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CHAPTER 1 2009-10 OVERVIEW

2 DEFENCE ANNUAL REPORT 2009-10 VOLUME 1


THE SECRETARY AND THE CHIEF OF THE DEFENCE FORCE OVERVIEW

In 2009-10, the men and women of the Australian Defence Organisation performed extremely well in achieving our mission of defending of our nation and our national interests. The efforts of our highly skilled and professional workforce produced excellent results in a wide range of areas, all of which enabled the performance of the Australian Defence Force (ADF) on 15 operations both here at home and overseas. We were proud to lead Defence during this

period, and we thank all the men and women of Defence for their dedication, hard work and commitment during a period of high operational tempo and organisational reform.

This year Defence demonstrated its commitment to attracting and retaining people, by implementing its People in Defence Strategy. The Strategy reinforces Defence's focus on recruiting and retaining the key people that we need; acknowledges the diversity of roles in Defence; and recognises that people give us the capacity in operations, enable and facilitate change, as well as deliver the outcomes reported here.

The Defence Strategic Reform Program (SRP) was validated when the Government endorsed the Program along with its implementation plan. As a decade-long program of reform directed at changing Defence culture and improving the sustainability of its business decisions, the SRP will deliver efficiencies and cost reductions of $20b.This will be reinvested in the delivery of Force 2030—the Defence White Paper's plan for the future capability requirements of the ADF. Defence successfully delivered the $797m in cost reductions programmed for 2009-10 while maintaining capability and delivering agreed outcomes.

Separately, the Government endorsed the Force Protection Review, which provides capability enhancements for ADF personnel on operations, including Counter-Improvised Explosive Device Systems; increased armoured protection and firepower for selected vehicles; increased protection against indirect fire through acquisition of counter-rocket, artillery and mortar sense-and-warn systems; enhancements to intelligence, surveillance and reconnaissance capabilities; and enhanced personal equipment, such as improved body armour and night-fighting equipment. These initiatives demonstrate Defence's resolve to support its people in harm's way.


DEFENCE ANNUAL REPORT 2009-10 VOLUME 1 3

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2009-10 IN REVIEWOperations, international relationships and our servicesOver the last year Defence conducted 15 operations, deploying people overseas or to protect Australia's borders and offshore maritime interests.

Tragically, during this time six soldiers lost their lives on operations overseas. The whole Defence community is deeply saddened by their loss. We take time to think of these soldiers and join together to offer our deepest sympathies to the families and friends of these fine men killed in action. We will always remember their sacrifice in the service of our nation:

The Government has directed that Australia's aim in Afghanistan is to prevent that nation from again being used by terrorists to plan, prepare and train to undertake attacks against Australians. The ADF contributes to this by training the Afghan National Army (ANA) 4th Brigade in Uruzgan Province so that it is able to assume security responsibility, without the support of international combat forces. We are also helping to stabilise Uruzgan through combined and co-ordinated military, police and civilian assistance. This year, good progress was made in training and mentoring growing numbers of ANA 4th Brigade soldiers, who are increasingly gaining the skills they need to fight independent of International Security Assistance Force (ISAF) support. We also successfully disrupted Taliban insurgent operations, thereby enhancing security and stability for the people of Uruzgan Province.

This financial year Operation CATALYST, the ADF's contribution to the United States-led multinational effort to develop a secure and stable environment in Iraq, concluded. Defence finalised its military commitment to the rehabilitation of Iraq on 31 July 2009, with the final 11 ADF members, working in various coalition headquarters, withdrawing on 29 July 2009. More than 20,000 ADF personnel served in Iraq as part of Operation CATALYST between 2003 and 2009. ADF personnel are still in Iraq providing security to the Australian Embassy as part of Operation KRUGER, and supporting the United Nations Mission for Iraq as part of Operation RIVERBANK.

As part of our contribution to the Combined Maritime Forces Task Force in the Middle East Area of Operations, we commenced counter-piracy operations in addition to our maritime security and counter-terrorism roles. Further, our continuing ADF deployments as part of the International Stabilisation Force in East Timor and the Regional Assistance Mission in Solomon Islands, underline our commitment to stability and security in our nearer region.

This year we again provided invaluable assistance to a number of countries following natural disasters or catastrophes including Tonga, Papua New Guinea, Fiji, Indonesia, Samoa and Haiti. The Navy's Patrol Boat Group in conjunction with Border Protection Command maintained surveillance and maritime law enforcement across Australia’s vast northern approaches.

Private Benjamin Ranaudo Sapper Darren Smith Private Scott Palmer

Sapper Jacob Moerland Private Timothy Aplin Private Benjamin Chuck



We have also strengthened our international relationships over the last year. The alliance with the United States has grown even stronger through our close operational cooperation in Afghanistan, the renewal of our bilateral Acquisition and Cross-Servicing Agreement and the successful completion of Exercise TALISMAN SABER 2009. Links with China were enhanced through the annual Defence Strategic Dialogue in Canberra (the second time these talks have been held at the Secretary and Chief of the Defence Force level), and a visit to Australia by General Guo Boxiong, Vice Chairman of the Central Military Commission, in May 2010. In the near region we advanced shared security interests with Indonesia by upgrading our strategic defence dialogue to a more senior level, and by successfully concluding the first coordinated naval patrol in April 2010. We continued to reinforce Pakistan’s efforts to remove terrorist networks from its territory by providing greater education and training assistance, while concurrently conducting a number of senior strategic dialogues with India. Relations with Japan were further formalised with the signing of a bilateral Acquisition and Cross-Servicing Agreement.

People, training and capacity-buildingIn response to the Defence White Paper, Defence released the People in Defence Strategy, which outlines how Defence will achieve the workforce needed to support the Defence White Paper’s capability requirements. The strategy is aligned with the SRP and sets out Defence’s vision for recruiting and retaining the key people that we need; increasing community support for Defence careers; and gaining the confidence of the Government that this can be done sustainably and affordably.

Defence's recruitment and retention performance has been strong, with high achievements against recruiting targets and a separation rate of just seven per cent for the ADF. This is the lowest ADF separation rate seen in over 20 years. This strong performance is important as the strategic goals and tasks outlined in the Defence White Paper require substantial growth in the size of the ADF workforce, from 55,000 in 2008-09 to an ultimate strength of over 59,000. Our present growth is ahead of targets but continuing efforts are still required. In particular, the ADF needs to continue to grow the skills required in the workforce to effectively use the equipment envisioned by Force 2030. This means that we need to recruit from diverse backgrounds and must be an attractive employer for all groups of Australians.

While each of the Services as a whole continue to meet, or exceed recruitment and retention targets, there are still some areas where attracting and retaining people has been difficult. For instance, although our Navy has seen an increase of almost 800 serving personnel, some submariner categories remain challenging. The establishment of a Submarine Recruiting Team is already paying dividends with in-service transfers to the submarine arm on the rise leading to significant improvement in the submarine workforce. Half of the 29 recommendations of the 2008 Submarine Workforce Sustainability Review have already been completed, with the remainder being implemented. The key measure of success has been an improvement in the recruitment, retention and qualification trends for our submariners over the past 18 months. The Air Force continues to experience its highest retention rates in 20 years, as well as very strong recruitment figures in all areas, except medical officers.

The Defence Indigenous Development Program-Navy commenced in March and has seen 34 young adults gain the skills and knowledge necessary for entry into the Royal Australian Navy. This exciting initiative offers considerable future promise.



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Defence has also been successful in efforts to increase the recruitment and retention rates of women in the ADF, with 416 more women serving in the ADF at the end of 2009-10 than the previous reporting period. The implementation of the New Generation Navy Program has also reinvigorated leadership development, with a women’s mentoring program, the Navy Women’s Leadership Program, providing an opportunity for female leaders to participate in leadership events and conferences across Australia. Defence will continue its efforts in this area.

We are continuing with the implementation of 38 agreed recommendations from the Hickling Review. The review looked at the general accountability, probity and transparency of the management of ADF Cadets and we have now implemented 10 recommendations with the remainder due in coming months.

In terms of health services for our personnel, we have developed strategic alliances with State Governments, private health facilities and Centres of Excellence as an integral part of providing high-quality health care to ADF personnel, while also offering increased training and educational opportunities to uniformed health personnel. The first stage of this project has been achieved with a Memorandum of Understanding signed with Queensland Health. We are in the second phase of this project and have started negotiations with the Royal Brisbane Women's and Children's Hospital regarding ADF use of ward and training facilities.

Our partnership with learning and think-tank organisations continues. Defence renewed its funding agreement with the Australian Strategic Policy Institute, including the provision of a generous funding increase. We have also commenced implementing a program to enhance civil-military-police collaboration through the Asia Pacific Civil-Military Centre of Excellence, contributing to Australia's capacity to prevent, prepare for and respond more effectively to conflicts and disasters overseas. Defence and the University of New South Wales at the Australian Defence Force Academy (UNSW@ADFA) have continued their relationship by signing an extended contract for academic services that sees both organisations working in partnership until 2023.

Strategic Reform Program (SRP)After support to operations, the SRP was Defence’s highest priority activity in 2009-10. Throughout 2009-10 Defence has been building a solid foundation to ensure that the SRP reforms are sensibly targeted, achievable and can be sustained into the future. The SRP is a decade-long ‘campaign of reform’ which will enable Defence to position itself to fund and operate Force 2030. This deliberate and managed approach to reform draws on lessons learned from previous organisation-wide reform efforts designed to deliver substantial cost reductions for reinvestment.

Development of the SRP Implementation PlanThe SRP was agreed by the Government as part of the 2009 Defence White Paper. Over the period from July 2009 to February 2010, many Defence personnel were dedicated to developing detailed plans for the implementation of the SRP. These plans detailed over 300 separate reform initiatives which will be managed across 15 individual ‘reform streams’. This detailed planning work culminated in the development of a SRP Portfolio-Wide Implementation Plan which was considered by the Government in March 2010. The Government endorsed the Plan and implementation of the SRP began in earnest soon thereafter. This Portfolio-Wide Implementation Plan is supported by detailed implementation plans across each of the 15 individual ‘reform streams’ and will ensure that Defence is best positioned to make implementation of the SRP happen.



2009-10 Cost reductionsDefence successfully delivered larger savings than the $797m in cost reductions programmed for 2009-10, and this has been reinvested to help deliver Force 2030.

Some of the key areas where cost reductions were achieved include:

• pursuing opportunities to become more productive in maintenance (particularly on the C130-J Hercules aircraft, the Army Land Rovers and the Minehunter Coastal fleet) and in supply chain processes through better ‘cost control’ measures such as deciding to refurbish rather than replace equipment

• improved demand management of travel, training, professional services and garrison support

• upgrading and consolidating Defence's fragile and ageing ICT infrastructure and improving the management and delivery of ICT support.

Other reforms which will help Defence improve productivity and efficiency in the future include improvements to our strategic planning processes and reforms to human resource and ICT processes in the intelligence community. Enhancements to governance arrangements have improved planning and transparency across capability development and science and technology activities. Implementation of the reforms coming out of the Mortimer Review into Defence procurement and sustainment is progressing well and helping Defence improve decision making and become more accountable to the Government; as well as being more transparent in managing the billions of dollars invested in building military capabilities.

Many other reforms are detailed in other parts of this Annual Report and are already reaping substantial and sustainable benefits for Defence.

While the overall annual cost reduction target was exceeded, there was some variance in how cost reductions were achieved across the different ‘reform streams’. There was an overachievement of total cost reductions of approximately $225m, which was largely due to one-off expense reductions not anticipated on an ongoing basis. For example, additional cost reductions against sustainment schedules were achieved due to external factors, such as lower fuel prices. The apparent non-achievement of target cost reductions in the Workforce and Shared Service reform stream is not the result of failed reform. It is instead driven by overachievement in military personnel numbers due to increased retention. This has resulted in military employee expense-related cost reductions not being met.

Table 1.1 2009-10 SRP Reform Stream cost reductions

NOTE:

1. Total Smart Sustainment cost reductions include $197m of one-off expense reductions.

Reform stream Cost reduction target Cost reductionsachieved

Information and Communications Technology $49m $94m

Smart Sustainment $263m $461m[1]

Non-Equipment Procurement $172m $343m

Workforce and Shared Services $58m -$131m

Other Savings (including logistics) $255m $255m

Total $797m $1,022m



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Change and communicationsThroughout 2009-10 significant effort was focused on developing a comprehensive Reform Change Management Strategy, including an SRP Communications Plan. This included a co-ordinated program of visits by senior Defence personnel, led by the Secretary and CDF, to major Defence establishments between May and June 2010 to present details of the SRP and answer questions. This high-level contact with Defence personnel at targeted levels across Australia has driven engagement with the SRP throughout the organisation in a positive way and encouraged personnel to suggest even more opportunities for reform and cost reductions. This level of communication will continue as the SRP progresses.

SRP governance and assuranceTo help ensure reform is sustainable and genuine, Defence has built a strong governance and assurance regime around the SRP. At the top of this framework is regular reporting to the Government and the newly-established Defence Strategic Reform Advisory Board (DSRAB), which will scrutinise the implementation of the SRP and provide independent advice to the Government. The DSRAB provides the combined insights of senior private sector leaders with experience in large-scale organisational reform as well as the broader whole-of-government perspectives of Secretaries of key Government departments. The DSRAB met for the first time on 30 November 2009 and has subsequently met on two other occasions during 2009-10. Defence has also embedded an internal management and reporting structure directly into the SRP and its reform initiatives. This structure will provide the ‘eyes and ears’ on the ground to ensure that the SRP is making sustainable and genuine reform, without impacting negatively on capability or safety.

2010-11 SRP outlookThe reform initiatives implemented throughout 2009-10 represent only the start of the reform task at hand. The SRP will, over time, touch and challenge every part of Defence. In 2010-11, the SRP is scheduled to deliver another $1,016m in cost reductions which will be made available for reinvestment in Force 2030. Over $380m will also be invested in reform activities to help us achieve this result. Additionally, we will examine ways to strengthen internal accountability and planning in 2010-11 to help Defence enshrine a cost-conscious culture and achieve greater benefit from the resources entrusted to us by the taxpayer.

Capability, industry and systemsDefence is consistently achieving key milestones to deliver the major capability equipment elements of Force 2030. These include, for the reporting period, the Government agreeing to purchase the first 14 Joint Strike Fighter aircraft; implementing a number of projects to ensure information and communication dominance in operations; and agreeing to a competitive tender for a new Naval Aviation Combat system (replacement helicopters).

The production of Australia's Super Hornet aircraft continues to progress ahead of contracted schedule and within budget, with five of the aircraft delivered to Australia by 30 June 2010. This program is just one example of the collective achievements of Defence and industry personnel in ensuring the ADF has the best equipment available, on time and on budget, and to quality and safety specifications. In 2010-11 we expect progress to continue in the acquisition of key capabilities across the land, maritime, aerospace and electronics domains.



This progress was underscored by the Defence Industry Policy Statement. Released towards the end of the reporting period, it emphasises an integrated defence industry policy underpinned by programs that provide industry with opportunities to improve its skills across the entire capability development lifecycle.

Some of our equipment programs continue to face major challenges. This was demonstrated by the Australian National Audit Office (ANAO) May 2010 report on the Lightweight Torpedo Replacement program (JP 2070) which found the project to have significant and serious problems. In relation to this audit, Defence acknowledged that its performance had not been optimal. JP 2070 has been a complex undertaking and has a long history of project management difficulties and failures. To help deliver the required capability and to address the systemic issues identified in the report, Defence accepted all of the report’s recommendations. Specific measures were introduced including: regular reports to Ministers to discuss the progress of the project; conducting a follow-on audit in approximately 18 months; and increasing the intensity of senior management oversight of the project. A ‘lessons learned’ exercise on JP 2070 will also be conducted with an independant reviewer, with outcomes from that process applied to all other Defence capital projects.

Intensive management effort is being applied, including on projects of concern like the Collins submarine program and the AEW&C (Wedgetail) aircraft. We are confident that positive capability outcomes can still be achieved.

Finally, following Defence mediation with BAE Systems Australia Pty Ltd on the Defence Integrated Distribution System contract, a much improved service delivery arrangement (which includes a robust governance framework until 30 June 2013) has been achieved.

Operating environmentIn addition to our successes, 2009-10 brought a number of challenges.

Defence undertook a major review of base security following the arrest of individuals allegedly planning an attack on the Holsworthy Army base, New South Wales in August 2009. As a result, Defence allocated approximately $10m in 2009-10 to enhance security at some bases. This included rectifying or enhancing perimeter fencing and installing closed circuit TV and security lighting. Defence has allocated a further $329m to the program out to 2013-14. On 24 June 2010, the Defence Amendment (Security of Defence Premises) Bill 2010 was introduced into the Parliament, which proposed to enhance the security of Defence bases and facilities within Australia. The Bill subsequently lapsed following the prorogation of the Parliament on 19 July 2010. The Bill was re-introduced in the 43rd Parliament on 29 September 2010.

On 24 February 2010, CDF announced the appointment of the Hon Roger Gyles, AO, QC to conduct a new inquiry into a range of matters arising from equity and diversity issues on board HMAS Success. It was extremely disappointing that Defence’s inquiry processes up to this point in relation to this matter were found wanting. This independent inquiry has been comprehensive and will identify the areas in which our current procedures may have been deficient. This incident reinforced that there are aspects of the administrative inquiry system that require significant improvement. The first hearing of the Commission of Inquiry was held on 12 March 2010. Due, among other things, to the volume of documents and the requirement to call additional witnesses, the final report and findings are expected to be received by the end of 2010. The focus must be to ensure that procedural fairness and privacy is afforded to all individuals involved, including the complainants and those responding to allegations.



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We continue to work with the Senate References Committee on this matter and have committed to providing the final report to the Senate Inquiry when completed. It is critically important that inquiry processes followed by Defence are beyond reproach and meet the highest legal standards.

In August 2009, the High Court of Australia in Lane v Morrison unanimously found that the part of the Defence Force Discipline Act 1982 that created the Australian Military Court was invalid. This presented an interesting challenge and, as an interim measure, legislation was passed by the Parliament which reinstated the former system of courts martial and Defence Force magistrates, which continues to hear serious Service offences. On 24 June 2010, the Military Court of Australia Bill 2010 was introduced into the Parliament. This Bill proposed the creation of a Military Court of Australia within the federal courts system to try all serious Service offences. Following the proroguing of the Parliament on 19 July 2010, the Military Court of Australia Bill 2010 lapsed. At the time of printing, the Bill had not been re-introduced to Parliament.

Media scrutiny on the legitimacy and appropriateness of certain Defence expenditure has drawn attention to the substance and consequence of some of Defence's past financial decisions. Accordingly, we have renewed our focus on establishing a more disciplined and cost-conscious culture to underpin every-day operations and decision-making in the organisation. A cost-conscious culture encourages paying greater attention to the accuracy of financial information, to the clarity of requests for tender, and the maintenance and accessibility of comprehensive records for future reference. Defence business is now conducted more effectively and efficiently, and our spending and procurement processes are more robust. Continued improvements in this area are a fundamental factor in the success of the SRP.

2010-11 OUTLOOK2010-11 promises to be as demanding as the previous year. We continue our commitment to the NATO/ISAF-led mission in Afghanistan and other operations around the globe. Defence will further progress development of Force 2030, including its future submarines, future frigates and a new training system for pilots of fixed wing aircraft and a helicopter rotary wing air crew training system. In the year ahead, approvals under the Force Protection Review will be progressively delivered and begin to enter service. We will also begin to undertake some of the more significant projects in the Defence Capability Plan, which are being prepared for Government consideration in 2010-11. The selection of a tactical uninhabited air vehicle system under JP 129 Phase 2 has been approved, and on current planning, further projects to be progressed in 2010-11 are likely to include: selection of the future naval helicopter to replace the Seahawk helicopter under project AIR 9000 Phase 8; and selection of the self-propelled Howitzer for Army under project LAND 17 Phase 1C.

We are continuing improvements and upgrades for the Collins class submarines, including three projects to progress the upgrades to the Integrated Ship Control Monitoring and Management System, sonar systems and communications systems over the next 10 years. As the Collins Class Submarines reach mid-life, certain systems fitted in the mid-1990s will have to be upgraded to ensure their capability is maintained at the required level for the foreseeable future. Restructuring towards the Hardened and Networked Army-2011 will see the initial deployment of a motorised infantry battalion with an improved battle management and communications infrastructure.



Defence will continue to implement the SRP in 2010-11 and beyond. We are committed to turning a well-planned program into a well-executed program that delivers on the benefits it promises. Delivering on the SRP means delivering Force 2030 and delivering the ADF and Defence organisation Australia needs for the future.

I J Watt AO A G Houston AC, AFCSecretary Air Chief MarshalDepartment of Defence Chief of the Defence Force


To mark the end of Operation CATALYST in IraqCorporal Andrew Hebden lowers the Australian national flagwhich had been flying over ‘Aussie Island’ at Camp Victory in

Baghdad.

Troops from the 3rd Battalion, The Royal Australian Regiment, watch as a C-130 Hercules taxies into Williamson Airfield, Queensland. One-hundred and fifty soldiers parachuted into Shoalwater Bay Training Area in a large scale tactical drop as part of Exercise TALISMAN SABER.

Seaman Boatswains Mate Tara Riley takes the helm ofHMAS Kanimbla during Exercise TALISMAN SABER. This joint

Australian–United States exercise is held every second year toimprove combat readiness and interoperability between the two

Defence forces.

Year in ViewJuly 2009


The Defence Secretary, Dr Ian Watt is welcomed into the job, at a meeting between the then Minister for Defence, Senator the Hon John Faulkner and the CDF, Air Chief Marshal Angus Houston.

Second Mentoring and ReconstructionTask Force Combat Engineer Sapper

Stuart Conlin and his ExplosiveDetection Dog ‘Solo’, on patrol in

Sarab, Southern Afghanistan.

Able Seaman Boatswains Mate Nathan Coles sits in the bow of one of HMAS Darwin's Rigid Hull Inflatable Boats off the coast of Manado, Indonesia after the International Fleet Review 2009.

August 2009


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Petty Officer Marine Technical AnthonyWalsh shows Lieutenant Thienchai

Punyafong of the Royal Thai Navy aroundthe central control station onboard

HMAS Darwin during Exercise AUSTHAI 09.During the week-long exercise, core

mariner and warfare skills were practisedincluding seamanship, Anti-Submarine

Warfare, Anti-Air Warfare, MaritimeInterdiction Operations and Anti-Surface

Warfare.

After five months away on Exercise NORTHERN TRIDENT, Able Seaman Medic Mathew Avery holds his 14 week old son Riley at the welcome home ceremony for HMAS Sydney, at Fleet Base East Garden Island, Sydney.

Captain Jessica Cordy, flying in an A25 Black Hawkhelicopter from HMAS Kanimbla, visits the locals of Madang,

Papua New Guinea, during Exercise OLGETA WARRIOR 09.

September 2009


A LCM8 (a medium sized landing craft) prepares to dock with HMAS Kanimbla on arrival to Padang, Indonesia. During Operation PADANG ASSIST, the ADF provided support and, in conjunction with the Indonesian Military (TNI) and local authorities, assisted in completing post-earthquake relief operations.

Sailors and Officers from HMAS Darwin spent a day at‘Enfants de Sihanouk Ville’, an Orphanage in Sihanouk Ville,Cambodia. Able Seaman Musician Chris Thompson helps out

local children on his drum set.

As part of the humanitarian and disaster relief effort for Operation SAMOA ASSIST, a donated Fire Engine is craned onto HMAS Tobruk alongside Garden Island, Sydney.

October 2009


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On White Ribbon Day, to show their support for theprevention of violence against women, members from

HMAS Warramunga formed a human white ribbon on theflight deck of HMAS Perth.

Leading Seaman Boatswains Mate Nathan Hardwiske, Able Seaman Stores Naval Scott Eggins and Seaman Boatswains Mate Kate McGregor are recovered in the Rigid Hull Inflatable Boat, during a man overboard exercise.

Tri-service Flag Party, Chief Petty Officer Adams, Petty OfficerTaylor, Sergeant Richmond, Sergeant Haddock, Leading

Seaman Clark and Leading Seaman Joost at Remembrance Dayceremonies, Melbourne.

November 2009


A number of ADF personnel deployed to East Timor took the time on Christmas morning to share gifts and food with local residents. Major Craig Campbell spreads the Christmas cheer through the streets of Dili.

After nearly 45 years of service to the nation, M113A1Armoured Personnel Carriers conduct their final

patrol in Dili, East Timor, as a Black Hawk helicopterflies overhead.

Soldiers based at Camp Holland, Afghanistan, enjoyed a traditional Christmas Day lunch. The base was decorated with Christmas trees, church services were offered and the 1st Battalion Band performed carols.

December 2009


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The then Minister for Defence Personnel,Materiel and Science, the Hon Greg

Combet AM MP, Program ManagerAirborne Early Warning Control

Programs, Air Vice-Marshal Chris Deebleand Boeing Vice President, Ms Maureen

Dougherty standing on the stairs in frontof one of the new Royal Australian Air

Force Wedgetail AEW&C aircraft.

His Royal Highness Prince William, receiving a gift of an Australian slouch hat from the Commanding Officer of 3rd Battalion, Royal Australian Regiment (3RAR), Lieutenant Colonel Trent Scott. His Royal Highness met with officers and soldiers of Alpha Company, 3 RAR, and participated in live fire small arms training at the Marksmanship Training Range at the Holsworthy Army Base, New South Wales.

Crew onboard HMAS Stuart celebrateAustralia Day with a BBQ and cricket on

the flight deck while on patrol in theGulf of Oman.

January 2010


Warrant Officer (WOFF) Rudy Mech from No. 37 Squadron stands in the paratroop door of a C-130 Hercules, at RAAF Base Richmond ahead of one of his final flights. The longest serving airman aircrew member in the Air Force, WOFF Mech, retired in February 2010 after 42 years in the Air Force.

Sapper Matthew Taylor, an Engineer with the SecondMentoring and Reconstruction Task Force deployed in

Afghanistan, searches a vineyard in the Baluchi Valley.

Defence personnel in Canberra participated in a touch football competition and sausage sizzle to raise funds for the Red Cross Haiti Appeal.

February 2010


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Australian F/A-18F Super Hornets fly information across the Pacific Ocean withan F-111C, a symbolic representation of

the old leading the new home in the ferryflight from the United States.

Civilian and Military members of HMAS Kuttabul gathered at the Navy Heritage Centre at Garden Island, Sydney for International Women’s Day 2010.

Able Seaman Marine Technician Cameron Gray andAble Seaman Stores Naval Shelley Kennedy veer onthe recovery line during Replenishment at Sea withHMAS Sirius during the Fleet Concentration Period.

March 2010


Australia's Federation Guard andthe Band of the Royal Military

College of Australia perform infront of the Australian War

Memorial as part of the 2010Anzac Day Parade, Canberra.

Corporal Cameron Butler, an engineer with the First Mentoring Task Force, shares a joke or two with Sergeant Gulrahman from the Afghan National Army.

Corporal Wayne Doolan provides medicalassistance to a curious local. ADF troops

continue to garner positive response fromlocals in Baucau, East Timor, a city previously

notorious for crime and unrest.

April 2010


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Sapper Tim Kesby from the Second CombatEngineer Regiment gets ready to paint the

exterior of the Hope Centre, Quy Nhon,Vietnam. Australian Army Engineers wereworking alongside United States militarypersonnel and Vietnamese locals during

Exercise PACIFIC PARTNERSHIP 10.

A member of the launch crew assists with pre-flight checks for an F-111C prior to take off for Exercise CHONG JU at RAAF Base Amberley.

Loadmasters of the Royal Australian AirForce C-17 Globemaster III, (L-R) Flight

Sergeant Dwayne Taylor and WarrantOfficer Brent Leong donate to the

Salvation Army's Red Shield Appeal atMultinational Base, Tarin Kot.

May 2010


The Defence Families Australia Executive at the Defence Families Australia annual conference dinner. The Defence Families Australia National Executive meets annually in Canberra to present the delegates with their appointments from the Minister for Defence Personnel and Certificates of Appreciation from theCDF.

Corporal Sean Campbell, an Avionics Technician with No.4Squadron, checks for any chips along the Propeller of a PC-9

forward control aircraft.

Explosion Detection dog ‘Sarbi’ and her handler, from the Special Operations Task Group, watch the arrival of the C-130 Hercules transport aircraft that took Sarbi on the first stage of her journey home.

June 2010

CHAPTER 2 RESOURCE SUMMARY


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RESOURCES OVERVIEWDepartmental cash flowThe Defence departmental net cash spend as at 30 June 2010 was $24,726.3m. This is an underspend of $22.1m when compared to the revised estimate as at the Portfolio Additional Estimates Statements 2009-10, primarily as a result of:

• the return of funding from the DMO primarily due to the appreciation of the Australian dollar and underspends in no-win/no-loss operational funding

• the impact of higher than planned ADF personnel and an increase in military superannuation contribution rates.

Figure 2.1 Departmental net cost of service (cash) six year trend

NOTE:

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

15,828

19,261 20,22122,058 24,726

17,299

5,000

10,000

15,000

20,000

25,000

30,000

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

$m

Net cost of service (cash)



Table 2.1 Departmental net cost of service (cash)

NOTES:

1. As published in the Portfolio Additional Estimates Statements 2009-10.2. Includes purchase of land and buildings, plant and equipment, infrastructure, intangibles, and

heritage and cultural.3. Includes grants, GST payments, finance costs, repayment of debts, selling costs on sale of

assets and other cash used.4. Includes sale of goods and services, other cash received, GST and proceeds from sale of assets.

2009-10Budget

Estimate$'000

2009-10 Revised Estimate[1] $'000

2009-10ActualResult$'000

Variation$'000

Cost of Service

Supplier payments 8,680,172 9,014,994 8,747,165 -267,829

Employee payments 8,586,137 8,620,840 8,819,781 198,941

Purchase of specialist military equipment 6,273,874 4,880,295 4,994,125 113,830

Purchase of inventory 1,360,900 1,254,480 1,120,136 -134,344

Purchase of property, plant and equipment[2] 1,558,701 1,697,913 1,954,045 256,132

Other[3] 635,348 763,562 815,112 51,550

Total cash used 27,095,132 26,232,084 26,450,364 218,280

Own source revenue[4] 1,554,405 1,483,695 1,724,058 240,363

Net cost of service (cash) 25,540,727 24,748,389 24,726,306 -22,083

Funded by

Appropriation Bills 1 & 3 (Price of Outcomes) 21,692,203 22,331,445 22,332,129 684

Appropriation Bills 2 & 4 (Equity Injection) 4,011,496 2,418,961 4,011,496 1,592,535

Other appropriation movements 60,000 60,000 - -60,000

Return of contributed equity -222,972 -62,017 -1,593,035 -1,531,018

Cash holdings from previous appropriations - - - -

Total funding source 25,540,727 24,748,389 24,750,590 2,201

Additional output funding - - - -

Revised Total funding source 25,540,727 24,748,389 24,750,590 2,201



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Departmental income and expensesThe result for Department income and expenses as at 30 June 2010 was a surplus of $534.4m. This surplus is primarily due to:

• lower than expected supplier expenses due to underspends in no-win/no-loss operational funding, the impact of the appreciation in the Australian dollar against the United States dollar and activities budgeted for as supplier expense actually being spent as capital

• the impact of higher than planned ADF personnel and an increase in military superannuation contribution rates.

Table 2.2 Departmental income and expenses

NOTES:

1. Includes grants, finance costs, write down of assets and impairment of assets, losses from sale of assets and other expenses.

2. Includes sale of goods and rendering of services, rental income, other revenue and gains.

2009-10Budget

Estimate$'000

2009-10 Revised Estimate

$'000


Variation$'000

Expenses

Suppliers 9,793,264 10,150,747 9,086,599 -1,064,148

Employees 8,886,506 8,753,731 9,072,746 319,015

Depreciation and amortisation 3,681,038 3,639,472 3,741,666 102,194

Other[1] 442,832 1,223,106 1,251,620 28,514

Total expenses 22,803,640 23,767,056 23,152,631 -614,425

Income

Revenue from Government 21,692,203 22,331,445 21,503,960 -827,485

Other income[2] 1,111,437 1,435,611 2,183,042 747,431

Total income 22,803,640 23,767,056 23,687,002 -80,054

Surplus/(deficit) attributable to the Australian Government

- - 534,371 534,371



Administered cash flowThe Defence Administered net cost of service as at 30 June 2010 was $746.8m representing an underachievement of $451.3m compared to the revised estimate. Administered cash flows primarily relate to Military Superannuation, Defence Homeownership Schemes and Defence Housing Australia dividends. Due to the nature of these activities, the administered net cost of service fluctuates year to year.

The variation primarily reflects:

• increased superannuation contribution rates

• superannuation contributions impacted by a higher than estimated military workforce during 2009-10

• new arrangements whereby the Kings Highway grants were paid directly to State and Territory Governments by Treasury.

Figure 2.2 Administered net cost of service (cash) six year trend

NOTE:

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

600

550

650

700

750

800

850

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

$m

Net cost of service (cash)

616

703 694 686

733 747



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Table 2.3 Administered net cost of service (cash)

2009-10Budget

Estimate$'000


$'000


Variation$'000

Cost of service

Employees 1,784,740 1,784,740 1,668,846 -115,894

Subsidies 79,834 79,834 62,733 -17,101

Grants 75,000 75,000 - -75,000

Loans to CAC Act bodies 40,480 40,480 40,480 -

CAC Act body investments 161,000 161,000 161,000 -

Other - - - -

Cash Used 2,141,054 2,141,054 1,933,059 -207,995

Cash received

Military superannuation contributions 819,036 861,036 1,078,417 217,381

Fees 5,469 5,469 6,022 553

Interest 2,646 1,897 1,269 -628

Dividends 42,800 74,600 47,344 -27,256

Other - - 53,217 53,217

Cash received 869,951 943,002 1,186,269 243,267

Net cost of service 1,271,103 1,198,052 746,790 -451,262

Funded by

Appropriations

Cash from the Official Public Account for appropriations 2,143,364 2,143,364 1,960,115 -183,249

Cash transfer to the Official Public Account -872,261 -945,312 -1,213,324 -268,012

Cash holdings at the beginning of the reporting period - - - -

Total funding source 1,271,103 1,198,052 746,791 -451,261



Administered income and expensesAs at 30 June 2010, Defence administered income was $1,162.9m representing a $219.9m variance to the revised estimate. This variance is primarily due to higher superannuation contributions made by members due to changes in the Australian Government retirement age policy and an increased military workforce.

As at 30 June 2010, Defence administered expenses were $3,663.2m representing a $230.3m variance to the revised estimate. This variance is primarily due to an increase in superannuation expenses as a result of a decrease in the interest rate used by the Actuary from 6 per cent to 5.2 per cent in calculating the Australian Government’s Defence superannuation liability.

Table 2.4 Administered income and expenses

2009-10Budget

Estimate$'000


$'000


Variation$'000

Expenses administered on behalf of Government

Military superannuation benefits 3,313,000 3,313,000 3,560,253 247,253

Military retention benefits 40,000 40,000 40,399 399

Defence home owner subsidies 79,834 79,834 62,304 -17,530

Grants 75,000 - - -

Other - - 15 15

Foreign exchange losses - - 196 196

Total expenses 3,507,834 3,432,834 3,663,167 230,333

Income administered on behalf of Government

Military Superannuation contributions 819,033 861,033 1,071,271 210,238

Dividends 42,800 74,600 52,653 -21,947

Fees 5,469 5,469 6,322 853

Interest 2,646 1,897 1,544 -353

Other 3 3 31,084 31,081

Foreign exchange gains - - - -

Total income 869,951 943,002 1,162,874 219,872



Supp

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SUPPLIERS OVERVIEWDefence’s 2009-10 revised cash estimate for expenditure to suppliers (non-capital) was $9,015.0m. As at 30 June 2010, $8,747.2m was spent, which represents an underspend of $267.8m.

The main categories of suppliers cash expenditure in 2009-10 include:

• DMO operating costs for the sustainment and acquisition of military equipment ($3,482.2m)

• base support services ($602.0m)

• estate upkeep ($521.9m)

• professional services/technical advice ($473.1m)

• communications and IT ($471.4m)

• lease costs ($326.4m)

• costs relating to the training of military and civilian employees ($298.8m)

• repair and overhaul of equipment ($224.7m)

• domestic and overseas travel ($221.8m)

• removal and relocation costs of military employees ($209.5m)

• freight and storage ($201.7m).

CAPITAL OVERVIEWCapital Investment ProgramThe Capital Investment Program comprises four elements:

• The Major Capital Investment Program including:

- the Unapproved Major Capital Investment Program (UMCIP), known as the Defence Capability Plan (DCP), is managed by the Chief of Capability Development Group and reported in Program 1.11 Capability Development

- the Approved Major Capital Investment Program (AMCIP), managed predominantly by the CEO DMO and reported in volume 2 of this report.

• The Major Capital Facilities Program, managed by the Deputy Secretary of the Defence Support Group, and reported in Program 1.6 Defence Support.

• Other Investment, managed by the Service Chiefs, Group Heads and the DMO.

• The Capital Receipts Program, managed by the Service Chiefs and Group Heads.

The public version of the DCP (Public DCP) was released by the then Minister for Defence at the 2009 Defence and Industry Conference in July. For the first time, the Public DCP was issued in an interactive online form, as well as in the traditional hard copy and Acrobat Portable Document Format (PDF) versions. In keeping with the Government's commitment to regularly update the document, an updated online version was released in February 2010.

In October 2009, Defence commissioned the Australian Strategic Policy Institute (ASPI) to undertake a review of the quantity and quality of information that is released in the Public DCP. ASPI provided its report in December 2009. The Government's response in June 2010 indicated that the next update would see increases in the amount of information and the degree of detail about the projects in the Public DCP and would return to a 10 year outlook.



The AMCIP comprises projects approved by the Government. Following approval, funding for projects are transferred from the DCP to the AMCIP program. The DMO manage the acquisition phase in accordance with each project's Materiel Acquisition Agreement (MAA). Chief Information Officer Group (CIOG) and, Intelligence & Security (I&S) and Defence Support Group (DSG) also manage elements of AMCIP acquisitions, and these are managed under separate agreements.

The Major Capital Facilities Program funds the construction of buildings and infrastructure including specialised ranges, training and accommodation facilities, maintenance hangars, messes and warehouse facilities. The program provides basic engineering and infrastructure services, either in support of new capability projects, new infrastructure projects or upgrades to existing facilities.

Table 2.5 Total Capital Investment Program

NOTES:

1. Funding allocated to Defence Groups for the delivery of AMCIP is not represented in the actual figure.

2. Budget and actual figures are represented on a cash basis.

Major Capital Investment ProgramThe Approved Major Capital Investment ProgramThe AMCIP comprises those projects that generally cost more than $20m which, following approval, have been transferred from the DCP to the DMO, CIOG, I&S and DSG to manage the acquisition phase.

Funding for approved major capital investment projects, including project management and overhead costs, is generally provided by Defence to the DMO under separate MAAs for each project and through the DMO’s direct appropriation.

Projects costing between $20m and $100m can be approved jointly by the Ministers for Defence and Finance and Deregulation. Projects costing more than $100m are approved by the National Security Committee of Cabinet.

The AMCIP outcome reflects budget adjustments post the Additional Estimates process, including increased investment and foreign exchange adjustments, and improved performance in the AMCIP for 2009-10.

The DMO closed 24 projects in 2009-10. Of these, the five projects with the highest expenditure at closure were:

• AIR 5186 Phase 1 ATC RADARs

• AIR 5391 Phase 6 Interim EWSP for F-111 Aircraft

• LAND 53 Phase 1F NINOX–Thermal Surveillance Systems

• SEA 1405 Phase 1/2 Seahawk Upgrade – FLIR

• LAND 132 Phase 1 Raising the Full Time Commando Capability.

Additional information is reported in volume 2 of this report.

2009-10Budget

Estimate$’000

2009-10Revised

Estimate$’000

2009-10ActualResult$’000

Variation$’000

Approved Major Capital Investment Program[1] 5,153,088 4,831,261 5,150,076 318,815

Major Capital Facilities Program 1,443,878 1,330,383 1,503,900 173,517

Other Investment 689,251 707,300 626,052 -81,248

Net Capital Receipts -63,342 -59,212 -55,275 3,937

Total Capital Investment Program[2] 7,222,875 6,809,732 7,224,753 415,021



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Major Capital Facilities ProgramTotal expenditure on Defence's Major Capital Facilities Program in 2009-10 was $1,503.9m. This was $173.5m above the projected result of $1,330.4m. The Capital component of this expenditure in 2009-10 was $1,440.2m, of which $1,291.7m was spent on major capital facilities projects and $64.4m on medium capital facilities projects. The balance of $84.1m was spent on acquisitions, fit out and a number of smaller projects in their defects liabilities period. The operating component of this expenditure in 2009-10 was $63.7m.

Achievement in this Program was in line with revised targets agreed at the departmental level. A number of larger projects are being delivered ahead of schedule.

Further information can be found in Appendix 5 of this volume.

Other InvestmentOther Investment includes the purchase of plant and equipment, including Information and Communication Technology, Minor Capital Investment projects, and purchase of repairable items. Minor Capital Investment projects cover new equipment, modifications to existing equipment or enhancements to equipment.

Capital Receipts ProgramThe Capital Receipts Program comprises proceeds from disposal of properties, specialised military equipment, commercial vehicles and other plant and equipment items. Defence is required to return property disposal proceeds to the Government in the form of equity, but is authorised to increase its departmental appropriation by the costs of remediation and disposal from the sale proceeds of properties.

PEOPLE OVERVIEWDefence recognises its workforce will provide a fundamental capability in the delivery of Force 2030 strategic objectives as outlined in the Defence White Paper. Accordingly, the organisation’s primary people objective is to ensure Defence attracts, develops and retains a workforce of the size and composition required to deliver those strategic objectives. To that end, Defence will need the correct balance of ADF members and Australian Public Service (APS) employees with the appropriate skills and experience to undertake, and support, complex military operations, and to administer the organisation.

People in Defence—Generating the Capability for the Future Force (PiD) provides a vision and blueprint to set the agenda for People reforms, and a framework to guide the development and execution of a suite of initiatives designed to ensure Defence has the People capability required to achieve Force 2030 strategic objectives. The first Annual People Plan will be developed early in 2010-11 to support PiD and provide further detail on the initiatives and projects to be conducted in the coming 12 months and beyond.

An overview of Defence's performance against the People initiatives is included in Chapter 4 of this volume, and detailed workforce statistical data as at 30 June 2010 is included in Chapter 7 and Appendix 7 of this volume.

Workforce overviewThe workforce overview contains statistical information on Average Funded Strength (AFS) during 2009-10, which is used by Defence for budget and management purposes. It provides a measure of Defence's performance against its budget and workforce estimates for the financial year.



ADF permanentThe changes in AFS budget from 2008-09 to 2009-10 for ADF permanent members is a consequence of additional workforce associated with the Defence White Paper and reductions as part of the Strategic Reform Program (SRP). The increase in AFS achievement is due to improved recruitment and retention outcomes as shown in Table 2.6. The AFS achievement for ADF Reservists on continuous full time service in 2009-10 was 1,378, comprising the Navy (518), the Army (692) and the Air Force (168), compared to 1,694 in 2008-09. The ADF is on target to meet the planned growth over the next 10 years.

Table 2.6 ADF Permanent Force Average Funded Strength[1][2]

NOTES:

1. Figures in this table are AFS; they are not a 'headcount'. Reservists undertaking continuous full time service are included in the figures. Employees on forms of Leave Without Pay are not included.

2. Includes ADF members in the DMO.3. Workforce impacts associated with the Defence White Paper and SRP had not been broken

down by Service when the Budget Estimate was published; this workforce has now been included in the revised estimate and actual result.

4. As published in the Portfolio Additional Estimates Statements 2009-10.5. 2009-10 achievement compared to the revised estimate; as a difference and a percentage.

ADF ReservesTable 2.7 shows the number of Reservists who rendered paid service during 2009-10. In 2009-10, 21,248 Reservists undertook paid service; 971 more than in 2008-09.

Table 2.7 ADF Reserve paid strength[1][2][3]

NOTES:

1. Reservists on continuous full-time service in the Permanent Force are included.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 2009-10.5. 2009-10 actual compared with the revised estimate, as a difference and a percentage.

2008-09Actual

2009-10Budget

Estimate[3]

2009-10Revised

Estimate[4]

2009-10Actual

Variation[5] %

Navy 13,182 13,635 13,902 13,828 -74 -0.5

Army 27,833 28,126 28,246 29,339 1,093 3.9

Air Force 14,066 14,010 14,177 14,530 353 2.5

Total Average Funded Strength

55,081 55,771 56,325 57,697 1,372 2.4

2008-09Actual

2009-10Budget

Estimate

2009-10Revised

Estimate[4]

2009-10Actual

Variation[5] %

Navy 2,032 2,250 2,250 2,142 -108 -4.8

Army 15,473 15,680 15,840 16,227 387 2.4

Air Force 2,772 2,700 2,700 2,879 179 6.6

Total Paid Reserves 20,277 20,630 20,790 21,248 458 2.2



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APS workforceTable 2.8 shows details of the APS average strength, expressed as Full-Time Equivalent Average (FTE-A), for 2009-10. The APS average strength achievement was 20,058 in 2009-10, an increase of 17 from 2008-09. This increase is the result of additional workforce associated with the Defence White Paper and conversion of contractors to less costly APS employees as part of the SRP. This is partially offset by underachievement in 2009-10 as a result of delays in recruitment and reductions associated with SRP. In addition to military and APS employees, Defence engages contractors with specialist skills to fill certain vacancies requiring specific expertise. There was a decrease of 364 contractors from the previous financial year due to a reduction in the use of contractors and the conversion of contractors to less costly APS employees as part of the SRP.

Table 2.8 APS FTE-A[1]

NOTES:

1. Figures in the table are FTE-A; they are not a headcount. 2. Workforce impacts associated with the Defence White Paper and SRP had not been broken

down by Service when the budget estimate was published; this workforce has now been included in the revised estimate and actual results.

3. As published in the Portfolio Additional Estimates Statements 2009-10.4. 2009-10 actual FTE-A compared with the revised estimate, as a difference and a percentage.

2008-09Actual

2009-10Budget

Estimate[2]

2009-10Revised

Estimate[3]

2009-10Actual

Variation[4] %

Defence APS 14,489 14,828 14,870 14,532 -338 -2.3

DMO APS 5,552 5,764 5,833 5,526 -307 -5

Total APS 20,041 20,592 20,703 20,058 -645 -7.3

Defence Contractors 1,008 1,156 1,049 700 -349 -33.3

DMO Contractors 176 164 108 120 12 11

Total Contractors 1,184 1,320 1,157 820 -337 -22.3

Total APS Workforce 21,225 21,912 21,860 20,878 -982 -29.6



Average staffing summaryTable 2.9 shows the AFS summary by Service, rank and level groupings and the FTE-A for APS employees and contractors.

Table 2.9 Workforce by Service, rank and level[1][2]

2008-09Actual

2009-10Budget

Estimate

2009-10Revised

Estimate[3]

2009-10Actual

Navy Star-ranked officers 45 45 48 49

Senior officers 499 481 513 528

Junior officers 2,641 1,969 2,703 2,657

Other Ranks 9,897 10,932 10,430 10,396

Gap Year Participants[4] 100 208 208 198

Sub-total Permanent Navy 13,182 13,635 13,902 13,828

Reserves 2,032 2,250 2,250 2,142

Sub-total Navy 15,214 15,885 16,152 15,970

Army Star-ranked officers 72 77 72 74


Junior officers 5,202 5,377 5,369 5,347

Other ranks 21,473 21,623 21,751 22,889


Sub-total Permanent Army 27,833 28,126 28,246 29,339

Reserves 15,473 15,680 15,840 16,227

Sub-total Army 43,306 43,806 44,086 45,566

Air Force Star-ranked officers 52 51 49 50


Junior officers 3,838 3,838 3,915 3,845

Other ranks 9,488 9,429 9,520 9,891


Sub-total Permanent Air Force 14,066 14,010 14,177 14,530

Reserves 2,772 2,700 2,700 2,879

Sub-total Air Force 16,838 16,710 16,877 17,409

APS Senior executives 147 160 163 152

Senior executive relief staff[5] 14 - - 12

Senior officers[6] 5,216 5,542 5,631 5,534

Senior officer relief staff[5] 256 - - 237

Other APS Staff 14,408 14,890 14,909 14,123

Sub-total APS 20,041 20,592 20,703 20,058

Contractors[7] 1,184 1,320 1,157 820

White Paper and Strategic Reform Program[8] - 1,009 - -

Total 96,583 99,322 98,975 99,823



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NOTES:1. The figures in this table are AFS for ADF members (including Reservists undertaking full time

service) and FTE-A for APS employees; they are not a headcount.2. Reserve AFS is not calculated; refer to Table 2.7 for Reserve paid strength details.3. As published in the Portfolio Additional Estimates Statements 2009-10.4. ADF recruitment and retention initiative.5. Relief staff represents the full-time average of employees 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.

6. Senior officers comprise substantive Executive Levels 1 and 2.7. Contractors are individuals under contract subject to direct management by Defence.8. Breakdown by Service and rank had not been finalised when the budget estimate was

published; this workforce has now been included in the revised estimate and actual result.

Employee expensesEmployee expenses totalled $9,580.6m, or $299.8m more than the revised estimate of $9,280.9m. The overachievement in employee expenses primarily relates to AFS overachievement in Defence and increased superannuation contributions.

Table 2.10 Defence (including the DMO) employee expenses

NOTE:1. The budget estimate for 2009-10 was published in the Portfolio Budget Statements 2009-10.2. The revised estimate for 2009-10 was published in the Portfolio Additional Estimates

Statements 2009-10.3. The variation is between the actual result as disclosed in the 2009-10 Financial Statements and

the revised estimate as published in the Portfolio Additional Estimates Statements 2009-10.

2009-10Budget

Estimate[1]

$m

2009-10Revised

Estimate[2]

$m

2009-10ActualResult

$mVariation[3]

$m

Defence:

Military employees

Salary, allowances, superannuation and leave 6,297.0 6,146.7 6,479.4 332.7

Housing 562.7 564.9 655.2 90.3

Health services 268.2 291.2 266.4 -24.7

Fringe Benefits Tax 379.6 325.9 298.3 -27.6

Total military employee expenses 7,507.4 7,328.7 7,699.4 370.7

Civilian employees

Salary, allowances, superannuation and leave 1,369.8 1,416.4 1,366.6 -49.8

Other expenses including Fringe Benefits Tax 9.2 8.7 6.8 -1.9

Total civilian employee expenses 1,379.1 1,425.1 1,373.4 -51.7

Total Defence employee expenses 8,886.5 8,753.7 9,072.7 319.0

DMO:

Civilian employees

Salary, allowances, superannuation and leave 452.9 527.2 507.9 -19.2

Total civilian employee expenses 452.9 527.2 507.9 -19.2

Total DMO employee expenses 452.9 527.2 507.9 -19.2

Total Defence (including the DMO) employee expenses 9,339.4 9,280.9 9,580.6 299.8

CHAPTER 3 DEPARTMENTAL OVERVIEW


CHAPTER 3DEPARTMENTAL

OVERVIEWDefence’s mission is to defend Australia and its national interests. In fulfilling this mission, Defence serves the Government of the day and is accountable to the Commonwealth Parliament—which represents the Australian people—to efficiently and effectively carry out the Government’s defence policy.

DEPARTMENT DESCRIPTION, ROLE AND FUNCTION RoleThe primary role of Defence is to defend Australia against armed attack. Australia's defence policy is founded on the principle of self-reliance in the direct defence of Australia, but with a capacity to do more where there are shared interests with partners and allies.

Strategic directionDefence’s primary focus continues to be to protect and advance Australia’s strategic interests by providing military forces for the four principal tasks set by the Government in the Defence White Paper. These tasks are:

• deterring and defeating attacks on Australia

• contributing to stability and security in the South Pacific and East Timor

• contributing to military contingencies in the Asia-Pacific region

• contributing to military contingencies in support of global security.

To achieve this, Defence prepares for and conducts military operations and other tasks as directed by the Government.

Apart from the conduct of current operations and preparedness for new contingencies, Defence’s key focus for 2009-10 has been the implementation of the Strategic Reform Program (SRP)—driving cost reductions across Defence to enable reinvestment in the delivery of Force 2030.

Australia’s defence policy continues to be founded on the principle of self-reliance in the direct defence of Australia and our unique strategic interests, but Defence must also have the capacity to either lead military coalitions or make contributions to coalitions where we share strategic interests with others.

Australia’s defence policy must be able to hedge against uncertainty and respond to changes in the strategic environment by adjusting Defence’s force structure,



Dep

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Des

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tion

, Ro

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nd F

unct

ion

preparedness or posture as directed by the Government. The new five-yearly planning cycle will allow for continuous review of strategic guidance in the lead up to the next Defence White Paper. The Government directed production of a new Defence White Paper every five years, but it may direct either an update or a new Defence White Paper to be released earlier if a change in circumstance suggests one is required.

Australia’s military strategy for defence self-reliance depends on the ADF’s ability to conduct joint operations in the approaches to Australia, particularly in achieving and maintaining sea control and air superiority. Defence’s strategy also requires the ADF to be prepared for proactive combat operations to defeat an adversary as far from Australia as possible, if necessary.

Australia will continue to promote its strategic interests through its alliances, its bilateral and multilateral defence relationships, and the evolving Asia-Pacific security architecture. These connections help us to promote stable strategic frameworks in our immediate neighbourhood, in the wider Asia-Pacific region and at the global level.

ValuesWithout diminishing the existing single-Service and Australian Public Service (APS) values, or their use, specific Defence values have been established to provide a common and unifying thread for all people working in Defence. These values are:

• Professionalism: striving for excellence

• Loyalty: commitment to each other and Defence, in serving the Government of the day

• Integrity: doing what is right

• Courage: moral and physical strength

• Innovation: striving for better ways of doing business

• Teamwork: working together with respect, trust and a sense of collective purpose.

Portfolio structureThe Defence portfolio consists of a number of component organisations that together are responsible for supporting the defence of Australia and its national interests. The three most significant bodies are:

• the Department of Defence—a department of state, headed by the Secretary of the Department of Defence

• the ADF—which consists of the three Services (including Reserves) commanded by the Chief of the Defence Force (CDF). Each Service Chief also administers their respective cadet service, although the cadet service is not a component of the parent Service

• the Defence Materiel Organisation (DMO)—a prescribed agency within Defence, headed by its Chief Executive Officer (CEO) DMO.

In practice, these bodies work together closely and are broadly regarded as one organisation known simply as Defence (or the Australian Defence Organisation). Figure 3.1 shows how the integrated organisation is structured.



The portfolio also contains a number of smaller entities, including:

• a number of statutory offices created by the Defence Force Discipline Act 1982 which are independent but reside administratively within Defence. These include the Judge Advocate General, the Chief Judge Advocate, the Director of Military Prosecutions, the Registrar of Military Justice and the Inspector General of the ADF

• various trusts and companies:

- Defence Housing Australia (DHA)

- Army and Air Force Canteen Service (Frontline Defence Services)

- Royal Australian Navy Central Canteen Service Board of Management

- Trustees of the Australian Military Forces Relief Trust Fund

- Australian Strategic Policy Institute Ltd

- Trustees of the Royal Australian Air Force Veterans’ Residences Trust Fund

- Trustees of the Royal Australian Air Force Welfare Trust Fund

- Trustees of the Royal Australian Navy Relief Trust Fund

- SAS Trust Fund

- AAF Company

- Royal Australian Air Force Welfare Recreation Company.

The Minister for Defence's portfolio also contains the Department of Veterans' Affairs and its associated bodies, as it is designated as part of the Defence portfolio in the Administrative Arrangements Order. The Department of Veterans' Affairs is administered separately from Defence.

Figure 3.1 Defence's portfolio structure as at 30 June 2010

Australian Defence Force

Navy Air Force

Army

Navy Reserves

Department of Defence

Defence Materiel Organisation

Disciplinary appointments

(DFDA)

Defence Housing Australia

Various small trusts &

companies

Army Reserves

Air Force Reserves

Navy Cadets

Army Cadets

Air Force Cadets

CHAPTER 3 D

EPARTMEN

TAL OVERVIEW

DEFEN

CE ANN

UAL REPO

RT 2009-10 VOLU

ME 1

39

Department Description, Role and Function

Figure 3.2 Defence's organisational structure as at 30 June 2010

(1) Statutory appointment.(2) Reports directly to the Minister for Defence in accordance with Section 196A of the Defence Force Discipline Act 1982.(3) The Inspector-General ADF is directly responsible to the Chief of the Defence Force (CDF).(4) Chief Audit Executive reports directly to the Secretary and CDF.(5) The Inspector-General Defence reports directly to the Secretary and CDF, and CEO DMO on investigative matters.

(6) Section 9(3) of the Defence Act 1903 requires the Service Chiefs to advise the Minister on matters relating to their command.(7) Deputy Secretary Strategy is appointed as the Group Head for Office of the Secretary and Chief of the Defence Force Groupto perform all the duties and exercise all the relevant delegations of that role. (8) Under the agreed business model for DMO as a prescribed agency, the CEO DMO Ministerial Directive identifies that the CEO DMO is directly accountable to the Minister for DMO’s performance but remains accountable to the Secretary and CDF.

Stars (*) refer to ADF Star rank or SES Band levels

Defence Materiel Organisation

Deputy Chief Executive Officerand General Manager Programs

Mr Warren King***

Acting General ManagerSystems

Ms Shireane McKinnie***

General ManagerCommercial

Mr Harry Dunstall***

General Manager Reform and Special Projects

Ms Jane Wolfe***

Office of the Secretary & Chief of the Defence Force Group

Judge Advocate GeneralMAJGEN the Hon Justice

Richard Tracey** (1) (2)

Chief Judge AdvocateBRIG Ian Westwood

*(1) (2)

Director Military ProsecutionsBRIG Lyn McDade

*(1) (2)

Inspector-General DefenceMr Ray Bromwich

*(5)

Chief Audit ExecutiveMr Geoff Brown

**(4)

Inspector-General ADFMr Geoff Earley

**(1) (3)

(7)

Deputy Secretary Intelligenceand Security

Mr Stephen Merchant***

Chief Executive OfficerDefence Materiel Organisation

Dr Stephen Gumley(8)

Deputy Secretary Strategy(Operations)(Acting)Mr Simeon Gilding

***

Chief Defence ScientistProfessor Robert G. Clark

***

Deputy Secretary PeopleStrategies and Policy

Mr Phil Minns***

Deputy Secretary DefenceSupport

Mr Simon Lewis***

Chief Information OfficerMr Greg Farr

***

Chief Finance OfficerMr Phillip Prior

***

Chief Capability DevelopmentVADM Matt Tripovich

***

Deputy Secretary StrategicReform and Governance

Mr Brendan Sargeant***

Deputy Secretary StrategyMr Peter Jennings

***

Chief of Joint OperationsLTGEN Mark Evans

***

Vice Chief of the Defence ForceLTGEN David Hurley

***(1)

Chief of NavyVADM Russ Crane

***(1) (6)

Chief of ArmyLTGEN Ken Gillespie

***(1) (6)

Chief of Air ForceAIRMSHL Mark Binskin

***(1) (6)

SecretaryDr Ian J Watt

****(1)

Chief of the Defence ForceACM Angus Houston

****(1)

Minister for DefenceSenator the Hon John Faulkner

Minister for DefenceMateriel and Science

The Hon Greg Combet AM MP

Minister for Defence Personnel

The Hon Alan Griffin MP

Parliamentary SecretaryDefence Support

The Hon Dr Mike Kelly AM MP



Organisational structureDefence consists of the ADF—members of the Navy, the Army and the Air Force—and members of the APS under the joint leadership of the Secretary and the CDF, known simply as the ‘diarchy’. The diarchy encompasses the individual and joint responsibilities and accountabilities of the Secretary and the CDF under the Minister for Defence.

Secretary, Dr Ian J Watt, AO

The Secretary is the principal civilian adviser to the Minister and carries out the functions of an agency head within the APS. The Secretary has responsibilities under the Public Service Act 1999 and the Financial Management and Accountability Act 1997 and is responsible for the civilian workforce.

Chief of the Defence Force, Air Chief Marshal Angus Houston, AC, AFC

The CDF is the commander of the Defence Force, in line with his statutory responsibilities and authority under the Defence Act 1903, and is the principal military adviser to the Minister.

Changes in ministerial responsibilitiesThe Defence ministerial responsibilities were revised during 2009-10, with the Hon Alan Griffin MP being sworn in as Minister for Defence Personnel on 1 April 2010, while the Hon Greg Combet AM MP remained as Minister for Defence Materiel and Science.

Changes in the Senior Leadership Group in DefenceDuring 2009-10, Defence saw a number of changes to the senior leadership group:

• Dr Watt was appointed as Secretary of the Department of Defence, to replace Mr Nick Warner who left Defence to take up the appointment of Director-General Australian Secret Intelligence Service. Mr Stephen Merchant acted as Secretary in the interim, prior to Dr Watt’s arrival.

• Mr Peter Jennings was promoted and appointed Deputy Secretary Strategy and Group Head of the Office of the Secretary and Chief of the Defence Force Group.

• Mr Brendan Sargeant was recruited on promotion and appointed to the new position of Deputy Secretary Strategy (Operations). Subsequently, he was appointed as Deputy Secretary Strategic Reform and Governance to replace Dr Margot McCarthy who left Defence to take up the role of Deputy National Security Adviser at the Department of the Prime Minister and Cabinet.

• Mr Simeon Gilding continues to act as Deputy Secretary Strategy (Operations), replacing Mr Brendan Sargeant.

• Mr Martin Bowles was seconded to the Department of Climate Change and Energy Efficiency.

• Mr Simon Lewis transferred from the Department of Finance and Deregulation as Deputy Secretary Defence Support.

• Mr Warren King was appointed to the position of Deputy Chief Executive Officer in the DMO.

• Following the making of Orders by the Federal Court, Ms Jane Wolfe returned in the newly established position of General Manager Reform and Special Projects in the DMO.

• Mr Harry Dunstall was appointed to the newly established position of General Manager Commercial in the DMO.



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Senior Management responsibilitiesThe individuals of the Defence Senior Management as at 30 June 2010 had the following roles:

Chief Executive Officer Defence Materiel Organisation, Dr Stephen Gumley, AOThe CEO DMO is accountable for the DMO's performance in purchasing and sustaining capital equipment assets for the ADF, and for the development and implementation of significant reforms in procurement, sustainment and contracting. The CEO DMO is also the National Armaments Director for Australia. Further details concerning the DMO's Senior Management can be found in Volume 2 of this report.

Vice Chief of the Defence Force, Lieutenant General David Hurley, AC, DSCProvides focus on Defence business at the strategic level to support the Government and the CDF. The key responsibilities of the Vice CDF include: the provision of military strategic advice to the CDF; provision of joint logistics and joint health support to the ADF in Australia and on operations; provision of Reserve policy and employer support and ADF Cadet policy and governance; provision of professional military education and ab-initio (initial) officer training; coordination of joint force capability; and oversight, on behalf of the CDF and the Secretary, of the Asia Pacific Civil-Military Centre of Excellence.

Chief of Joint Operations, Lieutenant General Mark Evans, AO, DSCPlans, controls and conducts campaigns, operations, joint exercises, and other activities on behalf of the CDF. Joint Operations Command includes 1st Joint Movements Group and Headquarters Northern Command, along with Joint Task Forces when raised for operations.

Chief of Navy, Vice Admiral Russell Crane, AO, CSM, RANThe Chief of Navy is responsible and accountable to the CDF for the command, leadership and capability output of the Navy. The Chief of Navy is also Defence's Principal Naval Advisor on strategic affairs. The Principal acts from which the Chief of Navy derives his command powers are the Defence Act 1903 and the Naval Defence Act 1910.

Chief of Army, Lieutenant General Ken Gillespie, AO, DSC, CSMThe Chief of Army is responsible and accountable to the CDF for command of the Army and management of designated joint functions. The Chief of Army oversees corporate policy formation within the Army and is jointly responsible and accountable to the CDF and the Secretary for effective and efficient management of his service.

Chief of Air Force, Air Marshal Mark Binskin, AO The Chief of Air Force is responsible and accountable to the CDF for the command of the RAAF and delivers Air Force capability for the defence of Australia and its interests. The Chief of Air Force’s role includes the management of designated joint functions such as the Australian Defence Force Airworthiness Authority. This includes the effective and efficient delivery of aerospace capability, enhancing the Air Force’s reputation, positioning the Air Force for the future and providing strategic advice on aerospace matters.

Chief Capability Development, Vice Admiral Matt Tripovich, AO, CSC, RANResponsible as the sponsor for developing capability proposals—consistent with strategic priorities, funding guidance, legislation and policy—for consideration and approval by the Government. In particular, responsibility is focused on Defence's Major Capital Investment Program and capability definition.



Chief Finance Officer, Mr Phillip PriorResponsible for monitoring and managing enterprise-wide financial risks, providing timely and accurate financial information, providing strategic financial advice, leading the ongoing financial management reform program, maintaining financial governance and policies, managing the strategic direction of business enterprise financial systems and providing leadership for the entire Defence finance community.

Chief Information Officer, Mr Greg FarrLeads the integrated design, cost-effective delivery and sustained operation of the Defence Information Environment to support business and Military operations.

Chief Defence Scientist, Professor Robert ClarkPrimary adviser to the Secretary and CDF and through their offices, Portfolio Ministers and the Government, on defence-related science and technology matters. He leads the Defence Science and Technology Organisation in delivering science and technology support to Defence and to Australia's national security agencies.

Deputy Secretary Strategy, Mr Peter JenningsResponsible for ensuring that Defence strategic planning and international engagement is responsive to the demands of high operational tempo while delivering quality policy advice, managing the reputation of Defence and providing support services to Ministers and senior leaders. Deputy Secretary Strategy, for administrative purposes, is regarded as the Group Head of the Office of the Secretary and Chief of the Defence Force Group.

Deputy Secretary Strategy (Operations)(Acting), Mr Simeon GildingResponsible for high-level coordination of policy support to operations in Afghanistan and defence relations with Pakistan.

Deputy Secretary Strategic Reform and Governance, Mr Brendan SargeantResponsible for the high-level integration, coordination and oversight of the SRP and whole-of-Defence governance. The SRP function includes providing the Secretary and CDF with a clear picture of the performance of the program as it progresses, and assisting reform streams in measuring, monitoring and reporting the reforms they implement in individual areas. The governance function includes reporting and accountability frameworks and processes, and the development of the enterprise risk management system. It also includes the secretariat for the Defence Committee and the Defence Strategic Reform Advisory Board.

Deputy Secretary Defence Support, Mr Simon LewisResponsible for the strategic direction and management of essential services and support to Defence, including base support; operations support; infrastructure; personnel services; corporate support; and financial, business and legal services.

Deputy Secretary Intelligence and Security, Mr Stephen MerchantOversees the activities of the three Defence intelligence agencies: Defence Intelligence Organisation; Defence Signals Directorate; and Defence Imagery and Geospatial Organisation, in delivering intelligence in support of ADF operations and other Defence and national priorities, and information security services to the Government. Deputy Secretary Intelligence and Security also oversees the activities of the Defence Security Authority in setting security policy and providing security services for Defence.



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Deputy Secretary People Strategies and Policy, Mr Phil MinnsResponsible for continuing to build and communicate an attractive and compelling employment offer, developing a work environment that delivers Defence's commitments to its People, and creating an effective and efficient People System to achieve more consistently effective People outcomes with greater efficiency.

Judge Advocate General, Major General the Hon Justice Richard Tracey, RFDProvides the Minister for Defence with an annual report on the operation of laws relating to the discipline of the ADF. The holder of the office must be or have been a judge of a Federal Court or a State Supreme Court. The functions of the Judge Advocate General are prescribed by the Defence Force Discipline Act 1982.

Chief Audit Executive, Mr Geoffrey Brown, OAMProvide Defence executive management, and the Defence Audit and Risk Committee, with an objective assessment of the adequacy of processes and procedures employed by management to both identify and manage risk. The Chief Audit Executive also provides assurance to the Secretary, the CDF and CEO DMO that the financial and operational controls designed to manage those risks are operating efficiently, effectively and ethically.

Inspector General ADF, Mr Geoff Earley, AMInspector General ADF is a statutory appointment outside the chain of command, whose role is to independently monitor and assess the health and effectiveness of the military justice system. Inspector General ADF provides an avenue by which failures of military justice may be exposed, examined and any injustice remedied. Primary functions include receiving submissions and inquiring into complaints, conducting military justice audits of ADF units, and promoting and contributing to awareness and improvement of the military justice system.

Outcome/Program structureAs part of the Government’s ‘Operation Sunlight’ initiative, co-ordinated by the Department of Finance and Deregulation, agencies must identify and report on the programs that contribute to Government outcomes over the Budget and forward years.

Consequently, the Defence Outcome and Output structure has been changed to a Program reporting structure. This structure has helped increase the Government’s and the community’s visibility of what Defence delivers as it is aligned with Defence’s internal resource allocations and accountability structure, and specifies performance indicators and targets used to assess and monitor the performance of Defence in achieving Government outcomes.

Defence reports against its Programs under 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.

• Outcome 3: Defence’s support to the Australian community and civilian authorities achieves the desired results.

Case studies demonstrating Defence’s performance indicators in action against each Program have been incorporated to showcase the key achievements of the Groups and Services during 2009-10.



Outcome summary table Figure 3.3 Structure of Defence’s Outcomes



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COST OF DEFENCE OUTCOMESTable 3.1 Total cost of Defence Outcomes and Programs on an accrual basis

NOTE:

1. This table excludes Capital payments for Outcomes.

2009-10Budget

Estimate$'000

2009-10Revised

Estimate$'000


Variation$'000 %

Outcome 1: Australia's national interests are protected and advanced through the provision of military capabilities and the promotion of security and stability

Departmental Net Cost of Service 20,148,040 20,676,636 19,905,882 -770,754 -4

Administered Net Cost of Service 2,562,883 2,489,832 2,500,293 10,461 -

Net Cost of Service for Outcome 1 22,710,923 23,166,468 22,406,175 -760,293 -3

Outcome 2: Military operations and other tasks directed by the Government to achieve the desired results

Net Cost of Service for Outcome 2[1] 1,533,544 1,642,183 1,053,087 -589,096 -36

Outcome 3: Defence's support to the Australian community and civilian authorities to achieve the desired results

Net Cost of Service for Outcome 3 10,619 12,626 10,620 -2,007 -16

Net Cost of Service for Defence Outcomes

Departmental Net Cost of Service 21,692,203 22,331,445 20,969,589 -1,361,856 -6

Administered Net Cost of Service 2,562,883 2,489,832 2,500,293 10,461 -

Total Cost of Defence Outcomes 24,255,086 24,821,277 23,469,882 -1,351,395 -5



Table 3.2 Overall cost to Government of Defence Outcomes (Departmental and Administered), 2009-10

NOTE:

1. This table excludes Capital payments for Outcomes.

Outcome 1$'000

Outcome 2$'000

Outcome 3$'000

Total$'000

DEPARTMENTAL

Expenses

Employees 8,811,890 260,770 86 9,072,746

Suppliers 8,301,155 774,910 10,534 9,086,599

Grants 11,386 45,901 - 57,287

Depreciation and amortisation 3,741,666 - - 3,741,666

Finance cost 90,561 - - 90,561

Write-down of assets and impairment of assets 878,254 - - 878,254

Net losses from sale of assets 7,413 - - 7,413

Other expenses 218,091 14 - 218,105

Total expenses 22,060,416 1,081,595 10,620 23,152,631

Income

Revenue

Goods and services 727,884 25,306 - 753,190

Other revenue 794,170 3,202 - 797,372

Total Revenue 1,522,054 28,508 - 1,550,562

Gains

Reversals of previous asset write-downs 614,852 - - 614,852

Net gains from sale of assets - - - -

Other Gains 17,628 - - 17,628

Total Gains 632,480 - - 632,480

Total income 2,154,534 28,508 - 2,183,042

Net cost of Departmental Outcomes 19,905,882 1,053,087 10,620 20,969,589

ADMINISTERED

Expenses 3,663,167 - - 3,663,167

Revenue 1,162,874 - - 1,162,874

Net cost of Administered Outcomes 2,500,293 - - 2,500,293

Total Departmental and Administered Outcomes 22,406,175 1,053,087 10,620 23,469,882



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Table 3.3 Cost to Government of Departmental Outcomes, 2009-10

NOTE:

1. Net gain from sale of assets was incorrectly represented in the Portfolio Budget Statements 2009-10.

2. Other revenue includes rental income.3. This table excludes Capital payments for Outcomes.

2009-10Budget

Estimate$'000

2009-10Revised

Estimate$'000


Variation$'000 %

Expenses

Employees 8,886,506 8,753,731 9,072,746 319,015 4

Suppliers 9,793,264 10,150,747 9,086,599 -1,064,148 -10

Grants 60,922 71,278 57,287 -13,991 -20

Depreciation and amortisation 3,681,038 3,639,472 3,741,666 102,194 3

Finance costs 60,307 77,666 90,561 12,895 17

Write-down and impairment of assets 317,570 1,073,290 878,254 -195,036 -18

Losses from asset sales[1] 3,111 - 7,413 7,413 -

Foreign exchange losses - - 146 146 -

Other expenses 922 872 217,959 217,087 -

Total expenses 22,803,640 23,767,056 23,152,631 -614,425 -3

Income

Revenue

Goods and services 782,972 765,171 753,190 -11,981 -2

Other revenue[2] 46,939 78,867 797,372 718,505 911

Total revenue 829,911 844,038 1,550,562 706,524 84

Gains

Reversal of previous asset write-downs 273,826 589,979 614,852 24,873 4

Net gains from sale of assets - 1,594 - -1,594 -

Other gains 7,700 - 17,628 17,628 -

Total gains 281,526 591,573 632,480 40,907 7

Total income 1,111,437 1,435,611 2,183,042 747,431 52

Net cost of all outcomes 21,692,203 22,331,445 20,969,589 -1,361,856 -6

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