10 February 2011
2010-11 Mid-Year Review
Recommendation/s
The Board agree to:
(i)	revised 2010-11 internal budgets as shown at column E of Attachment A.
The Board note:
(ii)	the 2010-11 capital budget at Attachment B.
(iii)	an initial paper will be prepared on the 2011-12 internal budget for the April OSM.	
Key Points
•	I have met with each Executive Director and the Group General Manager Corporate Services on priorities for the remainder of 2010-11.  Although there are a number of priorities that are currently unfunded, it is considered that the Treasury’s current underspend can accommodate these priorities for 2010-11.
•	The 2011-12 picture is more uncertain given that funding from government is expected to be less than that provided in 2010-11.  The Board considered at its September meeting that there would need to be staff and administrative reductions.  An initial paper on the 2011-12 internal budget will be prepared for the April OSM.
•	I am proposing a number of mid-year review adjustments to cover known priorities (refer column D of Attachment A).  These adjustments are explained in more detail in the additional information.  I am asking the Board to agree the proposed revised budget at column E of Attachment A, which still leaves a breakeven budget for 2010-11.
•	As at the end of January, the Treasury has a operating surplus of $6.5 million.  If the known priorities eventuate as planned I would still expect that the Treasury will have a surplus for 2010-11.
•	In relation to the capital budget, a summary of 2010-11 capital expenditure is provided at Attachment B.

Chief Financial Officer	Contact Officer:   	                      	

Distribution: Executive Board and SES.
Financial implications: Nil.
Consultation: Meetings were held with Executive Directors, the Group General Manager Corporate Services and a number of General Managers.
Timing: Revised budgets to be incorporated into February financial reports.
Communication strategy: Executive Board minutes and through GEMs.

Additional Information
SUMMARY OF PROPOSED MID-YEAR REVIEW ADJUSTMENTS
•	As part of the 2010-11 Additional Estimates and Administrative Arrangements Orders, the Treasury has a net increase in funding of $0.148 million for 2010-11.  This is made up of:
–	an additional $0.926 million for the tax forum;
–	an additional $0.277 million for the banking reform education and awareness campaign;
–	a reduction of $0.117 million for the termination of the Financial Reporting Panel; and
–	a reduction of $0.938 million for the transfer of the sustainable population strategy function from the Treasury to the Department of Sustainability, Environment, Water, Population and Communities.
It is proposed that:
:	
:	  [This section has been removed under s47E(d)]
:	
•	The main other proposed adjustments include:
–	funding to be provided to Corporate Services Group and the Executive (Organisational Strategy Unit) due to the abolition of the Policy Coordination and Governance Unit;
–	additional funding for Macroeconomic Group for pressures associated with Macroeconomic Modelling Division; and
–	additional funding for Fiscal Group for pressures associated with the Social Policy and Industry, Environment and Defence Divisions.
•	The increases in funding can be offset from areas expecting to underspend.  It should be noted that the majority of these adjustments are considered one-off and will not affect the Groups base funding when preparing the 2011-12 internal budget.
•	Specific details of each adjustment is in the Mid-Year Review analysis that follows.

MID-YEAR REVIEW ANALYSIS
Macroeconomic Group (MEG)
As at end January 2011, MEG (excluding AusAID funded activities) had an underspend of $0.782 million.
MEG are seeking additional funding of $1.3 million for Macroeconomic Modelling Division associated with additional staff and consultancy costs for covering bottom-up modelling for the land-use, electricity and transport sectors.  MEG should be able to offset $0.25 million of this cost through expected underspends in other divisions.
Funding of $0.15 million will be transferred from MEG to CSG for the transfer of the overseas deployment function.  This is the part year effect with the full year effect to be included as part of the 2011-12 internal budget.  This will be a permanent adjustment.
It is proposed that MEG be provided with the balance of $0.9 million from expected underspends from overseas posts ($0.6 million), Financial Reporting and Accounting Bodies ($0.1 million), CSG ($0.1 million) and Programs and Services ($0.1 million). These are considered one-off adjustments.
Fiscal Group (FG)
As at end January 2011, FG had an overspend of $0.117 million.
FG are seeking additional funding of $1.5 million for Social Policy Division and Industry, Environment and Defence Division.  
•	Social Policy Division are seeking $1.2 million for additional staff ($0.5 million) and consultancies ($0.7 million) associated with gambling and health reform.
•	Industry, Environment and Defence Division are seeking $0.3 million for six staff for the creation of a Regional Policy Unit.
As there are currently no savings available in FG, it is proposed that FG be provided with the full $1.5 million to be funded from expected savings in Markets Group ($1 million) and Revenue Group ($0.5 million).  These are considered one-off adjustments.
As a result of Administrative Arrangements Orders, the sustainable population strategy function transferred from the Treasury to the Department of Sustainability, Environment, Water, Population and Communities.  This reduces FG’s population budget by $0.751 million.
Revenue Group (RG)
As at end January 2011, RG had an underspend of $1.076 million. 
It is proposed that a portion of RG’s projected underspend be used to partially offset additional funding for FG ($0.5 million).  This is considered a one-off adjustment.

Markets Group (MG)
As at end January 2011, MG had an underspend of $2.476 million.  It should be noted that Standard Business Reporting (SBR) has moved from non-core to core from January 2011 in accordance with the Board’s decision of June 2010.  SBR represents $2.215 million of the underspend.
Whilst there are pressures associated with the Foreign Investment and Trade Policy Division for the Real Estate IT Program, funding for this can be offset from within the Group.
It is proposed that a portion of MG’s projected underspend be used to partially offset additional funding for FG ($1.0 million).  This is considered a one-off adjustment.
Executive (including Organisational Strategy Unit)
As at end January 2011, the Executive had an overspend of $0.171 million.
With the abolition of the Policy Coordination and Governance Unit, its functions have transferred to CSG and the Executive (Organisational Strategy Unit).  The Executive portion of the transfer is $0.380 million.  The full year effect of the transfer will be reflected in the 2011-12 internal budget.
Additional funding of $0.040 million is sought to fund an additional EL1 position .  This can be offset from savings within overall projected underspends.  This is considered a one-off adjustment.
Policy Coordination and Governance Unit
As at end January 2011, the Policy Coordination and Governance Unit had an overspend of $0.033 million.
The Policy Coordination and Governance Unit functions have transferred to CSG and the Executive (Organisational Strategy Unit).  
Of the transfer amount of $0.673 million, $0.380 million is for the Organisational Strategy Unit and $0.293 million for CSG.
Corporate Services Group (CSG)
As at end January 2011, CSG had an underspend of $0.890 million.
[This section has been removed under section 47E(d)]

With the abolition of the Policy Coordination and Governance Unit, its functions have transferred to CSG and the Executive (Organisational Strategy Unit).  The CSG portion of the transfer is $0.293 million.  The full year effect of the transfer will be reflected in the 2011-12 internal budget.
Funding of $0.15 million will be transferred to CSG from MEG for the transfer of the overseas deployment function.  This is the part year effect with the full year effect to be included as part of the 2011-12 internal budget.  This is a permanent adjustment.
It is proposed to transfer $0.1 million from the Program and Services budget to CSG from expected savings from the Australian Government Security Vetting Agency (AGSVA).  The expected cost to AGSVA in 2010-11 is now $0.2 million, down from the original estimate of $0.3 million.  Given the continuing ongoing work from the security team as a result of the revised security arrangements, it is proposed that the difference of $0.1 million be permanently transferred to CSG. 
It is proposed that a portion of CSG’s projected underspend be used to partially offset the additional funding outlined above ($0.430 million).  This is considered a one-off adjustment.
[This section has been removed under section 47E(d)]

Programs and Services
As at end January 2011, Programs and Services had an underspend of $0.581 million.  
It is proposed that a portion of the Programs and Services projected underspend be used to partially offset additional funding for MEG ($0.1 million).  This is considered a one-off adjustment.
It is also proposed to transfer $0.1 million from the Program and Services budget to CSG from expected savings from AGSVA (see CSG comments).  This is considered a permanent adjustment.
Overseas Posts
As at end January 2011, the overseas posts had an underspend of $0.744 million.  This is mainly due to delays with the India post as well as favourable exchange rates.
It is proposed that a portion of the projected underspend be used to offset additional funding for MEG ($0.6 million).  This is considered a one-off adjustment.
Non-core activities
As at end January 2011, non-core activities had an underspend of $1.221 million. 
The government agreed to wind up the operations of the Financial Reporting Panel.  This reduces the Panel’s budget by $0.117 million in 2010-11, with no funding required beyond this.
It is proposed that a portion of the projected underspends from the Financial Accounting and Reporting Bodies be used to offset additional funding for MEG ($0.1 million).  This is considered a one-off adjustment.
CAPITAL BUDGET
The Treasury set a capital budget of $12.8 million in 2010-11.
As at the end of January 2011, the Treasury’s capital spending was $4.3 million against a year‑to‑date budget of $5.1 million.  
It is expected that the replacement of the diesel generator will not incur in 2010-11 due to a  protracted tender process.  Expenditure will now be incurred in 2011-12.
Further details on capital is at Attachment B.
Attachment A

Attachment B