Chapter 2Overview of the annual reports examined
2.1In accordance with Standing Order 25(20)(a), the committee has examined annual reports against relevant legislative and reporting requirements and found them to be ‘apparently satisfactory’. This chapter highlights some of the findings in relation to the annual reports examined.
Performance reporting
Availability of performance framework documents
2.2The availability of relevant performance framework documents is essential to be able to assess a body’s level of achievement of planned performance. Commonwealth entities and companies are required to set out in their corporate plan each year how they will achieve their purpose and how their performance will be measured and assessed.
2.3Since the launch of the Transparency Portal in 2019, the committee has monitored the availability of the annual report, corporate plan and portfolio budget statement (PBS) for the relevant bodies it has oversight of.
2.4Most of the presented 2022–23 annual reports for Commonwealth entities and companies were available in HTML format on the Transparency Portal and in PDF format on most bodies’ websites.
2.5All 2022–23 corporate plans for the bodies whose annual reports were examined were located and available for reference.
2.6All 2022–23 Portfolio Budget Statements for the Department of Defence (Defence) and the Department of Foreign Affairs and Trade (DFAT) were available on the Transparency Portal and on their respective websites.
2.7The committee notes some non-corporate Commonwealth entities, in reporting on the performance of the entity, referenced an incorrect paragraph of the PGPA Act and did not mention the required rule.
2.8The committee would like to remind all entities in the Defence and Foreign Affairs portfolios receiving Commonwealth funds that they are required to participate in parliamentary proceedings.
‘Clear read’ principle
2.9Department of Finance (Finance) guidance on annual performance statements notes the importance of the alignment of the annual performance statement with the corporate plan and PBS:
Annual performance statements should include information that demonstrates the connection between corporate plan, PBS and annual performance statements to enable a ‘clear read’ across the three documents.
To achieve this, entities may wish to include a diagram demonstrating how the performance information fits together across the documents, or page number references to the corresponding information in corporate plans and the PBS.
It is good practice for entities to set out the discussion of the achievement of performance in their annual performance statements in the same order as the corporate plan, reinforcing the connection between the documents. Each performance measure should also be expressed in a consistent way to aid the clear read between its planned performance information and performance results.
Defence portfolio
Department of Defence
2.10The Department of Defence’s Annual Report 2022–23 was tabled in the Senate on 17 October 2023 and in the House of Representatives on 17 October 2023. The report was submitted to the minister on 19 September 2023.
Secretary and Chief of Defence’s reviews
2.11In his review for 2022–23, Defence Secretary, Mr Greg Moriarty, reflected on the ‘challenging strategic environment’ and how Defence continued to ‘prioritise and enhance investments in our people, capability and Defence industry, climate change initiatives, and our relationships with our international partners’.
2.12Mr Moriarty highlighted the six priority areas identified by the Government Response to the Defence Strategic Review for immediate action:
the acquisition of conventionally-armed, nuclear-powered submarines;
developing the Australian Defence Force’s (ADF) ability to precisely strike targets at longer range and manufacture munitions in Australia;
improving the ADF’s ability to operate from Australia’s northern bases;
investing in growth and retention of a highly skilled Defence workforce;
lifting Defence’s capacity to rapidly translate disruptive new technologies into defence capability, in close partnership with Australian industry; and
deepening Australia’s diplomatic and defensive partnerships with key partners in the Indo-Pacific.
2.13Mr Moriarty also discussed several of Defence’s achievements, including:
cessation of the Nuclear-Powered Submarine Task Force and the creation of the Australian Submarine Agency on 1 July 2023;
appointment of the inaugural Chief of the Guided Weapons and Explosive Ordinance Enterprise;
commitment of $3.8 billion over four years to upgrade and develop the network of northern bases, ports and barracks;
examples of Defence’s Indigenous Procurement Policy in the reporting period;
investments in renewable energy and net zero emissions, including solar energy generation and battery storage systems upgrades at 10 Defence sites across Australia; and
Defence’s relationship with partners around the world, including: the United States, United Kingdom, Indo-Pacific and Ukraine.
2.14In his review for 2022-23, the Chief of the Defence Force, General Angus J Campbell AO DSC discussed Defence’s efforts to grow and retain their workforce through a range of people-focused reviews.
2.15General Campbell highlighted Defence’s implementation of five of the thirteen recommendations from the Royal Commission into Defence and Veteran Suicide’s Interim Report as well as implementing 110 of the 143 recommendations from the Afghanistan Inquiry Report and Reform Plan.
2.16In his review, General Campbell identified Defence’s assistance with domestic natural disasters and response to the COVID-19 pandemic response efforts. He also discussed Defence’s assistance overseas, in:
Vanuatu
Ukraine
Sudan
New Zealand
Türkiye
United Kingdom
2.17General Campbell concluded by discussing Defence’s assistance in supporting international cooperation and thanking the Defence personnel and their families.
Performance reporting
2.18Defence’s reporting framework is set out in the Department of Defence’s 2022-23 Portfolio Budget Statements (Defence PBS) and the Department of Defence’s Corporate Plan 2022-26 (Defence Corporate Plan). The Defence PBS sets out the Department of Defence’s outcomes and programs administered under them.
2.19Defence has two outcome statements:
Outcome 1 - Defend Australia and its national interests through the conduct of operations and provision of support for the Australian community and civilian authorities in accordance with government direction; and
Outcome 2 – Protect and advance Australia’s strategic interest through the provision of strategic policy, the development, delivery and sustainment of military, intelligence and enabling capabilities, and the promotion of regional and global security and stability, as directed by Government.
2.20Defence introduced 10 new performance measures in their 2022–26 Corporate plan and maintained their four-tier rating system to measure performance:
Achieved
Substantially achieved
Partially achieved
Not achieved
2.21Outcome 1 contains one key activity and is measured by two performance measures. Of these performance measures, Defence reported one measure had been achieved, while the other performance measure was not assessed due to no government requirements to deploy Defence personnel.
2.22Outcome 2 contains six key activities and is measured by eight performance measures. Of these performance measures, Defence reported four were achieved, two substantially achieved, one partially achieved and one measure was unable to be measured as 2022–23 was the baseline year for data collection.
Partially Achieved
2.23The performance measure that was partially achieved was:
Defence is an employer of choice, attracting and retaining talented and skilled people from across Australia to the Australian Defence Force and Australian Public Service.
2.24The target for this performance measure was ‘Defence make progress against recruitment and retention milestones to meet our 2039–40 workforce growth requirements.’ Defence noted they did not meet their workforce guidance milestones outlined in the PBS however their qualitative assessment of Defence as an employer of choice was comparable to the previous reporting period.
Substantially Achieved
2.25Defence reported two performance measures as substantially achieved:
Defence delivers the right capability at the right time within a balanced Integrated Investment Program to ensure it is equipped to respond to future security challenges; and
Defence contributes to Australia’s prosperity through the inclusion of Australian businesses and enterprises in supply chains for capability and services.
2.26For the capability performance measure, Defence ‘conducted a risk assessment noting it did not deliver the right capability at the right time for each domain: land, maritime, air, space, cyber and enabling.’ Defence noted the complexity of the Integrated Investment Program and stated, ‘it was inevitable there were some variances in the Government-approved capability schedule and cost.’
2.27The second performance measure contained five targets: direct economic contribution, sovereign defence industry, defence industry exports, national science and technology and procurement through indigenous businesses. Four of the targets were achieved with the fifth being substantially achieved.
Financial reporting
2.28Defence reported a net capital surplus of $1027.9 million for the reporting period with a $357.3 million net operating deficit. This resulted in a net cash result of $670.6 million surplus or 1.4 per cent of the final budget for the reporting period.
2.29Defence noted the $1027.9 million surplus was:
primarily driven by delays in acquisition expenditure resulting from continuing disruptions to international supply chains as a result of the Russia and Ukraine war and the residual impacts of the COVID-19 Pandemic.
Other matters
2.30The committee notes that in Defence’s 2021–22 and 2022–23 annual report, Defence missed the inclusion of the mandatory PGPA requirement 17AG(7A)(b): A statement that ‘Annual reports contain information about actual expenditure on reportable non-consultancy contracts. Information on the value of reportable non-consultancy contracts is available on the AusTender website.’ Defence listed this requirement in their appendix with a page reference however it was unable to be located.
2.31The committee urges Defence to ensure it complies with the PGPA requirements and looks forward to seeing this information in Defence’s 2023–24 annual report.
Conclusion
2.32The committee considers the report to be ‘apparently satisfactory’.
Department of Veterans’ Affairs
2.33The Department of Veterans’ Affairs Annual Report 2022–23 was tabled in the House of Representatives on 16 November 2023 and the Senate out of session on 24 October 2023. The report was submitted to the minister on 13 October 2023.
Secretary’s review
2.34In her review, the Secretary of the Department of Veterans’ Affairs (DVA), Ms Alison Frame, noted the tabling of the interim report of the Royal Commission into Defence and Veterans’ Suicide and DVA’s implementation of five of the recommendations in the report.
2.35Ms Frame also highlighted DVA’s other achievements including addressing the claims backlog. DVA has hired more staff to assist in processing claims leading to a 20 per cent reduction in the backlog.
2.36Other achievements included:
Veterans’ legislation reform – facilitating the consolidation of eligibility criteria set out in three separate pieces of legislation into the Military Rehabilitation and Compensation Act 2004;
Modernising information technology systems – upgrading information technology systems to assist with claims processing and provide up to date information for veterans and their families;
Veterans’ and Families Hubs – expanding the Veterans’ and Families Hubs Program with the establishment of eight new hubs ‘in locations with significant Defence and veteran communities’;
Commemorations – DVA undertook in a wide range of commemoration activities during the reporting period including Anzac Day ceremonies in Türkiye and France and the 50th anniversary of the end of Australia’s involvement in the Vietnam War.
Performance reporting
2.37DVA’s performance reporting framework is set out in the Department of Veterans’ Affairs Corporate Plan 202–-23 (DVA Corporate Plan) and the Department of Veterans’ Affairs Portfolio Budget Statements 2022–23 (DVA PBS). The DVA PBS outlines the department’s three outcomes and programs related to each of them.
2.38DVA had 30 performance measures for Outcome 1 and met 10 of the performance targets. DVA measures performance for Outcome 1 by three categories: timeliness, quality and client satisfaction.
2.39For Outcome 1, DVA met two of the client satisfaction measures, six quality measures targets and two timeliness targets. DVA cited the recruitment of staff and new processing procedures as not meeting most of the performance measures.
2.40DVA met nine out of 10 performance measures for Outcome 2 including all quality measures and timeliness measures for targets. DVA stated they ‘continue to review and improve business practices and enabling systems to ensure programs are delivered efficiently and effectively.’
2.41Two out of three performance measures were unable to be reported on for Outcome 3. DVA noted the limitations of the War Graves System for being unable to report on performance measures. DVA will report on two new performance measures in their 2023–24 Annual Report that did not rely on data from the War Graves System.
Financial reporting
2.42DVA reported a financial position of assets totalling $394.6 million which exceeded the $307.9 million in liabilities. The Department noted they had sufficient financial assets to meet payables as of 30 June 2023. This is consistent with previous financial years.
2.43For the 2022–23 financial year, DVA reported a consolidated net cash surplus of $44.6 million which was comprised of a $36.7 million operating surplus and $7.9 million Defence Service Homes Insurance Scheme.
Other matters
2.44Under PGPA requirement 17AG(2)(d)–(e), DVA is required to report any non-compliance with financial law and the steps taken to remedy the breach.
2.45DVA reported a significant breach of non-compliance with financial law in the reporting period covering multiple instances. Procurements under the Open Arms program did not comply with Commonwealth Procurement Rules (CPR’s). DVA stated ‘corrective actions were being undertaken to ensure the Department complies with CPR’s when procuring services including the establishment of a panel through formal procurement processes.’
Conclusion
2.46The committee considers this report to be ‘apparently satisfactory’.
Foreign Affairs and Trade portfolio
Department of Foreign Affairs and Trade
2.47The Department of Foreign Affairs and Trade’s Annual Report 2022–23 was tabled in the Senate on 24 October 2023 and the House of Representatives on 28 November 2023. The report was submitted to the minister on 19 September 2023.
Secretary’s review
2.48In her review for 2022–23, Secretary Jan Adams AO PSM commented on the ‘The year in review’ and the ‘The year ahead’.
2.49In ‘The year in review’ section, Ms Adams drew attention to:
DFAT’s inaugural First Nations Ambassador and work on First Nations approach to foreign policy;
DFAT’s official development assistance to the Pacific;
increased engagement with South East Asia and stabilising Australia’s relationship with China;
deepening relations with Indo-Pacific partners including visits from the Japanese Prime Minister and Indian Prime Minister;
DFAT’s efforts to diversify trade relationships and Australia’s engagement in bilateral trade and environmental agreements;
Australia’s bid for a seat on the United Nations (UN) Security Council in 2029–30; and
DFAT’s consular assistance overseas and the implementation of the new ‘Rseries passport’.
2.50For ‘The year ahead’, Ms Adams drew attention to:
further commitment of funding through the official development assistance program;
deepening ties with Southeast Asian nations and further stabilisation of relations with China;
continued negotiations of a Free Trade Agreement with the European Union; and
continuation of DFAT’s humanitarian response efforts.
Performance reporting
2.51DFAT’s reporting framework is set out in the Department of Foreign Affairs and Trade’s 2022–23 Portfolio Budget Statements (DFAT PBS) and the Department of Foreign Affairs and Trade’s Corporate Plan 2022–23 (DFAT Corporate Plan). The DFAT PBS sets out DFAT’s outcomes and programs.
2.52In order to measure performance, DFAT has seven ‘priorities’ each with performance measures underneath them. Of the seven priorities, DFAT report two priorities as ‘achieved’, four as ‘on track’ and one priority ‘not achieved’.
2.53The priority DFAT did not achieve was ‘Support Australians overseas’. DFAT noted this priority was not met due to not meeting passport processing targets. DFAT aimed to process 95 per cent of passports within 10 business days however, only achieved 61 per cent of passports being processed within 10 business days. DFAT aimed to process 98 per cent of priority passports within two business days however, only achieved 91 per cent.
2.54The priorities assessed as on track were:
Promote a stable and prosperous Indo-Pacific;
Pursue our economic, trade and investment opportunities;
Keep Australia and Australians safe and secure; and
Provide a secure and effective overseas presence.
2.55The two priorities that assessed as achieved were deliver an effective and responsive development program, with all performance measures achieved and advance global cooperation with six out of nine performance measures achieved.
Financial reporting
2.56DFAT reported an overall deficit of $20.9 million for the reporting period. This was attributed to the impacts of COVID-19 still being felt through ‘higherthan‑normal costs driven by a high global inflationary environment’ and higher production costs for passports as well as increased demand for passports in the reporting period.
2.57DFAT reported $2086.5 million in revenue which was an increase of $272 million on the previous reporting period. The department also recorded $2269.3 million in expenses which was an increase $307.2 million from 2021–22.
Conclusion
2.58The committee considers this report to be ‘apparently satisfactory’.
Australian Trade and Investment Commission (Austrade)
2.59The Australian Trade and Investment Commission’s Annual Report 2022–23 tabled in the Senate on 24 October 2023 and in the House of Representatives on 16November 2023. The report was submitted to the minister on 10 October 2023.
Chief Executive Officer’s review
2.60In his review, Chief Executive Officer Mr Xavier Simonet, highlighted the challenging environment businesses have dealt with ‘slower global economic growth, inflationary pressures, rising interest rates and ongoing geopolitical tensions.’ Mr Simonet discussed Austrade’s focus on advancing Australia’s international interests by supporting Australian companies and international investors to underpin Australia’s economic security.
2.61Mr Simonet noted Austrade had achieved positive outcomes for exporters and international investors, aligning to government priorities and worked tirelessly to support Australians overseas through consular and passport services.
2.62Looking ahead, Mr Simonet discussed strategic priorities for the coming year, including:
net zero – supporting Australia’s transition to a carbon-neutral economy;
economic security – strengthening strategic relationships and economic resilience;
diversification – expanding trade and investment markets;
First Nations businesses – empowering Indigenous businesses and communities for equitable economic development;
visitor economy – restoring long-term sustainability to the tourism and visitor industry; and
trade modernisation – improving cross-border trade and digital services.
Performance reporting
2.63Austrade’s reporting framework is set out in the Australian Trade and Investment Commission’s 2022–23 Portfolio Budget Statements (Austrade PBS) and the Australian Trade and Investment Commission’s Corporate Plan 2022–23 (AustradeCorporate Plan). The Austrade PBS sets out the entity’s outcomes and programs.Austrade has two outcomes with three programs to achieve them.
2.64Outcome one has five performance measures of which four were achieved and one partially achieved. The performance measure that was partially achieved was ‘High level of satisfaction for Australia’s clients with Austrade’s services’. Austrade aimed to achieve 85 per cent however, only achieved 80 per cent satisfaction.
2.65Outcome two has one performance measure ‘Effective delivery of consular and passport services to Australians overseas’. In order to achieve this performance measure, Austrade aimed to process 97 per cent of passports accurately and achieved 99.59 per cent.
Financial reporting
2.66For the reporting period, Austrade reported $291 million in total income and $318.7 million in expenses resulting in a $27.8 million deficit.
2.67In his review, Chief Financial Officer Ken Wedgwood highlighted the ongoing fiscal pressures and a competitive financial environment. He noted increased staff costs, increases in the price of operating offshore posts and the costs associated with implementing a number of programs to support the recovery of Australia’s visitor economy as some of the factors of the deficit.
2.68Mr Wedgwood noted, Austrade had ‘experienced two years of operating losses arising from support to government initiatives around the ongoing impact of the COVID-19 pandemic’. Mr Wedgwood discussed Austrade’s careful management of its cash balances during that time and the ongoing need for careful management of funds ‘to ensure the agency can continue to operate and deliver on its outcomes’.
2.69In his outlook for 2023–24, Mr Wedgwood noted:
has generated operating losses in both 2021–22 and 2022–23. As a result, Austrade’s cash position no longer has capacity to fund operating losses. Austrade will need to focus on ensuring that it remains financially viable, rebuild its cash reserves through careful financial management, and operate sustainably during the course of 2023–24.
Conclusion
2.70The committee considers this report to be ‘apparently satisfactory’.
Senator Raff Ciccone
Chair
Labor Senator for Victoria