Senate Education and Employment Legislation Committee, , 26:33 to 30:05
Senators question the Secretary regarding a $25 million operating loss, which exceeded the approved $15 million deficit, and the role of asset impairments in this outcome.
Topics: Government spending, Integrity
Speakers: Simon Duggan, Senator Paul Scarr, Unknown Speaker
And this is my first estimates on this committee. So hello everyone, and uh excuse me if it takes a bit of time to get familiar with who's who. Duggan, on 2 June. I understand you told this committee the Department, quote, remains on track to stay within its approved operating deficit. End quote. What was the actual outcome?
Yeah, thank you, Senator. So just to provide a little bit of context. So this is the Department's 2025-26 was the Department's fourth financial year of operations since its establishment on the 1st of July 2022. The Department had recorded operating losses in three of those four financial years. And so one of my priorities since commencing as Secretary has been to get the Department back onto a sustainable financial footing. The answer to your question, Senator, is that for last financial year DUER's annual report recorded an operating loss of $25 million, which is larger than the operating loss of $15 million previously approved by the Finance Minister, and that was disclosed in our portfolio budget statements. Senator, the driver of that. So we actually, on my commencement as Secretary, I put in place a number of initiatives that were intended to bring our expenditure down, our operating expenditure. Those were largely successful. On an operating cash basis, we actually recorded a small surplus last financial year. The reason why we ran an operating deficit and one that was larger than the one that was approved by the Finance Minister is at the end of the financial year, we needed to record a number of accounting adjustments to account for the impairment of some assets. So the economic value of property and of software was assessed by the accountances being lower, which meant that those accounting adjustments more than offset what was an improved operating position on a cash basis to drive our accrual position to a larger operating deficit at the end of the financial Didn't impact our cash balance, so our cash balance remains broadly what it was at the start of the financial year at the end of the financial year. But it did, as you as I noted, it did record, mean that we did record a larger operating deficit than what I've been predicting.
Okay, so that 10 million dollars deterioration between the $15 million and the $25 million, as I understand your evidence just saying it's attributable primarily to impairment of assets. And that actually has an impact on the operating deficit?
It does. Yeah, it's an accrual accounting adjustment. So effectively we recorded 26.6 million of basically what I describe as technical accounting losses related to the impairment of non-financial assets in accordance with the accounting standards. So that, as I mentioned, it was due to an assessment that the economic value of some of our property assets and software assets were not as high as they'd previously been reflected in our accounts.
Okay. So when did So 2 June, you you gave us the evidence that you remained on track to stay within the approved operating deficit with then approaching 30 June in terms of year end. When were the decisions made and what was the process around the making of the decisions regarding impairment?
Yeah, thank you, Senator. So I became aware of the impairments after 2 June. I might ask Ms. Rule. might be able to provide you with a bit more information about the process which led to the led to the impairments.