Corporate governance framework

Financial management

2003—04 Budget

The Commission’s operating revenues for 2003—04 totalled $28.853 million. Revenues from Government accounted for 57.3%, sales of goods and services accounted for 42.6% and disposal of assets accounted for the remaining 0.1%. (See Table 34)

Investment in Program Development

The Commission indicated in its 2002—03 Annual Report that it was planning to access some of its additional accumulated reserves during 2003—04, and possibly outyears, to fund developmental work on an integrated approach to leadership development in the APS and on increasing Indigenous employment in the APS.

The Commission was granted approval through 2003—04 Additional Estimates to access its accumulated reserves to fund this work. (See Table 35)

TABLE 34: Revenue sources, 2000—01 to 2003—04

Revenue Source	2000—01	2001—02	2002—03	2003—04
Government	57.8%	60%	55.6%	57.3%
Sale of goods and services	40.4%	38.4%	43.8%	42.6%
Other	1.8%	1.6%	0.6%	0.1%

TABLE 35: Reserve funding for leadership development and Indigenous employment

	2003—04	2004—05	2005—06
Leadership Development	$0.898m	$0.761m	$0.516m
Indigenous Employment	$0.221m	$0.246m	$0.063m
Total additional funds	$1.119m	$1.007m	$0.579m

Non-Appropriation Revenue

Revenue from the sale of goods and services in 2003—04 is largely earned from training and development activities (75.0%), employment-related services (13.5%) and Public Service Gazette subscriptions (10.8%).

Revenue from training and development activities and employment-related services amounted to $10.881 million in 2003—04 and made up 37.7% of the Commission’s total revenue from all sources. This revenue is earned in an open market where agencies have choices about where they source their services and the level of services they acquire. This potentially volatile context means that the Commission must devote considerable effort to estimating revenue, expenditure and cashflows and to monitoring its financial performance during the year.

2003—04 Operating Outcome

The Commission’s operating outcome for 2003—04 was a loss of $1.229 million. The loss arose primarily from a significant increase in expenditure in Output 2 against forecast performance. Increased expenditure was driven by increases in activity within the output but was not accompanied by a commensurate increase in revenue, resulting in a deficit of $1.402m for the output. The Commission is reviewing its approach to estimating activity levels, price and expenditure for Output 2.

There was also significant variation between the planned and actual financial results for Outputs two, three and five and it is clear that, with hindsight, the expenditure estimate for Output 1 was overstated, while the expenditure estimate for Output 5 was substantially understated.

The operating loss follows on an expansion in the Commission’s work program generally during the last two years. The expanded work program has seen the Commission move away from a pattern of surpluses in 2000—01 and 2001—02 which led to the accumulation of additional reserves.

TABLE 36: End of year position 2000—01 to 2003—04

Revenue Source	2000—01	2001—02	2002—03	2003—04
Surplus	$0.916m	$0.989m	$0.074m
Deficit				$1.229m

The actual loss of $1.229 million is marginally less than the approved loss of $1.300 million estimated through the Portfolio Budget Statements process in April 2004. Mitigation strategies already applied to Commission activities have had a bigger impact than this might suggest, as effort has also been made to improve the detailed attribution of revenues and expenses to financial years.

The Commission has accumulated reserve funds sufficient to cover the operating loss and other liabilities.

Budget Outlook

In developing the 2004—05 budget the Commission has adopted a more conservative approach with the aim of achieving a balanced outcome in the 2004—05 budget year and forward estimates. The Commission is continuing to implement a number of changes to its budget practices and to planning, delivery and evaluation of its leadership, learning and development programs.

Estimates have been prepared reflecting increased sensitivity to the volatility of market demand for learning and development programs.
A review of the Commission’s pricing of its learning and development programs is being undertaken.
The Commission is developing a stronger relationship between financial and activity performance information as the basis for planning and monitoring its performance.

The Commission’s Integrated Leadership System will provide a suite of contemporary programs that are expected to encourage demand for future Commission learning and development offerings.

Accordingly, we are estimating increased operating revenue from 2004—05, with the Commission budgeting for a balanced operating outcome for 2004—05 and following years. Total revenue is estimated to be $29.745 million in 2004—05, an increase of $0.892 million from 2003—04.

Appropriation funding will decline slightly from 2005—06 onwards as investment funding approved at 2003—04 Additional Estimates for the Indigenous Employment and Integrated Leadership System concludes. This decrease in appropriations will be offset by increased training revenue and a slight decline in staffing levels, so a balanced operating position will be achieved.

Purchasing

The Commission undertakes its purchasing consistent with the requirements of the Commonwealth Procurement Guidelines issued by the Department of Finance and Administration. The majority of the Commission’s procurement is from small to medium-sized Australian and New Zealand enterprises. (The Commission is also part of the Group 8 information technology outsourcing arrangements that are contracted with Volante, a small to medium-sized Australian firm. This contract is discussed under Information Management.)

During 2003—04 the Commission undertook a range of procurement and contracting activities. These included contracts with:

PerSec Solutions, from 22 September 2003 for 3 years, for the provision of personnel security vetting services

Capital Indoor Plant Hire, from 1 October 2003 for 2 years, for the provision of plant hire services

Complete Cleaning, from 1 July 2003 for two years, for the provision of cleaning services at the Edmund Barton Complex

the Department of the Prime Minister and Cabinet, a two-year extension to the existing contract until 31 October 2005, in relation to the Portfolio agency banking services contract to which the Commission is a party.

Competitive tendering and contracting

During the year, the Commission did not undertake competitive tendering and contracting activities as defined by the Annual Report Guidelines.

Consultancy services

The Commission’s policy in relation to the selection and management of consultancy services is set out in its Chief Executive Instructions and complies with revised guidelines recently issued by the Department of Finance and Administration (Financial Management Guidance No. 12 (July 2004)–Guidance on Identifying Consultancies for Annual Reporting Purposes).

During 2003—04, the Commission let an estimated 62 consultancy contracts with estimated total actual expenditure of $1,451,441.

TABLE 37: Use of consultants

Range of consultancies	Number	Value
Range of consultancies	2003—04	2003—04
Over $100,000	3	594,019
$10,000—99,000	26	736,598
Less than $10,000	33	120,824
Total	62	1,451,441

Due to revised definitions within the guidelines regarding consultancy and non-consultancy contracts, it has not been possible to provide comparative information on previous expenditure on consultancy services. A list of all consultancy contracts with a value of $10,000 or more (inclusive of GST) is published on the Commission website at www.apsc.gov.au/about/consultants0304.htm.

This page is available from www.apsc.gov.au/annualreports/0304/financialmanagement.htm
For information and help with this site go to Using our site