s responses, the cruiser issued a final challenge to reveal her secret call sign. Not knowing how to respond, Captain Detmers de- camouflaged the Kormoran and opened fire on Sydney at the equivalent of point-blank range. The last sight of Sydney was a distant glow on the horizon late in the evening as the Germans began setting scuttling charges in their own doomed vessel before abandoning ship. Although 317 of Kormoran’s crew survived, none of Sydney’s crew of 645 men lived to tell the tale. A volunteer group known as the Finding Sydney Foundation was intent on conducting an in-water search for Sydney and Kormoran, and established their credentials with the Royal Australian Navy and ultimately the Australian Government. Confidence in the Foundation was further inspired through its alliance with notable shipwreck investigator Mr David Mearns, who had a successful record in locating deep-water shipwrecks, including that of the famous Royal Navy battle cruiser HMS Hood. This alliance aided the Finding Sydney Foundation’s objectives considerably and in August 2005 the foundation obtained partial funding for a search from the Australian Government. Other sizeable donations were obtained from the State Governments of Western Australia and New South Wales, while donations were also received from the public. The proposed scope of the search might yet have outstripped resources, but in August 2007 a further commitment by the Australian Government brought total funds to $4.2m. With sufficient funding in place, detailed planning for the in-water search could begin, with early 2008 set as the start date. Mr Mearns was confirmed as the search director while the Norwegian

28 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 company, DOF Subsea, secured the contract for the search vessel, the SV Geosounder. The vital deep-water side scan sonar equipment needed to find the wrecks was provided by an American firm, Williamson and Associates. The search team mobilised from Geraldton, Western Australia in February 2008 and sailed in early March to begin searching an area of seabed equivalent in size to the Australian Capital Territory. The first objective was to find the Kormoran which could then be used as a reference point to find Sydney. Despite setbacks caused by equipment malfunctions and the influence of a tropical cyclone, the defined search box proved accurate and the wreck of Kormoran was identified on 12 March 2008. This discovery enabled Mr Mearns to further refine his search box. Four days later at 11:03am on 16 March 2008 the wreck of Sydney was found at a depth of roughly 2,500 metres. News of the discovery was quickly communicated ashore and an official announcement was made by the Prime Minister, the Hon MP, on 17 March 2008. What has been described as Australia’s most enduring maritime mystery had been solved.

First ever underwater pictures of HMAS Sydney II courtesy of the Remotely Operated Vehicle from the Finding Sydney Foundation. (Photographer: David Mearns)

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 29 CHAPTER 2 Organisational Structure

Defence’s mission is ‘to defend Australia and its national interests’. In fulfilling this mission, we serve the Government of the day and are accountable to the Commonwealth Parliament,which represents the Australian people, to efficiently and effectively carry out the Government’s defence policy. PORTFOLIO STRUCTURE The Defence portfolio consists of a Registrar of the Australian Military number of legally distinct organisations. Court and the Inspector General The three most significant are: Australian Defence Force. • The Department of Defence — a • Various trusts and companies, department of state, headed by the including: Secretary of Defence - Defence Housing Australia (DHA) • The Australian Defence Force (ADF) — - Army and Air Force Canteen consists of the three Services Service (Frontline Defence (including Reserves) and headed by Services) the Chief of the Defence Force (CDF) - Australian Military Forces Relief • The Defence Materiel Organisation Trust Fund (Army Relief Trust (DMO) — a prescribed agency, headed Fund) by its Chief Executive Officer (CEO). - Australian Strategic Policy Institute In practice, these bodies work together so Ltd closely that they are effectively one - Royal Australian Air Force organisation known simply as Defence (or Veterans’ Residences Trust Fund the Defence organisation), although it has no separate legal identity. A series of - Royal Australian Air Force Welfare internal directives and delegations Trust Fund effectively create a unified organisation. - Royal Australian Navy Relief Trust Figure 1.1 shows how the integrated Fund organisation is structured. - SAS Trust Fund. The portfolio also contains a number of The Minister for Defence’s portfolio also smaller entities, including: contains the Department of Veterans’ • A number of statutory offices created Affairs and its associated bodies, as it is by the Defence Force Discipline Act, designated as part of the Defence 1982 which are independent but reside portfolio in the Administrative administratively within Defence. Arrangements Order. The Department of These include the Judge Advocate Veterans’ Affairs is administered General, the Chief Military Judge, the separately from Defence. Director of Military Prosecutions, the

30 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 2 ORGANISATIONAL STRUCTURE

Figure 1.1 Defence Portfolio Structure

DEPARTMENTAL STRUCTURE Defence consists of the ADF—members of the Vice Chief. This ensures that CDF the Navy, the Army and the Air Force—and is supported more directly by the Vice members of the Australian Public Service. Chief and enables a stronger focus on operations oversight by CJOPS. Key Structural Changes • The creation of the Deputy Secretary During 2007–08, Defence continued to White Paper position to assist in review and modify its structure to better development of the new Defence drive performance improvement. Key White Paper. changes included: • The organisational structure as at 30 • The separation of the Vice Chief of the June 2008 can be seen on the Defence Force and Commander Joint following page. Operations (CJOPS) responsibilities, and allocation of logistics oversight to OUTCOME & OUTPUT STRUCTURE Defence outcomes are the results that the these targets, in both financial and Government seeks from Defence, and are non-financial terms. achieved through the successful delivery Introduction of the new outcome and of outputs, to the standards set in the output structure flagged for 2007-08 in Portfolio Budget Statements 2007–08 and, the Defence Annual Report 2006-07 was where applicable, revised in the Portfolio delayed, coming into effect on 1 July Additional Estimates Statements 2007–08. 2008. The new structure is shown in the The Defence Annual Report 2007–08 Portfolio Budget Statements 2008–09. reports Defence’s achievements against

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 31 CHAPTER 2 ORGANISATIONAL STRUCTURE (6) *** *** *** MO is Mr Kim Gillis Ms Jane Wolfe Jane Ms Mr Warren King Warren Mr Dr Stephen Gumley Stephen Dr Chief Executive Officer Chief Executive General Manager Systems Manager General General Manager Programs Manager General General Manager Corporate Manager General Defence Materiel Organisation Materiel Defence (1) (5) *** *** Dr Roger Lough Roger Dr Chief of Air Force Chief of Chief Defence Scientist Defence Chief AIRMRSHL Geoff Shepherd AIRMRSHL (1) (5) Defence Support Defence Parliamentary Secretary Parliamentary The Hon Dr Mike Kelly MP (1) *** *** Chief of Army Mr Phil Minns Phil Mr LTGEN Peter Leahy Peter LTGEN Strategies andPolicy Deputy Secretary People People Secretary Deputy **** requires the Service Chiefs to advise the Minister on matters relating to their command. ACM Angus Houston Angus ACM (1) (5) Chief of the Defence Force Defence of the Chief Defence Procurement Parliamentary Secretary Parliamentary TheHon Greg Combet MP *** *** Group Defence Act 1903 Chief of Navy Chief of Mr Stephen Merchant Stephen Mr VADM Russ Shalders Deputy Secretary Intelligence, Intelligence, Secretary Deputy Security and International Policy and International Security Minister for Defence The Hon Joel Fitzgibbon MP Fitzgibbon Joel The Hon directly accountable to the Minister for DMO’s performance but remains accountable to the Secretary and CDF. and Secretary the to accountable remains but performance DMO’s for Minister the to accountable directly (6) Under the agreed business model for DMO as a prescribed agency, the CEO DMO Ministerial Directive identifies that the CEO D (4) The Inspector-General reports directly to the Secretary and CDF. the of 9(3) Section (5) (1) *** *** Support Mr Martin Bowles LTGEN David Hurley Chief of Joint Operations Chief of Deputy Secretary Defence Defence Deputy Secretary **** Secretary and Personnel and Mr Nick Warner (1) Minister for Defence Science Defence for Minister The Hon Warren Snowdon MP Snowdon Warren The Hon *** *** Defence Force Discipline Act 1982. Act Discipline Force Defence Mr Greg Farr Greg Mr LTGEN Ken Gillespie Chief Information Officer Information Chief Vice Chief of the Defence Force *** *** (acting) Mr Phillip Prior Mr Frank Lewincamp Chief Finance Officer Finance Chief Deputy Secretary Strategy, Strategy, Secretary Deputy Coordination and Governance and Coordination (4) (1) (2) (1) (3) (1) (2) (1) (2) * * ** ** ** *** *** Organisational Chart as at 30 June 2008 Organisational Chart as 30 at Richard Tracey Richard Dr Ian Williams Dr Mr Geoff Mr Earley Inspector General Inspector BRIG Lyn McDade Chief Military Judge Chief Military Mr Michael Pezzullo BRIG Ian Westwood Inspector General ADF General Inspector Judge Advocate General Advocate Judge VADM Matthew Tripovich Matthew VADM MAJGEN The Hon Justice MAJGEN The Hon Justice Director MilitaryProsecutions Chief Capability Development Deputy Secretary White Paper White Secretary Deputy Office of the Secretary & Chief of Defence Force Group Force Defence & Chief of the Secretary Office of * Stars refer to ADF Star rank or SES Band levels. SES Band or Star rank to ADF refer * Stars (1) Statutory appointment. (2) Reports directly to the Minister for Defence in accordance with Section 196A of the (3) The Inspector-General ADF is directly responsible to the Chief of the Defence Force (CDF). Figure 1.1

32 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 2 ORGANISATIONAL STRUCTURE

Change of Service Chiefs Vice Chief of the Defence Navy Force Russ Crane AM CSM RAN— Lieutenant General David Hurley AO Chief of Navy DSC—Vice Chief of the Defence Force Vice Admiral Crane was appointed Chief Lieutenant General David Hurley AO DSC of Navy on 4 July 2008. He joined the was appointed as the Vice Chief of the Royal Australian Navy as a junior recruit in Defence Force on 4 July 2008. Lieutenant 1970 before selection for commission in General Hurley’s career in Defence spans 1972. Since then, he has served in a wide a period of 36 years after first enlisting in range of postings, focused primarily in the Army in 1972. Mine Warfare and Clearance Diving and From November 1991, Lieutenant General Intelligence fields. Hurley commanded the 1st Battalion, The He has commanded HMA Ships Curlew, Royal Australian Regiment, including its Derwent and Success. His time in HMAS deployment to Operation Solace in Success included operations in East Timor Somalia in 1993. He also commanded the for which he was awarded the Conspicuous Service Medal. His senior 1st Brigade in Darwin in January 1999, postings have included being Navy overseeing the Brigade’s support to the Systems Commander, Director General Australian-led operations in East Timor. Coastwatch and subsequently the Lieutenant General Hurley has held inaugural Commander Joint Offshore several senior positions within Defence, Protection Command. In 2006, he including Chief of Joint Operations assumed duties as the Deputy Chief of between September 2007 and July 2008, Navy and was appointed as a Member of Chief of Capability Development Group the Order of Australia in 2007. between 2004 and 2007, and Land Commander Australia in 2003. Vice Admiral Russ Shalders AO CSC Lieutenant General Hurley was awarded a RANR—Achievements Distinguished Service Cross in 1993 and Vice Admiral Shalders’ career spanned became an Officer of the Order of over 41 years of dedicated service to the Australia in 2004. Royal Australian Navy. His outstanding career incorporated a number of international positions and command of HMA Ships Sydney, Darwin and Perth. His senior postings included positions such as the inaugural Director General Coastwatch, Head of Defence Personnel and the Vice Chief of the Defence Force. His career culminated with three years as the Chief of Navy. Under his guidance and leadership, he successfully progressed shaping the future fleet for the Royal Australian Navy.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 33 CHAPTER 2 ORGANISATIONAL STRUCTURE

Army Lieutenant General Peter Leahy AC— Achievements Lieutenant General Ken Gillespie AO With a career spanning over 37 years and DSC CSM—Chief of Army as the second–longest serving Chief of Lieutenant General Ken Gillespie enlisted Army, Lieutenant General Peter Leahy’s in the Australian Army as an apprentice achievements were numerous during his in 1968. He graduated from the Officer time in service. Lieutenant General Leahy Cadet School, Portsea in 1972 and was graduated from the Royal Military College commissioned into the corps of the Royal in 1974 and held various positions, Australian Engineers. including Commanding Officer of 8/9 RAR, Lieutenant General Gillespie’s senior Instructor at US Army Command and Staff appointments have included the inaugural College, Military Assistant to Chief of rd commanding officer of the 3 Combat General Staff, Commander 3rd Brigade, Engineer Regiment, Staff Officer Chief of Staff Headquarters Australian Operations to the Chief of the Defence Theatre, Deputy Chief of Army and Chief Force and inaugural commander of the of Army. Australian Theatre Joint Intelligence As Chief of Army, he restructured the Centre. Lieutenant General Gillespie was organisation with the Hardened and promoted to Brigadier in January 1999. Networked Army and Enhanced Land He commanded the United Nations Sector Force initiatives. He also revitalised the West multinational brigade in East Timor, Army Reserve and gave them pertinent and was the National Commander of objectives which have seen them make Australia's contribution to Operation significant contributions on operations Enduring Freedom (ADF Operations around the globe. Lieutenant General Catalyst and Slipper). Lieutenant General Leahy championed the acquisition of Gillespie was appointed as Land some significant capability, including Commander Australia in January 2004 and tanks, armed reconnaissance helicopters was promoted to Lieutenant General and and armoured fighting vehicles. He also appointed as Vice Chief of the Defence initiated the I’m an Australian Soldier Force in July 2005. He assumed the campaign and paved the way for women appointment of Chief of Army on to serve in support roles in combat units. 4 July 2008. Lieutenant General Leahy provided strong leadership and direction in developing an Army that is considered a first–class combat force and is highly respected across the world.

34 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 2 ORGANISATIONAL STRUCTURE

Air Force Geoff Shepherd— Achievements Air Marshal AM—Chief of Air Marshal Geoff Shepherd completed his Air Force term as Chief of Air Force on 3 July 2008. Air Marshal Mark Binskin joined the Royal On 4 July 2008, he retired from the Royal Australian Air Force in 1984 as a fighter Australian Air Force after a dedicated pilot and has 3,500 hours in single-seat career spanning over 37 years. His tenure fighter aircraft. He was awarded the as Chief of Air Force was marked by his Member of the Order of Australia for his substantial commitment to Australia’s performance as a Fighter Combat excellent operational performance, Instructor and F/A-18 Display Pilot. particularly in Operations Catalyst, Air Marshal Binskin has served in many Slipper and Astute. He established a staff positions including Chief of Staff, coherent and effective strategic planning Headquarters Australian Theatre in 2003. framework to reshape the Air Force, and He then served as the first dedicated non- his personal vision for the Air Force of the US Air Force Director of the US Central Air future has guided the Air Force through a Force Combined Air and Space Operations challenging period of change, including Centre, where he was responsible for the the introduction of the C-17 Globemaster conduct of all Coalition air operations in III Heavy Lift aircraft and the initiation of support of Operation Iraqi Freedom and the F/A-18F program. Operation Enduring Freedom. For this Air Marshal Shepherd's initiation of the service he was awarded a Commendation RAAF re–engineering program to identify for Distinguished Service. efficiencies and savings for reinvestment Air Marshal Binskin has held a variety of in the networked Air Force of the next commands from Commander Air Combat decade is a testament to his Group through to his last post as Air leadership. Australia’s reputation has Commander Australia, prior to promotion been enhanced by the personal and appointment as Chief of Air Force on relationships that Air Marshal Shepherd 4 July 2008. initiated and fostered through enthusiastic engagement with Service counterparts across the globe. Throughout his career, Air Marshal Shepherd demonstrated a passion for the Air Force and a deep commitment to his nation.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 35 CASE STUDY Logistics Reform

The Accelerated Inventory Optimisation Program has seen Defence embark on a clean out of its warehouses to minimise the number of surplus and obsolete items in its holdings. Working together, Joint Logistics Command and the Defence Materiel Organisation have been systematically identifying what is being stored that is no longer needed and taking steps to dispose of these items. The disposal process is routine and ongoing; however, in recent years a backlog of surplus materiel has built up in warehouses. Items such as equipment that is no longer useful or that has been superseded, spare parts Aerial view of Defence National Storage and for such equipment, and stock kept ‘just in case’, not Distribution Centre. only clutter up space, but represent a drain on Defence resources as we are still responsible for counting and caring for redundant stock. The Accelerated Inventory Optimisation Program and other planned inventory reform initiatives are designed to ensure that the right stock, parts and items are available in the right quantities in the right locations at the right time. Commencing at Defence’s largest warehousing complex, Defence National Storage and Distribution Centre in Moorebank, NSW, 18,854 stock codes (or item types) were identified in the first three months of this concentrated program. The 1,458,000 items that those codes represent have been swiftly processed for disposal. The program at Moorebank is expected to realise a reduction in approximately 40,000 stock codes by November 2008. The Accelerated Inventory Optimisation Program is also being rolled out to all of Defence’s major warehousing sites. Optimising the current inventory reduces the overall cost of inventory ownership, maximises use of existing warehouses and provides greater accuracy in determining the value of Defence assets. Based on this sound foundation, further logistics reforms involving smarter investment decisions and improved warehousing and distribution processes will result in better, more cost-effective logistics management in Defence.

Defence National Storage and Distribution Centre warehouse (internal).

36 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 SECTION TWO OUTCOME PERFORMANCE CHAPTER 3 Outcome performance

Table 3.1 To ta l c o st of De f e nc e Outcomes and Outputs, 2007–08

Outcome/Output Budget Revised Actual Variation[3] Variation[3] Estimate[1] Estimate[2] Result ($'000) ($'000) ($'000) ($'000) (%) Outcome 1: Command of Operations in defence of Australia and its interests 1.1 Command of operations 426,503 435,100 439,102 4,002 0.9 1.2 Defence force military operations & exercises 1,130,212 1,182,582 850,899 -331,683 -28.0 1.3 Contribution to national support tasks 19,876 35,483 30,802 -4,681 -13.2 Total for Outcome 1 1,576,590 1,653,164 1,320,802 -332,362 -20.1 Outcome 2: Navy Capability for the defence of Australia and its interests 2.1 Capability for major surface combatant operations 1,902,220 1,962,991 1,940,239 -22,752 -1.2 2.2 Capability for naval aviation operations 641,202 660,934 1,529,027 868,093 131.3 2.3 Capability for patrol boat operations 277,386 287,719 267,717 -20,002 -7.0 2.4 Capability for submarine operations 815,756 833,645 673,358 -160,287 -19.2 2.5 Capability for afloat support 263,997 275,762 306,226 30,464 11.0 2.6 Capability for mine warfare 387,512 400,218 370,899 -29,319 -7.3 2.7 Capability for amphibious lift 424,751 436,429 323,763 -112,666 -25.8 2.8 Capability hydrographic, meteorological & oceanographic operations 299,841 307,130 195,042 -112,088 -36.5 Total for Outcome 2 5,012,665 5,164,828 5,606,273 441,445 8.5 Outcome 3: Army Capability for the defence of Australia and its interests 3.1 Capability for special operations 581,018 607,171 688,057 80,886 13.3 3.2 Capability for medium combined arms operations 1,115,711 1,135,015 790,587 -344,428 -30.3 3.3 Capability for light combined arms operations 1,048,525 1,098,080 869,344 -228,736 -20.8 3.4 Capability for Army aviation operations 586,716 597,858 658,599 60,741 10.2 3.5 Capability for ground based air defence 126,106 126,937 138,743 11,806 9.3 3.6 Capability for combat support operations 457,002 467,601 498,766 31,165 6.7 3.7 Capability for regional surveillance 164,041 167,063 236,515 69,452 41.6 3.8 Capability for operational logistic support to land forces 604,490 614,233 664,142 49,909 8.1

38 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

Table 3.1 Total cost of Defence Outcomes and Outputs, 2007–08

Outcome/Output Budget Revised Actual Variation[3] Variation[3] Estimate[1] Estimate[2] Result ($'000) ($'000) ($'000) ($'000) (%) 3.9 Capability for motorised combined arms operations 620,015 631,749 727,072 95,323 15.1 3.10 Capability for protective operations 1,089,381 1,121,329 1,521,757 400,428 35.7 Total for Outcome 3 6,393,005 6,567,037 6,793,582 226,545 3.4 Outcome 4: Air Force Capability for the defence of Australia and its interests 4.1 Capability for air combat operations 1,842,613 1,857,419 2,072,223 214,804 11.6 4.2 Capability for combat support of air operations 1,022,579 1,066,429 1,048,984 -17,445 -1.6 4.3 Capability for surveillance & response operations 1,295,189 1,323,934 1,333,156 9,222 0.7 4.4 Capability for airlift operations 1,164,739 1,200,781 937,569 -263,212 -21.9 Total for Outcome 4 5,325,120 5,448,563 5,391,933 -56,630 -1.0 Outcome 5: Strategic Policy for the defence of Australia and its interests 5.1 International policy, activities & engagement 223,410 227,671 307,497 79,826 35.1 5.2 Strategic policy & military strategy 80,020 84,084 31,805 -52,279 62.2 Total for Outcome 5 303,430 311,755 339,303 27,548 8.8 Outcome 6: Intelligence for the defence of Australia and its interests 6.1 Intelligence 559,316 574,720 842,763 268,043 46.6 Total for Outcome 6 559,316 574,720 842,763 268,043 46.6 NET COST OF DEFENCE DEPARTMENTAL OUTCOMES 19,170,126 19,720,067 20,294,656 574,589 2.9 Approved allocated profit/(loss) - - -601,389 -601,389 - DEPARTMENTAL APPROPRIATIONS FROM GOVERNMENT 19,170,126 19,720,067 19,693,267 -26,800 -0.1 Outcome 7: Superannuation and housing services for current & retired Defence personnel 7.1 Superannuation support services for current & retired Defence personnel 2,069,468 2,084,600 2,092,423 7,823 0.4 7.2 Housing assistance for current & retired Defence personnel -64,500 -47,453 -122,979 -75,526 159.2 7.3 Other administered revenues & expenses -868 3,854 30,748 26,894 697.8 NET COST OF ADMINISTERED OUTCOMES 2,004,100 2,041,001 2,000,192 -40,809 -2.0 TOTAL COST OF DEFENCE OUTCOMES 21,174,226 21,761,068 22,294,848 533,780 2.5

NOTES 1. Budget Estimates are consistent with Portfolio Budget Statements 2007-08 (pp124-126). 2. Revised Estimates are consistent with Portfolio Additional Estimates Statements 2007-08 (pp73-76). 3. Variation figures are the difference between Actual Result and Revised Estimate.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 39 CHAPTER 3 OUTCOME PERFORMANCE 1,077 3,295 2,152 83,307 18,000 44,146 54,815 688,840 772,147 615,330 619,702 al 7,510,296 8,454,080 3,654,874 1,948,141 891,624 891,624 2,891,816 2,891,816 1,391,848 2,000,192 21,686,504 20,294,656 Tot ($'000) - - - 891,624 891,624 2,000,192 2,891,816 2,891,816 Outcome 7 Superannuation & housing support services & for current Defence retired personnel ($'000) - - - 1,077 3,295 2,152 83,307 83,307 18,000 44,146 54,815 688,840 688,840 772,147 615,330 619,702 7,510,296 8,454,080 3,654,874 1,948,141 1,391,848 21,686,504 20,294,656 Total Defence Departmental Outcome ($'000) - 24 284 581 128 -374 9,744 9,744 4,959 1,552 4,609 37,310 37,310 47,054 70,261 51,663 277,424 431,074 113,122 894,426 842,763 Outcome6 Intelligence ($'000) - 17 -40 101 629 -114 5,457 2,601 8,058 2,990 9,204 1,896 9,106 2,893 73,290 10,951 256,067 350,254 339,303 Outcome 5 Strategic policy ($'000) - 859 1,372 3,906 1,535 18,386 18,386 12,512 11,392 228,488 228,488 246,875 143,540 431,057 145,771 392,646 1,742,260 2,183,933 1,397,985 5,784,579 5,391,933 O u t c o m e 4 Force Air capability ($'000) - -584 -369 2,624 5,349 30,473 30,473 15,189 25,375 228,346 228,346 258,819 315,980 862,829 287,231 318,020 576,839 3,274,961 2,899,855 7,370,421 6,793,582 O u t c o m e 3 Army capability ($'000) - omes (Departmental and Administered), 2007–08 94 719 857 7,764 18,529 18,529 12,028 13,460 147,342 147,342 165,871 133,297 134,110 299,981 1,701,480 1,806,105 1,275,851 1,088,708 5,906,254 5,606,273 O u t c o m e 2 Navy capability ($'000) - 41 40 596 -307 3,573 3,573 1,940 2,407 41,897 41,897 45,471 14,564 38,746 18,917 14,298 59,768 440,881 877,045 1,380,571 1,320,802 Outcome 1 Outcome Command of operations ($'000) Overall Cost to Government of Defence Outc Defence of to Government Cost Overall Sale of goods and rendering of services rendering goods and of Sale Other revenues write-downs of previous asset Reversals Sale of assets Other gains Employees Suppliers Grants amortisation and Depreciation cost Finance and impairment of assets Write-down loss exchange Foreign expenses Other Table 3.2 Table DEPARTMENTAL Income Revenues Tot a l r ev e n ue Gains Tot a l g a in s Tot a l in c o me Expenses Tot a l ex pe n se s outcomes cost of departmental Net ADMINISTERED Revenues Expenses Net cost of administered outcomes

40 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

Table 3.3 Cost to Government of Departmental Outcomes, 2007–08

Budget Revised Actual Variation[3] Variation[3] Estimate[1] Estimate[2] Result ($'000) ($'000) ($'000) ($'000) (%) Income Revenues Sale of goods and rendering of services 643,206 719,479 688,840 -30,639 -4.3 Other revenue[4] 66,020 138,192 83,307 -54,885 -39.7 Tot a l re v e n ue 709,226 857,671 772,147 -85,524 -10.0 Gains Reversals of previous asset write-downs 200,000 415,025 615,330 200,305 48.3 Sale of assets – – 1,077 1,077 - Other gains 7,700 7,700 3,295 -4,405 -57.2 Tot a l ga i n s 207,700 422,725 619,701 196,976 46.6 Tot a l I nc o me 916,926 1,280,396 1,391,848 111,452 8.7 Expenses Employees 7,304,628 7,491,807 7,510,296 18,489 0.2 Suppliers 9,111,987 9,053,108 8,454,080 -599,028 -6.6 Grants 4,395 18,911 18,000 -911 -4.8 Depreciation and amortisation 3,409,595 3,611,350 3,654,874 43,524 1.2 Finance cost 25,574 31,639 44,146 12,507 39.5 Write-down and impairment of assets 230,000 792,796 1,948,141 1,155,345 145.7 Foreign exchange loss – – 2,152 2,152 - Other expenses 873 852 54,815 53,963 6333.7 Tot a l ex pe n se s 20,087,052 21,000,463 21,686,504 686,041 3.3 Net cost of all outcomes 19,170,126 19,720,067 20,294,656 574,589 2.9 Approved allocated profit/(loss) – – -601,389 -601,389 - Departmental appropriations from Government 19,170,126 19,720,067 19,693,267 -26,800 -0.1

NOTES 1. Budget Estimates are consistent with Portfolio Budget Statements 2007–08 (pp127-128). 2. Revised Estimates are consistent with Portfolio Additional Estimates Statements 2007–08 (p75). 3. Variation figures are the difference between Actual Result and Revised Estimate. 4. Other revenues includes rental income.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 41 CHAPTER 3 OUTCOME PERFORMANCE

OUTCOME 1 COMMAND OF OPERATIONS

At 30 June 2008, the ADF had about 3,500 personnel deployed on operations across the Middle East, Africa, the Pacific and Australia. The ADF successfully conducted 20 operations during the year and 89 joint and combined exercises.

The ADF continued to demonstrate its The ADF ceased land combat operations in ability to remain responsive to our southern Iraq on 1 June 2008 and handed domestic and regional responsibilities at over security responsibility to the Iraqi short notice. This included an emergency forces. During the course of operations in relief operation in Papua New Guinea southern Iraq, successive Battle Groups following substantial flooding caused by completed approximately 8,700 patrols, Cyclone Guba, which struck Oro travelling more than three million (Northern) Province in November 2007. kilometres, and completed more than 250 reconstruction projects in Dhi Qar and Al Muthanna provinces since April 2005. Capability Performance Information Output 1.1 Command of Operations Performance Targets Performance Australian operational concepts are further Achieved. developed to support ADF planning against credible contingencies. Joint Operations Command provides guidance Achieved. for joint force preparedness in accordance with the CDF’s direction. Command of ADF forces is effective and the Achieved. Government’s strategic objectives for operations are achieved. The Joint Operations Command transitional Achieved. structure implemented in early 2007 will be evaluated and refined. Output 1.2 Defence Force Military Operations & Exercises Performance Targets Performance Meet the stated objectives of ADF operations Achieved. 15 current or dormant operations within Government timeframes. plus five that were ceased or completed met Government direction in 2007–08. Maintain required preparedness levels of forces Achieved. Joint preparedness levels were indentified for operational tasks. monitored against the Joint Operations Command Operational Preparedness Requirement. Preparedness deficiencies were reported and remedied as necessary. ADF forces are effectively deployed and Achieved. ADF forces were effectively sustained. deployed, sustained and re-deployed during the period. The Program of Major Service Activities is Achieved. The Program of Major Service reviewed and modified where required. Activities was regularly reviewed and modified in response to changing priorities, world events and to meet identified training deficiencies. The major ADF exercise commitments for 2007–08 Achieved. All major ADF exercises were are met: conducted. Details of all scheduled exercises, • Exercises Suman Protector, Bersama Shield 08, whether conducted or cancelled, are included in the Pitch Black 08 and Talisman Sabre 07. online version of the Defence Annual Report 2007–08, at www.defence.gov.au/annualreports.

42 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

Output 1.3 Contribution to National Support Tasks Performance Targets Performance The ADF contribution to peacetime national Achieved. Four completed and three current tasks meet Government directives. ADF operations met the Government’s direction for peacetime national tasks in 2007–08. Forces are identified to provide Defence Achieved. Preparedness levels were Assistance to the Civil Community, Defence continuously monitored against the Operational Force Assistance to the Civilian Authorities and Preparedness Requirement. search and rescue capability and required The following Defence Assistance to the Civil preparedness levels maintained. Community tasks were completed: • Category One (local emergency assistance) – 27 • Category Two (general emergency assistance) – 2 • Category Three (civil emergency or disaster recovery) – nil • Category Four (public events of significance and general non-emergency assistance) - The Minister for Defence approved and the ADF supported 42 public events of significance and Deputy Service Chiefs approved a further 285 non-emergency assistance tasks during the year • Category Five (minor non-emergency assistance) – 400 • Category Six (non-emergency law) – 3. The ADF received no requests to provide Defence Force Assistance to Civilian Authorities. The ADF’s forces are effectively deployed and Achieved. ADF forces continued to be sustained. effectively deployed, sustained and re- deployed.

The ADF response to requests for search and Achieved. 12 search and rescue tasks were rescue and emergency assistance tasks are undertaken. effectively managed and reported. The ADF continues to conduct minor emergency Achieved. and non-emergency assistance tasks from local resources, where feasible. National support tasks undertaken by the ADF Achieved. as significant emergency assistance, public events of significance and non-emergency law enforcement are effectively managed and reported. National support tasks undertaken by the ADF Achieved. as Defence Force Assistance to the Civilian Authorities are effectively managed and reported. The ADF and Customs effectively manage the Achieved. civil maritime surveillance and response program through Border Protection Command.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 43 CHAPTER 3 OUTCOME PERFORMANCE

Table 3.4 ADF Operations Contributing to the Security of the Immediate Neighbourhood Operation Objective Status Contribution To w e r To contribute to the United Current Four staff officers and military (Previously Nations Integrated Mission in observers. Chiron) East Timor Headquarters. Commenced November 2006 Quickstep[1] To provide a presence and be Completed. No additional personnel. prepared to provide November The operation non-combatant evacuation remained 2006 – June operations in response to 2008 dormant regional instability. throughout the reporting period and ceased in June 2008 Astute To assist the Government of Current The ADF maintains Commenced East Timor and the UN to approximately 760 personnel May 2006 bring stability, security and deployed on Operation Astute confidence to the people of including a Joint East Timor to allow them to Headquarters, a Battle Group resolve their differences and an Aviation Group in democratically and conjunction with peacefully. approximately 170 New Zealand Defence Force personnel. Anode To support the Participating Current The ADF maintains Commenced Police Forces in maintaining approximately 140 personnel July 2003 the rule of law in Solomon deployed on Operation Anode Islands. including a Task Force Headquarters element and a company group. Gateway To conduct northern Indian Current Eight deployments of a P-3 Commenced Ocean and South-East Asian Orion aircraft. 1981 maritime surveillance patrols.

NOTE 1. The objective description for Operation Quickstep that was reported in the Portfolio Budget Statements 2007–08 has been revised. The commencement month was incorrectly reported in the Defence Annual Report 2006-07.

44 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

Table 3.5 ADF operations supporting wider interests Operation Objective Status Contribution Ramp II To provide and prepare Completed Deployment of a small Defence October 2007 for non-combatant Supplementation Staff on two occasions to – June 2008 evacuation in the assist with planning. Middle East (Lebanon) in response to regional instability. Palate II To pr o vi de a Mi l i t ar y Current One Military Liaison Officer. Commenced Liaison Officer to the June 2005 UN Assistance Mission in Afghanistan. Azure ADF contribution to the Current 15 personnel serving as headquarters staff May 2005 – UN Mission in Sudan. and military observers. continuing

Valient To equip the Republic Dormant No personnel are currently assigned to the October – of Fiji Military Force operation but ADF stores remain on loan to November UN Assistance Mission the Fijian Government for Fijian Military 2004 Iraq contingent, for Force serving in Iraq. service in Iraq and providing training assistance to the Republic of Fiji Military Force personnel protection details, to assist in their preparation for service in Iraq. Slipper To contribute to the Current The ADF currently has approximately 1,080 Commenced international coalition personnel deployed (not including dual October 2001 against terrorism, with assigned elements) including: a focus on Afghanistan. • an Australian National Headquarters element, commanded by a one star officer • the Reconstruction Task Force, which provides reconstruction and improvement of provincial infrastructure (hospitals, schools, bridges, culverts etc) and community–based projects to assist the Afghan Government achieve a stable and secure future for its people • a Special Forces Task Group, which provides enhanced provincial security by disrupting Taliban extremists' command and control and supply routes • an Air Force Radar Reporting Element, which controls a portion of Afghan operational airspace previously controlled by US elements • a Rotary Wing Group, which deployed in February 2008 to provide medium–lift helicopter support to both ADF and other Coalition Force elements. Mazurka To provide personnel to Current 25 personnel serving as specialist staff and Commenced the Multinational Force military observers. September and Observers to 1982 monitor the security arrangements in the Sinai. Paladin To contribute to the UN Current 12 unarmed military observers. Commenced Truce Supervisory June 1956 Organisation in the Middle East.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 45 CHAPTER 3 OUTCOME PERFORMANCE

Table 3.5 ADF operations supporting wider interests Operation Objective Status Contribution Catalyst ADF contribution in Current The ADF deployment to the Middle East Commenced support of the Area of Operations comprises approximately July 2003 rehabilitation of Iraq. 1,000 ADF personnel (recently reduced from approximately 1,500), including: • an Australian National Headquarters element, Commanded by a two–star officer • approximately 50 personnel serving in the multinational force headquarters and units, personnel numbers have been reduced since the start of 2008 from approximately 100 personnel • a maritime element of one frigate (dual force assigned) • aviation elements including C-130 Hercules and P-3 Orion aircraft and support detachments (dual force assigned) • a security detachment including Australian Light Armoured Vehicles to provide protection and escort for Australian Government personnel working in Baghdad • a land Task Group (also known as the Overwatch Battle Group – West) operated in the southern Iraqi provinces of Al Muthanna and Dhi Qar. The group finalised their operations on 1 June 2008 and the withdrawal of the group was completed by the end of June. • an Australian Army Training Team providing assistance with training of Iraqi Army personnel. The training team completed its operations and withdrew in parallel with the Overwatch Battle Group • a small number of personnel employed in the Combined Explosives Exploitation Cell tasked with disarming explosive devices and conducting post-explosion assessments to determine the type of explosive devices used • a tri–service Force Level Logistic Asset providing logistic support to all forces in Iraq and Afghanistan.

46 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

Table 3.6 Peacetime National Tasks Operation Objective Status Contribution Nargis Assist To support the Completed The ADF provided: May – June whole-of-government • a Defence Humanitarian Assistance pack 2008 effort to provide consisting of water, general shelter items and humanitarian medical supplies assistance and disaster • delivery of AusAID Humanitarian Assistance/ relief to Burma after Disaster Relief stores including ropes and Cyclone Nargis. tarpaulins, bed nets and blankets, water purification tablets and water containers • transport of Defence and AusAID humanitarian assistance stores by a single C-17 Globemaster III flight • C-17 transport of two SA330J PUMA helicopters from Johannesburg to Bangkok for use by UN World Food Program. Te s t a me n t To provide an agreed Completed Support to the whole-of-government February – level of ADF support in commitment to the security and safe August 2008 July to World Youth conduct of World Youth Day 2008. Day 2008 and the Papal visit to Australia. PNG Assist To support the whole- Completed The ADF provided: November – of-government effort • one Kingair aircraft to assist with aerial December to provide inspections of the disaster zone 2007 humanitarian • two Air Force C-130 Hercules transport assistance and disaster aircraft carrying AusAID humanitarian stores recovery to Papua New and people to the disaster area Guinea following severe flooding in Oro • three Caribou transport aircraft and three Province caused by Army Black Hawk helicopters to provide Cyclone Guba. access to remote and isolated regions of Oro province • one C-17 Globemaster for strategic airlift • a Navy heavy landing craft (LCH) to transport about 150 tonnes of rice, oil and food stores from Lae to Gona Beach and Oro Bay • specialist Navy clearance divers to conduct an assessment of the harbour and wharf • a health assessment team to report on was needed to help the victims of the disaster • an engineering team to assess the damage to local infrastructure including port facilities, roads and availability of water and sanitation • a small ADF support and command element to coordinate the deployment in close consultation with the PNG Government. Outreach To provide support to Current Provision of general support to the Northern Commenced the whole-of- Territory emergency intervention, in June 2007 government support to particular support to community surveys, indigenous child health checks and installation of communities in the police workplace and custodial facilities. Northern Territory. Support is largely provided by Reserve Force Units. Deluge To support the Asia- Completed A was raised to provide March – Pacific Economic security and general support in co-operation September Conference in 2007. with Commonwealth and State authorities. 2007

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 47 CHAPTER 3 OUTCOME PERFORMANCE

Table 3.6 Peacetime National Tasks Operation Objective Status Contribution Resolute To deter unauthorised Current The ADF currently provides the following Commenced boat arrivals, support major assets: July 2006 Australian sovereign • one Major Fleet Unit rights and fisheries law • seven Navy patrol boats enforcement in Australia’s Economic • one Mine Hunter Coastal Exclusion Zone and the • one Landing Craft Heavy Southern Ocean by • P-3 Orion maritime patrol aircraft contributing to • Army Regional Force Surveillance Units Southern Ocean fisheries patrols. • a 21-person Transit Security Element. Solania[1] To conduct South-West Current Two deployments of a P-3 Orion maritime Pacific maritime patrol aircraft and a single sortie Commenced surveillance patrols. deployment to Tonga were completed. 1988

NOTE 1. Operation Solania also contributes to ‘Operations Contributing to the Security of the Immediate Neighbourhood’.

Table 3.7 Major ADF Exercises Exercise Objective Status Combined ADF/Five Power Defence Arrangements Exercises Bersama Shield 08 To exercise assigned Five Power Defence Conducted May 2008 Arrangements forces in the conduct of joint and combined operations in a multi-threat scenario for the defence of Malaysia and Singapore. Suman Protector To exercise elements of the Five Power Defence Conducted August – September 2007 Arrangements–generated headquarters in the planning and conduct of a joint campaign. Other Combined Exercises Pitch Black 08 To conduct a large–scale activity to exercise ADF Conducted June 2008 and international participants in the tasking, planning and execution of offensive and defensive counter air operations in a coalition environment. Combined ADF/United States Exercises Ta l i s ma n S a br e 0 7 To practise the planning and conduct of combined Conducted May – July 2007 and joint task force operations in a high-end warfighting environment to improve combat readiness and enhance interoperability.

48 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

Cost to Government Table 3.8 Outcome 1: Command of Operations in defence of Australia and its interests

Budget Revised Actual Variation[3] Variation[3] Estimate[1] Estimate[2] Result ($'000) ($'000) ($'000) ($'000) (%) INCOME Revenues Sale of goods and rendering of services 37,158 37,315 41,897 4,582 12.3 Other revenue[4] 3,890 4,501 3,573 -928 -20.6 Tot a l Re v en u e 41,048 41,816 45,471 3,655 8.7 Gains Reversal of previous asset write-downs 10,319 10,960 14,564 3,604 32.9 Net gains from sale of assets – – 41 41 - Other gains 1,223 1,223 -307 -1,530 -125.1 Tot a l ga i n s 11,542 12,183 14,298 2,115 17.4 Tot a l in c o me 52,589 53,999 59,768 5,769 10.7 EXPENSES Employees 713,511 741,016 440,881 -300,135 -40.5 Suppliers 883,473 896,129 877,045 -19,084 -2.1 Grants 202 202 596 394 195.0 Depreciation and amortisation 28,999 43,998 38,746 -5,252 -11.9 Finance cost 719 1,684 1,940 256 15.2 Write-down and impairment of assets 2,213 24,120 18,917 - 5,203 -21.6 Net foreign exchange loss – – 40 40 - Other expenses 62 13 2,407 2,394 18,415.4 Tot a l ex pe n se s 1,629,180 1,707,163 1,380,571 -326,592 -19.1 Net cost of Outcome 1 1,576,590 1,653,164 1,320,802 -332,362 -20.1

NOTES 1. Budget Estimates are consistent with Portfolio Budget Statements 2007-08 (p135). 2. Revised Estimates are consistent with Portfolio Additional Estimates Statements 2007-08 (p77). 3. Variation figures are the difference between Actual Result and Revised Estimate. 4. Other revenues includes rental income.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 49 CHAPTER 3 OUTCOME PERFORMANCE

Table 3.9 Breakdown of Outcome 1 by output

Budget Revised Actual Variation[3] Variation[3] Estimate[1] Estimate[2] Result ($'000) ($'000) ($'000) ($'000) (%) Output 1.1 - Command of operations 426,503 435,100 439,102 4,002 0.9 Output 1.2 - Defence Force military operations and exercises 1,130,212 1,182,582 850,899 -331,683 -28.0 Output 1.3 - Contribution to national support tasks 19,876 35,483 30,802 -4,681 -13.2 Net cost of Outcome 1 1,576,590 1,653,164 1,320,802 -332,362 -20.1

NOTES 1. Budget Estimates are consistent with Portfolio Budget Statements 2007-08 (p136). 2. Revised Estimates are consistent with Portfolio Additional Estimates Statements 2007-08 (p77). 3. Variation figures are the difference between Actual Result and Revised Estimate.

Cost of ADF operations The Government provided $1.1b in the 2007–08 Additional Estimates, mainly to 2007–08 Budget for the net additional fund additional equipment purchases and costs of current ADF operations. In August operating costs for the continuation of 2007, the Government passed the operations in Afghanistan, Iraq and Northern Territory National Emergency Solomon Islands. Response Act, which provided an Actual expenditure was $1,149.1m or additional $15.5m in 2007–08 for $165.0m less than the revised additional Operation Outreach. Funding levels were estimates as shown in Table 3.10. further increased by $167.6m in the Table 3.10 Net additional cost of operations Operation Budget Revised Actual Variation estimate estimate expenditure ($) ($m) ($m) ($m) Slipper 575.3 623.2 394.9 -228.3 Catalyst 373.1 486.0 501.5 15.5 Astute 152.8 152.8 205.6 52.8 Anode 6.0 12.7 23.7 11.0 Resolute 12.6 12.6 7.0 -5.6 Deluge 11.3 11.3 4.0 -7.3 Outreach – 15.5 12.3 -3.2 Total Defence supplementation 1,131.1 1,314.2 1,149.1 -165.0

50 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

Explanations for Variations Operations in Afghanistan (Operation Operations in Solomon Islands Slipper) (Operation Anode) The 2007–08 Budget initially provided The Government agreed an extension of $575.3m for the continuation of the deployment period for the operation operations in Afghanistan. Subsequent to and approved an increase of $6.7m in the the Budget, the Government approved a 2007–08 Additional Estimates. This further $47.9m in 2007–08, primarily for brought the total level of funding for additional force protection measures, Operation Anode in 2007–08 to $12.7m. providing a total allocation of $623.2m. Actual expenditure for Operation Anode Actual expenditure on operations in was $11.0m higher than the revised Afghanistan for 2007–08 was $228.3m estimate, mainly due to due to a below the revised estimate. This was due significant increase in garrison support mainly to an over–estimate of surveillance costs. requirements, garrison support and Coastal Surveillance Operations strategic lift costs. (Operation Resolute) Operations in Iraq (Operation Catalyst) Operation Resolution consolidates Following the withdrawal of the previous ADF operations including Overwatch Battle Group (West) and the Operations Relex II (unauthorised arrivals) Australian Army Training Team in mid- and Operation Cranberry (illegal fishing 2008, approximately 1,000 personnel and smuggling). The Government provided remain committed to the operation. The an allocation of $12.6m in the 2007–08 2007–08 Budget initially provided $373.1m Budget for this operation. for the continuation of operations in Iraq. Actual expenditure for Operation Resolute Subsequent to the Budget, the was $5.6m less than the revised estimate Government approved a further $112.9m mainly due to lower than expected in 2007–08 primarily for additional force support costs for the AP-3C Orions. protection and equipment purchases, providing a total allocation of $486.0m. Operations for APEC Forum (Operation Deluge) Actual expenditure for operations in Iraq The ADF contribution dealt primarily with was $15.5m more than the revised the provision of counter-terrorism estimate mainly due to higher than security and ceremonial capabilities. The anticipated support costs partially offset Government provided an allocation of by lower than expected personnel costs. $11.3m in the 2007–08 Budget for this Operations in East Timor (Operation operation. Astute) Actual expenditure for Operation Deluge The Government provided an allocation of was $7.3m less than the revised estimate $152.8m in the 2007–08 Budget for this mainly due to a reduced requirement for operation. ADF support to seven Ministerial Actual expenditure for operations in meetings, with ADF support only being East Timor was $52.8m more that the provided to the APEC Economic Leaders revised estimate mainly due to increased meeting held in Sydney in September support costs and costs incurred in 2007. supporting additional ADF contributions to East Timor.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 51 CHAPTER 3 OUTCOME PERFORMANCE

Northern Territory National Emergency Actual expenditure for Operation Response (Operation Outreach) Outreach was $3.2m less than the revised In August 2007, the Government passed estimate mainly due to less than the Appropriation (Northern Territory estimated payments to employers of National Emergency Response) Act (No.1) Reservists through the Reserve Employer 2007–08, which provided $15.5m in 2007– Support Payment Scheme, lower than 08 for Operation Outreach. expected strategic lift requirements and lower than estimated field allowances. Status of Funding from all operations Tab le 3.11 provides a summary of the current actual and planned expenditure on operations from 2001 to 2010–11. In summary, the net additional cost of operations announced to date is $8.5b.

52 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE 6.7 9.8 ($m) Total 47.7 44.5 10.5 12.3 143.0 199.0 3,804.1 1,903.1 2,329.6 8,510.3 – – – – – – – – – 2.9 ($m) 13.3 16.2 Budget 2010-11 estimate – – – – – – – – – – – ($m) Budget 164.4 2009-10 estimate – – – – – – ($m) 12.8 27.1 174.3 618.9 215.7 Budget Budget 2008-09 estimate 1,048.7 – – – – 7.0 4.0 ($m) 23.7 12.3 result Actual Actual 205.6 394.9 501.5 2007–08 1,149.1 – – – – – 9.3 2.7 ($m) 17.3 result Actual Actual 191.4 223.3 398.5 842.5 2006-07 – – – 9.8 7.5 9.8 ($m) 23.9 91.0 12.9 10.4 result Actual Actual 351.4 516.7 2005-06 – – – – – 0.1 ($m) 27.4 11.9 27.6 37.0 result Actual Actual 284.9 388.9 2004-05 – – – – – 3.0 ($m) -5.0 15.9 90.4 result Actual Actual 554.0 240.6 898.9 2003-04 – – – – – – ($m) 14.6 27.8 result Actual Actual 579.3 176.0 285.3 2002-03 1,083.0 – – – – – – – ($m) 10.1 22.2 result Actual Actual 632.9 320.0 985.2 2001-02 – – – – – – – – – ($m) 20.0 result Actual Actual 798.5 818.5 2000-01 – – – – – – – – – – ($m) result Actual Actual 598.1 598.1 1999-00 Net Additional cost of operations from 1999–00 to 2007–08 and planned for 2008–09 to 2010–11 to 2008–09 and planned for to 2007–08 from 1999–00 of operations cost Net Additional Operation Astute Operation Bel Isi Operation Slipper Operation Resolute Operation Catalyst Operation Anode Operation Sumatra Operation Assist Acolyte Operation Deluge Operation Pakistan Operation Assist Outreach Operation net additional Total costs Table 3.11 Table

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 53 CHAPTER 3 OUTCOME PERFORMANCE

OUTCOME 2 NAVY CAPABILITY

2007–08 has been a period of significant achievement and challenge for the Navy. The high operational tempo for Defence continued, with Navy ships and personnel taking part in operations as diverse as Operation Catalyst in the Persian Gulf, to Operation Anode in Solomon Islands. The flexibility and adaptability of the Navy was demonstrated by its support to Operation Outreach in the Northern Territory, and humanitarian assistance and disaster recovery in Papua New Guinea following Cyclone Guba. All 14 Armidale class patrol boats became operational, and contributed to Operation Resolute in support of the Border Protection Command-led maritime enforcement activity off Northern Australia.

Delivery of Navy capability continued to This approach focuses on stabilising, be challenged by workforce shortages. recovering and growing the Navy’s totally Recognising that people are the integrated workforce of permanent, foundation of capability, the Navy’s Reserve and APS members. The Navy emphasis remains firmly fixed on shaping aligned its Reserves to contribute to improved outcomes for training, capability outcomes through each of its motivation and leadership of its people. Force Element Groups. Navy risk mitigation Table 3.12 Key risk mitigation status Key risks and Risk mitigation Status limitations Sufficient The Navy’s most significant risk is in providing a properly trained In place Trained workforce of sufficient numbers in the right places to contribute to Personnel delivery of the required capability outcome. Retention and recruitment initiatives are being implemented and appear to be having some effect. Retention outcomes for the Navy indicated a notable improvement late in the year, particularly in the officer corps and recruiting showed some signs of improvement. The Navy is also internally working to improve retention by continuing to employ innovative solutions to improve alignment of workloads, work practices and rewards for its people. The ‘People’ initiatives set out in the Navy Strategy – Charting the Course to 2025, together with the Sea Change program, have positioned the Navy for the future personnel environment and deliver key strategic outcomes to stabilise, recover and grow the Navy’s workforce. Improved recruiting has placed greater pressures on the Navy’s training pipeline and initiatives are consequently underway to address this area. Air Warfare Until delivery of the new Air Warfare Destroyers, the Navy’s Air Warfare In place Capability Capability is primarily resident in the four Adelaide class frigates. Project SEA 1390, FFG Upgrade, aims to upgrade four Adelaide class frigates and includes improvements to their self–defence and offensive capability, and other modifications to improve equipment reliability and maintenance. The most significant enhancement will be increased self-defence capabilities against modern anti-ship missiles. Enhancements have been partially achieved, albeit, significantly behind schedule. The DMO continues to progress towards target capability enhancements. Introduction of the SM-2 Air Defence Missile system in 2009 has been partially achieved, consistent with the expected timeline for introduction. Project SEA 1448, Anzac Air Search and further capability enhancements, aims to provide enhanced air warfare capabilities for the Anzac class frigates commensurate with the modern threats of the next decade. Expected progress has been achieved.

54 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

Table 3.12 Key risk mitigation status Key risks and Risk mitigation Status limitations Submarine The primary risk to the submarine capability is the provision of suitably In place Capability trained people (addressed above). Other risks are associated with ageing systems capability and these are being addressed. A replacement combat system and introduction of the new heavyweight torpedo for the Collins class submarines has been achieved in HMAS Waller and partially achieved for the other submarines, consistent with the expected timeline for introduction. Undersea The primary risk to the Undersea Warfare Capability lies in ageing In place Warfare systems in the Seahawk helicopter and these are being addressed. Capability Project SEA 1405, Seahawk Forward–Looking Infrared and Electronic Support Measures Upgrade outcomes were partially achieved. The DMO continues to progress towards target capability enhancements. In lieu of a mid-life upgrade of the Seahawk helicopter fleet, Defence intends a Seahawk Capability Assurance Program (SCAP) through Project AIR 9000 Phase 3C. This will ensure the current level of Seahawk anti- submarine warfare capability until introduction of the Future Naval Aviation Combat System through Project AIR 9000 Phase 8 mid–next decade. Introduction of the new ADF Lightweight torpedo through Project JP 2070 has been partially achieved, consistent with the expected timeline for introduction. Force The global terrorist threat has increased the risk to the Navy’s units In place Protection from asymmetric attack. Acquisition of force protection capabilities for Operation Catalyst has been achieved. Investigations into advanced sensors and protective systems have been partially achieved, consistent with the expected timelines. Aviation Seahawk helicopters were deployed to Anzac class frigates to maintain In place capability in units on high-priority operational tasking as mitigation against lengthy delays and uncertainty in the delivery of Super Seasprite helicopters. The Super Seasprite helicopter project was cancelled in May 2008. Seahawk helicopters will continue to carry the additional tasking burden. Project AIR 9000 Phase 8 will provide a suitable replacement combat helicopter. Support to Throughout 2007–08, the Navy continued to support a wide range of In place Operations operations at home, within our region and beyond. These operations demonstrated the Navy's capacity to contribute to missions in a broad spectrum of roles including constabulary operations within our Exclusive Economic Zone, peace and law enforcement abroad, regional stabilisation and assistance to the Civil Community. Amid these operations, the Navy participated in a number of major exercise activities, including Exercise Croix De Sud, Bersama Lima and Bersama Shield to maintain high-end warfighting skills to meet preparedness requirements. HMA Ships Perth and Parramatta conducted a north-east Asian deployment and HMAS Sydney conducted a north American deployment. During each exercise and deployment the Navy operated with the navies of our partners and allies, demonstrating our enduring ability to undertake real world operations in a coalition environment. The performance of our people in each of these roles has upheld the reputation of the Navy among our partners and closest allies. Environmental Following the completion of a study by the Defence and Industry Rapid In place Assessment Prototyping Development and Evaluation program in mid-2007, an enhanced deployable rapid environmental assessment capability is being progressed. This enhanced environmental assessment capability will improve battlespace awareness and be optimised for joint and combined operations in the littoral environment.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 55 CHAPTER 3 OUTCOME PERFORMANCE

Capability performance information Output 2.1 Capability for Major Surface Combatant Operations Performance Target Performance Achieve levels of preparedness directed Substantially achieved. Readiness levels were by the CDF for military response options met in accordance with current preparedness with a warning time of less than directives; however, shortages in some areas of 12 months. the trained workforce would have placed pressure on sustaining high levels of operational tempo. Achieve a level of training that maintains Partially achieved. Collective and individual core skills and professional standards training in all disciplines continues to be across all warfare areas. conducted. The training requirements are being hampered by the shortage of available trainees in some categories. Quality Achieve mission capability[1] for assigned Substantially achieved. 87 per cent (2,512 tasks. days) for the force. Mission capability was not fully achieved due to some systems-related defects. Class achievements: • Adelaide class frigates – 98 per cent (890 days). • Anzac class frigates – 82 per cent (1,622 days). 5 Adelaide class frigates – 911 (1,028[2]) Achieved. 4[4] Adelaide class frigates – 100 per Unit Ready Days (URD[3]) cent (911 URD achieved). 8 Anzac class frigates – 1,963 (2,344[2]) Achieved. 8 Anzac class frigates – 101 per cent URD (1,985 URD achieved). The overachievement of

Quantity URD was a result of maintenance rescheduling, which provided an extra 22 URD.

NOTES 1. Mission capability measures capability for assigned tasks. It is defined as the required level of unit readiness for the actual tasking for which the force element has been scheduled at any time through its operational cycle. Tasking includes all scheduled activities to achieve assigned Defence operations, international engagement requirements and levels of preparedness required for a military response. Mission capability is assessed against Unit Ready Days (URD) ‘achieved’ and calculated by dividing the total number of mission capable days recorded throughout the year by the URD achieved to produce a percentage. 2. As initially estimated in the Portfolio Budget Statements 2007–08. 3. URD are the number of days that a force element is available for tasking by the Commander Australian Fleet, either outside of major maintenance and within planned readiness requirements or in accordance with contracted availability. 4. The total number of Adelaide class frigates reduced to four when HMAS Adelaide decommissioned on 19 January 2008.

56 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

Output 2.2 Capability for Naval Aviation Operations Performance Target Performance Achieve levels of preparedness directed by Partially Achieved. Longer-term the CDF for military response options with preparedness targets for frigate support a warning time of less than 12 months. were affected by the unavailability and now cancellation of Super Seasprites. Qualified aircrew shortages affected preparedness and project impacts affected availability across all squadrons. Achieve a level of training that maintains Substantially Achieved. Core skills and core skills and professional standards professional standards across all warfare across all warfare areas. areas were maintained. The number of Seahawk flights at sea continued to be Quality temporarily reduced to meet workforce generation (training pipeline) and helicopter modification requirements ashore. Achieve mission capability for assigned Substantially Achieved. Embarked flights tasks. and detachments were mission capable to meet all but a limited number of assigned tasks. Seahawk and Sea King helicopters met all planned activities in 2007–08. 16 Seahawks – 2,800 flying hours Substantially Achieved. 16 Seahawks – 91 per cent (2,543 flying hours). Project demands on the Seahawk fleet and a shortage of maintainers and qualified aircrew reduced aircraft availability and consequently the hours achieved. 6 Sea King – 1,400 (1,600[1]) flying hours Partially Achieved. 6 Sea King – 66 per cent (927 flying hours). Sea King hours were affected by longer than anticipated modification programs from the Board of Inquiry that reduced availability and consequently hours achieved. 13[2] Squirrel – 4,000 flying hours Partially Achieved. 13 Squirrel – 77 per cent (3,079 flying hours). Squirrel hours were affected by a combination of factors including weather restrictions and a temporary reduction following the posting of a number of junior aircrew away from the

Quantity Navy to complete operational flying training and gain experience. 11 Super Seasprite – 200 hours Not Achieved. 0 Super Seasprite – 0 per cent (no flying hours). The Super Seasprite acquisition contract was cancelled and the aircraft have been returned to the DMO pending disposal by the contractor. 6 Kalkara – available for 39 presentations[3] Achieved. 6 Kalkara – 100 per cent. The system was available for 39 presentations as per the contractual requirements. Only 9 presentations were required until Kalkara was withdrawn from service on 31 January 2008 having reached the end of its operational life. The remaining Kalkaras were transferred to the DMO for disposal.

NOTES 1. As initially estimated in the Portfolio Budget Statements 2007–08. 2. 12 aircraft are operated, with the 13th held for attrition purposes. 3. Kalkara was an unmanned aerial target system used for Navy and Air Force missile/aircraft detection, tracking and engagement training. Presentations refer to the number of instances during which the system is used as a target in training or system testing exercises.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 57 CHAPTER 3 OUTCOME PERFORMANCE

Output 2.3 Capability for Patrol Boat Operations Performance Target Performance Achieve levels of preparedness directed by Achieved. The patrol boat workforce has the CDF for military response options with reached a mature-state of 21 crews, as a warning time of less than 12 months. required under the multi-crewing plan for the Armidale class patrol boat force. Achieve a level of training that maintains Achieved. core skills and professional standards across all warfare areas.

Quality Achieve mission capability for assigned Substantially Achieved. 88 per cent (3,327 tasks. days) for the patrol boat force. Mission capability was not fully achieved due to unscheduled maintenance requirements across all platforms due to fuel system and other general engineering-related problems. 14[1] Armidale class patrol boats – 3,222 Achieved. 14 Armidale class patrol boats – [2] 117 per cent (3,775 URD achieved). The (3,227 ) URD overachievement was due to better than forecast delivery of the patrol boats. The target in the mature-crewed force structure

Quantity beyond late 2007–08 is 3,500 days of annual contracted availability.

NOTES 1. Armidale class patrol boat numbers increased from 10 on 1 July 2007 to the final total of 14 on 22 February 2008. 2. As initially estimated in the Portfolio Budget Statements 2007–08.

58 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

Output 2.4 Capability for Submarine Operations Performance Target Performance Achieve levels of preparedness directed by Substantially Achieved. All submarines have the CDF for military response options with the hull improvements, and one submarine a warning time of less than 12 months. has the replacement combat system to achieve the full range of preparedness requirements. Readiness levels were mostly met in accordance with current preparedness directives. Shortages in some areas of the trained workforce would place pressure on sustaining high levels of operational tempo. Achieve a level of training that maintains Substantially Achieved. Core warfare skills core skills and professional standards and professional standards were maintained. across all warfare areas. Currently, Navy is able to routinely crew three submarines with appropriately qualified personnel. Continuing personnel shortages are impacting on experience levels

Quality in the submarine force. The training requirements are being hampered by the shortage of available trainees in some categories and pressures in the training pipeline in others. Achieve mission capability for assigned Partially Achieved. 64 per cent (559 days). tasks. Mission capability was not fully achieved due to delays in HMAS Waller achieving ‘operational release’ of the replacement combat system in early May 2008 instead of November 2007 as planned; and delays in HMAS Collins completing workup in November 2007 due to workforce shortfalls. 6 submarines – 970 (1,004[1]) URD Substantially Achieved. 6 submarines – 91 per cent (880 URD achieved). The underachievement was due to delays in HMA Ships Waller and Collins achieving full license certification in July and September 2007 due to personnel shortfalls and extensive trials of the new combat system; and HMAS Rankin

Quantity entering full-cycle docking early in March 2008 (instead of June 2008 as originally planned) because of end of battery life.

NOTE 1. As initially estimated in the Portfolio Budget Statements 2007–08.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 59 CHAPTER 3 OUTCOME PERFORMANCE

Output 2.5 Capability for Afloat Support Performance Target Performance Achieve levels of preparedness directed by Achieved. the CDF for military response options with a warning time of less than 12 months. Achieve a level of training that maintains Achieved. core skills and professional standards across all warfare areas.

Quality Achieve mission capability for assigned Achieved. 99 per cent (456 days) for the force. tasks. Class achievements: • Oil Tanker – 100 per cent (334 days). • Replenishment Ship – 97 per cent (122 days). 1 Oil tanker – 338 (366[1]) URD Achieved. 1 Oil tanker – 99 per cent (334 URD achieved). The slight underachievement was due to engineering defects in HMAS Sirius. 1 Replenishment ship – 191 (227[1]) URD Partially Achieved. 1 Replenishment ship – 66 per cent (126 URD achieved). The underachievement was primarily due to a delay Quantity in completing a refit for HMAS Success due to production delays.

NOTE 1. As initially estimated in the Portfolio Budget Statements 2007–08. Output 2.6 Capability for Mine Warfare Performance Target Performance Achieve levels of preparedness directed by Achieved. the CDF for military response options with a warning time of less than 12 months. Achieve a level of training that maintains Achieved. core skills and professional standards across all warfare areas. Achieve mission capability for assigned Substantially Achieved. 88 per cent (2,527 tasks. days) for the force. Underachievement was due to some systems-related defects, in particular reliability issues with the remote disposal vehicle, which reduced clearance Quality diving team capability, and the unscheduled refit extension of an auxiliary minesweeper, MSA Bandicoot. Class achievements: • Coastal mine hunters – 96 per cent (1,723 days). • Auxiliary minesweepers – 100 per cent (347 days). • Clearance diving teams – 62 per cent (457 days). 6[1] Coastal mine hunters – 1,934 Substantially Achieved. 6 Coastal mine [2] hunters – 93 per cent (1,801 URD achieved) (2,085 ) URD due to various systems-related defects. 2 Auxiliary minesweepers – 516 Partially Achieved. 2 Auxiliary minesweepers (732[2]) URD – 67 per cent (347 URD achieved). The underachievement was primarily due to an unscheduled refit extension of MSA Bandicoot as a result of emergent propulsion system Quantity defects and other systems-related defects that reduced overall URD achievement. 2 Clearance diving teams – 732 URD Achieved. 2 Clearance diving teams – 100 per cent (732 URD achieved).

NOTES 1. Two coastal mine hunters were tasked for surveillance and patrolling of Australia’s maritime approaches. 2. As initially estimated in the Portfolio Budget Statements 2007–08.

60 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

Output 2.7 Capability for Amphibious Lift Performance Target Performance Achieve levels of preparedness directed by Achieved. the CDF for military response options with a warning time of less than 12 months. Achieve a level of training that maintains Achieved. core skills and professional standards across all warfare areas. Achieve mission capability for assigned Achieved. 99 per cent (2,613 days) for the tasks. force. The slight underachievement was due to unscheduled maintenance. Quality Class achievements: • Heavy landing ship – 100 per cent (262 days). • Amphibious landing ships – 96 per cent (578 days). • Heavy landing craft – 99 per cent (1,773 days). 1 Heavy landing ship – 241 (366[1]) URD Achieved. 1 Heavy landing ship – 109 per cent (262 URD achieved). The overachievement was due to a reduced refit period in March to May 2008. 2 Amphibious landing ships – 605 URD Achieved. 2 Amphibious landing ships – 99 per cent (601 URD achieved). The underachievement was due to the unscheduled docking of HMAS Kanimbla in November 2007. Quantity 6 Heavy landing craft – Substantially Achieved. 6 Heavy landing 2,033 (2,066[1]) URD craft – 88 per cent (1,786 URD achieved). The underachievement was due to engineering defects in HMAS Tarakan and a delay in achieving a mariner skills evaluation for HMAS Labuan.

NOTE 1. As initially estimated in the Portfolio Budget Statements 2007–08.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 61 CHAPTER 3 OUTCOME PERFORMANCE

Output 2.8 Capability for Hydrographic, Meteorological and Oceanographic Operations Performance Target Performance Achieve levels of preparedness directed by Achieved. the CDF for military response options with a warning time of less than 12 months. Achieve a level of training that maintains Achieved. core skills and professional standards to conduct survey tasking, produce navigational information and provision of oceanographic and meteorological support. Achieve mission capability for assigned Achieved. 100 per cent (1,755 days) for tasks. the force. Class achievements: • Hydrographic ships – 100 per cent (664 days) • Survey motor launches – 100 per cent (1,091 days). Achieve HydrOcscheme 2006-09 data and Partially Achieved. 72 per cent. Units surveying tasking requirements to meet recorded 447 survey/sortie days achieved national hydrographic surveying and (SDA) from 618 survey/sortie days planned charting obligations. (SDP). Specific achievements were as follows: • Hydrographic ships – 66 per cent (114 SDA Quality from 174 SDP). 49 survey days were re- tasked to Operation Resolute. The remaining 11 days were lost due to personnel shortages in key departments, platform defects and inclement weather. • Survey motor launches – 73 per cent (249 SDA from 343 SDP) due to defects and inclement weather. • Laser airborne depth sounder aircraft – 117 per cent (63 SDA from 54 SDP). Delays in commencement of sensor upgrade led to greater availability of the aircraft earlier in the financial year. • Deployable geospatial support team – 45 per cent (21 SDA from 47 SDP). Underachievement due to staff shortages and support to Operation Papua New Guinea Assist conducted in lieu of HydrOcscheme availability.

62 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

Performance Target Performance 2 hydrographic ships – 732 URD Substantially Achieved. 2 hydrographic ships – 91 per cent (664 URD achieved) due to personnel deficiencies requiring rescheduling of mariner skills evaluation. 4 survey motor launches – 1,170 Substantially Achieved. 4 survey motor (1,184[1]) URD launches – 93 per cent (1,091 URD achieved) due to equipment defect and program change to mariner skills evaluation schedule. 1 laser airborne depth sounder aircraft – Substantially Achieved. 1 laser airborne 391 (664[1]) hours depth sounder aircraft – 95 per cent (372 hours achieved) due to poor weather limiting effective data collection. 1 deployable geospatial support team - 366 Achieved. 1 deployable geospatial support URD team - 100 per cent (366 URD). 1 Chart Production Office – 249 URD Achieved. 1 Chart Production Office – 99 per cent (248 URD for chart production) 1 Naval Air Station Weather and Achieved. 1 Naval Air Station Weather and Oceanographic Centre – 240 URD Oceanographic Centre – 102 per cent (244 URD). Figures exceeded the financial year target due to extra requirements for forecasters during weekend air show events at the Naval Air Station in Nowra, NSW.

Quantity 1 Mobile Meteorological and Achieved. 1 Mobile Meteorological and Oceanographic team – 655 (732[1]) URD Oceanographic team – 106 per cent (697 URD). Personnel shortages identified in the Operational METOC Centre were effectively mitigated. Navigation Chart Production: Achieved. Chart Production: • New charts/editions - 50 • 62 new charts/editions (124 per cent) • Electronic Navigational Chart cells – 180 • 172 electronic navigational chart cells (96 (200[1]) per cent). Target not fully met due to personnel shortages, current limitations of the digital hydrographic database and higher demand for other Defence products. Defence Support: Achieved. Defence Support: • New charts/editions - 12 • 20 new MGI products/editions (167 per cent) • Military Geographic Information (MGI) • 7 MGI Foundation Datasets (117 per cent). Foundation Datasets – 6 Demand for Military Geospatial Information datasets exceeded planned levels and was met. Oceanographic database production: Achieved. Oceanographic database • Web Enabled Datasets – 4 production: • 24 Web enabled datasets (600 per cent). Target exceeded due to process automation.

NOTE 1. As initially estimated in the Portfolio Budget Statements 2007–08.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 63 CHAPTER 3 OUTCOME PERFORMANCE

Cost to Government Table 3.13 Outcome 2: Navy Capability for the defence of Australia and its interests

Budget Revised Actual Variation[3] Variation[3] Estimate[1] Estimate[2] Result ($'000) ($'000) ($'000) ($'000) (%) INCOME Revenues Sale of goods and rendering of services 176,522 199,183 147,342 - 51,841 -26.0 Other revenues[4] 18,767 34,793 18,529 -16,264 -46.7 Tot a l re v e n ue 195,289 233,976 165,871 - 68,105 - 29.1 Gains Reversals of previous asset write-downs 18,974 34,007 133,297 99,290 292.0 Sale of assets – – 719 719 - Other gains 1,761 1,761 94 -1,667 -94.6 Tot a l ga i n s 20,735 35,767 134,110 98,343 275.0 Tot a l in c o me 216,025 269,743 299,981 30,238 11.2 EXPENSES Employees 1,736,555 1,786,985 1,701,480 - 85,505 -4.8 Suppliers 2,283,441 2,270,603 1,806,105 -464,498 -20.5 Grants 1,048 5,368 7,764 2,396 44.6 Depreciation and amortisation 1,170,356 1,229,939 1,275,851 45,912 3.7 Finance cost 7,144 7,676 12,028 4,352 56.7 Write-down and impairment of assets 30,178 133,805 1,088,708 954,903 713.7 Foreign exchange loss – – 857 857 - Other expenses –33 196 13,460 13,264 6,767.3 Tot a l ex pe n se s 5,228,689 5,434,572 5,906,254 471,682 8.7 Net cost of Outcome 2 5,012,665 5,164,828 5,606,273 441,445 8.5

NOTES 1. Budget Estimates are consistent with Portfolio Budget Statements 2007-08 (p150). 2. Revised Estimates are consistent with Portfolio Additional Estimates Statements 2007-08 (p83). 3. Variation figures are the difference between Actual Result and Revised Estimate. 4. Other revenues includes rental income.

64 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

Table 3.14 Breakdown of Outcome 2 by output

Budget Revised Actual Variation[3] Variation[3] Estimate[1] Estimate[2] Result ($'000) ($'000) ($'000) ($'000) (%) Output 2.1 - Capability for major surface combatant operations 1,902,220 1,962,991 1,940,239 -22,752 -1.2 Output 2.2 - Capability for naval aviation operations 641,202 660,934 1,529,027 868,093 131.3 Output 2.3 - Capability for patrol boat operations 277,386 287,719 267,717 -20,002 -7.0 Output 2.4 - Capability for submarine operations 815,756 833,645 673,358 -160,287 -19.2 Output 2.5 - Capability for afloat support 263,997 275,762 306,226 30,464 11.0 Output 2.6 - Capability for mine warfare 387,512 400,218 370,899 -29,319 -7.3 Output 2.7 - Capability for amphibious lift 424,751 436,429 323,763 -112,666 -25.8 Output 2.8 - Capability for hydrographic, meteorological and oceanograghic operations 299,841 307,130 195,042 -112,088 -36.5 Net cost of Outcome 2 5,012,665 5,164,828 5,606,273 441,445 8.5

NOTES 1. Budget Estimates are consistent with Portfolio Budget Statements 2007-08 (p151). 2. Revised Estimates are consistent with Portfolio Additional Estimates Statements 2007-08 (p84). 3. Variation figures are the difference between Actual Result and Revised Estimate.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 65 CHAPTER 3 OUTCOME PERFORMANCE

OUTCOME 3 ARMY CAPABILITY

The Army provides a world-class capability to fight and win as part of the ADF team. Its mission is to win the land battle and the Army achieved all its operational objectives during 2007–08.

The Army uses warfighting concepts to reinforce operational forces. The Army is investigate and describe future operating developing a High Readiness Reserve, environments and guide the development capable of supporting all HNA operational of military capabilities. This ensures the capabilities. Army has the agility and adaptability to The Army operations are at the highest sustain operations in all types of level since 1973. The equivalent of a conflict. The Army’s capstone doctrine Brigade-sized force is deployed in both Fundamentals of Land Warfare1, endorsed regional and non-regional commitments, in early 2008, conceptual and force with a similar sized force at high modernisation development. readiness in Australia for other The Army’s key initiative for future contingencies. The high operational operational demands and requirements is tempo and personnel shortages in key the Hardened and Networked Army (HNA). trades led to a number of activities being This initiative is based on the philosophy reduced in scope affecting overall of the combined arms approach to collective training. combat, whereby infantry, armour, The Army is coping with a high artillery, aviation and engineers work operational tempo, introduction of a together, sustained by combat service range of new equipment and the need support elements. to grow the size of the Army through The Army is also revitalising the Army HNA, Enhanced Land Force and retention Reserve for a more significant and and recruiting initiatives. meaningful contribution to sustain and Army risks Table 3.15 Key Risk Mitigation Status Key risks Risk mitigation Status Introduction of Develop an Army Force Structure Plan 2009-2016 to In place new capabilities effectively incorporate new and replacement capabilities. Delay in delivery Work with other Defence Groups to develop strategies to In place of the Army’s relieve pressures on capability delivery associated with Infrastructure infrastructure. Develop strategic planning guidance for the Army’s future use of the Defence estate and other estate planning initiatives to produce cost effective outcomes. Review training areas within Australia to identify capability needs and advance development. Sufficient Army Implement a series of new retention initiatives to address In place personnel the shortfalls in critical ranks. Adopt initiatives to improve internal trade transfers and retention. Increase recruiting targets to 3,500 per year for five years for the Australian Regular Army. Deficiencies in Develop equipment establishment plan to inform the In place logistic support planning process and set the priorities for equipping the Army. Provide additional funding in support of logistic shortfalls for the general service B-vehicles, explosive ordnance, Black Hawk helicopters, Army surveillance and battlefield command support systems.

1. http://adel.defence.gov.au:8087.

66 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

Capability performance information Output 3.1 Capability for Special Operations Performance targets Performance Achieve capabilities and levels of Substantially achieved. The special operations preparedness directed by the CDF for capability was able to meet almost all military response options with a warning preparedness requirements for military response time of less than 12 months. options. Some deficiencies in Special Operations Command air–droppable rigid hull inflatable boat and parachute capabilities created some limitations to a few military response options. Quality Achieve a level of training that maintains Achieved. core skills and professional standards across all warfare (including counter-terrorism) areas. Special Operations Command, comprising: Substantially achieved. Most equipment • a command headquarters availability for units in this output was • a Special Air Service Regiment sufficient to meet most preparedness requirements. • a Regular Army commando regiment • an Army Reserve commando regiment

Quantity • an Incident Response Regiment • a Special Forces Training Centre • a Special Operations Logistic Squadron. Output 3.2 Capability for Medium Combined Arms Operations Performance targets Performance Achieve levels of preparedness directed by Substantially achieved. The medium combined the CDF for military response options with a arms operations capability met most allocated warning time of less than 12 months, preparedness requirements for military response including the provision of a battalion-sized options in this reporting period. Personnel group within 90 days readiness notice. deficiencies in key trade areas, a high level of operational commitment for ASLAVs, and the introduction of M1 Abrams, coupled with a shortage of parts and Abrams key trade personnel affected preparedness levels for some contingency response options. Ongoing commitments of force elements for the Reconstruction Task Force in Afghanistan and the Security Detachment in Baghdad were maintained. Equipment and personnel shortages continue to be addressed with new retention and recruiting initiatives and the introduction of

Quality upgraded ASLAVs, along with new Bushmaster vehicles and Abrams main battle tanks. Additional projects will deliver upgraded armoured personnel carriers in the near future. Achieve a level of training that maintains Partially achieved. A number of training core skills and professional standards across activities were reduced in scope due to all warfare areas. operational commitments. Personnel shortages in a number of key trades and equipment deficiencies continue to affect the achievement of some core skills. Artillery and Air Defence Units were deployed in an Infantry role to East Timor and Solomon Islands which reduced their collective training in their normal roles. 1st Brigade, comprising: Substantially achieved. The medium • a brigade headquarters combined arms operations capability • a tank regiment continued to have deficiencies in personnel and equipment holdings that affected its • a cavalry regiment capacity to complete all required tasks. • a medium artillery regiment Initiatives have been instituted to mitigate • a combat engineer regiment both of these shortcomings. Quantity • a combat signal regiment • a mechanised infantry battalion • a combat service support battalion.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 67 CHAPTER 3 OUTCOME PERFORMANCE

Output 3.3 Capability for Light Combined Arms Operations Performance targets Performance Achieve levels of preparedness directed by Achieved. This capability provided force the CDF for military response options with a elements for the Baghdad Security warning time of less than 12 months, Detachment and for operations in Iraq, including the provision of a battalion-sized Solomon Islands, and East Timor. group within 90 days readiness notice. Achieve a level of training that maintains Substantially achieved. Most training core skills and professional standards across requirements were met. Airborne, Quality all warfare areas. airmobile and amphibious training continued to be restricted due to reduced availability of joint assets as a result of operational commitments. 3rd Brigade, comprising: Substantially achieved. Due to operational • a brigade headquarters tempo, some personnel and equipment • an armoured personnel carrier squadron availability for units in this output were not sufficient to meet all preparedness • a field artillery regiment requirements. • a combat engineer regiment

Quantity • a combat signal regiment • three infantry battalions • a combat service support battalion. Output 3.4 Capability for Army Aviation Operations Performance targets Performance Achieve levels of preparedness Substantially achieved. Almost all levels of directed by the CDF for military preparedness for military response options were response options with a warning met. Certain deficiencies in the SA-70 Black Hawk time of less than 12 months. helicopter resulted in some limitations to a few response options. The capability also continued to acquire the armed reconnaissance helicopter and multi-role helicopter assets.

Quality Achieve a level of training that Achieved. The capability has been heavily maintains core skills and committed to operations both offshore and professional standards across all domestically, which has provided the opportunity to warfare areas. practise core skills and professional standards across most warfare areas. 34 S-70A9 Black Hawk – 7,500 flying Substantially achieved. 84.6 per cent (6,348 flying hours hours). Black Hawk flying hours have not been achieved due to deep maintenance capacity limitations. 41 B-206 Kiowa – 8,750 (10,000[1]) Substantially achieved. 82.4 per cent (7,212 flying flying hours hours). Kiowa flying hours are decreasing as the aircraft is progressively withdrawn from service. 6 CH-47D Chinook – 1,270 flying Substantially achieved. 90 per cent (1,143 flying hours hours). 25 UH-1H Iroquois – 500 flying hours Substantially achieved. 90.2 per cent (451 flying hours). Iroquois was withdrawn from service in September 2007. Quantity 14 ARH Tiger – 1,010 flying hours Achieved. 98.4 per cent (994 flying hours). ARH pilot training flying hours are steadily increasing as planned. 2 MRH-90 – 200 flying hours Not Achieved. 7 per cent (14 flying hours). First two aircraft are undertaking test and evaluation activities. 3 B-300 King Air – 2,100 (2,000[1]) Achieved. 100.6 per cent (2,113 flying hours). flying hours

NOTE 1. As initially estimated in the Portfolio Budget Statements 2007–08.

68 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

Output 3.5 Capability for Ground-Based Air Defence Performance targets Performance Achieve levels of preparedness Partially achieved. The ground-based air defence directed by the CDF for military capability was unable to meet all preparedness response options with a warning time requirements as directed in the military response of less than 12 months. options. The introduction of upgraded RBS-70 and radar capability and shortcomings with RBS-70 ammunition clearances affected the ability to meet all preparedness levels. These issues are close to resolution. Quality Achieve a level of training that Partially Achieved. Most training activities were maintains core skills and professional achieved however operational commitments to standards across all warfare areas. Operations Astute and Resolute impacted on collective training. An Air Defence Regiment. Partially achieved. Due to upgrades in equipment, the Army was only able to provide a reduced capability in 2007–08. Quantity Output 3.6 Capability for Combat Support Operations Performance targets Performance Achieve levels of preparedness directed by Substantially achieved. The capability met the CDF for military response options with a most preparedness requirements as warning time of less than 12 months. directed in the military response options, due to continued deficiencies in critical trades for some preparedness requirements. These shortfalls are being addressed through the critical trade remediation plan and retention initiatives. Equipment deficiencies and the introduction of new capabilities such as the Unmanned Aerial Vehicle and protected Engineering vehicles are being resolved

Quality through new acquisition projects and the limited redistribution of assets. The available capability provided significant support to forces deployed on operations throughout the year in all theatres. Achieve a level of training that maintains Substantially achieved. Operational core skills and professional standards across deployments and shortfalls in personnel in all warfare areas. critical trades affected the achievement of some training requirements. Combat support units include: Substantially achieved. The combat • a surveillance and target acquisition regiment support operations capability had sufficient • an engineer support regiment headquarters personnel and equipment to provide a reduced, yet credible, capability. • two Army Reserve engineer construction regiments Partially achieved for one Intelligence Battalion due to operational tempo and a • two Regular Army engineer construction shortage of critical personnel. squadrons • a construction engineer works section

Quantity • a topographical survey squadron • a signals regiment • an intelligence battalion • a military police battalion • a combat training centre.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 69 CHAPTER 3 OUTCOME PERFORMANCE

Output 3.7 Capability for Regional Surveillance Performance targets Performance Achieve levels of preparedness directed by Achieved. The three regional force the CDF for military response options with a surveillance units provided support to warning time of less than 12 months. border protection operations in support of Operation Resolute. Achieve a level of training that maintains Achieved. Quality core skills and professional standards across all warfare areas. Three regional force surveillance units. Achieved. Quantity Output 3.8 Capability for Operational Logistic Support to Land Forces Performance targets Performance Achieve levels of preparedness directed by Partially achieved. The capability provided the CDF for military response options with a significant support to forces deployed on warning time of less than 12 months. operations throughout the reporting period in all theatres. A substantial number of logistic personnel were deployed to support relief operations in the Middle East and East Timor, as well as providing personnel to train elements of the Iraqi Army. The training support has now concluded. As a result of the continued support to operations and personnel shortfalls in

Quality critical trades, the capability was unable to meet all preparedness requirements as directed in the military response options. Achieve a level of training that maintains Partially achieved. Operational core skills and professional standards across deployments, limited exercise all warfare areas. opportunities, and personnel deficiencies in a number of key trades affected the achievement of all training requirements. 17 Combat Service Support Brigade and its Partially achieved. The logistic support integral logistic support units including: capability had insufficient personnel and • two logistic force headquarters equipment to achieve all of the tasks • a signals regiment required of it. A reduced yet credible level of capability was maintained. • two regular Army and one Army Reserve force support battalions • a personnel support battalion Quantity • two integrated and one Army Reserve health support battalions • a psychology unit.

70 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

Output 3.9 Capability for Motorised Combined Arms Operations Performance targets Performance Achieve levels of preparedness directed by Partially achieved. The motorised the CDF for military response options with a combined arms operations capability is warning time of less than 12 months, growing, with limitations from the ongoing including the provision of a battalion-sized requirement for the Army to provide group within 90 days readiness notice. elements of the 6th Battalion and 2nd/ 14th Light Horse Regiment to support operations in Iraq and Afghanistan. Accordingly, the capability was not able to meet all military response options due to an equipment shortage with large numbers of Bushmasters and ASLAVs deployed to the Middle East and personnel shortfalls in key trades. These issues continue to impact on the raise, train and sustain requirements necessary to fully develop the motorised combined arms capability. These issues are being addressed through retention and Quality recruiting programs and through the redistribution and acquisition of new equipment including Bushranger vehicles and upgrade of the ASLAV fleet. Achieve a level of training that maintains Partially Achieved. Most training activities core skills and professional standards across for the 6th Battalion were unable to be all warfare areas. completed due to operational commitments. Most activities for 2nd/14th collective training were reduced in scope due to operational commitments, and deficiencies in equipment and numbers of personnel deployed. 7th Brigade, comprising: Substantially Achieved. Most units • a brigade headquarters achieved the required staffing levels and provided a credible level of preparedness, • a cavalry regiment proven by the assumption of Ready • a field artillery regiment Battalion Group requirements. • a combat engineer regiment Partially Achieved for the motorised • a signal squadron infantry battalion due to shortages of Bushmaster vehicles. Quantity • a combat signal regiment • a motorised infantry battalion • two reserve infantry battalions • a combat service support battalion.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 71 CHAPTER 3 OUTCOME PERFORMANCE

Output 3.10 Capability for Protective Operations Performance targets Performance Achieve levels of preparedness directed by Substantially Achieved. The protective the CDF for military response options with a operations capability achieved almost all warning time of less than 12 months. the levels of preparedness directed for the Reserve Response Forces. A shortage of personnel to man High Readiness Response Groups was in effect until December 2007. Outputs provided personnel for the transit security element in support of border security operations, provided a company for security tasks in Solomon Islands and a company in Butterworth, Malaysia. The output also provided personnel to Quality supplement Regular Army units both in Australia and on operations. Achieve a level of training that maintains Partially Achieved. Most training activities core skills and professional standards across were successfully conducted. Some all warfare areas. collective training activities had to be reduced in scope due to circumstances such as the cancellation of Regular Army and overseas exchange exercises. The 4th, 5th, 8th, 9th, 11th and Partially Achieved. Some Reserve Response th Forces were provided during the reporting 13 Brigades, each comprising: period. Despite personnel shortfalls within • a Brigade headquarters the capability, the Reserves were still able • two infantry battalions to provide a reinforcement capability for Quantity • combat and logistic support units. the combat force component of the Army.

72 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

Cost to Government Table 3.16 Outcome 3: Army capability for the defence of Australia and its interests

Budget Revised Actual Variation[3] Variation[3] Estimate[1] Estimate[2] Result ($'000) ($'000) ($'000) ($'000) (%) Income Revenues Sale of goods and rendering of services 233,257 261,858 228,346 -33,512 -12.8 Other revenue[4] 29,458 59,244 30,473 -28,771 -48.6 Tot a l Re v en u e 262,715 321,102 258,819 -62,283 -19.4 Gains Reversals of previous asset write- downs 29,963 58,232 315,980 257,748 442.6

Sale of assets – – -584 -584 - Other gains 2,715 2,715 2,624 -91 -3.4 Tot a l Ga i ns 32,678 60,947 318,020 257,073 421.8 Tot a l I nc o me 295,393 382,049 576,839 194,790 51.0 Expenses Employees 2,840,746 2,909,207 3,274,961 365,754 12.6 Suppliers 2,884,746 2,858,436 2,899,855 41,419 1.4 Grants 2,112 12,112 5,349 -6,763 -55.8 Depreciation and amortisation 883,115 931,302 862,829 -68,473 -7.4 Finance cost 11,294 13,988 15,189 1,201 8.6 Write-down and impairment of assets 66,279 223,921 287,231 63,310 28.3 Foreign exchange loss – – -369 -369 - Other expenses 106 119 25,375 25,256 21,223.6 Tot a l Ex p en se s 6,688,398 6,949,085 7,370,421 421,336 6.1 Net cost of Outcome 3 6,393,005 6,567,037 6,793,582 226,545 3.4

NOTES 1. Budget Estimates are consistent with Portfolio Budget Statements 2007-08 (p164). 2. Revised Estimates are consistent with Portfolio Additional Estimates Statements 2007-08 (p88). 3. Variation figures are the difference between Actual Result and Revised Estimate. 4. Other revenues includes rental income.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 73 CHAPTER 3 OUTCOME PERFORMANCE

Table 3.17 Breakdown of Outcome 3 by output

Budget Revised Actual Variation[3] Variation[3] Estimate[1] Estimate[2] Result ($'000) ($'000) ($'000) ($'000) (%) Output 3.1 - Capability for special operations 581,018 607,171 688,057 80,886 13.3 Output 3.2 - Capability for medium combined arms operations 1,115,711 1,135,015 790,587 -344,428 -30.3 Output 3.3 - Capability for light combined arms operations 1,048,525 1,098,080 869,344 -228,736 -20.8 Output 3.4 - Capability for army aviation operations 586,716 597,858 658,599 60,741 10.2 Output 3.5 - Capability for ground based air defence 126,106 126,937 138,743 11,806 9.3 Output 3.6 - Capability for combat support operations 457,002 467,601 498,766 31,165 6.7 Output 3.7 - Capability for regional surveillance 164,041 167,063 236,515 69,452 41.6 Output 3.8 - Capability for operational logistic support to land forces 604,490 614,233 664,142 49,909 8.1 Output 3.9 - Capability for motorised combined arms operations 620,015 631,749 727,072 95,323 15.1 Output 3.10 - Capability for protective operations 1,089,381 1,121,329 1,521,757 400,428 35.7 Net Cost of Outcome 3 6,393,005 6,567,037 6,793,582 226,545 3.4

NOTES 1. Budget Estimates are consistent with Portfolio Budget Statements 2007-08 (p165). 2. Revised Estimates are consistent with Portfolio Additional Estimates Statements 2007-08 (p88). 3. Variation figures are the difference between Actual Result and Revised Estimate.

74 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

OUTCOME 4 AIR FORCE CAPABILITY

The Air Force continued to provide Australia with first rate air power in 2007–08, achieving all its operational outcomes including extensive commitments to ADF operations.

The Air Force Control and Reporting Officer category demonstrates the Air Centre in Kandahar, Afghanistan, is a key Force’s commitment to readying its component of Australia’s commitment to workforce for future capability Operation Slipper. The Centre took requirements. The relocations of the control of the Afghan operational airspace Officers’ Training School and No 1 Recruit from 5 August 2007 operating on a 24 hour Training Unit, to RAAF East Sale and RAAF continuous cycle. Air Force P-3 Orions Wagga respectively, provide state-of-the- provided vital support to border control art facilities for the initial training of Air operations in the north of Australia under Force personnel. Operation Resolute. The Air Force’s exercise program The C-17 Globemaster III represents a maintained operational preparedness and quantum leap for Australia’s airlift its ability to work with allies. Major capability. The C-17 achieved initial exercises included Pitch Black 08 and Red Operational Capability on 15 August 2007 Flag 08. and has flown more than 90 operational The Air Force has excelled in delivering heavy airlift support missions operational outcomes for the (1,590 hours). Government, and continues to evolve to The Air Force’s people are the key to meet the operational demands of the capability. The creation of the Air Combat future. Air Force Risks Table 3.18 Key risk mitigation status Key risks and Risk mitigation Status limitations To maintain External recruiting will be supplemented by greater use of Ongoing retention and internal recruiting and re-training of the existing recruitment rates workforce. Retention of staff through a more flexible in an increasingly application of non-remuneration personnel policy initiatives competitive labour and short term incentives targeted to personnel critical to market, capability. Supplemented with the establishment of the particularly in High Readiness reserve category and Gap Year program. specialist employment areas To maintain current The Air Force will evolve into a fully networked force, Ongoing capabilities during capitalising on persistent surveillance and reconnaissance a transition period platforms, adaptive command and control systems, and of new equipment fully networked operational and support systems. The deliveries and transition to future capabilities will be managed through a upgrades over the carefully orchestrated workforce plan to ensure the right coming decade person in the right job at the right time.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 75 CHAPTER 3 OUTCOME PERFORMANCE

Capability performance information Output 4.1 Capability for Air Combat Operations Performance targets Performance Achieve levels of preparedness directed by Achieved. Preparedness levels the CDF for military response options with a demonstrated through F/A-18 and F-111 warning time of less than 12 months. participation in Exercises Bersama Shield 08, Pitch Black 08 and Red Flag Alaska 08. Achieve levels of training that maintain Achieved. core skills and professional standards across all assigned warfare areas. Maintain upgrade and refurbishment of the Substantially achieved. The majority of F/A_18 Hornet aircraft. Hornet Upgrade Program targets were achieved and completion is on schedule. The first Structural Refurbishment

Quality Program 2 prototype was completed and returned to service and the second is underway. Low rate initial production commenced with the first two aircraft inducted in February 2008 with full rate production due to commence in late 2008. Maintain planning for the introduction of Achieved. Planning for F-111 withdrawal by Super Hornet in 2010-12 and the withdrawal end 2010 and introduction of the Super of the F-111. Hornet in 2010-2012 is on schedule. 21 F-111 – 3,600 flying hours Substantially achieved. 81 per cent (2,933 flying hours). The underachievement was principally the result of low aircraft availability for extended durations throughout the reporting period. This was a result of ageing aircraft issues requiring the development of new technical solutions, and significant damage to two airframes following a serious bird-strike and an in- flight fire. 71 F/A-18 – 11,500 (12,500[1]) flying hours Achieved. 98 per cent (11,301 flying hours). [1] Quantity 33 Hawk Lead-in Fighter – 7,200 (8,000 ) Substantially achieved. 91 per cent (6,572 flying hours flying hours). Underachievement was attributed to a combination of reduced serviceability, shortages of flying instructors and a lack of fast jet pilot students. Additional instructors will be trained and fast jet pilot student throughput is expected to increase in 2008. 4 PC-9/A (Forward Air Control training Achieved. 97 per cent (1,002 flying hours). aircraft) – 1,030 flying hours

NOTE 1. As initially estimated in the Portfolio Budget Statements 2007–08.

76 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

Output 4.2 Capability for Combat Support of Air Operations Performance targets Performance Achieve levels of preparedness directed by Achieved. Preparedness levels CDF for military response options with a demonstrated by ongoing deployments to warning time of less than 12 months. the Middle East, short notice deployments to Papua New Guinea for humanitarian assistance operations and support to exercises such as Pitch Black 08. Achieve a level of training that maintains Substantially achieved. While operational Quality core skills and professional standards in commitments continued to place significant conjunction with Defence Support Group pressure on training programs, core skills and the DMO across all operations. and professional standards were maintained at acceptable levels. Provide the level of preparedness required Achieved. based on a force structure of: • two expeditionary combat support wings • one health services wing. Quantity

Output 4.3 Capability for Surveillance and Response Operations Performance targets Performance Achieve levels of preparedness directed by Achieved. Preparedness targets were met the CDF for military response options with a or exceeded, as demonstrated by the warning time of less than 12 months. ongoing operational commitments to Operations Slipper, Catalyst and Resolute, and commitment to Operation Astute. Achieve levels of training that maintains Substantially achieved. The high core skills and professional standards across operational tempo placed pressure on all assigned warfare areas. No 92 Wing to complete all non-core training activities, however all core skills were maintained.

Quality Finalise plans for the introduction of the Substantially achieved. 2007–08 Wedgetail Wedgetail airborne early warning and aircraft planning requirements were control aircraft into operational service in substantially completed. Considerable 2009-10. effort and support continued to be provided to the project team. Test and development activities continued as expected. Training is scheduled to commence in 2009, subject to contractor delivery of supplies. 19 P-3 Orion aircraft – 7,850 (8,200[1]) Substantially achieved. 96 per cent (7,533 flying hours. flying hours). Minor underachievement due to serviceability, spares issues and limited maintenance capacity. Quantity

NOTE 1. As initially estimated in the Portfolio Budget Statements 2007–08.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 77 CHAPTER 3 OUTCOME PERFORMANCE

Output 4.4 Capability for Airlift Operations Performance targets Performance Achieve levels of preparedness directed by Achieved. Preparedness was constantly the CDF for military response options with a demonstrated with the continued warning time of less than 12 months. deployments to the Middle East Area of Operations under Operations Catalyst and Slipper, and regionally for Operations Astute and Anode. Rapid and sustained responses to humanitarian crises and disaster relief such as the Charleville, QLD, and Papua New Guinea flood relief, support to Operation Nargis Assist cyclone relief in Burma, search and survivor assistance and aero-medical evacuations were conducted. Achieve levels of training that maintains Achieved. core skills and professional standards across all assigned warfare areas.

Quality Continue to Introduce the Boeing Achieved. All four C-17 Globemaster III C-17 Globemaster III into service. aircraft have now been delivered and transition, training, test and evaluation activities are on schedule. Initial operating capability was achieved in August 2007. Final operating capability is expected in mid-2011. Maintain planning for the transition of the Achieved. Planning for the transition from air-to-air refuelling capability in 2009-10 to the B-707 to KC-30B Multi-Role Tanker the KC30B, whilst withdrawing the B707 Transport aircraft continued in support of its from service in 2008. introduction into service. The B-707 was retired on 30 June 2008. Initial operating capability for the KC-30B is scheduled for December 2009. 24 C-130 Hercules – 9,960 (9,200[1]) flying Achieved. 103 per cent (10,235 flying hours hours). 4[2] C-17 Globemaster III – 2,500 (3,500[1]) Substantially achieved. 84 per cent flying hours (2,102 flying hours). The under achievement was due to the uncertain nature of test and evaluation activities. However, the test and evaluation program is on schedule; initial operating capability was achieved in August 2007 and achievement of final operating capability is expected on schedule. 14 DHC-4 Caribou – 3,800 (4,100[1]) flying Substantially achieved. 82 per cent (3,129 hours flying hours). The collocation of the Caribou fleet in Townsville impacted the ability to fully achieve the forecast flying hours; Quantity however, the collocation will result in future efficiencies. The fleet was also affected by maintenance issues and spares availability. 2[3] B-707 – 800 flying hours Achieved. 97 per cent (776 flying hours). 2 B-737 BBJ – 1,414 flying hours Achieved. 100 per cent (1,419 flying hours). 3 CL604 Challenger – 2,403 flying hours Substantially achieved. 92 per cent (2,216 flying hours). All training requirements were achieved. The underachievement was due to reduced customer requirements.

NOTES 1. As initially estimated in Portfolio Budget Statements 2007–08. 2. Period commenced with two C–17s with a further two received in September and October 2007. 3. Period commenced with two B–707s, both of which were retired during the year.

78 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

Cost to Government Table 3.19 Outcome 4: Air Force capability for the Defence of Australia and its Interests Budget Revised Actual Variation[3] Variation[3] Estimate[1] Estimate[2 Result ($'000) ($'000) ($'000) ($'000) (%) INCOME Revenues Sale of goods and rendering of services 171,548 193,923 228,488 34,565 17.8 Other revenues[4] 13,260 36,190 18,386 -17,804 - 49.2 Tot a l re v e n ue 184,808 230,113 246,875 16,762 7.3 Gains Reversals of previous asset write- downs 137,407 304,291 143,540 -160,751 -52.8 Sale of assets – – 859 859 - Other gains 1,561 1,561 1,372 -189 -12.1 Tot a l ga i n s 138,968 305,852 145,771 -160,081 -52.3 Tot a l in c o me 323,776 535,965 392,646 -143,319 - 26.7 Expenses Employees 1,631,054 1,661,345 1,742,260 80,915 4.9 Suppliers 2,639,336 2,610,646 2,183,933 -426,713 -16.3 Grants 883 883 3,906 3,023 342.3 Depreciation and amortisation 1,241,319 1,300,066 1,397,985 97,919 7.5 Finance cost 5,918 7,741 12,512 4,771 61.6 Write-down and impairment of assets 129,657 403,352 431,057 27,705 6.9 Foreign exchange loss – – 1,535 1,535 - Other expenses 728 495 11,392 10,897 2,201.4 Tot a l ex pe n se s 5,648,896 5,984,528 5,784,579 -199,949 -3.3 Net cost of Outcome 4 5,325,120 5,448,563 5,391,933 -56,630 - 1.0 NOTES 1. Budget Estimates are consistent with Portfolio Budget Statements 2007-08 (p175). 2. Revised Estimates are consistent with Portfolio Additional Estimates Statements 2007-08 (p90). 3. Variation figures are the difference between Actual Result and Revised Estimate. 4. Other revenues includes rental income. Table 3.20 Breakdown of Outcome 4 by output Budget Revised Actual Variation[3] Variation[3] Estimate[1] Estimate[2 Result ($'000) ($'000) ($'000) ($'000) (%) Output 4.1 - Capability for air combat operations 1,842,613 1,857,419 2,072,223 214,804 11.6 Output 4.2 - Capability for combat support of air operations 1,022,579 1,066,429 1,048,984 -17,445 -1.6 Output 4.3 - Capability for surveillance and response operations 1,295,189 1,323,934 1,333,156 9,222 0.7 Output 4.4 - Capability for airlift operations 1,164,739 1,200,781 937,569 -263,212 -21.9 Net cost of Outcome 4 5,325,120 5,448,563 5,391,933 -56,630 -1.0 NOTES 1. Budget Estimates are consistent with Portfolio Budget Statements 2007-08 (p176). 2. Revised Estimates are consistent with Portfolio Additional Estimates Statements 2007-08 (p91). 3. Variation figures are the difference between Actual Result and Revised Estimate.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 79 CHAPTER 3 OUTCOME PERFORMANCE

OUTCOME 5 STRATEGIC POLICY

During 2007–08, Outcome 5 was achieved jointly by the International Policy Division within the Intelligence, Security and International Policy Group and the Strategy, Coordination and Governance Executive within the Office of the Secretary and the Chief of the Defence Force. Strategic Policy risks Key risk and limitations Risk mitigation Status Failure to detect changes Continuously monitored the strategic environment to Ongoing in Australia’s strategic enable the shaping of appropriate policies. environment, both generally and with respect to specific potential crises Failure to act in a timely Continued the development of Defence’s Ongoing manner to changes in international relationships. Australia’s strategic environment An inadequate policy Developed staff skills and ensured personnel Ongoing response to any changes in management practices focused on balancing Australia’s strategic competing priorities. environment External factors affecting Ensured alignment between Defence’s policy and its Ongoing the achievement of operational objectives. Defence Cooperation Program objectives in regional countries Performance information Output 5.1 International Policy, Activities and Engagement This output provides strategic and we successfully concluded our training international policy advice to the and battle-group deployments in Iraq. Government to enable it to make sound Defence assisted other Australian judgments on, and develop appropriate agencies to achieve their objectives in responses to, changes in Australia’s countries where the ADF is conducting strategic circumstances and specific operations. security issues. It also uses strategic policy guidance to develop International Engagement recommendations for the Government on Defence worked closely with the United international engagement activities and States to achieve closer cooperation in initiatives. areas such as humanitarian assistance and Policy advice for ADF operations disaster relief, intelligence, surveillance and reconnaissance, and joint training, Policy advice and support was provided and an agreement with the United States for forces deployed in Iraq, Afghanistan, on satellite communication was finalised. East Timor and Solomon Islands. Defence Information security agreements were engaged with other Australian reached with the North Atlantic Treaty Government agencies, allies and partner Organization and India, and military talks countries to help achieve operational were held with Pakistan at the Chief of objectives. Through close cooperation Defence Force level. and negotiation with allies and partners

80 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

Defence continued to consolidate its Defence cooperated closely with regional bilateral defence relationship with China. partners in South-East Asia on counter- In 2007, Defence attended the People’s terrorism cooperation and humanitarian Liberation Army (PLA) Exercise WARRIOR assistance and disaster relief. Cooperation foreign observer’s program for the first with South-East Asian partners in the area time. Defence also enhanced maritime of training and preparation for engagement with two PLA naval ships peacekeeping operations was also visiting Sydney in September 2007 to advanced. participate in a search and rescue exercise In the South Pacific, a new phase of defence with the Royal Australian Navy and Royal cooperation was reached as the Papua New New Zealand Navy on 2 October 2007 in Guinea Defence Force (PNGDF) focused on the Tasman Sea. Defence will continue to capability development. Defence also develop open and constructive launched a new program of enhanced engagement with China through senior defence cooperation with East Timor. level dialogue and practical activities.

Performance Targets Performance Provide the Government Achieved. Defence responded promptly and comprehensively to a range with comprehensive and of international defence matters including: timely policy advice on • ADF operations in Iraq, Afghanistan and Solomon Islands[1] current and emerging international defence • Provision of additional security assistance in East Timor issues. • Support to five successful Pacific multilateral operations, which involved 14 Pacific Island countries and 21 patrol boats. Manage Defence’s Achieved. Defence worked closely with allies and partners on a number international engagement of different aspects of security cooperation including the following key activities to support initiatives: Australia’s efforts to • The Australia-India Arrangement for the Reciprocal Protection of Exchanged promote regional and global Classified Information of Defence Interest was signed on 11 July 2007. security. • The Action Plan for implementing the 2007 Australia-Japan Joint Declaration on Security Cooperation was endorsed by former Prime Ministers Howard and Abe on 9 September 2007. • Singapore agreed to deploy a medical team to support Australian and other International Security Assistance Force troops in Afghanistan.[2] • The Coast Watch of the South initiative in the Philippines progressed strongly and is likely to begin operating in the Sulu and Celebes Seas in 2008. • Defence supported a high-level maritime security seminar in Cambodia. • Defence also worked closely with regional security bodies, particularly the Association of South-East Asian Nations Regional Forum, on initiatives to support humanitarian assistance/disaster relief and peacekeeping.[3] In support of Australia's regional counter-terrorism efforts, Defence continued engagement with countries including Indonesia, the Philippines, Thailand, Malaysia and Singapore on activities to build regional capabilities. As part of broader bilateral Defence Cooperation Programs, activities included counter-hijack and hostage recovery training, operations analysis training and intelligence analysis training. Ensure Defence’s overseas Achieved. Defence representatives, including 29 Defence Attachés and representatives contribute Defence Advisers and over 70 supporting Defence personnel worked in to the effective 51 countries in support of Australia’s overseas defence interests. In management of Australia’s diverse areas such as equipment procurement, humanitarian assistance, defence interests in the foreign training assistance and support for deployed ADF elements, context of overall bilateral Defence representatives successfully undertook a wide range of tasks on relationships. behalf of Australia and the Defence organisation. Achieving Defence Achieved. In accordance with Defence’s International Engagement Plan, Cooperation Program Defence successfully managed the 2007–08 Defence Cooperation objectives. Program. As detailed under ‘Defence Cooperation’, programmed activities were achieved within budgeted parameters.

NOTES 1. More information on the ADF’s involvement in international operations can be found at www.defence.gov.au/globalops.htm. 2. More information on Australia’s role in the International Security Assistance Force can be found at www.defence.gov.au/ opslipper/default.htm. 3. More information on the Association of South-East Asian Nations Regional Forum can be found at www.dfat.gov.au/arf/ index.html. DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 81 CHAPTER 3 OUTCOME PERFORMANCE

Defence Cooperation Program The Government’s strategic defence • working with regional countries in a objectives in the region were achieved by: constructive manner to assist them to • conducting defence relationships in a achieve defence self–reliance manner which contributed to the • working cooperatively to expand maintenance of regional security regional defence expertise and • cooperating closely with allies, capabilities in areas such as partners in the region and others to peacekeeping, humanitarian assistance achieve security-related outcomes and disaster relief, and counter- favourable to Australia terrorism cooperation. Table 3.21 Defence Cooperation Expenditure, 2005–06 to 2007–08 2005-06 2006-07 2007–08 2007–08 Actual Actual Budget Actual Result Result Estimate Result ($’000) ($’000) ($’000) ($’000) Papua New Guinea 19,206 14,214 11,063 12,213 South Pacific Region[1] 36,559 33,439 30,147 35,860 South-East Asia 20,992 21,286 21,774 20,640 Other regional activities 2,340 2,926 3,082 4,436 Defence International Training Centre[2] 3,782 3,915 4,923 4,414 Tot a l 82,879 75,781 70,989 77,564

NOTES 1. Defence entered into a Materiel Sustainment Agreement with the DMO in 2007–08 for the sustainment of the Pacific Patrol Boat Program for $12.225m. 2. The Defence International Training Centre is managed by Air Force to provide training to the defence forces of South-East Asia and South Pacific nations and other selected foreign personnel. Papua New Guinea of support to PNG will involve up to $48 The Defence Cooperation Program (DCP) million over ten years for infrastructure with Papua New Guinea (PNG) continues to upgrades, capital equipment and personal provide support to land and maritime military equipment. elements of the PNGDF through an East Timor extensive program of training, exercises, In 2007–08, the DCP with East Timor and infrastructure upgrades such as the continued to provide support for training Barracks Refurbishment Program and the programs and capacity development upgrading of PNGDF armouries and activities for the East Timor Defence Force magazines. Defence supported the (F–FDTL) and the East Timor Secretariat of upgrading of security at the PNGDF’s Defence (SED). Defence’s 18 in-country central ammunition depot at Goldie River advisers have continued to provide training Training Depot. The program funded in English language, governance, financial training for 56 PNGDF members in management, defence and security sector Australia. reform, engineering, civil-military Progress in the DCP was reviewed at the cooperation, medical, logistics, and Defence Talks, held in Canberra in communications for both the F–FDTL and December 2007, and the Ministerial Forum, the SED. held in Madang, PNG, in April 2008. Other DCP activities included seamanship Australia confirmed its intention to support training for F–FDTL officers at the the second phase of its support to PNG’s Australian Maritime College, English Defence Reform Program, the capability language training at Charles Darwin upgrade in response to PNG meeting its University, civil–military cooperation obligation to invest adequately in the activities in East Timor, and adviser sustainability of the PNGDF. This package support during F–FDTL apprehension

82 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

operations following the 11 February 2008 Solomon Islands, Tonga, Tuvalu and presidential assassination attempt. An Vanuatu totalled $35.9m, including Enhanced DCP was agreed by the training for 232 people. The DCP is Government and is being implemented supported by 32 ADF personnel who are over the next 12–18 months. It comprises posted in-country as advisers working a package of additional advisers and closely with South Pacific counterparts to projects designed to build the capacity of foster and support regional stability. the F–FDTL in the areas of engineering, Defence engagement with Fiji remains maritime security, English language suspended. proficiency and specialist training. Multinational activities South Pacific region Australia supported five successful In 2007–08, Defence engagement in the multilateral operations involving 14 South Pacific focused on capacity regional countries and 21 Pacific Patrol development and assisting the Boats, with additional support from New professional development of the region’s Zealand, France and the United States. security forces. Defence Cooperation Personnel from the Navy and three Air assistance to the Cook Islands, Federated Force aircraft contributed to these States of Micronesia, Kiribati, Palau, operations. Republic of Marshal Islands,

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 83 CHAPTER 3 OUTCOME PERFORMANCE

Pacific Patrol Boat Program operated by the participating nations, the The Pacific Patrol Boat Program has been Navy provides 32 resident maritime operating in the South Pacific since May surveillance advisers and technical 1987 when Australia gifted the first of 22 advisers to assist with boat operations and boats to 12 Pacific Island countries. The skills development. program provides participating countries Defence has provided funding for with a maritime surveillance and response infrastructure and logistics, training and capability to monitor and manage their skills support and general assistance to exclusive economic zones and protect sustain this capability; in 2007–08, this marine resources. The boats are also used totalled $12.2m. In 2007–08, Defence also in quarantine enforcement, search and funded major refit works to extend the rescue, disaster relief, medical planned life of two of the boats by a evacuation support, and general police further 15 years. This life extension work. While the boats are crewed and program will continue until 2012.

Table 3.22 South Pacific region expenditure, 2005–06 to 2007–08 2005-06 2006-07 2007–08 2007–08 Actual Actual Budget Actual Result Result Estimate Result ($’000) ($’000) ($’000) ($’000) East Timor[1] 6,458 5,105 6,551 9,243 Vanuatu 1,766 1,740 1,558 1,525 Solomon Islands 2,351 3,749 1,740 2,502 To n g a 1,396 1,600 2,321 2,706 Samoa 2,333 732 478 424 Cook Islands 256 318 388 394 Fiji 5,539 2,811 444 414 Republic of the Marshall Islands 853 917 791 915 Federates States of Micronesia 989 836 1,038 930 Tu va lu 715 888 861 1,458 Kiribati 635 624 677 781 Palau 970 939 1,070 768 Multilateral General Assistance[2] 12,298 13,182 12,230 13,801 Tot a l 36,559 33,439 30,147 35,860

NOTES: 1. East Timor was reported under South-East Asia in the Defence Annual Report 2005-06. East Timor is now reported under the South Pacific region. This change has revised the total actual expenditure for 2005-06 as reported in previous reports. 2. Defence entered into a Materiel Sustainment Agreement with the DMO in 2007–08 for the sustainment of the Pacific Patrol Boat Program for $12.225m.

84 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

South–East Asia Indonesia military education, logistics, emergency The Australia–Indonesia defence management and peacekeeping. During relationship has matured and gained 2007–08, 118 Malaysians attended training confidence over the past year through a courses in Australia. practical and effective defence Australia also committed $23.6m to engagement program. Activities include undertake extensive facilities ongoing senior level dialogue, military redevelopment works at Royal Malaysian training and postgraduate education, Air Force Butterworth, where study visits and exchanges, combined approximately 170 ADF personnel are exercises and maritime security based. ADF access to RMAF Butterworth cooperation. Defence provided training to enables close engagement with the over 100 Indonesian officers in areas Malaysian Armed Forces and full ADF including maritime law and security, participation in Five Power Defence financial management and governance. In Arrangements exercises and activities. March 2008, Defence Ministers agreed to the development of a Joint Understanding The Philippines on the Australian-Indonesian defence Australia continued to provide assistance relationship to further defence for counter-terrorism, maritime security cooperation.1 and Philippines Defense Reform during the year. In 2007–08, Australia provided Singapore training to 132 Filipino officers, an Australia’s defence relationship with increase that reflects the expansion of Singapore covers a broad range of the relationship. A highlight was the cooperative military activities, including significant progress made by the exercises and training. A significant Philippines' Coast Watch of the South feature of the relationship is the access initiative, which is likely to commence Australia provides to Singapore for operations in the Sulu and Celebes Seas in unilateral use of training facilities for land 2008 following three years of Australian and air exercises and training, including assistance. Our counter–terrorism support Exercise Wallaby. Australia welcomed also expanded into new areas, including Singapore’s announcement that it would counter-improvised explosive device deploy a medical capability to assistance, combat medic training and Afghanistan in late 2008 and is working training on law and leadership for the with Singapore to support this important Philippine military. contribution to global security operations. Thailand Malaysia Counter-terrorism and peacekeeping Australia’s well-established bilateral cooperation remain priorities for our defence relationship with Malaysia defence relationship with Thailand. To operates under the Malaysia Australia build capacity in the Royal Thai Armed Joint Defence Program. It encompasses Forces, Australia provided training to 88 senior visits and dialogue, exercises, officers in 2007–08, focusing on English personnel exchanges and training to build language and defence reform. capacity in diverse areas including

1. The Agreement between the Republic of Indonesia and Australia on the Framework for Security Cooperation is known as the Lombok Treaty. More information on this can be found at www.dfat.gov.au/GEO/indonesia/ind-aus-sec06.html.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 85 CHAPTER 3 OUTCOME PERFORMANCE

Vietnam, Cambodia and Laos Brunei Armed Forces with its airborne Australia’s bilateral relationships with capability. Vietnam, Cambodia and Laos are based Five Power Defence Arrangements primarily around officer training, with 77 officers trained in 2007–08. The growing Australia is an active member of the Five depth of the relationships with Vietnam Power Defence Arrangements (FPDA) and Cambodia was underscored by several framework which remains a key stabilising senior–level visits. Australia also provided element in regional security. The specialist support for Cambodia’s multilateral exercise program of the five maritime security arrangements by member nations (Malaysia, Singapore, funding a high-level maritime security Australia, New Zealand, and the United seminar in Phnom Penh during November Kingdom) aims to strengthen their 2007. combined ability to counter conventional threats and to address non–conventional Brunei Darussalam security issues such as humanitarian The bilateral defence relationship with assistance and disaster relief situations. Brunei centres on special forces training In November 2007, the FPDA conducted and exercises, working level dialogue and Exercise Suman Protector, the largest senior visits. Infantry exercises, such as exercise in the FPDA’s history. The Exercise Mallee Bull which involved a exercise successfully tested FPDA members’ ability to conduct combined reciprocal exchange of units in March and operations. June 2008, are held every two years. Australia also regularly assists the Royal Table 3.23 South-East Asia region expenditure, 2005–06 to 2007–08 2005-06 2006-07 2007–08 2007–08 Actual Actual Budget Actual Result Result Estimate Result ($’000) ($’000) ($’000) ($’000) Singapore 172 313 203 175 Philippines 3,612 4,311 6,788 4,310 Thailand 2,903 3,418 2,571 3,345 Malaysia 4,199 4,384 3,424 4,698 Indonesia 6,130 5,426 5,825 5,022 Vietnam 2,256 2,691 1,936 2,029 Cambodia and Laos 1,661 712 1,008 1,000 Brunei 59 31 19 62 Tot a l 20,992 21,286 21,774 20,640 Other regional activities peacekeeping. In early July 2007, the Australia’s Defence Cooperation activities signing of an Information Sharing with India, Pakistan and Bangladesh are Arrangement marked a significant step aimed at promoting constructive dialogue forward in the relationship. In September and opportunities for practical defence 2007, Australia, together with Japan and engagement in areas of mutual interest Singapore, participated in the United including peacekeeping, counter– States–Indian Naval Exercise Malabar in terrorism and disaster relief. the Port of Bengal. This was followed by India the Australia–India Joint Working Group in Defence cooperation with India included February 2008 where views were training courses and staff college exchanged on regional and global security exchanges to develop cooperation in issues and opportunities for progressing maritime security, counter–terrorism and the bilateral defence relationship.

86 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

Pakistan Bangladesh Defence cooperation with Pakistan Defence cooperation with Bangladesh comprised senior-level visits, staff college involved Bangladeshi attendance at the exchanges and short training activities. The International Peace Operations Seminar, second Australia-Pakistan Strategic two Defence Management Seminars, Dialogue was held in Islamabad and Emergency Management Seminar and the provided the opportunity to explore further Military Leadership Forum. opportunities for engagement between the two countries, in areas such as counter– terrorism, military education and training, industry cooperation, and expanded service–to–service and senior–level dialogue. Output 5.2 Strategic Policy and Military Strategy Strategic Policy The Implementing Arrangement was This output provides strategic guidance, negotiated and signed in March 2008. New policy advice and military strategy to legislation and processes are now being enable the Government to make sound developed to enable the ratification and judgments on, and respond to, changes in implementation of the Treaty. Australia’s strategic environment. This Security policy includes developing the strategic During 2007–08, Defence continued to framework for capability planners and coordinate non–operational policy for warfighters, and managing input into the Defence involvement in domestic security, development of Defence strategic reviews including pandemic planning. Defence also and updates. It provides analysis of coordinated arms control issues and Australia’s strategic environment to inform provided input for the Proliferation Security decision making, including the Initiative (PSI). Defence was a major development and use of Defence capability. participant in the Australian delegation This output produces higher–level Defence involved in the international Oslo processes guidance, deliberate planning and military to ban cluster munitions which cause strategic guidance on the employment of unacceptable harm to civilians. This the ADF and its capabilities. It provides included providing advice on the capability, advice and management of export controls operational and policy aspects of the for defence and dual use items, provides proposed draft text of the Oslo Convention policy guidance on defence aspects of non– on cluster munitions. proliferation and arms control, and Defence maintained its involvement in coordinates defence involvement in counter-proliferation matters, including the domestic security and counter-terrorism Proliferation Security Initiative, and efforts. engagement in outreach activities on export In 2007–08, Strategic Policy Division was the control and counter-proliferation in the lead area involved in drafting the treaty region.1 Defence was also involved in missile between the Government of Australia and defence issues and managed Australia’s the Government of the United States of export control system for defence and America Concerning Defense Trade strategic goods, including significant Cooperation. The Treaty was signed by the engagement with other government former Prime Minister, the Hon John agencies required to implement various Howard MP, and the President of the United United Nations sanctions. States, George W Bush, in September 2007.

1. More information on the Proliferation Security Initiative can be found at www.dfat.gov.au/ globalissues/psi.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 87 CHAPTER 3 OUTCOME PERFORMANCE

Performance Targets Performance Provide the Government and Achieved. Developed the Defence Planning Guidance endorsed Defence with comprehensive by the Government as the key policy guidance for Defence: and timely strategic policy • Produced and promulgated Defence Strategic Interests and Priorities advice on current and 2008. emerging strategic issues in • Managed the Strategic Capability and Technology Framework Track 1 the international, national of the Australia-United States Ministerial Consultations process and domestic environment including conducting strategic scenario planning and exchanging that affect Defence. personnel, and strategic policy and planning documents with the United States.[1] • Produced strategic guidance that assesses risks and opportunities, now and into the future, and articulates Defence’s top-level priorities and requirements. • Conducted strategic analysis for the next Defence White Paper, due for release in early 2009. • Developed advice to the Government on missile defence and space situational awareness policy. Provide comprehensive and Achieved. Promulgated Australia’s Military Strategy 2007 and a timely advice to the series of Defence Strategic Planning Guidance for Operations: Government and Defence on • Conducted strategic war games. military strategy and future • Provided strategic guidance for principals and for Defence planners military concepts that reflect through strategy papers. the changing strategic environment. • Released the provisional Australian Capability Context Scenarios for force structure review testing in developing the Defence White Paper.[2] Provide comprehensive and Achieved. Coordinated Australian involvement in the timely advice to the Proliferation Security Initiative, including regional outreach. Government and Defence on Provided advice to the Government on arms control issues, proliferation issues and including advice on international and domestic proposals to ban administer counter- cluster munitions. proliferation and export control activities as required Developed advice on Australia’s export control system for defence and dual-use goods, including advice on the by legislation. requirements to implement the Australia-United States Treaty Concerning Defense Trade Cooperation.[3] Provide the Government and Achieved. Coordinated Defence involvement in domestic Defence with improved policy security policy, particularly through the National Counter input to the whole-of- Terrorism Committee. government domestic security Coordinated the Defence contribution to whole-of-government and counter-terrorism efforts to prevent, prepare and respond to terrorism, pandemics programs. and chemical, biological and radiological threats, including the Publicly Funded Agencies’ Collaborative Counter Terrorism Research Program. Develop and enhance Achieved. Delivered Defence and strategic policy seminars and Defence’s strategic policy roundtables: workforce. • Developed the Strategic Policy Proficiency Framework • Supported strategic studies in universities • Delivered the pilot Australian Strategic Policy Short Courses • Continued the delivery of defence and strategic policy seminars to Defence graduates • Supported Defence participation on courses at the Asia-Pacific Center for Security Studies.[4]

NOTES 1. More information on the Australia–United States Ministerial Consultations can be found at www.dfat.gov.au/ geo/us/ausmin. 2. More information on the Defence White Paper can be found at www.defence.gov.au/whitepaper. 3. More information on the Australia–United States Treaty Concerning Defense Trade Cooperation can be found at www.defence.gov.au/publications/DefenceTradeCooperation_Treaty.pdf. 4. More information on the Asia-Pacific Centre for Security Studies can be found at www.apcss.org.

88 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

Cost to Government Table 3.24 Outcome 5: Strategic policy for the defence of Australia and its interests

Budget Revised Actual Variation[3] Variation[3] Estimate[1] Estimate[2] Result ($'000) ($'000) ($'000) ($'000) (%) INCOME Revenues Sale of goods and rendering of services 11,748 12,237 5,457 -6,780 -55.4 Other revenues[4] 453 1,979 2,601 622 31.4 Tot a l re v e n ue 12,201 14,216 8,058 -6,158 -43.3 Gains Reversals of previous asset write-downs 1,509 3,954 2,990 -964 -24.4 Sale of assets – – 17 17 - Other gains 192 192 -114 -306 -159.5 Tot a l ga i n s 1,701 4,146 2,893 -1,253 -30.2 Tot a l in c o me 13,902 18,362 10,951 -7,411 -40.4 EXPENSES Employees 109,774 111,610 73,290 -38,320 -34.3 Suppliers 200,253 197,230 256,067 58,837 29.8 Grants 38 234 101 - 133 -56.7 Depreciation and amortisation 6,752 17,024 9,204 -7,820 -45.9 Finance cost 61 –68 1,896 1,964 -2,888.9 Write-down and impairment of assets 449 4,084 9,106 5,022 123.0 Foreign exchange loss – – -40 -40 - Other expenses 5 3 629 626 20,866.6 Tot a l ex pe n se s 317,332 330,118 350,254 20,136 6.1 Net cost of Outcome 5 303,430 311,755 339,303 27,548 8.8

NOTES 1. Budget Estimates are consistent with Portfolio Budget Statements 2007-08 (p182). 2. Revised Estimates are consistent with Portfolio Additional Estimates Statements 2007-08 (p92). 3. Variation figures are the difference between Actual Result and Revised Estimate. 4. Other revenues includes rental income. Table 3.25 Breakdown of Outcome 5 by output

Budget Revised Actual Variation[3] Variation[3] Estimate[1] Estimate[2] Result ($'000) ($'000) ($'000) ($'000) (%) Output 5.1 - International policy, activities and engagement 223,410 227,671 307,497 79,826 35.1 Output 5.2 - Strategic policy and military strategy 80,020 84,084 31,805 -52,279 -62.2 Net cost of Outcome 5 303,430 311,755 339,303 27,548 8.8

NOTES 1. Budget Estimates are consistent with Portfolio Budget Statements 2007-08 (p183). 2. Revised Estimates are consistent with Portfolio Additional Estimates Statements 2007-08 (p93). 3. Variation figures are the difference between Actual Result and Revised Estimate.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 89 CHAPTER 3 OUTCOME PERFORMANCE

OUTCOME 6 INTELLIGENCE

In 2007–08, Defence’s intelligence areas continued to support military operations and whole–of–government responses to transnational crime, particularly counter-terrorism and border protection. The agencies succeeded in achieving their performance targets through the diligent efforts of the staff in the Defence Intelligence Organisation (DIO), the Defence Imagery and Geospatial Organisation (DIGO) and the Defence Signals Directorate (DSD). Intelligence risks Key risk and limitations Risk mitigation Status Defence’s ability to preserve This risk was managed through increased and Ongoing its capability edge in broadened recruitment strategies through programs intelligence collection, such as targeted university recruitment drives, production and analysis is indigenous cadets, and greater incentives for staff critically dependent on the with specific language and technical talents. availability of skilled and Detailed personnel development programs have experienced ADF and civilian been established and are continuing. Care is being personnel to support ongoing taken to ensure ADF billets are filled commensurate operations, the acquisition with ADF staffing across the board. and exploitation of new technology, and the maintenance of effective security. The environment in which This risk was managed through the Defence In place Defence operates is dynamic intelligence agencies participating in the Office of and demands that key National Assessment-chaired Foreign Intelligence intelligence priorities, Coordination Committee at the agency head-level. requirements and capabilities This facilitated coordination of intelligence be reviewed regularly. requirements and priorities across the wider Australian Intelligence Community, and high-level consideration of intelligence capability issues. Performance Information Output 6.1 Intelligence Defence Intelligence Organisation • Support to strategic level planning, Over 2007–08, the DIO supported three command and conduct of current and key priorities: the ADF’s sustained high potential operations, by the ADF operational tempo; the Defence White (notably Iraq, Afghanistan, East Timor and Solomon Islands) Paper; and support to Headquarters Joint Operations Command, including its • Strategic posture, policy and intent, transition to Bungendore, NSW. and the military capabilities of countries relevant to Australia's An organisational restructure during 2007- security, particularly through DIO's 08 enabled the DIO to better focus its classified White Paper Assessments support to military operations. As a • Foreign non-state actors, counter result, the DIO has strengthened its proliferation and counter terrorism as flexibility, adaptability and part of whole of government responsiveness under increasing activities. pressures. DIO also contributed to outcomes by providing intelligence The DIO also delivered on Government support to key Defence strategic planning directives to identify and implement documents and intelligence briefings to savings measures and streamlined its the Senior Command Group. DIO's business practices while sustaining the assessment focused on: efficiency of service delivery.

90 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

Defence Signals Directorate Defence Imagery and Geospatial In 2007–08, the DSD effectively supported Organisation military deployments by providing timely The DIGO continued to support national and accurate intelligence to inform and Defence priorities across a range of decision making and give operational intelligence and non–intelligence commanders the information edge. The activities during 2007–08. DSD also contributed to outcomes in An organisation restructure, following an combating transnational crime, in external review, enabled a more top- collaboration with other Australian and down approach to managing analysis and allied agencies, especially in the areas of production priorities in order to meet the counter-proliferation and counter- requirements of the DIGO’s diverse and terrorism, and supported a wide range of growing customer set. Organisational Government customers with high priority change was supported by increased staff intelligence. Additionally, the DSD’s training on leadership, people information security expertise continued management and internal governance. to be in high demand, reflecting an The DIGO also formalised its delegated increased awareness across government responsibility as Defence’s Coordinating of the need to protect networks and Capability Manager – Geospatial systems from electronic threats. Information. The DSD’s contributions throughout 2007–08 In June 2008, the construction of the new were recognised by the Government geospatial analysis facility in Bendigo, through two new policy proposals that will Victoria, was completed. Installation of significantly enhance the DSD’s specialised information technology, and capabilities. Announced in the 2007–08 the relocation of staff, has commenced. Budget, these measures include provisions Improved systems connectivity and to enhance Australia’s signals intelligence security at the new facility will enable the capability. The first of these measures DIGO to operate as a single integrated enables the DSD to deliver important new entity, ensuring improved service to capabilities to meet the Government’s Defence and government customers and a intelligence requirements. The second more efficient use of resources. budget measure, part of a cross–portfolio bid that addressed the outcomes of the E-Security National Agenda Review, enables the DSD to invest in new capabilities to assist government agencies to recognise vulnerabilities to communications and information systems and enhance protection measures.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 91 CHAPTER 3 OUTCOME PERFORMANCE

Performance Targets Performance Provide quality Achieved. The DIO continued to provide high-level support to key intelligence reporting Defence, ADF and Government decision makers, with tailored, timely and assessments. and unique intelligence products and advice. The DSD produced quality intelligence reports to support ADF deployments and Australian Government policy makers. The DIGO provided accurate, timely intelligence to support ADF operations, the Government’s understanding of the strategic environment, and national security authorities, including at the APEC leaders’ meeting and other international forums hosted by Australia. Provide effective and Achieved. The DIO provided a significant intelligence staff sustainable intelligence contribution to planning the ADF commitment to operations. support for the planning The DSD’s signals intelligence provided an operational edge to ADF and conduct of ADF operations and valuable insight for Australian Government decision operations and for makers. decision makers. The DIGO maintained its strong focus on supporting ADF overseas deployments and its national customers by providing high-quality geospatial data and products. Maintain and develop Achieved. The DIO delivered further improvements to information first-rate Defence communications and technology systems. intelligence and The DIGO’s Geospatial Analysis Centre continued its international geospatial information mapping programs under government-to-government memorandums capabilities. of understanding. The cooperative programs to map East Timor and Solomon Islands were completed, while production for Vanuatu is almost complete. The DIGO also provided critical geospatial data for the effective operation of ADF platforms, and maintained quality geospatial standards within Defence. Maintain the knowledge Achieved. The DIO introduced further new capabilities to enhance its edge by exploiting new access to and management of information systems. technology. The DSD’s 2007–08 investment in people and infrastructure under Government funding initiatives focused effectively on exploiting next generation technologies and securing Australian Government information. The DIGO conducted experimental activities to develop and refine its exploitation of imagery and geospatial technologies, and continued its support to Defence projects for which its geospatial intelligence capabilities can be adapted to meet best practice. Strengthen the Achieved. The DIO enhanced cooperation with a range of other intelligence contribution intelligence partners. to other intelligence The DSD worked closely with key allies, ensuring effective and partners including efficient transfer of expertise and intelligence across the providing new partnerships. capabilities to access intelligence information The DIGO contributed specialised analytical support on Australia’s region and area of direct military interest to international allies. The from key allies and other DIGO hosted a geospatial intelligence management and governance Defence relationships. conference of its key international counterparts. Improve investment and Achieved. The DSD achieved benchmarked outcomes planned for capability planning, 2007–08, ensuring corporate governance and resource management accountability and requirements were met. resource and security The DIGO improved the accessibility of its products to Defence management. customers by contributing to the completion of JP 2064 Phase 2.[1] Construction of the DIGO’s new site in Bendigo, Victoria was completed, paving the way for more effective integration of the agency’s imagery and geospatial functions.

92 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

Performance Targets Performance Develop motivated, Achieved. The DIO ensured its staff received the highest quality adaptable and skilled training and development to strengthen the skills of the organisation’s teams of highly workforce. competent professionals. The DSD renewed its analytical training program for new staff which reduced the training burden on experienced analysts. The DIGO increased its staff training on leadership, people management and internal governance to support organisational expansion. Provide, in conjunction Achieved. The DIO sustained its close working relationships with with the wider Australian counterpart agencies across the Australian Intelligence Community in Intelligence Community, support of whole-of-government initiatives. support to The DSD signals intelligence effectively supported operations against whole-of-government transnational crime. initiatives to address transnational crimes. The DIGO enhanced its support to whole-of-government initiatives on transnational crimes, including through increased joint production with Australian Intelligence Community partners, and by participating at an international counter-proliferation conference. Strengthen the Defence Achieved. The Intelligence, Security and International Policy Group Languages Other than made a significant investment in acquiring linguistic capabilities in English capability. non-traditional, rare languages to respond to the Government’s intelligence priorities. Exploit Defence and Achieved. The Intelligence, Security and International Policy Group allied intelligence, continued to deliver improvements for accessing intelligence surveillance and information from key allies, particularly by the ADF. Implementation reconnaissance capability of the Defence Intelligence, Surveillance and Reconnaissance to enhance support to Roadmap[2] has commenced and early deliverables include direct ADF operations. access to situational awareness reporting from current operational areas. A joint study between Australia and the United States has commenced and will investigate new opportunities for enhanced cooperation in access and capabilities for intelligence, surveillance and reconnaissance.

NOTES 1. More information on JP 2064 Phase 2 is available at www.defence.gov.au/dmo/esd/jp2064/jp2064.cfm. 2. More information the Defence Intelligence, Surveillance and Reconnaissance Roadmap is available at www.defence.gov.au/publications/ISR_Roadmap_2007_2017.pdf.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 93 CHAPTER 3 OUTCOME PERFORMANCE

Cost to Government Table 3.26 Outcome 6: Intelligence for the defence of Australia and its interests

Budget Revised Actual Variation[3] Variation[3] Estimate[1] Estimate[2] Result ($'000) ($'000) ($'000) ($'000) (%) INCOME Revenues Sale of goods and rendering of services 12,973 14,962 37,310 22,348 149.4 Other revenues[4] 192 1,485 9,744 8,259 556.2 Tot a l re v e n ue 13,165 16,448 47,054 30,606 186.1 Gains Reversals of previous asset write-downs 1,828 3,582 4,959 1,377 38.5 Sale of assets – – 24 24 - Other gains 248 248 -374 -622 -250.9 Tot a l ga i n s 2,076 3,830 4,609 779 20.3 Tot a l in c o me 15,241 20,278 51,663 31,385 154.8 Expenses Employees 272,987 281,643 277,424 -4,219 -1.5 Suppliers 220,737 220,063 431,074 211,011 95.9 Grants 112 112 284 172 153.4 Depreciation and amortisation 79,054 89,022 70,261 -18,761 -21.1 Finance cost 438 618 581 -37 -6.0 Write-down and impairment of assets 1,224 3,513 113,122 109,609 3,120.1 Foreign exchange loss – – 128 128 - Other expenses 4 27 1,552 1,525 5,647.7 Tot a l ex pe n se s 574,556 594,997 894,426 299,429 50.3 Net cost of Outcome 6 559,316 574,720 842,763 268,043 46.6

NOTES 1. Budget Estimates are consistent with Portfolio Budget Statements 2007-08 (p189). 2. Revised Estimates are consistent with Portfolio Additional Estimates Statements 2007-08 (p94). 3. Variation figures are the difference between Actual Result and Revised Estimate. 4. Other revenues includes rental income. Table 3.27 Breakdown of Outcome 6 by output

Budget Revised Actual Variation[3] Variation[3] Estimate[1] Estimate[2] Result ($'000) ($'000) ($'000) ($'000) (%) Output 6.1-Intelligence 559,316 574,720 842,763 268,043 46.6 Net cost of Outcome 6 559,316 574,720 842,763 268,043 46.6

NOTES 1. Budget Estimates are consistent with Portfolio Budget Statements 2007-08 (p190). 2. Revised Estimates are consistent with Portfolio Additional Estimates Statements 2007-08 (p94). 3. Variation figures are the difference between Actual Result and Revised Estimate.

94 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 3 OUTCOME PERFORMANCE

OUTCOME 7 SUPERANNUATION & HOUSING SUPPORT SERVICES FOR CURRENT & RETIRED DEFENCE PERSONNEL

This outcome encompasses all the activities that Defence performs on behalf of the Government that are resourced by Defence’s administered appropriation. Performance information Output 7.1 Superannuation support services for current & retired Defence personnel This output reports superannuation schemes, and the payment to the MSBS contributions and the movement in Retention Benefit to eligible MSBS liabilities associated with the two military members after 15 years of continuous superannuation schemes: the Defence eligible service. Force Retirement and Death Benefits The report of the Review into Military Scheme (DFRDB) and the Military Superannuation Arrangments was publicly Superannuation and Benefits Scheme released by the Hon Warren Snowdon MP, (MSBS). The DFRDB was closed to new Minister for Defence Science and participants in 1991. Both schemes are Personnel, on 24 December 2007. The managed on Defence’s behalf by public consultation period for submissions ComSuper. Output 7.1 shows the member on the report closed on 31 March 2008. contributions and employer contributions The Government is now considering its to both schemes, the liability to the position on the Review recommendations. Commonwealth for benefits under both Output 7.2 Housing assistance for current & retired Defence personnel This output reports dividends received on behalf of the Government from Defence Housing Australia (DHA) and payments to DHA to manage the existing Defence Home-Owner Scheme. Output 7.3 Other administered revenues & expenses (including UN receipts) This output encompasses all other foreign exchange losses and gains, administered revenues and expenses reimbursements from the United Nations recorded by Defence. It includes interest for contributions to UN-led operations and received on official bank accounts, net aircraft leasing costs.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 95 CHAPTER 3 OUTCOME PERFORMANCE

Cost to Government Table 3.28 Outcome 7: Superannuation and housing support services for current and retired Defence personnel

Budget Revised Actual Variation[3] Variation[3] Estimate[1] Estimate[2] Result ($'000) ($'000) ($'000) ($'000) (%) ADMINISTERED INCOME Revenue Non-taxation Sale of goods and rendering of services - - 40 40 - Interest 80 79 124 45 57.0 Dividends 73,500 58,703 134,263 75,560 128.7 Millitary superannuation contributions 724,000 724,000 756,982 32,982 4.6 Other non-taxation 788 569 215 -354 -62.2 Total non-taxation 798,368 783,351 891,624 108,233 13.8 Total administered income 798,368 783,351 891,624 108,273 13.8 ADMINISTERED EXPENSES Housing subsidies 9,000 11,250 11,284 34 0.3 Grants - - 26,800 26,800 - Retention benefits 42,000 42,000 31,405 -10,595 -25.2 Military superannuation benefits 2,751,468 2,766,600 2,818,000 51,400 1.9 Other expenses – 4,502 4,327 -175 -3.9 Total administered expenses 2,802,468 2,824,352 2,891,816 67,464 2.4 Net cost of Outcome 7 2,004,100 2,041,001 2,000,192 -40,809 -2.0

NOTES 1. Budget Estimates are consistent with Portfolio Budget Statements 2007-08 (p193). 2. Revised Estimates are consistent with Portfolio Additional Estimates Statements 2007-08 (p95). 3. Variation figures are the difference between Actual Result and Revised Estimate.

Table 3.29 Breakdown of Outcome 7 by output

Budget Revised Actual Variation[3] Variation[3] Estimate[1] Estimate[2] Result ($'000) ($'000) ($'000) ($'000) (%) Output 7.1 - Superannuation support services for current and retired Defence personnel 2,069,468 2,084,600 2,092,423 7,823 0.4 Output 7.2 - Housing assistance for current and retired Defence personnel -64,500 -47,453 -122,979 -75,526 159.2 Output 7.3 - Other administered revenues and expenses -868 3,854 30,748 26,894 697.8

Net cost of Outcome 7 2,004,100 2,041,001 2,000,192 -40,809 -2.0

NOTES 1. Budget Estimates are consistent with Portfolio Budget Statements 2007-08 (p194). 2. Revised Estimates are consistent with Portfolio Additional Estimates Statements 2007-08 (p96). 3. Variation figures are the difference between Actual Result and Revised Estimate.

96 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 SECTION 3 MANAGEMENT & ACCOUNTABILITY CHAPTER 4 People

This was a year of consolidation within Defence’s people domain, with a continued focus on implementing the range of ADF retention and recruitment initiatives introduced in 2006–07 and skilling Defence’s APS workforce.

There was strong competition in a tight · strategies and programs to increase workforce market to recruit people with the recruitment and retention of professional, technical and trade skills. women, Indigenous Australians and Defence was also challenged to retain its people from diverse ethnic current personnel whose critical skills and backgrounds experience are sought in the wider Australian workforce. · new opportunities for young people through the ADF Gap Year program Defence’s people priorities remain to recruit about 6,500 new full-time ADF · introduction of a flexible, graded pay entrants each year and reduce the ADF scale for officers and warrant officers separation rate to below 10 per cent. that better recognises skills and Defence performed well over the 2007-08 experience financial year, with 7,074 permanent · development and planning for the enlistments, 702 Gap Year entrants, and a separation rate of 9.8 per cent. introduction of the new Defence Home Consistently meeting and exceeding Ownership Assistance Scheme in targets will be important if Defence is to 2008-09 as a targeted retention meet ADF workforce capability measure. requirements over the next 10 years and For Defence APS employees, priority was beyond. given to attracting and retaining a first– The overall ADF recruitment achievement class workforce, with an emphasis on for 2007–08 represents a further reviewing training and development and improvement on previous years, with a improving career management. notable number of people with previous Strengthened workplace performance military service re-enlisting and an management arrangements also came into increased number of Reservists electing full effect during the year. This resulted in full-time service. an improved understanding of mutual The ADF separation rate was lower than responsibilities, the need to better the overall target and represents a balance work and personal commitments, marked improvement on recent years. including leave management, and better Recovery is still required in some defined training and development needs. employment categories that are The year saw the formation of the People experiencing high separation rates. Strategies and Policy Group, headed by a Policies and programs that contributed to Deputy Secretary. The Group’s charter is the improvements in recruitment and to develop contemporary and compelling retention included: employee conditions and policies that foster a climate in which people want to · ongoing reforms to reduce enlistment join the Defence organisation, work at lead times their best, and want to stay. This was in response to a recommendation from the Defence Management Review.

98 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 4 PEOPLE

PERFORMANCE AGAINST PEOPLE PRIORITIES FOR 2007–08 Reports on performance against the priorities included in People sections of the Portfolio Budget Statements 2007-08 and the Portfolio Additional Estimates Statements 2007-08 are contained in the online version of this report. WORKFORCE OVERVIEW The workforce overview is in two parts. The increase in average funded strength The first section contains information on for ADF permanent members comprised average funded strength during 2007-08, improved recruitment and retention which is used by Defence for budget and outcomes, as shown in Table 4.1, management purposes. It provides a especially for the Navy and the Air Force, measure of Defence’s performance and increases in the number of Reservists against its budget and personnel undertaking full-time service. The estimates for the financial year. The average funded strength for ADF second section contains information on Reservists on continuous full-time service the ADF workforce, enlistments and in 2007-08 was 1,704, comprising Navy separations. Information on the actual 408, Army 1,067 and Air Force 229, number of people employed by Defence compared to 1,364 in 2006-07. as at 30 June 2008 appears in Appendix 1 – The increased staffing level moves the Staffing and Remuneration. ADF towards meeting the planned growth over the next 10 years. This growth is Defence Workforce: needed to achieve the Hardened Budget Aspect Networked Army and Enhanced Land This section provides information on Force initiatives, including an additional actual and budgeted average staffing two infantry battalions. levels for the year. Table 4.1 ADF Permanent Force Average Funded Strength[1][2]

2006-07 2007-08 2007-08 2007-08 Variation[4] (%) Actual Budget Revised Actual Estimate Estimate[3] Navy 12,690 12,899 12,899 12,935 36 0.3 Army 25,525 26,126 26,693 26,611 -82 -0.3 Air Force 13,289 13,480 13,517 13,621 104 0.8 Total Average Funded Strength 51,504 52,505 53,109 53,167 58 0.8

NOTES 1. Figures in this table are average funded strengths: they are not a ‘headcount’. Reservists undertaking full- time service are included in the figures. Personnel on forms of Leave Without Pay are not included. 2. Includes ADF members in the DMO. 3. As published in the Portfolio Additional Estimates Statements 2007-08. 4. 2007–08 achievement compared to the Revised Estimate; as a difference and a percentage.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 99 CHAPTER 4 PEOPLE

Tab le 4.2 shows the number of Reservists The 153 overachievement in paid Air who rendered paid service during 2007–08. Force Reserve workforce was a In 2007–08, 20,340 Reservists undertook consequence of higher than anticipated paid service, 778 more than in 2006–07. retention of serving members and greater In 2007–08, 1,795 Navy Reservists interest in former Permanent Air Force undertook paid service, with the decrease (PAF) members seeking transfer to the due primarily to lower than anticipated paid elements of the Reserve. The Air retention and recruitment achievement. Force Reserve restructure, which now For the Army the increase against the embeds Reservists into regular PAF units, revised estimate is due to improved has proven to be highly popular with Air retention initiatives. Force personnel. Table 4.2 ADF Reserve Paid Strength[1][2][3]

2006-07 2007-08 2007-08 2007-08 Variation[5] % Actual Budget Revised Actual Estimate Estimate[4] Navy 1,730 1,900 1,900 1,795 -105 -5.5 Army 15,413 15,130 15,130 15,892 762 5.0 Air Force 2,419 2,500 2,500 2,653 153 6.1 Tot a l Pa id Re se r v e s 19,562 19,530 19,530 20,340 810 4.1

NOTES 1. Excludes the 1,704 Reservists in 2007–08 who undertook full-time service in the Permanent Force. These are included in Table 4.1. 2. Includes Reservists in the DMO. 3. Includes the High Readiness Reserve Force, Active Reserve Force and Specialist Reserve Force. 4. As published in the Portfolio Additional Estimates Statements 2007-08. 5. 2007–08 Actual compared with the Revised Estimate.

Tab le 4.3 shows details of the APS average 263 compared with the revised estimate strength, expressed as full-time of 14,824. Additional civilian staffing has equivalents, for 2007–08. This excludes been necessary to support capability the DMO’s APS workforce, which is shown growth, sustaining support to operations in the Defence Annual Report 2007–08 and growing the ADF. Action is in train to Volume 2. The average strength reduce APS staffing numbers to agreed achievement was 15,087, an increase of guidance. Table 4.3 APS Full-Time Equivalent Average[1][2]

2006-07 2007-08 2007-08 2007-08 Variation[4] % Actual Budget Revised Actual Estimate Estimate[3] Total APS (Full-Time Equivalent –Average) 14,516 14,658 14,824 15,087 263 1.8

NOTES 1. Figures in the table are average full–time equivalent (FTE); they are not a headcount. 2. This table excludes workforce data from the DMO. 3. As published in the Portfolio Additional Estimates Statements 2007-08. 4. 2007–08 actual compared with the revised estimate, as a difference and a percentage.

100 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 4 PEOPLE

Professional Service Providers In addition to military and APS employees, and shows a decrease of 545 against the Defence engages contractors with revised estimate. This decrease is due to specialist skills to fill certain vacancies a reduction in the number of contractors requiring particular expertise. Table 4.4 required to provide health services to the details the number of contractors ADF. There was an overall decrease of 190 engaged by Defence to fill positions in PSPs from the previous financial year. 2007-08, expressed as an average strength Table 4.4 PSP Average Funded Strength[1]

2006-07 2007-08 2007-08 2007-08 Variation[3] Actual Budget Revised Actual Estimate Estimate[2] Total PSP Average Funded Strength 810 1,171 1,165 620 -545

NOTES 1. This table excludes the PSP workforce data for the DMO. 2. As published in the Portfolio Additional Estimates Statements 2007-08. 3. 2007–08 actual compared to the revised estimate.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 101 Average Staffing Summary Tab le 4.5 shows the average funded level groupings, including the full-time strength summary by Service, rank and equivalent average for APS and PSPs. Table 4.5 Average Funded Strength by Service and Rank and Level[1][2]

2007-08 2007-08 2006-07 Budget Revised 2007-08 Actual Estimate Estimate[3] Actual Navy Star-ranked officers 44 46 46 50 Senior officers 453 470 470 474 Junior officers 2,502 2,668 2,732 2,583 Other Ranks 9,691 9,715 9,651 9,828 Sub-total Permanent Navy 12,690 12,899 12,899 12,935 Reserves 1,730 1,900 1,900 1,795 Sub-total Navy 14,420 14,799 14,799 14,730 Army Star-ranked officers 65 66 73 75 Senior officers 691 699 734 720 Junior officers 4,902 4,992 4,991 5,044 Other ranks 19,867 20,369 20,895 20,772 Sub-total Permanent Army 25,525 26,126 26,693 26,611 Reserves 15,413 15,130 15,130 15,892 Sub-total Army 40,938 41,256 41,823 42,503 Air Force Star-ranked officers 40 39 45 51 Senior officers 540 538 560 574 Junior officers 3,552 3,619 3,676 3,712 Other ranks 9,157 9,284 9,236 9,284 Sub-total Permanent Air Force 13,289 13,480 13,517 13,621 Reserves 2,419 2,500 2,500 2,653 Sub-total Air Force 15,708 15,980 16,017 16,274 APS Senior executives 97 108 115 103 Senior executive relief staff[4] 11 – – 18 Senior officers[5] 3,377 3,710 3,826 3,485 Senior officer relief staff[4] 279 – – 426 Others 10,752 10,840 10,883 11,055 Sub-total APS[6][7] 14,516 14,658 14,824 15,087 PSPs[6] 810 1,171 1,165 620

Total Average Funded Strength 86,392 87,864 88,628 89,214

NOTES 1. The figures in this table are average funded strength for ADF members and full–time equivalent average for APS members; they are not a headcount. 2. Reserve AFS is not calculated; refer to Table 4.2 for Reserve paid strength details. 3. As published in the Portfolio Additional Estimates Statements 2007-08. 4. Relief staff represents the full-time average of personnel acting within a higher classification for short duration pending permanent filling action or while the incumbents are taking leave, acting in higher positions or are on secondment to other agencies. 5. Senior officers comprise substantive Executive Levels 1 and 2. 6. The figures for APS personnel and professional service providers do not include APS data from the DMO. 7. PSPs are contractors filling line positions.

102 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 4 PEOPLE

Employee Expenses Employee expenses totaled $7,510.3m, or $18.5m more than the revised estimate of $7,491.8m. Table 4.6 Variations in employee expenses

2007-08 2007-08 2007-08 Variation[2] Variation[2] Budget Revised Actual Estimate Estimate[1] result ($m) ($m) ($m) ($m) (%) Permanent ADF Salaries, allowances, superannuation & leave liability[3] 4,897.0 5,098.8 5,027.0 -71.8 -1.4 Housing 453.3 466.8 504.3 37.5 8.0 Health Services 199.3 203.4 222.0 18.6 9.1 Fringe Benefits tax 285.3 286.8 295.6 8.8 3.1 Sub-total ADF 5,834.9 6,055.8 6,049.0 -6.9 -0.1 Reserves Navy Reserves 24.5 25.2 25.8 0.6 2.3 Army Reserves 126.0 126.3 129.8 3.5 2.8 Air Force Reserves 35.9 35.9 34.5 -1.4 -4.0 Sub-total Reserves 186.4 187.5 190.1 2.7 1.4 Total ADF employee expenses 6,021.3 6,243.3 6,239.1 -4.2 -0.1 APS Salaries, allowances, superannuation & leave liability 1,277.1 1,242.3 1,266.0 23.7 1.9 Other expenses, including fringe benefits tax 6.2 6.2 5.3 -1.0 -15.7 Total APS employees expense 1,283.3 1,248.5 1,271.2 22.7 1.8 Total employee expenses 7,304.6 7,491.8 7,510.3 18.5 0.2

NOTES 1. As published in the Portfolio Additional Estimates Statements 2007-08. 2. 2007–08 actual compared with the revised estimate as a difference (in $m) and as a percentage. 3. Includes the Superannuation Guarantee Charge.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 103 CHAPTER 4 PEOPLE

ADF enlistments & recruiting ADF enlistments include all entrants (ab Of the total number enlisted, 1,401 initio recruits and prior service entrants) personnel had prior military service in who joined the ADF in the financial year. either the Reserves, another Service, The ADF enlisted 7,074 permanent another nation, previous permanent force members, 6,013 men and 1,061 women, or transferred from the Gap Year for the 12 months up to 30 June 2008, as Initiative. There were 5,673 ab initio shown in Table 4.7. This was 1,046 more entrants. The following tables detail than in 2006-07. In addition, 702 recruitment activity for each Service. personnel were enlisted in the new recruiting initiative Gap Year, 505 men and 197 women. Table 4.7 Permanent Force enlistments, 2006–07 and 2007–08[1][2][3] Navy Army Air Force ADF Total Men Women Men Women Men Women Men Women 2006-07 Trained Force Officers[4] 33 9 113 26 85 31 231 66 297 Other Ranks 63 9 282 23 102 22 447 54 501 Training Force Officers[4][5] 146 40 296 65 184 63 626 168 794 Other Ranks[4][5][6] 1,000 265 2,240 138 649 144 3,889 547 4,436 Tot a l 1,242 323 2,931 252 1,020 260 5,193 835 6,028 2007-08 Trained Force Officers 36 8 159 29 106 35 301 72 373 Other Ranks 65 5 375 50 130 25 570 80 650 Training Force Officers 119 57 349 56 162 64 630 177 807 Other Ranks 1,018 326 2,778 226 716 180 4,512 732 5,244 Tot a l 1,238 396 3,661 361 1,114 304 6,013 1,061 7,074 Gap Year[7] 45 55 400 102 60 40 505 197 702

NOTES 1. Figures in this table show actual employees enlisted from all sources (headcount). 2. Enlistments exclude Reserves commencing periods of continuous full-time service. 3. Figures include ab initio enlistees and inter– and intra–service transfers processed by the Services. Table 4.8 and Table 4.9 provide the split between prior service enlistments and ab initio recruiting respectively. 4. Army enlistments shown in the Defence Annual Report 2006–07 have been adjusted due to backdated transactions. 5. Navy enlistments in the Defence Annual Report 2006–07 have been adjusted due to backdated transactions. 6. Air Force enlistments in the Defence Annual Report 2006–07 have been adjusted due to the failure of one female Other Ranks member to enlist in the Training Force. 7. Gap Year participants are not included in Permanent Force figures.

104 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 4 PEOPLE

Table 4.8 Permanent Force prior service enlistments, 2006–07 and 2007–08[1][2] Navy Army Air Force ADF Total Men Women Men Women Men Women Men Women 2006-07 Overseas entrants 21 1 108 1 24 1 153 3 156 Reserve transfers[3] 45 9 350 51 64 13 459 73 532 Service transfers[3] 27 2 38 1 75 16 140 19 159 Re-enlistments 42 7 105 7 55 16 202 30 232 Tot a l 135 19 601 60 218 46 954 125 1,079 2007-08 Overseas entrants 42 4 131 4 49 6 222 14 236 Reserve transfers 35 4 489 83 100 19 624 106 730 Service transfers 25 3 23 6 64 16 112 25 137 Re-enlistments 30 7 121 7 58 9 209 23 232 Gap Year transfers[4] 1 – 52 13 – – 53 13 66 Tot a l 133 18 816 113 271 50 1,220 181 1,401

NOTES 1. Figures in this table show actual employees (headcount). 2. Defence Force Recruiting processed 272 people with prior military service. 3. Army enlistments in the Defence Annual Report 2006–07 have been adjusted due to backdated transactions. 4. The Gap Year Initiative commenced in 2007–08, therefore no transfers were recorded in previous years.

ADF recruiting includes all new (ab initio) entrants to the Permanent, Gap Year and Reserve Forces. Table 4.9 ADF Permanent Force recruiting activity, 2006–07 and 2007–08 Navy Army Air Force ADF 2006-07 Total inquiries[1] 7,360 26,544 13,005 46,909 Formal applications 3,601 7,195 3,350 14,146 Ab initio enlisted[2][3] 1,411 2,524 1,016 4,951 Ta r g e t en li s t m en t s 1,801 2,939 1,180 5,920 Enlistments achieved (%) 78 86 86 84 2007-08 Total inquiries[4] 9,358 32,395 13,657 55,410 Formal applications 3,213 7,427 3,167 13,807 Ab initio enlisted 1,483 3,093 1,097 5,673 Ta r g e t en li s t m en t s 2,045 4,081 1,286 7,412 Enlistments achieved (%) 73 76 85 77

NOTES 1. 12,601 inquiries were received from people undecided on Service or commitment. 2. The number of Navy applicants enlisted as shown in the Defence Annual Report 2006–07 has been adjusted due to three failures to enlist. 3. The number of Air Force applicants enlisted as shown in the Defence Annual Report 2006–07 has been adjusted due to one failure to enlist. 4. 8,433 inquiries were received from people undecided on Service or commitment.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 105 CHAPTER 4 PEOPLE

Table 4.10 ADF Gap Year recruiting activity 2007–08[1][2] Navy Army Air Force ADF Total inquiries[1] 983 5,534 806 7,323 Formal applications 255 1,010 243 1,508 Ab initio enlisted 100 500 100 700 Transfers from Reserve[2] – 2 – 2 Ta r g e t 100 500 100 700 Percentage achieved (%) 100 100 100 100

NOTES 1. 8,433 inquiries were received from people undecided on Service or commitment. 2. The Army also had two transfers from Reserve to Gap Year.

Table 4.11 Reserve Force recruiting activity, 2006–07 and 2007–08[1][2] Navy Army Air Force ADF 2006-07 Total inquiries[1] 903 13,678 1,858 16,439 Formal applications 220 5,341 625 6,186 Applicants enlisted 79 2,509 305 2,893 Ta r g e t 147 2,675 424 3,246 Enlistments achieved (%) 54 94 72 89 2007-08 Total inquiries[2] 967 10,742 1,689 13,398 Formal applications 188 3,962 543 4,693 Applicants enlisted 71 2,207 262 2,540 Ta r g e t 144 2,150 439 2,733 Enlistments achieved (%) 49 103 60 93

NOTES 1. In addition, there were 12,601 inquiries about tri–Service, Permanent and Reserve Force who were undecided on which Service they wished to join and whether they were interested in Permanent or Reserve commitment. 2. In addition, there were 8,433 inquiries about tri–Service, Permanent, Gap Year and Reserve Force who were undecided on which Service they wished to join and whether they were interested in Permanent, Gap Year or Reserve commitment.

106 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 4 PEOPLE

Figures 4.1 to 4.4 shows the number of full-time personnel recruited (shaded bars) and the percentage achieved (line) of the annual target by each Service and the ADF over the last 10 financial years. The number of ab initio entrants into each Service and the ADF increased in 2007–08.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 107 CHAPTER 4 PEOPLE

Figures 4.5 to 4.8 show the number of part-time personnel recruited (shaded bars) and the percentage achieved (line) of the annual target by each Service and the ADF over the last ten financial years.

108 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 4 PEOPLE

ADF Separations As at 30 June 2008, the 12-month rolling ·Air Force – 7.2 per cent separation rates for the Permanent Force · Army – 10.6 per cent were: · ADF – 9.8 per cent. · Navy – 11.0 per cent Table 4.12 ADF Permanent Forces separations, 2006–07 and 2007–08[1][2][3] Age Voluntary[4] Involuntary[5] retirement Trainees Total 2006-07 Officers 152 26 1 91 270 Navy Other Ranks[6] 865 197 – 224 1,286 [6] Army Officers 370 31 1 80 482 Other Ranks [6] 1,582 482 2 422 2,488 Officers 228 23 7 48 306 Air Force Other Ranks[7] 661 95 8 129 893 Officers 750 80 9 219 1,058 Tot a l Permanent Other Ranks 3,108 774 10 775 4,667 Forces Total 3,858 854 19 994 5,725 2007-08 Officers 116 10 1 47 174 Navy Other Ranks 751 176 3 291 1,221 [8] Army Officers 279 29 – 129 437 Other Ranks[8] 1,373 446 – 479 2,298 Officers 193 16 3 52 264 Air Force Other Ranks 519 66 6 127 718 Officers 588 55 4 228 875 Tot a l Permanent Other Ranks 2,643 688 9 897 4,237 Forces Total 3,231 743 13 1,125 5,112

NOTES 1. Figures in this table show actual employees (headcount). 2. Classifications are not mutually exclusive, and an individual is placed in only one group. The order of classifications is as follows: age retirement; cadets and trainees; and the remainder are classified as voluntary or involuntary. 3. Personnel on maternity leave or on leave without pay, Reservists rendering continuous full-time service and Gap Year are not included. 4. 'Voluntary' includes voluntary redundancies and resignations. 5. 'Involuntary' primarily comprises members who are medically unfit, unsuitable for further duty or who fell into the 'Management Initiated Early Retirement' category. 6. Amendments to Navy and Army 2006–07 figures are due to retrospective separations. 7. Amendments to Air Force 2006–07 figures are due to change of separation type. 8. There were 36 personnel aged 55 or above who separated in 2007–08, but none had 'age retirement' as the separation reason.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 109 CHAPTER 4 PEOPLE

Figures 4.9 to 4.12 show the variation in the 12–month rolling separation rate for the ADF and each Service over the last 10 years. The higher separation rate for the Air Force is due to the impact of the 2000-01 redundancy program. The lower separation rates between June 2002 and June 2005 are due to two reasons: an increase in Army recruiting in the previous two to four years as a result of members being obliged to serve out their initial period of service and therefore unable to leave; and fewer Air Force members were able to separate following the Air Force redundancy program. Long-term separation rates typically vary between 11 and 13 per cent. Rates outside these percentages are caused by other influences such as redundancy programs and changes in previous years’ recruiting targets.

110 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 4 PEOPLE

NON–OPERATIONAL TRAINING Details of non-operational training are contained in the online version of this report. WORKPLACE EQUITY & DIVERSITY In order to maintain competitiveness in in May 2008, the Minister for Defence the employment marketplace, and to Science and Personnel convened the first support the expansion of the ADF, Defence of a series of meetings nationally with a is striving to create an organisation that is representative cross-section of Defence more broadly attractive to, and women. representative of, the Australian Defence began a comprehensive community than is presently the case. Recruitment of Women Strategy, with a This will ensure greater diversity within number of initiatives including: 1 the Defence workforce. · a dedicated public affairs program to Gender develop profiles, frequently asked questions and good news stories about Increasingly, the ADF needs to be able to women in the ADF for websites, provide more family–friendly work newspapers, local and regional media arrangements. Although these policies apply equally to both men and women, · the Services’ formal encouragement they have a disproportionate impact on and support of selected female decisions by ADF women to remain in the members to visit schools to market the ADF. ADF as a career. The Air Force’s The Chief of the Defence Force ‘Making Women Feel Welcome’ established an external Reference Group strategy is part of this initiative, on Women to present alternative and which helps dispel many of the innovative strategies and options to break popular stereotypes and myths about down current barriers to women joining military life and continuing to serve in the ADF. Members of the reference group are · a comprehensive mentoring program senior women with a track record of for women conducted by Defence success in male–dominated industries or Force Recruiting, from the initial professions, or who have been responsible inquiry through to enlistment/ for innovative strategies to increase the appointment, to ensure their success participation of women in their through the process workplaces. The reference group will · a specific marketing campaign for the make recommendations based on their recruitment of women. own experiences in non–traditional workplaces to overcome systemic, Initiatives such as the Navy's Sea Change cultural, attitudinal and behavioural address gender issues by improving aspects of the ADF environment that locational stability to positively impact on directly or indirectly discriminate against family life and individual lifestyles, and the recruitment, retention, development enhance work-life balance for the Navy’s and management of women. In addition, people. The Navy has also implemented

1. Defence’s performance against its Workplace Equity and Diversity Plan 2007-09 is discussed in depth in the Workplace Equity and Diversity Annual Report at www.defence.gov.au/fr.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 111 CHAPTER 4 PEOPLE other initiatives including improved Indigenous participation career management to better meet individual aspirations and circumstances, Defence developed a plan to establish a mentoring and coaching for officers, new Directorate of Indigenous Affairs programs to reduce individual and early in 2008–09 to provide a single point collective workloads by eliminating of contact for Defence Indigenous unnecessary tasks, improving matters. It will have responsibility for the opportunities for respite, and access to provision of advice and oversight of the training. Examples include contracting implementation of the Defence in–port services, such as harbour security Reconciliation Action Plan, which can be watch-keeping, engineering found on the Defence Fairness and watch-keeping, safety rounds, and storing Resolution website1. It will engage with and maintaining ships. This reduces Indigenous communities to establish demands on a ship's company when in Defence as a trusted employer. Internal port, with the aim of reducing family responsibilities will include advice to the separation and allowing personnel more Defence Senior Leadership on Indigenous control over their lifestyle. matters, development and management The Army’s initiatives to support the of Indigenous policy, and reporting on the increased retention and recruitment of plan’s implementation, as well as women include a trial of reduced Initial facilitating collaboration between those Minimum Periods of Service for selected responsible for components of the trades and development of a mentoring Indigenous Recruitment and Retention program for female officers and warrant Strategy. officers. The ADF Indigenous Recruitment Strategy The Air Force has recently made changes 2007–2017 was formally launched by the to the Physical Fitness Test criteria to Minister for Defence Science and better meet the needs of women, Personnel in early July 2008. The strategy including pre– and post–maternity leave. is a national, tri–Service strategy that In addition, the Air Force is actively seeks to attract, prepare, recruit and supporting initiatives to deliver increased retain more Indigenous Australians for all opportunities for tailored physical fitness avenues of entry to the ADF. Its three and reconditioning programs for women. main themes are: changing internal and The Air Force has also removed seniority external perceptions; specialised training restrictions for promotion eligibility, and employment pathways; and ongoing enabling greater opportunities for support to Indigenous ADF members and promotion of women following periods of their families. non–effective service. The Army released a Regional Force Statistical information on ADF and APS Communications Skills project, which has gender and employment categories is initiated a language, literacy and provided in Appendix 1 - Staffing and numeracy course at Nhulunbuy, Northern Remuneration. Territory, for local NORFORCE members and local Indigenous communities. The Army is also the lead service for the Defence Indigenous Development Program, which is currently being scoped. The aim of the program is to deliver a pilot course in 2009 in the Katherine area, which will provide instruction in military skills, personal development, language literacy and numeracy, and technical skills extension.

1. www.defence.gov.au/fr.

112 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 4 PEOPLE

People with a disability A major focus of the centrally–funded Defence Assistive Technology Program has Defence's reporting requirements in its been engaging with the Chief Information employer role under the Commonwealth Officer Group to streamline the provision Disability Strategy framework are met by of assistive software such as Dragon its input into the annual Australian Public Naturally Speaking, Zoom Text and Jaws Service Commission’s State of the Service to employees who require these Report. applications to perform their daily work. The Disability Management Strategy, An initiative under development is the published by Defence, is structured Step Up and Start program, which is a around the recommendations of the partnership between Defence, the Management Advisory Committee's 2006 Defence Special Needs Support Group and report Employment of people with Woolworths. The program aims to provide disability in the APS. Deputy Secretary, continuity of employment to youth with People Strategies and Policy was special needs when a family is transferred appointed the Defence Diversity or posted. A pilot program is scheduled to Champion and, as part of Defence's commence in late 2008. ongoing commitment to whole–of– Defence used the Australian Public government initiatives, is participating in Service Commissioner's Directions to put an APS–wide committee that will drive the in place special employment measures for employment of people with disability people with an intellectual disability. more broadly across the APS. Under clauses 4.2(6)(b)(ii) and As part of its membership of the 4.3(3)(b)(ii) of the Public Service Australian Employers Network on Commissioner’s Directions 1999, Defence Disability, Defence is participating in a Support Group advertised a number of work experience program for tertiary entry–level positions that were restricted students with disabilities. As part of the to people with an intellectual disability. A Stepping Into program, Defence is merit list has been established from which providing opportunities for seven students suitable individuals will be appointed over to undertake 4 to 12–week work the next 12 months. placements in information technology, human resources, law and finance. OCCUPATIONAL HEALTH & SAFETY Considerable progress was made across Occupational Health & Defence on Occupational Health and Safety (OHS) issues during 2007–08. These Safety Management improvements are guided by the Defence System development Occupational Health and Safety Strategy An OHS implementation plan has been 1 2007–2012 , which was released in the developed to realise the objectives and second half of 2007. The strategy provides priorities detailed in the Defence a prioritised, longer–term perspective of Occupational Health and Safety Strategy strategies to improve OHS throughout 2007–2012. This plan articulates the Defence. comprehensive program of work that will be progressed to achieve the strategy with progress reported to the Defence OHS Committee.

1. www.defence.gov.au/dpe/ohsc.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 113 CHAPTER 4 PEOPLE

Assessment of current Service and Group off–the–shelf management information level systems against the requirements of system. The system will be an enterprise– the Defence OHS Management System has wide solution for use by personnel informed development of the forward throughout the Services and Groups. Its work program. Alignment between the use will enable identifying areas to supporting systems and the whole–of– improve OHS outcomes, potentially Defence system will be achieved through reducing the high capability and financial implementing recommendations flowing costs of work–related injuries and from these assessments. illnesses. Education & awareness, Defence Civilian Injury/ recognition and reward Illness Prevention & Experts in OHS have long recognised that Management System strong leadership and an active learning Defence is reducing the incidence and culture will improve occupational severity of unscheduled absences in its accident, injury and illness performance civilian workforce through the Defence within an organisation. Defence is Civilian Injury/Illness Prevention and committed to improving these aspects of Management System. The success of this its OHS performance under the initiative is evident through a sustained stewardship of the Defence OHS reduction in the Defence civilian workers’ Committee. compensation premium rate from 1.53 per Defence has in place a range of education cent of payroll in 2004–05 to 1.27 per cent and awareness programs aimed at in 2007–08, with indications of a further achieving a greater level of awareness reduction to 1.01 per cent for 2008–09. and commitment. This year marked the fifth year of the ADF Rehabilitation Defence OHS Awards. The awards are Program targeted at recognising and rewarding The ADF Rehabilitation Program was innovative practices and solutions. The developed to ensure that injured or ill number and quality of entrants to these ADF members receive early referral for awards continues to improve, indicating rehabilitation assessment and coordinated that Defence people are more conscious management to deal with their injury or of how they can, both individually and as illness quickly, thereby supporting their part of a team, improve OHS in their early return to duty. workplaces. Previous winners have gone on to achieve national recognition and The ADF Rehabilitation Program success at the Safety, Rehabilitation and commenced in 2006, and has received Compensation Commission Safety Awards over 8,000 referrals, which represents an and in the Australian Safety and average of 400 per month. The indications Compensation Council — Safe Work are that the ADF Rehabilitation Program is having a positive impact by reducing the Australia Awards.1 medical discharge rate. This positive Management information impact is shown by a successful return-to-duty (members retained in the Defence recognises the importance of ADF) rate of 89 per cent. This compares information to understand and effectively favourably with the performance of other manage its OHS performance. A project is rehabilitation jurisdictions. underway to acquire a commercial,

1. Further information on the Defence OHS Awards can be found at www.defence.gov.au/dpe/ohsc/programs/ DefenceOHSAwards/Default.htm.

114 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 4 PEOPLE

Health and Safety Management Table 4.13 Incident reporting Arrangements 2005-06 2006-07 2007-08 Total incident These arrangements are handled through reports[1][2] 15,381 18,044 12,849 designated work groups and supported by Comcare elected or appointed Health and Safety notifiable Representatives in accordance with the Deaths[3] 2 3 3 Occupational Health and Safety Act 1991. Serious personal Representatives and deputies continue to injury[4] 739 880 978 be selected and trained as new work [5] groups are identified. Incapacity 219 241 147 Dangerous Notification and reporting occurrence[6] 5,784 8,429 4,365 of incidents Total Comcare notifiable 6,744 9,553 5,493[7] The collection of OHS information such as incidents provides an ongoing record for NOTES Defence personnel who have suffered an 1. Includes the DMO's incident reports. injury or exposure. This information may 2. An incident report records an event that causes, or has potential to cause, injury or illness to later be retrieved if a compensation claim Defence employees or other people, as a result of is made. Moreover, it enables Defence to a Defence undertaking. identify trends when developing 3. Comcare reportable deaths. preventative strategies and OHS policy, 4. Serious personal injury is defined as an injury or ensuring a safer working environment. disease in a person caused by work–related employment for which the person needs to be The figures shown in the following three given emergency treatment by a registered tables may be updated in subsequent medical practitioner, treated in a hospital as a years to include incidents that occurred in casualty without being admitted to hospital, or admitted to hospital. previous years but which may not have 5. Incapacity is when an employee is unable to been reported or recorded for that year perform work for 30 or more consecutive days or at the time of preparation of that year’s shifts. annual report. 6. A dangerous occurrence is a near miss event that could have, but did not, result in fatality, serious personal injury or incapacity. This includes exposures. 7. This does not include any of around 2,000 (approximate) incident forms yet to be recorded.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 115 CHAPTER 4 PEOPLE

Investigations by Comcare Comcare enforceable Details of investigations conducted by undertaking Comcare across Defence over the last In 2005, a soldier sustained a serious three years are reported in the following injury when conducting roadside repairs table. on an Army vehicle. In response to this accident Comcare indicated that it would Table 4.14 Investigations by Comcare[1] consider an 'Enforceable Undertaking (EU) 2005–06 2006–07 2007–08 from Defence. An EU is an alternative to Reports[2] civil proceedings or criminal prosecution Review of previous and aims to encourage voluntary investigations 15 11 17 compliance with the requirements of the Targeted OHS Act. investigations 1 2 13 Defence acknowledges that there were Reactive investigations 18 56 69 systemic OHS failures, consistent with the Tot a l 34 69 99 findings and conclusions set out in the Comcare Investigation Report. In NOTES December 2007, in accordance with 1. Includes DMO data. Comcare’s enforcement policy, Defence 2. Comcare undertakes three categories of OHS investigations: review of previous investigation, submitted, and Comcare accepted, an EU targeted (at specific OHS concerns), and reactive which details the remedial actions, (in response to an accident or incident). monitoring regime and publicity Notices issued to Defence by requirements in response to this accident. Comcare investigators The major remedial actions involve: The number of notices issued to Defence • reviewing the Army’s risk management by Comcare investigators over the last framework three years is reported in the following • conducting a research project on table. implementing OHS policies and Table 4.15 Comcare notices[1] procedures in the workplace Reports 2005-06 2006-07 2007-08 • reviewing Unimog repair procedures Improvement relating to the accident and providing notices[2] 10 19 3 training Prohibition • developing an accident case study to [3] notices 7 6 7 be used in promotion courses for Do not disturb supervisors. notices[4] 3 3 3 Letters of Australian Defence Force statutory obligation[5] 2 4 – Cadets Removal of plant In the 2007-08 Budget, the Government or substances[6] – 1 1 committed an additional $100m across 10 Tot a l 22 33 14 years to enhance and expand Cadets NOTES programs. Together with funding from the 1. Includes DMO data. Services, this has provided for the support 2. Based on incidents and occurrences that and management of the Cadet contravene the OHS Act or Regulations. organisations. Specific initiatives and 3. Issued to remove an immediate threat to the health or safety of personnel. further details of the Australian Defence 4. Issued for a specific period of time to remove a Force Cadets are contained in the online threat to the health or safety of personnel. version of this report. 5. Issued to individuals to inform them of a specific breach of the OHS Act. 6. Issued when Comcare requires plant or substances from an incident as evidence, or to carry out testing.

116 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CASE STUDY ADF Gap Year

2007-08 saw the first intakes in each Service of the ADF Gap Year. The Navy and Air Force offered 100 places each, and the Army 500. Women took up 197, or 28 per cent, of these positions. The aim of the ADF Gap Year is to offer young people a realistic taste of Service life without having to make the long-term commitment that many find daunting. In doing so, Defence hopes to attract a wider range of people to consider a Service career. Although there is no obligation for participants to stay beyond their initial 12-month period of service, many participants have already decided they like what they see. One who has made the decision to become a full-time serving member is Private Timothy Pashley who is undertaking training as a Gun Number in the Army. A Gun Number is a member of the Royal Regiment of Australian Artillery who assists in the operation of a gun or communications equipment in a Field or Medium Artillery Unit (Battery or Regiment). Private Pashley said, ‘I have been interested in all things military since I was young. I had seen the TV ads, looked up the internet for a career in the military and it looked like a wise and exciting career choice considering all the benefits that are available.’ ‘I was halfway through my basic training at Kapooka and I had already made a lot of mates in the first four to five weeks. I was enjoying the training and the whole experience so much that I knew then that Army was going to be a great fulltime career choice for me.’ ‘I am really looking forward to getting deployed overseas on operations or peace keeping. I want to do something for my country.’ The ADF Gap Year offers young Australians aged 17-24 years of age who have completed Year 12 (or equivalent) in the previous two years an opportunity to experience military training and lifestyle in the Navy, Army or Air Force for up to 12 months.

Gap Year recruits (left to right) Privates Danielle Garner, Rebekah McNelly and Nyssa Whiley enjoy a break in their training at Army Logistics Training Centre

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 117 CHAPTER 5 JUSTICE & FAIRNESS IN DEFENCE CHAPTER 5 Justice & fairness in Defence

The ADF requires a military justice system that supports commanders in achieving their respective operational objectives in an effective manner while at the same time providing, and being seen to provide, fairness to individual members. Military justice is not a concept that operates intermittently, but every day within every ADF unit. It is an integral component of ADF operational capability and is inseparable from the function of command. Without it the perception, and indeed the reality, of the ADF as a highly capable and reliable volunteer military force would be compromised. Leadership focus to ensure that the ADF is supported by an effective and fair military justice system has therefore remained a high priority throughout the reporting period.

During 2007–08, further substantial reporting systems are intended to progress, including the passage of key enhance transparency and accountability legislation, was achieved in the to enable a more effective general maturation and implementation of oversight of the military justice system. military justice reforms arising from the This will assist in the more timely Government’s agreement to identification of problems and remedy an recommendations from the 2005 Senate acknowledged systemic deficiency that Standing Committee on Foreign Affairs, has been evident in the past with the Defence and Trade’s Report into the ready availability of this type of Effectiveness of Australia’s Military contemporary military justice data. Justice System (the 2005 Senate The ADF military justice reform program Committee Report). Close monitoring of has drawn upon many useful features of the implementation of the military justice the military justice arrangements reform program continued both internally practised in a number of other allied and externally with comprehensive jurisdictions. When fully implemented, updates being provided to the Senate the ADF reform program will offer a Standing Committee in September 2007 unique and capable system that is not and June 2008. only well suited to ADF circumstances, Of particular interest during the reporting but is likely to represent best practice period has been the further development across a range of indicators in military and refinement of a range of reporting justice activities, both in regard to the systems to monitor discipline, inquiry, and maintenance of discipline and protection complaints management processes. These of the individual.

118 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 5 JUSTICE & FAIRNESS IN DEFENCE

MILITARY JUSTICE REFORMS In October 2007, the two–year period operation of the AMC covering the period provided for implementation of the 1 October to 31 December 2007, was agreed recommendations arising from the tabled in Parliament on 26 May 2008. 2005 Senate Committee Report ended. Another important milestone achieved The dedicated Military Justice during the reporting period was the Implementation Team established by the passage of the Defence Legislation CDF to oversee the implementation Amendment Act 2008, which received process was disbanded in December 2007 Royal Assent on 20 March 2008. Some and responsibility for oversight of the amendments took effect on remaining reform initiatives passed to the commencement and the balance will take Inspector General ADF (IGADF). Although effect from 20 September 2008. The Act impressive progress was made with the introduced a wide range of enhancements implementation of most of the agreed to the ADF disciplinary system, recommendations to December 2007, for particularly with regard to the conduct of various reasons, including the need for summary proceedings. The need for an legislative changes, a number of the efficient, fair, and speedy method of recommendations could not be completed disposing of less serious disciplinary within the two–year implementation offences is a basic requirement for the period. At 30 June 2008, six of the 32 day–to–day maintenance of discipline in agreed recommendations from the 2005 the ADF. The changes being made will Senate Committee Report remained to be address a number of longstanding issues fully implemented. It is expected that the that should greatly improve the ability of majority of these will be completed by the summary process to provide relatively the end of 2008. It is also expected that simple, quick and fair disciplinary action to recruit up to eight part-time responses for command and ADF military judges to supplement the existing individual members alike. three permanent judges will commence in For example, under the new early 2009. arrangements for summary proceedings, The 32 recommendations that were accused persons will be given the right to agreed for implementation are not minor. elect to be tried before the AMC for all The changes to the military justice system but a limited number of less serious that will result from these initiatives are commonly occurring service offences, as the most far reaching since the well as a right to appeal summary introduction of the Defence Force convictions and punishments to the AMC. Discipline Act (DFDA) in 1985. They will, Other key provisions of the Act regarding moreover, have been introduced over a summary proceedings include: considerably shorter time frame than was • a framework directing summary the case with the DFDA, which took over authorities to apply the rules of 20 years to bring to full fruition. procedural fairness and the basic One of the major recommendations to be principles of the rules of evidence implemented during the reporting period (relevance, reliability, weight and was the establishment and probative value) under a more commencement of the Australian Military simplified evidentiary system Court (AMC) in October 2007. The AMC is a • the imposition of summary trial time standing court and replaces the previous frames through the introduction of the system of ad hoc trials by courts martial requirement that members are and Defence Force magistrates. The Chief brought to trial within three months of Military Judge’s first annual report on the being charged

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 119 CHAPTER 5 JUSTICE & FAIRNESS IN DEFENCE

• automatic review of summary • standardisation of the powers of convictions by a ‘Reviewing Authority’ punishment of summary authorities in respect to technical errors related regardless of the Service of the to the awarding of punishments and convicted person. The current orders, and the approval of certain differences in the punishments more severe punishments applicable to members of the Navy, • an expanded Discipline Officer Scheme from those applicable to Army and Air enabling minor disciplinary infractions Force members, will be removed. by ADF members up to and including the rank of Lieutenant/Captain/Flight CDF Commissions of Lieutenant to be dealt with, if they so Inquiry choose, in a more efficient manner Amendments to the Defence (Inquiry) and without a permanent record. Regulations 1985 to enable the Other significant generic changes to the appointment of Commissions of Inquiry1 military justice system introduced by the (COI) were passed by the Federal Act include: Executive Council on 21 June 2007 and • a provision to ensure that legal commenced on 26 June 2007. With the officers are able to provide advice introduction of these Regulations, COI independently of potential undue superseded Boards of Inquiry (BOI) as the command influence primary mechanism for inquiring into the • increased AMC and summary death of ADF members. A civilian with jurisdiction to try offences involving judicial experience now presides over drugs, including cannabis, narcotic each COI. substances (amphetamine, cocaine, COIs have a very specific purpose. They heroin, methamphetamine etc) and are appointed by the CDF primarily to anabolic steroids inform internal Defence decision making • extension of the summary jurisdiction by thoroughly and impartially examining to try members up to the rank of deaths and other serious incidents — Rear Admiral/ Major General/ principally with a view to preventing Air Vice-Marshal similar incidents from occurring in the future. The outcome of these inquiries, in • provision to disqualify a summary turn, assists in obtaining timely authority from dealing with a charge information on incidents that affect where he or she was involved in the Defence personnel, training and policy, investigation of, issuing a warrant in which is vital for the maintenance of relation to, or charging the accused Defence’s capability — including person with the offence in question operational capability. • where an accused intends to plead The Minister for Defence may dispense guilty in a summary authority trial, with the requirement to appoint a COI provision to allow the accused to where a death occurs in circumstances in apply for the trial to be conducted in which he determines that a COI is not his or her absence if there are required; a combat fatality for example. exceptional circumstances COI reports are submitted to CDF and, • AMC and summary authorities will be after consultation with relevant given increased flexibility in stakeholders, CDF issues directions sentencing; namely, the ability to concerning the implementation of agreed suspend part of a punishment or order

1. Prior to the introduction of changes to the Defence (Inquiry) Regulations 1985 on 22 June 2007, the term Board of Inquiry was used to describe these inquiries. All CDF–appointed inquiries into the death of a member of Defence are presided over by a civilian with judicial experience.

120 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 5 JUSTICE & FAIRNESS IN DEFENCE

recommendations and makes initiated consultation with key Defence recommendations to the Minister stakeholders in preparation for concerning the report's release. implementation of the report’s Six COIs concerning the deaths of ADF recommendations. members were appointed by CDF during Private Baker the reporting period. Defence appreciates the importance of conducting such Private Ashley Baker died on 5 November inquiries in a way that promotes public 2007 from non–battle gun shot wounds confidence in the integrity of COI sustained while he was serving with the processes. In November 2007, CDF decided East Timor Battle Group. On 9 November his general practice will be to direct that 2007, CDF appointed a COI to inquire into COI be held in public, subject to the circumstances of Private Baker’s considerations of security and the exercise death. The COI conducted hearings in of legal discretions by COI Presidents. The March and April 2008 and submitted its public COIs/BOIs that were appointed or report to CDF on 23 April 2008. CDF reported during 2007–08 are summarised initiated consultation with key Defence below. stakeholders in preparation for implementation of the report’s Captain Lawton recommendations. Captain Paul Lawton died on 31 August Major McKerron 2006 while aboard the MV Talisman in the Pacific Ocean. CDF appointed a Board of Major Thomas McKerron died at work at Inquiry to inquire into his death on 18 Bulimba, Queensland on 11 May 2007. On September 2006. CDF determined on 13 4 September 2007 CDF appointed a COI to February 2007 to dissolve the original inquire into the circumstances surrounding Board, which had completed its hearings Major McKerron’s death. The Commission but not reported, in order to avoid lengthy held its hearings in Brisbane during time delays associated with Federal Court February and April 2008. CDF received the proceedings initiated by an inquiry Commission’s report on 4 June 2008 and witness. On the same date, CDF appointed has commenced implementation a new Board which completed its hearing consultations. on 23 October 2007. The Board submitted Captain Paljakka its report to CDF in December 2007. The report was publicly released on 17 June Captain Andrew Paljakka died on 2008. It contained 28 findings and 41 26 February 2007. CDF determined on recommendations of which 32 were 19 August 2007 that a COI was to be held accepted. Nine recommendations were to inquire into the circumstances not accepted because Defence is surrounding this death. The Commission constrained from implementing some of commenced its hearings in Sydney on the recommendations due to privacy 23 January 2008 and provided its report to implications and some of the matters CDF on 6 May 2008. CDF has commenced recommended by the Board have already implementation consultations. been addressed by Defence separately. HMAS Sydney II Black Hawk 221 On 28 March 2008, CDF appointed a COI to On 7 December 2006, CDF appointed a BOI inquire into the circumstances associated into the circumstances surrounding the with the loss of the HMAS Sydney II on crash of an Army Black Hawk helicopter 19 November 1941 and consequent loss of (Number 221) off Fiji on 29 November life and subsequent related events. The 2006. Two members of the Army, Captain first day of hearings was held in Sydney on Mark Bingley and Trooper Joshua Porter, 30 May 2008 and a further four days of died in the incident. The Board submitted hearings were conducted in Perth and its report to CDF on 25 January 2008. CDF Melbourne in late June 2008.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 121 CHAPTER 5 JUSTICE & FAIRNESS IN DEFENCE

Defence investigative which includes milestones for achievement, methods to promote change capability and measures of success. Implementation of the 2006 Audit of the Of the 99 Whiddett/Adams Report Australian Defence Force Investigative recommendations, 45 were completed Capability Report (Whiddett/Adams during the reporting period. While action Report) has continued during the is generally on track with respect to the reporting period under the direction of remaining recommendations to meet the the Provost Marshal ADF. The aim is to five year implementation plan, establish the ADF Investigative Service recruitment and retention issues will (ADFIS) as a highly trained unit capable of require ongoing attention. investigating Service offences On 15 May 2008, the new ADFIS independently, impartially and to a Headquarters was opened by the Hon Dr standard that equals best practice in the Mike Kelly AM MP. Located in Canberra, Australian civilian police and comparable the ADFIS Headquarters facility is the military police investigative services permanent location for the new joint overseas. The five–year implementation ADFIS investigative organisation. plan is guided by an internal action plan, Table 5.1 Combined ADFIS and Service Police Activity[1] Briefs Of Evidence Investigations Submitted Average Completed Duration To U n it s To D M P [2] 2006-07 1,677 40 N/A 140 2007-08 1,766 27 96 196

NOTES 1. Only the Navy retains a limited investigative capability. As part of ongoing initiatives, all three Services are developing a minor incident investigation capability. 2. Director of Military Prosecutions. Single Service Police initiatives underway - improvements to remuneration for include: qualifications and skills through •Navy the Graded Other Ranks Pay Structure Review; - improvements to the transfer of category and recruiting numbers •Army - recruitment of State and Federal - transfer of Army Special Police members as Naval Police Investigation Branch members to Coxswains into the Naval Reserve ADFIS - streamlining of the process for - progress on an Army Domestic recognition of prior learning and Policy New Policy Proposal to recognition of current establish a Garrison Policing and competencies Minor Criminal Investigation capability; -implementation of direct recruiting of Naval Police •Air Force Coxswains - development of a career, training - reduction to workforce demand and advancement strategy to and review of the category provide a minor investigative structure capability from which to support and grow the joint capability - reduction of separation rate to 8.5 per cent - transfer of RAAF Security Police members in Service Investigations to ADFIS.

122 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 5 JUSTICE & FAIRNESS IN DEFENCE

Learning Culture Inquiry Key military justice issues to which the IGADF has contributed or taken the lead By March 2007, the Chiefs of Service have included revision or amendment of Committee had endorsed a three–phased the following policy documents or approach to the implementation of the 46 legislation: agreed recommendations of the inquiry · Defence Legislation Amendment Act into the learning culture in ADF schools and training establishments (Learning 2008 Culture Inquiry). The first phase focused ·DI(G) ADMIN 67-2 Quick Assessment on articulating doctrinal, policy and · Defence (Inquiry) Regulations procedural changes along with training amendments courses requiring consequential amendment. The second phase is focused · Australian Defence Force Publication on amending courses and documenting 06.1.4 Administrative Inquiries and implementing the amended policy, in Manual particular at the training institution level. ·The Defence Act 1903 (as amended) The third phase is intended to be focused on confirming Defence’s achievements · Service Police Professional Standards and completing outstanding ·Protocol for Investigation and recommendations. prosecution under the DFDA of Defence’s implementation of this serious, complex or sensitive fraud approach has progressed steadily during and security incidents committed by 2007–08. Phase 1 is substantially ADF members. complete, Phase 2 is well underway and During this reporting period, considerable Defence commitments against emphasis has been placed on the further 25 recommendations have been development of military justice reporting completed. Preliminary work has also systems to facilitate ongoing IGADF commenced on Phase 3. CDF has analysis of factors that contribute to the commissioned a detailed assessment of health and effectiveness of the military Defence’s progress towards implementing justice system. Previously, little attempt the inquiry report recommendations, the had been made to support judgements findings of which will contribute to an about the effectiveness of the system by independent review of progress with the analysis of data because relevant implementation of the military justice data, other than formal outcomes of DFDA reform program scheduled for completion action, was not readily available. in February 2009. In the past, the military justice system, in Office of the Inspector both its disciplinary and administrative General of the ADF aspects, was largely decentralised and dispersed. Driven primarily by the 2007–08 was another very active period in separate approaches to discipline taken military justice terms, with a number of by each of the Services and the separation major reform initiatives being of their respective personnel, legal and implemented, including the service police branches, there was little commencement of the Australian Military central visibility, oversight or analysis of Court, the passing of the Defence the system as a whole on any routine Legislation Amendment Act 2008 and the basis. Reporting systems and processes to appointment of a team to independently collect relevant data were either review progress with the military justice rudimentary or simply did not exist. There reform program in satisfaction of an was no particular agency charged with agreed response to the 2005 Senate monitoring the health of the overall Committee Report.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 123 CHAPTER 5 JUSTICE & FAIRNESS IN DEFENCE system other than via the annual report of Military discipline the Judge Advocate General, which was essentially limited to the operation of the Based upon data gained from the ADF unit DFDA. military justice audits program and data from the Conduct Reporting and Tracking That situation has now changed. Central System, discipline across the ADF has oversight is now provided by the IGADF remained generally well maintained and and there are now in place effective administered equitably and fairly during reporting systems for disciplinary and the reporting period. Time taken to adverse administrative actions, for investigate alleged offences disposed of tracking administrative inquiries and for at the summary level has reduced monitoring the implementation of markedly and, overall, offenders are recommendations arising from them. The brought to trial within established time case management system for recording frames (21 days). This compares very police investigations has been upgraded favourably with the new summary and a new system for maintaining procedures to be introduced by the oversight of complaint handling is under Defence Legislation Amendment Act 2008 development for introduction in late whereby summary authorities will have up 2008. Most of these systems are, or will to three months to bring matters to trial be, accessible by command and elements once charges have been preferred. of the ADF. At unit level, discipline training remains The information now available, an issue. In particular, a significant supplemented by data gained as a result number of Junior Non-Commissioned of the rolling IGADF-sponsored ADF unit Officers lack sufficient DFDA knowledge military justice audit program, provides a to recognise that an offence may have process that permits the health and been committed and an equally effectiveness of the ADF military justice significant number of Junior Officers lack system to be continuously monitored to confidence in their ability to discharge an extent not previously possible. their responsibilities as Defending From the evidence available to the IGADF, Officers. In the latter case, ‘just in time’ there is a general level of satisfaction training is normally provided by the unit with the way the ADF’s military justice discipline staff. The development and system has operated in 2007–08. While it delivery of a comprehensive suite of must be acknowledged that individual discipline training packages for various instances of unfair treatment can and do categories of ADF personnel in occur from time to time, as they will in preparation for the introduction of the any large organisation, they are the revised summary justice system in exception rather than the rule. Although September 2008 can be expected to assist the incidence of such occurrences is with improving basic knowledge levels. sometimes cited as an indicator of the Overall, the IGADF has assessed that the health of the military justice system, a standard of discipline across the ADF is more useful indicator is likely to be the satisfactory. As was the case in the capacity of the ADF to respond to them previous reporting period, absence with appropriate mechanisms. In this without leave, failing to comply with a regard, the ADF is well served. general order and prejudicial conduct present as the more frequently committed lesser offences.

124 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 5 JUSTICE & FAIRNESS IN DEFENCE

Adverse administrative overlooked, is that the QA often takes much longer than it should to complete, action thereby delaying command’s ability to Adverse administrative actions are shape the most suitable course of action. designed to admonish and correct unsatisfactory or unacceptable The right to complain performance and are initiated and then At grass roots level, it is readily apparent managed by more senior officers. It might that there is a more mature approach to then be expected that this would lead to the complaint submission and handling greater assurance that matters would be process than has previously existed. This dealt with robustly, appropriately and in a can be largely attributed to a changing timely fashion. Unfortunately, this is not culture within the ADF, where members always the case. Like other elements of are more aware of their rights, and are the administrative system, good quality more willing to place greater trust in the administrative sanction processes and chain of command that they will be outcomes are directly related to treated fairly. Reassuring evidence of this knowledge and experience of has been noted in the feedback from administrative officers, local area support focus groups conducted as part of IGADF by legal officers, local area mentoring for unit military justice audits. junior administrators, good record- During the reporting period substantial keeping practices and, most importantly, changes, details of which are contained stability in appointments for unit later in this chapter, were made to the administrators. Defence Force Regulations and policy There are clear indications that dealing with the redress of grievance considerable improvement has been process. The changes, which provide for a achieved in the past twelve months, speedier and more transparent complaints although posting stability in key handling process, also impose a number of administrative appointments remains a limitations on who may submit a factor in the quality of administrative grievance and the subject matter that outcomes. may be redressed. Overall, the new arrangements effect some overdue Conduct of administrative improvements to the complaints handling inquiries process and have not, to date, resulted in complaint to the IGADF about their IGADF unit military justice audits indicate operation. that general awareness of, and compliance with, the recently published IGADF inquiries DI(G) ADMIN 67–2 Quick Assessment (QA) is satisfactory. Evidence shows that the The number of IGADF inquiries process is being used is evidenced by the undertaken during the reporting period is fact that some 340 QAs were conducted slightly down on previous years. It is into allegations of unacceptable difficult to quantify the overall inquiry behaviour alone during the reporting effort by statistics alone. The size and period. Where deficiencies in process duration of an inquiry can be influenced were noted in some units, these were by many factors including complexity, mostly related to the inexperience of QA scope, time, number of personnel officers tending to exceed the stated aim involved and external influences. IGADF and allowing the QA to become a quasi- inquiries may run between two months to routine inquiry. The main problem with two years and may be subject to a number this, apart from the likelihood of of repeat representations by the procedural fairness obligations being complainant or affected parties.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 125 CHAPTER 5 JUSTICE & FAIRNESS IN DEFENCE

Although the raw number of submissions The Office of the IGADF received 40 new received during 2007–08 is less than in submissions and finalised 52 during 2007–08. previous years, the complexity of many of Eleven administrative inquiries resulted them has in no way diminished. No from new submissions received and a specific causes for this declining trend further four administrative inquiries were have been identified, although reduced undertaken at the request of CDF and the numbers of matters that come to the Service Chiefs. attention of the IGADF for inquiry may be indicative of improved standards in the way that military justice grievances are being dealt with through the normal channels. Table 5.2 Submissions by outcome 2007–08 Outcome Number Percentage No failure of the military justice system 34 65.4 Individual failure of the military justice system 5 9.6 Systemic failure of the military justice system 6 11.5 Unable to make a determination or withdrawn 7 13.5 Tot a l 52 100 During the reporting period, IGADF staff audits that can reasonably be conducted conducted an IGADF ‘own motion’ inquiry given available resources. Audited units into the Prohibited Substance Testing represented in excess of 27 per cent of (PST) testing program. Terms of reference ADF full–time members. for the inquiry included: Of the 63 units audited during the • the efficiency, effectiveness, reporting period, one was assessed procedural fairness and equity of ‘unsatisfactory’ and six were assessed current PST program policy, processes ‘satisfactory with significant and practices shortcomings’. These units will be • whether the application and subjected to a partial re–audit within 12 administration of positive test results months to verify that identified is consistent across the Services and shortcomings have been rectified. ranks The IGADF audit program also aims to • the appropriateness of the current assist units in improving their overall approach to random and targeted stewardship of military justice matters. testing While no fundamental breaches of disciplinary or administrative procedure • the effectiveness of the policy, were identified, a number of recurring processes and practices of contracted problems were noted and highlighted in laboratories the respective audit reports. These • whether the PST program is achieving included poor record keeping, lack of its purpose of deterrence. appropriate disciplinary appointments and As the inquiry was recently completed inadequate knowledge of procedure. and the report is yet to be considered, Since unit audits were first introduced on further comment on the outcome would a trial basis in 2003–04, a total of 167 be premature at this stage. audits have been conducted, representing 78 per cent of ADF full–time members. Military justice audits 7,738 ADF personnel have participated in Military justice audits were conducted in the process, representing 19 per cent of 63 ADF units over the reporting period. unit strength and 15 per cent of ADF full– This is the maximum number of unit time members.

126 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 5 JUSTICE & FAIRNESS IN DEFENCE

Justice & Discipline Street/Fisher Military Health & Effectiveness Justice System Review Data System One of the final recommendations to be As foreshadowed in last year’s report, implemented in response to the 2005 IGADF has introduced a military justice Senate Inquiry Report is the requirement performance measurement system during to provide for periodic independent review the reporting period. The ADF military of the military justice system by a suitably justice system encompasses a wide range qualified eminent person or persons. The of disciplinary and administrative actions first such independent review, that together form a complex matrix with administratively supported by the office of many interactive components. The IGADF, commenced in April 2008. Former identification and measurement of those Chief Justice of NSW, Sir Laurence Street components that are useful in assisting AC KCMG QC, and a former Chief of the Air meaningful assessments about the health Force, Air Marshal AO (Retd), and effectiveness of the system as a whole were appointed by the CDF to report on is not a simple task. Moreover, it is not a the effectiveness of the current reform task for which there is much in the way of program. The calibre of the review team precedent. Simply measuring what can be reflects the importance placed by CDF on measured or what is easily measurable can this task. The team will provide its report provide misleading outcomes and/or be to CDF by 10 February 2009. Their report misrepresentative in such a complex will be an important indicator as to system. whether the many reforms to the military justice system have been, or are likely to The performance measurement system be, appropriate and effective and whether that has been developed to pilot stage, further evolutionary change is required. known as the Justice and Discipline Health and Effectiveness system, is designed to Liaison visits measure what should be measured in a consistent, auditable and reliable fashion A specified function of the IGADF is to so that the data collected can be used to ‘consult with overseas agencies and assess whether the intent of the military authorities having similar or related justice system is being achieved. functions.’ During the reporting period, IGADF conducted a benchmarking visit to The information–technology–based system the United Kingdom, the Netherlands, has the ability to assess ADF performance Canada and the United States. IGADF held across four key reporting areas that liaison discussions with equivalent correspond to the four elements of organisations and personnel in those military justice; namely discipline, countries regarding the oversight of adverse administrative action, the conduct military justice in their respective armed of administrative inquiries and the right to forces, and to ascertain what complain. The system will report against arrangements exist, both internally and key performance indicators patterned externally to those defence forces, to after the Commonwealth Ombudsman’s A achieve this function. Good Practice Guide for Effective Complaint Handling: access, timeliness, The defence forces of all countries visited fairness, accountability, resources and face similar issues to the ADF in military training, and system improvement. The justice terms, although the legal regimes system was launched on 26 June 2008 and under which they operate, the scale of will be trialled and further developed in their forces and resources, and the 2008–09. military justice arrangements they employ may differ markedly between them and in comparison with the ADF. The overall impression gained was that the approach

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 127 CHAPTER 5 JUSTICE & FAIRNESS IN DEFENCE to military justice issues that is being Right to Complain taken in Australia leaves little to be desired in comparison. Much interest was ADF Redress of Grievance expressed in what the ADF is doing, the 270 new applications for redress of new Justice and Discipline Health and grievance were received during 2007–08. Effectiveness System being but one Of the complaints submitted, 129 (48 per example. cent) were withdrawn1, not granted or During the reporting period, IGADF was not reviewable; the remainder being invited by the Commonwealth granted, partly granted or still under Ombudsman to participate in an review. 248 applications were finalised2 Ombudsman’s Workshop in Papua New at unit level. Of these, 195 (79 per cent) Guinea to discuss the ADF’s approach to were withdrawn, not granted or not complaint handling both internally and reviewable; the remainder being granted externally, as it interlinks with the or partly granted. There has been an Commonwealth Ombudsman’s Office, increasing trend during the period for which also has a specific role as the members dissatisfied with the decision by Defence Force Ombudsman. Following the their commanding officer to refer their success of the inaugural workshop, a complaint to their relevant Service Chief return visit by a PNG delegation from the and, where an entitlement exists, to the PNG’s Ombudsman’s Office was hosted by CDF for further review. The primary focus the Office of IGADF in conjunction with of complaints under the redress of the Commonwealth Ombudsman. Future grievance system remains the application arrangements are in hand for a member of of financial entitlements policies the PNG Ombudsman’s Office to (particularly housing entitlements, accompany IGADF staff when conducting retention benefits and pay structure an IGADF ADF unit military justice audit of reforms), termination of service decisions some ADF units so that first–hand and career management issues experience may be gained. (particularly promotions, postings and performance appraisal reports). The initial advice process introduced in July 2006 continues to prove its worth to the redress of grievance system, with generally positive feedback from commanding officers about the value of the administrative and legal advice provided by the Directorate of Complaint Resolution. The Directorate of Complaint Resolution has also observed a general improvement in the quality of decisions being provided to members by their commanding officer since the introduction of the process.

1. Withdrawn complaints are those withdrawn by the member prior to the authority making a formal decision on the merits of the complaint. This includes complaints withdrawn due to an acceptable outcome being provided through administrative resolution or alternative dispute resolution, and those withdrawn because the member does not wish to proceed with the complaint. 2. Redresses of grievance recorded as finalised may have been received in the preceding year. Redresses of grievance are finalised when the complainant chooses not to pursue the grievance further or when the process of inquiry and merit decision is complete. A complainant who is not satisfied with the outcome of a redress of grievance submitted at unit level has a right to refer the complaint for inquiry by the Service Chief. Officers, warrant officers, chief petty officers and flight sergeants have a further right to refer the complaint for inquiry by the CDF if not satisfied with the Service Chief–level inquiry.

128 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 5 JUSTICE & FAIRNESS IN DEFENCE

In May 2008, part 15 of the Defence Force APS Review of Actions Regulations 1952 was amended to preclude certain issues from the redress The total number of applications for of grievance process and to place time Review of Actions across Defence limits on the submission and referral to decreased by 10 per cent in 2007–08, higher authority of a redress of grievance. following a sharp increase in the previous The amendment also requires the Service year. This decrease coincides with a slight Chiefs to consider any redress of downturn of the number of performance grievance at unit level. Where a decision management applications, now that the has not been made by the commanding Performance Feedback and Development officer within 90 days of having received Scheme is now well established and the complaint, the Service Chief can better understood. Some of the decrease make a decision on whether to remove may also be attributed to an increased the redress of grievance from the control awareness of Alternative Dispute of the commanding officer and deal with Resolution options across Defence, it themselves. This has resulted in a more resulting in fewer employees seeking to interventionist approach by the have their employment disputes resolved Directorate of Complaint Resolution to through the more formal processes. ensure commanding officers make a Figure 5.2 APS reviews of actions timely decision on a member’s redress of received and finalised, 2005–06 to grievance, including the ability to ask the 2007–08 Service Chief to prompt action from other individuals and authorities from whom the commanding officer is awaiting information on which to base a decision. Another important element in the amendments was the alignment of the rights of Chief Petty Officers and Flight Sergeants with those of Warrant Officers Class 2 to refer their complaint to the CDF if they are not satisfied with the Service Chief-level decision. Figure 5.1 shows the total number of redresses of grievance submitted by ADF members from 2005–06 to 2007-08 and the number of grievances that were finalised at unit level in that period.

Figure 5.1 Military redresses of grievance received and finalised 2005–06 to 2007–08

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 129 CHAPTER 5 JUSTICE & FAIRNESS IN DEFENCE

Unacceptable Behaviour Figure 5.3 shows the total number of complaints reported over the past three In May 2008, the Secretary and the CDF years. The category of ‘other’ includes issued a joint statement on unacceptable complaints against contractors or where behaviour, confirming their commitment the identity of the respondent is to ensuring that everyone in Defence has unknown. a fair and equitable workplace in which they can do their job to the best of their Figure 5.3 Reported unacceptable ability. behaviour complaints, 2005–06 to 2007–08 In 2007–08, 765 complaints were received. While continuing to be of concern, this figure represents complaints from less than one per cent of the Defence workforce and a 10 per cent reduction from last year. During the reporting period, 559 complaints were finalised with 425 (76 per cent) being substantiated. The June 2007 report of the Defence Force Ombudsman’s investigation into the management of complaints of unacceptable behaviour1 found that Defence had a complaint management system that is widely recognised, effective and has the confidence of Alternative Dispute personnel. Action continued throughout Resolution 2007–08 to implement the report recommendations. Significant The interventions offered by Defence for achievements included the launch of APS employees and ADF members ‘ComTrack’ the Defence Complaint encompass interactive problem solving, Management Tracking and Reporting conflict coaching, mediation and System, and the production of an Equity workplace conferencing. Fairness and and Diversity Awareness DVD, with an Resolution Centres have been established introduction by Defence Senior Leaders, in each mainland capital city to provide a for distribution to all personnel. Defence one–stop–shop for assistance and support continues to offer a range of training in relation to dispute resolution and which aims to expand management equity issues for the Defence population. knowledge and capability in dealing with From 2006 to 2007, the use of Alternative unacceptable behaviour. Dispute Resolution interventions almost doubled, and a similar increase is

1. Available at http://www.comb.gov.au/commonwealth/publish.nsf/Content/ publications_investigationreports_2007.

130 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 5 JUSTICE & FAIRNESS IN DEFENCE

causes of their conflict and to identify by managers to critically assess the nature suitable responses and strategies to deal of their worksite interactions and adopt with that conflict. positive measures to achieve an Since the official launch of the Fairness acceptable outcome for the entire and Resolution Centres in May 2008, there workplace. Historically, workplace has been a surge in interest and uptake of conferencing was provided by services. The most significant increase contractors, costing in the vicinity of tens relates to workplace conferencing, which of thousands of dollars for each is an emerging capability of the Fairness intervention. Provision of this service and Resolution branch. On a positive note, internally is a far more effective use of this demonstrates a growing willingness Defence’s finances.

Figure 5.4 Alternative dispute resolution interventions, 2005–06 to 2007–08

Compensation for personnel disputes, it is a means by which ADF members can seek compensation, Detriment caused by whether or not their redress of grievance Defective Administration has been upheld. The restrictive criteria that applies under the scheme means that The Defence Legal Division in Defence compensation cannot be awarded in many Support Group manages claims made instances, although the member may have under the Compensation for Detriment grounds for complaint. Caused by Defective Administration (CDDA) scheme. The Department of A continuing trend of concern is that ADF Finance and Deregulation has general members dissatisfied with the outcome of oversight of the scheme. An explanation an application for redress of grievance of how the scheme and other seek to reopen the matter through a CDDA discretionary remedies operate can be claim. As a general rule, where an ADF found on the Department of Finance and member is dissatisfied with the outcome Deregulation website at of a redress of grievance process, the www.finance.gov.au. Defence Force Ombudsman may be the appropriate body to review the member’s In Defence, the majority of claims made complaint, noting that the Ombudsman under the scheme are from current has the discretion not to investigate serving and former members of the ADF. grievances. Other remedies may include Although the scheme has not been seeking judicial review. While the CDDA developed specifically to deal with ADF

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 131 CHAPTER 5 JUSTICE & FAIRNESS IN DEFENCE

scheme may be available to pay cases. The remaining sanctions involved compensation where the redress of formal reprimands and counselling. grievance has been upheld in full or in By comparison, in 2006-07 Defence part, it is not an appropriate avenue finalised investigation of 86 employees for through which to reopen matters where breaches of the Code of Conduct. Of the the member remains dissatisfied with the 86 employees investigated, 67 were found outcome of the grievance process. to have breached at least one element of Defence is currently reviewing all Chief the code and 86 sanctions were issued (in Executive Instructions. The Chief some cases more than one sanction was Executive Instruction on the CDDA applied to an individual). Employment Scheme, incorporating Finance Circular was terminated in nine cases, 22 had 2006/05, is expected to be published in financial sanctions applied and the rest late 2008. were counselled or reprimanded. Table 5.3 Compensation for Detriment The increase in cases investigated in Cause by Defective Administration 2007-08 could be attributable to greater claims summary awareness of the Code of Conduct through Year Claims Payments Amounts the Defence Collective Agreement (DeCA) Received Made Paid 2006-09 and the Performance Feedback Assessment and Development Scheme 2007-08 34 19 $451,497 introduced in 2007. In 2005-06 Defence 2006-07 40 20 $652,035 investigated a total of 102 employees for 2005-06 50 20 $321,660 breaches of the Code of Conduct. Of the 2004-05 47 29 $332,062 102 employees investigated, 79 were 2003-04 54 21 $359,010 found to have breached at least one 2002-03 37 36 $287,983 element of the Code and 90 sanctions were imposed. Employment was APS Code of Conduct terminated in ten cases and a financial The Australian Public Service ( APS) Code sanction applied in 37 cases. The rest of Conduct and APS values are set out in were counselled or reprimanded. These the Public Service Act 1999. The code sets figures include 11 DMO cases. After out the conduct expected of APS October 2005 DMO managed their own employees and obliges all employees to Code of Conduct investigations. uphold the APS values. The values Table 5.4 shows the comparison figures establish the framework in which the APS over the last three years. operates, underpinning relationships and Table 5.4 Code of Conduct investigations behaviour. 2005-06 2006-07 2007-08 During 2007–08, Defence finalised Number of 102 investigations of 126 employees for employees (including breaches of the Code of Conduct. This investigated 11 DMO) 86 126 figure represents less than 0.5 percent of Number of employees the Defence workforce. The total number who of suspected breaches was 76 (note that breached an employee can be suspected of more the Code 79 67 79 than one breach). Of the 126 employees Number of sanctions investigated, 79 were found to have issued 90 86 166 breached at least one element of the Terminations 10 9 14 code and 166 sanctions were imposed. Financial Employment was terminated in 14 cases, sanctions 37 22 34 and a financial penalty was applied in 34

132 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 6 Capital investment program The Capital Investment Program • Capital Receipts – managed by the comprises: Service Chiefs and Group Heads. • two components of the Major Capital Defence’s capital investment program Equipment program: includes capital and operating -the Unapproved Major Capital expenditure. A large portion of capital Equipment Program (Defence project costs are capitalised in the Capability Plan) – managed by the balance sheet; however, indirect project Chief Capability Development costs that cannot be directly attributed to Group specific projects are treated as operating expenses. In addition, certain project -the Approved Major Capital costs such as initial spares are charged to Equipment Program – managed by the project, but brought to account as the Chief Executive Officer inventory purchases or suppliers expense Defence Materiel Organisation in the operating budget. Tabl e 6.1 shows • the Capital Facilities Program – the investment program by both its managed by the Deputy Secretary capital and operating elements. Defence Support The actual result in 2007-08 was $259.8m • Other Capital Purchases – managed by lower than the revised estimate as the Service Chiefs and Group Heads detailed in Tabl e 6.1.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 133 CHAPTER 6 CAPITAL INVESTMENT PROGRAM

Table 6.1 Defence Financial Performance for the Capital Investment Program 2007–08

Budget Revised Actual Variation Estimate Estimate[1] Result ($m) ($m) ($m) ($m) Approved Major Capital Equipment Program – Operating 504.5 625.8 361.8 -264.0 Approved Major Capital Equipment Program – Capital[2] 3,790.4 3,759.5 3,668.2 -91.3 Total Approved Major Capital Equipment Program[3][4] 4,294.9 4,385.4 4,030.0 -355.4 Major Capital Facilities Program – Operating 103.0 20.0 82.4 62.4 Major Capital Facilities Program – Capital 540.6 579.9 487.3 -92.6 Total Major Capital Facilities Program[5] 643.6 599.9 569.7 -30.2 Minor Capital 181.6 149.2 112.6 -36.6 Repairable Items 246.6 317.6 472.0 154.4 Other Plant & Equipment 340.7 244.0 244.8 0.8 Sub Total Other Capital Purchases[6] 768.9 710.8 829.4 118.6 Total Operating Component – Capital Investment Program 607.5 645.8 444.2 -201.6 Total Capital Component – Capital Investment Program 5,099.9 5,050.2 4,984.9 -65.3 (A) Sub Total Gross Capital Investment Program 5,707.4 5,696.0 5,429.1 -266.9 Proceeds from the Sale of Land and Buildings 39.7 90.7 6.0 -84.7 Less: Capital Withdrawal (Net Proceeds Returned to the Government) -22.3 -73.2 0.0 73.2 Proceeds Retained by Defence From Sale of Land and Buildings 17.4 17.5 6.0 -11.5 Revenue from Sale of Housing 20.3 20.3 18.5 -1.8 Less: Capital Withdrawal (Net Proceeds Returned to the Government) -20.3 -20.3 -18.5 1.8 Proceeds Retained by Defence from the Sale of Housing - - - - Proceeds from the Sale of Specialist Military Equipment - - - - Proceeds from the Sale of Other Property, Plant and Other Equipment 39.5 36.5 40.9 4.4 (B) Sub Total Net Capital Receipts[7] 56.9 54.0 46.9 -7.1 (C) Net Capital Investment Program (A - B=C) 5,650.5 5,642.0 5,382.2 -259.8

NOTES 1. As published in the Portfolio Additional Estimates Statements 2007-08. 2. Includes the capitalisation of the DMO Acquisition Service Fee. 3. See further details in the `Major Capital Equipment Program’ section later in this chapter. 4. The Actual Result reflects Defence accrued expenses of $221.5m and DMO accrued expenses of $3,459.5m. Defence prepaid DMO $4,114.7m in cash for Major Capital Equipment projects in 2007-08 including Acquisition Service Fee of $349.0m. DMO cash expenditure for Major Capital Equipment projects less Service Fee was $3,515m in 2007-08. Further information is in Chapter 3 of Volume 2 of this report. 5. See further details in the `Major Capital Facilities Program’ section later in this chapter. 6. See further details in the `Other Capital Purchases’ section later in this chapter. 7. See further details in the ‘Capital Receipts’ section later in this chapter.

134 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 6 CAPITAL INVESTMENT PROGRAM

MAJOR CAPITAL EQUIPMENT PROGRAM The Defence Capability Significant projects progressed for Government approval during 2007–08 Plan included: The Defence Capability Plan is a detailed, • the replacement of the Army’s field costed plan for Australia’s military and vehicle and trailer fleet (LAND 121 other defence capabilities for the next Phase 3) 10-year period, with broad guidance on • partnership with the US in the major investments over the following 10 Wideband Global Satellite (WGS) years. The plan is updated annually to communications project, which will take account of changing strategic allow the ADF access to global circumstances and new technologies. It satellite communications (JP 2008 sets out the planned investment in new Phase 4) equipment under six capability goals— land, air combat, maritime forces, strike, • acquisition of an improved counter– information and intelligence. mine capability (LAND 144 Phase 1) In 2007–08, the Government agreed to • first pass approval for the new three first pass project approvals and six maritime patrol aircraft (AIR 7000 second pass approvals, plus a number of Phase 2) other studies and project development • first pass approval for the acquisition activities, at a cost of around $4.4b and of additional Chinook helicopters (AIR listed at Table 6.2. 9000 Phase 5C).

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 135 CHAPTER 6 CAPITAL INVESTMENT PROGRAM

Table 6.2 List of Major Capital Equipment Projects Approved by the Government in 2007–08[1] Project Phase Name Approval Status as at 30 Budget June 2008 (band $m) Support to the development of the Major Capital Equipment Program CTD 12 Capability Technology Demonstrator 20-30 PDF 2008 Project Development Funding Under 20 First Pass Approval AIR 7000 2B Maritime Patrol Aircraft 150-200 Various [3] Yet to go out to AIR 9000 5C Additional Heavy Lift Helicopters Under 20 tender Tactical Information Exchange Yet to go out to JP 2089 2 Domain (TIED) Under 20 tender Second pass approval Project underway JP 126 2 Joint Theatre Distribution System 150-200 (contract signed) LAND 121 3 Field Vehicles and Trailers 2,500-3,500 Tender closed AIR 5440 1 C-130J Block Upgrade Program 7.0[2] Under 20 Various [3] Project underway JP 2008 4 WGS Satellites 750-1,000 (contract signed) LAND 144 1 Counter-Mine Capability 30-50 Tender closed Yet to go out to JP 2044 3A.1 Project Eagle Eye[1] Under 20 tender

NOTES 1. This list excludes highly classified projects. 2. This project has received a partial second pass approval in 2007-08, with the remainder to be approved later. 3. This project is either contributing to more than one project or consisting of several internal phases of varying status. The Approved Major Capital Equipment Program The approved major capital equipment In total Defence spent $4,030.0m on the program comprises those projects that Major Capital Equipment Program, which generally cost in excess of $20m and was $355.4m less than the revised which, following approval, are transferred estimate. Major variations contributing to from the Defence Capability Plan to the the lower than planned result in 2007-08 DMO to manage the acquisition phase. include: Funding for approved major capital • AIR 5402 Air to Air refueling capability equipment projects, including project (-176m) management and overhead costs, is • AIR 5077 Phase 3 Airborne Early provided by Defence to the DMO under Warning and Control System (-$96m) separate Materiel Acquisition Agreements • AIR 9000 Phase 2 Multi Role Helicopter for each project. (-63m) Projects costing between $8m and $50m • JP 2085 Phase 1B Explosive Ordnance are approved jointly by the Minister for Reserve Stocks (-15m) Defence and the Minister for Finance and Deregulation. Projects costing more than • Other project variations (-5.4m). $50m are approved by the National Security Committee of Cabinet.

136 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 6 CAPITAL INVESTMENT PROGRAM

MAJOR CAPITAL FACILITIES PROGRAM 2007-08 The Major Capital Facilities Program funds acquisitions and a number of smaller the construction of buildings and projects in their defects liability periods. infrastructure including specialised The capital expenditure outcome was ranges, training and accommodation $92.6m below the project result of facilities, maintenance hangars, messes $579.9m. This result was primarily due to and warehouse facilities. The program the number of projects reaching develops facilities and infrastructure to completion and also an unprocessed support the introduction of new military capital to operating category adjustment. equipment into operational service, as Operating expenditure in 2007-08 was well as maintaining facilities to support $82.4m, which was $62.4m above the Defence personnel where they work, live projected result of $20.0m. Operating and train. The program comprises expenses include all costs incurred in approved and unapproved major and developing projects such as preliminary medium projects. designs, environmental clearances and Approval processes for capital facilities cost estimates for facilities including projects vary according to value. Major whole-of-life operating and maintenance capital facilities projects costing over costs. The 2007-08 result has significantly $15m are subject to the Government’s increased the aggregate value of projects approval and review by the Joint Standing approved for construction. The capital Committee on Public Works. Medium and operating expenditure profile results facilities projects have budgets between in part from an unprocessed capital to $250,000 and $15m. Medium facilities operating category adjustment. projects between $5m and $15m are subject to the Government’s approval, Approved major capital but are generally not subject to inquiry by facilities projects the committee. Projects under $5m are approved by departmental delegates. In 2007-08, 13 projects received Parliamentary clearance. A further five Total expenditure on Defence's Major projects are scheduled for consideration Capital Facilities Program in 2007-08 was by the Parliament in 2008-09. During $569.7m, this was $30.2m below the 2007-08, 23 medium projects received projected result of $599.9m. either departmental or Governmental Capital expenditure in 2007-08 was approval to proceed. $487.3m, of which $399.2m was spent on Table 6.3 and the following descriptions major capital facilities projects provide details on progress and (Tab le 6.3) and $85.4m on medium capital expenditure during 2007-08 on major facilities projects (Table 6.5). The capital facilities projects. balance of $2.7m was expended on

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 137

Table 6.3 Approved Major Capital Facilities Projects by state and federal electorate To t al Cumulative 2007-08 2007-08 2007-08 estimated expenditure Budget Additional Actual expenditure to 30 June estimate estimate[1] expenditure ($m) 2008 ($m) ($m) ($m) ($m) NEW SOUTH WALES Eden-Monaro Headquarters Joint Operations Command Command, Control, Communications, Computing and Intelligence Systems[2] 93.9 43.1 43.8 46.8 34.2 Hughes Holsworthy Special Forces Training Facilities 94.0 89.3 9.1 9.1 7.1 Special Operations Working Accommodation and Base Redevelopment Stage 1 207.7 171.1 53.5 53.5 56.9 171 Aviation Squadron Relocation 92.0 70.1 46.0 46.0 42.9 Parramatta Ermington Pre-Disposal Site Works 33.1 27.3 7.2 6.1 2.0 Paterson Williamtown RAAF Williamtown Redevelopment Stage 1 and Airborne Early Warning and Control Works and Multi Role Tanker Transport Pavement Works[3][4] 132.7 117.0 13.7 3.0 1.7 Riverina RAAF Wagga College Relocation[5] – 65.6 25.0 27.8 27.7 Total New South Wales 653.4 583.5 198.3 192.3 172.5 VICTORIA Gippsland RAAF East Sale College Relocation 133.4 65.6 25.0 27.8 27.7 Jagajaga Watsonia Defence Force School of Signals 101.3 2.6 – 10.4 2.6 McEwen Monegeetta Land Engineering Agency – Test Services Relocation[6] 35.9 – – – – Tot a l Vi c t or i a 270.6 68.2 25.0 38.2 30.3 QUEENSLAND Blair Amberley RAAF Amberley Redevelopment Stage 2 285.6 244.3 63.0 46.5 46.5 RAAF Amberley Redevelopment Stage 3 331.5 12.5 – 10.0 12.5

138 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 6 CAPITAL INVESTMENT PROGRAM

Table 6.3 Approved Major Capital Facilities Projects by state and federal electorate To t al Cumulative 2007-08 2007-08 2007-08 estimated expenditure Budget Additional Actual expenditure to 30 June estimate estimate[1] expenditure ($m) 2008 ($m) ($m) ($m) ($m) Heavy Airlift Capability – Permanent Facilities[6] 268.2 11.3 –- 8.0 11.3 Brisbane Enoggera Tactical Unmanned Aerial Vehicle Facilities 17.5 16.5 7.5 7.5 7.3 Base Redevelopment Stage 1[6] 80.2 – – – – Forde Canungra Kokoda Barracks Redevelopment 86.7 82.1 19.5 12.5 12.8 Leichhardt Cairns HMAS Cairns Redevelopment 76.3 52.1 45.0 39.0 38.5 Herbert To w n s vi ll e RAAF Townsville Troop Lift Helicopter Facilities 20.0 19.5 14.4 14.4 14.2 Lavarack Barracks Redevelopment Stage 4 207.2 42.3 – 41.5 42.3 Total Queensland 1,373.2 480.6 149.4 179.4 185.4 SOUTH AUSTRALIA Wakefield Edinburgh Defence Precinct Hardened and Networked Army Facilities[7][8] 596.8 – – – – RAAF Edinburgh Heavy Airlift Capability – Permanent Facilities[6] – 1.7 – 1.0 1.7 Total South Australia 596.8 1.7 – 1.0 1.7 WESTERN AUSTRALIA Pearce RAAF Base Pearce Redevelopment Stage 1 142.2 0.7 – 5.0 0.7 Total Western Australia 142.2 0.7 – 5.0 0.7 NORTHERN TERRITORY Lingiari RAAF Tindal Redevelopment Stage 5[6] 58.7 – – – – Airborne Early Warning and Control Aircraft Facilities[6] 64.2 – – – – Timber Creek Bradshaw Field Training Area Infrastructure 72.6 64.8 0.5 2.0 0.3

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 139 CHAPTER 6 CAPITAL INVESTMENT PROGRAM

Table 6.3 Approved Major Capital Facilities Projects by state and federal electorate To t al Cumulative 2007-08 2007-08 2007-08 estimated expenditure Budget Additional Actual expenditure to 30 June estimate estimate[1] expenditure ($m) 2008 ($m) ($m) ($m) ($m) Solomon Darwin Darwin Naval Base – Patrol Boat Facilities 19.2 13.2 3.5 5.4 3.4 Robertson Barracks Redevelopment[6] 72.1 – – – – RAAF Darwin Redevelopment Stage 2[6] 49.8 – – – – Heavy Airlift Capability – Permanent Facilities [7] – 1.6 – 1.0 1.6 Total Northern Territory 336.6 79.6 4.0 8.4 5.3 AUSTRALIAN CAPITAL TERRITORY Jervis Bay HMAS Creswell Redevelopment[6] 83.6 – – – – Total Australian Capital Territory 83.6 – – – – OTHER Malaysia Royal Malaysian Air Force – Butterworth ADF Facilities Rationalisation 23.6 0.5 – 5.6 0.5 Tot a l Ot h e r 23.6 0.5 – 5.6 0.5 VARIOUS Multi Role Helicopter Facilities[6][9] 137.2 – – – – Tot a l Va r io us 137.2 – – – – Tot a l 3,623.0 1,209.0 376.7 429.9 390.7

NOTES 1. As published in the Portfolio Additional Estimates Statements 2007-08. 2. Increase in approved budget cost related to land acquisition, relocation and project management costs. 3. The budget figure is the approved project budgets for the RAAF Williamtown Redevelopment Stage 1 and Airborne Early Warning and Control Works projects and the addition of the Multi Role Tanker Transport Pavement Works project. 4. Budget increased approved after publication of the Portfolio Additional Estimates Statements 2007-08. 5. RAAF College Relocation Wagga/East Sale has an approved budget of $133.4m covering two locations, RAAF East Sale and RAAF Wagga. 6. Project approved after publication of the Portfolio Additional Estimates Statements 2007-08. 7. RAAF Amberley Heavy Airlift Capability – Permanent Facilities has an approved budget of $268.2m covering five locations, RAAF Amberley, RAAF Edinburgh, RAAF Darwin, RAAF Townsville and RAAF Pearce. 8. The $623.7m budget for Hardened and Networked Army facilities includes the development and delivery phase budgets. The delivery phase budget of $596.8m may need to be adjusted to reflect the final expenditure from the development phase. 9. Multi Role Helicopter Facilities – Permanent Facilities has an approved budget of $168.7m covering four locations, RAAF Townsville, the Army Aviation Centre (Oakey), HMAS Albatross (Nowra), and Gallipoli Barracks, Enoggera (Brisbane). Multi Role Helicopter Facilities – Permanent Facilities budget excludes $31.5m for simulation facilities being delivered by the DMO and is reported by the DMO.

140 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 6 CAPITAL INVESTMENT PROGRAM

Performance of major capital facilities projects Location Performance New South Wales Headquarters Joint Operations Substantially achieved. The new HQJOC facility is located Command (HQJOC) — Provision approximately 11 kilometres south-west of Bungendore, NSW. of Command, Control, The acquisition of C4I systems commenced in August 2005, and Communications, Computing is scheduled for completion in November 2008. and Intelligence (C4I) Systems Holsworthy—Special Forces Substantially achieved. Final fit out of the ranges with Training Facilities specialised target systems is scheduled for completion in late 2008. Holsworthy — Special Achieved. Key facilities were completed and occupied as Operations Working planned in 2007-08. Completion of the project is currently Accommodation and Base scheduled for 2009. Redevelopment Stage 1 Holsworthy — 171 Aviation Substantially achieved. Construction of the permanent working Squadron Relocation accommodation and supporting infrastructure is well advanced and scheduled for completion in 2009. Ermington — Pre-Disposal Site Substantially achieved. This project involves preparing the Works former Naval Stores site at Ermington for disposal. Second and final stage of the infrastructure works is scheduled for completion in late 2008. Williamtown — RAAF Substantially achieved. This project has provided a major Williamtown Redevelopment upgrade to the base infrastructure The remaining project Stage 1 and Airborne Early element, construction of an Ordnance Loading Complex, Warning commenced in September 2008, with completion anticipated in 2009. New South Wales and Victoria RAAF College Relocation — Achieved. This project relocated the RAAF College from RAAF RAAF Wagga and RAAF East Williams (Point Cook) and RAAF Edinburgh to RAAF East Sale and Sale RAAF Wagga. The project provided working accommodation, training facilities, and living-in accommodation for college staff and students. Key facilities were completed and occupied by RAAF College in early 2008. This project is now substantially complete, with only minor elements of the project outstanding. Victoria Watsonia — Defence Force Partially achieved. This project will provide new working School of Signals accommodation, improved security arrangements and upgraded living-in accommodation for the Defence Force School of Signals at Simpson Barracks. Construction commenced in October 2008 after delays were experienced in tendering the works. The project is scheduled for completion in 2011. Monegeetta — Land Achieved. This project will relocate existing land materiel test Engineering Agency Test and evaluation functions currently conducted at Maribyrnong to Services Relocation new facilities at Monegeetta. Parliamentary clearance was obtained in March 2008. Construction is expected to commence in late 2008 and be completed in 2010. Queensland Amberley — RAAF Amberley Achieved. This project provided new facilities to support the Redevelopment Stage 2 relocation of the 9th Force Support Battalion and the Multi— Role Tanker Transport to RAAF Amberley and included upgrading the base’s trunk engineering services. All key facilities have been completed and occupied. Minor elements of the project remain to be completed in 2008. Amberley — RAAF Amberley Achieved. This project will provide new trainee living-in Redevelopment Stage 3 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 April 2008, with key facilities expected to be completed progressively from 2010 through to late 2011.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 141 CHAPTER 6 CAPITAL INVESTMENT PROGRAM

Location Performance Heavy Air Lift Capability — Achieved. This project will provide new facilities for the Permanent Facilities introduction into service of the C-17 Globemaster III heavy lift aircraft. This includes 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 at Amberley in April 2008, and is expected to be complete by late 2010. Enoggera — Tactical Unmanned Achieved. This project provided facilities to support the Aerial Vehicle Facilities introduction of the tactical unmanned aerial vehicle capability and collocation of the Regimental Headquarters at Enoggera. This project is now complete. Enoggera — Base Achieved. This project will provide refurbished working Redevelopment Stage 1 accommodation for Headquarters 7th Brigade, address shortcomings in base engineering services infrastructure, and rationalise and modernise existing catering and messing facilities. Parliamentary clearance was obtained in June 2008. Construction is expected to commence in late 2008, and be completed in 2010. Canungra — Kokoda Barracks Achieved. This project provided upgraded training and mess Redevelopment facilities, working accommodation, and living-in accommodation for the Army training units located at Kokoda Barracks. The project also included the upgrading of infrastructure services. All key facilities have been completed. Minor works remain to be completed by the end of 2008. Cairns — HMAS Cairns Achieved. This project provides a combination of new and Redevelopment refurbished facilities to accommodate a full range of operational and support functions at HMAS Cairns including appropriate berthing space and shore services to accommodate all vessels to be home-ported. Key facilities were completed and occupied as planned in 2007-08. The project is expected to be completed in 2009. Townsville — Lavarack Barracks Achieved. This project will provide upgraded working Stage 4 accommodation for various Army elements located at Lavarack Barracks. The first phase of the project was completed on schedule in 2008. The project is expected to be complete in 2011. Townsville — RAAF Townsville Achieved. This project provided a combination of new and Troop Lift Helicopter Facilities refurbished facilities to support the introduction of the new troop lift helicopter at 5th Aviation Regiment. This project is now complete. South Australia Edinburgh Defence Precinct — Achieved. This project will provide facilities and infrastructure Hardened and Networked Army to support the establishment of a mechanised battle group in Facilities the Edinburgh Defence Precinct with additional infrastructure also at Murray Bridge and in the Cultana training area. Parliamentary clearance was obtained in June 2008. Construction is expected to commence in late 2008. While the project is not planned to be complete until 2012, progressive occupation of facilities is expected to start in late 2010. Western Australia RAAF Pearce — Redevelopment Substantially achieved. This project will provide new and Stage 1 refurbished operational, training, domestic support and aircraft maintenance facilities, improvements and upgrading of engineering services and demolition of redundant facilities. Preparatory works commenced in July 2008, after delays were experienced in procuring the managing contractor. The project is expected to be completed in 2011.

142 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 6 CAPITAL INVESTMENT PROGRAM

Location Performance Northern Territory Katherine — RAAF Tindal — Achieved. This project will expand and upgrade existing Redevelopment Stage 5 working accommodation, construct new working accommodation and augment electrical and water supply infrastructure. Parliamentary clearance was obtained in June 2008. Construction is expected to commence in 2009, with completion expected in 2011. Katherine — RAAF Tindal Achieved. This project will provide facilities and infrastructure Airborne Early Warning and at RAAF Tindal to support the introduction of the new airborne Control Facilities early warning and control aircraft. The scope of work includes new taxiways, operational facilities and working accommodation. Parliamentary clearance was obtained in June 2008. Construction is expected to commence in 2009, with completion expected in 2010. Timber Creek — Bradshaw Partially achieved. This project provides engineering services Field Training Area and infrastructure to allow the use of Bradshaw as a field Infrastructure training area for the 1st Brigade. Works include roads, training force maintenance area, base camp, range control and caretaker facilities. The residual works are scheduled for completion by late 2008. Darwin — Darwin Naval Base Substantially achieved. This project provides upgraded Patrol Boat Facilities facilities at the Darwin Naval Base for the new Armidale class patrol boats. Minor elements of the project remain outstanding. Delays have been experienced in obtaining satisfactory tenders for these works. The project is scheduled for completion in early 2009. Darwin — Robertson Barracks Achieved. This project comprises three individual project Redevelopment elements: the Robertson Barracks Redevelopment project; facilities for the LAND 907 Main Battle Tank Replacement project; and the Hardened and Networked Army (HNA) facilities project. The Robertson Barracks Redevelopment 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 HNA project will provide additional working accommodation and other support facilities. Parliamentary clearance was obtained in June 2008. Construction is expected to commence in 2009, with completion expected in 2011. Darwin — RAAF Darwin Achieved. This project will upgrade existing facilities including Redevelopment Stage 2 fuel farms and workshops and construct a new logistics headquarters. Parliamentary clearance was obtained in June 2008. Construction is expected to commence in 2009, with completion expected in 2011. Australian Capital Territory HMAS Creswell Redevelopment Partially achieved. This project will provide new and upgraded facilities for the training of Navy officers upon initial entry and senior sailors in the areas of leadership, management and personal development. Parliamentary clearance was obtained in March 2008. Construction is expected to commence in 2009, with completion expected in 2011. Malaysia RMAF Butterworth — Australian Achieved. The project will provide three new headquarters Defence Force Facilities buildings, a combined armoury, a sewerage treatment plant, Rationalisation and will refurbish some other existing support facilities. Preparatory works commenced in April 2008, and the project is expected to be complete in 2010. Various Multi Role Helicopter Facilities Achieved. 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 at RAAF Townsville, Army Bases Oakey and Enoggera and HMAS Albatross. Parliamentary clearance was obtained in June 2008. Construction is expected to commence in late 2008 and be complete in 2010.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 143 CHAPTER 6 CAPITAL INVESTMENT PROGRAM

Status of major projects for Parliamentary consideration in 2007-08 In the Portfolio Budget Statements Standing Committee on Public Works in 2007-08, Defence foreshadowed a number 2007-08. Table 6.4 provides details on the of projects for consideration by the progress of proposed projects. Government and the Parliamentary Joint Table 6.4 Program of Major Works (by state, federal electorate and locality) Current Status New South Wales Gilmore Nowra: HMAS Albatross – Phase 2 Single LEAP Expediency motion 21 June 2007 Kingsford Smith Randwick: Randwick Barracks – Phase 2 Single LEAP Expediency motion 21 June 2007 Riverina Wagga Wagga: RAAF Wagga – Phase 2 Single LEAP Expediency motion 21 June 2007 Kapooka: Blamey Barracks – Phase 2 Single LEAP Expediency motion 21 June 2007 Victoria Indi Bandiana: Joint Logistics Unit Victoria – Warehousing Hearing scheduled 7 August 2008 Albury/Wodonga: Bandiana South - Phase 2 Single LEAP Expediency motion 21 June 2007 Jagajaga Watsonia: Defence Force School of Signals Expediency motion 14 June 2007 Watsonia: Simpson Barracks - Phase 2 Single LEAP Expediency motion 21 June 2007 Lalor Laverton: RAAF Williams - Phase 2 Single LEAP Expediency motion 21 June 2007 McEwen Monegeetta: Land Engineering Agency Test Services Relocation Expediency Motion 20 March 2008 Puckapunyal: Redevelopment In development Puckapunyal: Phase 2 Single LEAP Expediency motion 21 June 2007 Queensland Blair Amberley: RAAF Amberley – Redevelopment Stage 3 Expediency motion 20 September 2007 Amberley: RAAF Amberley – Australian Super Hornet Facilities Hearing scheduled 20 August 2008 Brisbane Enoggera: Base Redevelopment Stage 1 Expediency motion 25 June 2008 Herbert Townsville: Lavarack Barracks - Redevelopment Stage 4 Expediency motion 14 June 2007 Townsville: Lavarack Barracks - Phase 2 Single LEAP Expediency motion 21 June 2007 South Australia Wakefield Edinburgh Defence Precinct: Hardened and Networked Army Facilities Expediency motion 25 June 2008 Edinburgh: RAAF Edinburgh Redevelopment Stage 2 In development Edinburgh: RAAF Edinburgh - Phase 2 Single LEAP Expediency motion 21 June 2007

144 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 6 CAPITAL INVESTMENT PROGRAM

Table 6.4 Program of Major Works (by state, federal electorate and locality) Current Status Western Australia Brand Garden Island: HMAS Stirling - Phase 2 Single LEAP Expediency motion 21 June 2007 Curtin Swanbourne: Campbell Barracks - Phase 2 Single LEAP Expediency motion 21 June 2007 Pearce RAAF Pearce Redevelopment Stage 1 Expediency motion 16 August 2007 RAAF Pearce - Phase 2 Single LEAP Expediency motion 21 June 2007 Northern Territory Solomon Darwin: RAAF Darwin Redevelopment Stage 2 Expediency motion 25 June 2008 Darwin: Robertson Barracks Redevelopment (includes Land 907 and Hardened and Networked Army projects) Expediency motion 25 June 2008 Darwin: Robertson Barracks - Phase 2 Single LEAP Expediency motion 21 June 2007 Darwin: HMAS Coonawarra (Larrakeyah Barracks) - Phase 2 Single LEAP Expediency motion 21 June 2007 Lingiari Katherine: RAAF Tindal Redevelopment Stage 5 Expediency motion 25 June 2008 Katherine: RAAF Tindal Airborne Early Warning and Control Facilities Expediency motion 25 June 2008 Australian Capital Territory Fraser HMAS Creswell Redevelopment Expediency motion 20 March 2008 Duntroon: Royal Military College - Phase 2 Single LEAP Expediency motion 21 June 2007 Duntroon: Australian Defence Force Academy - Phase 2 Single LEAP Expediency motion 21 June 2007 Various Locations Heavy Airlift Capability – Permanent Facilities Expediency motion 20 September 2007 Multi Role Helicopter Facilities Expediency motion 25 June 2008 Enhanced Land Force Facilities – Stage 1 In development

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 145 CHAPTER 6 CAPITAL INVESTMENT PROGRAM

Approved medium capital facilities projects Tab le 6.5 shows spending in 2007-08 for medium facilities projects. Medium facilities projects are those expected to cost between $250,000 and $15m.

Table 6.5 Approved medium capital facilities by state and federal electorate

To t al Cumulative 2007-08 2007-08 2007-08 estimated expenditure to Budget Additional Actual expenditure 30 June 2008 estimate[1] estimate expenditure ($’000) ($’000) ($’000) ($’000) ($’000) NEW SOUTH WALES Hughes Holsworthy and Moorebank Trainee Rehabilitation Wing – Interim Works 1,710 1,242 – 1,555 1,242 Hunter Singleton School of Infantry – Interim Works 1,940 1,383 – 1,764 1,383 Kingsford Smith Randwick Disposal and Rationalisation 8,750 5,980 3,700 2,500 1,370 Lindsay Orchard Hills Follow On Stand Off Weapon Explosive Storehouse[2][3] 6,125 33 – – 33 Macquarie RAAF Richmond Tri Mobile Engine Testing Facility 1,280 732 – 1,000 732 Paterson RAAF Williamtown Aircraft Clear Water Rinse Facility 5,578 4,073 4,478 5,000 4,005 Riverina Kapooka Marksmanship Training Range Facility 4,025 4,005 2,100 1,105 1,210 Army Recruit Training Facility – Interim Works[4] 4,796 4,236 – 3,953 4,236 Total New South Wales 34,204 21,684 10,278 16,877 14,211 VICTORIA Bendigo Bendigo Defence Imagery and Geospatial Organisation Relocation 15,200 15,017 7,600 12,000 13,124

146 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 6 CAPITAL INVESTMENT PROGRAM

Table 6.5 Approved medium capital facilities by state and federal electorate

To t al Cumulative 2007-08 2007-08 2007-08 estimated expenditure to Budget Additional Actual expenditure 30 June 2008 estimate[1] estimate expenditure ($’000) ($’000) ($’000) ($’000) ($’000) Flinders HMAS Cerberus Small Arms Training Centre 14,432 13,306 12,000 11,507 12,526 West Head Gunnery Range 13,395 115 – 53 115 Indi Graytown Proof and Experimental Establishment Upgrade 4,680 4,495 2,000 2,300 2,723 Jagajaga Watsonia Land Warfare Centre (formerly Regional Training Centre) 5,813 5,500 2,400 2,500 2,712 McEwen Puckapunyal School of Armour – Interim works 2,500 1,148 – 2,273 1,148 Melbourne Ports Defence Science and Technology Organisation Environmental Test Chamber 3,500 63 – 1,380 63 Tot a l Vi c t or i a 59,520 39,644 24,000 32,013 32,411 QUEENSLAND Blair RAAF Amberley Contaminated Land Remediation[3] 3,850 3,780 – – 3,780 Capricornia Rockhampton Western Street Depot Redevelopment 11,700 1,596 7,500 5,000 1,550 Groom Oakey Weapons Training Simulator System[4 ] 2,000 980 – 1,500 980 Herbert Lavarack Barracks 11th Brigade Relocation 7,400 7,351 5,000 5,000 5,396 38 Squadron Relocation 3,600 4,178 – 3,600 4,178 Total Queensland 28,550 17,885 12,500 15,100 15,884

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 147 CHAPTER 6 CAPITAL INVESTMENT PROGRAM

Table 6.5 Approved medium capital facilities by state and federal electorate

To t al Cumulative 2007-08 2007-08 2007-08 estimated expenditure to Budget Additional Actual expenditure 30 June 2008 estimate[1] estimate expenditure ($’000) ($’000) ($’000) ($’000) ($’000) SOUTH AUSTRALIA Boothby Warradale Barracks Weapons Training Simulation System[3] 2,100 5 – – 5 Wakefield RAAF Edinburgh 87 Squadron Interim Facility 4,985 4,984 2,000 3,307 4,091 Explosives Warehouse Replacement[4] 13,250 18 – 4,400 18 DSTO Edinburgh Combat Mission Systems Research Centre Extension[3] 1,950 10 – – 10 Weapons System Division Refurbishment[3] 1,350 13 – – 13 Countermine Facility Refurbishment[3] 2,550 24 – – 24 Over the Horizon Radar – Additional Working Accommodation[3] 4,000 66 – – 66 Total South Australia 30,185 5,120 2,000 7,707 4,227 WESTERN AUSTRALIA Brand Garden Island Submarine Sustainment Software Systems Support Facility 4,200 3,272 3,900 3,685 3,261 Navy Personnel and Training Centre (West) and School of Survivability and Ship Safety (West) 4,470 167 – 600 167 ANZAC System Program Office - Office Refurbishment 3,420 76 – 3,000 76 Kalgoorlie Karatha – Infrastructure for North West Shelf Forward Based Armidale Patrol Boats 4,000 2,522 2,000 2,500 1,701 Pearce Bindoon Training Range Access Control Facility[3] 2,730 – – – – Total Western Australia 18,820 6,037 5,900 9,785 5,205

148 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 6 CAPITAL INVESTMENT PROGRAM

Table 6.5 Approved medium capital facilities by state and federal electorate

To t al Cumulative 2007-08 2007-08 2007-08 estimated expenditure to Budget Additional Actual expenditure 30 June 2008 estimate[1] estimate expenditure ($’000) ($’000) ($’000) ($’000) ($’000) NORTHERN TERRITORY Lingiari RAAF Tindal Airborne Early Warning and Control Operations Facility 5,460 5,271 4,600 5,430 5,261 Follow On Stand Off Weapon Explosive Storehouse [2][3] – – – – – Solomon RAAF Darwin Fuel Equipment Maintenance Section 4,528 4,173 3,800 3,810 4,153 Naval Fuel Installation Refurbishment[3] 6,360 – – – – Special Operations Forward Mounting Facility 5,585 408 2,221 710 245 Robertson Barracks 7th Battalion, Royal Australia Regiment - Interim Works 4,310 3,770 – 1,855 3,770 Total Northern Territory 26,243 13,622 10,621 11,805 13,429 Tot a l 197,522 103,992 65,299 93,287 85,367

NOTES 1. As published in the Portfolio Additional Estimates Statements 2007-08. 2. Follow On Stand Off Weapons Explosive Storehouse has an approved budget of $6.125m covering two locations, Orchard Hills and RAAF Tindal. 3. Project approved after publication of the Portfolio Budget Statements 2007-08. 4. Budget increased approved after publication of the Portfolio Budget Statements 2007-08.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 149 CHAPTER 6 CAPITAL INVESTMENT PROGRAM

Medium capital projects proposed for consideration in 2007-08 Tab le 6.6 provides details on the progress of new medium capital facilities projects foreshadowed for approval in 2007-08. Table 6.6 Status of Proposed Medium Capital Facilities Projects by state, federal electorate and locality Program of Medium Works (State, Federal Electorate and Locality) Status New South Wales Gilmore Beecroft Range: Air Defence Targets Capability Facilities Cancelled[1] Lindsay Orchard Hills: Office Accommodation and Entry Redevelopment In development Hughes Liverpool Military Area: High Voltage Reticulation System Upgrade In development Hunter Singleton School of Infantry: Urban Operations Training Facility In development Wentworth HMAS Watson: Bridge Simulator In development Victoria Flinders West Head Gunnery Range Redevelopment Approved Indi Bandiana: Supply Wing Army Logistics Training Centre Upgrade In development McEwen Puckapunyal: Regional Training Centre Included in Puckapunyal redevelopment project Queensland Groom Oakey: Loadmaster and Heliborne Training Facility Cancelled[1] South Australia Wakefield Port Wakefield: Replacement Explosive Storehouses Approved Battery Firing Facility In development Salisbury: Edinburgh Defence Precinct: Countermine Facility Refurbishment Approved Weapons System Division Refurbishment Approved Combat Missions Systems Research Centre Extension Approved Over The Horizon Radar Systems Program Office Additional Accommodation Approved Western Australia Brand Garden Island: HMAS Stirling Naval Personnel and Training Centre West and Royal Australian Navy School of Survivability and Ship Safety (West) Approved

150 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 6 CAPITAL INVESTMENT PROGRAM

Table 6.6 Status of Proposed Medium Capital Facilities Projects by state, federal electorate and locality Pearce Bindoon Training Range: Access Control Works Approved Northen Territory Solomon Darwin: Naval Fuel Installation Rectification Approved Wharf - Upgrade Bulk Fuel Transfer Services Requirement being reviewed Shoal Bay Receiving Station In development Robertson Barracks: 1 Aviation Facilities Upgrade In development Australian Captial Territory Fraser 1 Joint Public Affairs Unit Facility In development Various Locations Follow-on Stand-off Weapon Facilities (AIR 5418) Approved Countermine Capability Facilities (Land 144) In development RAAF 25 Metre Ranges (Richmond, Williamtown and Darwin) In development Weapons Training Simulation System Facilities (Adelaide Area - Warradale) Approved

NOTE 1. Project was withdrawn by sponsor. Approved projects being developed under private financing arrangements Single Living Environment and Blair, Queensland Accommodation Precinct (Single LEAP) Phase 1, Queensland and New South Construction of 295 living-in units at RAAF Wales Amberley is now complete. The 30-year Under Project Single LEAP Phase 1, term over which Plenary will provide Plenary Living (LEAP 1) Pty Ltd (Plenary) accommodation services commenced on has been engaged to deliver a 16 June 2008. whole-of-life accommodation service Brisbane, Queensland including the funding, designing, building, Construction of 500 living-in units is well maintaining and operating, of 1395 advanced at Gallipoli Barracks. living-in accommodation units over a 30 Construction of the LEAP Facility year contractual period at three Defence commenced at Gallipoli Barracks in May bases: Holsworthy (NSW), RAAF Amberley 2007, with the 30-year operational phase (QLD) and Gallipoli Barracks in the expected to commence two months ahead Brisbane suburb of Enoggera (QLD). of schedule in late January or early Under the Phase 1 Single LEAP contract February 2009. Plenary was responsible for funding, designing, building and is now providing Hughes, New South Wales accommodation services for the 295 Construction of 600 living-in units at living-in units at RAAF Base Amberley. The Holsworthy Barracks commenced in 30-year term over which Plenary will February 2007, with the operational phase provide accommodation services expected to commence on schedule in commenced on 16 June 2008. mid-August 2008.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 151 CHAPTER 6 CAPITAL INVESTMENT PROGRAM

Single Living Environment and Eden-Monaro – Headquarters Joint Accommodation Precinct (Single LEAP) Operations Command (HQJOC), New Phase 2, National South Wales Project Single LEAP Phase 2 represents an The new facility is located approximately extension to the Phase 1 requirements for 11 kilometres south-west of Bungendore, permanent living-in-accommodation to NSW. Praeco Pty Ltd completed all meet Defence's previously identified buildings and other infrastructure on the priorities. Project Single LEAP Phase 2 will site in time for the construction provide 3,535 contemporary living-in units completion milestone of 9 July 2008. At and associated facilities and services at a this time the finance lease is expected to further 17 ADF bases in all mainland commence for the remaining 28 years of Australia States and Territories. the 30 year private financing contract. After consideration by the Parliamentary Joint Standing Committee on Public Works, the project was approved by Parliament in June 2007. The two-stage tendering process for Phase 2 commenced with an Expression of Interest stage beginning in October 2006 that resulted in the short listing of four consortia. These consisted of Living In Partnerships, Pinnacle Housing (LEAP2), Plenary Living and Ubique Infrastructure Services. OTHER CAPITAL PURCHASES Other capital purchases comprise minor In 2007–08, the capitalisation threshold capital equipment projects, purchase of for other plant and equipment was repairable items, other plant and reduced from the 2006–07 threshold of equipment, software and intangibles $5,000 to $2,000. The actual result for costing more that $5,000. 2007-08 was $829.4m, which was $118.6m Minor capital projects are generally above the revised estimate of $710.8m. valued between $250,000 and $20m, and This was primarily due to a variation of cover new equipment, modifications to $154.4m in Repairable Items due to effort existing equipment or enhancements to applied to increasing Repairable Items new equipment. Minor projects costing holdings to serviceable asset target levels between $8m and $20m are approved following sustained operational tempo jointly by the Minister for Defence and and effects of ageing platforms, offset by the Minister for Finance and Deregulation. a -$36.6m variation in several minor The Minister for Defence approves capital projects. projects costing between $5m and $8m. The Service Chiefs and Group Heads, or their nominated delegates, approve projects costing less than $5m.

152 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 6 CAPITAL INVESTMENT PROGRAM

CAPITAL RECEIPTS The capital receipts program comprises Sale of Defence housing and proceeds from property sales that are annuity returned to the Government in the form Defence received $18.5m from the sale of of equity, and proceeds from the sale of annuities by Defence Housing Australia in specialised military equipment and 2007-08. As required under the Section 31 commercial vehicles, and other plant and Agreement that came into effect at the equipment items that is retained by start of 2005–06, Defence has returned Defence, under the Section 31 these proceeds to Government. Agreement. Property sales Proceeds from Sale of Specialist Military Equipment In 2007–08, Defence received $6.0m from the sale of surplus properties, $84.7m less Defence received minimal proceeds from than the revised estimate of $90.7m in the sale of specialist military equipment. the Portfolio Additional Estimates Proceeds from Sale of Other Statements 2007–08. None of these funds Property, Plant and were required to be returned to Government. Equipment Defence received $40.9m from the sale of Other Property, Plant and Equipment in 2007-08.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 153 CHAPTER 7 Enabling our business DEFENCE REFORM

Defence continued to identify and implement further improvements to the way it does business in 2007–08, building on major reforms over the last decade. Key initiatives are the audit of the Defence Business Model Defence Budget and financial management processes, the savings and A new version of Defence Business Model efficiencies program, and the Defence was released in June 2008 and forms the reform program arising from recent basis for internal governance, reviews and investigations including the accountability and assurance in Defence. Defence Management Review. These The model enables clear identification of initiatives provide a strategic direction for roles and responsibilities and provides a the organisation, a more sustainable strategic framework for implementing financial base, and enhanced governance improvements in business planning, and improved business processes leading business processes, communication to greater efficiency and effectiveness. engagement and performance management. The new White Paper will be an important vehicle for enabling reform. The White Risk Management Paper Companion Reviews and the Defence Budget Audit are looking even A more strategic and effective approach more deeply into how Defence runs to risk management is a key element of various parts of its business to determine Defence reform and the enhanced whether these processes represent the governance framework. Defence has best way of delivering capability to the initiated a process to establish an Government. Enterprise Risk Management Plan focusing on critical risks affecting the organisation. Key areas of focus of Defence’s The approach to risk management at the management reform program in 2007–08 enterprise level has involved a number of included the launch of a new business related initiatives including a risk model and development of an enhanced management business process. governance framework, with clearer authority and accountability, and more The development of an Enterprise Risk rigorous performance management, Management Plan will enhance the ability assurance and audit processes. These of senior Defence leaders to manage and reforms are ensuring that the ADF monitor key Defence risks. Once agreed, receives the best possible support for its the plan will be the basis for risk operations and that the Government management across Defence with receives the maximum value for every cascading plans developed by Groups and dollar invested in Defence. These Services. achievements are outlined below.

154 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 7 ENABLING OUR BUSINESS

Charters and Agreements Defence Management The Defence authority and accountability Review framework is underpinned by directives, A key focus in reform over the last year charters and agreements consistent with has been continuing to implement the the Defence Business Model and reflecting recommendations of the Defence key deliverables and priorities for the Management Review, released in 2007. organisation. Revised Charters and Organisational Performance Agreements Of the agreed recommendations, were developed in 2007–08. The Charters significant achievements have been made and Organisational Performance over 2007–08, including: Agreements identify key result areas for • Release of a Defence Business Model Groups and Services, and joint to support Defence’s enhanced responsibilities of each Group Head and governance framework Service Chief in delivering core Defence • Consolidation and outsourcing of priorities. These documents form a key regional information communications element of Defence business planning and technology (ICT) service delivery and performance reporting. consolidation of the ICT function into Planning the Chief Information Officer Group • Implementation of more cost–effective During 2007–08, the rhythm and cycle of contracting arrangements for on–base higher-level Defence processes were health services and the Defence mapped, focusing on strategy Library Service which will focus on development, financial and resource delivering efficient, cost–effective planning, capability planning and services in accordance with the preparedness management. This work was Commonwealth Procurement undertaken to ensure that these processes Guidelines, based on value for money are efficient, properly coordinated and and continuous productivity integrated. This work will also provide the improvement foundation for the reform of Defence’s • Strengthening the role of the Defence senior committees and enhanced Audit Committee in providing governance. independent advice to the Secretary and Chief of the Defence Force on all aspects of government by expanding its responsibilities and membership, and adopting a new charter • Establishment of the People Strategies and Policy Group and appointment of a new Deputy Secretary People Strategies and Policy in February 2008 to develop a strategic human resources function aligned with Defence’s strategic priorities and decision making. Further work to implement the remainder of the recommendations is being progressed within Defence’s major reform program.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 155 CHAPTER 7 ENABLING OUR BUSINESS

DEFENCE SUPPORT GROUP The Defence Support Group (DSG) is a at HMAS Stirling, Lavarack Barracks and consolidation of most of Defence’s shared RAAF Amberley. These three bases will service provision responsibilities. Its serve as the trial sites from 1 July mission is to be an innovative, agile and 2008. This important initiative aims to cost-effective support service that enables clarify responsibility and accountability and enhances the delivery of Defence for activities on a base as they affect capability. The DSG supports Defence by capability, operational support, force providing legal services; personnel generation and other Service/Group administration and related functions such specific deliverables from whole-of- as coordinating education, training and base coordination to the delivery of development; administration of honours support products and services. After and awards; ADF housing; support to ADF the initial trial period of three month’s members and their families; financial and a national rollout is planned from travel services; contracts that provide February 2009. catering, cleaning and grounds • Significant steps were taken to maintenance services; strategic health establish the Defence Honours and policy and advice to ADF members; and Awards Tribunal. The Government, in management and sustainment of the its Plan for Defence, highlighted its Defence estate. desire to reward military service while The DSG’s workforce consists of around preserving the integrity of the 5,000 APS employees and 1,600 military Australian honours and awards system. personnel, along with a large contracted In order to achieve this balance, the workforce delivering products and support Government has established an services to Defence people throughout independent tribunal to oversee Australia. Defence honours and awards. Emeritus During 2007–08, the DSG spent $3.1b, Professor Dennis Pearce AO was which included $0.6b in capital budget and appointed Chair of the Tribunal on $2.5b in operating budget. 23 July 2008. • A review of mental health care in the Service delivery ADF and the transition to non-military In 2007-08, the DSG’s major achievements life commenced in May 2008. The include: review will provide an independent assessment of the existing mental • A new housing classification scheme for health programs and support across the members with dependants ADF and Department of Veterans’ implemented from 1 July 2007. The Affairs (DVA) and advise on their scheme raises the minimum standard effectiveness, gaps in services, and for Service residences to more closely challenges in delivery. It will also reflect current community standards, examine and advise on the transition particularly for junior ranks. Under the process between the ADF and DVA. The new scheme, Defence Housing Australia review is expected to take can deliver a greater variety of housing approximately six months to complete types within each rank group. This with a report due to both Ministers in provides greater flexibility in meeting December 2008. the needs of ADF families. • Defence successfully completed • Major planning was undertaken towards negotiations with Serco Sodexho developing and articulating base Defence Services for the provision of accountability with the implementation garrison support services, and Spotless of the new Base Accountabilities Model

156 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 7 ENABLING OUR BUSINESS

Property and Facilities Pty Ltd for the the centre has generated significant provision of comprehensive community interest via the maintenance for the Defence estate in employment opportunities and the Northern Territory/Kimberley ongoing economic benefit to the local region in March 2008. These community. The construction of the agreements provide substantial leased facility, by local firm and business opportunities for local owner Buildev, was completed on businesses, injecting over $240m over 1 May 2008 and incorporates a number the first five years of the contracts. of heritage, sustainable energy, water Both arrangements will see a conservation and environmental reduction in waste, increased initiatives into its design and recycling, the minimisation of energy construction. Defence has taken use and greenhouse emissions, and occupation of the facility and the will continue to ensure environmental centre is now fully operational. The and safety compliance. Many ADF Personnel Administration Centre was operations are undertaken from the officially opened by the Parliamentary Northern Territory/Kimberley region, Secretary for Defence Support on and these contracts are essential to 16 July 2008. sustain the quality of base support services. Maintaining the Defence • The ADF Integrated People Support estate Strategy was launched in August 2007. Defence is the largest Commonwealth The strategy is aimed at enhancing the landowner and one of the largest support structures for past and landowners in Australia, with 3.4 million present ADF members and their hectares of land. The Defence estate families. It uses a consists of 64 major bases1 and some whole-of-government approach to 25,000 facilities valued at around $62b. provide support services across the Another 350 properties are leased, with ‘continuum of care’ spectrum. A key an annual lease bill in the order of $120m. initiative is the ADF Integrated People Support Model which incorporates and The DSG continues to work with its strengthens existing support services, customer groups and services in internal and external to Defence. The maintaining the vast Defence estate. ADF Integrated People Support Model Major achievements in estate was piloted at Fleet Base West in management are detailed below. Western Australia and RAAF Edinburgh • Over $1b of facilities works (major in South Australia from October 2007. capital and facilities operations) were The initial focus of the pilot was on delivered in 2007–08 including: enhancing the transition process as - Special Operations Working well as strengthening communication Accommodation and Base between internal and external service Redevelopment Stage 1 providers, to offer a high-quality through life service. - 171 Aviation Squadron Relocation • Defence is consolidating up to 50 per - RAAF Colleges Relocation cent of its military personnel - RAAF Amberley Redevelopment administration (processing of pay and Stage 2, and leave) into a new Personnel - Lavarack Barracks Redevelopment Administration Centre at Raymond Stage 4. Terrace, NSW. The establishment of

1. List of Major Defence Bases and Establishments is contained in the online version of this report.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 157 CHAPTER 7 ENABLING OUR BUSINESS

More information about these works is partnership arrangements and Defence detailed in ‘Major capital facilities will be providing an annual service program 2007–08’ on page 137. payment to Praeco for the next 28 • The new Headquarters Joint years for the design, construction, Operations Command facility at operation and maintenance of the Bungendore, NSW, was delivered to facility. At the end of this period, the Defence by Praeco Pty Ltd on time and facility will be owned by the budget. The facility is environmentally Commonwealth. The next phase of the friendly and sustainable. Significant project is the installation of all the attention has been paid to self information and communication sufficiency, especially in terms of systems by Defence prior to its water use and power. The facility was opening in November 2008. delivered under public private JOINT LOGISTICS COMMAND Joint Logistics Command’s (JLC) mission is • JLC and the DSTO have continued the to lead the coordinated delivery of collaborative development of a Joint efficient and effective logistics to enable Logistics Planning Tool, which Defence to train, fight and win. Key provides joint logistic planners with achievements of JLC in 2007–08 are the capability to more quickly and outlined below. effectively support specified • Logistic support to operations operational situations. The prototype continued to be the primary focus for was released in June 2008. JLC, which has drawn on increased • A Strategic Logistics Elective was utilisation of contractors in all jointly developed for the Australian operational theatres and seen further Command and Staff Course by JLC and developments in the application of the Australian Defence College. The consignment visibility systems. elective provides future military • The Explosive Ordnance Management leaders with an improved awareness of and Policy Branch was established to the importance of joint logistics in address the recommendations of the improving the effectiveness and Weapons, Munitions and Explosives efficiency of ADF operations. Security Performance Audit, and the • An improved management model for Review of Defence Policy and radiation sources and facilities was Procedures for the Management of introduced and Commander Joint Explosive Ordnance. Since its Logistics was appointed the single formation, the branch has managed point of accountability for this domain the implementation of 10 of the 58 within Defence. Consequently, recommendations of the audit's Defence's relations with the radiation project plan which is scheduled to regulator, the Australian Radiation continue until 2013. A further nine Protection and Nuclear Safety Agency, recommendations will be completed in have been considerably enhanced and 2008–09. Defence is now considered an example of best practice amongst Commonwealth licence holders.

158 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CASE STUDY ICT Reform

‘If the system doesn’t work properly, it affects not only productivity - a serious issue for any business - but also operational effectiveness. Our strategy for fixing IT focuses on four key areas - improving service delivery; improving governance of the whole IT enterprise; reducing the time it takes to deliver new IT capabilities; and reviewing our sourcing strategies.’ (Nick Warner, Secretary)

Throughout 2007-08, several initiatives have been implemented to address these issues in the short, medium and long terms. First Steps Top 10 irritants For immediate results in the short term, a program was introduced to rectify the 10 biggest irritants as identified by users, on both the Defence restricted and secret networks. By fixing these long-standing irritants the ‘user experience’ and ability of Defence employees to carry out their jobs was significantly improved. Most of the identified issues have now been resolved, while some will require a longer term resolutions. Projects to implement these long term resolutions have already commenced. Restructuring the Chief Information Officer Group In the medium term, the Chief Information Officer Group (CIOG) has undergone a restructure to a more traditional Information and Communication Technology (ICT) environment based around the ‘Plan, Build, Run’ model. To do this, in late 2007, the Chief Information Officer established a Chief Technology Officer position, and associated Division, to provide an architect to ensure the continued integrity of the Defence Information Environment. Strategy and Future In early 2008, work began on a Defence-wide ICT Strategy Paper. The ICT Strategy will ensure alignment of ICT and Defence business needs, as well as improving the governance of ICT. As a complementary activity, an ICT Sourcing Strategy will improve the efficiency ICT procurement and is expected to drive cost reductions.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 159 CHAPTER 7 ENABLING OUR BUSINESS

DEFENCE SCIENCE & TECHNOLOGY ORGANISATION As the Government’s lead agency for participation in the Joint Strike Fighter providing science and technology support Technology Advisory Board program for Australia’s defence and domestic substantially assisted with assessing and security, the Defence Science and mitigating the project’s risks. Technology Organisation (DSTO) delivers The DSTO’s expertise has also supported expert, impartial advice and innovative the optimisation of Defence’s existing solutions to Defence and other capability, especially through minimising organisations involved in national ownership costs, and by extending security. performance and operating life. The DSTO outputs are increasingly critical to DSTO’s work on structural integrity, for the development, sustainment, example, provides the means by which protection and effective application of Australia, as a sole operator, can retain Defence and national security the F–111 in service until its planned capabilities. This is especially so with the withdrawal date. complex nature of Australia’s security The DSTO maintained a long-range environment, the high operational tempo, research program to assist in the ongoing advances in technology and the definition and development of new continued need to minimise Defence’s capabilities to enhance Australia’s costs. defence. In hypersonics, a technology The DSTO continues to provide direct that could result in revolutionary changes support to ADF operations, principally in military capabilities, the DSTO and the through technical advice to solve University of Queensland have operational problems and through collaborated to successfully launch a providing analysis and advice to number of supersonic-combustion commanders. As well as providing support ramjets; in 2007, the HyCAUSE vehicle from within its Australian-based capacity, reached speeds in the order of Mach 10. the DSTO deployed scientists to In supporting future technology solutions headquarters in Operations Catalyst, for Defence, the DSTO also managed the Slipper and Astute. A number of Capability and Technology Demonstrator technology insertion teams were also program. Of the 34 projects under deployed to the Middle East Area of management, 14 came to completion Operations and East Timor, and the DSTO’s during 2007–08. Twelve of these delivered contributions were highly valued by products of a standard suitable for phase Australian Commanders. two consideration, with two of these The DSTO provided science and suitable for consideration for acquisition. technology support for the acquisition of The organisation continues to broaden its new Defence capability, in particular by scientific and technological capabilities helping Defence determine the most through collaboration with domestic and appropriate capability options and international partners, maintaining over reducing risk in technically complex 300 agreements with external agencies. projects. The DSTO’s analysis and advice Foremost among these is the multilateral makes an essential contribution to alliance between Australia, the United Defence capability decision making, in States, the United Kingdom, Canada and many cases saving millions of dollars and New Zealand under The Technical increasing the level of capability. In the Cooperation Program. In partnership with case of the New Air Combat Capability the DMO, the DSTO successfully Project, the DSTO’s extensive implemented the Defence Future

160 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CHAPTER 7 ENABLING OUR BUSINESS

Capability Technology Centre initiative, DSTO’s Training & with the first centre ready to commence operations from its headquarters at Development Swinburne University on 1 July 2008. During 2007–08, the Defence Science and The DSTO actively participated in the Technology Organisation continued to Publicly-funded Agencies Collaborative achieve against its people priorities: Counter-Terrorism (PACCT) research developing leadership and management program, in particular through the PACCT skills, a leading-edge science and Thematic Working Groups. technology knowledge base and providing a safe and healthy workplace. The DSTO maintains three leadership and management programs to develop the skills of staff members throughout their careers, as well as a comprehensive suite of learning and development activities for all new DSTO staff, spanning their first five years with the organisation. MINISTERIAL SUPPORT & PUBLIC AFFAIRS Ministerial Support responses finished to deadline increased from 71 to 86 per cent. Responsiveness to Ministers During the year, 33 Cabinet submissions or Defence has continued to improve its memoranda were provided to Cabinet or mechanisms for reporting on and the National Security Committee. This monitoring the quality of advice provided shows a decrease from the 2006-07 figure to our Ministers and Parliamentary of 68 submissions or memoranda. Secretaries. Additionally, with the change To ensure Defence continues to provide of Government in November 2007, high quality advice to Ministers in a timely Defence has reviewed the types, format and accurate manner, Defence continued and processes for providing advice to to place emphasis on the development ensure the needs and expectations of the and delivery of training products to assist new Government are met. all Defence personnel enhance their skills Overall, 3,891 submissions or briefs were for responding to Ministers. (see case provided to the Ministers and the study on page 163). Parliamentary Secretaries in 2007–08. A total of 9,845 items of ministerial Parliamentary Committees correspondence were tasked to Defence Defence appeared before 17 and 10,264 were completed (the Parliamentary committee hearings and/or difference relates to correspondence private briefings over a total of 19 days. completed from the previous financial Defence appeared before the Senate year). This represents a total of 14,155 Standing Committee on Foreign Affairs, submissions and items of correspondence Defence and Trade at two estimates that were provided to our ministerial team hearings during 2007–08, and appeared in 2007–08, compared to 15,242 for 2006– before several other committees to give 07. The slight decrease can be attributed evidence on a variety of issues such as to the Federal Election and the associated treaties, military justice and the Defence Caretaker period. The percentage of Legislation Amendment Bill 2007.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 161 CHAPTER 7 ENABLING OUR BUSINESS

In addition, Defence contributed 11 proposals received and productions that submissions to various Parliamentary reached completion, with Defence's committees throughout the year, provided audience reach almost doubled in the responses to 101 committee questions on process. notice and 39 Parliamentary questions on • Provided media awareness briefings to notice. Further information on Defence’s 121 Pre–deployment Force Preparation participation in Parliamentary committees Courses involving 9,870 participants in can be found in Appendix 3 - External 2007 and 28 courses in 2008 involving Scrutiny. 2,473 participants. Public Affairs •Undertook 3,466 imagery stills and video tasks, with 19,905 still images The Public Affairs Branch assists Defence processed and approved for distribution. stakeholders, including Ministers and the The Defence imagery database now Parliamentary Secretaries, in promoting contains 120,000 images approved for and protecting the Defence Organisation’s distribution. In addition, 149 hours of reputation by increasing public awareness vision of Defence activities were of Defence activities and managing issues processed, with 284 Defence video news effectively through integrated command, releases, 120 compiles and 534 web management and public affairs planning. videos being issued (including Achievements Christmas, Australia Day and Anzac Day). • Deployed Public Affairs teams on 12 • Fielded 5,046 media inquiries and issued short notice operational tasks, including 965 media releases and alerts in support emergency assistance to Papua New of Government and departmental Guinea and Burma; provided 17 announcements, media launches, events personnel (public affairs officers and and in response to emerging issues. In photographers) to standing operational addition the Public Inquiry officer rotations in Iraq, Afghanistan, and East responded to 2,723 direct inquiries from Timor; travelled extensively throughout the public. Australia to cover 38 national tasks and supported six international • Continued to improve the useability and events including support to overseas service delivery of the Defence Internet ANZAC Day commemorations, the homepage. There were 322,166,616 hits repatriation of Australian soldiers killed on the Defence internet web server, in South Vietnam and the re-interment representing 7,228,281 of First World War soldiers in Belgium. visits and 44,388,567 page views. • Facilitated and managed seven Defence– • Produced 69 issues of the fortnightly sponsored media tours involving 29 Navy, Army and Air Force newspapers, media representatives from 17 agencies distributing in excess of 1.38 million to the Middle East area of operations. copies to Defence members at home and The branch also deployed seven military on deployment. Online versions of these public affairs officers to facilitate the papers were also produced fortnightly. visit of 22 media representatives • Edited and distributed 715 stories about travelling to operational areas with individual ADF members to their Government Ministers and senior hometown regional or suburban Defence leaders. newspapers, an increase of 5 per cent • Received 142 proposals requesting over 2006–07 — which was itself an Defence's support for film and television increase of 15 per cent over 2005–06. productions, books and other projects. Some 80 per cent were published in over Compared to 2006–07, there was a 150 newspapers across Australia. Each notable increase in both the numbers of hometown story appears on the Defence webpage.

162 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 CASE STUDY Supporting our Ministers

The focus on achieving best practice policies and protocols for supporting our Ministers has continued this year. Particular importance was placed on providing quality support in the lead up to and during the pre-election period and subsequently and meeting the requirements of our new Ministers and Parliamentary Secretaries. During the pre-election period, a broad Caretaker awareness program was conducted. Detailed information was provided via employee information sessions and a Caretaker advice intranet site to ensure Defence members were well aware of the ‘Guidelines on Caretaker Conventions’ and how this period could affect Defence business. Interest in the new site was substantial and between July and October 2007 leading up to the Federal election, the intranet site received some 28,300 hits. An email advice line was also established to encourage the prompt discussion and resolution of any questions or issues. This awareness program greatly assisted with the smooth progression of Defence business prior to and during the caretaker period. Immediately following the 2007 election, incoming ministers and their staff received extensive induction briefs (written and oral) on Defence, its roles, activities and business processes. Dedicated support by the Ministerial and Executive Support Branch and other key Defence stakeholders meant the Defence ministerial offices were among the first to be fully functional following the swearing in of the new Government. Parallel to all of this action, the enhancement of Defence’s ministerial awareness and training program continued. Led by the Ministerial Awareness and Training team, in conjunction with Policy Development Division, training and awareness programs were consolidated through regular delivery and evaluation. The program now comprises formal training (eLearning and face-to-face) in government processes and structures and what these mean for Defence; ministerial writing; the more difficult aspects of developing complex submissions; and how to work effectively with our Ministers and their staff by better understanding their roles and expectations of us. Demand for the training has been extremely high and very positive feedback has been received: · I understand how my organisation feeds into Defence as a whole and to Government · I am now more aware of the APS relationship with the Minister and how to behave in the APS value framework · Better understanding of how the ‘little’ person affects the Minister/Secretary/CDF’s ability to do their job · The workshop forced me to re-examine how and why I approach ministerial writing · I am now better informed on strategies/approaches I can use to provide an enhanced service. During the year, 460 Defence personnel successfully completed the Defence Ministerial Writing course. The Defence Ministerial Writing course is designed to assist personnel in developing quality briefs and correspondence for our Ministers and Parliamentary Secretaries - in particular question time briefs, ministerial submissions and ministerial correspondence. The newly established Defence Government Awareness course was rolled out to the broader Defence audience in February 2008 following a successful pilot program in the second half of 2007. This course provides an introduction into government and parliamentary processes. Through the use of case studies and examples it shows how these processes relate to an individual’s roles and responsibilities as a Defence employee. Since the introduction of the course, 101 Defence participants have successfully completed the course.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 163 Similarly, 236 members of the Defence Senior Leadership Group participated in the half-day ‘Working with Ministers’ workshops, which aims to improve and shape the organisational culture to engage and support the Ministers through enhancing relationships and advisory skills for Senior Defence managers. The ‘Developing Complex Submissions’ workshop, an intensive and interactive one-day training program, was developed in the second half of 2007 for personnel tasked with developing complex advice for our Ministers and Government. The key objective of this workshop is to assist Defence personnel in understanding how to ensure their complex submissions and briefs meet the needs of our Ministers. At the end of June, 339 participants had successfully completed the program. Defence will continue to deliver the suite of ministerial awareness training during 2008-09 to further skill personnel in support of our Ministers. Table 7.1 shows the breakdown of the courses and number of staff who successfully completed the modules during 2007-08.

Table 7.1 Course Completion Course Personnel Democratic System of Government (e-learning module) 782 Defence Government Awareness 101 Defence Ministerial Writing 460 Developing Complex Submissions 341 Working With Ministers 264 To t a l 1,948

164 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDICES APPENDIX 1 STAFFING & REMUNERATION APPENDIX 1 Staffing & remuneration

This appendix outlines the changes in the workforce that occurred during 2007-08 and provides personnel information as at 30 June 2008. It includes numbers of personnel (headcount), employment categories, locations and gender information. The figures shown for APS staff do not include those employed by the DMO. ACTUAL STAFFING At 30 June 2008, Defence had 69,047 This included both Reservists on Continuous permanent employees, comprising 53,149 Full Time Service and Active Reserves. At 30 permanent ADF members and 15,898 APS June 2008, 1,005 Reservists were also Defence personnel. In the 12 months to June 2008, the APS employees. permanent ADF strength increased by 1,962. At 30 June 2008 there were 15,898 APS The introduction of Gap Year program personnel. This number included all APS occurred during this financial year with 566 personnel recorded as active employees and personnel employed under the program at the included full-time, part-time, ongoing and end of 2007-08. The Reserve Force comprised non-ongoing, and paid and unpaid employees. 24,885 employees. The total ADF workforce Figure A1.1 shows the percentage of personnel was 78,600, and included 17,651 Navy by type of service (ADF, APS, Reserves) and Permanent, Gap Year and Reserve members, then by the Service to which they belong. In 43,533 Army Permanent, Gap Year and Reserve addition to military and APS employees, members and 17,416 Air Force Permanent, Gap Defence engages a number of Professional Year and Reserve members. In the 12 months Service Providers (PSPs) as part of its total to 30 June 2008, the Reserve component of the workforce. Further details are provided in ADF increased by 1,075, from 23,810 to Table 4.4 in Chapter 4. 24,885. Figure A1.1 Defence workforce staffing as at 30 June 2008

166 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 1 STAFFING & REMUNERATION

Tab le A 1.1 through to Table A1.8 provides information on Defence staffing levels showing rank/level, gender, location and with some tables highlighting Defence Senior Management. Table A1.1 Defence personnel comparison as at 30 June 2007 and 30 June 2008 Navy Army Air Force ADF APS 30 June 2007 Permanent[1][2] 12,638 25,142 13,407 51,187 – APS[3] – – – – 15,853 Total (as at 30 June 2007) 12,638 25,142 13,407 51,187 15,853 Separations Permanent[1] 1,395 2,735 982 5,112 – APS – – – – 1,886 Sub-Total 1,395 2,735 982 5,112 1,886 Net Transfers[4] APS – – – – 146 Sub-Total – – – – 146 Additions Permanent[1] 1,634 4,022 1,418 7,074 – APS – – – – 2,077 Sub-Total 1,634 4,022 1,418 7,074 2,077 Permanent[1] 12,877 26,429 13,843 53,149 – APS – – – – 15,898 Total (as at 30 June 2008) 12,877 26,429 13,843 53,149 15,898 Variation 239 1,287 436 1,962 45

NOTES 1. Figures do not include Gap Year program, which is reported in Tabl e A1.2 nor any Reserves including those on Continuous Full-Time Service. 2. The Navy's permanent strength as at 30 June 2007 adjusted to account for two retrospective separations and four failed to enlist. The Army's permanent strength as at 30 June 2007 adjusted to account for four retrospective transactions. The Air Force's permanent strength as at 30 June 2007 adjusted to account for one failed to enlist. 3. APS strength as at 30 June 2007 was adjusted to account for retrospective hire, separation and transfer transactions. 4. Net Transfers represents the net effect of transfers between Defence and the DMO for APS personnel. This figure may differ from the DMO figures in Volume 2 of this report due to differing data run dates. 5. APS figures include paid and unpaid employees, which covers full-time, part-time, ongoing and non-ongoing personnel.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 167 APPENDIX 1 STAFFING & REMUNERATION

. Table A1.2 Defence Gap Year personnel comparison as at 30 June 2007 and 30 June 2008[1]

Navy Army Air Force ADF Total Total as at 30 June 2007 – – – – Additions Ab initio 100 500 100 700 Transferred from Reserves – 2 – 2 Sub-Total 100 502 100 702 Outgoing Transferred to Permanent 1 65 – 66 Transferred to Reserves – 4 – 4 Discharged during Gap Year 17 46 3 66 Completed Gap Year – – – – Sub-Total 18 115 3 136 Total as at 30 June 2008 82 387 97 566

NOTES 1. Gap Year program commenced during 2007-08.

168 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 1 STAFFING & REMUNERATION

Defence Workforce by Gender & Employment Category

Table A1.3 ADF Permanent, Gap Year and Reserves Forces, and APS personnel, by gender and employment category[1][2][3]

As at 30 June 2007 As at 30 June 2008

Men % Women % Men % Women % Navy[4][5] Trained Force Officers 1,699 13.4 360 2.8 1,738 13.5 381 3.0 Other Ranks 6,397 50.6 1,205 9.5 6,266 48.7 1,188 9.2 Training Force Officers 639 5.1 193 1.5 655 5.1 215 1.7 Other Ranks 1,698 13.4 447 3.5 1,875 14.6 559 4.3 Tot a l Na v y 10,433 82.6 2,205 17.4 10,534 81.8 2,343 18.2 Army[6] Trained Force Officers 4,033 16.0 641 2.5 4,182 15.8 642 2.4 Other Ranks 15,860 63.1 1,566 6.2 16,629 62.9 1,582 6.0 Training Force Officers 673 2.7 154 0.6 759 2.9 164 0.6 Other Ranks 2,087 8.3 128 0.5 2,288 8.7 183 0.7 Total Army 22,653 90.1 2,489 9.9 23,858 90.3 2,571 9.7 Air Force[7] Trained Force Officers 2,916 21.7 586 4.4 3,034 21.9 643 4.6 Other Ranks 7,123 53.1 1,308 9.8 7,310 52.8 1,366 9.9 Training Force Officers 555 4.1 152 1.1 536 3.9 172 1.2 Other Ranks 657 4.9 110 0.8 674 4.9 108 0.8 Total Air Force 11,251 83.9 2,156 16.1 11,554 83.5 2,289 16.5 ADF Permanent Trained Force Officers 8,648 16.9 1,587 3.1 8,954 16.8 1,666 3.1 Other Ranks 29,380 57.4 4,079 8.0 30,205 56.8 4,136 7.8 Training Force Officers 1,867 3.6 499 1.0 1,950 3.7 551 1.0 Other Ranks 4,442 8.7 685 1.3 4,837 9.1 850 1.6 Total ADF 44,337 86.6 6,850 13.4 45,946 86.4 7,203 13.6 Permanent Gap Year Navy – – – – 36 6.4 46 8.1 Army – – – – 310 54.8 77 13.6 Air Force – – – – 58 10.2 39 6.9 Tot a l Ga p Ye a r – – – – 404 71.4 162 28.6

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 169 APPENDIX 1 STAFFING & REMUNERATION

Table A1.3 ADF Permanent, Gap Year and Reserves Forces, and APS personnel, by gender and employment category[1][2][3]

As at 30 June 2007 As at 30 June 2008 Men % Women % Men % Women % Reserves[8] Navy 3,300 13.9 839 3.5 3,750 15.1 942 3.8 Army 14,208 59.7 2,383 10.0 14,309 57.5 2,408 9.7 Air Force 2,464 10.3 616 2.6 2,736 11.0 740 3.0 Tot a l Re se r v es 19,972 83.9 3,838 16.1 20,795 83.6 4,090 16.4 APS[9][10][11] 9,307 58.7 6,546 41.3 9,188 57.8 6,710 42.2 Tot a l [12] 53,644 81.0 13,396 19.0 55,134 79.8 13,913 20.2

NOTES 1. Figures in this table show actual employee numbers (headcount) as at 30 June 2007 and 30 June 2008. 2. ADF Permanent headcount does not include Gap Year personnel who are reported separately in this table. 3. Percentage figures are calculated against the individual Service totals. The Service totals for 2007–08 can be found in Table A1.1. 4. The Navy’s permanent strength as at 30 June 2007 adjusted to account for retrospective separations and members who failed to enlist. 5. Seaman-ranked sailors have been classified in the Training Force. 6. The Army’s permanent strength as at 30 June 2007 adjusted to account for retrospective transactions. 7. The Air Force’s permanent strength as at 30 June 2007 adjusted for one retrospective transaction. 8. Reserves include all active personnel (training, deployed and other part-time military work commitments) and those on Continuous Full-Time Service as at 30 June 2008. 9. The APS headcount does not include DMO employees. 10. 30 June 2008 figures for APS include 1,005 APS employees that are also counted as Reserve members. 11. APS strength as at 30 June 2007 adjusted to account for retrospective hire, separation and transfer transactions. 12. Total only includes ADF Permanent and APS personnel.

Table A1.4 APS personnel by gender and category[1][2][3]

As at 30 June 2007[4] As at 30 June 2008 Full-time Part-time[5] Total Full-time Part-time[5] Total Ongoing employees Males 8,984 95 9,079 8,864 106 8,970 Females 5,699 566 6,265 5,788 626 6,414 Tot a l On g oi n g 14,683 661 15,344 14,652 732 15,384 Non-ongoing employees Males 203 25 228 194 24 218 Females 252 29 281 246 50 296 Tot a l No n -o ng o i ng 455 54 509 440 74 514 Total Males 9,187 120 9,307 9,058 130 9,188 Total Females 5,951 595 6,546 6,034 676 6,710 Total APS personnel 15,138 715 15,853 15,092 806 15,898

NOTES 1. Figures in this table are actual employee numbers (headcount) as at 30 June 2007 and 30 June 2008. 2. Figures include paid and unpaid employees. 3. Figures do not include DMO employees. 4. Figures for 2006-07 adjusted to account for retrospective transactions. 5. Part-time now includes personnel with weekly hours less than the standard hours, regardless of position type, rather than only members in part-time positions.

170 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 1 STAFFING & REMUNERATION

Table A1.5 Distribution of Defence personnel by employment location as at 30 June 2008[1]

NSW Vic. Qld SA WA Tas. NT ACT[2] O/S[3] Total Permanent Forces[4][5][6] Navy 5,760 1,950 815 68 2,286 17 610 1,170 201 12,877 Army 6,404 2,919 9,410 585 828 84 3,786 2,093 320 26,429 Air Force 4,944 945 2,694 1,749 410 9 1,048 1,725 319 13,843 Sub-total 17,108 5,814 12,919 2,402 3,524 110 5,444 4,988 840 53,149 Gap Year Navy – 82 – – – – – – – 82 Army 197 119 41 2 – – 28 – – 387 Air Force – 97 – – – – – – – 97 Sub-total 197 298 41 2 - - 28 - - 566 Reserve Forces[6][7] Navy 1,313 424 730 168 784 165 94 1,006 8 4,692 Army 4,242 2,711 4,280 1,228 1,708 542 885 637 484 16,717 Air Force 821 446 888 382 272 55 124 486 2 3,476 Sub-total 6,376 3,581 5,898 1,778 2,764 762 1,103 2,129 494 24,885 ADF Total 23,681 9,693 18,858 4,182 6,288 872 6,575 7,117 1,334 78,600 APS[8][9][10] 2,513 2,692 1,210 1,917 479 106 457 6,431 93 15,898 Tot a l 26,194 12,385 20,068 6,099 6,767 978 7,032 13,548 1,427 94,498

NOTES 1. Figures in this table show actual employee numbers (headcount) as at 30 June 2008, not average funded strengths. 2. ACT includes personnel located at Jervis Bay. 3. Overseas figures represent personnel posted for long-term duty and deployments. 4. Permanent Forces figures include paid and unpaid personnel. 5. Personnel are shown in the location that they are administered. 6. Personnel serving on ships are included against the state or territory in which the ship is home-ported. 7. Reserve Forces figures include Reserves on Continuous Full-Time Service. 8. APS figures include paid and unpaid employees, which covers full-time, part-time, ongoing and non-ongoing personnel. 9. APS figures do not include DMO employees. 10. 30 June 2008 figures for APS include 1,005 APS employees that are also counted as Reserve members.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 171 APPENDIX 1 STAFFING & REMUNERATION

Table A1.6 Distribution of APS personnel by employment location as at 30 June 2008[1][2]

NSW Vic. Qld SA WA Tas. NT ACT[3] O/S[4] Total Secretary – – – – – – – 1 – 1 Senior – 4 1 7 – – – 99 1 112 Executive Service[5] SES relief – 1 – – – – – 11 – 12 staffing[6] Executive 245 557 64 721 52 8 39 2,110 67 3,863 levels[7] Executive 32 20 15 20 1 1 5 215 3 312 relief staffing[8] Other APS 2,236 2,110 1,130 1,169 426 97 413 3,995 22 11,598 Levels[9] Tot a l 2,513 2,692 1,210 1,917 479 106 457 6,431 93 15,898

NOTES 1. Figures in this table show actual employee numbers as at 30 June 2008 and include paid and unpaid personnel. 2. Figures do not include APS employees in DMO. 3. ACT includes personnel located at Jervis Bay. 4. Overseas figures represent personnel on long-term duty. 5. Senior Executive Service includes Deputy Secretary, First Assistant Secretary, Assistant Secretary, Chief of Division and Medical Officer Class 6 classifications. 6. SES relief staffing indicates non-SES officers who are temporarily acting in SES positions. These officers are on Additional Responsibility Payments (ARP) while the incumbents are taking leave, acting in higher positions or on secondment to other agencies. 7. Includes Executive Levels 1 and 2. 8. Executive relief staffing indicates APS levels on Additional Responsibility Payments while the incumbents are taking leave, acting in higher positions or on secondment to other agencies. 9. Other APS levels include levels 1 to 6.

172 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 1 STAFFING & REMUNERATION

Defence senior management Table A1.7 Star-ranked officers as at 30 June 2008[1][2]

To ta l st a r ra nk 2007-08 promotions[3] 2007-08 separations[4] Men Women Total Men Women To t a l Men Women Tot a l Four star Navy – – – – – – – – – Army – – – – – – – – – Air Force 1 – 1 – – – – – – Three star Navy 2 – 2 1 – 1 – – – Army 4 – 4 1 – 1 – – – Air Force 1 – 1 – – – – – – Two star Navy 10 – 10 3 – 3 2 – 2 Army 17 1 18 4 1 5 – – – Air Force 11 – 11 3 – 3 – – – One star Navy[5] 35 2 37 7 – 7 3 – 3 Army[5][6] 50 1 51 10 – 10 3 – 3 Air Force[5] 35 1 36 13 – 13 4 – 4 Tot a l 166 5 171 42 1 43 12 – 12

NOTES 1. Officers on acting or higher duties are not included. 2. Figures do not include Reservists, including Reservists on CFTS. 3. Promotions include those officers promoted between levels. 4. Separations include only permanent officers who have separated from Defence or transferred to Reserves. 5. Figures include three Chaplains (one from each Service). 6. Contains one transfer from Reserves.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 173 APPENDIX 1 STAFFING & REMUNERATION

Table A1.8 APS Senior Executive Service employees as at 30 June 2008[1][2][3] Total SES 2007-08 Engagements 2007-08 Separations Men Women To ta l Men Women To ta l Men Women Tot a l Senior Executive Secretary 1 – 1 – – – – – – Band 3 7 – 7 2 – 2 – – – Band 2[6] 15 5 20 2 1 3 4 – 4 Band 1 48 21 69 5 1 6 3 – 3 Chief of 3 – 3 – – – 1 – 1 Division Grade 3 – – – – – – – – – Grade 2 10 3 13 – – – 3 – 3 Senior Executive Relief 10 2 12 – – – – – – Staff[7] Tot a l 94 31 125 9 2 11 11 – 11

NOTES 1. Figures in this table show actual employee numbers at their substantive level, but not personnel on longer term unpaid leave. 2. Gains and losses do not reflect movement of officers between levels in each of the Senior Executive Service and Chief of Division streams. 3. Numbers exclude SES officers in the DMO. These figures are reported in Volume 2 of this report. 4. Engagement figures include new engagements and transfers from other agencies. 5. Separation figures include resignations, retirements, redundancies, promotions and transfers to other departments. 6. Senior Executive Band 2 includes Medical Officer Grade 6. 7. Relief Staff indicates non-SES officers who are temporarily acting in SES/Chief of Division positions while the incumbents are taking leave, acting in higher positions or on overseas duty.

174 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 1 STAFFING & REMUNERATION

APS separations Table A1.9 APS separations 2006-07 and 2007-08[1] Resignation/ Voluntary[2] Involuntary[3] Retirement[4] Transfers [5] Total 2006-07 SES – – 11 4 15 Senior Officers 5 10 197 95 307 Other Staff 43 45 1,265 154 1,507 Total APS (2006-07) [6] 48 55 1,473 253 1,829 2007-08 SES – – 9 2 11 Senior Officers 2 15 241 93 351 Other Staff 17 45 1,285 177 1,524 Total APS (2007-08) 19 60 1,535 272 1,886

NOTES 1. Figures do not include DMO employees. 2. Voluntary figures include voluntary redundancies (due to Commercial Support Program, Defence Reform Program or Program Initiated). 3. Involuntary figures include breach of conduct, death, invalidity retirement, involuntary redundancy, lack of qualifications, non-performance and term probation. 4. Resignation/retirement figures include resignation, retirement (minimum age and SES) and completion of non-ongoing. 5. Transfers include transfers/promotions to other government departments, not including movements to the DMO. 6. Figures for 2006-07 adjusted to account for retrospective transactions. REMUNERATING DEFENCE’S PEOPLE Defence remuneration is underpinned by Star Ranks Remuneration Arrangement. a legal framework that provides separate However, individual pay and allowance mechanisms for setting pay and conditions cases concerning specific employment for the ADF and Defence APS employees. groups in the ADF are also determined The main legislation relevant to independently by the tribunal. Other remuneration in Defence is the Defence financial conditions of service that reflect Act 1903, the Workplace Relations Act the special characteristics of military 1996 and the Public Service Act 1999. service such as leave, bonuses, locality Pay and pay-related allowances for allowances, housing assistance and permanent and reserve members of the deployment allowance, are determined ADF are set by the Defence Force by the Minister for Defence under section Remuneration Tribunal, the independent 58B of the Defence Act 1903. Additional pay fixing tribunal for the ADF established benefits, such as tax exemptions and under the Defence Act. General increases veterans’ benefits, are established to ADF pay and allowances are managed administratively by means of ministerial primarily under the ADF Workplace declarations for individual warlike and Remuneration Arrangement and the ADF non-warlike operations.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 175 APPENDIX 1 STAFFING & REMUNERATION

Senior officers who hold statutory offices Executive remuneration are paid under Remuneration Tribunal Defence Senior Executive remuneration is Determinations. set out in Note 13 of the Financial Defence APS employees are covered by Statements. either the Defence Collective Agreement 2006-2009 (DeCA) or individual Australian workplace agreements. These are comprehensive agreements that cover the full range of conditions of service and pay for public servants. Main features of Defence workplace arrangements & agreements Tab le A1.10 to Table A1.14 provide Workplace Agreements, determinations aggregated information on salary, made under section 24(1) of the Public performance pay and non-salary benefits Service Act 1999, determinations made to which Defence personnel were entitled under the Remuneration Tribunal Act under the DeCA, Workplace Remuneration 1973, and determinations made by the Arrangements, Star Ranks Remuneration Defence Force Remuneration Tribunal Arrangement and individual under section 58H of the Defence Act arrangements, such as Australian 1903. Table A1.10 Defence APS base salary ranges by classification as at 30 June 2008 Classification Minimum salary ($) Maximum salary ($) Individual arrangements[1] SES Band 3[2] 177,375 290,000 SES Band 2[3] 144,266 178,028 SES Band 1 119,336 142,758 Non-SES 72,595 155,376 Collective Agreement[4] Executive Level 2 92,639 146,888[5] Executive Level 1 80,319 98,353[6] APS Level 6 63,550 74,785[7] APS Level 5 58,009 62,135[8] APS Level 4 52,009 57,094 APS Level 3 46,665 50,991 APS Level 2 40,969 46,056[9] APS Level 1 36,201 40,636

NOTES 1. SES and non-SES individual arrangements salary ranges exclude the DMO. 2. Includes rates for Chief of Division 3. 3. Includes rates for Chief of Division 2 and Medical Officer Class 6. 4. Certified Agreement salary ranges also apply to APS employees in the DMO. 5. Includes rates for Academic, Legal and Science specialist structures. 6. Includes rates for Public Affairs and Legal specialist structures. 7. Includes rates for Public Affairs specialist structures. 8. Includes rates for Registered Nurse and Occupational Health Nurse specialist structures. 9. Includes rates for Enrolled Nurse specialist structures

176 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 1 STAFFING & REMUNERATION

Table A1.11 ADF salary ranges as at 30 June 2008 Classification Salary Range ($) Minimum Maximum Officer of the Permanent Force (Equivalent) General (E)[1] 312,840[2] 312,840[2] Lieutenant General (E) 242,510[2] 250,100[2] Major General (E) 150,563[3] 196,093 Brigadier (E) 120,785[4] 167,544[3] Colonel (E) 103,724[4] 160,562[5] Lieutenant Colonel (E) 89,867[8] 151,033[3] Major (E) 63,261[4] 135,782[3] Captain (E) 51,172[4] 131,389[3] Lieutenant (E) 44,350 92,968[6] 2nd Lieutenant (E) 41,437 86,787[6] Other rank of the Permanent Force (Equivalent) Warrant Officer Class 1 (E) 61,549 99,459[7] Warrant Officer Class 2 (E) 56,201 88,937 Staff Sergeant (E) 53,205 84,601 Sergeant (E) 47,630 80,263 Corporal (E) 41,481 74,796 Lance Corporal (E) 38,117 70,915 Private Proficient (E) 37,379 70,097 Private (E) 36,658 69,296

NOTES 1. (E) is ‘equivalent rank’ across the Services. 2. General (E) and some Lieutenant General (E) rates are set by the Remuneration Tribunal. 3. Includes rates for Medical Officers on specialist structure. 4. Includes rates for Chaplains not on specialist structure. 5. Includes rates for Dental Officers on specialist structure. 6. Includes transitional rates for other rank appointed as officer. 7. Includes rates for Service Warrant Officer. 8. Includes rates for Chaplains on specialist structure.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 177 APPENDIX 1 STAFFING & REMUNERATION

Table A1.12 Defence Workplace Agreements and Arrangements as at 30 June 2008

Civilian[1][2] SES Non–SES APS employees covered by Collective – 15,680 Agreement APS employees covered by individual 116[3] 40 arrangements Statutory office holder[4] 1 – Australian Defence Force[5] Star Rank Non-Star Rank[6] Members covered by ADF Workplace – 78,337 Remuneration Arrangement[7] Members covered by Star Ranks 153 – Remuneration Arrangement Individual Determinations[8] 2 – ADF Statutory Office Holders[9] 10 –

NOTES 1. Excludes the Secretary who is appointed by the Prime Minister. 2. Excludes DMO civilian employees. 3. Includes four SES Band 2 officers on temporary transfer to other agencies, noting that they still have active agreements with Defence. 4. Statutory office holders not included in headcount figures in previous tables. 5. Includes ADF members billeted to the DMO. 6. Includes ADF Permanent Force and Reservists up to the rank of COL (E). 7. Includes ADF Permanent Force. Figures do not include those Members covered by the Specialist Officer Salary Structure. 8. Individual Determinations established through the Defence Force Remuneration Tribunal. 9. Includes Reservists (Judge Advocate General, Deputy Judge Advocate General Air Force and Deputy Judge Advocate General Navy).

178 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 1 STAFFING & REMUNERATION

Table A1.13 Defence performance pay[1][2][3] Level Aggregated (Substantive) Staff eligible Number of Amount paid Average [4] staff paid ($) payment ($) Range ($) APS Trainee 2 2 769 385 269-500 APS Level 1 243 231 109,808 475 105-500 APS Level 1-3 70 26 13,000 500 500-500 APS Level 2 980 965 458,567 475 76-500 APS Level 3 869 827 392,830 475 92-510 APS Level 3 – 11 10 9,577 958 955-984 Executive Level 1 (Legal) APS Level 3–4 84 89 46,981 528 99-571 APS Level 4 652 545 288,113 529 40-571 APS Level 4–5 264 369 207,752 563 1-621 APS Level 4-6 33 59 37,880 642 282-705 APS Level 5 988 936 547,217 585 17-621 APS Level 5–6 16 16 11,192 700 620-705 APS Level 6 1,611 1,540 1,051,515 683 7-726 Executive Level 1 1,287 48[6] 37,413 779 71-1,145 Executive Level 2[5] 820 796 865,698 1,088 132-1,469 Tot a l 7,950 6,459 4,078,314 631 1-1,469

NOTES 1. Subject to performance, employees may be entitled to a higher pay point within the salary band for their classification. This salary advancement is not considered performance pay. An employee whose employment conditions are governed by the DeCA and who is at the top of his or her classification’s salary band may, subject to performance, receive a lump sum payment of the greater of $500 or one per cent of his or her rate of pay (adjusted for part-time hours, if applicable). As this lump sum payment does not affect the employee’s nominal salary, it is considered performance pay. 2. The data in this table represents employees who were paid performance pay at any point during 2007-08. The DMO’s APS Performance Pay is reported separately in Volume 2 of this report. 3. Under the DeCA, employees who were within 1 per cent of the top of their salary range were eligible to receive a combination of performance progression (increase in rate of salary) and the top of range lump sum payment. Their salary was increased until it reached the top of the range, and the bonus described in footnote 1 was paid, reduced by the dollar amount of salary increase. As a result, the amount of performance bonus received by some employees is lower than in previous years. 4. For reporting purposes, employees who were on the top of their salary range as at 31 October 2007 were considered to have been eligible for the top of range lump sum payment. This eligibility data did not include those employees who received the combination of a salary increase and a lump sum payment as described in footnote 3. The eligibility data did not include those employees who were at the top of the lower classification within a broadband. For this reason, the numbers of employees in the table above who received the bonus in some classifications are greater than the number who appear to have been eligible. 5. Medical Officer grades have been included in the EL2 classification. 6. In 2007, the EL1 pay range increased. Most EL1 employees received an annual increase to their rate of pay rather than the lump sum payment.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 179 APPENDIX 1 STAFFING & REMUNERATION

Table A1.14 Non-salary benefits as at 30 June 2008[1][2] All non-SES employees could Employee assistance program access the following Flexible remuneration packaging benefits: Learning and development Transition management services, including financial advice Flexible working arrangements including home-based and part-time work Subject to availability, Defence supported child care eligibility criteria and Study assistance operational requirements, employees could also Defence amenities access: Dependant care costs Time off for long business travel Mobile phone for official use Family care rooms Airline lounge membership Home office equipment Under individual Motor vehicle for official and private use, plus fuel remuneration Professional memberships arrangements, SES staff Financial advice on remuneration and conditions of service could access all the above benefits, together with the Home office equipment following benefits: Parking ADF Non-Star Rank members Flexible remuneration packaging could access the following Learning and development benefits: Medical and dental treatment Pharmaceuticals Housing and accommodation benefits Transition management services, including financial advice Subject to availability, Defence supported child care eligibility criteria and Study assistance operational requirements, Defence amenities ADF Non–Star Rank members could also access: Dependant Care costs Time off for long business travel Mobile phone for official use Family care rooms Airline lounge membership Home office equipment ADF Star Rank members Motor vehicle for official and private use, plus fuel could access all the above Parking benefits, together with the Professional memberships following benefits: Financial advice on remuneration and conditions of service Home office equipment

NOTES 1. Non-salary benefits are dependent upon eligibility criteria and may not be available to all employees. 2. Excludes Senior Executive Staff and non-Senior Executive Staff employees on Australian Workplace Agreements or determinations made under s24(1) of the Public Service Act 1999 in the DMO.

180 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 2 Corporate governance

Defence has 10 senior Defence Committees, each of which plays an important role in the effective governance of Defence. All senior Defence committees have an advisory role with the chair exercising executive authority.1

In 2007–08, significant work was augmented, and a new Charter adopted. undertaken to streamline senior Defence Terms of reference were also developed committees to provide targeted, for a new strategic Information and informed, strategic advice to the Communications Technology (ICT) Secretary and Chief of the Defence Force. Committee. An assessment was made of issues Further reforms will be undertaken during addressed by the Defence Committee and 2008–09 to improve the strategic focus of the Chiefs of Service Committee to the senior Defence committees and reduce overlap. The Defence Audit ensure they are effective in supporting Committee was strengthened with its role the Secretary and Chief of the Defence and responsibilities expanded to include a Force to achieve Defence outcomes. stronger focus on governance and assurance processes, including risk management and a controls framework. External and internal membership of the Defence Audit Committee has also been

Figure A2.1 Committee structure

1. Lists of Committee members are available in the online version of this report at www.defence.gov.au/ annualreports.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 181 APPENDIX 2 CORPORATE GOVERNANCE

Defence Committee and experience in accounting, financial management, enterprise risk The Defence Committee is the primary management, audit and governance. advisory body supporting the Secretary Mr Paul Rizzo, who has a strong and Chief of the Defence Force in meeting background in blue chip and public sector their joint obligations under the business management, was appointed the Ministerial Directive for the management independent Chair of the Defence Audit and administration of Defence. It is Committee in February 2008. chaired by the Secretary and provides holistic senior management advice to the Defence Committee Secretary and Chief of the Defence Force sub–committees on strategic management and governance issues, and monitors the overall Defence Capability & performance of Defence. Investment Committee Chiefs of Service The Defence Capability and Investment Committee reviews major capability and Committee investment issues to ensure that The Chiefs of Service Committee is resourcing, including capital investment chaired by the Chief of the Defence and operating costs, is consistent with Force, and provides military advice to Defence’s strategic priorities and assist him in commanding the ADF and resourcing strategy. providing military advice to Government. Defence Capability Committee Defence Audit Committee The Defence Capability Committee The Defence Audit Committee was considers and develops options for current established by the Secretary and Chief of and future capability. The committee is a the Defence Force in accordance with sub-committee of the Defence Capability section 46 of the Financial Management and Investment Committee and focuses on and Accountability Act 1997. It provides individual major capital investment independent advice to the Secretary and projects. Chief of the Defence Force on all aspects Workforce & Financial of Defence governance, including audit, Management Committee assurance, financial management and risk The Workforce and Financial Management management issues. Committee ensures the efficient and Reforms to the role and effectiveness of effective allocation of Defence resources the Defence Audit Committee have to meet strategic objectives. It reviews resulted in a strengthening of the all funding requests and workforce membership of the committee. From planning initiatives including the February 2008, the committee comprises allocation of the workforce to meet three external members, including the performance objectives, and also provides Chair and Deputy Chair, and two senior strategic direction on reprioritisation of Defence representatives. These members Defence resources. collectively have a wide range of skills

182 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 2 CORPORATE GOVERNANCE

Defence Information & Defence People Committee Communication Technology The Defence People Committee identifies Committee and oversees the implementation of The Defence ICT Committee was critical workforce initiatives and established in June 2008 as part of the personnel policies needed to generate ongoing reforms to the governance and organisational capability required by management of Defence ICT. This Defence. committee will provide strategic direction on the planning, expenditure and Financial Management & allocation of ICT resources across Controls Committee Defence. The Financial Management and Controls Committee is responsible for overseeing Defence Occupational Health and monitoring financial remediation & Safety Committee projects, the financial control The Defence Occupational Health and environment, the remediation of Safety Committee oversees all issues Australian National Audit Office findings, related to occupational health and safety and risks to financial statements. including strategic planning, compliance with internal and external arrangements, and monitoring risks to the wellbeing of Defence’s people. OTHER GOVERNANCE STRUCTURES Defence Business Improvement Board The Defence Business Improvement Board to improve business practices and was established in 2006 to foster productivity in Defence. continuous productivity improvements The Board was disbanded in March 2008, across Defence. The role of this external following substantive reforms to the advisory board was to review Defence Defence Audit Committee and the major business processes in the areas of function and process reviews being corporate management and support and undertaken to support the development develop proposals to improve business of a new White Paper. practices and productivity, and oversee the implementation of changes designed

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 183 APPENDIX 3 Internal audit

The Management Audit Branch (MAB) of the Inspector General Division, provides assurance to the Secretary, Chief of the Defence Force, and Chief Executive Officer DMO, that financial and operational controls designed to manage the organisation's risks and achieve objectives are operating in an efficient, effective and ethical manner. The MAB also assists Defence senior managers and the DMO Executive in improving the business performance of their organisations.

During 2007-08, the MAB provided internal client support during the conduct of nine audit services in accordance with the ANAO performance audits. annual audit work program that was Largely in response to an external review approved by the Defence Audit of the MAB performance by the Institute Committee and developed in consultation of Internal Auditors, the branch undertook with Defence senior managers using Group a change program in 2007–08. The Risk Plans. majority of recommendations have been During 2007-08, the MAB completed a implemented, leading to improvements in range of audit tasks comprising corporate relationship management, level audits from the work program and communication, performance reporting unplanned audits or consulting activities and staff development. In particular, a in response to client requests. A total of standing offer panel to provide audit and 34 audit reports were issued for Defence, assurance services to Defence is currently nine for the DMO and two covering both being established through an open tender Defence and the DMO. A further 22 audits process. were in the reporting phase as at The Inspector General is an adviser to the 30 June 2008. The MAB also provided Defence Audit Committee. ETHICS AWARENESS & FRAUD CONTROL Fraud & ethics awareness A fraud and ethics awareness program During 2007-08, 195 fraud and ethics underpins Defence and the DMO’s awareness presentations were given to approach to fraud control. The awareness more than 11,000 Defence and DMO program includes provision of face-to-face personnel across Australia. In addition, presentations, e-learning, videos, over 12,000 personnel accessed newsletters and a dedicated intranet site awareness training through the Defence for information and advice. Fraud and CAMPUS online learning portal. ethics training is mandatory for APS employees in Defence.

184 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 3 INTERNAL AUDIT

Fraud control 2007-08 was due to the successful prosecution of a case involving theft of During 2007-08, in line with the aircraft turbine engine spare parts dating Commonwealth Fraud Control Guidelines, back to 2003. The determined loss for this Defence produced a new Defence Fraud case, based on the useful life of the Control Plan (No.7) for the period stolen parts, was assessed at $1.56m. 1 December 2007 to 1 December 2009. Table A3.1 provides the total value of Fraud investigations determined losses and monies recovered from completed fraud cases for the period There were 434 fraud investigations 1 July 2003 to 30 June 2008. registered within Defence and DMO during 2007-08 and 348 investigations completed The historically low rate of recovery of (a number of those completed were determined fraud loss is due primarily to registered in the previous year). the following factors. Firstly, Approximately 28 per cent of completed investigations often confirm that there investigations resulted in criminal, has been a loss to the Commonwealth, but disciplinary or administrative action. Of recoveries are not possible due to these, around 30 per cent related to evidentiary limitations and/or the lack of action under the Defence Force Discipline a suspect. Secondly, serious frauds which Act 1982. have resulted in successful convictions often establish significant reparation The determined fraud loss for completed amounts. Subsequent recovery from a cases in 2007-08 was $2.3m, while monies convicted offender who may have been recovered amounted to around $0.2m. imprisoned, is unemployed, has few Over the last five financial years, assets and is (or becomes) bankrupt, can detected fraud has averaged be very difficult. Even when a recovery approximately $1.2m per year, within a arrangement has been successfully range of $0.7m to $2.3m. Previous years entered into between Defence and the showed a steady decline in the offender, it is often many years (given the determined loss as a result of successful offender’s circumstances) before the full early detection processes. The large amount owed can be recovered. increase in the determined fraud loss in Table A3.1 Determined fraud loss and recoveries 2003-04 to 2007-8 2003-04 2004-05 2005-06 2006-07 2007-08 Loss 1,195,805 1,003,642 962,339 707,230 2,302,281 Recovery[1] 125,050 52,984 114,524 112,320 189,494

NOTE 1. Debts are often not assessed and/or recovered in the same financial year that the loss occurred.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 185 APPENDIX 3 INTERNAL AUDIT

DEFENCE WHISTLEBLOWER SCHEME The legislative basis for the scheme lies in Inspector General Division or referred to section 16 of the Public Service Act 1999, other relevant Defence investigative or Public Service Regulations 2.4-2.7 and review organisations. Feedback is Public Service Commissioner Directions, provided on the outcome of investigations which require agency heads to: and, where wrongdoing is judged to have · prohibit victimisation or occurred, action is taken through civil discrimination against an APS courts or under the Defence Force employee because the employee has Discipline Act or the APS Code of Conduct. reported alleged breaches of the Code The incidence of whistleblower reports of Conduct over the last four years has stabilised to · establish procedures for dealing with an average of around 170 per financial whistleblower reports year. The ongoing use of the scheme suggests that people who use it have · ensure that employees are made confidence that their identity will be aware of procedures and encouraged suitably protected and that all allegations to make disclosures. made are assessed, then investigated as The Defence Whistleblower Scheme is appropriate. managed by the Inspector General Allegations of fraud and unethical conduct Division. It provides an alternative and account for about 70 per cent of all independent way for any person - reports made through the scheme. The including ADF personnel, public servants remainder consist of matters such as in Defence or the DMO, and suppliers of harassment, mismanagement of goods and services - to report alleged resources, use of drugs, discrimination, misconduct or unethical behaviour. occupational health and safety, and All allegations raised under the scheme security. Table A3.2 shows the number of are assessed. Those assessed as allegations made to the scheme over the warranting investigation are then subject, past five years. as appropriate, to investigation by the Table A3.2 Claims made to the Defence Whistleblower Scheme, 2003-04 to 2007-08 2003-04 2004-05 2005-06 2006-07 2007-08 Claims 219 162 178 168 176

186 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 3 INTERNAL AUDIT

SECURITY OF DEFENCE WEAPONS, MUNITIONS & EXPLOSIVES To improve the governance of weapons Logistics to manage the implementation and explosive ordnance in Defence, a of the recommendations through the Weapons, Munitions and Explosives Weapons, Munitions and Explosives Security Performance Audit was Project. An Explosive Ordnance conducted during 2007-08. The audit Management and Policy Branch was proposed 22 main recommendations with established to coordinate the a further 36 sub-recommendations. management and implementation of the Recommendations addressed accounting report’s recommendations and to provide systems, governance, training, contract a single point of accountability for management and physical and procedural weapons and explosive ordnance security measures. Improvements to assurance. The DMO and Defence Security enhance identification and accounting of Authority have also raised explosive– M72 66mm rocket launchers were ordnance–specific offices within their implemented immediately. organisations. A proposal to implement all As at 30 June 2008, 10 of the recommendations was provided to the recommendations were implemented, then Minister on 11 October 2007. with nine more programmed for Subsequently, Vice Chief of the Defence completion in 2008-09. The remainder Force appointed the Commander Joint will be implemented by 2013.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 187 APPENDIX 4 External scrutiny

This section reports on Defence activities in relation to parliamentary committee inquiries and activities from 1 July 2007 to 30 June 2008. Further information on the parliamentary reports, inquiries and hearings detailed below can be accessed through the Australian Parliament House website, www.aph.gov.au. JOINT COMMITTEES Parliamentary Joint Committee on Intelligence & Security Review of the administration Visits by the Committee & expenditure of the On 23 April 2008, the Committee visited Intelligence agencies Defence intelligence organisations. The On 27 May 2008, the Committee invited visit included a briefing and tours of the Defence to lodge a submission by the end Defence Signals Directorate, Defence of July 2008. Imagery and Geospatial Organisation, and the Defence Intelligence Organisation. Parliamentary Standing Committee on Public Works Report No 5/2007 - Single Report No 8/2007 – RAAF Base Living Environment & Pearce Redevelopment Stage Accommodation Precinct - 1, Pearce, WA Phase 2, various locations This project was considered by the This project was considered by the Committee at a public hearing on 19 July Committee at a public hearing on 11 May 2007 and cleared by Parliament on 2007 and cleared by Parliament on 16 August 2007. Construction is expected 21 June 2007. Construction is expected to to commence in late 2008, with commence in early 2009, with completion completion expected in 2011. expected in 2012. Report No 11/2007 – RAAF Report No 7/2007 – Base Amberley Rationalisation of ADF Redevelopment Stage 3, QLD Facilities at RMAF This project was considered by the Butterworth Committee at a public hearing on 24 July This project was considered by the 2007 and cleared by Parliament on Committee at a public hearing on 15 June 20 September 2007. Construction 2007 and cleared by Parliament on commenced in 2008, with completion 16 August 2007. Construction commenced expected progressively from 2010 through in 2008, with completion expected in to late 2011. 2010.

188 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 4 EXTERNAL SCRUTINY

Report No 12/2007 – Heavy Report No 5/2008 – Robertson Airlift Capability – Permanent Barracks Redevelopment, Facilities (C-17 Heavy Airlift Darwin, NT Infrastructure Project) This project was considered by the This project was considered by the Committee at a public hearing on 16 April Committee at a public hearing on 24 July 2008 and cleared by Parliament on 2007 and cleared by Parliament on 20 25 June 2008. Construction is expected to September 2007. Construction commence in 2009, with completion commenced in 2008, with completion expected in 2011. expected by late 2010. Report No 5/2008 – RAAF Base Report No 2/2008 – HMAS Darwin Redevelopment Stage Creswell Redevelopment, 2, Darwin, NT Jervis Bay Territory This project was considered by the This project was considered by the Committee at a public hearing on 16 April Committee at a public hearing on 2008 and cleared by Parliament on 14 September 2007 and cleared by 25 June 2008. Construction is expected to Parliament on 20 March 2008. commence in 2009, with completion Construction is expected to commence in expected in 2011. 2009, with completion expected in 2011. Report No 5/2008 – Airborne Report No 3/2008 – Land Early Warning & Control Engineering Agency Test Facilities, RAAF Base Tindal, Services Relocation, NT Monegeetta, VIC This project was considered by the This project was considered by the Committee at a public hearing on 17 April Committee at a public hearing on 2008 and cleared by Parliament on 7 September 2007 and cleared by 25 June 2008. Construction is expected to Parliament on 20 March 2008. commence in 2009, with completion Construction is expected to commence in expected in 2010. 2008, with completion expected by 2010. Report No 5/2008 – RAAF Base Report No 5/2008 – Hardened Tindal Redevelopment Stage 5, & Networked Army (HNA) NT facilities at Edinburgh This project was considered by the Defence Precinct, SA Committee at a public hearing on 17 April This project was considered by the 2008 and cleared by Parliament on Committee at a public hearing on 1 April 25 June 2008. Construction is expected to 2008 and cleared by Parliament on commence in 2009, with completion 25 June 2008. Construction is expected to expected in 2011. commence in 2008, with completion expected in 2012. Progressive occupation Report No 5/2008 – Multi Role is expected to start in December 2010. Helicopter Facilities This project was considered by the Committee at a public hearing on 6 May 2008 and cleared by Parliament on 25 June 2008. Construction is expected to commence in 2008, with completion expected in 2010.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 189 APPENDIX 4 EXTERNAL SCRUTINY

Report No 5/2008 – Enoggera Redevelopment Stage 1 Project, Gallipoli Barracks, Brisbane, QLD This project was considered by the Committee at a public hearing on 6 May 2008 and cleared by Parliament on 25 June 2008. Construction is expected to commence in 2008, with completion expected in 2010. Joint Committee on Public Accounts & Audit Inquiry into Financial notice. Defence submitted responses to Management & Equipment these questions on 19 September 2007. Acquisition in the Department On 20 September 2007, Defence provided of Defence & the Defence evidence to the Committee at a private Materiel Organisation. hearing. On 10 July 2007, the Committee provided Following reconstitution of Parliament Defence with four written questions on and the Committees, this inquiry was notice regarding Project AIR 87. Defence re-opened. submitted responses to these questions on On 5 March 2008, the Committee provided 14 August 2007. Defence with seven written questions on On 15 August 2007, Defence provided notice. Responses to these questions were evidence to the Committee at a public submitted to the Committee on hearing. Two questions were taken on 5 June 2008. Joint Standing Committee on Foreign Affairs, Defence & Trade Inquiry into Regional Air Inquiry into the Defence Superiority Annual Report 2005-06 On 12 September 2007, the Committee On 10 July 2007, Defence submitted tabled its report. Defence did not prepare responses to questions taken on notice at a Government Response as the report the public hearing of 30 March 2007. contained no recommendations. The Committee’s review of the Defence Inquiry into the Defence Annual Report 2005-06 was tabled on Annual Report 2006-07 2 June 2008. Defence commenced drafting a Government Response to the On 4 April 2008, the Committee review in June 2008. authorised the Defence Sub-Committee to review the Defence Annual Report Inquiry into RAAF F-111 2006-07. The hearing was held in early Deseal/Reseal workers & their 2008-09. families On 28 May 2008, the Committee authorised the Defence Sub-Committee to conduct this inquiry.

190 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 4 EXTERNAL SCRUTINY

On 2 June 2008, the Committee invited In May 2008, the Defence Sub-Committee officers from Defence to provide evidence inspected Darwin-based Defence at a public hearing scheduled for July 2008. organisations including Headquarters Northern Command, HMAS Coonawarra, the Visits by the Committee 1st Brigade, RAAF Darwin and On 31 July 2007, the Committee visited the RAAF Tindal. Submarine Force Element Group at On 26 May 2008, the Chair of the Defence HMAS Stirling. Sub-Committee wrote to the Minister for On 11 September 2007, Defence provided Defence seeking support for the remainder evidence to the Committee at a private of the 2008 Defence visit program. The briefing. Minister approved the visits on In April and May 2008, Defence gave ADF 26 June 2008. Operations Update Briefings to the Defence Sub-Committee. Joint Standing Committee on Electoral Matters Inquiry into the 2007 Federal Election Defence will provide a submission to the Committee in 2008-09. Joint Standing Committee on Treaties Status of Visiting Forces Treaty between Australia & the Agreement United States concerning On 13 August 2007, Defence provided Defense Trade Cooperation evidence to the Committee at a public On 16 June 2008, Defence provided hearing. On 17 September 2007, a second evidence to the Committee at a public hearing was held following two submissions hearing. Eight written questions were being received by the Committee. No received from the Committee. The results questions were taken on notice at either will be tabled in 2008-09. hearing. On 20 September 2007, the Committee tabled its report. SENATE COMMITTEES Senate Standing Committee on Foreign Affairs, Defence & Trade Budget Supplementary Budget Additional Estimates Estimates 2007-08 2007-08 Defence had been scheduled to appear On 20 February 2008, Defence provided before the Committee in November 2007; evidence to the Committee at a public however, the hearing was cancelled due to hearing. Seven questions were taken on the timing of the Federal election. notice, and one further question was provided in writing. Defence submitted responses to these questions on 6 May 2008.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 191 APPENDIX 4 EXTERNAL SCRUTINY

Budget Estimates 2008-09 Defence Legislation On 4 June 2008, Defence gave evidence to Amendment Bill 2007 the Committee at a public hearing. Defence provided seven written Tw e n t y - s i x q u e s t i o n s were taken on submissions to the Committee between notice, and a further four were provided 22 August 2007 and 28 August 2007. On in writing. 30 August 2007, the Committee provided nine questions in writing. Responses to Inquiry into naval shipbuilding these written questions were provided on in Australia 4 September 2007. On 5 September 2007, The Government Response to the Defence provided evidence at a public Committee’s report was prepared but was hearing, where one question was taken on unable to be tabled due to the caretaker notice. conventions. The response will be tabled On 10 September 2007, the Committee in 2008-09. tabled its final report, making one Inquiry into the Review of recommendation. The Parliamentary Reforms to Australia’s Military amendment to the Bill was approved by Justice System the Minister Assisting the Minister for Defence on 14 September 2007, and Following the reconstitution of the introduced in the Main Committee of the Committee under the new Government, House of Representatives on the Committee indicated it would hold a 19 September 2007. new hearing into military justice. Defence provided evidence at a public hearing on Inquiry into the nature & 20 June 2008, and then at an additional conduct of Australia’s public hearing on 26 June 2008. No questions diplomacy were taken on notice from either hearing. The Committee’s report was tabled on Inquiry into economic & 16 August 2007. security challenges facing PNG Private briefings for the On 25 June 2008, the Committee invited Committee Defence to lodge a submission by the end On 15 May 2008, Defence provided a of August 2008. private briefing to the Committee Inquiry into Australia’s concerning the Portfolio Budget involvement in peacekeeping Estimates Statements 2008-09. operations On 24 July 2007, Defence provided evidence to the Committee at a public hearing. Three questions were taken on notice and 30 written questions were received. Defence submitted responses to these questions to the Committee on 16 October 2007. Defence also provided evidence to the Committee at a second public hearing on 6 September 2007. No questions were taken on notice during the second hearing.

192 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 4 EXTERNAL SCRUTINY

Senate Standing Committee on Finance & Public Administration Inquiry into the Superannuation Legislation Amendment Bill 2007 On 5 July 2007, Defence provided evidence to the Committee at a public hearing. Two questions were taken on notice. Defence submitted responses to these questions on 14 August 2007. Senate Standing Committee on Economics Inquiry into the current state of Australia’s Space Science & Industry Sector On 15 May 2008, Defence lodged a submission with the Committee. Senate Standing Committee on Infrastructure, Regional Development & Local Government Coastal shipping policy & regulation inquiry On 16 May 2008, Defence provided evidence at a public hearing. No questions were taken on notice. Senate Standing Committee on Legal & Constitutional Affairs Inquiry into the Appropriation (Northern Territory National Emergency Response) Bill (No. 2) 2007-08 On 10 August 2007, Defence provided evidence to the Committee at a public hearing. No questions were taken on notice.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 193 APPENDIX 4 EXTERNAL SCRUTINY

HOUSE COMMITTEES House of Representatives Standing Committee on Industry, Science & Innovation Inquiry into Research Training & Research Workforce in Australian Universities On 28 April 2008, the Committee invited Defence to provide a submission to the inquiry. The submission was approved by the Minister on 4 June 2008. AUDITOR-GENERAL’S REPORTS Three Auditor-General’s reports relating recommendations of each report were specifically to Defence were tabled during referred to relevant areas within Defence the year. The key findings and for implementation. Audit Report No.1 - Acquisition of the Abrams Main Battle Tank, tabled 17 July 2007 The objective of the audit was to assess process; analysed the acquisition the effectiveness of management of the agreements for elements of the project; procurement of a major, replacement and examined the interim through-life capability for the ADF by the DMO and support arrangements being put in place Defence. The audit reviewed the initial to support the capability. capability requirements and approval No recommendations were raised. Audit Report No.11 - Management of the FFG Capability Upgrade, tabled 31 October 2007 The audit follows on from Audit Report Equipment Acquisition at the Department No. 45 2004-05, Management of Selected of Defence and DMO. Defence Systems Program Offices, May The ANAO made three recommendations 2005. That report is being considered by to which Defence and the DMO agreed. the Joint Committee of Public Accounts Two recommendations have been and Audit as part of its current inquiry implemented and Defence and the DMO into Defence Financial Management and are in the process of implementing the third.

194 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 4 EXTERNAL SCRUTINY

Audit Report No.28 – Defence’s Compliance with the Public Works Committee Approval Processes, tabled 22 April 2008 The objective of the audit was to review Cross-portfolio audit selected Defence public works projects reports submitted in the three year periods ending mid-2007 to assess whether they had been Defence also contributed to the following submitted in accordance with the cross-portfolio Auditor-General’s report in Committee’s prevailing requirements for 2007-08: notification and review prior to entering Audit Report No. 9 - Senate Order for into financial commitments or pubic Departmental and Agency Contracts, works. The audit also examined the tabled 27 September 2007. procedures applied by Defence to refer public works projects to the Committee, and identified administrative practices that may improve adherence with relevant legislative and administrative referral requirements. The ANAO made one recommendation to which Defence agreed, and has implemented. DEFENCE FORCE OMBUDSMAN There were no formal reports to the Chief any reports raised under sections 16, 17 or of the Defence Force pursuant to section 19 of the Act relating to the operations of 15 of the Ombudsman Act 1976, nor were the ADF during the period under report. DECISIONS OF COURTS & TRIBUNALS On 29 October 2007, the Full Court of the allegations that Defence investigators had Federal Court of Australia set aside a been forewarned about faulty fuel lines decision to terminate the service of that caused the fire aboard HMAS Private Martincevic. Private Martincevic Westralia in May 1998. The Ombudsman had been determined by a delegate for the reported that press reports of February Chief of Army to be unemployable and 2007 stating that Defence had been non-deployable within his trade under the warned about the safety risk to HMAS Defence (Personnel) Regulations. The ADF Westralia and failed to act were wrong. accepted the decision of the Full Federal During 2007-08, 45 claims for common law Court and reinstated Private Martincevic damages, brought by former crew of with effect from 28 January 2008. HMAS Melbourne, were resolved. The In April 2008, the Commonwealth Government engaged Mr Jeremy Gormly SC Ombudsman published his Report into of the New South Wales Bar to undertake a Allegations Concerning the HMAS review of the remaining 24 unresolved Westralia Fire (Report number 03/2008). claims. The review commenced in June The Ombudsman’s own-motion 2008, and is expected to take several investigation was prompted by published months to conclude.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 195 APPENDIX 5 Defence’s relationships with external organisations

This appendix includes purchaser/provider information. Defence Housing Australia the Defence Homeowner Scheme for ADF members was $436m. This amount Defence and Defence Housing Australia includes a number of projects initiated by (DHA) have two formal agreements: Defence to address specific housing Services Agreement for Housing and needs, including upgrading of heritage Related Requirements (the Services housing and the upgrade of security of Agreement) and the Relocations Services housing in the NSW and NT regions. Agreement. The agreements formalise the relationship between Defence, as the Defence Materiel purchaser, and DHA as the provider of Organisation housing and relocation services. A revised Services Agreement was implemented on Under the Defence/DMO Business Model, 1 July 2006 to establish a more an initial pre-payment/unearned revenue commercial arrangement between transaction is made to the DMO at the Defence and DHA, and strengthen commencement of each financial year contractual performance management based on all approved activities. Based processes. The Services Agreement upon advice provided by the DMO, extends to 2018 and provides for a major Defence’s pre-payment is progressively review of the agreement every five years. reduced as expenses are recorded, or The Relocations Services Agreement assets recognised. extends to 2010. A performance review The acquisition of major and minor was completed in 2007, resulting in a capital equipment is governed by a series revised fee structure that simplified of Materiel Acquisition Agreements payment arrangements and provided for between Defence and the DMO. The better performance reporting. 2007–08 pre-payment was based upon DHA continued to provide community estimated cash flow requirements for all standard housing, tenancy management currently approved major capital and relocation services to ADF personnel projects, including their operating to support Defence capability component. requirements. During 2007–08, the cost to The sustainment of equipment by the Defence for DHA to provide housing and DMO is governed by a series of Materiel relocation services and administration of Sustainment Agreements. The 2007-08

196 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 5 DEFENCE’S RELATIONSHIPS WITH EXTERNAL ORGANISATIONS

pre-payment covered the product costs Defence also maintains a memorandum of for all materiel products. The contracted understanding with the DFAT for the component covers payments by the DMO provision of information and to external suppliers for repairs and communication technology services to maintenance, inventory purchases Defence personnel at DFAT-managed including explosive ordnance, general overseas posts. A fee for these services, stores, fuel and repairable items. based on a schedule of charges, is levied The DMO also receives pre-payment for on Defence annually. both acquisition and sustainment service The services provided to Defence under fees from Defence. The DMO acquisition the memorandum of understanding are: service fee is funded on the basis that it · local area networked desktop office will cover project staffing and associated products at the classified and overheads. Similarly, the DMO unclassified levels, facilitating emails sustainment service fee covers the DMO and cablegrams being communicated operating costs, including staff and to and from appropriate Defence overheads in the delivery of the networks sustainment program. · telephone exchange services, Department of Foreign including the provision of telephone Affairs & Trade handsets. The information and communications Defence maintains a service-level technology infrastructure providing these agreement and a memorandum of services is provided, maintained and understanding with the Department of supported by the DFAT. Foreign Affairs and Trade (DFAT) for the provision of services at DFAT-managed The services are provided in 32 overseas overseas posts. The agreement facilitates posts in 30 countries, to approximately efficient and effective Australian 300 Defence personnel and locally Government business overseas by avoiding engaged staff. The memorandum of unnecessary duplication of common understanding came into force on services at overseas posts. 1 July 2004 for a three year period, and was extended to cover 2007-08 while The services provided for Defence under negotiations for a new memorandum of the agreement include personnel understanding continue. The cost to administration, residential and office Defence for 2007-08 was $1.2m (excluding accommodation, security, financial advice GST), slightly more than last financial and transactional processing for year due to a greater demand for Australian-based and program-support equipment and services to cover an staff engaged at overseas posts. The cost increased number of overseas personnel. of the agreement was $3.8m in 2007-08.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 197 APPENDIX 5 DEFENCE’S RELATIONSHIPS WITH EXTERNAL ORGANISATIONS

Comcare Defence pays an annual workers Scheme. The expenses for 2007-08 were compensation premium to Comcare to $22.847m. meet the cost of workers compensation A one-time funding injection of $6.072m claims for civilian personnel who suffer to fund ComSuper’s Risk Mitigation work-related injuries or illnesses during Program on its current information the year and the cost of managing those technology system to resolve legislative claims. The premium paid for 2007–08 was breaches and ANAO audit findings was $16.702m. also paid by Defence in 2007-08. Defence is also required to pay regulatory The Department of Finance and contributions to Comcare to fund costs Deregulation is responsible for negotiating incurred by Comcare and the Safety the Commonwealth-wide superannuation Rehabilitation and Compensation administration services provided by Commission for regulatory functions ComSuper for civilians. Defence is performed under the Safety required to pay the fees negotiated for Rehabilitation and Compensation Act APS employees. The fees for Defence 1988 and the Occupational Health and civilian employees for 2007-08 were Safety Act 1991. For 2007-08 the $3.731m. regulatory contributions were $0.528m for Performance–service–level standards, civilian personnel and $4.830m for the which form part of the 2007-09 Service ADF. Level Agreement negotiated with the Defence has a positive working Military Superannuation and Benefits relationship with Comcare which Scheme Board, the Defence Force promotes regular review of claims Retirement and Death Benefits Authority, management performance and Defence’s ComSuper and Defence, apply to the injury prevention and return to work delivery of services provided by performance indicators, as well as sharing ComSuper. ComSuper's overall information to improve performance. performance against its service–level Defence was satisfied with the level of standards for 2007-08 was 84 per cent, service provided by Comcare in 2007-08. representing a decline of 3 per cent from ComSuper the previous year’s figure of 87 per cent. The decline in service–level standards is Defence pays Commonwealth partly as a result of the reallocation of Superannuation Administration resources to address unanticipated (ComSuper) an agreed annual pressure on several key areas of administration fee for providing ComSuper, including: administration services (excluding optional administration services) for · retrospective pay rises for Defence current and former military personnel personnel and the resulting pressure who are either contributing, deferred on benefit service–level standards benefit, or pensioner members of the · retrospective changes for Better Super Military Superannuation and Benefits and the resulting pressure on pensions Scheme, the Defence Force Retirement service–level standards and Death Benefits Scheme or the · re-entered recipients and the impact Defence Forces Retirement Benefits on member communication service– level standards

198 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 5 DEFENCE’S RELATIONSHIPS WITH EXTERNAL ORGANISATIONS

· additional legislative changes such as the restoration of widows pensions that were cancelled prior to 1977 · Anti-Money Laundering and Counter-Terrorism Financing compliance obligations. ComSuper has sought ways to continue to maintain its service standards and delivery against its overall performance measures. However, the impact on three primary areas of dispute resolution, member communications and benefit payments, has had an impact on 47 of ComSuper's 55 service standards.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 199 APPENDIX 6 Freedom of information

This appendix provides information about the implementation of the Freedom of Information Act 1982 and is intended to partly meet the requirements of section 8 of the Act.

Section 8 requires agencies to publish personal information (16 in the previous information about: year). Applications for internal review · the way they are organised, their numbered 10 (eight in the previous year) functions, and the decision-making and three applications were made to the and other powers they have that Administrative Appeals Tribunal for affect the public review of freedom of information decisions (one in the previous year). · arrangements for public participation in the agency’s work In addition to formal freedom of information requests, the Freedom of · document categories that are held by Information Directorate responded to the agency and how the public can 567 inquiries that did not require access the documents. consideration under the Act, including Tab le A6.1 shows the number of freedom requests for access to personnel records of information requests received and that were re-directed for administration, completed or otherwise dealt with in accordance with section 15A of the Act. in 2007–08. The figures refer to requests Section 15A provides for access to be for access to documents under section 15 given in such cases, outside the provisions of the Act. Defence also received of the Act, through established 11 requests under Part V of the Act for administrative channels. amendment or annotation of records of Table A6.1 Requests for access to documents 2006-07 2007-08 Number of requests received 184[1] 175 Number of requests finalised (including withdrawn 193 174 and transferred to another agency) Number of requests withdrawn 36 46 Number of requests transferred to another agency 4 2 Number of requests outstanding 53 54

NOTE 1. In addition to this figure, 62 requests are outstanding from 2005-06.

200 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 6 FREEDOM OF INFORMATION

Tab le A6.2 shows the performance of Further information about Defence’s Defence in meeting the 30-day statutory dealings with freedom of information time limit for responding to requests for requests in 2007-08, including information access to documents. The time limit about costs incurred, will be published in continues to be a challenge for Defence, the Freedom of Information Annual in part because of the relatively high Report, which the Department of the proportion of complex requests, often Prime Minister and Cabinet is required to relating to operational and policy present to Parliament in accordance with matters, involving a large number of section 93 of the Act. documents and difficult issues. Such requests represented 62 per cent of total requests in 2007–08. Table A6.2 Time taken to answer requests for access to documents[1] 2006-07 2007-08 Requests answered in less than 30 days (with % of total) 35 (22.9) 48 (38.0) Requests answered in 30 to 60 days (with % of total) 47 (30.7) 32 (25.4) Requests answered in 60 to 90 days (with % of total) 21 (13.7) 23 (18.3) Requests answered in more than 90 days (with % of total) 50 (32.7) 23 (18.3)

NOTE 1. The 30-day deadline may be extended by an additional 30 days to allow for consultation with third parties. Defence’s functions & Authorised decision decision making powers makers Information about Defence’s structure Decisions on requests made to Defence and functions, including its organisational under the Act may be made by the chart, can be found in Chapter 2— Minister for Defence, the Secretary of Organisational Structure. Information Defence, or by persons acting under about legislation administered by the authority. The authority to release Minister for Defence is published in the documents or to refuse requests for Administrative Arrangements Order1. access to documents is held widely Further information relating to throughout Defence at the Director level decision-making powers can be found in (Executive Level 2 and Colonel or the online version of this report. equivalent rank) and above. Authority to make decisions of other kinds under the Freedom of Information legislation, such as the power to impose charges on applicants, has also been delegated to appropriate officers. Details can be obtained from the Defence Freedom of Information Directorate, using the address and contact numbers below.

1. Available at www.pmc.gov.au/parliamentary/index.cfm.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 201 APPENDIX 6 FREEDOM OF INFORMATION

Procedures & contact National Health and Medical Research points Council’s national statement on ethical conduct in research involving human A request for access to documents under participants and has representatives the Act must be made in writing and external to Defence. provide sufficient information concerning the documents to enable Defence to Defence Families of Australia identify them. The request has to be Defence Families of Australia is an accompanied by a $30 application fee and independent advisory group convened by should include a telephone number and a Defence to represent the diversity of return address in Australia at which the today’s Defence families. Its aim is to applicant can be contacted. In some improve the quality of life for ADF cases, a fee may not be required or may families by providing them with a forum be remitted by Defence. for expressing their views, for reporting Requests under the Act should be sent to: and making recommendations to the CDF, and for influencing policy that affects ADF

Freedom of Information Directorate families. Defence Legal Division Campbell Park Offices (CP2-3-055) Defence Reserves Support Department of Defence Council CANBERRA ACT 2600 The Defence Reserves Support Council Phone: (02) 6266 2200 provides a link between the ADF, Facsimile: (02) 6266 2112 employers and the community from which Email: [email protected] the Reserves are drawn. The council aims to enhance the capability contribution of Applicants seeking access to documents the Reserve to the ADF by assisting may be liable to pay charges at rates Defence in promoting the benefits of prescribed by the Freedom of Information employing Reservists and encouraging (Fees and Charges) Regulations. support for the Reserve by promoting Privacy flexible partnerships with the community in general and with employers in Defence is subject to the Privacy Act 1988 particular. and, when dealing with personal information, it must comply with the Environmental Advisory eleven Information Privacy Principles Committees prescribed in the Act. Environmental Advisory Committees Arrangements for public provide advice on environment and heritage matters relating to Defence participation areas. These areas include Shoalwater Bay Australian Defence Human Training Area, Queensland; Garden Island, Research Ethics Committee Western Australia; Greenbank Training Area and Wide Bay Training Area, The Australian Defence Human Research Queensland; and Mount Bundy Training Ethics Committee’s mission is to promote Area and Bradshaw Field Training Area, and encourage ethical health research in Northern Territory. The committees the military context, with responsibility consist of representatives from Defence, for the review and monitoring of all the local community and business human research in Defence. It is organisations. structured in accordance with the

202 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 6 FREEDOM OF INFORMATION

National Workplace Relations Documents available for Committee purchase by the public The National Workplace Relations Defence has a number of documents Committee, established under the available for purchase including: Defence Collective Agreement 2006–2009, · annual flying safety calendar, deals with a wide range of employment aeronautical maps and charts, matters affecting Defence civilian supplements and planning documents, employees. It provides a forum for and aerial photographs management and union delegates to · defence cataloguing handbooks and consult on current and future Defence information workplace policies and conditions. · documents that are available for Royal Australian Air Force inspection or purchase by the public in Veterans’ Residences Trust accordance with section 9 of the Act, The purpose of the Royal Australian Air that is manuals, instructions and the Force Veterans’ Residences Trust is to like that are used by, or are available provide residences so that qualifying to, Defence staff for making decisions former members of the Royal Australian affecting the public Air Force (RAAF) and their dependants, · draft and final environmental impact in needy circumstances, can be statements (held by, and available accommodated. There are from, the Defence Support Group1) three Trustees: · journals and magazines published by · one trustee is nominated by the Service schools Returned Services League of Australia · manuals that have been cleared for · a second trustee is nominated by the release and sale to the public. These RAAF Association include, for example, the Defence · the third trustee is nominated by the Freedom of Information Manual Chief of Air Force, and may be a (available through the Freedom of currently serving or a former member Information Directorate) of the RAAF. · procurement manuals and guidelines Categories of documents produced by the DMO2 · Service newspapers (available by Documents available as part annual subscription) of a public register & subject to a fee or other charge · tide tables (Australian national tide tables and navigational charts and Documents in this category relate to publications are available for purchase oceanographic data (copies of original either through appointed chart agents survey documents, and hydrographic and or directly from the Hydrographic oceanographic data held by the Navy on Office). computer file).

1. Further information and contact details can be found at www.defence.gov.au/DSG/index.htm 2. Available for purchase in hard copy or through the DMO website at www.defence.gov.au/dmo.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 203 APPENDIX 6 FREEDOM OF INFORMATION

Documents available free of technical reports, technical and charge to the public research press releases and lectures Defence holds a wide range of given at professional, commercial and documentary material that can be public events provided free of charge—and some are · notices to mariners, containing available online. These include: hydrographic advice to correct · academic calendars and prospectuses navigational charts, as well as for Defence educational institutions documents and detailed information about exercises and firings (issued by · academic publications and research the Navy) papers1 · organisational material (functional · a range of booklets and brochures statements, organisation charts and from the Defence Community duty statements) 2 Organisation · pamphlets and brochures on graduate · flying and ground safety publications employment programs and made available by the Air Force scholarships in Defence for APS · general Defence material (pamphlets, employees and APS graduate careers brochures, and posters), and the page on the internet Australian Defence Force Journal · pamphlets, brochures, guides and available on request or at Defence application forms relating to export exhibitions, launches and open days control and obligations imposed through export controls, including the ·the Defence Magazine3 Australian export control list (part of · information on military retirement the Defence and Strategic Goods List) and superannuation schemes · personnel documentation and records, · manuals and guides relating to APS including medical and psychological and ADF pay and conditions, including records (ordinarily only released to the Australian Defence Force the subject of the records or to a third Member's Guide to ADF Pay and party authorised by the subject) Conditions of Service, the Defence · policy documents, such as the Defence Force Pay and Conditions Manual, the Update 2007, Strategy Planning Defence Collective Agreement Framework Handbook, Joint 2006–2009, the Defence Workplace Operations for the 21st Century and 4 Relations Manual , and exempt Force 2020 (these documents can be legislative instruments under the accessed at www.defence.gov.au) Defence Act 1903, including · procurement policy and procedural determinations made under section guides, contract templates and 58B and 58H of the Defence Act 1903 Defence industry statements · material relating to the activities of · recruitment pamphlets, brochures and the DSTO, consisting of brochures and video media, the 'career explorer' booklets, research news, selected

1. Available at www.defence.gov.au/adc. 2. Available at www.defence.gov.au/dco/publications.htm or by email request to [email protected]. 3. Available by subscription or at www.defence.gov.au/defencemagazine. 4. Available at www.defence.gov.au/DPE/PAC/.

204 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 6 FREEDOM OF INFORMATION

computer software program on ADF · accounting records career options, and an internet home · arrangements with other Government page on ADF career options agencies and with state and territory · technical material, including technical governments and agencies details of obsolete and selected · Cabinet documents (including current equipment, unclassified submissions, memoranda, minutes and technical reports and Defence promulgation of decisions) (Australia) Standards ·committee records · transcripts of public seminars · documents setting out conditions of conducted by Defence. service (including documents relating Electronic documents to financial conditions for overseas service) Defence’s internet homepage1 contains material that may be of interest to the · contractual documents, requests for general public, including departmental tender documents and industry study media releases and speeches, statutory reports reports, including Defence annual reports · departmental instructions, circulars and the Defence Portfolio Budget and reference books Statements and Additional Estimates · documents concerning quality Statements2, the Defence Fast Facts assurance booklet, Service-specific information, · guidelines held in electronic form by including Service newspapers, journals, the Directorate of Classified Archival handbooks and academic papers; and Records Review that are used in export control information. determining which matter, if any, Departmental press releases are available contained in classified Defence by email from the press release service by historical records is exempt from subscription. Photos of a Defence nature public access under paragraphs are also freely available from the image 33(1)(a) and (b) of the Archives gallery on the site, but copyright laws Act 1983 . New guidelines are created, apply. Ministerial press releases and or existing ones revised or abolished, speeches are linked to the Defence from time to time website. · documents relating to industrial Other documents matters (including agenda and minutes of meetings of various industrial Defence maintains records in various committees and councils, forms and locations relating to its occupational health and safety functions. Records are retained for committees and policy on industrial varying periods depending on their practices within the department) administrative and historical value and are disposed of in accordance with · intelligence reports standards and practices approved by the · international agreements and National Archives of Australia. Some arrangements held in a register of categories of documents held are: agreements.

1. Found at www.defence.gov.au. 2. These are available at www.defence.gov.au/budget.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 205 APPENDIX 6 FREEDOM OF INFORMATION

· ministerial submissions and briefing Facilities for accessing papers documents · personal documentation (for example, The following areas within Defence recruitment, enlistment and maintain access points at which promotion documents and those information about their activities is relating to medical and psychological available: issues)

· technical publications (relating to the Defence Science and Technology maintenance of ADF material, and Organisation drawings, specifications and standards Director Defence Science Communications relating to ships, aircraft and other Defence Science and Technology equipment in use) Organisation · working papers (internal working Department of Defence papers are maintained throughout the CANBERRA ACT 2600 organisation on a wide range of policy, Phone: (02) 6128 6376 technical and administrative subjects). Ministerial Support and Public Affairs Division Director General Public Affairs Department of Defence CANBERRA ACT 2600 Phone: (02) 6265 2999

Defence Publishing Service ACT/Southern NSW Region Defence Support Group Department of Defence CANBERRA ACT 2600 Phone: (02) 6266 2022

Hydrographic Office Locked Bag 8801 WOLLONGONG NSW 2500 Phone: (02) 4221 8612

Documents that are available for inspection or purchase by the public in accordance with Section 9 of the Freedom of Information Act 1982 are listed in an index available through the National Archives of Australia and through the Defence Freedom of Information Directorate. Arrangements to inspect listed documents, or to purchase copies, may be made by contacting the Freedom of Information Directorate.

206 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 7 Ecologically sustainable development & environmental performance

This appendix reports on Defence’s ecologically sustainable development and environmental performance under section 516A of the Environment Protection and Biodiversity Conservation Act 1999. Defence continued to improve environmental performance through the implementation of its 14 national environmental programs under the Defence Environmental Strategic Plan 2006-2009. SUSTAINABLE MANAGEMENT OF ECOSYSTEMS Land management Defence completed a review of its policy that was affecting endangered flora and guidance to assist the ongoing fauna. After examining a wide range of management of feral animals, weeds, management options, a cull of kangaroos environmental diseases and native animal was undertaken in May 2008. The cull was species on Defence land. undertaken in the most humane manner Defence also continued to implement possible under the guidance of animal routine works associated with bushfire management experts including the RSPCA management and mitigation, soil and was compliant with the Code of conservation, feral animals, weeds and Practice for the Humane Destruction of native animals that can become Kangaroos in the ACT. Defence has acted overabundant. in accordance with its legislative obligations to manage the site in an The former Belconnen Naval Transmitting environmentally sustainable and Station site in the ACT had an responsible manner. unsustainable population of kangaroos

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 207 APPENDIX 7 ECOLOGICALLY SUSTAINABLE DEVELOPMENT & ENVIRONMENTAL PERFORMANCE

Defence commenced and completed Strategy in accordance with its Heritage several sustainability–related studies to Strategy. Significant achievements for the inform the consistent collection and year included the revision and monitoring of environmental data to finalisation of 12 publicly notified support planning, management and use of heritage management plans, further training areas. A pilot study at Cultana integration of heritage considerations into Training Area in South Australia included Defence business processes, and an assessment of the application of continuing support for inclusion of RAAF satellite imagery to assist monitoring of Williams at Point Cook on the National land condition. Heritage List. Interaction with marine & Climate Change aquatic environments Defence continued to implement Defence activities in the marine initiatives in support of the Government’s environment are undertaken in agenda on climate change. A Defence- accordance with the ADF Maritime wide Combat Climate Change awareness Activities Environmental Management initiative was commenced to promote Plan. The plan guides the full range of energy savings across the organisation. activities Defence is likely to undertake in Natural resource the marine environment, including the use of military sonar. management In line with the Government’s Biodiversity conservation commitment towards the use of E10 fuel, Under the Defence Biodiversity Defence has mandated the use of E10 fuel Conservation Program, a range of policies, where possible in Defence fleet cars. processes, surveys and monitoring Defence continued to implement policies initiatives are implemented to conserve and strategies aimed at reducing energy biodiversity values on priority sites, consumption, including continuing including meeting the requirements of membership of the Greenhouse Challenge threat abatement plans and recovery initiative. Progress continued under the plans. Defence Energy Management Strategy, In 2007-08, the Threatened Species including the development and Database was developed to facilitate implementation of site and regional wider access to centralised information energy management plans, audits of on national and state-listed threatened distribution systems and installation of species and ecological communities additional sub-metering, energy occurring on the Defence estate. The monitoring and reporting infrastructure. database assists in informing planning and Roll-out of an electricity sub-metering management strategies for the Defence system commenced during 2007. Sub- estate. A similar Biosecurity Database of meters will be installed at Defence sites pests and weeds was also developed. over a three–year period to allow Heritage management development of performance benchmarks for different facility types and to support Defence continued to promote the energy management improvements. Defence Heritage Toolkit and completed An energy conservation pilot was the Defence Heritage Communications undertaken over a three–month period in

208 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 7 ECOLOGICALLY SUSTAINABLE DEVELOPMENT & ENVIRONMENTAL PERFORMANCE

the Russell 1 Defence building in remediation projects. Defence continued Canberra. A 14.8 per cent saving in energy to participate in the Cooperative Research use was achieved through behavioural Centre for Contamination Assessment and changes, and better aligning settings of Remediation of the Environment, and air conditioning and lighting to building continued formal staff training on use. The pilot will be used to inform other contamination assessment and energy conservation initiatives across the remediation technologies through the Defence Estate. In addition, it is University of South Australia. anticipated that significant energy savings Defence also remained involved in four are to be achieved from the automatic collaborative research projects to provide nightly power down of computers on the access to leading-edge technologies and Defence network, an initiative improve the understanding and cost- commenced in June 2008. effective management of contaminated Water & waste sites in Defence. management The Defence Pollution Prevention Strategy was developed in 2007 to advance Defence continued to implement the Defence’s pollution prevention water management and waste capabilities in regard to managing high minimisation strategies into its business risk activities and priority pollutants processes. Defence actively participated across the estate. In 2007, Defence also in regional water reduction strategies. developed and implemented Defence met its requirements under the Environmental Guidelines for the National Packaging Covenant in October Management of Fire Fighting Aqueous Film 2007. A series of 30 waste audits were Forming Foam Products. undertaken to identify opportunities for improvements in waste management. National Environment Recommendations from the audits are Protection Measures being considered for implementation Defence continues to contribute to the across the Defence Estate as applicable. Minister for the Environment, Heritage Pollution prevention & and the Arts’ Annual Report on the contaminated sites Government’s implementation of National Environment Protection Measures (NEPMs) management and the effectiveness of those NEPMs. Contaminated land on the Defence Estate Defence continues to report under the continued to be managed through the National Pollutant Inventory. implementation of the Defence In consultation with the Department of Contaminated Land Management Strategy. the Environment, Water, Heritage and the The National Contaminated Sites Arts, Defence is developing alternative Program has so far completed initial arrangements for streamlining desktop studies at 67 highest risk sites, implementation of the National Pollutant detailed contamination risk investigations Inventory and Movement of Controlled at 53 sites and managed 40 site Waste NEPMs.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 209 APPENDIX 7 ECOLOGICALLY SUSTAINABLE DEVELOPMENT & ENVIRONMENTAL PERFORMANCE

INFRASTRUCTURE DEVELOPMENT Defence continued to implement its green guide asset development. Defence policy buildings policy for designing energy, covering the construction and operation water and waste efficiencies into new of buildings is provided in the Defence building developments. Defence continues Green Building Requirements Part 1 to serve as a director on the board of the available at www.defence.gov.au/im/ Green Building Council of Australia and policy/green_building/gbrpart1.pdf. has adopted the Green Star rating tool to OZONE-DEPLETING SUBSTANCES & SYNTHETIC GREENHOUSE GASES Defence continues to work closely with objectives, Joint Logistics Command the Department of the Environment, introduced three policies to ensure Water, Heritage and the Arts, and Fire compliance and standardised action. The Protection Association Australia to ensure policies cover the import and export of that all permits, licences and exemptions ODS and SGG, fire protection systems, necessary for the effective management plus refrigeration and air-conditioning of ozone depleting substances (ODS) and systems. These policies set the foundation synthetic greenhouse gases (SGG) are in for enhanced administration of controlled place. To successfully support Defence’s substances within the Defence Estate. ozone layer and climate protection STAKEHOLDER MANAGEMENT Environmental training & awareness Defence continues to develop and deliver Defence continued the annual scheme of environmental training and awareness Environment and Heritage Awards by the initiatives. These included environmental Chief of the Defence Force and the induction programs for personnel using Secretary of Defence. At a ceremony in Defence bases and training areas, September 2007, eight individuals and inclusions in Service courses and teams were recognised for major development of training videos. The achievements in environmental revised Defence Environmental Education management. Strategy has been completed.

210 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 7 ECOLOGICALLY SUSTAINABLE DEVELOPMENT & ENVIRONMENTAL PERFORMANCE

Strategic partnerships Defence continued to demonstrate its and rehabilitation of remnant commitment to responsible vegetation, SA. environmental management and shared · University of Western Australia— best environmental practice information research on tammar wallabies at on a diverse range of issues through Garden Island, Western Australia strategic partnerships with universities, (WA). local community groups, key · University of Western Australia and stakeholders, local governments and non- Murdoch University—monitoring of government organisations. Key little penguins at Fleet Base West, partnerships work during the year WA. included: · Edith Cowan University—monitoring of · University of Canberra and the seagrass in Cockburn Sound at Garden Australian Capital Territory (ACT) Island, WA. Government monitoring of threatened species across the ACT region. · Catchment and natural resource management groups—survey of · Greening Australia and Australian phytophthera dieback at Bindoon National Botanical Gardens collection Training Area (WA). and propagation of threatened flora species seed for revegetation · Western Australian Museum—research programs in the ACT region. at Learmonth Air Weapons Range, WA. · Canberra Ornithological Group—data · Western Australian Water sharing and monitoring of bird species Corporation—stygofauna monitoring in the ACT region. and research on North West Cape regarding water supply at the Defence · University of Melbourne—kangaroo Communications Station at Harold E census and management at Holt and RAAF Learmonth, WA. Puckapunyal, Victoria. · Australian National University—project · University of Newcastle—trial of at Jervis Bay to develop sustainable fertility control methods for eastern fire management practices and to grey kangaroos, ACT. integrate improved biodiversity · University of Melbourne, University of conservation with improved land and New South Wales, CSIRO, RSPCA, ACT asset protection, ACT. Government and the Australian · Yued Indigenous group—heritage Museum—eastern grey kangaroos and rehabilitation of Bullfrog Well area threatened species management in within the Lancelin Training Area WA. the ACT region. · Wetlands International and · Ngunnawal indigenous groups— Queensland Department of Natural indigenous heritage advice and Resources—wetlands and waterways assessments for the Majura Training surveys, Qld. Area and HMAS Harman in the ACT region. · Great Barrier Reef Marine Park Authority—development of a · South Australian Department of the management agreement on Environment and Heritage—collaborative implementation of the Great Barrier research project on natural regeneration

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 211 APPENDIX 7 ECOLOGICALLY SUSTAINABLE DEVELOPMENT & ENVIRONMENTAL PERFORMANCE

Reef Marine Park Strategic · Darwin Region Weeds Advisory Environmental Assessment, Qld. Council—membership to support cross- · Central Queensland University— boundary treatment and reduction of regional sustainable development, risks due to invasive grasses and Qld. subsequent high fire risk species. Involvement includes supporting · University of Queensland—surveys for research programs to map and treat quolls at the Greenbank Training Area, priority invasive species such as grassy Qld. weeds and developing a scientific · University of Queensland, Ipswich, method for mapping and eradication Beaudesert and Logan Shire Councils of grassy weeds in savannah woodland and the RSPCA—horse management in environments, NT. Greenbank Training Area, Qld. · Mornington Wildlife Sanctuary and · Cooperative Research Centre School Australian Wildlife Conservancy— for Environmental Research and enabling access to Bradshaw Field Charles Darwin University (Menzies Training Area for Gouldian finch School of Health and others)— health research, NT. mosquito breeding research in and · Rapid Creek Catchment Area around Robertson Barracks, RAAF Committee—Defence maintains Darwin and Defence Establishment membership to support RAAF Darwin’s Berrimah, NT. placement in the catchment, NT. · Australian Quarantine and Inspection In addition, Defence was involved in the Service—supporting biosecurity – following arrangements: detection of exotic diseases in feral animals (pigs at Mt Bundey Training · Flinders Peak to Greenbank Karawatha Area and Bradshaw Field Training Conservation Partnership. Partners: Area) and plants (Yampi Sound Queensland Environment Protection Training Area), NT. Agency; Brisbane, Ipswich, Logan and Beaudesert Shires, Qld. · Darwin Harbour Catchment Advisory Committee—member of the · State Land Pest Management Ecosystems Monitoring Group that Committee. Committee members: All coordinates monitoring and reporting Queensland State Government activities in the region, including landholding agencies. developing data protocols, making · Multi-tenure Feral Animal data accessible and establishing an Management Working Group. integrated monitoring program and Participants: Queensland Environment reporting system for the Darwin Protection Agency, Queensland Main Harbour Catchment, NT. Roads, Queensland Department of · Victoria River District Conservation Natural Resources, seven Local Shire Association—Gouldian finch Councils, Forestry Plantations monitoring, NT. Queensland. · Katherine District Weeds Advisory · Bremer River Catchment Coordinating Council—membership to support cross- Committee. Members: Ipswich Shire boundary treatment and reduction of Council, industry and landholders, risks due to invasive grasses and Qld. subsequent high fire risk species, NT.

212 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 7 ECOLOGICALLY SUSTAINABLE DEVELOPMENT & ENVIRONMENTAL PERFORMANCE

· Land management projects including Water Minimisation Strategy with bushfire, weeds and feral animals at ACTEW AGL to meet the water Evans Head Air Weapons Range in restriction targets. cooperation with New South Wales · Supporting Hunter-Central Rivers National Parks and Wildlife Service, Catchment Management Authority NSW. with the implementation of erosion · Weeds Working Group. Participants: and salinity control works in the Molonglo Catchment Group, ACT Singleton area, NSW. Government agencies including the · North Sydney/Mosman, Manly Bushfire Land Development Agency, ACT Parks, Management Committee. Committee Conservation and Lands and Research Members: Local NSW Government, and Planning, ACT Rural Landholders Sydney Harbour Federation Trust, NSW and Defence. National Parks and Wildlife Advisory · Stage 3 Water Restrictions in the ACT. Council and Defence. Defence cooperatively developed a BUSINESS PRACTICES Defence Environment & Heritage Panel The panel of specialist environmental and years. The panel undertook heritage consultants, established under a environmental work to the value of $28m three-year contract in February 2004, was from July 2007 to June 2008 as outlined in extended in early 2006 for a further two Table A7.1. Table A7.1 Categories of work for the Defence environment and heritage panel, July 2007 – June 2008

Number of Projects Value ($ '000) Environmental consultancies 76 5,331 Contamination works 70 9,450 Environmental management system 15 518 Environmental planning 17 892 Monitoring of environmental values 32 4,402 Environmental audits 11 422 Asbestos removal and management 4 175 Heritage works 69 2,212 Environmental works 9 1,172 Works management 4 1,063 Other 21 1,051 Impact Assessment 39 1,445 Statutory Review/Investigations Tot a l 367 28,133

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 213 APPENDIX 7 ECOLOGICALLY SUSTAINABLE DEVELOPMENT & ENVIRONMENTAL PERFORMANCE

Incident reporting There are a number of environmental be reported to the Department of the incident reporting processes in place as Environment, Water, Heritage and the part of the Defence environmental Arts for further investigation under the management system. Statistics are Environment Protection and Biodiversity collated annually from these processes. Conservation Act. This concerned the The number of incidents reported in construction of an earthen storm water 2007–08 is shown in Tabl e A7.2 . As was the diversion bank on Defence-owned land by case in 2006–07, the use of systematic the Capital Airport Group in the ACT, approaches to incident reporting resulting in impacts on areas of Natural continues to result in elevated levels of Temperate Grassland listed under the incident reporting relative to previous Act. Department of the Environment, years. Water, Heritage and the Arts have Only one incident in 2007–08 was followed up directly with the Capital considered to be sufficiently significant to Airport Group on the issue. Table A7.2 Environmental incidents reported, July 2007 – June 2008 Category Number of incidents Emissions Disturbance of soil due to clearing and contamination by fire, 16 flood or explosion or other activity outside of environmental approval Accidental release, leaks and spills 138 Intentional release 3 Interaction with flora and fauna 31 Interaction with heritage 6 Waste 39 Management (faults in procedures, processes etc) 14 Resource consumption - Run Off - Other 1 Tot a l 248 Defence referrals under the Environment Protection and Biodiversity Conservation Act 1999 Under the Act, Defence is required to only proceed with the approval of the consult with the Department of the Minister for the Environment, Heritage Environment, Water, Heritage and the and the Arts In 2007-08, Defence formally Arts to ensure that Defence activities that referred three actions for assessment and will have, or are likely to have, a approval under the Act, as shown in Table significant impact on the environment A7.3.

214 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 7 ECOLOGICALLY SUSTAINABLE DEVELOPMENT & ENVIRONMENTAL PERFORMANCE

Table A7.3 Defence actions referred under the Environment Protection and Biodiversity Conservation Act 1999, 2007-08 Referral title Referral Date referred Referral decision Current status number Sale of surplus land at 2007/3567 25 July 2007 Approval required Assessment Ingleburn, NSW completed Awaiting approval decision Transfer of Defence 2007/3756 4 October 2007 Approval required Assessment land at Majura, ACT completed Approved subject to conditions Demolition of four 2008/4251 5 June 2008 Approval required Assessment in Bellman hangars at progress Point Cook, VIC Defence environmental management system Defence continued to implement the Management Plan, and continues to Defence Environmental Management maintain a comprehensive pollution System at sites across its estate including and environmental incident reporting bases, training areas and offices. Under system for application to the fleet at the system, Defence implements a sea. risk-based approach to the assessment · The Army continued to implement and management of potential adverse environmental requirements as part of impacts to environment. its capability development, training In response to 14 management reviews and operations. The use of simulators conducted in 2006-07, environmental continues to assist in reducing fuel action plans incorporating 17 sites were usage and damage to training areas. developed to facilitate improvements in · The Air Force completed testing of the environmental management across the draft Air Activities Environmental estate. These action plans will commence Management Plan including related in 2008-09. handbooks and procedure cards. The Defence maintained certification to the plan and guidance materials will International Standards Organization inform Air Force planning and further Standard 14001:2004 Environmental assist in minimising adverse impacts of Management Systems for its air activities on the environment. An environmental management system environmental assessment of RAAF processes and procedures at Puckapunyal training in the Western Airspace of Military Area, Victoria and RAAF New South Wales was completed to Townsville, Queensland. assist the planning of air activities in Further progress was made in this area. implementing the Defence EMS in Groups · The DSTO introduced environmental and Services, planning and business awareness induction briefings for all processes. In particular: new staff and also commenced a · The Navy has commenced developing project to identify a set of relevant additional ship maintenance–alongside metrics that can be used to both procedures for inclusion in the ADF measure and target reductions in the Maritime Activities Environmental DSTO environmental footprint.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 215 APPENDIX 7 ECOLOGICALLY SUSTAINABLE DEVELOPMENT & ENVIRONMENTAL PERFORMANCE

· The Joint Logistics Command implementation of the Defence EMS. completed environmental baseline The Joint Logistics Command is also surveys for its operational sites and progressively strengthening undertook an evaluation of environmental requirements in environmental aspects and impacts as storage and distribution, maintenance part of the Command’s and explosive ordnance contracts. Environmental impact assessment Defence routinely undertakes Defence activities such as large–scale environmental impact assessments to training, major infrastructure works, the ensure that the effects of Defence introduction of major equipment and any activities on the environment are activity likely to affect important appropriately considered and managed. environmental values require a higher The level of environmental impact level of environmental impact assessment conducted for a specific assessment. This may involve literature Defence activity depends upon the degree reviews, field surveys, impact prediction of environmental risk posed by the (modelling), evaluation of alternatives activity. and identification of impact mitigation After taking into account the values and measures. For some projects Defence resilience of the receiving environment, seeks input from state and local Defence activities that pose only a low governments, the local community and risk to the environment are typically the general public. controlled through existing management Environmental assessments and approvals practices such as standard operating were issued for 15 important Defence procedures, standing orders, infrastructure and capability related environmental management plans and projects in 2007-08. An example included environmental clearance certificates. the comprehensive environmental impact Examples include routine individual and assessment of the $624m Hardened and small unit training, minor construction Networked Army Facilities Project at works such as refurbishments and the use Edinburgh Defence Precinct in South of some new or upgraded equipment. Australia. Preliminary environmental advice or studies were completed on a further 248 projects.

216 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 7 ECOLOGICALLY SUSTAINABLE DEVELOPMENT & ENVIRONMENTAL PERFORMANCE

ADMINISTRATION OF COMMONWEALTH POLICY ON THE MANAGEMENT OF LAND AFFECTED BY UNEXPLODED ORDNANCE Defence provides advice to federal and in the website by July 2007, and work to state authorities on the policy, technical add information on locations and and commercial aspects of unexploded descriptions of non-Commonwealth ordnance management in Australia and its owned or controlled registered sites in territories. Where appropriate, this that state continued during the year. advice extends to local government Information on Western Australia is authorities and individual land holders. expected to be complete by October Relationships established with 2008. administrations in the worst-affected The Defence unexploded ordnance panel, states – Queensland, New South Wales, established in 2001 and re-tendered in Western Australia and the Northern 2005, comprises four specialist Territory – were maintained in 2007-08 commercial contractors and consultants. and continue to be effective. On 30 June 2008, the three-year term of The national unexploded ordnance office the agreement expired and Defence has in Canberra undertook a major revision exercised its option to extend the and upgrade of its state-based geographic agreement for a period of 12 months. The information system detailing sites in panel mechanism continues to provide an Australia that are confirmed as, or efficient and effective means to deliver suspected of being, contaminated by Defence-sponsored investigative surveys unexploded ordnance. In parallel with this and remediation projects. database, Defence continues to develop To increase public awareness of its unexploded ordnance web site which unexploded ordnance hazards, Defence provides information to the public on again placed full-page unexploded safety matters.1 The site also offers a ordnance warnings in police child safety facility for members of the public to handbooks in all states and territories. determine whether or not individual land The national unexploded ordnance office titles of interest are potentially also conducted a site-specific public contaminated. In the event that a title is information and warning initiative in potentially affected, appropriate advice cooperation with Swan Hill Rural City is offered on the website. The website Council in Victoria in May and June 2008. also provides email contact details to the There were no reported unexploded national office in order that timely and ordnance-related deaths or injuries to appropriate responses to stakeholders’ members of the Australian public during queries can be provided. Western 2007-08. Australia was the only state not included

1. More information can be found at www.defence.gov.au/uxo

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 217 APPENDIX 8 Legal expenses

Defence Legal Division provides a broad spectrum of legal services. Service and civilian lawyers provide legal advice, legal policy advice and legal training, which covers operations and international law, aspects of military justice, the development of Defence policies and legislation, advice in relation to Defence-sponsored international agreements and arrangements, freedom of information and historical records access matters, litigation management, and special financial claims. In addition to headquarters staff located in Canberra, many military legal officers remain outposted to provide direct legal support to ADF commanders and other regional Defence elements.

Since 1 June 2006, the Legal Division has include salaries for military and civilian also managed the use of external legal staff, divisional operating costs and services. military justice reimbursements. External Expenditure on internal and external legal expenses are professional fees, services in 2007–08 is shown in the disbursements and legal assistance at following tables. Internal expenses Commonwealth expense. LEGAL SERVICES PANELS New initiatives for the management and who are nominated across one or more accountability of Defence’s spending on areas of expertise. The engagement of external legal services were implemented these law firms to provide specific legal on 1 June 2006, to coincide with the start services to Defence is being managed in of Defence’s new Legal Services Panels. accordance with revised policy and The new panel arrangement comprises 16 procedures, and uses new information areas of legal expertise. The panel systems. arrangements now comprise 12 law firms Table A8.1 Estimated expenditure on internal and external legal services 2006–07 and 2007–08[1]

Type of Legal Expenditure 2006-07[2] 2007-08 $m $m Internal 28.4 30.2 External 25.9 26.4 Tot a l 54.3 56.6

NOTES 1. These figures exclude DMO legal expenses, which are reported in Volume 2 of this report. 2. Based on the method used to calculate the figure for 2007-08 legal expenditure, the figure for external legal expenditure reported in the Defence Annual Report 2006-07 was incorrect (refer to correction on p237).

218 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 8 LEGAL EXPENSES

Table A8.2 Estimated cost breakdown of internal legal expenses

Items 2006-07 2007-08[1] $m $m Salaries for military lawyers 10.7 12.3 Salaries for civilian staff 9.8 10.1 ADF Reserve legal officers 5.1 4.7 Operating costs of the Division 2.2 2.5 Military justice reimbursements 0.6 0.6 Tot a l 28.4 30.2

NOTE 1. Unlike the figure reported for 2006-07 for internal legal expenses, the figure reported for 2007-08 does not include expenses incurred by the Office of the Judge Advocate General and the Director of Military Prosecutions, as they are statutory organisations, and spending by these entities is no longer managed through the Defence Legal Division.

Table A8.3 Estimated cost breakdown of external legal expenses

Items 2006-07[1] 2007-08 $m $m Professional fees—Defence legal panel 21.3 20.4 Disbursements 4.2 4.4 Legal expenses—other 0.4 Legal Assistance at Commonwealth Expense[2] 1.6 Tot a l 25.9 26.4

NOTES 1. Based on the method used to calculate the figures for 2007-08 external legal expenditure, the figure for professional fees reported in the Defence Annual Report 2006-07 was incorrect (refer to correction on p237). 2. This category has not been separately identified in previous financial years.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 219 APPENDIX 9 Discretionary grants

Discretionary grants are payments made to organisations or individuals at the discretion of the Minister. All discretionary grants made by Defence are paid from departmental rather than administered funds. Grant recipients must satisfy eligibility and reporting requirements and may be subject to certain conditions in return for the grants. Table A9.1 Grants approved, 2006-07 and 2007-08 Grant Program 2006-07 2007-08 $’000 $’000 Army Military History Research Grants Scheme 71 55 Defence Family Support Funding Program 869 911 Australian Member Committee of the Council for Security - 95[1] Cooperation in the Asia-Pacific Kokoda Foundation - 102 Livingstone Shire Council 1,649 1,895 International Institute for Strategic Studies for the Asia Seminar - 81[2] Series International Institute for Strategic Studies for the Shangri-La 64 121[3] Dialogue Townsville Maritime Historical Society Inc - 200 Murdoch University - 15 Operation Aussies Home 63 - Royal United Services Institute of Australia 83 86 Sherwood Indooroopilly RSL 31 - Submarine Institute of Australia 173 208 Tot a l 3003 3769

NOTES 1. This figure consists of a $40,000 grant paid in December 2007 for general administration costs and a $55,000 grant paid in June 2008 for general administration costs and publications costs for the CSCAP Regional Security Outlook. 2. This figure consists of a $39,000 grant for the 2008 Asia Seminar Series and a $42,000 grant for the 2009 Asia Seminar Series. 3. This figure consists of a $53,000 grant for the 2008 Shangri-La Dialogue and a $68,000 grant for the 2009 Shangri-La Dialogue. Army Military History Research Grants Scheme This scheme supports and encourages nation. Recipients of grants and research into the role and involvement of expenditure under the scheme in 2007-08 the Army in the development of the are shown in Table A9.2.

220 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 9 DISCRETIONARY GRANTS

Table A9.2 Army Military History Research Grants Scheme Expenditure 2007-08 Grantee Title of research Amount of Grant ($) Australian Capital Territory Dr Craig Stockings Heirs to Anzac: Re-evaluating the Battle of 10,000 Bardia January 1941 Mr James Hurst The Gallipoli Landing - a Battalion Perspective 3,500 and Re-analysis Mr Mark Foxe The Big Raid: The Story of the 10th Composite 2,970 Raiding Battalion Total Australian Capital Territory 16,470 New South Wales Mr Douglas Hunter The Albury Battery: Artillery in Albury 1903 - 660 1940 Mr Phillip Bradley The Salamaua Campaign 8,000 Total New South Wales 8,660 Queensland Professor Linda Shields Dame Maud McCarthy and her influence on 3,000 Australian Military Nursing Total Queensland 3,000 South Australia Associate Professor Peter Monteath Australian POWs in German Captivity 1941-45 8,000 Dr Julie-Ann Ellis Deaf to the Call: Why and Where Early 4,000 Recruitment Failed in the First World War Total South Australia 12,000 Victoria Mr Mark Johnston The Proud 6th: An Illustrated History of the 1,320 6th Australian Division, 1939-45 Tot a l Vi c t or i a 1,320 Western Australia Associate Professor Michael Sturma Australian Commandos on US Submarines 1,000 Mr Jeffrey Hatwell The 4th Australian Division in the Great War 3,000 Ms Jenny Mills A Goldfields Doctor Goes to War - Major 2,372 General George Walter Barber Total Western Australia 6,372 International Dr Danny Dawson (UK) Insufficient Support - The Australian Army's 7,500 Treatment of WWI Amputees Total International 7,500 Tot a l 55,322

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 221 APPENDIX 9 DISCRETIONARY GRANTS

Defence Family Support Funding Program The Defence Family Support Funding composed of, or benefiting, Defence Program provides funds to support families. Net grant expenditure on the projects and services initiated by Defence Defence Family Support Funding program families. The program is also available to in 2007-08 is summarised in Table A9.3. existing groups in the community Table A9.3 Defence Family Support Funding Program direct grants expenditure 2007-08 Organisation Amount of grant ($) Australian Capital Territory Duntroon Community Centre Inc. 37,973 Gungahlin Defence Families Playgroup 2,089 Total Australian Capital Territory 40,062 New South Wales Banksia House Interest Group 7,075 Shoalhaven Defence Families Association Inc. 11,435 Waratah Interest Group Inc. 4,371 Anklebiters Playgroup 1,818 Kissingpoint Cottage 30,073 Defence Special Needs Support Group (Williamtown) 1,479 RAAF Base Williamtown Umbrella Support Group Inc. 10,389 Williamtown RAAF Playgroup 1,662 Forest Hill Defence Community Group Inc 8,395 RAAF Wagga Wagga Playgroup 1,535 Wagga Wagga Defence Newsletter 4,961 Total New South Wales 83,193 Northern Territory Creative Craft Club 1,526 Tindal Community Times 2,337 Tindal Playgroup 1,008 Billeroy Road Community Centre Inc. 36,477 Larrakeyah Neighbourhood House Inc. 63,006 North Australia Area Family Support Committee Inc. 51,246 Robertson Barracks Family Group Inc. 9,279 The Top Ender Tri-Services Newsletter Inc. 47,834 Total Northern Territory 212,713 Queensland Defence Groups in Gallipoli 11,053 Pine Rivers Family Association Inc. 846 Kokoda Barracks Families Association 8,072 Toowoomba Defence Families Support Association Inc. 27,245 Tri-Service Defence Families Support Association Inc. 29,600 Tropical North Family Centre Inc. 41,405 Defence Community and Recreation Centre 46,383

222 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 9 DISCRETIONARY GRANTS

Table A9.3 Defence Family Support Funding Program direct grants expenditure 2007-08 Total Queensland 164,604 South Australia Port Moresby Australian Defence Families Club 9,437 Woodside Defence Families Association 25,901 Edinburgh Community Centre 4,320 Total South Australia 39,658 Tasmania Dowsing Point Community Centre Inc. 25,030 Tot a l Ta s ma n i a 25,030 Victoria Cerberus Cottage Family and Friends Inc. 23,154 East Sale Family Group Inc. 4,956 Bandiana Neighbourhood House Inc. 16,627 Necana Association Inc. 9,971 Mactier Community Centre 11,036 Defence Special Needs Support Group (Melbourne West) 2,850 Defence Special Needs Support Group (National) 35,760 Werribee Defence Community House Inc. 51,780 Puckapunyal & District Neighbourhood Centre Inc. 40,692 Puckapunyal Kindergarten Association Inc. 22,540 Tot a l Vi c t or i a 219,366 Western Australia Marilla House Community Centre Inc. 30,095 Karrakatta Community House 39,855 SASR Auxiliary 41,162 Pilbara Regiment Family Group 7,680 Pearce Community Toy Library and Social Group Inc. 1,597 Total Western Australia 120,389 International Butterworth Support Group (Malaysia) 6,056 Total International 6,056 Tot a l 911,071 Table A9.4 Defence Family Support Funding Program seeding grants expenditure 2007-08 Organisation Amount of grant ($)

Northern Territory Billeroy Road Community Centre Inc. 21,791 Total Northern Territory 21,791 Victoria Cerberus Cottage Family and Friends Inc. 3,771 Puckapunyal Little Tackers Playgroup 4,880 Tot a l Vi c t or i a 8,651 Tot a l 30,442

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 223 APPENDIX 9 DISCRETIONARY GRANTS

Australian Member representing Australian speakers and Committee of the Council perspectives. A grant of $42,000 was also made for the 2009 Asia Seminar series. for Security Cooperation This grant was approved after the tabling in the Asia-Pacific of Portfolio Additional Estimates Two grants, one of $40,000 and one of Statements 2007-08. $55,000, were made to the Australian International Institute for Member Committee of the Council for Security Cooperation in the Asia-Pacific Strategic Studies – (Aus-CSCAP). Aus-CSCAP seeks to Shangri-La Dialogue facilitate and promote dialogue on A grant of $53,000 was paid as a security issues in the Asia-Pacific and contribution to the overall cost of the provides a forum in which Defence 2008 Shangri-La Dialogue, a key event for personnel can informally discuss issues defence and security diplomacy in the with a range of experts from academic, Asia-Pacific region. The dialogue provides diplomatic and governmental an opportunity for regional states’ backgrounds. defence establishments to exchange Kokoda Foundation views on the security challenges facing the region. Another grant of $68,500 was A grant of $102,000 was made to the paid for the 2009 Shangri-La Dialogue. Kokoda Foundation to foster research and innovative thinking on Australia’s future Townsville Maritime security challenges. The Kokoda Historical Society Foundation is a not-for-profit organisation A grant of $200,000 was made to the that focuses on issues relating to national Townsville Maritime Historical Society for security and whole-of-nation responses to the preservation and display of the crises and threats. Fremantle class patrol boat, ex-HMAS Livingstone Shire Council Townsville. The boat was gifted to the City of Townsville for permanent display The Livingstone Shire Council received at the Maritime Museum of Townsville. funding assistance to upgrade and improve access roads to the Shoalwater Murdoch University Bay Training Area. These funds will assist A grant of $15,000 was made to Murdoch in sustaining the training area and enable University for its public lecture series continued safe access to Shoalwater Bay ‘Emerging Security Threats in the Asia- for training purposes. Grants to the Pacific’. The lecture series was organised amount of $1.895m were paid in 2007-08. by the Security, Terrorism and Counter International Institute for Terrorism Programme and Asia Research Strategic Studies – Asia Centre at Murdoch University. The grant from Defence was to fund airfares, Seminar Series accommodation and meals for two A grant of $39,000 was made to the Australian and two international speakers. International Institute of Strategic Studies This grant was approved after the tabling for its 2008 Asia Seminar series which of Portfolio Additional Estimates aims to enrich regional debate on defence Statements 2007-08. and security, with a specific intention of

224 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 9 DISCRETIONARY GRANTS

Royal United Services Submarine Institute of Institute of Australia Australia A grant of $86,000 was made to the Royal A grant of $208,500 was provided to the United Services Institute of Australia to Submarine Institute of Australia to help assist in promoting the discussion of reserve the memory of World War I national security and defence matters, submarine HMAS AE2 in the Sea of and improving public awareness and Marmara. Ministerial approval was understanding of such matters. The provided in August 2006 for a grant of Institute addresses strategic, defence and $388,500 to support the institute until national security issues through its 30 June 2008, with the final payment of program of international seminars, $208,500 to be made in 2007-08. ongoing lectures in all states and territories, and publication of a national journal. The grant also provides continuing support for the Institute’s national secretariat.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 225 APPENDIX 10 Contracts & consultants

The DMO develops contracting policy and advice on behalf of Defence. Further discussion of contracting information, such as Auditor-General access to contractor sites, is discussed in Volume 2 of this report. CONTRACTS Contracts exempt from publication on AusTender In 2007–08, Defence reported a total of 92 contracts, standing offers or variations thereto, with a total value of $89.95m, which were subject to an exemption under the Freedom of Information Act 1982. CONSULTANCIES Defence engages consultants where it During 2007-08, Defence entered into lacks specialist expertise or when 1,214 new consultancy contracts involving independent research and assessment are total actual expenditure of $50.7m1. In required. The process for selecting addition, 173 ongoing consultancy consultants is consistent with Defence’s contracts were active during 2007-08, procurement policies and the which incurred expenditure of $17.3m. Commonwealth Procurement Guidelines. Information on expenditure on contracts and consultancies is available on the AusTender website at www.tenders.gov.au. Table A10.1 Total expenditure on consulting contracts 2005-06 to 2007-08 2005-06 2006-07 2007-08 $43.6m $47.3m $68.0m

1. Excludes DMO contracts. Information on DMO contracts can be found in Volume 2 of this report.

226 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 10 CONTRACTS & CONSULTANTS

Table A10.2 Summary by Group of consultancies let with a total contract value of $10,000 (including GST) or more 2007-08 Group Number of Total contract contracts let value ($) Office of Secretary and Chief of the Defence Force 24 2,379,201 Vice Chief of the Defence Force Group 23 7,480,978 Joint Operations Command 7 328,494 Navy 1 17,382 Army 3 119,400 Air Force 2 40,790 Capability Development Group 1 157,989 Chief Finance Officer Group 17 5,708,237 Chief Information Officer Group 44 8,651,559 Defence Science and Technology Organisation 6 427,926 Defence Support Group 605 51,338,075 Intelligence, Security and International Policy Group 22 1,438,239 People Strategies and Policy Group 33 3,816,601 Tot a l 788 81,904,871 ADVERTISING & MARKET RESEARCH Particulars of amounts relating to organisations paid. Particulars of advertising and market research paid by, payments less than $10,500 (including or on behalf of, Defence during 2007–08 GST) are not included. Advertising and are shown in the following tables, market research information for the DMO including details of the persons or is available in Volume 2 of this report. Table A10.3 Total advertising and market research expenditure by type of agency

2005-06 2006-07 2007-08 ($) ($) ($) Advertising 1,498,316 8,023,058 6,627,677 Market Research 706,844 1,096,037 1,340,252 Polling 23,035 – – Direct Mail – – 81,652 Media Advertising 29,455,053 25,810,444 35,249,329 Tot a l 31,683,248 34,929,539 43,298,910

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 227 APPENDIX 10 CONTRACTS & CONSULTANTS

Table A10.4 Total advertising and market research expenditure by Group 2005-06 2006-07 2007-08 ($) ($) ($) Office of the Secretary and Chief of the Defence 96,089 – 166,063 Force Group(1) Vice Chief of the Defence Force Group(2) 301,205 131,278 1,466,167(3) Joint Operations Command(4) – 22,747 51,631 Navy 411,385 675,279 396,950 Army 226,082 334,319 169,071 Air Force 291,182 323,085 417,846 Capability Development Group 16,094 – – Intelligence, Security and International Policy Group 1,588,802 1,564,418 969,749 Chief Finance Officer Group(5) 43,889 – 28,783 Chief Information Officer Group 73,996 169,854 190,973 Defence Science and Technology Organisation 605,043 728,744 345,373 People Strategies and Policy Group(6) 25,805,113 29,171,771 37,153,167 Defence Support Group 2,224,368 1,808,044 1,943,137 Tot a l 31,683,248 34,929,539 43,298,910

NOTES 1. Office of the Secretary/Chief of the Defence Force Group now includes Strategy, Coordination and Governance Executive and Inspector General Executive, which were reported separately last year. Historical figures have been amended to reflect the change. 2. Vice Chief of the Defence Force Group now incorporates Joint Logistics Command and Joint Education, Training and Warfare Command, which were reported separately last year. The historical figure has been amended to incorporate Joint Logistics Command. Joint Education, Training and Warfare Command reported previously under 'Personnel Executive' and 'Vice Chief of the Defence Force Executive'. 3. The increase in expenditure can be attributed to an advertising campaign by Reserve and Employer Support Division. The campaign was designed to promote the benefits of Reserve service to employers, potential employers of Reservists and the community. The 2006-07 funding rolled over into 2007-08 and that, together with the planned 2007-08 expenditure, increased the advertising and market research reported expenditure by $1,056,485. 4. Joint Operations Command was previously reported under the Vice Chief of the Defence Force Group. Historical data for 2006-07 has been extrapolated from the Vice Chief of the Defence Force Group 2006-07 total. 5. Previously reported as ‘Finance Executive’. 6. Previously reported as ‘Personnel Executive’.

228 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 10 CONTRACTS & CONSULTANTS

Table A10.5 Particulars of advertising and market research payments by Group 2007-08 Purpose ($) Office of the Secretary and Chief of the Defence Force Group Media Advertising HMA Blaze Pty Ltd 64,413 Recruitment advertising — Civilian HMA Blaze Pty Ltd 44,088 Public Notices HMA Blaze Pty Ltd 33,372 Tender notices The Weekend Australian 24,189 Recruitment advertising — Civilian Total Office of the Secretary/Chief of 166,063 the Defence Force Group Vice Chief of the Defence Force Group Advertising HMA Blaze Pty Ltd 314,929 Recruitment advertising — Civilian George Patterson Y & R Pty Ltd 174,818 Resizing & copy changes to existing advertising suite Media Advertising Universal McCann Australia 906,570 Advertisement placements including dissemination fees Direct Mail George Patterson Y & R Pty Ltd 69,850 Total costs for pilot phase of Direct Marketing campaign Total Vice Chief of the Defence Force 1,466,167 Group Joint Operations Command Media Advertising HMA Blaze Pty Ltd 51,631 Recruitment advertising — Civilian Total Joint Operations Command 51,631 Navy Advertising HMA Blaze Pty Ltd 177,449 Recruitment advertising — Civilian HMA Blaze Pty Ltd 15,295 Advertising — Navy Day Sensis Pty Ltd 10,970 Advertising — Magazines Universal McCann Australia 40,181 Advertising — Fleet Air Arm Museum Universal McCann Australia 120,819 Advertising — RAN Heritage Collection Paula M Promotions 17,398 Advertising — Promotional Merchandise Spatchurst Design Associates Pty Ltd 14,837 Advertising — Fleet Air Arm Museum & RAN Heritage Collection Tot a l Na v y 396,950 Army Media Advertising The Canberra Times 10,661 Recruitment advertising — Civilian The Weekend Australian 45,489 Recruitment advertising — Civilian HMA Blaze Pty Ltd 57,608 Recruitment advertising — Civilian Army News 29,112 Recruitment advertising — Military 13,044 Recruitment advertising — Military

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 229 APPENDIX 10 CONTRACTS & CONSULTANTS

Table A10.5 Particulars of advertising and market research payments by Group Air Force News 13,158 Recruitment advertising — Military Total Army 169,072 Air Force Advertising HMA Blaze Pty Ltd 348,051 Recruitment advertising — Civilian and Military Media Advertising Carrington Publishing 10,800 Promotion of the RAAF Museum Fairfax Radio Network 38,995 Promotion of various air exhibitions Network Outdoor Pty Ltd 20,000 Promotion of the RAAF Edinburgh Air Show Total Air Force 417,846 Intelligence, Security and International Policy Group Advertising Expression-s 11,217 Promotional products for DIGO Intelligence Development Program Paddywack 11,184 Promotional Products for Career Fairs Niche Concepts 35,072 Design work for corporate branding Media Advertising HMA Blaze Pty Ltd 912,276 Recruitment advertising — General Total Intelligence, Security and 969,749 International Policy Group Chief Finance Officer Group Media Advertising Canberra Times 28,783 Recruitment advertising — Civilian Total Chief Finance Officer Group 28,783 Chief Information Officer Group Advertising HMA Blaze Pty Ltd 190,973 Recruitment Advertising — Civilian Total Chief Information Officer Group 190,973 Defence Science and Technology Organisation Media Advertising HMA Blaze Pty Ltd 246,687 Recruitment advertising — Civilian HMA Blaze Pty Ltd 60,000 Corporate promotion to external audiences HMA Blaze Pty Ltd 11,476 Capability & Technology Demonstrator Program advertising Yaffa Publishing Group Pty Ltd 27,210 Corporate promotion to external audiences Total Defence Science and Technology 345,373 Organisation People Strategies and Policy Group Advertising EOC Group Pty LTD 185,937 Recruitment advertising — Military George Patterson Y & R Pty Ltd 1,939,378 Recruitment advertising — Military LAM Agency Pty Ltd 17,531 Recruitment advertising — Military Visual Jazz PTY LTD 2,565,149 Recruitment advertising — Military Market Research

230 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 10 CONTRACTS & CONSULTANTS

Table A10.5 Particulars of advertising and market research payments by Group Blue Moon Research and Planning Pty 201,500 Army Officer advertising research, Ltd concept testing & exploratory advertising ECA International Pty Ltd 48,171 Overseas Cost of Living indices & Hardship Allowances rates, & cost of living and hardship international surveys. George Patterson Y & R Pty Ltd 99,800 Multicultural Target Market Research International Consultants Centre 13,053 Administration Survey of Overseas Posts for the Overseas Conditions of Service Policy & Administration Review KPMG Corporate Finance (Australia) 39,000 Advice on the Australian economy and housing industry, and costing advice on strategic planning scenarios Open Mind Research Group Pty Ltd 314,014 Qualitative research to maximise ADF recruitment targets Open Mind Research Group Pty Ltd 116,454 Market Research — Perception of Cadets & barriers to joining Woolcott Research Pty Ltd 508,260 Qualitative research to maximise ADF recruitment targets Direct Mail CanPrint Communications 11,802 Recruitment advertising — Military Media Advertising Graduate Careers Australia 22,561 Recruitment advertising — Military HMA Blaze Pty Ltd 3,257,300 Recruitment advertising — Military HMA Blaze Pty Ltd 120,436 Recruitment advertising — Civilian Unimail Pty Ltd 11,050 Recruitment advertising — Military Universal McCann Australia 27,666,903 Recruitment advertising — Military Westfield Shopping Centre 14,867 Recruitment advertising — Military Total People Strategies and Policy 37,153,167 Group Defence Support Group Advertising Federal Capital Press 14,433 Public Sector Management Program HMA Blaze Pty Ltd 28,394 Recruitment advertising — Civilian — Regional Health HMA Blaze Pty Ltd 227,277 Australian Defence Medal advertising HMA Blaze Pty Ltd 86,867 Request for Tender Health Services Reed Personnel Services 26,312 Public Sector Management Program SCS Club Services 12,571 Alcohol, Tobacco & Other Drugs Service promotional advertising Unimall 15,200 Recruitment Advertising — Graduate Development Program Walsh Media Pty Ltd 25,434 Child safety handbooks for schools on unexploded ordnance Media Advertising Australian Public Service Commission 344,123 Civilian recruitment advertising — ACT/SNSW Brisbane Courier Mail 14,506 Recruitment advertising — Civilian The Canberra Times 28,088 Recruitment advertising — Civilian

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 231 APPENDIX 10 CONTRACTS & CONSULTANTS

Table A10.5 Particulars of advertising and market research payments by Group Colliers International 30,975 Advertising for the sale of surplus property HMA Blaze Pty Ltd 358,638 Recruitment advertising — Civilian HMA Blaze Pty Ltd 149,153 Recruitment advertising — Civilian — ACT/Southern NSW region HMA Blaze Pty Ltd 28,673 Recruitment advertising — Civilian — Central Northern NSW region HMA Blaze Pty Ltd 82,400 Recruitment advertising — Civilian — Sydney Central region HMA Blaze Pty Ltd 23,086 Recruitment advertising — Civilian — Southern QLD region HMA Blaze Pty Ltd 34,374 Recruitment advertising — Civilian — Southern Victoria region HMA Blaze Pty Ltd 119,000 Recruitment advertising — Civilian — WA region HMA Blaze Pty Ltd 92,352 Recruitment advertising — Civilian — Sydney West/South region HMA Blaze Pty Ltd 32,684 Regional public notices John Kontek Real Estate 12,592 Advertising for the sale of surplus property Jones Lang Lasalle (NSW Pty Ltd) 45,900 Advertising for the sale of surplus property My Career 11,317 Recruitment advertising — Civilian The Weekend Australia 73,818 Recruitment advertising — Civilian The West Australian 11,393 Recruitment advertising — Civilian Westwood First National Real Estate 13,577 Advertising for the sale of surplus property Total Defence Support Group 1,943,137

232 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 11 Annual report on the administration & operation of the Defence Force (Home Loans Assistance) Act 1990

The Defence HomeOwner Scheme is covered by the Defence Force (Home Loans Assistance) Act 1990. Section 39 of the Act requires that an annual report be prepared for the Minister on the administration and operation of the Act. The annual report is set out below. The Defence Home Ownership Assistance Description Scheme is scheduled for implementation The Defence HomeOwner Scheme is a on 1 July 2008. To support the Government initiative that provides a implementation of the scheme and to subsidy on the interest payable on a home protect the entitlements of ADF loan for members of the ADF. The scheme members, it was necessary to extend the is open to permanent ADF members who existing contractual arrangement with the enlisted on or after 15 May 1985 and to National Australia Bank, as the sole those permanent ADF members who Defence HomeOwner Scheme loan elected to revoke their entitlement under provider, to 30 June 2008. the Defence Service Homes Scheme in Objectives favour of a Defence HomeOwner entitlement. Reserve and Emergency The objectives of the Defence Force personnel who provide efficient HomeOwner Scheme are to attract and part-time service are also eligible for retain ADF personnel, to encourage home assistance. ownership during service as a cost- effective alternative to rental assistance, The benefits are provided under an and to assist in the reintegration of ADF agreement between the National personnel into the community on return Australia Bank and the Commonwealth. to civilian life. Interest subsidy is paid on loans between $10,000 and $80,000. Spouses who are both members of the ADF can apply for a combined subsidised loan of up to

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 233 APPENDIX 11 ANNUAL REPORT ON THE ADMINISTRATION & OPERATION OF THE DEFENCE FORCE (HOME LOANS ASSISTANCE) ACT 1990

$160,000. The subsidy amount is processed. The total number of approved calculated at 40 per cent of the average loans current as at 30 June 2008 was monthly interest. 6,272. With the expected introduction of Providing a person has a period of the new assistance scheme from 1 July entitlement, the subsidised loans can be 2008, there was a significant decline in transferred from one home to another applications for entitlement certificates during service as often as is required and and loan subsidies. once within two years of the date of Of new subsidy applications, 68 per cent separation from the ADF. were from members either discharging or transferring to the Reserves. This is much Subsidy entitlement higher than last year and is considered The subsidy entitlement period is mainly attributable to members awaiting calculated on the number of completed the introduction of the new scheme. years of effective full-time service after completion of a five-year qualifying Performance evaluation period. The qualifying period for Active of the scheme’s Reservists is eight continuous years of administration efficient service. Defence is satisfied with the For members with recognised operational administration of the scheme by Defence or war-like service, the qualifying period Housing Australia. During the reporting does not apply and the maximum period period, there were no appeals lodged with of the subsidy may be extended from 20 the Administrative Appeals Tribunal. to 25 years. There are special The National Australia Bank has met its considerations for re-joining members, obligations to the Commonwealth under widows and widowers, eligible persons the Act and has provided effective and members discharged as a result of a support to the scheme. The National compensable disability. Australia Bank and Defence Housing Performance for 2007-08 Australia continue in their efforts to streamline the administration process of During 2007-08, there were 801 obtaining the subsidy. applications for entitlement certificates and 610 applications for loan subsidies Table A11.1 Applications for Payment of Subsidy by Type of Assistance[1] Activity 2003-04 2004-05 2005-06 2006-07 2007-08 Buy a home 845 744 661 583 366 Re-finance a loan 365 366 338 294 154 Enlarge a home 5 2 8 7 1 Build a home 160 156 145 112 75 Renovate a home 53 33 32 21 14

NOTE 1. The figures are taken from the subsidy applications.

234 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 11 ANNUAL REPORT ON THE ADMINISTRATION & OPERATION OF THE DEFENCE FORCE (HOME LOANS ASSISTANCE) ACT 1990

Table A11.2 Comparison of Activities Activity 2003-04 2004-05 2005-06 2006-07 2007-08 Applications for entitlement Certificate 2,095 1,913 1,724 1,526 801 received Entitlement certificate issued[2] 2,032 1,855 1,674 1,483 770 Applications for entitlement certificate 63 58 50 43 31 declined/withdrawn Applications for payments of subsidy 1,428 1,301 1,184 1,017 610 received Applications for payments of subsidy 1,398 1,286 1,170 1,001 597 approved Applications for subsidy declined/ 30 15 14 16 13 withdrawn Amount of Commonwealth subsidy paid $8.269m $9.3m $9.9m $10.6m $11.5m Number of subsidy payees as at 30 June 6,481 6,683 6,745 6,665 6,272

NOTE 1. Entitlement certificates are valid for 12 months. Operational costs An annual management fee of $558,058 (including GST) was paid to Defence Housing Australia in 2007-08 by Defence. The authority was also paid a fee in respect of each application for entitlement certificates lodged. These fees totaled $66,831 (including GST).

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 235 APPENDIX 12 Errors & Omissions

This appendix provides information on errors and omissions in the Defence Annual Report 2006-07. Page 126 Note 1 to Table 4.2 is incorrect. The note should read, ‘Excludes the 1,364 Reservists in 2006-07 who undertook full-time service in the Permanent Force. These are included in Tab le 4.1.’ Page 128 Note 2 to Table 4.5 is incorrect. The note should read, ‘Reserve AFS is not calculated; refer to Table 4.2 for Reserve paid strength details. Page 132 Caption to photograph should read ‘Squadron Leader Ian White with his family after clearing customs and quarantine following his return from Operation Astute in East Timor. His wife Christine, son Jacob, aged 7, and daughter Ashleigh, aged 4, are all happy to see him’. Page 213 The second last line of Table A1.1 is incorrect. The line should read, ‘Total (as at 30 June 2007)’. Note 6 to Table A1.1 is also incorrect. The note should read, ‘Separations include all personnel who have left the Defence workforce through voluntary and involuntary redundancy, age or voluntary retirement, or transfer to other agencies. Table A1.8 provides further detail about separation classification.’ Page 214 Four footnote numbers in table A1.2 are wrongly numbered and do not refer to the correct footnote text. The footnote numbers should read as follows: · first line of the table, ‘Navy[3]’ · seventh line of the table, ‘Other ranks[4]’ · ninth line of the table, ‘Army[5]’ · seventeenth line of the table, ‘Air Force[6]’.

236 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 12 ERRORS & OMISSIONS

Page 253 The figure reported in the Defence Annual Annual Report 2006-07 against the Report 2006-07 for external legal corrected figures. In 2006-07 the report expenses captured only those expenses parameters used in preparing the 2006-07 coded against Defence Legal managed figures identified a discrepancy that at allocations. The corrected figures capture the time could not be explained. external legal expenses for all Defence Subsequent investigations explained the groups. The tables below show the figures discrepancy and enabled the correction of as they were reported in the Defence reported external legal expenses. Table A12.1 Correction of 2006-07 expenditure on internal and external legal services Type of Legal Expenditure Reported figures Corrected figures 2006-07 2006-07 ($m) ($m) Internal 28.4 28.4 External 20.8 25.9 Tot a l 49.2 54.3

Table A12.2 Correction of 2006-07 cost breakdown of external legal expenses Items Reported figures Corrected figures 2006-07 2006-07 ($m) ($m) Professional fees—Defence legal panel 16.5 21.3 Disbursements 4.2 4.2 Legal expenses—other 0.1 0.4 Tot a l 20.8 25.9

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 237 APPENDIX 13 Defence’s finances

Including audited financial statements. SAVINGS & EFFICIENCY MEASURES Savings returned to Government Defence has returned $2.7b to the Government over the period 2004–05 to 2010–11 by way of savings and efficiency measures as set out in Table A13.1. Table A13.1 Savings Returned to the Budget

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Total ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) White Paper savings 200.0 200.0 200.0 200.0 200.0 200.0 200.0 1,400.0 requirement

2003 Defence – 80.0 73.9 85.3 76.4 99.2 152.8 567.6 Capability Review

Administrative – – 70.0 60.0 12.0 – – 142.0 Overheads

Efficiency Dividend – 3.4 11.9 25.0 39.0 55.5 71.1 205.9 (initial tranche)

Broadening of the – – 4.5 11.2 20.1 29.0 37.9 102.7 Efficiency Dividend

Rationalisation of – – 5.9 12.7 20.5 31.0 31.0 101.1 ADF Command and Control Structure Efficiency Dividend – – – 10.9 46.9 47.1 44.2 149.0 – 2 per cent election commitment Efficiency Dividend – – – – 4.6 9.7 13.6 27.9 - increase in the rate from 1 per cent to 1.25 per cent Tot a l S a v i ng s 200.0 283.4 366.2 405.1 419.5 471.5 550.6 2,696.2 Returned to the Budget White Paper savings program The White Paper resourcing strategy required Defence to make efficiency savings of $50m in 2001–02, and $200 million in 2002–03 and thereafter. The efficiency savings were fully achieved and returned to the Government.

238 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

2003 Defence Capability Rationalisation of ADF Review Command & Control structure These savings were to be achieved by As part of the 2006–07 Budget measures, paying off two guided missile frigates by Defence has returned $101.1m over a September 2006, retiring the F-111 fleet five–year period. This involves the by 2010 and mothballing two minehunter transition to the new Headquarters Joint coastal vessels. Since these decisions Operations Command building at were taken, Defence retained HMAS Bungendore and a permanent reduction of Adelaide in service until January 2008, 241 military positions in the command and and reactivated the two minehunters for control structure. Staffing numbers have surveillance work. In doing so, it restored been reduced and funds have been the funds to the Defence budget. returned to the Government. Administrative overheads Efficiency Dividend—2 per As part of the 2005-06 Budget, Defence cent Election Commitment was required to find further savings in In 2007–08, the Government applied a administrative overheads totalling $142m one-off, two per cent efficiency dividend over a three–year period from 2006–07. in 2007-08 and across the forward These funds have been returned to the estimates. The efficiency dividend applies Government. to all non-capability related areas of the budget. These funds have been returned Efficiency Dividend to the Government. During the development of the 2005–06 Budget, the Government decided that an Efficiency Dividend— efficiency dividend would apply to increase in the rate from 1 per Defence for the first time. Operational cent to 1.25 per cent and direct capability linked funding was In 2005–06, the rate of the efficiency exempted from the application of the dividend was increased for a period of dividend. The efficiency dividend which three years from one per cent per annum applies to all non-capability related areas to 1.25 per cent per annum. The of the budget grows from 0.25 per cent in increased rate ceased in 2007–08. As 2005–06 and then compounds by 0.25 per Defence compounded the dividend by cent per annum to one per cent in 0.25 per cent from 2005–06, it would only 2008–09 and onwards. These funds have reach one per cent by 2008–09 and been returned to the Government. therefore this increase did not impact on the budget. The Government has now Broadening the Efficiency extended the higher 1.25 per cent rate to Dividend include 2008–09 to 2010–11. These funds As part of the 2006–07 Budget, the have been returned to the Government. efficiency dividend was broadened to include 30 per cent of the Defence Additional internal Science and Technology Organisation’s efficiencies from 2008-09 budget, garrison support, estate upkeep Government is implementing an and the sale and leaseback program. additional internal efficiency and These funds have been returned to the economy initiative that seeks to save $10b Government. over a 10 year period from 2008-09.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 239 APPENDIX 13 DEFENCE’S FINANCES

ASSET MANAGEMENT Defence manages some $59.0b in assets. has a responsibility to manage Defence This comprises some $32.4b of specialist assets in a way that promotes efficient, military equipment, $12.6b of land and effective and ethical use of buildings, $5.9b of infrastructure, plant Commonwealth resources. and equipment, $5.0b of inventory, $0.8b Although Defence reports major of heritage and cultural assets, $0.4b of non-financial assets on its balance sheet, intangibles and $1.9b of other assets such the DMO acts as project manager on as cash, receivables and prepayments. behalf of Defence for both the acquisition In accordance with section 44 of the and sustainment of Defence military Financial Management and Accountability assets and inventories. Act 1997, the Chief Executive of Defence 2007-08 achievements & developments During 2007–08, Defence built on the · commencement of a new Defence- improvements in asset management and wide cycle of stocktake to provide reporting, particularly in relation to assurance around asset and inventory resolving asset valuation issues, and balances improving system and business process · commencement of an extensive controls. Defence achieved the following: disposal program of surplus or · management reliance on system and obsolete assets, including general business controls relating to the stores inventory Defence logistics management system · further review and recognition of · removal of audit uncertainty relating liabilities associated with land to the reported balance of general decontamination and restoration and stores inventory following a significant specialist military equipment verification exercise decommissioning. PAYMENT OF ACCOUNTS In 2007–08, Defence paid 1,530,079 or Reporting processes now consider the 92.5 per cent of all payment transactions date of validity, the time taken to apply, within a 30-day target. This result is time for approval and payment date for ahead of the 90 per cent Government each entitlement. The volume of benchmark. When compared with the payments through Defence Purchase and previous year, there has been a reduction Travel Cards represents more than 60 per in the percentage paid by due date. This cent of all payments. This is having a is accounted for by improvements in the positive effect on the paid by due date reporting of employee entitlements. result. Table A13.2 Accounts paid by due date, 2005-06 to 2007-08

2005-06 2006-07 2007-08 Number of accounts paid 1,340,419 1,662,503 1,654,870 Accounts paid by due date 1,218,193 1,585,716 1,530,079 Percentage of accounts paid by 90.9 95.4 92.5 due date

240 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Auditor-General for Australia

Australian National Audit Office

INDEPENDENT AUDITOR'S REPORT

To the Minister ror Derence

I have audited the accompanying financial statements ofthe Department of Defence for the year ended 30 lune 2008, which comprise: a Statement by the Secretary and Chief Finance Officer; Income Statement; l3alance Sheet; Statement of Changes in Equity; Cash Flow Statement; Schedule of Commitments; Schedule of Contingencies; Schedule of Administered Items and Notes to and forming part of the Financial Statements, including a Summary ofSignificant Accounting Policies.

The Respomibi/ily olSecretarylor the Financial Statements

The Department of Defence's Secretary is responsible for the preparation and fair presentation of the financial statements in accordance with the Finance Minister'S Orders made under the Financial ManagemenJ and Accountability ACI f997, including the Australian Accounting Standards (which include the Australian Accounting Interpretations). This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor's Responsibility

My responsibility is to express an opinion on the financial statements based on my audit. My audit has been conducted in accordance with the Australian National Audit Office Auditing Standards, which incorporate the Australian Auditing Standards. These Auditing Standards require that I comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments. the auditor considers internal control relevant to the Department of Defence preparation and fair

liP(} 80> 107 CANB£ftRA ACT 2601 19 Nallon~ OrGoi' IAIlTON AcT _ (02) 62Ol1_ Fa. «Ill 6.213 SlSS !,.,.ilion.m

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 241 APPENDIX 13 DEFENCE’S FINANCES

presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the etTectiveness of the Depanment of Defence's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Depanment of Defence's Secretary, as well as evaluating the overall presentation ofthe financial statements.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

Independence

In conducting the audit, I have followed the independence requirements of the Australian National Audit Office, which incorporate the requirements of the Australian accounting profession.

Auditor's Opinion

In my opinion, the financial statements ofthe Depanment of Defence:

(a) have been prepared in accordance with the Finance Minister's Orders made under the Financial Management and Accormtabilily Act 1997. including the Australian Accounting Standards; and

(b) give a true and fair view of the matters required by the Finance Minister's Orders including the Depanment of Defence financial position as at 30 June 2008 and its financial performance aod cash flows for the year then ended.

~ 2,-'''--_ Ian M~ee Auditor-General Canberra 2 October 2008

242 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

STATEMENT BY THE CHIEF EXECUTIVE AND CJIIEF FINAI"CE OFFICER Pursuant 10 Seelion 49(4) of the Financial Management and Accountabilil)' ACl1997 and Seclion 14.3 of the Finance Minister's Ordcrs

In our opinion. the financial statements for the year ended 30 June 2008: • give a true and fair view ofthe mailers required by the Finance Minisler's Orders made under the Financial Mwwgemem and ACCOlllllllbiliry ACI 1997 as amended; and • have been prepared based on properly maintained financial records.

Signed Signed

71pz=,"'--- Nick Wamer I' j Prior Secrelary Chief Fina e Officer

L.Oclober 2008 2.... October 2008

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 243 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence

Financial Statements for the Period Ended 30 June 2008

244 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence INCOME STATEMENT for the period ended 30 June 2008

2008 2007 Notes $'000 $'000 INCOME Revenue Revenue from Government 3A 19,693,267 17,221,662 Sale of goods and rendering of services (including cost recovery) 3B 688,840 674,514 Rental income 3C 7,073 6,963 Other revenue 3D 76,233 111,000 Total revenue 20,465,413 18,014,139

Gains Sale of assets 3E - 1,770 Foreign exchange 4G 1,077 - Reversals of previous asset write-downs 3F 615,330 549,804 Other gains 3G 3,295 7,467 Total gains 619,702 559,041

Tot a l I nc o me 21,085,115 18,573,180

EXPENSES Employee benefits 4A 7,510,296 6,895,744 Suppliers 4B 8,454,080 7,634,623 Grants 4C 18,000 3,003 Depreciation and amortisation 4D 3,654,874 3,665,338 Finance costs 4E 44,146 38,594 Write-down and impairment of assets 4F 1,948,141 804,109 Losses from sale of assets 3E 2,152 - Foreign exchange losses 4G - 306 Other expenses 4H 54,815 6,971

Tot a l Ex p en se s 21,686,504 19,048,688

Surplus (Deficit) attributable to the Australian Government (601,389) (475,508)

The above statement should be read in conjunction with the accompanying notes.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 245 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence BALANCE SHEET as at 30 June 2008

2008 2007 Notes $'000 $'000 ASSETS Financial assets Cash and cash equivalents 5A 29,223 32,007 Trade and other receivables 5B 462,185 501,682 Total financial assets 491,408 533,689

Non-financial assets Land and buildings 6A, 6G 12,568,074 11,880,750 Specialist military equipment 6B, 6G 32,447,754 32,596,224 Plant and equipment 6C, 6G 1,147,762 1,214,244 Infrastructure 6D, 6G 4,710,086 4,627,894 Intangibles 6E, 6G 357,625 276,399 Heritage and cultural assets 6F, 6G 805,587 763,944 Inventories 6H 4,952,862 4,869,072 Prepayments 6I 1,055,217 762,123 Total non-financial assets 58,044,967 56,990,650 Assets held for sale 6J 427,220 144,375

Total Assets 58,963,595 57,668,714

LIABILITIES Payables Suppliers 7A 857,995 757,120 Other payables 7B 197,170 130,344 Total payables 1,055,165 887,464

Interest bearing liabilities Leases 8 404,988 313,588 Total interest bearing liabilities 404,988 313,588

Provisions Employee provisions 9A 1,856,704 1,718,072 Restoration, decontamination and decommissioning 9B 615,572 541,256 Other provisions 9C 24,603 46,300 Total provisions 2,496,879 2,305,628

Total Liabilities 3,957,032 3,506,680

NET ASSETS 55,006,563 54,162,034

246 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence BALANCE SHEET (Continued) as at 30 June 2008

2008 2007 Notes $'000 $'000

EQUITY Contributed equity 7,388,861 6,876,202 Reserves 12,834,121 11,900,862 Retained surplus (accumulated deficit) 34,783,581 35,384,970 TOTAL EQUITY 55,006,563 54,162,034

Current assets 2,615,082 2,107,194 Non-current assets 56,348,513 55,561,520 Current liabilities 2,820,126 2,501,041 Non-current liabilities 1,136,906 1,005,639

The above statement should be read in conjunction with the accompanying notes.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 247 APPENDIX 13 DEFENCE’S FINANCES - - 2007 $'000 66,870 780,553 780,553 305,045 (47,993) (475,508) 1,998,277 1,950,284 51,839,835 51,906,705 54,162,034 - - Total Equity 2008 4,750 $'000 933,259 933,259 331,870 512,659 (601,389) 1,998,806 54,162,034 54,162,034 55,006,563 (1,490,897) ------2007 $'000 (47,993) 4,925,918 4,925,918 1,998,277 1,950,284 6,876,202 ------2008 4,750 $'000 512,659 Contributed Equity 6,876,202 6,876,202 1,998,806 7,388,861 (1,490,897) ------2007 $'000 780,553 780,553 780,553 11,120,309 11,120,309 11,900,862 ------Reserve 2008 $'000 933,259 933,259 933,259 Asset Revaluation 11,900,862 11,900,862 12,834,121 ------2007 $'000 66,870 (475,508) (475,508) 35,793,608 35,860,478 35,384,970 ------2008 $'000 Retained Surpluses (601,389) (601,389) 35,384,970 35,384,970 34,783,581 1 recognised directly in Refer Note 1.21 and 1.3 (c) for details regarding change in accounting policy. Department of Defence EQUITY IN OF CHANGES STATEMENT as at 30 June2008 1. notes the accompanying with in conjunction read be should statement above The Returns to OPA to OPA Returns Appropriations (equity injection) (Note Restructuring 10) Opening balance period previous from forward carried Balance Adjustment for changes in accounting policies Adjusted opening balance Expenses and Income movements revaluation Asset Subtotal income and expenses Surplus (deficit) for the period income and expenses attributable to the Australian Total Government owners with Transactions to owners Distributions Returns of equity Contributions by owners Sub-total transactions with owners between equity components Transfers Government to the Australian balance attributable Closing equity

248 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence CASH FLOW STATEMENT for the period ended 30 June 2008

2008 2007 Notes $'000 $'000 OPERATING ACTIVITIES Cash received Goods and services (including cost recovery) 579,628 529,853 GST receipts from customers 17,034 20,181 Appropriations (current year) 19,659,706 17,133,408 Appropriations (prior year) 50,000 6,736 Net GST received from Australian Taxation Office 443,097 420,895 Other cash received 114,174 69,351 Total cash received 20,863,639 18,180,424

Cash used Employees (7,248,681) (6,570,436) Suppliers (7,733,976) (6,983,772) GST payments to suppliers (459,476) (439,068) Grants (17,894) (5,270) Other cash used (800) (5,185) Total cash used (15,460,827) (14,003,731)

Net cash flows from (used by) operating activities 11 5,402,812 4,176,693

INVESTING ACTIVITIES Cash received Proceeds from sales of land and buildings 1 24,486 74,399 Proceeds from sales of plant and equipment 1 40,300 40,449 Proceeds from sales of specialist military equipment1 2 23,770 Proceeds from sales of infrastructure 1 - 1,106 Other cash received 595 1,706 Total cash received 65,383 141,430

Cash used Purchase of land and buildings (608,490) (622,952) Purchase of plant and equipment (156,956) (179,803) Purchase of specialist military equipment (3,603,107) (4,393,676) Purchase of infrastructure (53,099) (69,463) Purchase of software and intangibles (60,287) (16,823) Purchase of inventory (1,446,140) (1,070,934) Purchase of heritage and cultural assets (19) (2,059) Selling costs on sale of assets 1 (12,459) (17,355) Finance costs (15,193) (11,589) Total cash used (5,955,750) (6,384,654)

Net cash flows from (used by) investing activities (5,890,367) (6,243,224)

1. The 2006-07 comparative figures have been updated to reflect selling costs on sale of assets in investing cash used.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 249 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence CASH FLOW STATEMENT (Continued) for the period ended 30 June 2008

2008 2007 Notes $'000 $'000 FINANCING ACTIVITIES Cash received Appropriations - contributed equity (current year) 1,998,630 1,998,277 Appropriations - contributed equity (prior year) - 160,850 Total cash received 1,998,630 2,159,127

Cash used Repayment of debt (including finance lease principal) (24,039) (54,166) Return of contributed equity (1,490,897) (42,338) Total cash used (1,514,936) (96,504)

Net cash flows from (used by) financing activities 483,694 2,062,623

Net increase/(decrease) in cash held (3,861) (3,908) Cash and cash equivalents at the beginning of the reporting period 32,007 36,221 Effect of exchange rate movements on cash and cash equivalents 4G 1,077 (306) Cash and cash equivalents at the end of the reporting period 5A 29,223 32,007

The above statement should be read in conjunction with the accompanying notes.

250 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence SCHEDULE OF COMMITMENTS as at 30 June 2008

2008 2007 $'000 $'000 BY TYPE Commitments receivable Lease rental income1 (28,295) (32,972) GST recoverable on commitments (739,280) (545,310) Total commitments receivable (767,575) (578,282)

Capital commitments payable Land and buildings2 2,104,518 1,540,951 Infrastructure, plant and equipment3 83,081 122,568 Specialist military equipment4 16,069,796 10,441,641 Other capital commitments5 59,197 62,062 Total capital commitments payable 18,316,592 12,167,222

Other commitments payable Operating leases6 4,294,487 4,588,647 Research and development7 104,043 129,234 Other non-capital commitments8 12,464,260 10,793,169 Total other commitments payable 16,862,790 15,511,050 Net commitments by type 34,411,807 27,099,990

BY MATURITY Commitments receivable Lease rental revenue One year or less (14,349) (21,944) From one to five years (5,306) (3,283) Over five years (8,640) (7,745) Total lease rental revenue (28,295) (32,972)

Other commitments receivable One year or less (119,493) (175,342) From one to five years (436,664) (208,532) Over five years (183,123) (161,436) Total other commitments receivable (739,280) (545,310)

Commitments payable Capital commitments One year or less 1,330,897 3,137,934 From one to five years 12,724,552 7,282,365 Over five years 4,261,143 1,746,923 Total capital commitments 18,316,592 12,167,222

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 251 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence SCHEDULE OF COMMITMENTS (continued) as at 30 June 2008

2008 2007 $'000 $'000 Operating lease commitments One year or less 392,672 760,367 From one to five years 1,777,813 1,727,404 Over five years 2,124,002 2,100,876

Total operating lease commitments 4,294,487 4,588,647

Other commitments One year or less 2,437,876 3,292,905 From one to five years 7,282,717 4,940,374 Over five years 2,847,710 2,689,124

Total other commitments 12,568,303 10,922,403

Net commitments by maturity 34,411,807 27,099,990

NOTE: Commitments are GST inclusive where relevant.

Due to changes in accounting treatment specifically relating to the Defence Housing Australia Services Agreement, a movement of $1,277.46m from operating lease commitments to other non- capital commitments has been applied to the 2006-07 Schedule.

1. The lease rental income includes rental contributions from Defence service members for residences sub- leased by Defence. The lease term is normally 3 to 5 years. The lease rental receivable is calculated for 28 days which is the minimum period of notice Defence members are required to provide before terminating the lease. 2. Outstanding contractual payments for buildings under construction. 3. Infrastructure, plant and equipment capital commitments include outstanding contractual payments for such items of plant and equipment as the maintenance of hardware and software. 4. Outstanding contractual payments for Specialist Military Equipment under construction. 5. Other capital commitments include contractual payments for software licence agreements. 6. Operating leases included are effectively non-cancellable and are described in the table below. 7. Outstanding commitments on research and development projects including Through Life Support agreements. 8. Outstanding commitments on supplier type expenditure including general goods and services, communications, domestic and overseas travel and removal costs. The majority of these commitments are payable to DMO.

252 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence SCHEDULE OF COMMITMENTS (continued) as at 30 June 2008

Nature of leases General description of leasing arrangement DHA property leases Defence leases residences, under a service agreement, from Defence Housing Australia (DHA) to provide accommodation to eligible service members. The total commitment has been calculated based on an initial forecast of housing demand for the period of the agreement, which is 12 years. Lease payments are subject to the terms and conditions of the lease and are payable to DHA. Other property leases Defence leases both residential and commercial properties in Australia and overseas in support of its activities. Lease payments are subject to the terms and conditions of the lease. Generally the leases are subject to market reviews, reviews in accordance with agreed indexation or a combination of both. The terms range between 1 year and 99 years. Aircraft leases Defence leases aircraft in support of scientific and military operations and in support of parliamentary services. Lease terms range between 2 and 12 years. Motor vehicle leases Leases for the provision of motor vehicles to Senior Executive Officers and for other general service. No contingent rentals exist. There are no renewal or purchase options available to Defence. Equipment leases Defence has leases for items of equipment including computer hardware, photocopiers and communication equipment. General lease terms are 2 to 5 years. Property revenue leases Defence receives revenue from the lease of property and office space. Office space is generally let to contractors in support of Defence activities and to other government agencies or to local civic authorities. The terms of these leases range between 1 year and 99 years.

The above schedule should be read in conjunction with the accompanying notes.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 253 APPENDIX 13 DEFENCE’S FINANCES

1 - - 20 2007 (319) (738) $’000 9,768 $’000 1,840 1,122 2007 99,602 (3,107) 121,736 (28,476) (98,480)

- Total (5) 490 2008 2008 (590) 137. Details of each class 137. Details $’000 $’000 1,122 1,673 2,690 ed in Note 12: Contingent 99,602 21,282 14,477 100,146 (35,215) (97,456) - - 20 2007 2007 2007 (319) (738) $’000 $’000 9,768 $’000 1,840 1,122 99,602 (3,107) 121,736 (28,476) with the requirements of AASB of the requirements with use they cannot be quantified, are disclos - (5) 490 2008 2008 (590) losed schedule. in this $’000 $’000 1,122 1,673 2,690 99,602 21,282 14,477 100,146 (35,215) Claims for damages/costs for Claims ured and disclosed in accordance or letters of comfort disc or letters ts, including those not included above beca ts, conjunction with the accompanying notes. Contingent Assets Contingent Contingent Liabilities Balance from previous period previous from Balance New Re-measurement Liabilities crystallised expired Obligations contingentliabilities Total period previous from Balance New Re-measurement crystallised Assets Expired assets contingent Total Assets (Liabilities) Net contingent contingent liabilities and contingent asse and contingent contingent liabilities and Contingent Assets. Liabilities Department of Defence CONTINGENCIESSCHEDULE OF 2008 June at 30 as warranties indemnities, were guarantees, There no are classified, meas liabilities and contingent assets Contingent 1. Comparative amounts have been revised to reflect correct contingency movements. in be read should schedule above The

254 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence SCHEDULE OF ADMINISTERED ITEMS for the period ended 30 June 2008

2008 2007 Notes $'000 $'000 INCOME ADMINISTERED ON BEHALF OF GOVERNMENT Revenue Non-taxation revenue Sale of goods and rendering of services 17A 40 235 Interest 17B 124 12,277 Dividends 17C 134,263 77,599 Military superannuation contributions 17D 756,982 700,595 Other revenue 17E 215 (466) Total non-taxation revenue 891,624 790,240 Total revenues administered on behalf of Government 891,624 790,240

TOTAL INCOME ADMINISTERED ON BEHALF OF GOVERNMENT 891,624 790,240

EXPENSES ADMINISTERED ON BEHALF OF GOVERNMENT Employees 18A 2,849,405 2,794,512 Subsidies 18B 11,284 10,487 Grants 18C 26,800 - Other expenses 18D 4,327 - TOTAL EXPENSES ADMINISTERED ON BEHALF OF GOVERNMENT 2,891,816 2,804,999

Administered activities performed by Defence on behalf of the Government relate mainly to the provision of superannuation and housing support services to current and retired Defence personnel. Defence also administers reimbursements from the United Nations for costs associated with East Timor and returns the receipts to the Government.

The above schedule should be read in conjunction with the accompanying notes.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 255 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence SCHEDULE OF ADMINISTERED ITEMS (continued) as at 30 June 2008

2008 2007 Notes $'000 $'000 ASSETS ADMINISTERED ON BEHALF OF GOVERNMENT Financial assets Cash and cash equivalents 19A - 39 Receivables 19B 51,721 490 Investments 19C/25 1,069,443 1,098,624 Total financial assets 1,121,164 1,099,153

Non-financial assets Prepayments 19D 85,506 88,955 Total non-financial assets 85,506 88,955 TOTAL ASSETS ADMINISTERED ON BEHALF OF GOVERNMENT 1,206,670 1,188,108

LIABILITIES ADMINISTERED ON BEHALF OF GOVERNMENT Payables Subsidies 20A - 898 Other payables 20B 25,242 17,469 Total payables 25,242 18,367

Provisions Employee provisions 20C/21 33,622,000 32,460,000 Total provisions 33,622,000 32,460,000 TOTAL LIABILITIES ADMINISTERED ON BEHALF OF GOVERNMENT 33,647,242 32,478,367

Current assets 55,522 89,484 Non-current assets 1,151,148 1,098,624 Current liabilities 1,575,242 1,563,367 Non-current liabilities 32,072,000 30,915,000

Administered activities performed by Defence on behalf of the Government relate mainly to the provision of superannuation and housing support services to current and retired Defence personnel. Defence also administers reimbursements from the United Nations for costs associated with East Timor and returns the receipts to the Government.

The above schedule should be read in conjunction with the accompanying notes.

256 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence SCHEDULE OF ADMINISTERED ITEMS (continued) for the period ended 30 June 2008

2008 2007 Notes $'000 $'000 ADMINISTERED CASH FLOWS

OPERATING ACTIVITIES Cash received Rendering of services 69 342 Interest 146 12,374 Net GST received from ATO 175 - Superannuation contributions 790,924 707,649 Other cash received 215 (466) Total cash received 791,529 719,899 Cash used Subsidies (12,200) (9,589) Employees (1,517,426) (1,481,585) Grants (26,800) - Other cash used (4,502) - Total cash used (1,560,928) (1,491,174) Net cash flows from (used by) operating activities (769,399) (771,275) INVESTING ACTIVITIES Cash received Dividends 83,604 77,599 Total cash received 83,604 77,599 Net cash flows from (used by) investing activities 83,604 77,599 Net Increase (Decrease) in cash held (685,795) (693,676)

Cash and cash equivalents at the beginning of the reporting period 39 188 Cash from the Official Public Account for: Appropriations 1,560,929 1,516,290 1,560,929 1,516,290 Cash to the Official Public Account for: Appropriations (875,173) (822,763) (875,173) (822,763) Effect of exchange rate movements on cash and cash equivalents - - Cash and cash equivalents at the end of reporting period 19A - 39

Administered activities performed by Defence on behalf of the Government relate mainly to the provision of superannuation and housing support services to current and retired Defence personnel. Defence also administers reimbursements from the United Nations for costs associated with East Timor and returns the receipts to the Government.

The above schedule should be read in conjunction with the accompanying notes.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 257 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Notes 1 Summary of Significant Accounting Policies 2 Events Occurring after the Balance Sheet Date 3Income 4Expenses 5 Financial Assets 6 Non-Financial Assets 7Payables 8 Interest Bearing Liabilities 9Provisions 10 Restructuring 11 Cash Flow Reconciliation 12 Contingent Liabilities and Contingent Assets 13 Executive Remuneration 14 Remuneration of Auditors 15 Financial Instruments 16 Accounting for Errors 17 Income Administered on Behalf of Government 18 Expenses Administered on Behalf of Government 19 Assets Administered on Behalf of Government 20 Liabilities Administered on Behalf of Government 21 Defined Benefit Superannuation Plans Administered on Behalf of Government 22 Administered Reconciliation Table 23 Administered Commitments 24 Administered Contingent Liabilities and Contingent Assets 25 Administered Investments 26 Administered Financial Instruments 27 Administered Accounting for Errors 28 Appropriations 29 Special Accounts 30 Compensation and Debt Relief 31 Assets Held in Trust 32 Reporting of Outcomes

258 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 1: Summary of Significant Accounting Policies 1.1 Objective of Defence Defence comprises the Department of Defence, as an Australian Public Service organisation, and the Australian Defence Force. The objective of Defence is to defend Australia and its national interests. Defence is structured to meet seven outcomes: • Outcome 1 – Command of Operations in Defence of Australia and its Interests; • Outcome 2 – Navy Capability for the Defence of Australia and its Interests; • Outcome 3 – Army Capability for the Defence of Australia and its Interests; • Outcome 4 – Air Force Capability for the Defence of Australia and its Interests; • Outcome 5 – Strategic Policy for the Defence of Australia and its Interests; • Outcome 6 – Intelligence for the Defence of Australia and its Interests; and • Outcome 7 – Superannuation and Housing Support Services for Current and Retired Defence Personnel. Defence activities contributing toward these outcomes are classified as either departmental or administered. Departmental activities involve the use of the assets, liabilities, revenues and expenses controlled or incurred by Defence in its own right. Administered activities involve the management or oversight by Defence, on behalf of the Government, of items controlled or incurred by the Government. Defence Outcomes 1-6 are departmental and Outcome 7 is administered. An overview of Defence’s Output and Outcome structure is described in Chapter 3 of the Annual Report. In 2008-09, Defence is implementing a new outcome and output structure. The new structure will increase the Government’s and the community’s visibility of what Defence delivers, as it is aligned with Defence’s internal resource allocations and accountabilities. Under the new structure, Defence will report against the following three outcomes: • Outcome 1: Australia’s national interests are protected and advanced through the provision of military capabilities and the promotion of security and stability; • Outcome 2: Military operations and other tasks directed by Government to achieve the desired results; and • Outcome 3: Defence’s support to the Australian community and civilian authorities achieves the desired results. The continued existence of Defence in its present form, and with its present programs, is dependent on Australian Government policy and on continuing appropriations by Parliament for Defence’s administration and programs. 1.2 Basis of Preparation of the Financial Statements The financial statements and notes are required by section 49 of the Financial Management and Accountability Act 1997 and are a General Purpose Financial Report. The financial statements and notes have been prepared in accordance with: • Finance Minister’s Orders (or FMOs) for reporting periods ending on or after 1 July 2007; and • Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period. The financial statements and notes have been prepared on an accrual basis and are in accordance with the historical cost convention, except for certain assets at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position. The financial statements and notes are presented in Australian dollars and values are rounded to the nearest thousand dollars unless disclosure of the full amount is specifically required. Unless alternative treatment is specifically required by an accounting standard or the FMOs, assets and liabilities are recognised in the balance sheet when, and only when, it is probable that the future economic benefits will flow to the entity (in the case of an asset) or it is probable that the outflow of resources embodying economic benefits will result (in the case of a liability) and the amounts of the assets or liabilities can be reliably measured. However, assets and liabilities arising under agreements equally proportionately unperformed are not recognised unless required by an accounting standard. Liabilities and assets that are unrealised are reported in the Schedule of Commitments and the Schedule of Contingencies (other than Unquantifiable Contingencies, which are reported at Note 12).

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 259 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Unless alternative treatment is specifically required by an accounting standard, revenues and expenses are recognised in the income statement when, and only when, the flow, consumption or loss of economic benefits has occurred and can be reliably measured. Administered transactions Administered revenues, expenses, assets, liabilities and cash flows reported in the Schedule of Administered Items and related notes are accounted for on the same basis and using the same policies as for departmental items, except as otherwise stated in Note 1.27. Trust transactions Defence has responsibility for transactions and balances relating to trust funds on behalf of third parties external to the Australian Government. As Defence acts only in a custodial role in respect of these transactions, they are not recognised in the financial statements but are disclosed in Note 31: Assets Held in Trust. 1.3 Significant Accounting Judgements and Estimates (a) Significant accounting judgements In the process of applying Defence’s accounting policies listed in this note, management has made no judgements that would have a significant impact on the amounts recorded in the financial statements. (b) Significant accounting estimates and assumptions The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions Defence has made are: • Provisions for land decontamination, site restoration and SME decommissioning are based on Defence’s estimates of future obligations relating to the underlying assets. Some of these estimates are supported by external valuer’s opinions; • Provisions for annual leave and long service leave are estimates based on expert actuarial assumptions on the likely tenure of existing staff, patterns of leave claims and payouts, future salary movements and future discount rates; • Estimates and assumptions have been made in relation to inventory obsolescence in order to determine the remaining service potential for inventory items which have experienced obsolescence or impairment and the pricing of certain legacy items; • Low value asset pooling estimates have been made to determine the net book value of other plant and equipment asset pools. These include estimates relating to useful economic lives and disposal rates; • Defence assesses non-financial assets for impairment by monitoring impairment indicators specific to an assets use in the Defence context. Where these indicators signify that an asset is impaired, management has made an estimate of the recoverable amount of those assets to determine any impairment loss; and • Defence heritage and cultural assets are stored, managed, repaired and restored in ways that will maintain their heritage and cultural value over time. As such, an assumption is made that these assets have indefinite useful lives and therefore no depreciation is recognised. (c) Change in Accounting Policy During 2007-08, Defence made a change to the accounting treatment for repairable items (RI) movements recorded as ‘stock adjustments’. Previously, these movements were considered to be supply chain movements and as such were recognised in the balance sheet. After detailed consideration in 2007-08, they have now been identified and treated as genuine stock adjustments resulting from periodic stock takes and are treated more appropriately as stock write-offs and gains in the income statement. This is a voluntary change in accounting policy and has been applied to the earliest period presented in the current financial statements. Refer to Note 16 for prior year adjustments made for this change in accounting policy. 1.4 Statement of Compliance (a) Adoption of new Australian Accounting Standard requirements No accounting standard has been adopted earlier than the application date as stated in the standard. The following new standards are applicable to the current reporting period. AASB 7 Financial Instruments: Disclosures This standard is effective for reporting periods beginning on or after 1 January 2007 (i.e. the 2007-08 260 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008 financial year) and amends the disclosure requirements for financial instruments. In general AASB 7 requires greater disclosure than that previously required. Associated with the introduction of AASB 7 a number of accounting standards were amended to reference the new standard or remove the present disclosure requirements through 2005-10 Amendments to Australian Accounting Standards [AASB 132, AASB 101, AASB 114, AASB 117, AASB 133, AASB 139, AASB 1, AASB 4, AASB 1023 & AASB 1038]. Adoption of these standards has only affected the disclosure in these financial statements. There has been no effect on profit or loss or the financial position of Defence. (b) Other effective requirement changes The following amendments, revised standards or interpretations have become effective but have had no financial impact or do not apply to the operations of Defence: • 2007-4 Amendments to Australian Accounting Standards arising from ED 151 and Other Amendments and Erratum: Proportionate Consolidation; • 2007-7 Amendment to Australian Accounting Standards [AASB 1, 2,4 ,5 ,107, 128]; and • UIG Interpretation 11 AASB 2 – Group and Treasury Share Transactions and 2007-1 Amendments to Australian Accounting Standards arising from AASB Interpretation 11. (c) Accounting standards that will become effective for Defence in the future Australian Accounting Standards require Defence to disclose Australian Accounting Standards that have not been applied, or standards that have been issued but are not yet effective. The table below illustrates Standards and amendments that will become effective for Defence in the future. The nature of the impending change within the table has been abbreviated out of necessity and users should consult the full version available on the AASB’s website (www.aasb.com.au) to identify the full impact of the change. The expected impact on the financial report of adoption of these standards is based on Defence’s initial assessment at reporting date. Defence intends to adopt all applicable standards on their application date.

Application Nature of impending Impact expected on Title Standard affected date* change financial report AASB 1004 1 July 2008 Amendments arising No expected Contributions from review of AAS 27, financial impact 29 and 31 AASB 1050 1 July 2008 Amendments arising No expected Administered Items from review of AAS 27, financial impact 29 and 31 AASB 1052 1 July 2008 Amendments arising No expected Disaggregated from review of AAS 27, financial impact Disclosures 29 and 31 2007-9 AASB 3, AASB 5, 1 July 2008 Amendments to No expected AASB 8, AASB 101, Australian Accounting financial impact AASB 114, AASB 116, Standards arising from AASB 127 & AASB 137 the Review of AAS's 27, 29 and 31 2007-8 AASB 101 1 July 2009 Revised standard Disclosure impact Presentation of introduces the notion of only. Financial Statements a ‘complete set of No financial impact financial statements’ as opposed to the ‘primary statements’ Interpretation 1 1 July 2009 Compilation change only No expected Changes in existing financial impact Decommissioning, restoration and similar Liabilities

* Application date is for annual reporting periods beginning on or after the date shown.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 261 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

(d) Other The following standard has been issued but is not applicable to the reporting of Defence: AASB 1049 Whole of Government and General Government Sector Financial Reporting – AASB 1049 specifies the reporting requirements for the General Government Sector. 1.5 Revenue (a) Revenue from Government Amounts appropriated for departmental output appropriations 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 that 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 appropriations as at 30 June 2008 are reflected as a receivable and are available for drawdown to meet future obligations. Appropriations receivable are recognised at their nominal amounts. (b) Revenue from Sale of Goods and Rendering of Services Revenue from the sale of goods is recognised when: • the risks and rewards of ownership have been transferred to the buyer; • Defence retains no managerial involvement nor effective control over the goods; • the revenue and transaction costs can be reliably measured; and • it is probable that the economic benefits associated with the transaction will flow to Defence. Revenue from the rendering of services is recognised by reference to the stage of completion of contracts at reporting date. The revenue is recognised when: • the amount of revenue, stage of completion and transaction costs incurred can be reliably measured; and • it is probable the economic benefits of the transaction will flow to the entity. The stage of completion of contracts at the reporting date is determined by reference to the proportion that costs incurred to date bear to the estimated costs of the transaction. (c) Rental Revenue Rental revenue is accounted for on a straight line basis over the lease term. Contingent rental revenue is recognised as revenue in the periods in which it is earned. Lease incentives granted are recognised as an integral part of the total rental revenue. (d) Resources Received Free of Charge Resources received free of charge are recognised as revenue when and only when a fair value can be reliably determined and the services would have been purchased if they had not been donated. Use of those resources is recognised as an expense. Fair value is determined based on actual full cost if the resources were to be purchased. 1.6 Gains (a) Contributions of Assets Contributions of assets at no cost of acquisition or for nominal consideration are recognised as gains at their fair value when the asset qualifies for recognition (with the exception of assets valued at cost), unless received from another Government agency as a consequence of a restructuring of administrative arrangements (Refer to Note 1.9(b)). Fair value is assessed by asset class as described in Note 1.19(f). (b) Sale of Assets Gains from disposal of non-current assets are recognised when control of the asset has passed to the buyer. The gain or loss on disposal of non-current assets is determined as the difference between the carrying amount of the asset at the time of disposal and the net proceeds of disposal.

262 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

(c) Other Gains Gains may be realised or unrealised and are usually recognised on a net basis. These include gains arising on foreign exchange transactions and balances. 1.7 Impairment of Assets Defence applies its impairment testing to the smallest identifiable group of assets that is useful to Defence in achieving its objectives and whose utility/usefulness is largely independent of the utility provided to Defence by other assets or groups of assets. All relevant assets were assessed for impairment during the year. Where indications of impairment exist, the asset’s recoverable amount is estimated and an impairment adjustment made if the asset’s recoverable amount is less than its carrying amount. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. Where the future economic benefit of an asset is not primarily dependent on the asset’s ability to generate future cash flows, and the asset would be replaced if Defence were deprived of the asset, its value in use is taken to be its depreciated replacement cost. 1.8 Grants Contributions by Defence to other government entities, private sector organisations and individuals which have been identified as a grant are recognised as an expense when incurred. 1.9 Transactions with the Australian Government as Owner (a) Equity injections Amounts appropriated which are designated as ‘equity injections’ (less any formal reductions) are recognised directly in contributed equity in that year. Equity injection appropriations in Acts passed after the commencement of the period are recognised from the date of royal assent. (b) Restructuring of Administrative Arrangements Net assets/liabilities received from or relinquished to another Australian Government agency or authority under a restructuring of administrative arrangements are recognised as contributions or distributions of equity respectively, at their net book value. (c) Other Distributions to Owners including Repayments of Appropriations The FMOs require that distributions to owners be debited to contributed equity unless it is a dividend. In 2007-08 appropriation drawn of $nil (2006-07: $5.66m) was returned to the Official Public Account together with property disposal proceeds of $16.58m (2006-07: $42.34m). In recognising the repayments and reductions of appropriations funding, during the year the Minister for Finance and Deregulation issued determinations to reduce Departmental appropriations as follows: Date Year Departmental Items Equity Injections $’000 $’000 21 May 2008 2007-08 - 662,118 24 June 2008 2007-08 - 812,197 To ta l - 1,474,315 1.10 Cash and Cash Equivalents Cash and cash equivalents includes cheques and other negotiable instruments, 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 nominal amount. 1.11 Financial Risk Management Under relevant legislation and Australian Government policy, Defence is restricted from entering into borrowings, some investments and entering into derivative transactions to offset risk exposure. As such Defence’s exposure to risk is primarily related to credit risk on trade receivables and foreign currency risk in relation to payments to overseas suppliers of goods and services received. However, this exposure is minimal in terms of the operations of Defence.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 263 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Defence is also exposed to some contract price escalation risk. This risk exposure is due to the difference in the basis on which Defence is funded for price escalations from government (being the non-farm GDP deflator) to the price escalation clauses embedded within the contracts. The risk of increased cost is managed by Defence to ensure exposure to the Commonwealth is minimised. 1.12 Derecognition of Financial Assets and Liabilities Financial assets are derecognised when the contractual rights to the cash flows from the financial assets expire or the asset is transferred to another entity. In the case of a transfer to another entity, it is necessary that the risks and rewards of ownership are also transferred. Financial liabilities are derecognised when the obligation under the contract is discharged, cancelled or has expired. 1.13 Receivables Receivables for goods and services, which have 30 day terms, are recognised at the nominal amounts due less any allowance for impairment. The collectability of receivables is assessed periodically with allowance made for doubtful debts when there is objective evidence that Defence will not be able to collect the debt. No allowance is made for Australian Government, foreign government and employee debts as they are deemed to be collectable unless there is objective evidence to the contrary. 1.14 Employee Benefits Defence’s workforce comprises 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 services rendered by employees are recognised at the reporting date to the extent that they have not been settled. 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 benefit liabilities (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. (a) Leave The liability for employee benefits includes provisions for annual leave and long service leave. The liability for annual leave is measured at the amounts expected to be paid when the liability is settled. 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 rates to the extent that leave is likely to be taken during service rather than paid out on termination. Where there is a legal obligation to payment of leave within 12 months, even when payment is not expected, the liability is disclosed as current. The liability for annual leave for employees reflects the value of total annual leave entitlements at 30 June 2008 and is recognised as a current liability, with amounts expected to be taken or paid within 12 months measured at nominal values and amounts not expected to be taken or paid within 12 months measured at net present value. The liability for long service leave has been 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. (b) Separation and Redundancy Provision is made for separation and redundancy benefit payments. Defence recognises a provision for termination when it has a detailed formal plan for the terminations and has informed those employees affected that the terminations will be carried out.

264 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

(c) Superannuation – APS Employees Permanently appointed APS employees of Defence are members of 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 employee superannuation schemes at rates determined by an actuary to be sufficient to meet the current cost to the Government of the superannuation entitlements of the department’s employees. Defence accounts for these contributions as if they were contributions to defined contribution plans in accordance with AASB 119. (d) Superannuation – ADF Members 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 its 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 Defence’s administered statements. 1.15 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 non-current assets. In operating leases, the lessor effectively retains substantially all such risks and benefits. Where a non-current 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 liability is also recognised at the same 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. Non-current 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. 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. Lease incentives taking the form of ‘free’ leasehold improvements and rent holidays are recognised as an integral part of the total consideration agreed for the use of the leased asset. 1.16 Suppliers and Other Payables Suppliers and other payables are recognised at amortised cost. Defence’s suppliers and other payables are of short duration 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 having been invoiced). 1.17 Contingent Liabilities and Contingent Assets Contingent Liabilities and Contingent Assets are not recognised in the Balance Sheet but are disclosed in the relevant schedules and notes. They may arise from uncertainty as to the existence of a liability or asset, or represent an existing liability or asset in respect of which settlement is not probable or the amount cannot be reliably measured. Contingent assets are disclosed when settlement is probable but not virtually certain, and contingent liabilities are disclosed when settlement is greater than remote. 1.18 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.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 265 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Assets acquired at no cost, or for nominal consideration are initially recognised as assets and revenues at their fair value at the date of acquisition, unless acquired as a consequence of restructuring of administrative arrangements. In the latter case, assets are initially recognised at the amounts at which they were recognised in the transferor agency’s accounts immediately prior to the restructuring. 1.19 Property, Plant and Equipment including Land, Buildings, Infrastructure, Heritage and Cultural Assets, and Specialist Military Equipment (a) Individual Asset Recognition Threshold Purchases of property, plant and equipment including land, buildings and infrastructure are recognised initially at cost where they meet the individual asset capitalisation threshold. Individual items are capitalised where the individual 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. (b) Componentisation Major assets, such as specialist military equipment, are componentised if it is likely that the components will have useful lives that differ significantly from the other parts of the asset. The useful life of components may be determined with reference to the individual asset items, or, over the life of the related primary asset. (c) Decontamination, Restoration and Decommissioning Costs Where a legal or constructive obligation arises on acquisition to restore an asset back to its original condition, the net present value of estimated restoration and decommissioning costs are capitalised and added to the cost of the underlying asset and depreciated over the asset’s useful life. At the same time, a corresponding provision is recognised for these costs. When discounting is used, the carrying amount of the provision is adjusted to reflect the passage of time and any incremental costs are recognised as finance costs. Where a legal or constructive obligation arises as a result of the operations of Defence (i.e. use of the asset) the cost of restoration is recognised as an expense in the period in which the obligation arises. One of the following past events would give rise to a constructive obligation: • A public announcement or statement by Government or Defence that a site would be restored; • The existence of an established pattern of past practice of restoring sites of a particular nature or type; or • A specific policy adopted by Government with regard to restoration of sites of a particular nature or type. (d) Reversal of Previous Asset Write-Downs These are amounts relating to assets which have been previously written down or expensed in prior periods. In the current year, these items have been either reversed as a write down or capitalised for the first time due to either exceeding the capitalisation threshold or through identification during stocktakes. They may include identification of heritage and cultural assets not previously recognised as assets. (e) Assets under construction (AUC) Assets under construction (AUC) are carried at cost and are separately identified as ‘work in progress’ in Note 6. 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 expenditure is reviewed to ensure accurate capitalisation. (f) Subsequent valuations Land, buildings, infrastructure, plant and equipment and heritage and cultural assets are measured and disclosed at fair value less any accumulated depreciation and accumulated impairment losses. Specialist military equipment is carried at cost in accordance with the Finance Minister’s Orders. The basis for determining fair value is by reference to the highest and best use that is physically possible, legally permissible and financially feasible. Where an active and liquid market exists, fair value is determined by reference to market values, noting the highest and best use criteria and any specific factors that have been noted by the valuer.

266 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Fair values for each class of asset are determined as shown below: Active and Liquid Market does not Asset Class Active and Liquid Market Exists exist Land Market selling price Replacement cost

Buildings Market selling price Depreciated replacement cost or net present value of lease payments for leased assets Infrastructure Market selling price Depreciated replacement cost

Plant & Equipment Market selling price Depreciated replacement cost or net present value of lease payments for leased assets Heritage and Cultural Estimated market selling price Depreciated reproduction cost

Following initial recognition at cost, valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets do not materially differ from the assets’ fair values as at the reporting date. Revaluations for land, buildings and infrastructure are conducted every three years; other plant and equipment are revalued annually. Revaluation adjustments are made on a class basis. Any revaluation increment is credited to equity under the heading of asset revaluation reserve except to the extent that it reverses a previous revaluation decrement of the same class that was previously recognised through profit and loss. Revaluation decrements for a class of assets are recognised through profit and loss except to the extent that they reverse a previous revaluation increment for that class. Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the asset is restated to the revalued amount. Refer to Note 1.20 for policy regarding revaluation of intangible assets. (g) Depreciation Property plant and equipment items having limited useful lives are systematically depreciated over their estimated useful lives on a straight-line basis. Pooled assets are depreciated using an estimated useful life based on the average useful lives of similar assets. The aggregate amount of depreciation allocated for each class of asset during the reporting period is disclosed in Note 4D. Depreciation rates (useful lives) are reviewed at each reporting date and necessary adjustments are made in the current, or current and future reporting periods, as appropriate. Residual values are re- estimated only when assets are revalued. The following are minimum and maximum useful lives for the different asset classes. These are not necessarily indicative of typical useful lives for these asset classes. 2007-08 2006-07 Buildings 2 to 90 years 2 to 90 years Infrastructure 3 to 87 years 3 to 87 years Specialist military equipment 2 to 70 years 2 to 74 years Other plant and equipment 2 to 70 years 2 to 70 years Assets under finance lease 2 to 62 years 2 to 62 years

Heritage and cultural assets within Defence have been assessed to have indefinite lives. These heritage and cultural assets are stored, managed, displayed, repaired and restored in ways that will maintain their cultural or heritage value over time. Where conservation, restoration and preservation activities demonstrate that an asset will be maintained for an indefinite period, these items are considered to have indefinite useful lives and therefore not subject to depreciation. Heritage and cultural items include artefacts and memorabilia that are or may be of national historical or cultural significance. While many of these items represent military achievements, others

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 267 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008 are associated with developments in science and exploration, or with significant personal achievements. Some land and buildings may be of historical or cultural significance. Road earthworks are depreciated over the estimated useful life of the asset except where an engineering review has determined the useful life to be indefinite, in which case no depreciation is applied. 1.20 Intangibles Defence’s intangibles primarily comprise externally acquired and internally developed computer software for internal use. Intangibles with gross values greater than $150,000 are only capitalised when they meet the recognition criteria in AASB 138 Intangible Assets. Software is amortised on a straight–line basis over its anticipated useful life. The useful lives of Defence software are 2-20 years. All software assets are assessed annually for indications of impairment. Defence recognises its intangible assets initially at cost and measures those which have an active market at fair value subsequent to initial recognition. If an intangible asset is acquired at no cost or for nominal consideration, other than those acquired through restructuring, it is recognised initially at fair value as at the date of acquisition. All Defence intangible assets are currently stated at cost or fair value less any subsequent accumulated amortisation and accumulated impairment losses. Acquired intellectual property may form part of the acquisition of particular tangible assets. Where the acquired intellectual property is inseparable from the underlying tangible asset it is reflected in the value of the tangible asset in the balance sheet. Defence reviews the useful life of intangible assets annually based on the service potential of the assets. All Defence intangible assets have a finite useful life and are amortised over their anticipated useful life. Where there is an indication that the service potential of an intangible asset is impaired, the recoverable amount of that asset is determined based on the remaining service potential. Where the recoverable amount is lower than the carrying amount, the asset is written down to its recoverable amount. 1.21 Inventories Defence holds inventory for its own use and does not ordinarily hold inventory for sale. Sales of inventory relate to minor fuel sales to foreign governments. Inventory held for use is valued at cost adjusted where applicable for loss of service potential. Defence considers that loss of operating capacity due to obsolescence is the most appropriate basis for loss of service potential of its inventories. Costs incurred in bringing each item of inventory (primarily explosive ordnance and general stores inventory) 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. Inventories acquired at no cost or nominal consideration are measured at current replacement cost at the date of acquisition. 2006-07: In 2005-06 inventories were measured at the lower of cost and current replacement cost. Due to early adoption of AASB 2007-5 Amendments to Australian Accounting Standards Inventories Held for Distribution by Not-for-Profit Entities [AASB 102], where an adjustment has been made in 2005-06 to revalue inventories to current replacement cost and there has been no decline in service potential, the adjustment has been reversed in 2006-07. The reversal of the adjustment is recognised in retained earnings as at 1 July 2006 in accordance with AASB 2007-5. 1.22 Assets Held for Sale Non-current assets are classified as held for sale if the carrying amount is to be recovered principally through a sale transaction rather than through continuing use. Classification as held for sale occurs when the asset is available for immediate sale in its present condition, and the sale is highly probable. On classification as held for sale, the asset is measured at the lower of its carrying amount and fair value less costs to sell. Any write down to fair value less costs to sell is recognised as an impairment loss. Assets which have been classified as held for sale are no longer subject to depreciation or amortisation. 1.23 Prepayments Prepayments, excluding those paid to DMO or to employees as retention benefit payments, are recognised if the value of the payment is $50,000 or greater. Prepayments made to DMO for acquisition and sustainment services and to employees for retention benefits, are recognised when the payment is made irrespective of the amount.

268 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

1.24 Foreign Currency Transactions denominated in a foreign currency are converted at the exchange rate on the date of transaction. Foreign currency receivables and payables are translated at the exchange rate at the balance date. Exchange gains and losses are reported in the income statement. Non-financial items that are measured at cost in a foreign currency are translated using the spot exchange rate at the date of the initial transaction. Non-financial items that are measured at fair value in a foreign currency are translated using the spot exchange rates at the date when the fair value was determined. 1.25 Taxation Defence is exempt from all forms of taxation except Fringe Benefits Tax (FBT), the Goods and Services Tax (GST) and certain excise and customs duties. Revenues, expenses, assets and liabilities are recognised net of GST, except: • where the amount of GST incurred is not recoverable from the Australian Taxation Office; and • for receivables and payables which are recognised inclusive of GST. 1.26 Investments in Co-operative Research Centres Defence had partial ownership in, and participated in the governance of, several Co-operative Research Centres (CRC’s). These include the Co-operative Research Centre for Sensor Signal and Information Processing (CSSIP), Spire Innovations Pty Ltd, the Co-operative Research Centre for Advance Composite Structures (CRC ACS), the Co-operative Research Centre for Integrated Engineering Asset Management (CRC IEAM) and the Co-operative Research Centre for Contamination Assessment and Remediation of the Environment (CRC CARE). Except for CSSIP, Defence does not have control, joint control or significant influence over these entities. CSSIP was assessed to be a jointly controlled operation over which Defence has joint control, but was wound up during 2007-08. Because Defence’s investments in these entities are immaterial, they have not been recognised in the financial statements. 1.27 Reporting of Administered Activities Administered revenues, expenses, assets, liabilities, contingencies and commitments and cash flows are disclosed in the Schedule of Administered Items and related notes. Except where otherwise stated below, administered items are accounted for on the same basis and using the same policies as for departmental items, including the application of accounting standards. (a) Administered Cash Transfers to and from Official Public Account Revenue collected by Defence, for use by the Australian Government rather than Defence, is administered revenue. Collections are transferred to the Official Public Account (OPA) maintained by the Department of Finance and Deregulation. Cash is drawn down from the OPA to make payments under Parliamentary appropriations on behalf of the Australian Government. These 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 Statement of Cash Flows in the Schedule of Administered Items and in the Administered Reconciliation Table in Note 22. Thus the Schedule of Administered Items largely reflects the Australian Government’s transactions, through Defence, with parties outside the Australian Government. (b) 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 Defence Housing Australia. (c) Administered Investments Defence reports the Australian Government’s capital investment in Defence Housing Australia (DHA) which is outlined at Notes 19C and 25. 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 was assessed for impairment at year end and no indicators of impairment were noted.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 269 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

(d) Military Retention Benefits Certain categories of ADF personnel who are members of the Military Superannuation Benefits Scheme (MSBS) 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 amortised over the expected period of service. (e) Military Superannuation The Defence Force Retirement and Death Benefits Scheme (DFRDB) is a fully unfunded scheme and the Military Superannuation and Benefits Scheme (MSBS) is a partly funded scheme. MSBS member contributions are paid into the MSBS Fund that is controlled by the MSBS Board and are therefore not reflected in the Schedule of Administered Items. The Australian Government, on behalf of the MSBS Fund, makes funded benefit payments to members of the scheme and is reimbursed by the MSBS 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 Schedule of Administered Items. The AGA completes a full review of the unfunded liabilities (Long Term Cost Report) every three years. This was last completed in 2005. Actuarial gains and losses for defined benefit plans are recognised applying the “direct to equity” option as outlined in AASB 119. (f) Other Guarantees There are no quantifiable administered amounts guaranteed by the Commonwealth to disclose in the Schedule of Administered Items. There is one unquantifiable guarantee disclosed in the Administered Contingent Liabilities and Contingent Assets Note (Note 24). At the time of completion of the financial statements there was no reason to believe that the guarantees would be called upon and therefore recognition of a liability was not required. (g) Indemnities There are currently no quantifiable indemnities to disclose in the Schedule of Administered Items. There is one unquantifiable contingency disclosed in the Administered Contingent Liabilities and Contingent Assets Note (Note 24). At the time of completion of the financial statements there was no reason to believe that the indemnities would be called upon and therefore no recognition of any liability was required. (h) Subsidies Defence administers the Defence Home Owner Subsidy 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.

270 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 2: Events Occurring after the Balance Sheet Date On 4 September 2008, the Minister for Defence, the Hon Joel Fitzgibbon MP, announced that DMO and Boeing Australia had agreed to terminate the contract for the delivery of a Tactical Unmanned Aerial Vehicle (TUAV) System. As part of the agreement to terminate, Boeing Australia will refund the $6 million Defence has paid to date under the contract. This agreement has an immaterial impact on Defence’s 2007-08 financial statements.

On 2 July 2008, Defence entered into a contract for approximately $405 million with Chandler Macleod Recruiting Services to provide recruitment services for the Australian Defence Force.

On 11 July 2008, Defence renewed a contract for approximately $269 million with IBM for the provision of information technology hardware and software to support Defence operations.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 271 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

2008 2007 $'000 $'000 Note 3: Income

Revenue

Note 3A: Revenue from Government Appropriation: Departmental outputs 19,693,267 17,221,662 Total revenue from government 19,693,267 17,221,662

Note 3B: Sale of goods and rendering of services (including cost recovery) Sale of goods to: Related entities 6,532 7,179 External entities 126,319 115,800 Total sale of goods 132,851 122,979

Rendering of services to: Related entities 356,881 361,564 External entities 199,108 189,971 Total rendering of services 555,989 551,535 Total sale of goods and rendering of services (including cost recovery) 688,840 674,514

Note 3C: Rental income Operating leases 7,073 6,963 Total rental income 7,073 6,963

Note 3D: Other revenue Excise refunds 33,509 57,017 Settlement of damages 17,224 16,822 Foreign military sales refunds 1,859 10,335 Other minor revenues 17,758 5,575 Resources received free of charge 5,883 21,251 Total other revenue 76,233 111,000

272 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

2008 2007 $'000 $'000 Gains

Note 3E: Sale of assets Land and buildings Proceeds from sale 24,486 65,136 Carrying value of assets sold (14,853) (53,572) Selling expense (10,618) (15,338) Net gain (loss) from sale of land and buildings (985) (3,774)

Specialist military equipment Proceeds from sale 2 23,748 Carrying value of assets sold - (20,155) Selling expense (161) - Net gain (loss) from sale of specialist military equipment (159) 3,593

Other infrastructure, plant and equipment Proceeds from sale 40,300 42,240 Carrying value of assets sold (40,223) (44,542) Selling expense (1,195) (1,917) Net gain (loss) from sale of other infrastructure, plant and equipment (1,118) (4,219)

Other assets Proceeds from sale 595 6,270 Selling expense (485) (100) Net gain (loss) from sale of other assets 110 6,170

Total net gain (loss) from sale of assets (2,152) 1,770

Note 3F: Reversals of previous asset write-downs Specialist military equipment 414,180 357,153 Land and buildings 27,478 16,681 Plant and equipment 61,656 28,170 Infrastructure 5,667 4,740 Heritage and cultural assets 1,023 4,553 Software and intangibles 15,333 1,631 Total property, plant and equipment and intangibles 525,337 412,928

Receivables 4,874 - Inventory 85,119 136,876 Total reversal of previous asset write-downs 615,330 549,804

Note 3G: Other gains Other gains 3,295 7,467 Total other gains 3,295 7,467

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 273 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

2008 2007 $'000 $'000 Note 4: Expenses

Note 4A: Employee benefits Australian Public Service (APS) employee benefits Wages and salaries 940,755 877,629 Superannuation – defined contribution plan 167,114 159,910 Leave and other entitlements 129,007 141,687 Fringe Benefits Tax 5,259 5,393 Separation and redundancies 179 704 Other allowances 22,216 21,520 Health expenses 5,232 4,115 Other employee expenses 1,461 1,435 Total APS employee benefits 1,271,223 1,212,393

Australian Defence Force (ADF) employee benefits Wages and salaries 3,220,990 2,879,489 Superannuation – defined contribution plan 846,659 787,106 Housing1 504,297 436,822 Leave and other entitlements 411,213 423,042 Fringe Benefits Tax 295,644 268,711 Overseas allowances 273,972 238,059 Separation and redundancies 1,780 2,342 Other allowances 311,474 340,070 Health expenses 221,965 192,398 Other employee expenses 151,079 115,312 Total ADF employee benefits 6,239,073 5,683,351

Total employee benefits 7,510,296 6,895,744

1. Housing expenses include lease payments made to DHA for the provision of housing for Australian Defence Force (ADF) members with families. Due to their nature, these payments are classified as employee expenses. Residences leased from DHA are subleased by Defence to ADF members for a nominal charge. Sublease expenses paid by Defence to DHA recognised as part of ADF Housing expenses is $335.56m (2006-07: $292.26m).

274 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

2008 2007 $'000 $'000 Note 4B: Suppliers Provision of goods - related entities 14,990 14,307 Provision of goods - external entities 1,342,722 1,095,178 Rendering of services - related entities 3,302,968 3,069,286 Rendering of services - external entities 3,455,167 3,214,912 Operating lease rentals Minimum lease repayments 314,458 218,243 Contingent rentals 1,124 907 Sublease 5,139 4,791 Workers Compensation premiums 17,512 16,999 Total suppliers 8,454,080 7,634,623

Note 4C: Grants Public sector: State and Territory Governments 14 - Local Governments 1,895 1,650 Private sector: Non-profit organisations 15,883 1,353 Overseas 208 - Total grants 18,000 3,003

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 275 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

2008 2007 $'000 $'000 Note 4D: Depreciation and amortisation Depreciation Buildings 403,344 364,032 Buildings - leasehold improvements 12,025 6,617 Specialist military equipment 2,656,342 2,741,840 Plant and equipment 266,950 268,300 Infrastructure 229,371 209,937 Total depreciation 3,568,032 3,590,726

Amortisation Buildings under finance lease 27,202 19,731 Software under finance lease 10,824 10,824 Software 45,488 40,351 Intangibles – other 3,328 3,706 Total amortisation 86,842 74,612

Total depreciation and amortisation 3,654,874 3,665,338

The aggregate amounts of depreciation or amortisation expensed during the reporting period for each class of depreciable asset are as follows: Buildings 442,571 390,380 Specialist military equipment 2,656,342 2,741,840 Plant and equipment 266,950 268,300 Infrastructure 229,371 209,937 Software and intangibles 59,640 54,881 Total depreciation and amortisation 3,654,874 3,665,338

Note 4E: Finance costs Finance leases 31,602 28,329 Unwinding of discount for site restoration, decontamination and decommissioning 12,540 10,246 Bank interest 4 19 Total finance costs 44,146 38,594

276 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

2008 2007 $'000 $'000 Note 4F: Write-down and impairment of assets Financial assets Receivables 2,170 4,010 Total financial assets 2,170 4,010

This is represented by: Bad debts written off 360 679 Impairment allowance 1,810 3,331 2,170 4,010 Non financial assets

Specialist military equipment Assets in use 1,020,734 531,202 Work in progress 365,778 37,810 Total specialist military equipment 1,386,512 569,012

Land and buildings Assets in use 33,816 33,121 Work in progress 19,638 600 Total land and buildings 53,454 33,721

Plant and equipment Assets in use 42,932 68,811 Work in progress 25,015 51,225 Total plant and equipment 67,947 120,036

Infrastructure Assets in use 4,581 4,613 Work in progress 39,605 - Total infrastructure 44,186 4,613

Intangibles Assets in use 4,691 28,822 Work in progress 8,525 18,208 Total intangibles 13,216 47,030

Heritage and cultural assets Assets in use - 1,608 Total heritage and cultural assets - 1,608

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 277 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

2008 2007 $'000 $'000

Inventory * Write-down of general stores inventory 267,913 114,347 Write-down of explosive ordnance 112,743 (90,268) Total inventory 380,656 24,079

Total write-down and impairment of assets 1,948,141 804,109

* 2006-07: In accordance with the amendments to AASB 102, the current replacement cost adjustment from 2005-06 for explosive ordnance is no longer required and has been reversed in 2006-07. Refer Note 1.21.

Note 4G: Foreign exchange Foreign exchange gains Non-speculative 3,729 23,028

Less foreign exchange losses Non-speculative (2,652) (23,334) Total net foreign exchange 1,077 (306)

Note 4H: Other expenses Act of Grace payment Section 33 81 200 Ex-gratia payments 157 2,595 APS payments 19 6 Defective Administration Scheme payments 543 652 Restoration in use costs 54,015 1,785 Other minor expenses - 1,733 Total other expenses 54,815 6,971

278 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

2008 2007 $'000 $'000 Note 5: Financial Assets Note 5A: Cash and cash equivalents Cash on hand 4,614 5,521 Cash at bank - at call 24,609 26,486 Total cash and cash equivalents 29,223 32,007 Cash and cash equivalents are recognised as current assets.

Note 5B: Trade and other receivables Goods and services 80,852 82,973 Less: Impairment allowance account (3,302) (6,437) Net goods and services receivables 77,550 76,536

GST receivable from the Australian Taxation Office 88,096 75,589

Appropriation receivable: For existing outputs 247,363 199,628 Accrued revenue 34,835 127,537 Other 14,341 22,392 Total trade and other receivables (net) 462,185 501,682

Trade and other receivables are represented by: Current 456,784 486,303 Non-current 5,401 15,379 Total trade and other receivables (net) 462,185 501,682

Trade and other receivables (gross) are aged as follows: Not overdue 441,003 492,360 Overdue by: Less than 30 days 4,994 2,729 30 to 60 days 1,541 1,266 61 to 90 days 2,339 1,269 More than 90 days 15,610 10,495 Total trade and other receivables (gross) 465,487 508,119

The impairment allowance account is aged as follows: Not overdue - - Overdue by: Less than 30 days - - 30 to 60 days - - 61 to 90 days (780) - More than 90 days (2,522) (6,437) Total impairment allowance account (3,302) (6,437)

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 279 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

2008 2007 $'000 $'000 Reconciliation of impairment allowance account Opening balance (6,437) (3,105) Amounts written off 360 679 Amounts recovered and reversed 4,874 - Increase / decrease recognised in net surplus/deficit (2,099) (4,011) Closing balance (3,302) (6,437)

Note 6: Non-Financial Assets

Note 6A: Land and buildings Freehold land at fair value * 4,183,862 3,880,314 Total freehold land 4,183,862 3,880,314

Buildings on freehold land at fair value * 7,717,838 7,133,022 Accumulated depreciation (204,620) (112,068) Total buildings on freehold land 7,513,218 7,020,954

Work in progress – at cost 484,657 668,700

Buildings held under finance lease 512,092 419,336 Accumulated amortisation (125,755) (108,554) 386,337 310,782 Total buildings 8,384,212 8,000,436

Total land and buildings 12,568,074 11,880,750

* All independent valuations were conducted by the Australian Valuation Office in accordance with the revaluation policy stated at Note 1.19(f).

280 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

2008 2007 $'000 $'000 Note 6B: Specialist military equipment Specialist military equipment in use other than repairable items at cost 42,312,376 42,417,667 Accumulated depreciation (23,288,820) (22,619,386) Net carrying value of specialist military equipment 19,023,556 19,798,281

Repairable items at cost 10,611,732 8,917,402 Accumulated depreciation (6,567,566) (5,178,350) Net carrying value of repairable items 4,044,166 3,739,052

Work in progress - at cost 9,380,032 9,058,891

Total specialist military equipment 32,447,754 32,596,224

Note 6C: Plant and equipment at fair value * 1,718,027 1,663,964 Accumulated depreciation (739,502) (651,686) 978,525 1,012,278

Work in progress - at cost 169,237 201,966

Total plant and equipment 1,147,762 1,214,244

* All independent valuations were conducted by the Australian Valuation Office in accordance with the revaluation policy stated at Note 1.19(f).

Note 6D: Infrastructure at fair value * 4,712,704 4,558,879 Accumulated depreciation (74,962) (43,646) 4,637,742 4,515,233

Work in progress - at cost 72,344 112,661

Total infrastructure 4,710,086 4,627,894

* All independent valuations were conducted by the Australian Valuation Office in accordance with the revaluation policy stated at Note 1.19(f).

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 281 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

2008 2007 $'000 $'000 Note 6E: Intangibles Computer Software Purchased at cost 270,484 199,852 Accumulated amortisation (116,178) (86,050) 154,306 113,802

Work in progress - at cost 130,202 87,770

Computer software under finance lease 64,944 64,944 Accumulated amortisation (64,944) (54,120) - 10,824 Total purchased computer software 284,508 212,396

Internally Generated at cost 76,879 48,941 Accumulated amortisation (43,548) (22,320) 33,331 26,621

Work in progress - at cost - - Total internally generated computer software 33,331 26,621 Total computer software 317,839 239,017

Other Intangibles Purchased at cost 61,127 60,606 Accumulated amortisation (37,437) (34,240) 23,690 26,366

Work in progress – at cost 15,573 10,362 Total other intangibles purchased 39,263 36,728

Internally Generated at cost 1,277 1,277 Accumulated amortisation (754) (623) 523 654

Work in progress – at cost - - Total other intangibles internally generated 523 654 Total other intangibles 39,786 37,382

Total intangibles 357,625 276,399

282 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

2008 2007 $’000 $’000 Note 6F: Heritage and cultural assets at fair value * 805,587 763,944 Total heritage and cultural assets 805,587 763,944

*All valuations were either conducted by management or independently in accordance with the revaluation policy stated at Note 1.19(f)

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 283 APPENDIX 13 DEFENCE’S FINANCES - - 58,677 (55,076) 118,129 933,259 525,337 To ta l $’000 (282,845) 4,600,141 80,270,498 51,359,455 83,300,974 52,036,888 (3,654,874) (1,565,315) (28,911,043) (31,264,086) ------112 654 523 (623) (131) (754) 1,277 1,277 13,243 (13,355) $’000 Other Internally Generated Intangibles Intangibles 2 ------7,734 70,968 76,700 (3,197) (2,004) 36,728 39,263 (34,240) (37,437) $’000 Other Purchased Intangibles Intangibles ------48,941 50,263 76,879 (8,011) 26,621 33,331 (22,320) (35,542) (43,548) $’000 Software Internally Computer Computer Generated ------30,717 85,687 15,221 ent, and Intangibles (2007-2008) 352,566 465,630 (48,301) (11,212) 212,396 284,508 $’000 (140,170) (181,122) Software Computer Purchased ------19 982 1,023 41,963 (2,344) and 763,944 805,587 $’000 763,944 805,587 Assets Cultural Cultural Heritage Heritage - - (389) 7,181 3,500 61,656 (8,130) 244,820 (67,947) (40,223) (651,686) (266,950) (739,502) 1,865,930 1,887,264 $’000 1,214,244 1,147,762 leased) Plant and Equipment (owned and (owned and - - - - (159) 5,667 55,113 of Property, Plant and Equipm of Property, 169,777 125,351 (43,646) (44,186) (74,962) IAL STATEMENTS $’000 (229,371) 4,671,540 4,785,048 4,627,894 4,710,086 Infrastructure - - - - 59,067 414,180 (58,076) (126,250) $’000 3,605,463 Military 60,393,960 62,304,140 (2,656,342) (1,386,512) Specialist 32,596,224 32,447,754 Equipment (27,797,736) (29,856,386) - (1) OF THE FINANC 20,138 (9,049) 597,179 118,129 295,141 (52,247) (22,981) $’000 (220,622) (119,962) (442,571) (330,375) 8,221,058 8,714,587 Buildings 8,000,436 8,384,212 ------3,322 7,340 (1,207) (5,804) 434,508 Land $’000 (134,611) 3,880,314 4,183,862 3,880,314 4,183,862 Item downs Sale Department of Defence NOTES TO AND FORMING PART thefor period ended 30 June 2008 plant and equipment, intangibles of property, Note 6G: Analysis Balances and Closing Opening of the A: Reconciliation Table by purchase by finance lease of previous asset write- Reversal Other adjustments in (out) Transfers to/from Assets Held for Transfers Other disposals As at 1 July 2007 Gross Book value depreciation/ Accumulated amortisation impairment and value 1 JulyNet book 2007 Additions: Revaluations/impairments through equity Reclassifications Depreciation/amortisation expense and impairments Write-downs recognised in operating result Other movements: Disposals value as atNet book 30 June 2008 by: represented Gross book value depreciation/ Accumulated amortisation value net book Closing

284 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES - 27,801 (8,637) 780,553 412,928 180,686 (16,470) To ta l $’000 (776,020) (118,269) 4,531,552 76,929,226 50,010,669 80,270,498 51,359,455 (3,665,338) (26,918,557) (28,911,043) ------654 (40) (623) 6,262 1,277 72,619 33,776 (38,843) (39,344) $’000 Other Internally Generated Intangibles Intangibles ------324 28,792 18,765 70,968 (2,946) (3,706) (4,501) 25,846 36,728 (34,240) $’000 Other Purchased Intangibles Intangibles 8 ------37,788 48,941 (8,751) (1,449) 26,621 198,408 (39,054) (22,320) 159,354 $’000 (160,329) Software Internally Internally Computer Generated ------1,299 25,224 72,480 159,460 196,857 352,566 (86,980) (42,424) (41,040) 212,396 $’000 (140,170) ent, and Intangibles (2006-2007) Software Computer Computer Purchased ------2,059 4,165 4,553 2,110 29,093 (1,608) and and 723,572 763,944 $’000 723,572 763,944 Assets Cultural Cultural Heritage Heritage - - (66) 37,895 28,170 (1,512) (4,655) 321,763 (44,516) $’000 (457,513) (268,300) (120,036) (651,686) 1,723,014 1,865,930 leased) 1,265,501 1,214,244 Plant and Equipment (owned and - - - - (26) 4,740 70,645 14,272 (4,613) 306,324 (21,998) (43,646) $’000 (209,937) 4,468,487 4,671,540 of Property, Plant and Equipm of Property, 4,446,489 4,627,894 IAL STATEMENTS Infrastructure - - - (8,637) 357,153 (20,224) (18,514) (20,155) $’000 (569,012) 3,440,754 Military Military 58,292,831 60,393,960 (2,741,840) Specialist 32,176,699 32,596,224 Equipment (26,116,132) (27,797,736) - - 27,801 12,285 11,060 624,919 414,068 (13,922) (18,007) (18,342) $’000 OF THE FINANC (155,091) (390,380) (220,622) 7,506,045 8,221,058 Buildings 7,350,954 8,000,436 ------2,138 1,272 4,396 (6,827) 174,281 Land $’000 (15,714) (35,230) 3,755,998 3,880,314 3,755,998 3,880,314 Item Sale downs Department of Defence NOTES TO AND FORMING PART thefor period ended 30 June 2008 plant and equipment, intangibles of property, Note 6G: Analysis Balances and Closing Opening of the A: Reconciliation Table by purchase by finance lease of previous asset write- Reversal Other adjustments in(Out) Transfers to/from Assets Held for Transfers Other disposals As at 1 July 2006 Gross Book value Accumulated depreciation/amortisation and impairment value 1 JulyNet book 2006 Additions: Revaluations/impairments through equity Reclassifications Depreciation/amortisation expense and impairmentsrecognisedWrite-downs in operating result Other movements Disposals value as atNet book 30 June 2007 by: represented Gross book value Accumulated depreciation/amortisation value net book Closing

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 285 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

2008 2007 $’000 $’000 Note 6H: Inventories Inventories – General ** 1,992,923 2,141,402 Inventories – Explosive ordnance 2,831,713 2,610,821 Inventories – Fuel 128,226 116,849 Total inventories 4,952,862 4,869,072 Inventories are represented by: Current 684,639 727,888 Non-current 4,268,223 4,141,184 Total inventories 4,952,862 4,869,072

I n v e n t o r y v a l u a t i o n d i s s e c t i o n Balance at cost as at 1 July ** 4,869,072 4,017,484 Inventory acquired during period 1,462,228 1,503,147 Inventory recognised during period 85,119 136,876 Inventory consumed during period (946,208) (797,271) Inventory write downs during period (380,656) (24,079) Transfers to inventory during period 667 568 Transfers from inventory during period (137,360) (29,954) Change in accounting policy* - 62,301 Closing balance as at 30 June 4,952,862 4,869,072

* Refer Note 1.21 for details regarding change in accounting policy. ** Refer Note 16 for details regarding accounting for errors.

286 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

2008 2007 $'000 $'000 Note 6I: Prepayments Capital prepayments 828,531 575,680 Non capital prepayments 226,686 186,443 Total prepayments 1,055,217 762,123

Prepayments are represented by: Current 1,017,216 716,621 Non-current 38,001 45,502 Total 1,055,217 762,123

Note 6J: Assets held for sale Land and buildings 297,277 139,685 Specialist Military Equipment 126,250 - Other infrastructure, plant and equipment 3,693 4,690 Total assets held for sale 427,220 144,375

Note 7: Payables

Note 7A: Suppliers Trade creditors - non capital 811,088 697,049 Trade creditors - capital 46,907 60,071 Total supplier payables 857,995 757,120

Supplier payables are represented by: Current 857,995 757,120 Non-current - - Total supplier payables 857,995 757,120

Note 7B: Other payables Other payables 197,170 130,344 Total other payables 197,170 130,344

Other payables are represented by: Current 169,345 115,308 Non-current 27,825 15,036 Total other payables 197,170 130,344

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 287 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

2008 2007 $'000 $'000 Note 8: Interest Bearing Liabilities *

Finance leases payable: Within one year Minimum lease payments 58,452 50,759 Deduct: future finance charges (34,498) (27,934) In one to five years Minimum lease payments 231,499 179,488 Deduct: future finance charges (111,057) (92,692) In more than five years Minimum lease payments 368,040 263,141 Deduct: future finance charges (107,448) (59,174) Finance leases recognised on the balance sheet 404,988 313,588

Lease liability is represented by: Current 23,954 22,825 Non-current 381,034 290,763 Net lease liability 404,988 313,588

* Finance leases exist in relation to properties. The leases are non-cancellable and for fixed terms with an average remaining of 11 years. The maximum number of years remaining is 31 relating to the new Single Leap finance lease to May 2039. The lease assets secure the lease liabilities. In some cases Defence has guaranteed the residual values of leased assets. The interest rate implicit in the leases averaged 6.67% (2007: 8.91%).

288 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

2008 2007 $'000 $'000 Note 9: Provisions

Note 9A: Employee provisions Australian Public Service (APS) employee provisions Wages and salaries 13,520 8,723 Leave 416,402 402,190 Superannuation 3,218 1,839 Separations and redundancies 18 807 Total APS employee provisions 433,158 413,559

Australian Defence Force (ADF) employee provisions Wages and salaries 64,233 35,716 Leave 1,325,949 1,233,202 Superannuation 11,994 6,298 Separations and redundancies - 561 Other provisions 21,370 28,736 Total ADF employee provisions 1,423,546 1,304,513

Total employee provisions 1,856,704 1,718,072

Employee provisions are represented by: Current 1,668,728 1,545,371 Non-current 187,976 172,701 Total employee provisions 1,856,704 1,718,072

The classification of current employee provisions includes amounts for which there is not an unconditional right to defer settlement by one year, hence in the case of employee provisions the above classification does not represent the amount expected to be settled within one year of reporting date. Employee provisions expected to be settled in twelve months from the reporting date $693.72m (2007: $623.07m), in excess of one year $1,162.98m (2007: $1,094.99m).

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 289 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

2008 2007 $'000 $'000 Note 9B: Restoration, decontamination and decommissioning Provisions for restoration and decommissioning 272,790 257,411 Provision for decontamination1 342,782 283,845 Total restoration, decontamination and decommissioning provisions 615,572 541,256

Restoration, decontamination and decommissioning provisions are represented by: Current 85,559 60,177 Non-current 530,013 481,079 Total restoration, decontamination and decommissioning provisions 615,572 541,256

*Refer to Note 9D for reconciliation 1. This provision does not represent the total cost of remediating contamination on all Defence sites rather, it provides an estimate of the present obligation that exists in relation to these sites (see Note 1.19(c) for the accounting policy on this matter).

Note 9C: Other provisions Other provisions 24,603 46,300 Total other provisions 24,603 46,300

Other provisions are represented by: Current 14,545 240 Non-current 10,058 46,060 Total other provisions 24,603 46,300

*Refer to Note 9D for reconciliation

Restoration and Decontamination Other decommissioning provision provisions provision Note 9D: Reconciliation of $’000 $’000 provision balances $’000 Carrying amount at 1 July 2007 257,411 283,845 46,300 Payments made during financial year (2,425) (25,101) (18,552) Additional provisions made 10,156 97,802 360 Unwinding of the discounted amount arising from the passage of time and changes in the discount rate 7,660 4,880 - Amounts reversed (12) (18,644) (3,505) Closing balance 2008 272,790 342,782 24,603

290 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 10: Restructuring

Transfer of assets from the Department of Immigration and Citizenship As part of the new Detention Strategy agreed by Government, a number of demountable buildings and plant and equipment assets from the Woomera Immigration Reception and Processing Centre were transferred from the Department of Immigration and Citizenship to the Department of Defence during 2007-08.

2008 2007* $'000 $'000

The net book value of assets transferred from the Department of Immigration and Citizenship for no consideration and recognised as at the date of transfer were:

Total assets recognised 4,750 - Net assets assumed 4,750 -

Net increase (decrease) in net assets during the year 4,750 -

* (2007: there were no restructuring activities during 2006-07).

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 291 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 11: Cash Flow Reconciliation 2008 2007 $'000 $'000

Reconciliation of cash and cash equivalents as per Balance Sheet to Cash Flow Statement Cash at year end per Cash Flow Statement 29,223 32,007 Balance Sheet items comprising above cash 'Financial Asset-Cash' 29,223 32,007 Reconciliation of net surplus/(deficit) to net cash from/(used by) operating activities: Operating result (601,389) (475,508) Depreciation and amortisation 3,654,874 3,665,338 Foreign exchange (gains) losses (1,077) 306 Reversals of previous asset write-downs (610,456) (549,804) (Gains) losses from assets sales 2,152 (5,805) Other gains - (27,078) Net write-down and impairment of assets 1,945,971 805,082 Finance costs 44,146 38,594 Inventory consumption or expensed 951,114 801,513 Reallocation of appropriation receipts 176 (166,506) Restoration in use costs 54,015 (255) Decrease/(increase) in trade and other receivables 39,497 59,562 Decrease/(increase) in inventories (117,685) (121,743) Decrease/(increase) in prepayments (224,054) (59,893) Increase/(decrease) in employee provisions 138,632 209,075 Increase/(decrease) in other provisions (21,697) (15,870) Increase/(decrease) in suppliers 81,767 39,422 Increase/(decrease) in other payables 66,826 (19,737) Net cash from/(used by) operating activities 5,402,812 4,176,693

292 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008 Note 12: Contingent Liabilities and Contingent Assets Quantifiable Contingencies The Schedule of Contingencies in the Financial Report reports contingent liabilities as at 30 June 2008 in respect of claims for damages/costs of $100.15m (2006-07: Defence $99.60m). This amount represents an estimate of the Department’s liability based on precedent. This estimated figure is determined by conducting an objective analysis of the probable amount payable for all the matters managed by the Defence Legal Panel. However, as an estimate, the exact amount that will become payable under these claims is uncertain. The Department of Defence is defending the claims, and as a consequence, the timing of outflows resulting from the claims will depend on the nature of each individual case. The Schedule also reports contingent assets in respect of claims for damages/costs of $2.69m (2006-07: Defence $1.12m). The Department is expecting to succeed in claims against suppliers, although the cases are continuing. This estimate is based on precedent. Unquantifiable Contingencies ADI Limited – Officers’ and Directors’ Indemnities Under the sale agreements for ADI Ltd, the Australian Government agreed to indemnify the directors, officers and employees for claims and legal costs associated with assistance related to the sale of the Australian Government’s shares in the company. The Australian Government has provided an indemnity to ADI Ltd for uninsured losses relating to specific heads of claims. HMAS Voyager / HMAS Melbourne claims Based on a report by the Australian Government Actuary on the financial implications of the HMAS Voyager / HMAS Melbourne collision in 1964, provision has been made for financial liabilities that may arise from the settlement of claims in the future (see Note 9C for further details). This provision covers the expected total costs of settling current and possible future damages claims, the review process currently underway, and the legal/indirect costs involved in dealing with this issue. Accordingly, the financial implications of the collision no longer constitute a contingent liability to be faced by Defence. Decontamination of Defence sites Defence has made financial provision for the possible costs involved in restoring, decontaminating and decommissioning Defence sites in Australia where a legal or constructive obligation has arisen (see Note 9B and Note 1.19(c) for further information). Litigation cases The Department of Defence is involved in a wide range of litigation and other claims for compensation and/or damages that may result in litigation where the matters have yet to be finalised by negotiation or, where required, litigation. Various claims, the subject of cases that have yet to be heard, are part-heard or are subject to an appeal, await a decision on what (if any) damages and/or costs should be paid to the claimant. The litigated and non-litigated claims include common law liability claims and claims arising from complaints to the Human Rights and Equal Opportunity Commission. The litigation includes asbestos claims and claims from injury resulting from the F-111 Deseal/Reseal programmes. Claims have been received for damage caused by the use of Defence Practice Areas and from the presence of unexploded World War II ordnance. Remote Contingencies Defence’s remote contingencies can be divided into three categories: contingencies from the Defence Central Indemnity Register (for guarantees, indemnities and warranties in contracts and agreements), those arising from matters managed by members of Defence’s Legal Services Panels, and those indemnities involved in the leases of senior executive vehicles taken out under the Fleet Management Agreement between the Commonwealth Government represented by the Department of Finance and Deregulation and LeasePlan Australia Ltd as the Fleet Manager under the Agreement, and the novated lease arrangements utilised by Defence employees through salary sacrificing arrangements with various financiers. All categories are considered too remote to be included on the Schedule of Contingencies. The remote contingencies have been objectively assessed as having less than 5% chance of crystallising and, as such, are considered remote. Similarly, contingencies on the Defence Central Indemnity Register are remote, because no actual liability has ever arisen from them or from similar types of contingent liabilities that have been on Defence’s Central Indemnity Register in the past. In addition, there is no record of any indemnity under the Fleet Management Agreement and the novated lease arrangements ever having crystallised. In total, there are 7,998 instances (2006-07: Defence 410) of unquantifiable remote contingent liabilities and 65 instances (2006-07: Defence 44) of quantifiable remote contingent liabilities, to the value of $2,101.85m (2006- 07: Defence $1,766.07m). There are 3 (2006-07: Defence 13) instances of unquantifiable remote contingent assets, and 6 (2006-07: Defence 3) instances of quantifiable remote contingent assets. This increase of unquantifiable remote contingent liabilities for 2007-08 is largely attributed to the inclusion of the indemnities relating to the above vehicle leases. The requirement to include them was clarified in the course of the 2007-08 financial year.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 293 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 13: Executive Remuneration

The number of senior executives who received, or were due to receive, total remuneration of $130,000 or more are set out below:

Remuneration Band 2008 2007

$130,000 to $144,999 7 9 $145,000 to $159,999 5 10 $160,000 to $174,999 15 15 $175,000 to $189,999 28 26 $190,000 to $204,999 31 29 $205,000 to $219,999 23 32 $220,000 to $234,999 27 22 $235,000 to $249,999 26 26 $250,000 to $264,999 26 17 $265,000 to $279,999 20 6 $280,000 to $294,999 17 11 $295,000 to $309,999 12 5 $310,000 to $324,999 7 7 $325,000 to $339,999 1 2 $340,000 to $354,999 4 4 $355,000 to $369,999 - 2 $370,000 to $384,999 4 - $385,000 to $399,999 1 2 $400,000 to $414,999 1 - $415,000 to $429,999 3 2 $430,000 to $444,999 1 1 $460,000 to $474,999 - 1 $475,000 to $489,999 2 - $535,000 to $549,999 1 - 262 229

The aggregate amount of total remuneration of senior executives shown above. 62,797,657 52,106,781

The aggregate amount of separation and redundancy/ termination benefit payments during the year to executives shown above. 1,683,690 1,621,963

294 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 13: Executive Remuneration (continued) The Executive Remuneration Note includes remuneration details for Defence Senior Executives: the Secretary of Defence, the Chief of the Defence Force (CDF), APS SES, ADF Star Ranked Officers, Chief of Division Grades 2 and 3, Medical Officer Grade 6 and Chaplains. In addition Executives who act in substantive SES or Star Ranked positions are included in the note if they meet the criteria while acting at that level.

Included in the above Note: • total remuneration based on salary and allowances, accrued superannuation, redundancy payments, accrued leave, car parking, motor vehicle costs and fringe benefits tax, where the total remuneration exceeds $130,000; • for Australian Defence Force members only, the value of health and housing subsidy and a number of other miscellaneous allowances (such as field allowances, career transition training, separation and retention allowances); • remuneration paid to Senior Executives on secondment from other Departments or Agencies; and • all Military Star Ranked Officers who have been posted to the Defence Materiel Organisation (DMO) for 2007-08 who exceed the threshold of $130,000 which is in accordance with the Department of Finance and Deregulation advice. In 2007-08 there were 25 such Officers (2006- 07: 26). The total remuneration for these Officers was $5,931,145 (2006-07: $4,820,120) including $146,330 (2006-07: $152,718) in separation/redundancy payments. Whilst these Officers undertake a management function within DMO they remain employees of the Department of Defence. Defence has received a payment from the DMO for these Officers in accordance with the Military Workforce Agreement.

Not included in the Note: • Senior Executives who are employed overseas for a period exceeding six months. • remuneration of any Senior Executive employed by Defence during the reporting period but on secondment to another Department or Agency; and • reimbursements of out of pocket expenses.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 295 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

2008 2007 $ $ Note 14: Remuneration of Auditors

Financial statement audit services are provided free of charge to the Department.

The fair value of the services provided by the Auditor-General was: 4,975,000 4,800,000

No other services were provided by the Auditor-General.

296 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 15: Financial Instruments Financial risk management objectives and policies Details of the significant accounting policies and methods adopted, including the criteria for recognition and the basis for measurement in respect of each class of financial asset and financial liability are disclosed in Note 1 to the financial statements. In accordance with Australian Government policy, Defence does not enter into reportable derivative financial instruments.

2008 2007 $'000 $'000 (a) Categories of financial instruments Financial assets Loans and receivables Cash and cash equivalents 29,223 32,007 Trade and other receivables 126,726 226,465 Carrying amount of financial assets 155,949 258,472

Financial Liabilities At amortised cost Suppliers 857,995 757,120 Other payables 197,170 130,344 Finance lease 404,988 313,588 Carrying amount of financial liabilities 1,460,153 1,201,052

(b) Net income and expense from financial assets Loans and receivables Exchange gains /(loss) (935) (1,956) Impairment 2,704 (4,010) Net gain/(loss) on financial assets 1,769 (5,966) There is no interest income from financial assets not at fair value through the profit or loss.

(c) Net income and expense from financial liabilities At amortised cost Exchange gains /(loss) 2,012 1,650 Interest expense 31,606 28,348 Net gain/(loss) on financial liabilities 33,618 29,998

There is no interest expense from financial liabilities not at fair value through the profit or loss.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 297 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 15: Financial Instruments (continued) (d) Fair values of financial instruments The fair values of cash, non-interest bearing monetary financial assets and trade creditors approximate their carrying amounts. The fair value of finance leases are based on the discounted cash flows using current interest rates for liabilities with similar risk profiles.

2008 2007 Tot a l Total Carrying Carrying Amount Fair Value Amount Fair Value Notes $'000 $'000 $'000 $'000 Financial Liabilities (recognised) Finance lease liabilities1 8 404,988 404,988 313,588 352,034

1. Disclosures of fair value are not required when the carrying amount is a reasonable approximation of fair value – AASB 7 para 29. The interest rate implicit in each finance lease applies over the term of the lease.

298 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES 2007 $'000 9,322 9,322 Total 2008 $'000 21,182 21,182 e for Defence. 2007 $'000 4,058 4,058 he majority of goods or services goods or services of he majority to credit risk. Defence has no Defence credit risk. to ount of those assets as indicated in as indicated assets those ount of - Over 90 days Over 90 2008 $'000 2007 $'000 13,088 13,088 15,759 15,759 Impaired Past Due or 2007 $'000 1,269 1,269 - 2008 $'000 24,484 24,484 61 to 90 days 61 2008 $'000 Impaired 1,559 1,559 Past Due or 2007 $'000 2007 $'000 1,266 1,266 32,007 217,143 249,150 lance Sheet represents Defence’s exposure Defence’s exposure represents Sheet lance gnised financial assets is the carrying am carrying is the assets financial gnised Not Past Due Past Not Nor Impaired 31 to 60 days 2008 $'000 1,541 1,541 2008 $'000 r debt management to reduce the incidence of credit credit risk. of T incidence reduce the to r debt management 29,223 105,544 134,767 2007 $'000 and employees and therefore represent minimal credit credit risk exposur minimal represent and therefore employees and 2,729 2,729 to each class of reco each class of to Not Past Due Nor Impaired 0 to 30 0 to 30 days 2008 $'000 5B 5A 4,994 4,994 Notes 5B t of impairment losses, reported in the Ba the in losses, reported t of impairment Notes due or individually determined as impaired: determined due individually or (continued) Trade and other receivables Trade Cash and cash equivalents and other receivables Trade Financial assets: Financial To ta l assets: Financial To ta l the Balance Sheet. Defence has endorsed policies and procedures fo policies and procedures endorsed Sheet. Defence has Balance the entities government provided other to are by Defence provided Note 15: Financial 15: Financial Instruments Note (e) Credit risk in relation date reporting the at credit risk maximum Defence's The carrying amount of financial assets, ne past due but impaired: assets not of Ageing financial past not assets financial of quality Credit significant exposures to any concentrations credit of risk. to any concentrations exposures significant

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 299 APPENDIX 13 DEFENCE’S FINANCES 2007 $'000 757,120 130,344 313,588 1,201,052 Total 2008 $'000 857,995 197,170 404,988 1,460,153 - 2007 $'000 meet its financial obligations. financial its meet 12,857 sms available to Defence (e.g. 203,967 216,824 ence will encounter difficulty in in difficulty ence will encounter - > 5 years 2008 $'000 19,936 260,592 280,528 - 2007 $'000 2,179 86,796 88,975 - 1 to years 5 2008 $'000 7,889 120,442 128,331 2007 $'000 22,825 757,120 115,308 895,253 ures put in place to ensure there are appropriate resources resources to appropriate are there ures to ensure put in place e exposure to liquidity risk is based on the notion that Def that notion on the risk is based e exposure to liquidity Within 1 year 2008 $'000 is highly unlikely due to appropriation mechani funding and appropriation due to unlikely highly is 23,954 857,995 169,345 1,051,294 - - - - 2007 $'000 - - - - On demand (continued) 2008 $'000 8 7B 7A Notes Suppliers Other payables Finance lease Financial liabilities: Financial To ta l Note 15: Financial 15: Financial Instruments Note risk (f) Liquidity and leases. Th finance payables are liabilities financial Defence's liabilities. for financial maturities the illustrates table following The meeting its obligations associated with financial liabilities. This liabilities. financial with associated obligations its meeting proced and policies Minister) and internal Finance the to Advance

300 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 15: Financial Instruments (continued) (g) Market risk Currency risk Foreign currency transactions are recorded at the rate of exchange at the date of the transaction. Foreign currency receivables, payables and provisions are translated at exchange rates current at the balance date. Exchange gains and losses are brought to account in determining the operating result for the year. These exchange gains and losses are not speculative and no hedging is undertaken. Defence is exposed to foreign exchange rate risk through primary financial assets and liabilities yet a change in risk variable will not have a significant effect on the Balance Sheet or the Income Statement. The following table summarises the currency risk in respect of recognised financial assets and financial liabilities.

United Malaysian Arab Euros Kuwait Canadian Singapore Solomon Other Total States Ringgit Emirates Dinar Dollars Dollar Islands Dollars Dirham Dollar A$'000 A$’000 A$’000 A$'000 A$'000 A$’000 A$’000 A$'000 A$'000 A$’000

Financial Assets

Cash 5,270 487 144 122 62 - 1 107 68 6,261

Receivables 3,968 9 1,094 43 422 - 3 918 139 6,596

9,238 496 1,238 165 484 - 4 1,025 207 12,857

Financial Liabilities

Suppliers 17,945 31 52 965 4 103 59 - 929 20,088

Departmental currency risk is minimised through budget supplementation for any adverse movements in exchange rates on financial assets and financial liabilities held in foreign currencies. Interest rate risk Defence reports interest-bearing Finance leases that bear interest at a fixed interest rate at inception. Therefore, a change in interest rates at the reporting date would have a nil impact. Other price risk Defence is exposed to a variety of immaterial commodity price risks relating to various supply contracts.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 301 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 16: Accounting for Errors

Defence has made adjustments for changes in accounting policy and to correct accounting errors identified during the current financial year but relating to prior years. The nature and amount of the adjustments identified are set out below. (a) Changes in Accounting Policies During 2007-08, Defence made a change to the accounting treatment for repairable items (RI) movements recorded as ‘stock adjustments’. Previously, these movements were considered to be supply chain movements and as such were recognised in the balance sheet. After detailed consideration in 2007-08, they have now been identified and treated as genuine stock adjustments resulting from periodic stock takes and are treated more appropriately as stock write-offs and gains in the income statement. This is a voluntary change in accounting policy and has been applied to the earliest period presented in the current financial statements. (b) Adjustments for Errors During this year, Defence developed and implemented a general stores inventory (GSI) legacy pricing remediation plan. The outcome of the plan was to determine a remediation factor to be applied to the closing balance of GSI as at 30 June 2007. The remediation factor was successfully determined and when applied, resulted in an adjustment to the 30 June 2007 GSI closing balance of $167.04m. The adjustment will be amortised over a four year period commencing in 2007-08 and each year thereafter until 2010-11. The amortisation amount for 2007-08 is $41.76m. The choice of a four year amortisation period reflects the average consumption period across all GSI stock held by Defence. The error has been adjusted in the accounting period in which the original error was made in accordance with the requirements of AASB 108 Accounting Policy Changes in Accounting Estimates and Errors.

302 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 16A: Reconciliation of Equity as at 1 July 2006 Changes in Previous Accounting Adjustment Adjusted Balance Policies for Errors Balance 1 July 2006 1 July 2006 $'000 $’000 $’000 $'000 ASSETS Financial assets Cash and cash equivalents 36,221 36,221 Trade and other receivables 561,247 561,247 Total financial assets 597,468 - - 597,468 Non-financial assets Land and buildings 11,106,952 11,106,952 Specialist military equipment 32,172,130 4,569 32,176,699 Plant and equipment 1,265,501 1,265,501 Infrastructure 4,446,489 4,446,489 Intangibles 291,456 291,456 Heritage and cultural assets 723,572 723,572 Inventories 4,017,484 4,017,484 Prepayments 223,241 223,241 Total non-financial assets 54,246,825 4,569 - 54,251,394 Assets held for sale 325,061 325,061 TOTAL ASSETS 55,169,354 4,569 - 55,173,923

LIABILITIES Payables Suppliers 696,607 696,607 Other payables 142,971 142,971 Total payables 839,578 - - 839,578 Interest bearing liabilities Leases 323,509 323,509 Total interest bearing liabilities 323,509 - - 323,509 Provisions Employee provisions 1,508,997 1,508,997 Restoration, decontamination and decommissioning 595,265 595,265 Other provisions 62,170 62,170 Total provisions 2,166,432 - - 2,166,432 TOTAL LIABILITIES 3,329,519 - - 3,329,519 NET ASSETS 51,839,835 4,569 - 51,844,404

EQUITY Contributed equity 4,925,918 4,925,918 Reserves 11,120,309 11,120,309 Retained surpluses (accumulated deficit) 35,793,608 4,569 35,798,177 TOTAL EQUITY 51,839,835 4,569 - 51,844,404

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 303 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 16B: Reconciliation of Equity as at 30 June 2007 Changes in Previous Accounting Adjustment Adjusted Balance Policies for Errors Balance 30 June 30 June 2007 2007 $'000 $’000 $'000 $'000 ASSETS Financial assets Cash and cash equivalents 32,007 32,007 Trade and other receivables 501,682 501,682 Total financial assets 533,689 - - 533,689 Non-financial assets Land and buildings 11,880,750 11,880,750 Specialist military equipment 32,566,704 29,520 32,596,224 Plant and equipment 1,214,244 1,214,244 Infrastructure 4,627,894 4,627,894 Intangibles 276,399 276,399 Heritage and cultural assets 763,944 763,944 Inventories 4,702,035 167,037 4,869,072 Prepayments 762,123 762,123 Total non-financial assets 56,794,093 29,520 167,037 56,990,650 Assets held for sale 144,375 144,375 TOTAL ASSETS 57,472,157 29,520 167,037 57,668,714

LIABILITIES Payables Suppliers 757,120 757,120 Other payables 130,344 130,344 Total payables 887,464 - - 887,464 Interest bearing liabilities Leases 313,588 313,588 Total interest bearing liabilities 313,588 - - 313,588 Provisions Employee provisions 1,718,072 1,718,072 Restoration, decontamination and decommissioning 541,256 541,256 Other provisions 46,300 46,300 Total provisions 2,305,628 - - 2,305,628 TOTAL LIABILITIES 3,506,680 - - 3,506,680 NET ASSETS 53,965,477 29,520 167,037 54,162,034

EQUITY Contributed equity 6,876,202 6,876,202 Reserves 11,900,862 11,900,862 Retained surpluses (accumulated deficit) 35,188,413 29,520 167,037 35,384,970 TOTAL EQUITY 53,965,477 29,520 167,037 54,162,034

304 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 16C: Reconciliation of Operating results as at 30 June 2007

Changes in Previous Accounting Adjustment Adjusted Balance Policies for Errors Balance 30 June 30 June 2007 2007 $'000 $’000 $’000 $'000 INCOME Revenue Revenue from Government 17,221,662 17,221,662 Sale of goods and rendering of services (including cost recovery) 674,514 674,514 Rental revenue 6,963 6,963 Other revenue 111,000 111,000 Total revenue 18,014,139 - - 18,014,139

Gains Reversals of previous asset write-downs 456,258 93,546 549,804 Sale of assets 1,770 1,770 Other gains 7,467 7,467 Total gains 465,495 93,546 - 559,041 TOTAL INCOME 18,479,634 93,546 - 18,573,180

EXPENSES Employee benefits 6,895,744 6,895,744 Suppliers 7,801,660 (167,037) 7,634,623 Grants 3,003 3,003 Depreciation and amortisation 3,665,338 3,665,338 Finance costs 38,594 38,594 Write-down and impairment of assets 735,514 68,595 804,109 Losses from sale of assets - - Foreign exchange losses 306 306 Other expenses 6,971 6,971 TOTAL EXPENSES 19,147,130 68,595 (167,037) 19,048,688

NET SURPLUS OR (DEFICIT) ATTRIBUTABLE TO THE AUSTRALIAN GOVERNMENT (667,496) 24,951 167,037 (475,508)

Note 16D: Explanation of material adjustments to the Cash Flow Statement for year ended 30 June 2007

There are no material differences for the cash flow statement.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 305 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

2008 2007 $'000 $'000 Note 17: Income Administered on Behalf of Government

Revenue Non-taxation revenue Note 17A: Sale of goods and rendering of services Rendering of services – external entities (United Nations) 40 235 Total sale of goods and rendering of services 40 235

Note 17B: Interest Deposits 124 12,277 Total interest 124 12,277

Note 17C: Dividends Australian Government Entities - Defence Housing Australia 102,979 77,599 Competitive Neutrality Revenue – Defence Housing Australia 31,284 - Total dividends 134,263 77,599

Note 17D: Military superannuation contributions Military superannuation contributions 756,982 700,595 Total military superannuation contributions 756,982 700,595

Note 17E: Other revenue Other 215 (466) Total other revenue 215 (466)

306 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

2008 2007 $'000 $'000 Note 18: Expenses Administered on Behalf of Government

Expenses Note 18A: Employees Superannuation 2,818,000 2,763,000 Retention benefits 31,405 31,512 Total employees 2,849,405 2,794,512

Note 18B: Subsidies Payable to related entities - Defence Home Owner Subsidy 11,284 10,487 Total subsidies 11,284 10,487

Note 18C: Grants Public Sector: State and Territory Governments 26,800 - Total grants 26,800 -

Note 18D: Other expenses Chartered Special Purpose Aircraft 4,327 - Total other expenses 4,327 -

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 307 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

2008 2007 $'000 $'000 Note 19: Assets Administered on Behalf of Government

Financial assets Note 19A: Cash and cash equivalents Administered bank account - 39 Total cash and cash equivalents - 39

Note 19B: Receivables Goods and services 731 301 Accrued superannuation 331 189 Dividends 44,279 - Competitive neutrality 6,380 - Total receivables 51,721 490 Receivables are aged as follows: Not overdue 51,540 265 Overdue by: Less than 30 days 19 78 30 to 60 days - 46 61 to 90 days 41 - More than 90 days 121 101 Total receivables 51,721 490

Note 19C: Investments Commonwealth authorities - Defence Housing Australia 1,069,443 1,098,624 Total investments 1,069,443 1,098,624

Non-financial assets Note 19D: Prepayments Prepayments - retention benefits 85,506 88,955 Total non-financial assets 85,506 88,955

Assets are represented by: Current 55,522 89,484 Non-current 1,151,148 1,098,624

308 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

2008 2007 $'000 $'000 Note 20: Liabilities Administered on Behalf of Government

Payables Note 20A: Subsidies Payable to related entities – Defence Home Owner Subsidy - 898 Total subsidies - 898

Note 20B: Other payables Other payables 25,242 17,469 Total other payables 25,242 17,469

Provisions Note 20C: Employee provisions Superannuation - DFRDB 22,917,000 22,662,000 Superannuation - MSBS 10,705,000 9,798,000 Total provisions 33,622,000 32,460,000

Liabilities are represented by: Current 1,575,242 1,563,367 Non-current 32,072,000 30,915,000

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 309 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 21: Defined Benefit Superannuation Plans Administered on Behalf of Government Defence administers on behalf of the Australian Government, two defined benefit superannuation plans for ADF members. The two plans are the Defence Force Retirement and Death Benefits Scheme (DFRDB) and the Military Superannuation Benefits Scheme (MSBS). A general description of the plans and Defence's accounting policy for recognising actuarial gains and losses can be found in Note 1.27(e) of these statements. The following is a reconciliation of the two plans as required by AASB 119: Employee Benefits. 2008 2007 $'000 $'000 Defence Force Retirement and Death Benefits Scheme (DFRDB) The amounts recognised in the balance sheet are as follows: Present value of funded obligations - - Fair value of plan assets - - - - Present value of unfunded obligations 22,917,000 22,662,000 Unrecognised past service cost - - Net liability in balance sheet 22,917,000 22,662,000

Amounts in balance sheet: Liabilities 22,917,000 22,662,000 Assets - - Net liability in balance sheet 22,917,000 22,662,000

The amounts recognised in the income statement are as follows: Current service cost 156,000 172,000 Interest on obligation 1,413,000 1,379,000 Expected return on plan assets - - Past service cost - - Losses (gains) on curtailments and settlements - - Expense 1,569,000 1,551,000

Net actuarial losses (gains) recognised in equity 5,000 (1,503,000)

Changes in the value of the defined benefit obligation are as follows: Net liability at 1 July 22,662,000 23,945,000 Service cost 156,000 172,000 Interest cost 1,413,000 1,379,000 Actuarial losses (gains) 5,000 (1,503,000) Benefits paid (1,319,000) (1,331,000) Past service cost - - Net liability as at 30 June 22,917,000 22,662,000

310 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 21: Defined Benefit Superannuation Plans Administered on Behalf of Government (continued) 2008 2007 $'000 $'000 Changes in the fair value of plan assets are as follows: Opening fair value of plan assets - - Contributions by employer 1,319,000 1,331,000 Benefits paid (1,319,000) (1,331,000) Closing value of plan assets - -

Principle actuarial assumptions at the reporting date (expressed as weighted averages): Discount rate at 30 June 6.6% 6.40% Expected return on plan assets at 30 June - - Future salary increases * 4.00% 4.00% Future pension increases 2.50% 2.50%

The demographic assumptions used at 30 June 2007 and 30 June 2008 are those used for the preparation of the Long Term Cost Report for the DFRDB and MSBS as at 30 June 2005.

* Separate promotional salary scales are used to allow for promotional salary increases. Notes: 1. Service cost includes the cost of benefits accruing as a result of contributions deducted from members’ salaries that are paid into Consolidated Revenue.

2. Benefits payable under the Defence Force Retirement and Death Benefits Act 1973 are paid from Consolidated Revenue on an emerging (or pay as you go) basis. Benefits paid under the Defence Act 1903 Determination are paid by the Department of Defence on an emerging cost basis. Thus contributions made equal benefits paid for the DFRDB.

3. The expected employer contributions in respect of 2008-09 are $1,370m which is the expected amount of benefit payments. Note that member contributions paid to Consolidated Revenue would be an offset to this.

4. The figures shown above include the 3% Productivity Benefit.

5. The cumulative actuarial losses and gains recognised in equity are as follows:

$’000 Opening balance as at 30 June 2004 - 2004-05 loss 3,528,000 30 June 2005 cumulative loss 3,528,000 2005-06 gain (2,457,000) 30 June 2006 cumulative loss 1,071,000 2006-07 gain (1,503,000) 30 June 2007 cumulative gain (432,000) 2007-08 loss 5,000 30 June 2008 cumulative gain (427,000)

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 311 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 21: Defined Benefit Superannuation Plans Administered on Behalf of Government (continued) 2008 2007 $'000 $'000 Military Superannuation Benefits Scheme (MSBS) The amounts recognised in the balance sheet are as follows: Present value of funded obligations 2,929,000 2,774,000 Fair value of plan assets 2,929,000 2,774,000

Present value of unfunded obligations 10,705,000 9,798,000 Unrecognised past service cost - - Net liability in balance sheet 10,705,000 9,798,000

Amounts in balance sheet: Liabilities 13,634,000 12,572,000 Assets 2,929,000 2,774,000 Net liability in balance sheet 10,705,000 9,798,000

The amounts recognised in the income statement are as follows: Current service cost 613,000 621,000 Interest on obligation 838,000 753,000 Expected return on plan assets (202,000) (162,000) Past service cost - - Losses (gains) on curtailments and settlements - - Expense 1,249,000 1,212,000

Liability actuarial losses (gains) recognised in equity (365,000) (901,000)

Actual return on plan assets: Expected return on plan assets 202,000 162,000 Actual return on plan assets (82,000) 374,000

Actuarial gains (losses) on plan assets recognised in equity (284,000) 212,000

Changes in the value of the defined benefit obligation are as follows: Net liability at 1 July 12,572,000 12,149,000 Service cost 613,000 621,000 Non-employer contributions 201,000 169,000 Interest cost 838,000 753,000 Actuarial losses (gains) (365,000) (901,000) Benefits paid (225,000) (219,000) Past service cost - - Net liability as at 30 June 13,634,000 12,572,000

312 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 21: Defined Benefit Superannuation Plans Administered on Behalf of Government (continued) 2008 2007 $'000 $'000 Changes in the fair value of plan assets are as follows: Opening fair value of plan assets 2,774,000 2,216,000 Expected return 202,000 162,000 Actuarial gains and losses (284,000) 212,000 Contributions by employer 261,000 234,000 Funded non-employer contributions 201,000 169,000 Benefits paid (225,000) (219,000) 2,929,000 2,774,000

The major categories of plan assets as a percentage of total assets are as follows: Australian equities 20% 31% Overseas equities 13% 23% Property trusts 7% 6% Private equity 16% 14% Hedge funds 6% 6% Infrastructure 10% 9% Cash, debt instruments and other 28% 11%

Principle actuarial assumptions at the reporting date (expressed as weighted averages): Discount rate at 30 June (unfunded component) 6.6% 6.4% Discount rate at 30 June (funded component) 6.9% 6.75% Expected return on plan assets at 30 June 7.0% 7.0% Future salary increases * 4.0% 4.0% Future pension increases 2.5% 2.5%

The demographic assumptions used as at 30 June 2008 and 30 June 2007 are those used for the preparation of the Long Term Cost Report for the DFRDB and MSBS as at 30 June 2005.

* Separate promotional salary scales are used to allow for promotional salary increases.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 313 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 21: Defined Benefit Superannuation Plans Administered on Behalf of Government (continued) Notes: 1. Employer contributions of 3% of superannuation salary are paid into the MSBS Fund. The balance of superannuation benefits payable, after allowing for any funded part of the benefit, under the Military Superannuation and Benefits Act 1991 are paid from Consolidated Revenue on an emerging (or pay as you go) basis. 2. The expected employer contributions in respect of 2008-09 are $290m. 3. The expected return on assets reflects the fact that the majority of plan assets are in growth assets which would be expected to return a premium over fixed interest investments in the long term. In recent years, the real yield on Government bonds has been of the order of 2.5%pa to 3.5%pa. In this context, a 4.5%pa real rate of return on plan assets seems reasonable giving a nominal rate of return on plan assets of 7%pa. 4. The cumulative actuarial losses and gains recognised in equity are as follows: $’000 Opening balance as at 30 June 2004 - 2004-05 Liability loss 2,551,000 2004-05 Asset gain (75,000) 30 June 2005 cumulative loss 2,476,000 2005-06 Liability gain (1,642,000) 2005-06 Asset gain (169,000) 30 June 2006 cumulative loss 665,000 2006-07 Liability gain (901,000) 2006-07 Asset gain (212,000) 30 June 2007 cumulative gain (448,000) 2007-08 Liability gain (365,000) 2007-08 Asset loss 284,000 30 June 2008 cumulative gain (529,000)

314 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

2008 2007 Notes $'000 $'000 Note 22: Administered Reconciliation Table Opening administered assets less administered liabilities as at 1 July (31,290,259) (32,739,696)

Plus: Administered revenues 17 891,624 790,240 Less: Administered expenses 18 (2,891,816) (2,804,999) Administered transfers to/from Australian Government: Appropriation Transfers from Official Public Account Annual Appropriations Administered Expenses 26,800 - Special Appropriations (limited) 4,502 - Special Appropriations (unlimited) 1,529,627 1,516,290 Transfers to Official Public Account (875,173) (822,763) Administered revaluation taken to/from reserves (29,181) 42,520 Currency translation gain/(loss) 17 - - Actuarial gains/(loss) 193,304 2,728,149 Closing administered assets less administered liabilities as at 30 June (32,440,572) (31,290,259)

Note 23: Administered Commitments There are no Administered commitments to report for the current or prior year

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 315 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 24: Administered Contingent Liabilities and Contingent Assets Unquantifiable Administered Contingencies

Contingent Liability During this year and prior years, ComSuper made some under payments and overpayments of pensions and benefits. While these underpayments and overpayments have been corrected and adjusted, there is a possibility of legal claims against the Commonwealth. No claims have been received to date. Guarantee The Military Superannuation and Benefits Scheme (MSBS) provide occupational superannuation benefits for members of the Australian Defence Force. Much of the day-to-day administration associated with the MSBS is conducted by ComSuper. Under the Military Superannuation and Benefits Act 1991 the actions of ComSuper and its Commissioner are deemed to be those of the Military Superannuation and Benefits Board (MSB Board). Defence has indemnified the MSB Board for certain specified claims that are made in relation to acts of ComSuper and/or its Commissioner that are not recoverable elsewhere. Contingent Assets There are no contingent assets to report in the current or prior year.

Note 25: Administered Investments The Australian Government holds a 100% interest in Defence Housing Australia which is a Government Business Enterprise. The principal activity of Defence Housing Australia is: To deliver total housing and relocation services that meet Defence operational and client needs through a strong customer and business focus.

316 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 26: Administered Financial Instruments

Details of the significant accounting policies and methods adopted, including the criteria for recognition and the basis for measurement in respect of each class of financial asset and financial liability are disclosed in Note 1 to the financial statements. 2008 2007 $'000 $'000 (a) Categories of financial instruments Financial Assets Loans and receivables Cash and cash equivalents - 39 Receivables 51,721 490

Available for sale Investment – Defence Housing Australia 1,069,443 1,098,624

Carrying amount of financial assets 1,121,164 1,099,153

Financial Liabilities At amortised cost Subsidies payable - 898 Other payables 25,242 17,469 Carrying amount of financial liabilities 25,242 18,367

(b) Net income and expense from financial assets Loans and receivables Interest revenue 3 12,277 Net gain/(loss) on loans and receivables 3 12,277

Available for sale Dividend revenue 134,263 77,599 Net gain/(loss) on available for sale 134,263 77,599

Net gain/(loss) from financial assets 134,266 89,876

(c) Net income and expense from financial liabilities At amortised cost Interest expense - - Exchange gains /(loss) - - Gain /(loss) on disposal - - Net gain/(loss) on amortised cost - -

Net gain/(loss) from financial liabilities - -

(d) Fair values of financial instruments The fair values of Defence Administered financial instruments approximate their carrying amounts.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 317 APPENDIX 13 DEFENCE’S FINANCES 225 225 2007 $’000 Total 181 181 2008 $’000 - - 101 101 225 225 2007 2007 $'000 t to reduce the incidence of incidence the reduce to t $’000 therefore represent minimal minimal represent therefore iabilities represent Defence’s Defence’s represent iabilities Impaired ount of those assets as indicated assets as indicated those of ount Past Due or 121 121 2008 Over 90 Days Over $’000 - - - - 181 181 2007 2008 $’000 $'000 Impaired Past Due or 41 41 61-90 Days 2008 $’000 46 46 39 265 2007 2007 $'000 $’000 1,098,624 1,098,928 - - Not Past Due Not Past Nor Impaired 31-60 Days 31-60 2008 $’000 - 78 78 2007 2008 IAL STATEMENTS $’000 $'000 51,540 s, reported in the Schedule of Administered Items: Assets and L and Assets of Administered Items: Schedule the in s, reported to each class of recognised financial assets is the carrying carrying class ofam to each recognised financial assets is the 1,069,443 1,120,983 19 19 Not Past Due Due Past Not Nor Impaired 0-30 Days 0-30 2008 (continued) $’000 t exposures to any concentrations of credit risk. of credit any concentrations to t exposures 19B 19B 19A 19C Notes Notes OF THE FINANC due or individually determined as impaired: ices provided by Defence are provided to other government entities and employees and Australia Receivables Cash and cash equivalents Receivables Investments – Defence Housing Note 26: Administered Financial Instruments Note 26: Administered risk (e) Credit date in relation reporting Defence's maximum credit at the risk losse of impairment net assets, of financial amount carrying The has no significan Defence credit risk. exposure to impaired: not but of financial assets past due Ageing Financial assets: Total of financial assets not past Credit quality Financial assets: Total credit risk exposure for Defence. Defence. for exposure credit risk in the Schedule of Administered Items: Assets and Liabilities. Defence has endorsed policies and procedures for debt managemen debt for and procedures policies endorsed has Defence and Liabilities. Assets Items: Administered of Schedule in the of goods or serv risk. The majority credit Department of Defence NOTES TO AND FORMING PART thefor period ended 30 June 2008

318 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES 898 2007 $’000 17,469 18,367 To t a l - 2008 $’000 25,242 25,242 meet its financial its financial meet - - - ill encounter difficulty in difficulty ill encounter sms available to (e.g. Defence 2007 $’000 - - - > 5 years 2008 $’000 - - - 2007 $’000 - - - propriation funding and mechani 1 to 5 years 2008 $’000 - 898 898 2007 $’000 - IAL STATEMENTS 482 482 sure to liquidity risk is based on the notion that Defence w Defence notion that on the risk based to liquidity is sure ures put in place to ensure there are appropriate resources to Within 1 year 2008 $’000 is is highly unlikely due to ap unlikely due to is highly - (continued) 2007 $’000 rrency risk, interest rate risk or other price risk. price other or risk rate interest risk, rrency 17,469 17,469 - OF THE FINANC On demand On 2008 $’000 24,760 24,760 turities for financial liabilities for financial turities 20B 20A Notes Subsidies payable Other payable obligations. Advance to the Finance Minister) and internal policies and proced policies and internal and Minister) Finance to the Advance meeting its obligations associated with financial liabilities. Th its obligations associated meeting Note 26: Administered Financial Note Instruments risk (f) Liquidity expo The payables. liabilities are financial administered Defence's The following table illustrates the ma liabilities: Financial To ta l (g) Market risk to cu exposure material no has Administered Defence Department of Defence NOTES TO AND FORMING PART thefor period ended 30 June 2008

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 319 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 27: Administered Accounting for Errors No material Administered accounting errors were identified in 2007-08.

320 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008 Note 28: Appropriations As per Note 1, Defence is structured to meet seven outcomes: Outcome 1: Command of Operations in Defence of Australia and its Interests Outcome 2: Navy Capability for the Defence of Australia and its Interests Outcome 3: Army Capability for the Defence of Australia and its Interests Outcome 4: Air Force Capability for the Defence of Australia and its Interests Outcome 5: Strategic Policy for the Defence of Australia and its Interests Outcome 6: Intelligence for the Defence of Australia and its Interests Outcome 7: Superannuation and Housing Support Services for Current and Retired Defence Personnel [Activities administered on behalf of the Australian Government] Accordingly for Tables A to C below, all items are attributable to seven outcomes. Note 28A: Acquittal of Authority to Draw Cash from the Consolidated Revenue Fund for Ordinary Annual Services Appropriations Particulars Departmental Outputs To ta l 2008 2007 2008 2007 $’000 $’000 $’000 $’000 Balance carried from previous period 202,236 220,083 202,236 220,083 Other (Net GST on customer receivables and supplier payables) 1 - (22,858) - (22,858) Adjustment to prior year 2 - (630) - (630) Adjusted balance carried forward from previous period 202,236 196,595 202,236 196,595 Appropriation Act: Appropriation Act (No. 1) 2007-08 19,170,126 17,063,404 19,170,126 17,063,404 Appropriation (NTER) Act (No. 1) 2007-083 15,500 94,260 15,500 94,260 Appropriation Act (No. 3) 2007-08 507,641 - 507,641 - Reductions of appropriations (Appropriation Act s9) - prior year - (5,656) - (5,656) - current year - - - - Comcover receipts (Appropriation Act s12) 1,026 142 1,026 142 Advance to the Finance Minister (Appropriation Act s11) - - - - FMA Act Adjustment of appropriations on change of entity function (FMA s32) - - - - Refunds credited (net) (FMA s30) 823,825 255,082 823,825 255,082 Appropriations to take account of recoverable GST (FMA s30A) 459,476 418,887 459,476 418,887 Annotations to 'net appropriations' (FMA s31)4 638,931 609,682 638,931 609,682 Total appropriation available for payments 21,818,761 18,632,396 21,818,761 18,632,396 Cash payments made during the year (GST inclusive) (21,636,187) (18,430,160) (21,636,187) (18,430,160) Balance of Authority to Draw Cash from the Consolidated Revenue Fund for Ordinary Annual Services Appropriations 182,574 202,236 182,574 202,236 Represented by: Cash at bank and on hand 29,223 32,007 29,223 32,007 Departmental appropriations receivable 99,361 115,800 99,361 115,800 GST receivable from the ATO 53,990 54,429 53,990 54,429 To ta l 182,574 202,236 182,574 202,236

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 321 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 28: Appropriations (continued) 1. An amount was incorrectly included in the 2005-06 GST receivable from the ATO closing balance. Under FMA S30a this amount should not have been recognised as appropriation. 2. The adjustment to the opening balance of $630,000 was due to a misclassification between Output and Equity in 2005-06. 3. The undrawn, unspent NTER appropriation will be returned in 2008-09. 4. Appropriation Acts nos. 1 and 3 (for the ordinary annual services of government) authorise the supplementation of an agency’s annual net appropriation by amounts received in accordance with agreements made under section 31 of the Financial Management and Accountability Act 1997 between the Finance Minister and the responsible Minister or their delegated or authorised officials.

322 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 28: Appropriations (continued) Note 28B: Acquittal of Authority to Draw Cash from the Consolidated Revenue Fund for Other than Ordinary Annual Services Appropriations

Particulars Operating Non-operating Outcome 4 SPP Equity Total 2008 2007 2008 2007 2008 2007 $’000 $’000 $’000 $’000 $’000 $’000 Balance carried from previous period - - 83,828 393,116 83,828 393,116 Adjustment to prior year1 - - - 630 - 630 Adjusted balance carried from previous period - - 83,828 393,746 83,828 393,746 Appropriation Act: Appropriation Act (No.2) 2007-08 - - 2,062,804 1,937,879 2,062,804 1,937,879 Appropriation Act (No.4) 2007-08 26,800 - - 60,398 26,800 60,398 Appropriation Act (No. 6) 2007-08 ------Reductions of appropriations (Appropriation Act s11) ------prior year - - (1,474,315) (149,068) (1,474,315) (149,068) Advance to the Finance Minister (Appropriation Act s12) ------FMA Act ------Appropriations to take account of recoverable GST (FMA s30A) ------Total appropriations available for payments 26,800 - 672,317 2,242,955 699,117 2,242,955 Cash payments made during the year (GST inclusive) (26,800) (524,315) (2,159,127) (551,115) (2,159,127) Balance of Authority to Draw Cash from the Consolidated Revenue Fund for Other Than Ordinary Annual Services Appropriations - - 148,002 83,828 148,002 83,828

Represented by: Cash at bank and on hand ------Appropriations receivable - - 148,002 83,828 148,002 83,828 Undrawn, unlapsed - administered appropriations - - - - - Tot a l - - 148,002 83,828 148,002 83,828

1. The adjustment to the opening balance of $630,000 was due to a misclassification between Output and Equity in 2005-06.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 323 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 28: Appropriations (continued) Note 28C: Acquittal of Authority to Draw Cash from the Consolidated Revenue Fund - Administered Special Appropriations (Unlimited Amount) The responsible agency is Defence and ComSuper has drawn against the following Special Administered Appropriations (Unlimited Amount)

Defence Force Retirement Benefits Act 1948 2008 2007 Purpose: The Defence Force Retirement Benefits Act 1948 is an act to Outcome 7 provide Retirement Benefits for Members of the Defence Force who enlisted before 1 October 1972, and for other purposes. All transactions under this Act are disclosed as administered items $’000 $’000 Cash payments made during the year (67,015) (69,197) Appropriations credited to special accounts - - Refunds credited (FMA s30) - - Total charged to appropriation (67,015) (69,197) Estimated Actual * 91,639 **

Defence Force Retirement and Death Benefits Act 1973 2008 2007 Purpose: Defence Force Retirement and Death Benefits Act Outcome 7 1973 is an act to make provision for and in relation to a Scheme for Retirement and Death Benefits for Members of the Defence Force who enlisted before 1 October 1991. All transactions under this Act are disclosed as administered items $’000 $’000 Cash payments made during the year (1,228,488) (1,228,729) Appropriations credited to special accounts - - Refunds credited (FMA s30) 1,964 1,403 Total charged to appropriation (1,226,524) (1,227,326) Estimated Actual *1,442,361 **

Military Superannuation and Benefits Act 1991 2008 2007 Purpose: Military Superannuation and Benefits Act 1991 is an Act Outcome 7 to make provision for and in relation to an occupational superannuation scheme for, and the payment of other benefits to members of the Defence Force, and for related purposes. All transactions under this Act are disclosed as administered items $’000 $’000 Cash payments made during the year (193,060) (178,972) Appropriations credited to special accounts - - Refunds credited (FMA s30) 115 319 Total charged to appropriation (192,945) (178,653) Estimated Actual * 1,215,600 **

* 2007-08 Full year budget estimates as published in 2008-09 PBS. ** 2006-07 Budget Estimates of $2,610,484,000 cannot be allocated between the DFRDB and MSBS.

324 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 28: Appropriations (continued) The responsible agency is Defence and Defence has drawn against the following Special Administered Appropriations (Unlimited Amount)

Defence Force (Home Loans Assistance) Act 1990 Purpose: Defence Force (Home Loans Assistance) Act 1990 is an Act to 2008 2007 provide for the payment of home loan subsidies in respect of certain Outcome 7 members of the Defence Force and certain other persons, and for related purposes. All transactions under this Act are disclosed as administered items $’000 $’000 Cash payments made during the year (12,200) (9,589) Appropriations credited to special accounts - - Refunds credited (FMA s30) - - Total charged to appropriation (12,200) (9,589) Estimated Actual 11,250 11,000

Military Superannuation and Benefits Act 1991 Purpose: Military Superannuation and Benefits Act 1991 is an 2008 2007 Act to make provision for and in relation to retention benefits Outcome 7 for ADF personnel. All transactions under this Act are disclosed as administered items $’000 $’000 Cash payments made during the year (28,864) (29,803) Appropriations credited to special accounts - - Refunds credited (FMA s30) - - Total charged to appropriation (28,864) (29,803) Estimated Actual 42,000 44,000

2008 2007 Totals for Unlimited Special Administered Appropriations Outcome 7 $’000 $’000 Cash payments made during the year (1,529,627) (1,516,290) Appropriations credited to special accounts - - Refunds credited (FMA s30) 2,079 1,722 Total charged to appropriation (1,527,548) (1,514,568) Estimated Actual 2,802,850 2,665,484

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 325 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008 Note 28: Appropriations (continued)

Note 28D: Acquittal of Authority to Draw Cash from the Consolidated Revenue Fund - Special Appropriation (Limited Amount)

Parliamentary Entitlements Act 1990 2008 2007 Purpose: An act relating to the provision of benefits to the Outcome 7 Members of each House of Parliament for charter of Special Purpose Aircraft. All transactions under this Act are disclosed as administered items. $’000 $’000 Amount available carried forward from previous period - 2 Appropriation for the reporting period 4,327 - Appropriations to take account of recoverable GST (FMA s30A) 175 - Other Administered receipts - - Available for payments 4,502 2 Cash payments made during the year (GST inclusive) (4,502) (2) Amount available carried to the next period - - Represented by: Cash - - Administered receipts receivable - - Total available carried to the next period - -

326 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008 Note 28: Appropriations (continued) Note 28E: Acquittal of Authority to draw cash from the Consolidated Revenue Fund – Special Appropriations* No special appropriations were drawn upon by Defence under the following legislation containing Special Appropriation clauses that are administered by the Department.

1 Air Force Act 1923 2 Approved Defence Projects Protection Act 1947 3 Cockatoo and Schnapper Islands Act 1949 4 Commonwealth and State Housing Agreement (Service Personnel) Act 1990 5 Control of Naval Waters Act 1918 Defence Act 1903, except to the extent administered by the Prime Minister and the Attorney-General and other than sections 58F to 58Q, 61, 61A, 61B, 61C, 118A and 118B and 6 paragraph 124(1)(qba) 7 Defence Force Discipline Act 1982 8 Defence Force Retirement and Death Benefits (Pension Increases) Acts 9 Defence Forces Retirement Benefits (Pension Increases) Acts 10 Defence Forces Special Retirement Benefits Act 1960 11 Defence Housing Australia Act 1987 12 Defence Reserve Service (Protection) Act 2001 13 Defence (Parliamentary Candidates) Act 1969 14 Defence (Road Transport Legislation Exemption) Act 2006 15 Defence (Special Undertakings) Act 1952 16 Explosives Act 1961 17 Geneva Conventions Act 1957, Part IV Intelligence Services Act 2001, in so far as it relates to that part of the Department of Defence known as the Defence Intelligence and Geospatial Organisation, the Defence 18 Intelligence Organisation and the Defence Signals Directorate Military Rehabilitation and Compensation Act 2004, Chapter 3, in relation to rehabilitation of serving members of the Australian Defence Force; and Chapter 6, in relation to 19 treatment for injuries and diseases of serving members of the Australian Defence Force 20 Naval Defence Act 1910 21 Royal Australian Air Force Veterans' Residences Act 1953 22 Services Trust Funds Act 1947 23 War Gratuity Act 1945 24 War Service Estates Act 1942 25 Weapons of Mass Destruction (Prevention of Proliferation) Act 1995 26 Williamstown Dockyard Employees Act 1987

* Other FMA agencies may utilise the Special Appropriations contained within these Acts. Amounts drawn down by other agencies are required to be reported in their own financial statements. The Department of Veteran's Affairs is part of the Defence Portfolio and is responsible for various legislation. Refer to Department of Veteran Affairs 2007-08 Financial Statements for details.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 327 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 29: Special Accounts

2008 2007 $’000 $’000 Services for Other Governments and Non-Agency Bodies Account (Special Public Monies) Legal Authority: Financial Management and Accountability Act 1997 s20 and s21 Appropriation: Financial Management and Accountability Act 1997 s20 and s21 Purpose: For expenditure in connection with services performed on behalf of other Governments and Non- Agency Bodies. This account is non-interest bearing. Balance carried from previous period 23,484 31,678 Costs recovered 63,208 26,427 GST credits (FMA s30A) 1,997 2,340 Total credits 88,689 60,445 Available for payments 88,689 60,445 Payments made to suppliers (30,287) (36,961) Total debits (30,287) (36,961) Balance carried forward to next period 58,402 23,484 Represented by: Cash - transferred to the Official Public Account 58,402 23,484 Total balance carried to the next period 58,402 23,484

Defence Endowments Account (Special Public Monies) Legal Authority: Financial Management and Accountability Act 1997 s20 Appropriation: Financial Management and Accountability Act 1997 s20 Purpose: For expenditure in accordance with the conditions of each endowment. This account is interest bearing in regard to cash held by the Agency and cash transferred to the Official Public Account. Balance carried from previous period 306 301 Costs recovered - - GST credits (FMA s30A) - 1 Other receipts 27 35 Total credits 333 337 Available for payments 333 337 Payments made to recipients (36) (31) Total debits (36) (31) Balance carried forward to next period 297 306 Represented by: Cash - transferred to the Official Public Account 297 85 Cash - held by Defence - 221 Total balance carried to the next period 297 306

328 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 29: Special Accounts (continued)

2008 2007 $’000 $’000 Fedorczenko Legacy Fund Account (Special Public Monies) Legal Authority: Financial Management and Accountability Act 1997 s20 Appropriation: Financial Management and Accountability Act 1997 s20 Purpose: For expenditure in relation to the defence of Australia of the residue of the estate of the late Petro Fedorczenko. This account is interest bearing in regard to cash held by the Agency. Balance carried from previous period 160 156 Other receipts 10 8 To t a l c r ed i ts 170 164 Available for payments 170 164 Payments made to suppliers (14) (4) Total debits (14) (4) Balance carried forward to next period 156 160 Represented by: Cash - transferred to the Official Public Account 156 12 Cash - held by Defence - 148 Total balance carried to the next period 156 160

Other Trust Monies Account (Special Public Monies) Legal Authority: Financial Management and Accountability Act 1997 s20 and s21 Appropriation: Financial Management and Accountability Act 1997 s20 and s21 Purpose: For expenditure of monies temporarily held on trust or otherwise for the benefit of a person other than the Commonwealth. This account is non-interest bearing. Balance carried from previous period 4,271 1,543 Costs recovered 3,053 3,764 GST credits (FMA s30A) (16) 23 To t a l c r ed i ts 7,308 5,330 Available for payments 7,308 5,330 Payments made to suppliers (5,250) (1,059) Total debits (5,250) (1,059) Balance carried forward to next period 2,058 4,271 Represented by: Cash - transferred to the Official Public Account 2,058 4,271 Total balance carried to the next period 2,058 4,271

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 329 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 29: Special Accounts (continued)

2008 2007 $’000 $’000

Young Endeavour Youth Program Operating Fund Account (Special Public Monies) Legal Authority: Financial Management and Accountability Act 1997 s20 Appropriation: Financial Management and Accountability Act 1997 s20 Purpose: For the receipt and payment of money in connection with the operations and activities of the STS Young Endeavour, as specified by the Young Endeavour Program Board of Management or by the Commonwealth. This account is interest bearing in regard to cash held by the entity. Balance carried from previous period 875 1,476 Costs recovered 99 310 GST credits (FMA s30A) (15) 4 To t a l c r ed i ts 959 1,790 Available for payments 959 1,790 Payments made to suppliers (93) (915) Total debits (93) (915) Balance carried forward to next period 866 875 Represented by:

Cash - transferred to the Official Public Account 714 728 Cash - held by Defence 152 147

Total balance carried to the next period 866 875

For the periods 2005-06, 2006-07 and 2007-08, Defence has not used Section 39 of the FMA Act in respect of the above listed Special Accounts.

330 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 30: Compensation and Debt Relief

2008 2007 $ $

Compensation and Debt Relief- Administered

284 'Act of Grace' expenses were incurred during the reporting period (2006-07: 286 expenses).* 96,934 96,191

284 of the above expenses amounting to $96,934 were paid on a periodic basis (2006-07: 286 periodic expenses amounting to $96,191). All periodic payments are expected to continue in future years. The estimated amount outstanding in relation to payments being made on a periodic basis as at 30 June 2008 was $1,470,000 ($1,580,000 at 30 June 2007). This estimate was determined by the Australian Government Actuary.*

No waivers of amounts owing to the Australian Government were made pursuant to subsection 34(1) of the Financial Management and Accountability Act 1997. (2006-07: No waivers). nil nil

No ex-gratia payments were provided for during the reporting period. (2006-07: No payments). nil nil

* ComSuper made ‘Act of Grace’ payments from Defence’s administered special appropriation.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 331 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 30: Compensation and Debt Relief (continued)

2008 2007 $ $ Compensation and Debt Relief- Departmental 3 'Act of Grace' payments made during the reporting period pursuant to authorisation given under s33 (1) of the Financial Management and Accountability Act 1997. (2006-07: 14 payments made). 81,483 199,559 There were 0 ‘Act of Grace’ payments outstanding at the end of the reporting period pursuant to authorisation given under s33(1) of the Financial Management and Accountability Act 1997. (2006-07: 1 payment outstanding). - 60,500 20 waivers of amounts owing to the Commonwealth made during the reporting period pursuant to subsection 34(1) of the Financial Management and Accountability Act 1997. (2006-07: 75 payments made). 230,797 304,981 8 ex-gratia payments made during the reporting period. (2006-07: 94 payments made). 187,092 3,724,883 6 ex-gratia payments outstanding at the end of the reporting period. (2006-07: 8 payments outstanding). 210,000 240,000 23 payments made under 'Defective Administration Scheme' during the reporting period. (2006-07: 20 payments made). 542,578 652,034 There were 6 payments outstanding under the ‘Defective Administration Scheme’. (2006-07: 7 payments outstanding). 84,949 137,182 3 payments were made during the reporting period under s73 of the Public Service Act 1999. (2006-07: 3 payments made). 20,316 37,700 There were 0 payments outstanding under s73 of the Public Service Act 1999 at 30 June 2008. (2006-07: 2 payments outstanding). - 18,996

332 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 31: Assets Held in Trust

Defence Endowments Account (Trust) The transactions of the account have been disclosed in Note 29 of Special Accounts.

Fedorczenko Legacy Fund Account (Trust) The transactions of the account have been disclosed in Note 29 of Special Accounts.

2008 2007 $’000 $’000 Young Endeavour Youth Program Public Fund (Trust) Legal Authority: Financial Management and Accountability Act 1997 s20. Appropriation: Financial Management and Accountability Act 1997 s20. Purpose: To create a capital fund for the purpose of furthering youth development initiatives, to make specific acquisitions and to support the Young Endeavour Youth Scheme through sail training for young Australians. The fund is listed as a deductible gift recipient. This account is interest bearing. Balance carried from previous period 147 66 Other receipts 6 108 To t a l c r ed i ts 153 174 Available for payments 153 174 Payments made to suppliers (1) (27) Total debits (1) (27) Balance carried forward to next period 152 147

This balance has been disclosed as “Cash – Held by Defence” in Note 29 Special Accounts – Young Endeavour Youth Program Operating Fund Account (Special Public Monies).

Comcare Trust Account (Trust) Legal Authority: Financial Management Accountability Act 1997 s21. Appropriation: Financial Management Accountability Act 1997 s21. Purpose: Monies held in trust and advanced to Defence by Comcare for the purposes of distributing compensation payments made in accordance with the Safety Rehabilitation and Compensation Act 1998. The transactions of the account have been disclosed in Note 29 Special Accounts - Services for Other Governments and Non-Agency Bodies and Other Trust Monies (Special Public Monies).

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 333 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 31: Assets Held in Trust (continued)

2008 2007 $’000 $’000 Peter Mitchell Trust Fund (Trust) Legal Authority: Financial Management and Accountability Act 1997 s20 Appropriation: Financial Management and Accountability Act 1997 s20 Purpose: For expenditure of monies temporarily held on trust or otherwise for the benefit of a person other than the Commonwealth.

Balance carried from previous period 1 1 Other receipts 9 10 To t a l c r ed i ts 10 11 Available for payments 10 11 Payments made to suppliers (9) (10) Total debits (9) (10) Balance carried forward to next period 1 1 Represented by: Cash – transferred to the Official Public Account 1 1

This balance has been included under Other Trust Monies in Note 29 Special Accounts.

RAAF Air Power Conference (Trust) Legal Authority: Financial Management and Accountability Act 1997 s20 Appropriation: Financial Management and Accountability Act 1997 s20 Purpose: For expenditure of monies temporarily held on trust or otherwise for the benefit of a person other than the Commonwealth.

Balance carried from previous period 197 192 Other receipts 31 223 To t a l c r ed i ts 228 415 Available for payments 228 415 Payments made to suppliers - (218) Total debits - (218) Balance carried forward to next period 228 197 Represented by: Cash – transferred to the Official Public Account 228 197

This balance has been included under Other Trust Monies in Note 29 Special Accounts. Non-Cash Assets Defence accommodates and operates some non-cash assets on behalf of other governments; however, their disclosure would compromise the activities of these assets. In accordance with clause 17.6 of the FMOs the Minister for Finance granted an exception from disclosing these assets.

334 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 32: Reporting of Outcomes

As per Financial Statement Note 1, Defence is structured to meet seven outcomes, as follows: OUTCOME 1. COMMAND OF OPERATIONS IN DEFENCE OF AUSTRALIA AND ITS INTERESTS 1.1 Command of Operations 1.2 ADF Military Operations and Exercises 1.3 Contribution to National Support Tasks OUTCOME 2. NAVY CAPABILITY FOR THE DEFENCE OF AUSTRALIA AND ITS INTERESTS 2.1 Capability for Major Surface Combatant Operations 2.2 Capability for Naval Aviation Operations 2.3 Capability for Patrol Boat Operations 2.4 Capability for Submarine Operations 2.5 Capability for Afloat Support 2.6 Capability for Mine Warfare 2.7 Capability for Amphibious Lift 2.8 Capability Hydrographic- Meteorological and Oceanographic Operations OUTCOME 3. ARMY CAPABILITY FOR THE DEFENCE OF AUSTRALIA AND ITS INTERESTS 3.1 Capability for Special Operations 3.2 Capability for Medium Combined Arms Operations 3.3 Capability for Light Combined Arms Operations 3.4 Capability for Army Aviation Operations 3.5 Capability for Ground Based Air Defence 3.6 Capability for Combat Support Operations 3.7 Capability for Regional Surveillance 3.8 Capability for Operational Logistic Support to Land Forces 3.9 Capability for Motorised Combined Arms Operations 3.10 Capability for Protective Operations OUTCOME 4. AIR FORCE CAPABILITY FOR THE DEFENCE OF AUSTRALIA AND ITS INTERESTS 4.1 Capability for Air Combat Operations 4.2 Capability for Combat Support of Air Operations 4.3 Capability for Surveillance and Response Operations 4.4 Capability for Air Lift Operations OUTCOME 5. STRATEGIC POLICY FOR THE DEFENCE OF AUSTRALIA AND ITS INTERESTS 5.1 International Policy, Activities and Engagement 5.2 Strategic Policy and Military Strategy OUTCOME 6. INTELLIGENCE FOR THE DEFENCE OF AUSTRALIA AND ITS INTERESTS 6.1 Intelligence OUTCOME 7. SUPERANNUATION AND HOUSING SUPPORT SERVICES FOR CURRENT AND RETIRED DEFENCE PERSONNEL 7.1 Superannuation Support Services for Current and Retired Defence Personnel 7.2 Housing Assistance for Current Defence Personnel 7.3 Other Administered Revenues and Expenses

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 335 APPENDIX 13 DEFENCE’S FINANCES

This page is intentionally blank.

336 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008 Note 32: Reporting of Outcomes As per Financial Statement Note 1. Defence is structured to meet seven outcomes: Outcome 1: Command of Operations in Defence of Australia and Its Interests Outcome 2: Navy Capability for the Defence of Australia and Its Interests Outcome 3: Army Capability for the Defence of Australia and Its Interests Outcome 4: Air Force Capability for the Defence of Australia and Its Interests Outcome 5: Strategic Policy for the Defence of Australia and Its Interests Outcome 6: Intelligence for the Defence of Australia and Its Interests Outcome 7: Superannuation and Housing Support for Current and Retired Defence Personnel Additional details relating to Defence's outcomes and outputs are disclosed in Chapter 3 of the 2007-08 Annual Report. Table 32A: Net Cost of Outcome Delivery

Outcome 1 Outcome 2 Outcome 3 Outcome 4 Outcome 5 Outcome 6 Outcome 7 Total Outcomes4 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 Expenses Administered 2,891,816 2,804,999 2,891,816 2,804,999 Departmental 1,380,571 1,379,391 5,906,254 5,210,490 7,370,421 6,553,614 5,784,579 5,096,010 350,254 292,518 894,426 514,588 21,686,504 19,046,612 Total expenses 1,380,571 1,379,391 5,906,254 5,210,490 7,370,421 6,553,614 5,784,579 5,096,010 350,254 292,518 894,426 514,588 2,891,816 2,804,999 24,578,320 21,851,611 Costs recovered from provision of goods and services Administered - - - - Departmental1 19,793 14,371 69,608 75,372 107,877 125,763 107,944 72,101 2,578 8,990 17,626 9,173 325,427 305,770 Total costs recovered 19,793 14,371 69,608 75,372 107,877 125,763 107,944 72,101 2,578 8,990 17,626 9,173 - - 325,427 305,770 Other external income Administered Revenue Non-taxation Goods and services 40 235 40 235 Interest 124 12,277 124 12,277 Dividends 134,263 77,599 134,263 77,599 Military superannuation 756,982 700,595 756,982 700,595 Other sources of non-taxation revenues 215 (466) 215 (466) Total revenue ------891,624 790,240 891,624 790,240 Gains Net foreign exchange gains - - - - Total gains ------Total administered income ------891,624 790,240 891,624 790,240 Departmental Revenue Goods and services revenue from related entities 22,104 28,148 77,734 91,975 120,469 125,227 120,544 122,331 2,879 (67) 19,684 1,130 - - 363,413 368,744 Rental Income 436 - 1,408 - 2,757 - 1,252 - 1,120 - 102 - - - 7,073 - Other revenue2 3,137 2,652 17,121 40,307 27,716 39,854 17,135 30,524 1,481 2,521 9,643 2,105 - - 76,233 117,963 Total revenue 25,677 30,800 96,262 132,282 150,942 165,081 138,930 152,855 5,480 2,454 29,428 3,235 - - 446,719 486,707 Gains Reversals of previous asset write-downs 14,564 19,325 133,297 177,208 315,980 238,118 143,540 86,831 2,990 7,827 4,959 20,495 - - 615,330 549,804 Foreign Exchange 41 26 719 38 (584) (1,138) 859 292 17 425 24 51 - - 1,077 (306) Other gains (307) 101 94 1,934 2,624 2,187 1,372 2,846 (114) 50 (374) 349 - - 3,295 7,467 Total gains 14,298 19,452 134,110 179,180 318,020 239,167 145,771 89,969 2,893 8,302 4,609 20,896 - - 619,702 556,965 Total departmental income 39,975 50,252 230,372 311,462 468,962 404,248 284,702 242,823 8,373 10,756 34,037 24,131 - - 1,066,421 1,043,672 Total other external income 39,975 50,252 230,372 311,462 468,962 404,248 284,702 242,823 8,373 10,756 34,037 24,131 891,624 790,240 1,958,045 1,833,912 Net cost/(contribution) of outcome3 1,320,802 1,314,769 5,606,273 4,823,656 6,793,582 6,023,603 5,391,933 4,781,086 339,303 272,772 842,763 481,285 2,000,192 2,014,759 22,294,848 19,711,929 Notes: 1. In accordance with Finance Minister's Orders 2006-07, Defence disclosed the above 'cost recoveries' as required by Finance Circular No 2002/02 'Cost Recovery by Government Agencies'. The specific elements that constitute cost recoveries are; the sale of Navy Hydrographic and Aerial Survey maps and charts, and the provision of specific training provided by the Defence College to foreign forces. The disclosed cost recoveries are in accordance with the 'Commonwealth Cost Recovery Guidelines for Information Agencies' and therefore exclude intra- and inter-governmental services. Cost recoveries are Departmental in nature and are included as part of the Sale of Goods and Services total in the Income Statement. 2. Rents have been aggregated into the Other revenue category for previous year results. 3. Net costs/(contribution) of outcome include intra-government costs that are eliminated in calculating the actual Budget outcome. 4. The figures for Total outcomes are consistent with Defence's income statement. 5. Details of outcomes are further explained in Chapter Three under 'Overall Cost to the Government of Defence Outcomes'.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 337 Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 32: Reporting of Outcomes Table 32B: Major Classes of Departmental Revenues and Expenses by Output Outcome 11 Output 1.01 Output 1.02 Output 1.03 Total Outcome 1 Defence Operations 2008 2007 2008 2007 2008 2007 2008 2007 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 Departmental expenses Employee Benefits 184,149 232,118 251,734 211,890 4,998 33,948 440,881 477,956 Suppliers 235,793 187,060 614,706 563,988 26,547 5,452 877,045 756,500 Grants 492 88 94 25 10 2 596 115 Depreciation and amortisation 27,506 8,320 10,477 83,590 763 31,695 38,746 123,605 Finance costs 1,502 1,225 416 223 22 15 1,940 1,463 Write-down and impairment of assets 13,760 9,203 4,900 10,016 257 434 18,917 19,654 Losses from asset sales 66 140 (28) (59) 2 4 40 85 Other expenses 1,858 88 515 (76) 33 2 2,407 14 Total departmental expenses 465,126 438,242 882,814 869,597 32,632 71,552 1,380,571 1,379,391 Funded by: Revenue Revenues from Government 415,528 399,577 735,347 818,541 24,420 65,261 1,175,294 1,283,379 Sale of goods and rendering of services 16,595 15,555 23,702 25,083 1,600 1,881 41,897 42,519 Rental Income2 342 - 89 - 4 - 436 - Other revenue3 2,081 1,838 963 786 93 28 3,137 2,652 Total revenue 434,546 416,970 760,102 844,410 26,117 67,170 1,220,765 1,328,550 Gains Reversal of previous asset write-downs 7,347 11,325 7,079 5,758 138 2,243 14,564 19,325 Foreign exchange 36 (226) 5 195 1 57 41 26 Other gains (376) 66 76 30 (6) 5 (307) 101 Total gains 7,006 11,164 7,160 5,983 132 2,305 14,298 19,452 Total departmental income 441,552 428,135 767,261 850,392 26,249 69,475 1,235,063 1,348,002

Outcome 21 Output 2.01 Output 2.02 Output 2.03 Output 2.04 Output 2.05 Output 2.06 Output 2.07 Output 2.08 Total Outcome 2 Navy Capability 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 Departmental expenses Employee Benefits 706,745 432,081 195,628 194,624 137,356 146,361 118,987 171,577 168,068 133,111 146,442 149,031 128,518 251,549 99,736 138,263 1,701,480 1,616,597 Suppliers 701,873 850,372 234,610 279,541 105,161 147,560 236,617 261,559 103,821 134,172 147,715 166,409 151,006 60,330 125,304 116,887 1,806,105 2,016,830 Grants 1,782 268 1,023 103 783 68 844 74 773 59 843 77 966 96 751 61 7,764 806 Depreciation and amortisation 596,705 568,382 155,283 140,808 27,525 34,171 304,581 355,168 34,724 26,470 86,083 69,599 47,916 168,679 23,033 30,886 1,275,851 1,394,163 Finance costs 4,154 2,560 1,080 1,741 577 1,097 1,793 1,205 1,162 862 1,080 1,246 1,621 1,005 561 964 12,028 10,680 Write-down and impairment of assets 41,354 163,898 967,784 8,482 5,150 (14,273) 42,914 70,404 4,955 (14,937) 11,558 (12,460) 10,231 (10,143) 4,762 (17,410) 1,088,708 173,561 Losses from asset sales 425 (236) 112 68 4 (84) 148 107 20 (825) 86 16 49 (1,711) 13 (41) 857 (2,706) Other expenses 5,080 241 1,757 92 969 25 1,221 38 773 34 1,226 37 1,536 78 898 14 13,460 559 Total departmental expenses 2,058,118 2,017,566 1,557,277 625,458 277,525 314,925 707,105 860,132 314,296 278,946 395,032 373,955 341,842 469,883 255,059 269,623 5,906,254 5,210,490 Funded by: Revenue Revenues from Government 2,034,905 1,766,441 1,030,746 566,015 273,736 287,529 694,975 797,692 320,606 257,756 383,034 347,839 319,622 430,753 190,040 248,591 5,247,665 4,702,616 Sale of goods and rendering of services 39,059 82,642 12,406 21,758 6,281 10,943 9,997 14,841 4,937 7,532 8,473 9,191 10,791 11,474 55,397 8,966 147,342 167,347 Rental Income2 536 - 160 - 90 - 135 - 73 - 116 - 152 - 146 - 1,408 - Other revenue3 6,215 18,533 3,388 4,361 904 3,409 1,608 2,554 1,243 2,833 1,035 2,383 1,876 4,082 852 2,152 17,121 40,307 Total revenue 2,080,715 1,867,616 1,046,699 592,134 281,012 301,881 706,716 815,087 326,860 268,121 392,658 359,413 332,440 446,309 246,435 259,709 5,413,535 4,910,270 Gains Reversal of previous asset write-downs 70,860 106,126 12,398 20,157 2,771 7,466 21,537 15,523 2,015 5,777 14,347 6,524 5,574 10,844 3,794 4,791 133,297 177,208 Foreign exchange 418 44 64 (76) 5 (65) 122 429 1 (48) 77 (78) 21 (87) 12 (81) 719 38 Other gains 791 347 (166) 238 (244) 215 347 258 (200) 210 85 223 (336) 231 (184) 212 94 1,934 Total gains 72,069 106,516 12,296 20,318 2,532 7,617 22,006 16,211 1,816 5,939 14,509 6,669 5,260 10,988 3,621 4,922 134,110 179,180 Total departmental income 2,152,784 1,974,132 1,058,995 612,452 283,544 309,498 728,722 831,298 328,676 274,060 407,167 366,082 337,700 457,297 250,057 264,631 5,547,645 5,089,450

Outcome 31 Output 3.01 Output 3.02 Output 3.03 Output 3.04 Output 3.05 Output 3.06 Output 3.07 Output 3.08 Output 3.09 Output 3.10 Total Outcome 3 Army Capability 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 Departmental expenses Employee Benefits 272,994 340,803 374,995 432,561 376,187 461,530 194,894 264,570 55,754 57,353 288,192 221,378 102,248 78,261 286,466 297,995 370,303 313,961 952,927 447,523 3,274,961 2,915,935 Suppliers 365,220 217,458 360,290 372,068 428,015 419,165 325,463 250,534 62,799 45,510 187,178 158,127 97,468 39,804 323,893 232,197 294,729 222,362 454,800 452,331 2,899,855 2,409,556 Grants 418 86 682 171 908 204 540 107 131 25 382 115 186 48 560 134 583 147 957 305 5,349 1,342 Depreciation and amortisation 68,921 99,070 90,598 125,644 108,450 145,557 152,798 74,802 28,843 18,832 41,772 74,511 47,352 24,191 76,283 98,284 85,233 174,604 162,578 77,816 862,829 913,311 Finance costs 1,033 1,094 2,210 2,317 2,881 2,489 1,389 1,430 375 269 1,136 839 446 215 2,094 1,463 1,550 1,085 2,075 1,339 15,189 12,540 Write-down and impairment of assets 12,936 28,183 26,657 45,368 36,022 51,464 76,960 27,159 9,555 6,334 14,199 22,807 14,512 5,728 25,455 29,123 22,649 27,140 48,287 58,311 287,231 301,618 Losses from asset sales (61) (30) (252) (408) (340) (438) 224 (1) 35 (114) (125) (200) 130 82 (103) (257) (47) (131) 171 404 (369) (1,093) Other expenses 1,582 (15) 2,854 105 3,657 160 1,903 109 461 27 1,805 7 1,162 (4) 2,436 78 2,971 41 6,545 (102) 25,375 406 Total departmental expenses 723,043 686,649 858,034 977,826 955,781 1,080,131 754,170 618,709 157,954 128,237 534,538 477,584 263,504 148,325 717,086 659,017 777,970 739,209 1,628,340 1,037,927 7,370,421 6,553,614 Funded by: Revenue Revenues from Government 662,088 627,644 796,790 871,766 861,580 976,674 641,016 558,462 141,988 100,620 519,508 419,128 244,787 133,385 654,801 577,764 746,966 653,771 1,645,176 945,532 6,914,700 5,864,746 Sale of goods and rendering of services 17,378 16,010 33,093 36,197 43,918 42,333 21,344 22,236 4,741 13,477 18,183 19,983 5,258 3,489 24,218 32,802 23,248 35,073 36,964 29,390 228,346 250,990 Rental Income2 193 - 361 - 453 - 212 - 51 - 182 - 84 - 551 - 264 - 405 - 2,757 - Other revenue3 2,079 2,642 3,386 6,585 4,298 5,451 2,786 1,959 712 2,782 2,123 3,981 1,077 760 2,674 5,249 2,857 5,481 5,724 4,963 27,716 39,854 Total revenue 681,738 646,296 833,631 914,548 910,249 1,024,458 665,359 582,657 147,491 116,879 539,996 443,092 251,207 137,634 682,244 615,815 773,335 694,325 1,688,269 979,885 7,173,519 6,155,590 Gains Reversal of previous asset write-downs 15,471 21,799 30,541 40,408 37,673 26,170 69,191 20,726 13,539 9,756 15,505 23,698 20,372 7,033 25,513 28,441 24,773 27,246 63,402 32,842 315,980 238,118 Foreign exchange (157) (66) (65) 65 (22) 139 177 26 (167) 108 (157) 59 (126) (6) (96) (174) (102) (297) 131 (992) (584) (1,138) Other gains 21 216 130 350 117 448 1,861 196 336 54 (63) 196 324 55 84 240 (143) 200 (43) 233 2,624 2,187 Total gains 15,336 21,949 30,606 40,823 37,768 26,757 71,229 20,948 13,708 9,918 15,285 23,953 20,570 7,081 25,501 28,507 24,528 27,149 63,490 32,083 318,020 239,167 Total departmental income 697,074 668,245 864,236 955,371 948,017 1,051,215 736,587 603,605 161,200 126,797 555,281 467,045 271,776 144,715 707,745 644,321 797,864 721,474 1,751,758 1,011,968 7,491,539 6,394,757 Notes: 1. The details of these Outcomes are further explained in Chapter Three. 2. Rents have been aggregated into the Other revenue category for previous year results. 3. Resouces free of charge have been aggregated into the Other revenue category. 4. Discrepancies in some totals are due to rounding. 5. The 2006-07 comparative figures have been adjusted, where applicable, to conform with prior year adjustments made in the formation of the 2007-08 financial statements.

338 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 32: Reporting of Outcomes Table 32B: Major Classes of Departmental Revenues and Expenses by Output

Outcome 41 Output 4.01 Output 4.02 Output 4.03 Output 4.04 To ta l Ou t c o m e 4 Air Force Capability 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 Departmental expenses Employee benefits 497,904 451,656 426,874 339,308 485,095 428,975 332,386 294,352 1,742,260 1,514,291 Suppliers 785,428 606,412 476,352 487,344 480,050 469,073 442,102 541,861 2,183,933 2,104,691 Grants 850 168 1,646 167 829 143 581 109 3,906 587 Depreciation and amortisation 713,821 675,511 142,798 30,174 353,163 322,164 188,203 128,664 1,397,985 1,156,513 Finance costs 3,534 1,965 3,169 2,984 2,812 3,182 2,997 4,501 12,512 12,632 Write-down and impairment of assets 215,940 113,218 46,507 40,562 108,810 92,377 59,799 53,592 431,057 299,749 Losses from asset sales 381 (14) 740 1,160 275 80 139 164 1,535 1,390 Other expenses 3,130 4,275 3,812 589 2,664 679 1,787 614 11,392 6,157 Total departmental expenses 2,220,989 1,853,192 1,101,899 902,289 1,433,697 1,316,674 1,027,995 1,023,856 5,784,579 5,096,010 Funded by: Revenue Revenues from Government 2,053,023 1,684,144 1,027,595 845,509 1,349,383 1,148,204 911,798 956,267 5,341,799 4,634,124 Sale of goods and rendering of services 74,190 69,670 32,306 18,826 57,702 72,184 64,290 33,752 228,488 194,432 Rental Income2 296 - 299 - 236 - 420 - 1,252 - Other revenue3 5,381 12,539 3,607 3,064 4,268 8,604 3,878 6,317 17,135 30,524 To ta l r ev en u e 2,132,890 1,766,353 1,063,807 867,399 1,411,590 1,228,992 980,387 996,336 5,588,673 4,859,080 Gains Reversal of previous asset write-downs 67,125 19,784 17,244 12,203 37,645 56,287 21,525 (1,444) 143,540 86,831 Foreign exchange 410 834 94 (523) 226 78 129 (97) 859 292 Other gains 1,363 2,648 (636) 69 463 83 183 45 1,372 2,846 To ta l g a in s 68,898 23,266 16,702 11,750 38,334 56,448 21,837 (1,496) 145,771 89,969 Total departmental income 2,201,788 1,789,619 1,080,509 879,149 1,449,924 1,285,440 1,002,224 994,840 5,734,445 4,949,048

Outcome 51 Output 5.01 Output 5.02 Total Outcome 5 Outcome 61 Output 6.01 Total Outcome 6 Strategic Policy 2008 2007 2008 2007 2008 2007 Intelligence 2008 2007 2008 2007 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 Departmental expenses Departmental expenses Employee benefits 67,567 100,227 5,723 32,509 73,290 132,736 Employee benefits 277,424 238,229 277,424 238,229 Suppliers 231,985 119,633 24,081 22,100 256,067 141,733 Suppliers 431,074 205,314 431,074 205,314 Grants 74 22 27 68 101 90 Grants 284 63 284 63 Depreciation and amortisation 7,461 9,093 1,743 6,345 9,204 15,438 Depreciation and amortisation 70,261 62,308 70,261 62,308 Finance costs 1,692 929 204 110 1,896 1,039 Finance costs 581 240 581 240 Write-down and impairment of assets 7,760 1,359 1,346 344 9,106 1,703 Write-down and impairment of assets 113,122 7,824 113,122 7,824 Losses from asset sales (60) (133) 20 20 (40) (113) Losses from asset sales 128 667 128 667 Other expenses 504 (92) 125 (16) 629 (108) Other expenses 1,552 (57) 1,552 (57) Total departmental expenses 316,984 231,037 33,270 61,481 350,254 292,518 Total departmental expenses 894,426 514,588 894,426 514,588 Funded by: Funded by: Revenue Revenue Revenues from Government 255,028 211,626 25,995 55,397 281,023 267,023 Revenues from Government 732,786 469,774 732,786 469,774 Sale of goods and rendering of services 4,799 7,021 657 1,902 5,457 8,923 Sale of goods and rendering of services 37,310 10,303 37,310 10,303 Rental Income2 1,004 - 116 - 1,120 - Rental Income5 102 - 102 - Other revenue3 1,312 2,211 169 310 1,481 2,521 Other revenue2 9,643 2,105 9,643 2,105 To t al r ev e nu e 262,143 220,858 26,938 57,609 289,081 278,467 Total revenue 779,840 482,182 779,840 482,182 Gains Gains Reversal of previous asset write-downs 2,447 5,450 543 2,376 2,990 7,827 Reversal of previous asset write-downs 4,959 20,495 4,959 20,495 Foreign exchange 14 230 3 195 17 425 Foreign exchange 24 51 24 51 Other gains (90) 32 (25) 18 (114) 50 Other gains (374) 349 (374) 349 To t al gai ns 2,371 5,713 521 2,589 2,893 8,302 Total gains 4,609 20,896 4,609 20,896 Total departmental income 264,515 226,571 27,459 60,198 291,974 286,769 Total departmental income 784,449 503,078 784,449 503,078 Notes: 1. The details of these Outcomes are further explained in Chapter Three. 2. Rents have been aggregated into the Other revenue category for previous year results. 3. Resouces free of charge have been aggregated into the Other revenue category. 4. Discrepancies in some totals are due to rounding. 5. The 2006-07 comparative figures have been adjusted, where applicable, to conform with prior year adjustments made in the formation of the 2007-08 financial statements.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 339 APPENDIX 13 DEFENCE’S FINANCES

Department of Defence NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2008

Note 32: Reporting of Outcomes

Table 32B: Major Classes of Departmental Revenues and Expenses by Output (continued)

To tal D efence Outcome 1 Outcome 2 Outcome 3 Outcome 4 Outcome 5 Outcome 6 Tot a l Departmental Outcomes 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 Departmental expenses Employee benefits 440,881 477,956 1,701,480 1,616,597 3,274,961 2,915,935 1,742,260 1,514,291 73,290 132,736 277,424 238,229 7,510,296 6,895,744 Suppliers 877,045 756,500 1,806,105 2,016,830 2,899,855 2,409,556 2,183,933 2,104,691 256,067 141,733 431,074 205,314 8,454,080 7,634,623 Grants 596 115 7,764 806 5,349 1,342 3,906 587 101 90 284 63 18,000 3,003 Depreciation and amortisation 38,746 123,605 1,275,851 1,394,163 862,829 913,311 1,397,985 1,156,513 9,204 15,438 70,261 62,308 3,654,874 3,665,338 Finance costs 1,940 1,463 12,028 10,680 15,189 12,540 12,512 12,632 1,896 1,039 581 240 44,146 38,594 Write-down and impairment of assets 18,917 19,654 1,088,708 173,561 287,231 301,618 431,057 299,749 9,106 1,703 113,122 7,824 1,948,141 804,109 Losses from asset sales 40 85 857 (2,706) (369) (1,093) 1,535 1,390 (40) (113) 128 667 2,152 (1,770) Other expenses 2,407 14 13,460 559 25,375 406 11,392 6,157 629 (108) 1,552 (57) 54,815 6,971 Total departmental expenses 1,380,571 1,379,391 5,906,254 5,210,490 7,370,421 6,553,614 5,784,579 5,096,010 350,254 292,518 894,426 514,588 21,686,504 19,046,612 Funded by: Revenue Revenues from Government 1,175,294 1,283,379 5,247,665 4,702,616 6,914,700 5,864,746 5,341,799 4,634,124 281,023 267,023 732,786 469,774 19,693,267 17,221,662 Sale of goods and rendering of services 41,897 42,519 147,342 167,347 228,346 250,990 228,488 194,432 5,457 8,923 37,310 10,303 688,840 674,514 Rental Income2 436 - 1,408 - 2,757 - 1,252 - 1,120 - 102 - 7,073 - Other revenue3 3,137 2,652 17,121 40,307 27,716 39,854 17,135 30,524 1,481 2,521 9,643 2,105 76,233 117,963 To ta l r e v e n ue 1,220,765 1,328,550 5,413,535 4,910,270 7,173,519 6,155,590 5,588,673 4,859,080 289,081 278,467 779,840 482,182 20,465,413 18,014,139 Gains Reversal of previous asset write-downs 14,564 19,325 133,297 177,208 315,980 238,118 143,540 86,831 2,990 7,827 4,959 20,495 615,330 549,804 Foreign exchange 41 26 719 38 (584) (1,138) 859 292 17 425 24 51 1,077 (306) Other gains (307) 101 94 1,934 2,624 2,187 1,372 2,846 (114) 50 (374) 349 3,295 7,467 To ta l g ain s 14,298 19,452 134,110 179,180 318,020 239,167 145,771 89,969 2,893 8,302 4,609 20,896 619,702 556,965 Total departmental income 1,235,063 1,348,002 5,547,645 5,089,450 7,491,539 6,394,757 5,734,445 4,949,048 291,974 286,769 784,449 503,078 21,085,115 18,571,104 Notes: 1. The details of these Outcomes are further explained in Chapter Three. 2. Rents have been aggregated into the Other revenue category for previous year results. 3. Resouces free of charge have been aggregated into the Other revenue category. 4. Discrepancies in some totals are due to rounding. 5. The 2006-07 comparative figures have been adjusted, where applicable, to conform with prior year adjustments made in the formation of the 2007-08 financial statements. Note 32C: Major Classes of Administered Income and Expenses by Outcome

Tot a l D e f e n ce Outcome 7 Tot al Administered Outcomes 2008 2007 2008 2007 $'000 $'000 $'000 $'000 Income Revenue Non-taxation Goods and services 40 235 40 235 Interest 124 12,277 124 12,277 Dividends 134,263 77,599 134,263 77,599 Military superannuation contributions 756,982 700,595 756,982 700,595 Other sources of non-taxation revenues 215 (466) 215 (466) Tot al re v e n u e 891,624 790,240 891,624 790,240 Gains Net foreign exchange gains - - - - Total gains - - - - Total income administered on behalf of government 891,624 790,240 891,624 790,240 Expenses Subsidies 11,284 10,487 11,284 10,487 Employee benefits 2,849,405 2,794,512 2,849,405 2,794,512 Grants 26,800 - 26,800 - Other expenses 4,327 - 4,327 - Total expenses administered on behalf of government 2,891,816 2,804,999 2,891,816 2,804,999

Notes: 1. Details of this Outcome are further explained in Chapter Three under Outcome Seven. 2. Discrepancies in some totals are due to rounding. 3. The 2006-07 comparative figures have been adjusted, where applicable to conform with prior year adjustments made in the formation of the 2007-08 financial statements.

340 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 INDEXES & GLOSSARY LEGISLATION

The following legislation referred to in this report can be found at www.comlaw.gov.au except where noted.

· Archives Act 1983 · Commonwealth Electoral Act 1918 · Commonwealth Procurement Guidelines www.finance.gov.au/procurement/ procurement_guidelines.html · Copyright Act 1968 · Defence Act 1903 · Defence Force (Home Loans Assistance) Act 1990 · Defence Force Discipline Act 1982 · Defence Legislation Amendment Act 2006 · Environment Protection and Biodiversity Conservation Act 1999 · Financial Management and Accountability Act 1997 · Freedom of Information Act 1982 · Intelligence Services Act 2001 · Military Rehabilitation and Compensation Act 2004 · Occupational Health and Safety (Commonwealth Employment) Act 1991 · Ombudsman Act 1976 · Public Service Act 1999 · Safety Rehabilitation and Compensation Act 1988 · Telecommunications Act 1997 · United Nations Safety of Life at Sea (SOLAS) Convention 1974 (as amended) and Navigation Act 1912 www.dfat.gov.au/security/safety_nuc_shipment.html · Workplace Relations Act 1996.

342 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 ACRONYMS & ABBREVIATIONS AASB Australian Accounting FTE Full-time equivalent Standards Board GDP Gross Domestic Product ACT Australian Capital Territory GSI General Stores Inventory ADF Australian Defence Force GST Goods and services tax ANAO Australian National Audit HMAS Her Majesty’s Australian Ship Office Hon Honourable ANZAC Australian and New Zealand HQJOC Headquarters Joint Army Corps Operations Command APEC Asia-Pacific Economic ILS Integrated Logistics Support Cooperation JP Joint Project APS Australian Public Service LEAP Living Environment and ASLAV Australian light armoured Accommodation Precinct vehicle MAC Materiel Audit Committee CDF Chief of the Defence Force MP Member of Parliament CEO Chief Executive Officer MoU Memorandum of CFO Chief Finance Officer Understanding COMSUPER Commonwealth MSBS Military Superannuation and Superannuation Benefits Scheme Administration MYEFO Mid-Year Economic and Fiscal DFAT Department of Foreign Affairs Outlook and Trade PSPs Professional Service Providers DFRDB Defence Force Retirement RAAF Royal Australian Air Force and Death Benefits Scheme RAN Royal Australian Navy DHA Defence Housing Australia SAS Special Air Service Regiment DMFP Defence Management Finance Plan SES Senior Executive Service DMO Defence Materiel Organisation UAV Unmanned aerial vehicle DSTO Defence Science and URD Unit ready days Technology Organisation UN United Nations ELF Enhanced Land Force US United States ERC Expenditure Review USAF United States Air Force Committee USN United States Navy FFG Guided Missile Frigate VCDF Vice Chief of the Defence FMS Foreign Military Sales Force

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 343 GLOSSARY Accumulated The aggregate depreciation recorded for a particular depreciating asset. Depreciation Additional Where amounts appropriated at Budget time are required to change, Estimates Parliament may make adjustments to portfolios through the Additional Estimates Acts. Administered Revenue, expenses, assets and liabilities administered by and agency for appropriation the Commonwealth (such as taxes, benefits payments and public debt) that are not concerned with running the agency or its commercial activities. Administered Expenses, revenues, assets or liabilities managed by agencies on behalf of items the Commonwealth. Agencies do not control administered items. Administered expenses include grants, subsidies and benefits. In many cases, administered expenses fund the delivery of third party outputs. Agency Assets, liabilities, revenues and expenses that are controlled by Defence or a subsidiary. Includes officials allocated to the organisation. Amortisation A term used interchangeably with depreciation, except that it applies to a non-current physical asset under finance lease, or a non-current intangible asset, over its limited useful life. Appropriation An authorisation by Parliament to spend money from the Consolidated Revenue Fund (the principal working fund of the Commonwealth) for a particular purpose. Annual Two appropriation Bills are introduced into Parliament in May and comprise appropriation the Budget for the financial year beginning 1 July. Further Bills are introduced later in the financial year as part of the Additional Estimates. Assets Future economic benefits controlled by Defence as a result of past transactions or other past events. Assets are initially recognised at the cost of acquisition. Non-financial assets are subject to ongoing revaluation assessment. Assets under Assets under construction by Defence for Defence, or for the use of construction another entity according to a construction contract where Defence controls the asset until completion, or assets under construction or otherwise being made ready by another entity for use by Defence. Australian Specify techniques of accounting practice and the method of presenting Accounting financial information about a reporting entity. Standards Average funded A budgetary measure used to count the average number of ADF members strength paid on a full-time equivalent basis during a financial year. Capability The combination of military equipment, personnel, logistics support, training, resources, etc that provides Defence with the ability to achieve its operational aims. Capability A Capability Manager is responsible for raising, training and sustaining in- Manager service capabilities through the coordination of fundamental inputs to capability. Capability Managers include the Service Chiefs, the Chief of Joint Operations and the Chief Information Officer. Capital budget All proposed capital expenditure funded by appropriation for outcomes, by equity injections or loans and/or appropriations for administered capital, or by other sources. Capital Expenditure by an agency on capital projects, for example purchasing a expenditure building. Coalition Countries including Australia who provide troops, logistical support or assistance in Military Operations, peacekeeping or reconstruction efforts. Combined An exercise or activity involving one or more Services of the ADF with the exercise forces of other countries.

344 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 GLOSSARY

Consolidated Section 81 of the Constitution stipulates that all revenue raised or money Revenue Fund received by the Commonwealth forms the one consolidated revenue fund. The fund is not a bank account. The Official Public Account reflects most of the operations of the fund. Corporate The process by which agencies are directed and controlled. It is generally governance understood to encompass authority, accountability, stewardship, leadership, direction and control. Defence The Defence Capability Plan is a costed, detailed development plan for Capability Plan 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. Defence Encompasses all of Defence’s computing and communication capabilities information at all classification levels. It supports all Defence warfighting functions, environment including overseas deployed elements and connection to Coalition networks, as well as the day-to-day management functions. Defence The Defence Management and Finance Plan provide Ministers and central Management and agencies with a clear oversight of Defence planning and financing Finance Plan strategies. It describes the strategies agreed through the 2000 Defence White Paper and subsequent Strategic Review papers. As a compendium of information attached to Defence’s annual Portfolio Budget Submission, it is intended to help Ministers make informed strategic and budgetary decisions on Defence, by bringing into one document the expected financial position of the portfolio taking into account existing commitments and proposed new investments. The Plan also provides the Government with the information necessary to ensure that its investment in Defence is both affordable and sustainable. Defence A review commissioned in August 2006 by the Minister for Defence in Management consultation with the Secretary and the Chief of the Defence Force to Review examine organisational efficiency and effectiveness across the Defence organisation. Defence An independent review initiated by the Government in December 2002 to Procurement examine the procurement process for major acquisitions in Defence. The Review review was led by Mr Malcolm Kinnaird and is also known as the Kinnaird Review. Departmental Assets, liabilities, revenues and expenses that are controlled by the items agency in providing its outputs. Departmental items would generally include computers, plant and equipment assets used by agencies in providing goods and services and most employee expenses, supplier costs and other administrative expenses incurred. Depreciation Apportionment of an asset’s capital value as an expense over its estimated useful life to take account of normal usage, obsolescence, or the passage of time. Discretionary Payments where the portfolio Minister and paying agency have discretion grants in determining whether or not a particular applicant should receive funding and may or may not impose conditions in return for the grant. There is a central discretionary grants register. Employee Any APS officer of Defence or serving Defence Force member who receives a salary or wage, along with other benefits, for the provision of services whether on a full-time, part-time, permanent, casual or temporary basis Employee Include, but are not limited to, benefits provided to employees in the form expenses of salaries and wages, performance pay, senior officers’ allowances, leave, and superannuation, but does not include amounts paid or owed to employees as reimbursement of out-of-pocket expenses. Equity injection An additional contribution, over and above the cost of outputs. Equity injections form part of the Commonwealth’s investment in Defence. Expense Total value of all of the resources consumed in producing goods and services or the loss of future economic benefits in the form of reductions in assets or increases in liabilities of an entity. Fair value The amount for which an asset could be exchanged, or a liability settled, between knowledgeable and willing parties in an arm’s length transaction. The fair value can be affected by the conditions of the sale, market conditions and the intentions of the asset holder.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 345 GLOSSARY

Financial The Act establishes the regulatory framework for financial management Management and within Defence and other public sector agencies. Accountability Act 1997 Force element A component of a unit, a unit or an association of units having common prime objectives and activities. Force element A grouping of force elements with an appropriate command and control group structure for a specified role or roles (for example, the Navy Submarine Group). Forward The level of proposed expenditure for future years, based on relevant estimates demographic, economic and other future forecasting assumptions). The Government required forward estimates for the following three financial years to be published in each annual Federal Budget paper. Garrison support Includes a range of base support services such as ground maintenance, services hospitality, training area management, base security, transport, air support and fire fighting and rescue services. Group A high-level organisational grouping of functions and activities used by the Defence Executive as its primary management grouping (e.g. the Capability Development Group). Hardened and The Army’s key initiative to modernise and meet future operations Networked Army demands and requirements of the Government. It will increase the size (HNA) and firepower of the land force, improve the protection provided to troops, and allow them to communicate better on the future battlefield. Infrastructure Items owned, leased or otherwise under the control of Defence in support of activities on land and within buildings. Infrastructure includes items such as runways, roads, car parks, parade grounds, ovals, lighting, water, sewerage and other general service related items. It does not include land upon which, or within which, it is constructed or those fixed items integral to, and under, buildings. Interoperability The ability of systems, units or forces to provide the services to, and accept services from, other systems, units or forces and to use the services so exchanged to enable them to operate effectively together. Inventory Inventory is comprised of consumable stores and supplies, fuel and explosive ordnance used in the delivery of Defence services. These are items which are consumed in normal use, lose their identity during periods of use by incorporation into, or attachment upon, another assembly, as a result of wear and tear, cannot be reconditioned because their design does not make it possible or their specific values do not justify it. Joint exercise An exercise involving two or more Services of the ADF. Liabilities Sacrifices of future economic benefits that Defence is presently obliged to make to other entities as a result of past transactions or other past events. Materiel Materiel Acquisition Agreements cover the DMO’s acquisition services to Acquisition Defence for both major and minor capital equipment. Agreements Materiel Materiel Sustainment Agreements are between the Capability Managers Sustainment and the CEO DMO. These agreements cover the sustainment of current Agreements capability, including services such as repairs, maintenance, fuel and explosive ordnance. Military response A set of generic tasks that describe the range of military options the options Government could consider as a basis for a response to a particular situation or contingency. Net assets See Equity. Network Centric The aim of Network Centric Warfare is to improve the ability of the ADF to Warfare collaborate internally with supporting agencies and with coalition partners across organisation and geographic boundaries. Network Centric Warfare would allow Defence to harness recent development in computing and communications technologies to enhance decision making and warfighting capability. Operating result Equals revenue less expense.

346 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 GLOSSARY

Operational The rate at which the ADF is able to deliver its operations effects, for tempo example, the rate at which forces are dispatched and the time in which they are turned around for their next task. At the local level, this might translate to the crew of an aircraft spending a very small amount of time on the ground before it is re-tasked for its next mission. At the organisational level, this translates to available fighting forces spending very little time at home before they are deployed again for their next operation. Outcomes The results that the Government seeks from Defence, and are achieved by the successful delivery of its outputs, to the standards set in the Portfolio Budget Statements. For more information, see Chapter Six – Planned Outcome Performance in the Portfolio Budget Statements 2008-09. Output The product or service produced by Defence on behalf of government for external organisations or individuals. For more information, see Chapter Six – Planned Outcome Performance in the Portfolio Budget Statements 2008-09. Output groups A logical aggregation of agency outputs, where useful, and based either on homogeneity, type of product, business line or beneficiary target group. Aggregation of outputs may also be needed for the provision of adequate information for performance monitoring, or based on a materiality test. Permanent forces The permanent Navy, the regular Army and the permanent Air Force. Platforms Refers to air, land, surface or sub-surface assets that are discrete and taskable elements within the ADF. Portfolio Similar to the portfolio budget statement and prepared at Additional additional Estimates time to support and update on the Government’s original annual estimates budget for Defence. statements Portfolio Budget The document presented by the Minister for Defence to Parliament to Statements inform Senators and Members of the basis for the Defence budget appropriations in support of the provisions in Appropriations Bills 1 and 2. The statements summarise the Defence budget and provides detail of outcome performance forecasts and resources in order to justify expenditure for Defence. Prescribed agency An agency established by regulation under the Financial Management and Accountability Act 1997. The Act provides financial management authority to, and requires accountability by the Chief Executive of an agency. Price One of the three key efficiency indicators. The amount the government or the community pays for the delivery of agreed outputs. Professional Individuals with specialist skills contracted to fill a line position. Service Providers Purchaser- Arrangements under which the outputs of one agency are purchased by provider another agency to contribute to outcomes. Purchaser-provider arrangements arrangements can occur between Commonwealth agencies and state/ territory government or private sector bodies. Quality One of the three key efficiency indicators. Relates to the characteristics by which customers or stakeholders judge an organisation, product or service. Assessment of quality involves use of information gathered from interested parties to identify differences between user's expectations and experiences. Quantity One of the three key efficiency indicators. Examples include: the size of an output; count or volume measures; how many or how much. Readiness The readiness of forces to be committed to operations within a specified time, dependent on the availability and proficiency of personnel, equipment, facilities and consumables. Reserves The Naval Reserve, the Army Reserve and the Air Force Reserve. Revenues Inflows or other enhancements, or savings in outflows, of future economic benefits in the form of increases in assets or reductions in liabilities of Defence, other than those relating to contributions by the Commonwealth, that result in an increase in equity during the reporting period.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 347 GLOSSARY

Risk management At the highest level, involves the identification and mitigation of those risks that have the potential to adversely affect the achievement of agreed output performance at the agreed output price. Special account Balances existing within the Consolidated Revenue Fund, that are supported by standing appropriations (Financial Management and Accountability Act 1997, ss.20 and 21). Special accounts allow money in the Consolidated Revenue Fund to be acknowledged as set-aside (hypothecated) for a particular purpose. Amounts credited to a Special Account may only be spent for the purposes of the Special Account. Special Accounts can only be established by a written determination of the Finance Minister (s.20 of the Financial Management and Accountability Act 1997) or through an Act of Parliament (referred to in s.21 of the Financial Management and Accountability Act 1997). Special An amount of money appropriated by a particular Act of Parliament for a Appropriations specific purpose and number of years. For special appropriations the (including authority to withdraw funds from the Consolidated Revenue Fund does not Standing generally cease at the end of the financial year. Appropriations) Standing appropriations are a sub-category consisting of ongoing special appropriations — the amount appropriated will depend on circumstances specified in the legislation. Specialist military Items of a specific military nature and that are not available though the equipment normal external market in their current form to other than government military purchasers. It includes the prime military equipment plus the direct support items associated with the equipment. Standard Defence A key information system for the financial management of inventory, Supply System general stores, repairable items and other assets associated with (SDSS) Defence’s logistic capability. System Program The office of the program manager and some of his or her key team Office members. It serves as the single point of contact with industry, government agencies, and other activities participating in the acquisition process of a given system. Theatre The area in which military operations and activities take place. Two-pass approval The process by which major capital investment proposals are developed process for consideration and approval by the Government. Unit ready days The number of days that a force element is available for tasking, by the Maritime commander, either outside of major maintenance and within planned readiness requirements, or in accordance with contracted availability. Planned unit ready days are determined for each Force Element Group by aggregating total days for the unit in commission, less all days when the unit is programmed to be in major maintenance and conducting associated pre-workup (preparations for initial operational training) or based on the total number of days the force element is contracted to be available to Defence. Contracted availability applies to the Armidale class patrol boats and may apply to other classes in the future. Weighted average An inventory valuation method which considers the fluctuating prices and cost quantities of acquired goods in computing of the cost of inventory. The weighted average method takes the prices of units at the beginning inventory and the varying prices of purchases made and are weighted by the number of units to determine the weighted average cost per unit. It may be computed as the weighted average cost of all available goods present in a given period, or as a weighted moving average cost adjusted when new goods are delivered. Write-downs The reduction in the value of assets.

348 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 COMPLIANCE INDEX This index is prepared from the checklist Annual Reports as approved by the Joint of annual report requirements contained Committee of Public Accounts and Audit in attachment F to the Requirements for on 18 June 2008.1 Description Page Requirement Letter of transmittal i Mandatory Table of contents iii Mandatory Index 352 Mandatory Glossary 344 Mandatory Contact officer(s) inside back Mandatory cover Internet home page address and Internet address for report inside back Mandatory cover Review by the Secretary Review by departmental secretary 2 Mandatory Summary of significant issues and developments 6 Suggested Overview of department’s performance and financial results 2, 11 Suggested Outlook for following year 2 Suggested Significant issues and developments – portfolio 2 Portfolio departments – suggested Departmental overview Overview description of department 30 Mandatory Role and functions 31 Mandatory Organisational structure 31 Mandatory Outcome and output structure 31 Mandatory Where outcome and output structures differ from PBS format, N/A Mandatory details of variation and reasons for change Portfolio structure 30 Portfolio departments – mandatory Report on performance Review of performance during the year in relation to outputs and 38-116 Mandatory contribution to outcomes Actual performance in relation to performance targets set out in 38-116 Mandatory PBS/ PAES Performance of purchaser/ provider arrangements 196 If applicable, mandatory Where performance targets differ from the PBS/ PAES, 38-116 Mandatory details of both former and new targets, and reasons for the change Narrative discussion and analysis of performance 38-116 Mandatory Trend information 11-15 Suggested Factors, events or trends influencing departmental performance 2-9 Suggested Discussion and analysis of the department’s financial 11-15 Mandatory performance

1. These guidelines can be found at www.dpmc.gov.au/guidelines/index.cfm.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 349 COMPLIANCE INDEX

Discussion of any significant changes from the prior year or from 11-15 Suggested budget. Summary resource tables by outcomes 38-116 Mandatory Management accountability Corporate governance Statement of the main corporate governance practices in place 154 Mandatory Senior management committees and their roles 181 Suggested Corporate and operational planning and associated performance 154, 181 Suggested reporting and review Approach adopted to identifying areas of significant financial or 154 Suggested operational risk and arrangements in place to manage risks Agency heads are required to certify that their agency comply i Mandatory with the Commonwealth Fraud Control Guidelines. Policy and practices on the establishment and maintenance of 184 Suggested appropriate ethical standards How nature and amount of remuneration for SES officers is 175, 294 Suggested determined External scrutiny Significant developments in external scrutiny 188 Mandatory Judicial decisions and decisions of administrative tribunals 195 Mandatory Reports by the Auditor-General, a Parliamentary Committee or 188-195 Mandatory the Commonwealth Ombudsman Management of human resources Assessment of effectiveness in managing and developing human 98-116 Mandatory resources to achieve departmental objectives Workforce planning, staff turnover and retention 98-116 Suggested Impact and features of certified agreements and AWAs 176 Suggested Training and development undertaken and its impact 114, 161, Suggested online Occupational health and safety performance 113 Suggested Statistics on staffing Mandatory Certified agreements and AWAs Mandatory Performance pay 179 Mandatory Assets management Assessment of effectiveness of assets management 240 If applicable, mandatory Purchasing Assessment of purchasing against core policies and principles Volume 2 Mandatory (Appendix 9) Consultants Consultancy services contracts 226, online Mandatory Australian National Audit Office Access Clauses Absence of provisions in contracts allowing access by the Auditor- Volume 2 Mandatory General (Appendix 9) Exempt contracts Contracts exempt from the AusTender 226 Mandatory Commonwealth Disability Strategy Report on performance in implementing the Commonwealth 113 Mandatory Disability Strategy Financial Statements Financial Statements 244 Mandatory

350 DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 COMPLIANCE INDEX

Other Information Occupational health and safety (section 74 of the Occupational 113 Mandatory Health and Safety Act 1991) Freedom of Information (subsection 8(1) of the Freedom of 200 Mandatory Information Act 1982) Advertising and Market Research (Section 311A of the 227 Mandatory Commonwealth Electoral Act 1918) Ecologically sustainable development and environmental 207 Mandatory performance (Section 516A of the Environment Protection and Biodiversity Conservation Act 1999) Discretionary Grants 220 Mandatory Correction of material errors in previous annual report 236 If applicable, mandatory

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 351 INDEX INDEX

A APS Code of Conduct, 132 Armidale class patrol boats, 54, 58, 143 Abrams Tanks (M1A1), 16, 25 Army, 4, 6, 7, 16, 18, 24, 30, 31, 33, 34, Accelerated Disposals Program, 10 71, 102, 116, 117, 120, 121, 122, 135, 139, Accelerated Inventory Optimisation 140, 142, 143, 144, 145, 146, 162 Program, 36 Outcome performance, 38, 40, 46, 48, Accountability, 2, 7, 9, 10, 92, 118, 127, 51, 66, 67, 68, 69, 70, 72, 73, 154, 155, 156, 158 74 Adelaide class frigates, 54, 56 People, 99, 100, 103, 104, 105, 106, ADF enlistments & recruiting, 104 109, 110, 112 ADF Gap Year, 98, 106, 117 Army Aboriginal Community Assistance Program, 7 ADF Separations, 109 Asia Pacific Economic Cooperation Administered Cash, 13 (APEC), 7, 51 Administered Income and Expense, 15 Australian Light Armoured Vehicle Afghanistan, 5, 6, 7, 16, 17, 21, 23, 27, 45, (ASLAV), 67, 71 46, 50, 51, 67, 71, 75, 80, 81, 85, 90, 162 Audit, 2, 126, 154 Tarin Kowt, 6, 16, 25 Audit of the Australian Defence Force Africa, 6, 42 Investigative Capability Report (Whiddett/ AIR 5077, 136 Adams Report), 122 AIR 5402, 136 AusTender, 350 AIR 7000, 135 Australian Defence Force (ADF), 30 AIR 9000, 135, 136 Australian Defence Force Academy (ADFA), 17 Air Combat Capability Review, 8 Australian Federal Police (AFP), 6 Air Force, 4, 6, 7, 27, 30, 31, 35, 39, 40, 79, 82, 83, 85, 106, 120, 122, 127, 140, 162 Australian Military Court (AMC), 6, 30, 119, 123 Outcome performance, 45, 47, 57, 75 People, 99, 102, 103, 104, 105, 109, Australian Strategic Policy Institute 110, 111, 112, 117 (ASPI), ii, 30 Alternative Dispute Resolution, 130 Amphibious landing ships, 61 B Anzac class frigates, 54, 55, 56 Baker AC DSM, General John Stuart, 16 AP-3C Orion aircraft, 23 Baker, Private Ashley, 121 APS, 2, 3, 9, 17, 98, 100, 102, 103, 112, Bangladesh, 86, 87 113, 129, 163 Binskin AM, Air Marshal Mark, 35 Code of Conduct, 132 Black Hawk, 22, 47, 66, 68, 121 expenses, 103 numbers, 100, 102 Border Protection, 54, 90 review of actions, 129 Brunei Darussalam, 86 Butler MP, Mark, 24

352 DEFENCE ANNUAL REPORT 2007-08 VOLUME 2 INDEX

C D C-130 Hercules, 6, 46, 47, 78 Defence Annual Report 2006-07, 31 C-17 Globemaster III, 4, 5, 6, 7, 18, 35, 47, Defence Audit Committee, 10, 155 75 Defence Budget Audit, 3, 7, 154 Cadets, 17, 24, 90, 109, 116 Defence Business Model, 154 Caligari, Brigadier John, 26 Defence Capability Plan, 8, 133, 345 Cambodia, 86 Defence Cooperation Program, 82 Capability, 8, 33, 133, 135, 136 Defence estate, 157 Capability and Technology Demonstrator Defence Housing Australia (DHA), 95, 156 program, 160 Defence Imagery and Geospatial Capital Facilities, 133, 134, 137, 138, 141, Organisation (DIGO), 90, 91 146, 150, 158 Defence Intelligence Organisation Capital Facilities Program, 133 (DIO), 90 Capital Investment Program, 133, 134 Defence Management Review, 2, 155 Capital Purchases, 133, 152 Defence Materiel Organisation, 30, 36, Capital Receipts, 133, 153 133, 136, 160 Chief Information Officer Group, 159 Defence National Storage and Distribution Chief of Air Force, 35 Centre, 10, 36 Chief of Army, 24, 34 Defence Reform, 154 Chief of Navy, 33 Defence Science and Technology Organisation (DSTO), 158, 160, 161 Chief of the Defence Force, 2, 4, 5, 30, 31, 32, 80, 111, 119, 120, 121, 123, 126, 127, Defence Signals Directorate (DSD), 90, 91 128, 129, 130, 155, 163 Defence Support Group (DSG), 156 China, 81 Department of Veterans’ Affairs, 30, 156 Chinook helicopter, 8, 18, 68, 135 Departmental Cash, 11 Coalition, 4, 6, 35, 45, 48, 55 DOF Subsea, 29 Coastal Surveillance, 51 Combet AM MP, Greg, 24 E Comcare, 116 East Timor, 6, 19, 22, 33, 34, 44, 51, 67, Companion Reviews, 2, 3, 7, 9, 154 68, 70, 80, 81, 82, 84, 90, 92, 121, 160, Compensation for Detriment caused by 162 Defective Administration, 131 Enhanced Land Force, 34, 66, 99, 145 Counter-Terrorism, 7, 8, 51, 81, 82, 85, Enterprise Risk Management Plan, 10, 154 87, 90, 91, 161 Exercise Malabar, 18 Crane AM CSM RAN, Vice Admiral Russ, 33 Explosive Ordnance, 2, 10, 158

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 353 INDEX

F I F/A-18 Hornet, 35, 76 ICT Strategy Paper, 159 F–111, 76, 160 Inspector General ADF, 125, 126, 127 Fairness and Resolution Centres, 131 Incident reporting, 115 Financial Performance, 9, 11 Income and Expenses, 12, 245 Finding Sydney Foundation, 28 India, 8, 44, 80, 81, 86 Fitzgibbon MP, the Hon Joel, 26 Indigenous participation, 112 Five Power Defence Arrangements, 8, 48, Indonesia, 8, 81, 85, 86 85, 86 Intelligence, 90 Foley MP, the Hon Kevin, 24 International Engagement, 8, 80 Force Structure Review, 2, 3, 7, 9, 88 International Policy, 80 Fraser, Major General Tony, 18 Investigative capability, 122 Iraq, 4, 6, 17, 35, 42, 45, 46, 50, 51, 68, G 70, 71, 80, 81, 90, 162 Gender, 111 Iroquois helicopter, 18 Gillespie, Lance Corporal John, 21 Governance, 2, 6, 9, 10, 80, 82, 85, 91, 92, J 154, 155, 159, 181, 182, 183, 187, 269 Japan, 8, 81, 86 Governance framework, 9, 154, 155 Jeffery, Governor General Major General Governance reform, 10 Michael, 19 Joint Logistics Command, 158 H Joint Standing Committee on Public Works, 144 Hardened and Networked Army, 34, 99 Joint Strike Fighter (JSF), 160 Hassett AC KBE CB DSO NVO, General Sir Francis, 27 JP 2008, 135 HMAS Adelaide, 18, 21, 22 JP 2085, 136 HMAS Curlew, 33 Justice & Discipline Health & Effectiveness Data System, 127 HMAS Darwin, 33 HMAS Derwent, 33 K HMAS Perth, 6, 20, 33 HMAS Sirius, 18 Kelly AM MP, Dr Mike, 26 HMAS Success, 33 HMAS Sydney, 33 L HMAS Sydney II, 28, 29, 121 LAND 121, 135 HMAS Waller, 26 LAND 144, 135 Housing, 95, 96, 103, 128, 134, 152, 153, Laos, 86 156 Lawton, Captain, 121 Hurley AO DSC, Lieutenant General Leahy, Lieutenant General Peter, 4, 34 David, 33 Learning Culture Inquiry, 123 Leopard tanks, 16 Locke, Sergeant Matthew, 7

354 DEFENCE ANNUAL REPORT 2007-08 VOLUME 2 INDEX

M O Major Capital Equipment program, 133 Occupational health & safety, 113 Major capital facilities, 137, 144 Office of the Inspector General of the Malaysia, 8, 27, 48, 72, 81, 85, 86, 140 ADF, 123 Management, 9 Operation Anode, 6, 44, 51, 53, 54 Management of Explosive Ordnance, 158 Operation Astute, 6, 44, 51, 53, 77 Maritime Patrol Aircraft, 8, 48, 135, 136 Operation Catalyst, 6, 51, 53, 54, 55 Marks, Lance Corporal Jason, 7 Operation Deluge, 51 McKerron, Major, 121 Operation Nargis Assist, 5, 7, 78 Media, 162 Operation Outreach, 7, 50, 51, 52, 53, 54 Medium capital facilities projects, 146 Operation PNG Assist, 20 Medium capital projects, 150 Operation Resolute, 51 Middle East, 5, 6, 7, 9, 20, 23, 42, 45, 46, Operation Slipper, 6, 51, 53, 75 70, 71, 77, 78, 160, 162 Operations, 6, 42, 51 Military discipline, 124 Operations Relex II, 51 Military Justice Audits, 126 Organisational Chart, 32 Military Justice Reforms, 119 Organisational Structure, 30 Military Justice Review, 118 Outcome performance, 38 Minister for Defence, 8 Outcomes, 31 Minister for Defence Science and Outputs, 31 Personnel, 23 Overwatch Battle Group, 6, 17, 46, 51 Ministerial Support, 161 Ministers, 161 P Myanmar (Burma), 7 Pacific Patrol Boat Program, 84 Pakistan, 8, 53, 80, 86, 87 N Paljakka, Captain Andrew, 121 National Counter Terrorism Committee, 8, Papua New Guinea, 7, 42, 47, 54, 62, 77, 88 78, 81, 82, 128, 162 Navy, 4, 7, 28, 31, 33, 40, 81, 84, 120, Parliamentary Committees, 161 122, 143, 148, 162 Pearce, Trooper David, 7 Outcome performance, 38, 47, 48, 54, Performance Feedback and Development 55, 57, 59, 64 Scheme, 129 People, 99, 100, 102, 103, 104, 105, 106, 109, 111, 117 Philippines, 85 Navy Sea Change, 4, 7, 111 Plenary Living and Ubique Infrastructure Services, 152 New Zealand, 8, 44, 81, 86, 160 Portfolio Additional Estimates Statements North Atlantic Treaty Organization, 8, 27, 2007–08, 31, 99, 153 80 Portfolio Budget Statements 2008–09, 31, Northern Territory, 47, 54 99, 144 National Emergency Response, 50, 51 Portfolio Structure, 30 Professional Service Providers, 101, 102 Public Affairs, 161, 162

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 355 INDEX

Q Strategic Policy, 87 Street/Fisher Military Justice System Quinn, Mrs Nicole, 23 Review, 127 Superannuation, 95, 96 R Support to Government, 9 Reform, 2, 3, 10 SV Geosounder, 29 Remuneration, 166 Reserves, 9, 30, 52, 54, 98, 99, 100, 103, T 104 Tanks, see Abrams (M1A1), Leopard. RIMPAC, 26 Thailand, 85 Risk Management, 154 Rudd MP, the Hon Kevin, 29 U S Unacceptable behaviour, 130 United Kingdom, 8, 86, 127, 160 Savings, 2, 3, 9, 10, 35, 90, 154, 208, 209, 238, 239 United Nations, 6, 8, 34, 44, 87, 95 Seasprite helicopter, 55, 57 United States, 8, 80, 83, 86, 87, 88, 93, 127, 160 Secretary, 2, 3, 5, 26, 30, 80, 155, 159, 163 University of Queensland, 160 Security policy, 87 Unmanned Aerial Vehicle (UAV), 16 Senate Standing Committee on Foreign Affairs, Defence and Trade, 161 V Serco Sodexho Defence Services, 156 Vice Chief of the Defence Force Shalders AO CSC RANR, Vice Admiral (VCDF), 23, 31, 33, 34 Russ, 4, 33 Vietnam, 86 Shepherd, Air Marshal Geoff, 4, 35 Singapore, 8, 27, 48, 81, 85, 86 W Single LEAP Phase 1, 151 Wedgetail Airborne Early Warning and Single LEAP Phase 2, 152 Control (AEW&C) aircraft, 7, 77 Snowdon MP, the Hon Warren, 23 White Paper, 2, 3, 4, 6, 7, 8, 9, 10, 31, 88, Solomon Islands, 6, 44, 50, 51, 54, 67, 68, 90, 154 72, 80, 81, 84, 90, 92 Wideband Global Satellite (WGS), 8, 135 South Pacific, 83 Williamson and Associates, 29 South-East Asia, 8, 44, 81, 82, 84, 86 Workforce Overview, 99 Special Operations Task Group, 9 Workplace equity & diversity, 111 Staffing, 166 Worsley, Private Luke, 7

356 DEFENCE ANNUAL REPORT 2007-08 VOLUME 2 INDEX

DEFENCE ANNUAL REPORT 2007-08 VOLUME 1 357 This report was developed by the Directorate of Ministerial and Parliamentary Reporting with input and assistance from staff throughout Defence.

Internet The Defence website is a comprehensive resource on matters of military security, capability and people issues.

Defence www.defence.gov.au Defence jobs www.defencejobs.gov.au Defence honours and awards www.defence.gov.au/medals

The online version of this report, which contains additional detailed information, can be accessed at www.defence.gov.au/annualreports. Contact Comments and feedback about this report are welcome and should be directed to: Director Ministerial and Parliamentary Reporting Department of Defence Russell Offices R1-5-A036 Canberra ACT 2600 Telephone: (02) 6265 6277 Facsimile: (02) 6265 2923 Email: [email protected] Concept and design Defence Publishing Service Template development Netimpact Online Publishing Editing, proofreading and typesetting Department of Defence Printing Paragon Printing