Overview of financial performance
Departmental operating budget
The department began 2013–14 with a budgeted net cost of services of $302.6 million, and an expected deficit of $7.8 million.
During the year, this budgeted net cost of services increased to $305.1 million (an increase of $2.5 million), as a result of decreases in estimates for own-source revenue ($42.9 million) and expenses ($40.4 million) during the Portfolio Additional Estimates Statements (PAES) process. The PAES identified that the department was anticipating a deficit in 2013–14 because of a reduction in external source revenue. The department subsequently reported a budgeted deficit for 2013–14 of $29.7 million in the 2014–15 Portfolio Budget Statements.
The department received an additional $19.6 million as part of the Portfolio Supplementary Additional Estimates process. Most of this funding relates to the Mid-Year Economic and Fiscal Outlook measure ‘Funding for pre-existing measures affecting the public sector’.
Looking forward, the department is budgeting for a deficit of $13.3 million for 2014–15. The year ahead will be challenging, however the department will continue its focus on strong financial management and reducing costs while continuing to deliver key activities to our stakeholders.
Departmental operating results
The department’s 2013–14 financial result was better than expected despite the challenges posed by economic conditions and savings measures. The year ended with a $13.4 million operating deficit compared to an estimated deficit of $29.7 million at the time of the 2014–15 Budget.
A series of actions in 2013–14 have resulted in the department achieving a more sustainable financial position compared to earlier years. These have included:
- a major voluntary redundancy programme, through which around 365 staff have separated from the department, including more than 70 staff at the Senior Executive Service and Executive Level classifications
- a re-design of the department’s structure to ensure staffing arrangements appropriately reflect the Government’s priorities
- continued implementation of the service delivery modernisation programme, to improve workforce productivity and make business practices more modern, effective and efficient.
Action has also been taken to better manage the department’s revenue. Unlike many other Commonwealth agencies, the department relies heavily on volatile cost-recovery revenue that cannot be forecast with certainty. In the 2014–15 Budget, the Government agreed to fee adjustments to allow the department to fully recover costs from users of the biosecurity and export certification systems in 2014–15.
The Government has also agreed to progress reforms to the pricing architecture of the department’s cost-recovery arrangements to ensure it clearly aligns with the modern and efficient nature of the services delivered under these arrangements.
Departmental revenue increased by $14.7 million to $376.1 million in 2013–14, falling short of the budgeted own-source revenue of $384.1 million. The reduction is because of less than anticipated income relating to cost-recovery arrangements.
A majority of own-source revenue received by the department relates to revenue from cost-recovery arrangements. Cost-recovery programmes continue to present challenges for the department’s financial management because revenue can fluctuate with trade volumes. Efforts continue to ensure the cost base is in line with revenues.
Figure 1 outlines the own-source revenue received by the department and estimated revenue as per the Portfolio budget statements 2014–15.
Total cost-recovery revenue collected in 2013–14 was $343.9 million. Figure 2 shows cost-recovery revenue by programme in 2013–14.
The department’s total expenses in 2013–14 totalled $709.7 million, against a budget of $728.7 million
(PBS 2014–15), a small reduction from $711.8 million in 2012–13. Expenditure is expected to decrease further in the forward years.
Our five-year Finance Strategy has the long-term objective of ensuring the department remains a financially sustainable department of state and service delivery organisation. In particular, the strategy aims to ensure our cost-recovered services, which represent more than half of departmental expenditure, are efficient, transparent and sustainably funded.
Figure 3 shows the trend of departmental expenses over the past five years, and budgeted expenditure figures from 2014–15.
We continue to meet the savings targets and efficiency measures imposed by the Government. In doing this, the department has reprioritised investments and continued to reduce spending such as travel (by $3.88 million) and contractors and consultants (by $4.86 million).
Figure 4 outlines the major expenditure categories in supplier expenditure during 2013–14.
The department manages 16 cost-recovery arrangements that are supported by industry reserves. Figure 5 outlines the industry reserve balances as at 30 June 2014.
Administered programme performance
Our 2013–14 administered activities covered programmes including:
- Clean Energy Future—Creating Opportunities on the Land
- Caring for our Country—Landcare
- Rural Financial Counselling Service
- Carbon Farming Initiative
- Farm Finance Concessional Loans Scheme
- Drought Concessional Loans Scheme.
The department managed administered assets of $578.4 million on behalf of the Government. This largely comprised farm finance and drought loans of $214.4 million and investments in six portfolio entities of $278.6 million.
Administered revenue received for 2013–14 was $469.2 million, an increase from the previous year’s revenue of $450.9 million, because of the incremental increase in levies collected from industries, as well as commencing the collection of interest revenue under the Drought Concessional Loans Scheme and the Farm Finance Concessional Loans Scheme.
Revenue is forecast to increase in 2014–15 because of an increase in interest revenue from the concessional loans programmes.
Expenditure for 2013–14 was $892.7 million, an increase from previous year’s expenditure of $791.06 million, primarily because of increased appropriation for the following programmes:
- Clean Energy Future—Creating Opportunities on the Land
- Drought Concessional Loans Scheme and Farm Finance Concessional Loans Scheme
- Interim Farm Household Allowance
- Rural Financial Counselling Service.
Expenditure is expected to decrease in 2014–15 in line with programme funding profiles and terminating measures.