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Chapter 7 - Asset management and purchasing

Asset management

Defence manages $71.5b of total assets. This comprises approximately $40.3b of specialist military equipment, $22.7b of land, buildings and infrastructure, $6.1b of inventory, $1.0b of heritage and cultural assets and $1.4b of other items, including cash, receivables and prepayments.

In accordance with section 44 of the Financial Management and Accountability Act 1997, the Chief Executive of Defence has a responsibility to manage Defence assets in a way that promotes efficient, effective, economical and ethical use of Commonwealth resources.

Defence groups and Services, including the Defence Materiel Organisation (which acts as project manager on behalf of Defence for both the acquisition and sustainment of Defence military assets and inventories), are accountable for the underlying business transactions and records that substantiate the reported financial balances of assets under their control.

Defence Asset Accounting within the Chief Finance Officer Group undertakes accounting processes to enable the accurate and timely reporting of asset balances and ensure that they are consistent with requirements for financial statement reporting defined in the Australian Accounting Standards. As part of the implementation of shared financial services across Defence, it was determined that the asset accounting function would be delivered as a pooled shared financial service by Defence Asset Accounting for all of Defence.

During 2012-13, Defence has worked to secure and advance the improvements in financial and asset management achieved in previous years. This has been achieved by:

  • moving to a shared service delivery model for asset accounting to further enhance financial reporting of assets and deliver standardised policies and processes to support the management of assets
  • a maturing data assurance framework and controls environment to swiftly identify and resolve asset management issues as they occur.

These improvements are reflected in the reduction in the level of obsolescence of Defence's inventory and the removal of two Category B Australian National Audit Office findings (related to change management and governance of the Military Integrated Logistic Information System) in 2012-13.

The DMO manages its assets in accordance with its Chief Executive Instructions, relevant accounting standards and internal DMO guidelines.

The DMO's property, plant and equipment, which were valued at $5.6m, are subject to an annual stocktake to ensure records are accurate. Impairment reviews were also undertaken as at 30 June 2013 and valuations are conducted as outlined in Note 1.21 of the DMO financial statements.

Assessment of purchasing against core policies and principles

Defence Support and Reform Group places importance on managing relationships with Australian industry and providing contracting opportunities in support of Defence capability. The group aims to work with industry as partners to support and maintain a sustainable and high-performance Defence organisation.

Defence Support and Reform Group announces business opportunities through a range of mediums, including approach to market notices published on the AusTender website and advertisements in newspapers. Notification of approaches to the market enhances the group's ability to achieve value for money by encouraging competition. When engaged in commercial and business relationships, Defence and industry must each endeavour to demonstrate ethical practices at all times and deal with each other on a basis of mutual trust and respect. Adopting an ethical, transparent approach enables business to be conducted fairly, reasonably and with integrity.

Through the Defence Procurement and Contracting Branch, Defence Support and Reform Group has developed an initiative to further encourage suppliers to employ Indigenous Australians and people with disability. The branch currently has two processes in place where the resultant contracts will incorporate relevant diversity requirements.