Corporate Publications Statements of Intent Annual Reports

Resource material › Corporate Publications › Annual Report 2010-11Pūrongo ā Tau

Part C: Financial Statements – Departmental

Comprehensive Income

Statement of Comprehensive Income for the year ended 30 June
Revenue
ACTUAL 2009/10 $000		NOTE	ACTUAL 2010/11 $000	MAIN EST 2010/11 $000	SUPP EST 2010/11 $000
109,526	Crown		141,695	98,464	141,693
126,138	Third Parties	2	147,570	143,360	147,350
33	Gain on Sale of Property, Plant and Equipment		9	–	–
235,697	Total Revenue		289,274	241,824	289,043
Expenses
119,701	Personnel	3	136,327	121,117	137,294
86,606	Operating	4	105,433	97,521	118,638
156	Financing	5	67	–	–
15,832	Depreciation and Amortisation	11,12	23,116	15,272	29,847
5,646	Capital Charge	6	11,835	5,981	10,705
–	Christchurch Earthquake Costs		896	–	3,100
–	Loss on Sale of Property, Plant and Equipment		711	–	–
227,941	Total Expenses	19	278,385	239,891	299,584

7,756	Net Surplus/(Deficit)		10,889	1,933	(10,541)

Other Comprehensive Income
(741)	Revaluation Gain (Loss)	20	(2,173)	–	–
7,015	Total Comprehensive Income		8,716	1,933	(10,541)

Explanation of significant variances against budget are detailed in note 27.

The accompanying notes form part of these financial statements.

Financial Position

Statement of Financial Position as at 30 June
Assets
ACTUAL 2009/10 $000		NOTE	ACTUAL 2010/11 $000	MAIN EST 2010/11 $000	SUPP EST 2010/11 $000
Current Assets
42,843	Cash and Cash Equivalents	7	51,721	31,959	61,452
3,592	Accounts Receivable	8	25,271	4,238	3,700
1,444	Inventories	9	1,419	1,190	1,551
463	Prepayments		4,654	5,062	4,322
–	Derivative Financial Instruments	24	15	–	–
–	Property, Plant and Equipment Held for Sale	11	1,100	–	–
48,342	Total Current Assets		84,180	42,449	71,025
Non-Current Assets
28,386	Property, Plant and Equipment	11	192,929	25,589	188,787
53,338	Intangible Assets	12	59,973	67,828	85,624
81,724	Total Non-Current Assets		252,902	93,417	274,411
130,066	Total Assets		337,082	135,866	345,436
Liabilities and Taxpayers’ Funds
Current Liabilities
19,288	Accounts Payable	13	30,284	19,019	28,791
1,600	Provisions	14	3,468	1,266	3,422
5,490	Revenue Received in Advance	15	8,141	6,757	5,776
7,924	Employee Entitlements	16	10,106	6,899	12,223
1,322	Finance Leases	17	1,322	1,322	1,322
7,777	Provision for Repayment of Surplus	18	16,600	1,933	–
21	Derivative Financial Instruments	24	81	–	–
43,422	Total Current Liabilities		70,002	37,196	51,534
Non-Current Liabilities
1,124	Employee Entitlements	16	1,632	1,239	1,313
4,515	Finance Leases	17	3,194	2,906	3,193
5,639	Total Non-Current Liabilities		4,826	4,145	4,506
49,061	Total Liabilities		74,828	41,341	56,040
Taxpayers’ Funds
79,297	General Funds		233,776	92,076	258,745
1,708	Revaluation Reserve	20	28,478	2,449	30,651
81,005	Total Taxpayers’ Funds		262,254	94,525	289,396
130,066	Total Liabilities and Taxpayers’ Funds		337,082	135,866	345,436

Explanation of significant variances against budget are detailed in note 27.

The accompanying notes form part of these financial statements.

Movements in Taxpayers’ Funds

Statement of Movements in Taxpayers’ Funds for the year ended 30 June
Transfers of General Funds and Revaluation Reserves between Government Departments
ACTUAL 2009/10 $000		NOTE	ACTUAL 2010/11 $000	MAIN EST 2010/11 $000	SUPP EST 2010/11 $000
7,015	Total Comprehensive Income		8,716	1,933	(10,541)
(7,777)	Provision for Payment of Surplus	18	(16,600)	(1,933)	–
(1,360)	Transfers to Crown		–	–	–
12,843	Capital Contribution	21	–	11,400	36,064
–	Other Movements in Taxpayers’ Funds		–	–	318
15,404	Government Technology Services		–	–	–
–	National Library		115,689	–	110,880
–	Archives New Zealand		73,444	–	71,670
15,404	Total Transfers of General Funds and Revaluation Reserves between Government Departments		189,133	–	182,550
26,125	Movement in Taxpayers’ Funds for the year		181,249	11,400	208,391
54,880	Add Taxpayers’ Funds as at 1 July		81,005	83,125	81,005
81,005	Taxpayers’ Funds as at 30 June		262,254	94,525	289,396

Explanation of significant variances against budget are detailed in note 27.

The accompanying notes form part of these financial statements.

Cash Flows

Statement of Cash Flows for the year ended 30 June
Cash Flows from Operating Activities
ACTUAL 2009/10 $000		NOTE	ACTUAL 2010/11 $000	MAIN EST 2010/11 $000	SUPP EST 2010/11 $000
Cash was Provided from:
109,526	Supply of Outputs to the Crown		127,374	98,464	141,693
125,469	Supply of Outputs to Third Parties		140,287	143,360	147,066
234,995	Total Cash was Provided from:		267,661	241,824	288,759
Cash was Disbursed to:
(206,594)	Suppliers and Employees		(238,062)	(223,687)	(244,433)
(5,646)	Capital Charge	6	(11,835)	(5,981)	(10,705)
(557)	Goods and Services Tax (Net)		2,289	–	–
(212,797)	Total Cash was Disbursed to:		(247,608)	(229,668)	(255,138)
22,198	Net Cash Flows from Operating Activities		20,053	12,156	33,621
Cash Flows from Investing Activities
Cash was Provided from:
660	Sale of Property, Plant and Equipment		–	395	910
660	Total Cash was Provided from:		–	395	910
Cash was Disbursed to:
(4,849)	Purchase of Property, Plant and Equipment		(25,797)	(3,165)	(8,007)
(17,381)	Purchase of Intangibles		(6,417)	(20,425)	(36,202)
(22,230)	Total Cash was Disbursed to:		(32,214)	(23,590)	(44,209)
(21,570)	Net Cash Flows from Investing Activities		(32,214)	(23,195)	(43,299)
Cash Flows from Financing Activities
Cash was Provided from:
12,843	Capital Contribution	21	–	11,400	36,064
–	Transfers from Government Departments		30,204	–	–
12,843	Total Cash was Provided from:		30,204	11,400	36,064
Cash was Disbursed to:
(7,267)	Repayment of Net Surplus		(7,777)	(2,279)	(7,777)
(771)	Payment of Finance Leases		(1,388)	–	–
(8,038)	Total Cash was Disbursed to:		(9,165)	(2,279)	(7,777)
4,805	Net Cash Flows from Financing Activities		21,039	9,121	28,287
Movement in Cash
37,410	Opening Cash and Cash Equivalents		42,843	33,877	42,843
5,433	Add Net Increase/(Decrease) in Cash Held		8,878	(1,918)	18,609
42,843	Closing Cash and Cash Equivalents		51,721	31,959	61,452

The accompanying notes form part of these financial statements.

Net Surplus to Net Cash Flow from Operating Activities

Reconciliation of Total Comprehensive Income to Net Cash Flow from Operating Activities for the year ended 30 June
Add/(Deduct) Non-Cash Items
ACTUAL 2009/10 $000		ACTUAL 2010/11 $000	MAIN EST 2010/11 $000	SUPP EST 2010/11 $000
7,015	Total Comprehensive Income	8,716	1,933	(10,541)
15,832	Depreciation and Amortisation	23,116	15,272	29,847
21	Net Losses/(Gains) on Derivative Financial Instruments	(66)	–	–
–	Revenue from Collection Donations and Legal Donations	(161)	–	–
–	Interest Unwind on Leased Premises	(200)	–	–
18	Net Foreign Exchange Losses	7	–	–
15,871		22,696	15,272	29,847
Add/(Deduct) Items Classified as Investing Activities
(33)	Loss/(Gain) on Sale of Property, Plant and Equipment	702	–	3,100
(33)		702	–	3,100
Add/(Deduct) Movements in Working Capital Items
875	(Increase)/Decrease in Accounts Receivable	(21,614)	–	(108)
160	(Increase)/Decrease in Inventories	72	20	(107)
(332)	(Increase)/Decrease in Prepayments	(4,191)	(4,060)	(3,859)
(1,771)	Increase/(Decrease) in Accounts Payable	12,097	(1,021)	8,181
434	Increase/(Decrease) in Provisions	(9)	1	2,334
(1,544)	Increase/(Decrease) in Revenue Received in Advance	1,225	7	286
1,523	Increase/(Decrease) in Employee Entitlements	359	4	4,488
(655)		(12,061)	(5,049)	11,215
22,198	Net Cash Flows from Operating Activities	20,053	12,156	33,621

The accompanying notes form part of these financial statements.

Commitments

Statement of Commitments as at 30 June
Capital Commitments
ACTUAL 2009/10 $000		ACTUAL 2010/11 $000
Capital Contracts for Goods and Services
11,094	Less than one year	19,442
4,756	One to two years	3,852
167	Two to five years	167
16,017	Total Capital Contracts for Goods and Services	23,461
16,017	Total Capital Commitments	23,461
Operating Commitments
Non-Cancellable Accommodation Leases
9,131	Less than one year	13,655
6,075	One to two years	10,964
3,630	Two to five years	23,227
614	Over five years	20,274
19,450	Total Non-Cancellable Accommodation Leases	68,120
Other Non-Cancellable Leases
10,424	Less than one year	11,097
7,076	One to two years	8,450
611	Two to five years	22,871
–	Over five years	20,667
18,111	Total Other Non-Cancellable Leases	63,085
Non-Cancellable Contracts for Goods and Services
244	Less than one year	20,534
2	One to two years	18,862
–	Two to five years	33,888
–	Over five years	–
246	Total Non-Cancellable Contracts for Goods and Services	73,284
37,807	Total Operating Commitments	204,489
53,824	Total Commitments	227,950

Capital Commitments

Capital commitments are the aggregate amount of capital expenditure contracted for the acquisition of property, plant and equipment and intangible assets that have not been paid for, or not recognised as a liability, at the balance date.

Non-Cancellable Lease Commitments

The Department leases property, plant and equipment in the normal course of its business. The majority of the leases are for premises, vehicles, office equipment and electronic monitoring of non-casino gaming machines. The non-cancellable leasing period for these leases varies.

Non-Cancellable Contracts for Goods and Services

The Department has entered into non-cancellable contracts for IT maintenance, property maintenance and other contracts for service.

The accompanying notes form part of these financial statements.

Contingent Assets and Liabilities

Statement of Contingent Assets and Liabilities as at 30 June

Quantified Contingent Liabilities
ACTUAL 2009/10 $000		ACTUAL 2010/11 $000
144	Legal Disputes	124
144	Total Contingent Liabilities	124

Unquantified Contingent Liabilities

There is one new personal grievance case pending against the Department that cannot be reliably quantified due to uncertainty around the outcome. Management believes the resolution of this case will not have a materially adverse effect on the financial statements of the Department.

The Department had two personal grievance cases in 2009/10.

Unquantified Contingent Assets

The Department has two unquantified contingent assets. One was from normal operations and the other resulted from insurance recoveries as a consequence of the 2010/11 Canterbury earthquakes.

The Department had no unquantified contingent assets in 2009/10.

The accompanying notes form part of these financial statements.

Unappropriated Expenditure

Statement of Unappropriated Expenditure and Capital Expenditure for the year ended 30 June

There was no unappropriated expenditure for the year ended 30 June 2011. (2009/10: $Nil.)

The accompanying notes form part of these financial statements.

Memorandum Accounts

Memorandum accounts are notional accounts to record the accumulated balance of surpluses and deficits for outputs funded by fees charged to third parties. They are intended to provide a long-run perspective to the pricing of outputs.

Memorandum Accounts for the year ended 30 June
Memorandum Account	OPENING BALANCE 2009/10 $000	REVENUE MOVEMENT 2010/11 $000	EXPENSE MOVEMENT 2010/11 $000	CLOSING BALANCE 2010/11 $000
New Zealand Gazette	469	998	847	620
Use of facilities and access to Lake Taupo by boat users	(45)	305	385	(125)
Passport products	9,457	79,799	71,831	17,425
Citizenship products	(1,490)	9,223	8,048	(315)
Marriage products	(417)	2,984	3,098	(531)
Issue of Birth, Death and Marriage certifications and other products	1,505	7,450	8,683	272
Administration of non-casino gaming	(6,276)	16,564	15,826	(5,538)
Kotui library services	–	–	–	–
Infrastructure as a Service (IaaS)	–	–	1,071	(1,071)

Actions Taken to Address Surpluses and Deficits

New Zealand Gazette (Established 30 June 2002)

Purpose: The cost of publishing and distributing the New Zealand Gazette is recovered through third party fees.

Actions: Fees will be reviewed once the costs of a project to improve the New Zealand Gazette’s online capability have been fully scoped. The planning phase for this project is underway and is due to be completed by December 2011.

Use of Facilities and Access to Lake Taupo by Boat Users (Established 30 June 2002)

Purpose: The Department manages berths, jetties and boat ramps located at Lake Taupo. Fees are charged to third parties for the use of boat ramps and marina berths. These fees are used to cover the cost of the administration and maintenance of these facilities.

Actions: In 2010/11 lower levels of fees were recovered due to reduced usage of lake facilities as a result of the continued economic environment. A review of fees is scheduled in 2011/12.

Passport Products (Established 30 June 2002)

Purpose: To support a strategy to stabilise fees based on full cost recovery over a four-to-five year planning horizon. This strategy supports the introduction of new technologies including the replacement of the ageing passport system within that timeframe.

Actions: The memorandum account surplus is expected to reduce as passport developments are implemented. Passport fees will be reviewed following the completion of the Passport Redevelopment Programme in 2012/13. The current fees schedule was approved with effect from 4 November 2005. The balance in this account is affected by fluctuating volumes and the timing of system changes.

The 2010/11 movement mainly reflected the timing of expenditure on Passport Redevelopment Programme developments and higher revenue than forecast. Productivity improvements achieved through system enhancements implemented in 2010/11 also resulted in the ability to handle the 2010/11 passport volume increase with a modest increase in staff.

The Passport Redevelopment Programme that is expected to be completed in 2012/13 will replace ageing technology, improve process integrity, and implement a new robust system to handle the progressive increase in passport application volumes resulting from the move to a five-year passport announced in 2005.

Citizenship Products (Established 30 June 2002)

Purpose: To support a strategy to stabilise fees based on full cost recovery over a four-to-five year planning horizon.

Actions: The current fees schedule was approved with effect from 1 September 2003. The balance in this account in recent years has been affected by fluctuating volumes and legislative changes that increased the citizenship eligibility qualifying period from three-to-five years of permanent residence.

The 2010/11 favourable movement reflected lower levels of expenditure resulting from the Department’s performance and productivity initiatives and lower business support costs as a result of the Department’s restructure, together with higher revenues than forecast.

Citizenship systems, processes and costs are currently being reviewed as part of the Department’s Performance and Productivity Improvement Programme and Machinery of Government changes affecting the Department. Citizenship fees will be reviewed in 2011/12 and will incorporate the results of the foregoing initiatives and the impact of volume changes.

Marriage Products (Established 30 June 2002)

Purpose: To support a strategy to stabilise fees based on full cost recovery over a four-to-five year planning horizon.

Actions: The current fees schedule was approved with effect from 1 September 2003 to recover full costs. The adverse movement in 2010/11 is expected to continue in 2011/12 and reflects higher costs since fees were last reviewed. Marriage systems, processes and costs are currently being reviewed as part of the Department’s Performance and Productivity Improvement Programme and Machinery of Government changes affecting the Department. Marriage product fees will be reviewed in 2011/12 and will incorporate the results of the foregoing initiatives and the impact of volume changes.

Births, Deaths and Marriages Certificates, and Other Products (Established 30 June 2002)

Purpose: To support a strategy to stabilise fees based on full cost recovery over a four-to-five year planning horizon. This strategy includes the introduction of new technologies that allow greater access by applicants through the Internet.

Actions: The current fees schedule was approved with effect from 1 September 2003 to recover full costs. The adverse movement in 2010/11 is lower than expected efficiency savings resulting from the Department’s Performance and Productivity Improvement Programme, together with lower business support costs. The shortfall mainly reflects additional expenditure associated with the implementation of the Births, Deaths, Marriages and Relationships Registration legislation. A deficit is still expected to continue in 2011/12 and accordingly the accumulated surplus is likely to be exhausted. Births, Deaths and Marriages systems, processes and costs are currently being reviewed as part of the Department’s Performance and Productivity Improvement Programme and Machinery of Government changes affecting the Department. Births, Deaths and Marriages Certificates, and Other Products fees will be reviewed in 2011/12 and will incorporate the results of the foregoing initiatives and the impact of volume changes.

Administration of Non-casino Gaming (Established 30 June 2002)

Purpose: Fees established to recover the cost of administration and regulation of non-casino gaming are reflected in gaming machine fees, licence fees and similar charges for differing types of gaming activity, in addition to charges relating to the electronic monitoring of non-casino gaming machines.

Actions: The accumulated deficit resulted from uncertainties surrounding the introduction of the Gambling Act 2003 and the electronic monitoring system in 2006, in particular around volumes and activity. The current fees schedule was approved with effect from 1 February 2008, and a further review is planned in 2011/12 due to permanent reductions to the bases of revenue recovery for gaming machines and associated activity.

Kotui Library Services (Established 30 January 2011)

Purpose: The National Library has been working towards providing a shared service for public library management and discovery systems in collaboration with the Association of Public Library Managers (APLM). The business model is a subscription service where libraries will pay a one-off license fee followed by annual subscription.

Actions: There has been no activity in the Kotui memorandum account in the five months to 30 June 2011.

Infrastructure as a Service (IaaS) (Established 1 January 2011)

Purpose: The establishment of IaaS is to provide Government agencies with access to shared storage, computing and data centre facilities on a self-service, pay-as-you-use basis. The model is flexible so that agencies can choose service elements that best fit their business needs, and to join the initiative in a staged way as existing infrastructure assets require replacement or as new capacity is required.

This approach consolidates Government demand, reduces duplication (in respect of infrastructure and capital expenditure), allows agencies to manage resources better and provides agencies with the improved ability to understand the total cost of ownership of their use of ICT infrastructure.

The cost of establishing and managing the IaaS will be recovered through fees charged to Government agencies for use of the service.

Actions: The IaaS will go live by 31 December 2011. The cost of establishing and managing the IaaS will be recovered through Government agencies that use the service. Agency fees will be agreed by the Inter-agency Steering Group on an annual basis. Cabinet has directed the Department to repay the establishment costs within a four year period.

The accompanying notes form part of these financial statements.

Departmental Appropriations and Expenditure

Statement of Departmental Expenditure and Capital Appropriations for the year ended 30 June
Appropriations for Output Expenses
ACTUAL 2009/10 $000		NOTE	ACTUAL 2010/11 $000	MAIN EST 2010/11 $000	SUPP EST 2010/11 $000
Vote Community and Voluntary Sector
Multi-Class Output Appropriation
Community and Voluntary Sector Services
1,610	Policy Advice – Community		1,679	1,408	1,891
14,508	Administration of Grants		13,355	14,123	13,967
5,308	Community Advisory Services		5,398	5,303	6,031
21,426	Total Community and Voluntary Sector Services		20,432	20,834	21,889
21,426	Total Vote Community and Voluntary Sector		20,432	20,834	21,889
Vote Emergency Management
Multi-Class Output Appropriation
Emergency Management Services
846	Policy Advice – Emergency Management		774	970	993
5,458	Support Services, Information and Education		6,105	5,830	7,116
3,875	Management of National Emergency Readiness, Response and Recovery		5,715	4,243	5,473
10,179	Total Emergency Management Services (MCOA)		12,594	11,043	13,582
10,179	Total Vote Emergency Management		12,594	11,043	13,582
Vote Internal Affairs
Multi-Class Output Appropriation
Policy and Advisory Services
4,021	Policy Advice- Internal Affairs		3,453	4,145	3,828
2,816	Information and Advisory Services		4,450	3,018	5,585
6,837	Total Policy and Advisory Services (MCOA)		7,903	7,163	9,413
Departmental Output Expenses
353	Anti-Money Laundering and Countering Financing of Terrorism		969	1,535	1,459
11,511	Government Technology Services		8,536	11,587	9,598
96,484	Identity Services		108,437	104,841	113,246
24,910	Regulatory Services		25,313	25,687	26,509
5,651	Services for Ethnic Affairs		5,671	5,982	6,082
818	Contestable Services		957	908	958
146,564	Total Vote Internal Affairs		157,786	157,703	167,265
Vote Local Government
Multi-Class Output Appropriation
Services for Local Government
7,258	Policy Advice – Local Government		6,563	6,641	6,961
4,067	Information, Support and Regulatory Services – Local Government		3,462	3,513	3,499
11,325	Total Services for Local Government		10,025	10,154	10,460
Departmental Output Expenses
379	Implementation of Auckland Governance Reforms		158	183	210
11,704	Total Vote Local Government		10,183	10,337	10,670
Vote Ministerial Services
Departmental Output Expenses
26,758	Support Services to Members of the Executive		26,475	27,260	26,994
4,472	Visits and Official Events Co-ordination		5,361	4,430	5,420
7,178	VIP Transport		7,214	7,925	7,468
38,408	Total Vote Ministerial Services		39,050	39,615	39,882
Vote Racing
Departmental Output Expenses
246	Policy Advice – Racing		195	359	267
246	Total Vote Racing		195	359	267
Vote National Library
Multi-Class Output Appropriation
–	Access to Information		9,664	–	13,502
–	Collecting and Preserving Information		12,382	–	12,623
–	Policy Advice and Statutory Servicing		374	–	477
–	Library and Information Services to Schools		5,244	–	6,647
–	Total Vote National Library		27,664	–	33,249
Vote National Archives
–	Archives Services		9,442	–	9,680
–	Total Vote National Archives		9,442	–	9,680
228,527	Total Department Appropriation for Output Expenses	19, 27	277,346	239,891	299,584
Other Expenses
–	Recovery from February 2011 Christchurch Earthquake		896	–	3,100
–	Total Other Expenses		896	–	3,100
Appropriation for Capital Expenditure
22,974	Department of Internal Affairs		35,487	23,590	44,209
22,974	Total Department Appropriation for Capital Expenditure		35,487	23,590	44,209
251,501	Total Department Appropriations		312,833	263,481	343,793

The accompanying notes form part of these financial statements.

Notes to the Financial StatementsNotes to the Financial Statements for the year ended 30 June

1. Statement of Accounting Policies

Reporting Entity

The Department of Internal Affairs (Department) was established as a result of the integration of the National Library of New Zealand, Archives New Zealand and the Department of Internal Affairs on 1 February 2011. Financial statements have been prepared in accordance with the requirements of the Public Finance Act 1989. Section 2 of this Act defines the Department of Internal Affairs as a Government Department. For the purposes of financial reporting the Department of Internal Affairs is a public benefit entity.

The financial information for the year ended 30 June 2011 includes the financial information:

for the former National Library of New Zealand and Archives New Zealand since the merger date on 1 February 2011 i.e. for the five month period from 1 February 2011 to 30 June 2011
the information for the Department of Internal Affairs for the full 12 month period from 1 July 2010 to 30 June 2011.

The comparative values for 30 June 2010 are those of the Department of Internal Affairs prior to the merger and do not include the financial information for the former National Library of New Zealand or Archives New Zealand.

In addition, the Department has reported the Crown activities and trust money, which it administers.

Transfer of Assets from other Government Departments

The National Library of New Zealand and Archives New Zealand merged with the Department of Internal Affairs on 1 February 2011. On that date, the assets and liabilities of the National Library of New Zealand and Archives New Zealand were transferred to the Department at their carrying values which was considered to equate to fair value.

Government Technology Services was transferred from the State Services Commission on 1 July 2009.

The effect on the Departments’ accounts, at the date of transfer, is summarised below.

Effect on the Departments’ accounts, at the date of transfer
DEPARTMENT	FIXED ASSETS$000	CURRENT ASSETS $000	LIABILITIES $000	TAXPAYERS’ FUNDS $000
2010/11
National Library of New Zealand	100,033	24,443	8,787	115,689
Archives New Zealand	66,029	9,619	2,204	73,444
2009/10
Government Technology Services	14,091	4,390	3,077	15,404

The value of Taxpayers’ Funds includes the value of General Funds, Revaluation Reserves and Net Surplus Repayments.

Transfer of Other Functions from Other Government Departments

The functions relating to the Office of the Community and Voluntary Sector and the Government Chief Information Officer were transferred into the Department on 1 February 2011. The Office of the Community and Voluntary Sector was transferred from the Ministry of Social Development and the Government Chief Information Officer was transferred from the State Services Commission. Other than employee entitlements, neither of these transfers carried any transfer of assets or liabilities.

Reporting Period

The reporting period for these financial statements is the year ended 30 June 2011. The financial statements were authorised for issue by the Chief Executive of the Department on 30 September 2011.

Basis of Preparation

Statement of Compliance

These financial statements have been prepared in accordance with New Zealand generally accepted accounting practice. They comply with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and other applicable Financial Reporting Standards, as appropriate for public benefit entities.

Budget Figures

The budget figures are those presented in the Budget Estimates of Appropriation (Main Est) for the Department. These budgets do not include the National Library of New Zealand or Archives New Zealand.

The Supplementary Estimates (Supp Est) figures include the Department’s full year estimates from the former Department and five months of the former National Library of New Zealand and Archives New Zealand. The budgets also include other amendments made through the course of the Supplementary Estimates process.

Changes in Accounting Policies

This is the first period of operation of the newly merged Department. The accounting policies stated below have been consistently applied throughout the period and correspond to the accounting policies specified in the Statement of Intent for the Department for the year ended 30 June 2011 and, where applicable, the Statements of Intent for the National Library of New Zealand and Archives New Zealand for the year ended 30 June 2011.

The accounting policies as set out below have been applied consistently to all periods presented in these financial statements.

Comparatives

When presentation or classification of items in the financial statements are amended or accounting policies are changed voluntarily, comparative figures are restated to ensure consistency with the current period unless it is impracticable to do so.

Critical Accounting Judgements and Estimates

The preparation of financial statements in conformity with NZ IFRS requires judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are:

Long Service, Sick and Retirement Leave

The long service and retirement leave valuations include the use of discount rates and inflationary estimates. These valuations are independently conducted.

Finance Leases

The Department has exercised its judgement on the appropriate classification of equipment leases and has determined one lease arrangement to be a finance lease as identified in note 17. To determine if a lease arrangement is a finance lease or an operating lease requires judgement as to whether the arrangement transfers substantially all the risks and rewards of ownership to the Department. Judgement is involved in determining the fair value of the leased asset, useful life and discount rate to calculate the present value of the minimum lease payments.

Effects from Accounting Standard Adoption

The Department has adopted the following revisions to accounting standards during the financial year, which have had only a presentational or disclosure effect:

NZ IAS 24 Related Party Disclosures (Revised 2009) replaces NZ IAS 24 Related Party Disclosures (Issued 2004) and is effective for reporting periods on or after 1 January 2011. The revised standard:

removes the previous disclosure concessions applied by the Department for arm’s length transactions between the Department and entities controlled or significantly influenced by the Crown. The effect of the revised standard is that more information is required to be disclosed about transactions between the Department and entities controlled or significantly influenced by the Crown
provides clarity on the disclosure of related party transactions with Ministers of the Crown
clarifies that related party transactions include commitments with related parties.

Standards, Amendments, and Interpretations Issued that are not yet Effective and have not been Early Adopted

Standards, amendments, and interpretations issued that are not yet effective, and have not been early adopted, and are relevant to the Department, are:

NZ IFRS 9 Financial Instruments will eventually replace NZ IAS 39 Financial Instruments: Recognition and Measurement. NZ IAS 39 is being replaced through the following three main phases: Phase 1 Classification and Measurement, Phase 2 Impairment Methodology, and Phase 3 Hedge Accounting. Phase 1 on the classification and measurement of financial assets has been completed and has been published in the new financial instrument standard NZ IFRS 9. NZ IFRS 9 uses a single approach to determine whether a financial asset is measured at amortised cost or fair value, replacing the many different rules in NZ IAS 39. The approach in NZ IFRS 9 is based on how an entity manages its financial instruments (its business model) and the contractual cash flow characteristics of the financial assets. The new standard also requires a single impairment method to be used, replacing the many different impairment methods in NZ IAS 39. The new standard is required to be adopted for the year ended 30 June 2014. The Department has not yet assessed the effect of the new standard and expects it will not be early adopted.

Functional and Presentation Currency

The functional currency of the Department is New Zealand dollars. The financial statements are presented in New Zealand dollars and all values are rounded to the nearest thousand dollars ($000). All notes are presented in millions (m).

Significant Accounting Policies

The measurement base used in preparing the financial statements is historical cost modified by the revaluation of land and buildings and antiques and artworks and certain financial instruments (including derivative instruments). The accrual basis of accounting has been used unless otherwise stated.

The following particular accounting policies have been applied:

Revenue

Revenue Crown

The Department derives revenue for the provision of outputs (services) to the Crown. Revenue Crown is recognised when earned and reported in the financial period to which it relates.

Third Party Revenue

The Department derives revenue from third parties for the provision of outputs (products or services) to third parties. Revenue from the supply of goods and services is measured at the fair value of consideration received. Revenue from the supply of goods is recognised when the significant risks and rewards of ownership have been transferred to the buyer unless an alternative method better represents the stage of completion of the transaction. Such revenue is recognised when earned and is reported in the financial period to which it relates.

Donated or Subsidised Assets

Where a physical asset is acquired for nil or nominal consideration the fair value of the asset received is recognised as revenue in the Statement of Comprehensive Income.

Revenue Received in Advance

Revenue is recognised in Statement of Financial Position as a liability when the revenue has been received but does not meet the criteria for recognition as revenue in the Statement of Comprehensive Income.

Expenses

Expenses are recognised and reported in the Statement of Comprehensive Income in the period in which the service is provided or the goods are received.

Statement of Cost Accounting Policies

Criteria for Direct and Indirect Costs

Direct costs are those costs directly attributed to an output. Indirect costs are those costs that cannot be identified with a specific output in an economically feasible manner.

Cost Allocation Policy

Direct costs are charged directly to significant activities. Indirect costs are charged to significant activities based on cost drivers and related activity/usage information.

Method of Assigning Costs to Outputs

Costs of outputs are derived using the following cost allocation system:

Indirect Costs are allocated to outputs includes capital charge and depreciation (which are charged on the basis of assets utilised), personnel costs (which are charged by recording time spent on each output) and operating costs (which are charged based on usage). For the year ended 30 June 2011, 85 percent of output costs were direct costs (2009/10: 85 percent).

Indirect Costs are allocated to outputs on an activity-costing basis reflecting a mix of perceived benefit, personnel numbers, floor space, network connections and estimated allocation of time. For the year ended 30 June 2011, indirect costs accounted for 15 percent of the Department’s costs (2009/10: 15 percent).

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, cash in transit, and funds on deposit with banks.

Accounts Receivable

Accounts receivable have been designated as loans and receivables. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables entered into, with duration of less than 12 months, are recognised at their nominal value. At each balance date, the Department assesses whether there is any objective evidence that loans and receivables are impaired. Any impairment losses are recognised in the Statement of Comprehensive Income as bad debts.

Provision for Doubtful Debts

A provision is established when there is objective evidence that the Department will not be able to collect amounts due according to the original terms of the receivable. Significant financial difficulties of the debtor, probability that the debtor will enter into bankruptcy, and default in payments are considered indicators that the debtor is impaired. The amount of the provision is the difference between the receivables carrying amount and the present value of estimated future cash flows, discounted using the original effective interest rate.

Inventories

Inventories held for distribution, or consumption in the provision of services, that are not issued on a commercial basis are measured at the lower of cost (determined on the first-in first-out method) and current replacement costs. Where inventories are acquired at no cost, or for nominal consideration, the cost is the current replacement cost at the date of acquisition.

The replacement cost of the economic benefits or service potential of inventory held for distribution reflects any obsolescence or any other impairment.

Any write-down from cost to current replacement cost is recognised in the Statement of Comprehensive Income in the period when the write-down occurs.

Accounting for Derivative Financial Instruments, Hedging Activities and Foreign Currency Transactions

The Department uses derivative financial instruments to hedge exposure to foreign exchange. In accordance with its foreign exchange policy, the Department does not hold or issue derivative financial instruments for trading purposes. The Department has not adopted hedge accounting.

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value at each balance date. Movements in the fair value of derivative financial instruments are recognised in the Statement of Comprehensive Income.

Foreign currency transactions (including those for which forward exchange contracts are held) are translated into New Zealand dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Comprehensive Income.

Property, Plant and Equipment

Additions

Items of property, plant and equipment costing more than $0.003 m are initially capitalised and recorded at cost.

For each property, plant and equipment asset project, borrowing costs incurred during the period required to complete and prepare the asset for its intended use are expensed.

Disposals

Realised gains and losses arising from disposal of property, plant and equipment are recognised in the Statement of Comprehensive Income in the period in which the transaction occurs. Any balance attributable to the disposed asset in the asset revaluation reserve is transferred to Other Comprehensive Income.

Impairment

The carrying amounts of plant, property and equipment are reviewed at least annually to determine if there is any indication of impairment. Where an asset’s recoverable amount is less than its carrying amount, it will be reported at its recoverable amount and an impairment loss will be recognised on the Statement of Comprehensive Income as either Loss on Sale of Property, Plant and Equipment or Canterbury Earthquake Costs. Losses resulting from impairment are reported in the Statement of Comprehensive Income, unless the asset is carried at a revalued amount, in which case any impairment loss is treated as a revaluation decrease.

Revaluations

Revaluations are carried out for a number of classes of property, plant and equipment to reflect the service potential or economic benefit obtained through control of the asset. Revaluation is based on the fair value of the asset with changes reported by class of asset.

Classes of property, plant and equipment that are revalued are revalued at least every five years or whenever the carrying amount differs materially to fair value. Unrealised gains and losses arising from changes in the value of property, plant and equipment are recognised as at balance date and are debited or credited to Other Comprehensive Income in the Statement of Comprehensive Income.

To the extent that a gain reverses a loss previously charged to the Statement of Comprehensive Income for the asset class, the gain is credited to the Statement of Comprehensive Income. Otherwise, gains are credited to an asset revaluation reserve for that class of asset. To the extent that there is a balance in the asset revaluation reserve for the asset class any loss is debited to the reserve. Otherwise, losses are reported in the Statement of Comprehensive Income.

Accumulated depreciation at revaluation date is eliminated against the gross carrying amount so that the carrying amount after revaluation equals the revalued amount.

Specific Asset Class Policies

The following asset class specific policies have been applied:

Land and Buildings

Land and buildings are recorded at fair value less impairment losses and, for buildings, less depreciation accumulated since the assets were last revalued. Valuations are undertaken in accordance with the standards issued by the New Zealand Property Institute.

Collections

Collections include both general and school library collections. These current use collections are recorded at cost less accumulated depreciation and accumulated impairment losses.

Other Property, Plant and Equipment

Other property, plant and equipment, which include motor vehicles and office equipment, are recorded at cost less accumulated depreciation and accumulated impairment losses.

Depreciation

Depreciation is charged on a straight-line basis at rates calculated to allocate the cost or valuation of an item of property, plant and equipment or collections, less any estimated residual value, over its estimated useful life.

Depreciation is not charged on land, artworks or capital work in progress.

The estimated useful lives and associated depreciation rates of major classes of assets have been estimated as follows:

Estimated useful lives and associated depreciation rates of major classes of assets
ASSET CATEGORY	ASSET LIFE
Buildings	33–90 Years
Leasehold Improvements	The unexpired period of the lease or the estimated life of the improvements, whichever is shorter
National Library General and Schools Collections	3–50 Years
Plant and Equipment	5–100 Years
Furniture and Fittings	5–30 Years
Office Equipment	5–10 Years
Motor Vehicles	2–6 Years
IT Equipment	3–5 Years

Intangible Assets

Additions

Intangible assets are initially recorded at cost. The cost of an internally generated intangible asset represents expenditure incurred in the development phase of the asset only. The development phase occurs after the following can be demonstrated: technical feasibility; ability to complete the asset; intention and ability to sell or use; and development expenditure can be reliably measured. Expenditure incurred on research of an internally generated intangible asset is expensed when it is incurred. Where the research phase cannot be distinguished from the development phase, the expenditure is expensed when it is incurred.

Disposal

Realised gains and losses arising from disposal of intangible assets are recognised in the Statement of Comprehensive Income in the period in which the transaction occurs. Unrealised gains and losses arising from changes in the value of intangible assets are recognised as at balance date. To the extent that a gain reverses a loss previously charged to the Statement of Comprehensive Income, the gain is credited to the Statement of Comprehensive Income. Otherwise, gains are credited to an asset revaluation reserve for that asset. To the extent that there is a balance in the asset revaluation reserve for the intangible asset a revaluation loss is debited to the reserve. Otherwise, losses are reported in the Statement of Comprehensive Income.

Impairment

Intangible assets with finite lives are reviewed at least annually to determine if there is any indication of impairment. Where an intangible asset’s recoverable amount is less than its carrying amount, it will be reported at its recoverable amount and an impairment loss will be recognised. Losses resulting from impairment are reported as Loss on Sale of Property, Plant and Equipment in the Statement of Comprehensive Income.

Amortisation

Amortisation is charged to the Statement of Comprehensive Income on a straight-line basis over the useful life of the asset. Amortisation is not charged on capital work in progress. The estimated useful lives of intangible assets are as follows:

Estimated useful lives of intangible assets
ASSET CATEGORY	ASSET LIFE
Computer Software	3–8 Years
Births, Deaths and Marriages Historical Records Databases	10 Years
Digitised Collections	8 Years

Non-Current Assets Held for Sale

Non-current assets held for sale are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than continuing use. Non-current assets held for sale are measured at the lower of their carrying amount and fair value less costs to sell.

Any impairment losses for write-downs of non-current assets held for sale are recognised in the Statement of Comprehensive Income.

Any increases in fair value (less costs to sell) are recognised up to the level of any impairment losses that have been previously recognised.

Non-current assets held for sale (including those as part of a disposal group) are not depreciated or amortised while they are classified as held for sale.

Treatment of Non-Current Assets Transferred from Other Government Departments

All assets are transferred at net book value which was considered to equate to fair value. The assets, where applicable, will continue to be depreciated or amortised over their remaining useful lives.

All pre-integration assets held by the Department and all fixed assets post-integration were initially recorded at the cost of purchase.

Financial Instruments

Financial assets and financial liabilities are measured at fair value plus transaction costs. Any profit or loss from the financial transaction is recognised in the Statement of Comprehensive Income.

Financial Liabilities

Financial liabilities are recognised initially at fair value less transaction costs and subsequently measured at amortised cost using the effective interest rate method.

Financial liabilities entered into with duration of less than 12 months are recognised at their nominal value.

Leases

Finance Leases

Finance leases transfer to the Department, as lessee, substantially all the risks and rewards incident on the ownership of a leased asset. Initial recognition of a finance lease results in an asset and liability being recognised at amounts equal to the lower of the fair value of the leased property or the present value of the minimum lease payments. The capitalised values are amortised over the period in which the Department expects to receive benefits from their use.

The Department currently holds one finance lease. Approval is held under Section 50 of the Public Finance Act 1989 for the Department to be able to enter into a finance lease for supply of specialist printing equipment for the production of passport books.

Operating Leases

Operating leases, where the lessor substantially retains the risks and rewards of ownership, are recognised in a systematic manner over the term of the lease. Accommodation and motor vehicle leases are recognised as operating leases.

Lease incentives received are recognised evenly over the term of the lease as a reduction in rental expense.

Employee Entitlements

Employee entitlements to salaries and wages, annual leave, long service leave, retiring leave, sick leave and other similar benefits are recognised in the Statement of Comprehensive Income when they accrue to employees. Employee entitlements to be settled within 12 months are reported at the amount expected to be paid. The liability for long-term employee entitlements is reported as the present value of the estimated future cash outflows.

Termination benefits are recognised in the Statement of Comprehensive Income only when there is a demonstrable commitment to either terminate employment prior to normal retirement date or to provide such benefits as a result of an offer to encourage voluntary redundancy. Termination benefits settled within 12 months are reported at the amount expected to be paid, otherwise they are reported as the present value of the estimated future cash outflows.

Long Service, Retirement and Sick Leave

Long service, retirement leave and sick leave are calculated on an actuarial basis. The portion not considered payable in the next 12 months is recognised as a term liability. The current portion is recognised as a current liability.

Defined Contribution Superannuation Schemes

Obligations for contributions to the State Sector Retirement Savings Scheme, KiwiSaver and the Government Superannuation Fund are accounted for as defined contribution schemes and are recognised as an expense in the Statement of Comprehensive Income when incurred.

Other Liabilities and Provisions

Other liabilities and provisions are recorded at the best estimate of the expenditure required to settle the obligation. Liabilities and provisions to be settled beyond 12 months are recorded at their present value.

Commitments

Operating and capital commitments arising from non-cancellable contractual or statutory obligations are disclosed within the Statement of Commitments to the extent that both parties have not performed their obligations.

Contingent Assets and Liabilities

Contingent assets and contingent liabilities are recorded in the Schedule of Contingent Assets and Contingent Liabilities at the point at which the contingency is evident. Contingent assets are disclosed if it is probable that the benefits will be realised. Contingent liabilities are disclosed when there is a possibility they will crystallise.

Taxation

The Department is exempt from the payment of income tax. Accordingly, no charge for income tax has been provided. The Department is subject to fringe benefit tax (FBT), and goods and services tax (GST). It administers pay as you earn tax (PAYE), employer superannuation contribution tax (ESCT) and withholding tax (WHT).

Goods and Services Tax (GST)

All items in the financial statements including commitments and contingencies are GST exclusive, except for receivables and payables that are GST inclusive. Where GST is not recoverable as an input tax it is recognised as part of the related asset or expense.

The amount of GST owing by or payable to the Department at balance date, being the difference between output GST and input GST, is included in either receivables or payables.

2. Revenue Third Parties

Revenue Third Parties
ACTUAL 2009/10 $000		ACTUAL 2010/11 $000
60,909	Passport Fees	78,796
7,963	Citizenship Fees	9,073
10,283	Birth, Death, Marriage and Civil Union Fees	10,345
17,231	Gambling Licences	16,264
5,244	Casino Operators’ Levies	5,352
6,630	VIP Transport	7,142
10,027	Recovery from New Zealand Lottery Grants Board	8,976
1,013	New Zealand Gazette	952
1,183	e-Government Development and Operations	1,340
5,655	Other Third Party Revenue	9,330
126,138	Total Revenue Third Parties	147,570

3. Personnel Expense

Personnel Expense
ACTUAL 2009/10 $000		ACTUAL 2010/11 $000
113,644	Salaries, Wages and Contractors	127,812
2,671	Employer Contribution to Defined Contribution Plans	2,736
965	Increase in Employee Entitlements	2,690
2,421	Other Personnel Costs	3,089
119,701	Total Personnel Costs	136,327

4. Operating Expenses

Operating Expenses
ACTUAL 2009/10 $000		ACTUAL 2010/11 $000
10,157	Agency Fees	10,427
15,023	Computer Costs	19,140
3,600	Consultants	4,633
13,669	Inventory Costs	15,819
12,415	Office Expenses	13,981
4,534	Professional Fees	7,647
2,182	Publicity and Promotion	1,623
11,409	Rental and Leasing Costs	12,322
2,370	Staff Development	2,298
–	Library Resources and Subscriptions	1,957
4,400	Travel Expenses	5,806
195	Fee for Auditor (for the Financial Statement Audit)	325
32	Fees to Auditor (for Assurance and Related Services)	34
(19)	Increase/(Decrease) in Provision for Doubtful Debts	3
18	Realised Foreign Exchange Losses	36
21	Unrealised Foreign Exchange Losses/(Gains)	(29)
6,600	Other Departmental Operating Costs	9,411
86,606	Total Operating Expenses	105,433

5. Financing Expense

Financing Expense
ACTUAL 2009/10 $000		ACTUAL 2010/11 $000
156	Interest on Finance Leases	267
–	Make Good on Lease Premises	(200)
156	Total Finance Costs	67

6. Capital Charge Expense

The Department pays a capital charge to the Crown based on the taxpayers’ funds held as at 30 June and 31 December each year. The capital charge rate in 2010/11 was 7.5 percent (2009/10: 7.5 percent).

7. Cash and Cash Equivalents

Cash and Cash Equivalents
Overseas Bank Accounts
ACTUAL 2009/10 $000		ACTUAL 2010/11 $000
41,665	New Zealand Bank Accounts	50,197
814	Australian Bank Accounts	374
364	UK Bank Accounts	864
–	US Bank Accounts	286
42,843	Total Cash and Cash Equivalents	51,721

Overseas bank accounts are shown in New Zealand dollars converted at the closing mid-point exchange rate.

8. Accounts Receivable

Accounts Receivable
ACTUAL 2009/10 $000		ACTUAL 2010/11 $000
3,610	Trade Receivables	10,902
–	Debtor Crown	14,390
(18)	Less Provision for Doubtful Debts	(21)
3,592	Total Accounts Receivable	25,271

The carrying value of trade receivables approximates their fair value.

As at balance date, all overdue receivables have been assessed for impairment, and appropriate provisions applied, as detailed below.

Overdue receivables impairment assessment, appropriate provisions applied
GROSS $000	IMPAIRMENT $000	NET $000		GROSS $000	IMPAIRMENT $000	NET $000
ACTUAL 2009/10				ACTUAL 2010/11
3,514	(16)	3,498	Not past due	24,450	–	24,450
84	(1)	83	Past due 1–30 days	105	–	105
8	–	8	Past due 31–60 days	194	–	194
1	–	1	Past due 61–90 days	218	–	218
3	(1)	2	Past due > 91 days	325	(21)	304
3,610	(18)	3,592	Total Accounts Receivable	25,292	(21)	25,271

The provision for doubtful debts has been calculated based on expected losses for the Department’s pool of receivables. The expected losses have been determined based on analysis of the Department’s losses in prior periods, and a review of individual receivables.

Movements in the provision for doubtful debts are as follows:

Movements in the provision for doubtful debts
ACTUAL 2009/10 $000		ACTUAL 2010/11 $000
(37)	Opening Doubtful Debts as at 1 July	(18)
19	Additional Provisions Made During the Year	(3)
–	Trade Receivables Written Off	–
(18)	Closing Doubtful Debts as at 30 June	(21)

9. Inventories

Inventories
Birth, Death and Marriage Certificates
ACTUAL 2009/10 $000		ACTUAL 2010/11 $000
24	Stock on Hand	22
Citizenship
49	Stock on Hand	18
566	Work in Progress	534
Civil Defence and Emergency Management
20	Guides to National CDEM Plan	–
National Library
–	Stock on Hand	48
Passports
12	Stock on Hand	11
773	Work in Progress	786
1,444	Total Inventories	1,419

No inventories are pledged as security for liabilities; however some inventories are subject to retention of title clauses.

10. Derivative Financial Instruments

The notional principal amounts of the outstanding forward exchange contracts at balance date are as follows

Outstanding forward exchange contracts notional principal amounts
ACTUAL 2009/10 000		ACTUAL 2010/11 000
1,650	Australian dollars $	2,700
120	UK Sterling £	210
–	United States dollars $	1,353

The fair value of forward exchange contracts has been determined using a discounted cash flows valuation technique based on stated market rates.

The nominal value of these 11 contracts was $NZD 5.628 m (2009/10: 6 contracts valued at $NZD 2.262 m).

11. Property, Plant and Equipment

Cost or Valuation 2010/11
Asset Class	Balance 1 July $000	Additions $000	Revaluations/ Impairments $000	Disposals $000	Transfers* $000	Balance 30 June $000
Land	3,650	–	(1,162)	–	50,537	53,025
Buildings	2,972	11,114	(5,744)	–	75,815	84,157
Leasehold Improvements	10,915	1,617	–	(3,128)	3,372	12,776
Antiques and Works of Art	456	–	323	(24)	431	1,186
Furniture and Fittings	983	1,536	–	(150)	10,126	12,495
General Collections	–	337	–	–	26,041	26,378
Schools Collection	–	599	–	–	11,691	12,290
Office Equipment	1,056	28	–	(50)	4,321	5,355
Motor Vehicles	6,564	293	–	(73)	721	7,505
Plant and Equipment	886	239	–	(205)	7,953	8,873
IT Equipment	16,840	12,382	–	(522)	15,912	44,612
Leased Assets	6,608	–	–		–	6,608
Total Cost	50,930	28,145	(6,583)	(4,152)	206,920	275,260

Accumulated Depreciation 2010/11
Asset Class	Balance 1 July $000	Depreciation $000	Revaluations/ Impairments $000	Disposals $000	Transfers* $000	Balance 30 June $000
Land	–	–	–	–	–	–
Buildings	169	1,019	(4,410)	–	8,307	5,085
Leasehold Improvements	7,518	1,588	–	(3,111)	1,532	7,527
Antiques and Works of Art	–	–	–	–	–	–
Furniture and Fittings	575	293	–	(118)	6,633	7,383
General Collections	–	718	–	–	13,046	13,764
Schools Collection	–	454	–	–	8,872	9,326
Office Equipment	756	210	–	(49)	3,899	4,816
Motor Vehicles	2,047	1,042	–	(41)	428	3,476
Plant and Equipment	698	170	–	(3)	3,561	4,426
IT Equipment	10,010	4,110	–	(393)	10,708	24,435
Leased Assets	771	1,322	–	–	–	2,093
Total Accumulated Depreciation	22,544	10,926	(4,410)	(3,715)	56,987	82,331

* Transfers include transfers made to Non-Departmental accounts and transfers between Government Departments.

Cost 2009/10
Asset Class	Balance 1 July $000	Additions $000	Revaluations/ Impairments $000	Disposals $000	Transfers* $000	Balance 30 June $000
Land	5,350	–	(723)	–	(977)	3,650
Buildings	3,397	–	(18)	–	(407)	2,972
Leasehold Improvements	10,060	868	–	(123)	110	10,915
Antiques and Works of Art	456	–	–	–	–	456
Furniture and Fittings	639	175	–	(31)	200	983
General Collections	–	–	–	–	–	–
School Collections	–	–	–	–	–	–
Office Equipment	1,198	74	–	(262)	46	1,056
Motor Vehicles	6,628	629	–	(693)	–	6,564
Plant and Equipment	1,028	11	–	(153)	–	886
IT Equipment	11,094	3,833	–	(785)	2,698	16,840
Leased Assets	6,608	–	–	–	–	6,608
Total cost	46,458	5,590	(741)	(2,047)	1,670	50,930

Accumulated Depreciation 2009/10
Asset Class	Balance 1 July $000	Depreciation $000	Revaluations/ Impairments $000	Disposals $000	Transfers* $000	Balance 30 June $000
Land	–	–	–	–	–	–
Buildings	98	97	–	–	(26)	169
Leasehold Improvements	5,328	2,313	–	(123)	–	7,518
Antiques and Works of Art	–	–	–	–	–	–
Furniture and Fittings	420	94	–	(23)	84	575
General Collections	–	–	–	–	–	–
School Collections	–	–	–	–	–	–
Office Equipment	840	168	–	(262)	10	756
Motor Vehicles	1,419	1,044	–	(416)	–	2,047
Plant and Equipment	745	106	–	(153)	–	698
IT Equipment	7,037	2,462	–	(239)	750	10,010
Leased Assets	–	771	–	–	–	771
Total Accumulated Depreciation	15,887	7,055	–	(1,216)	818	22,544

* Transfers include transfers made to Non-Departmental accounts and transfers between Government Departments.

Summary of Property, Plant and Equipment
2009/10			Asset Class	2010/11
Cost of Valuation $000	Accumulated Depreciation $000	Carrying Value $000	Asset Class	Cost or Valuation $000	Accumulated Depreciation $000	Carrying Value $000
3,650	–	3,650	Land	53,025	–	53,025
2,972	169	2,803	Buildings	84,157	5,085	79,072
10,915	7,518	3,397	Lease Improvements	12,776	7,527	5,249
456	–	456	Antiques and Works of Art	1,186	–	1,186
983	575	408	Furniture and Fittings	12,495	7,383	5,112
–	–	–	General Collections	26,378	13,764	12,614
–	–	–	School Collections	12,290	9,326	2,964
1,056	756	300	Office Equipment	5,355	4,816	539
6,564	2,047	4,517	Motor Vehicles	7,505	3,476	4,029
886	698	188	Plant and Equipment	8,873	4,426	4,447
16,840	10,010	6,830	IT Equipment	44,612	24,435	20,177
6,608	771	5,837	Leased Assets	6,608	2,093	4,515
50,930	22,544	28,386	Total Property, Plant and Equipment	275,260	82,331	192,929

Leased Assets

The net carrying amount of the leased assets (Passport Printers) held under finance lease is $4.515 m (2009/10: $5.837 m).

Capital Work in Progress

The total amount of property, plant and equipment in the course of construction is $17.254 m (2009/10: $0.014 m).

Revaluation Movement

Details of valuations and revaluation movements are contained in note 20.

Impairment Losses

Adjustments have been made within the accounts for all potential impairment losses resulting from the 2010/11 Canterbury earthquakes. While damages have not as yet been fully quantified damages are not expected to materially affect the current residual value of the Department’s assets.

There were no impairment losses in 2009/10.

Restrictions of Title

There are no restrictions over the title of the Department’s Property, Plant and Equipment and no Property, Plant and Equipment assets are pledged as security for liabilities.

Non-Current Property, Plant and Equipment Held for Sale

A Department owned building has been classified as current Property, Plant and Equipment held for sale following the approval to sell the premises, as it will provide no future use to the Department. The completion date of the sale is expected by October 2011.

12. Intangible Assets

Intangible Assets 2010/11
ASSET CLASS	BALANCE 1 JULY $000	ADDITIONS/ DEPRECIATION $000	RECLASSED $000	DISPOSALS $000	TRANSFERS $000	BALANCE 30 JUNE $000
Cost
Computer Software	87,716	7,342	–	(1,704)	26,401	119,755
Less Accumulated Depreciation
Computer Software	34,378	12,189	–	(1,452)	14,667	59,782
Net Book Value	53,338	(4,847)	–	(252)	11,734	59,973

Intangible Assets 2009/10
ASSET CLASS	BALANCE 1 JULY $000	ADDITIONS/ DEPRECIATION $000	RECLASSED $000	DISPOSALS $000	TRANSFERS $000	BALANCE 30 JUNE $000
Cost
Computer Software	53,797	17,381	1,278	(125)	15,385	87,716
Less Accumulated Depreciation
Computer Software	22,443	8,777	–	(125)	3,283	34,378
Net Book Value	31,354	8,604	1,278	–	12,102	53,338

Capital Work in Progress

The total amount of intangibles in the course of construction is $20.734 m (2009/10: $18.926 m).

Impairment Losses

There were no impairment losses (2009/10: $Nil).

Restrictions of Title

There are no restrictions over the title of the Department’s intangible assets and no intangible assets are pledged as security for liabilities.

13. Accounts Payable

Accounts Payable
ACTUAL 2009/10 $000		ACTUAL 2010/11 $000
6,193	Accounts Payable	11,882
10,493	Accrued Expenses	12,300
2,214	Accrued Salaries	3,425
388	GST Payable	2,677
19,288	Total Accounts Payable	30,284

Accounts payable are non-interest bearing and are normally settled on 30 day terms; therefore the carrying value of account payables approximates their fair value.

14. Provisions

Provisions
LEASE MAKE GOOD $000	RESTRUC- TURING $000	OTHER $000	TOTAL $000		LEASE MAKE GOOD $000	RESTRUC- TURING $000	OTHER $000	TOTAL $000
ACTUAL 2009/10					ACTUAL 2010/11
–	–	1,166	1,166	Opening Provisions as at 1 July	320	–	1,280	1,600
320	–	471	791	Additional provisions made during the year	675	1,184	962	2,821
–	–	(338)	(338)	Charge against provision for the year	–	(263)	(189)	(452)
–	–	(19)	(19)	Unused provisions reversed	–	–	(501)	(501)
320	–	1,280	1,600	Closing Provisions as at 30 June	995	921	1,552	3,468

Lease Make Good Provision

In respect of a number of the Department’s leased properties, the Department is required at the expiry of the lease term to restore the properties to an agreed condition, repairing any damages to the properties and removing any fixtures and fittings installed by the Department.

Restructuring Provision

Provision has been made for one-off costs for the realignment of the National Library of New Zealand and Archives New Zealand’s services through the integration with the Department of Internal Affairs.

Other Provision

A staff development programme is the major component of the other provision.

15. Revenue Received in Advance

Revenue Received in Advance
ACTUAL 2009/10 $000		ACTUAL 2010/11 $000
3,250	Identity Products	3,183
2,120	Licensing Fees	2,034
–	Te Puna Subscriptions	329
–	Electronic Procurement in Collaboration (EPIC)	1,993
120	Other	602
5,490	Total Revenue Received in Advance	8,141

16. Employee Entitlements

Employee Entitlements
Current Entitlements
ACTUAL 2009/10 $000		ACTUAL 2010/11 $000
6,720	Annual Leave	9,185
239	Sick Leave	142
965	Long Service and Retirement Leave	779
7,924	Total Current Entitlements	10,106
Term Entitlements
1,124	Long Service and Retirement Leave	1,632
9,048	Total Entitlements	11,738

Long Service and Retirement Leave

The assessment was undertaken of the Long Service and Retirement Leave liability for each employee as at balance date. Actuarial services were provided by Mercer Human Resource Consulting Ltd and were prepared by Anna Whitmore, Fellow of the New Zealand Society of Actuaries.

The measurement of the retiring and long service leave obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. Two key assumptions used in calculating this liability include the discount rate and salary inflation factor. Any changes in these assumptions will affect the carrying value of the liability.

Long Service and Retirement Leave
Discount Rate
	2009/10	2010/11
Long Service Leave	4.45%	6.19%
Retiring Leave	3.33%	6.19%
Salary Inflation Factor
Salary Inflation Factor	3.50%	3.50%

17. Finance Leases

Finance Leases
Minimum Lease Payments Payable
ACTUAL 2009/10 $000		ACTUAL 2010/11 $000
1,589	Not later than one year	1,589
5,429	Later than one year and not later than five years	3,840
7,018	Total Minimum Lease Payments	5,429
(1,181)	Future Finance Charges	(913)
5,837	Total Present Value of Minimum Lease Payments	4,516
1,322	Not later than one year	1,322
4,515	Later than one year and not later than five years	3,194
5,837	Total Present Value of Minimum Lease Payments	4,516
Represented by:
1,322	Current	1,322
4,515	Non-Current	3,194
5,837	Total Present Value of Minimum Lease Payments	4,516

The Department has entered into a finance lease for the supply of specialist printing equipment required for printing passport books. The net carrying amount of the leased assets is shown within Property, Plant and Equipment.

There are no restrictions placed on the Department by the finance lease arrangement.

Finance lease liabilities are effectively secured as the rights to the leased assets revert to the lessor in the event of default. The effective interest rate used for this lease is 7.5 percent.

18. Provision for Repayment of Surplus

The Department is required to repay the surplus to the Crown by 31 October each year.

Provision for Repayment of Surplus
ACTUAL 2009/10 $000		ACTUAL 2010/11 $000
7,756	Total Comprehensive Income	8,716
–	Add Revaluation Loss/(Gain)	2,173
21	Less/Add Unrealised Foreign Exchange (Gains)/Loss	(29)
–	Add Repayment of Other Expenses from Recovery from February 2011 Christchurch Earthquake	896
–	Add Repayment of National Library of New Zealand Net Surplus as at 31/1/11	4,837
–	Add Repayment Net Surplus from Archives New Zealand*	7
7,777	Total Current Entitlements	16,600

* The net surplus from the National Library of $4.837 m and the net surplus from Archives New Zealand of $0.007 m for the seven months ended 31 January 2011 were not repaid to/from Treasury but were transferred into the Department of Internal Affairs Taxpayers’ Funds. These funds are due for repayment to the Crown by 31 October.

19. Reconciliation between Total Operating Expenses and Total Appropriations

The financial information shown for each output expense on the Statement of Service Performance and in the Statement of Departmental Appropriations and Expenditure includes revenue earned from other business units within the Department. The intra-entity charging reported at output expense level has been eliminated from the other departmental financial statements.

Reconciliation between Total Operating Expenses and Total Appropriations
ACTUAL 2009/10 $000		ACTUAL 2010/11 $000
227,941	Total Operating Expenses in Statement of Comprehensive Income	278,385
–	Remeasurement of Long Service Leave	(143)
–	Other Expenses	(896)
586	Intra-entity Expenditure	–
228,527	Total Appropriations in Statement of Departmental Appropriations and Expenditure	277,346

20. Revaluation Reserve

Revaluation Reserve
LAND $000	BUILDINGS $000	ANTIQUES AND ART $000	TOTAL $000		LAND $000	BUILDINGS $000	ANTIQUES AND ART $000	TOTAL $000
ACTUAL 2009/10					ACTUAL 2010/11
2,167	48	234	2,449	Opening Revaluation Reserves as at 1 July	1,444	30	234	1,708
–	–	–	–	Transfers from Other Government Departments	14,392	14,323	228	28,943
(723)	(18)	–	(741)	Revaluation Movement	(1,162)	(1,334)	323	(2,173)
1,444	30	234	1,708	Closing Revaluation Reserves as at 30 June	14,674	13,019	785	28,478

Land and Buildings

Ministerial Properties and Department Accommodation

Darroch Ltd, a Licensed Real Estate Agent (REAA 2008), registered independent valuer, conducted a valuation of Ministerial Properties land and buildings for the Department in May 2011 with valuations effective 30 June 2011.

The 2009/10 revaluation movement is a result of the transfer of one Ministerial Property from the Department to Non-Department, and the sale of a Ministerial Property ($0.938 m).

Antiques and Works of Art

A valuation of antiques and works of art was undertaken by Dunbar Sloane Ltd, an independent expert, in June 2011 with valuations effective 30 June 2011.

21. Capital Contributions

Capital Contributions
ACTUAL 2009/10 $000		ACTUAL 2010/11 $000
6,000	Passport System Redevelopment	–
4,443	Government Technology Services	–
2,400	Backup Emergency Operations Facilities	–
12,843	Total Capital Contributions	–

The Department of Internal Affairs is a government department and wholly owned and controlled by the Crown. The Department undertakes a number of trading activities with the Crown, other government departments, Crown entities and state-owned enterprises who are related parties as they are similarly related to the Crown.

Where there are close family members of key management personnel employed by the Department, the terms and conditions of the employment arrangements are no more favourable than the Department would have adopted if there were no relationship to key management personnel.

All material transactions are on an arm’s length basis, with the interests of each party being completely independent.

Significant Transactions with Government-related Entities

In conducting its activities the Department is required to pay various taxes and levies (such as GST, PAYE, FBT and ACC levies) to the Crown and entities related to the Crown. The payment of these taxes and levies, other than income tax, is based on standard terms and conditions that apply to all tax and levy payers. The Department is exempt from Income Tax.

The Department also purchases goods and services from entities controlled, significantly influenced, or jointly controlled by the Crown. Purchases from these Government-related entities are set out in the table below:

Department purchases from entities controlled, significantly influenced, or jointly controlled by the Crown
ACTUAL 2009/10 $000		ACTUAL 2010/11 $000
1,789	Air New Zealand	2,353
795	New Zealand Post	1,036
2	Meridian Energy	22
14	Genesis Energy	–
2,600	Total Government-Related Transactions	3,411

The Department also receives third party revenue from administering the Lottery Grants Board grants. See note 2.

Key Management Personnel Compensation

Key Management Personnel Compensation
ACTUAL 2009/10 $000		ACTUAL 2010/11 $000
2,579	Salaries and Other Short-term Employee Benefits	2,345
89	Post-employment Benefits	–
35	Other Long-term Benefits	5
–	Termination Benefits	126
2,703	Total Key Management Personnel Compensation	2,476

Key management personnel included thirteen members during 2010/11 as the Executive Leadership Team transitioned from ten members, pre 1 February, to seven members post 1 February. These numbers include the Chief Executive.

Key management personnel compensation excludes the remuneration and other benefits of the Responsible Ministers for the Department, namely, Hon Nathan Guy, Rt Hon John Key, Hon Pansy Wong, Hon Tariana Turia, Hon Rodney Hide, Hon Craig Foss, Hon Hekia Parata and Hon John Carter. The Ministers’ remuneration and other benefits are not received for their role as a member of key management personnel of the Department. The Ministers’ remuneration and other benefits are set out by the remuneration authority under the Civil List Act 1979 and are paid under Permanent Legislative Authority.

23. Financial Instrument Risks

The Department is party to financial instrument arrangements as part of its daily operations. These include cash and cash equivalents, accounts receivable, accounts payable and provisions, accrued expenses, term accrued expenses and foreign currency forward contracts.

The Department’s activities expose it to a variety of financial instrument risks, including market risk, credit risk and liquidity risk. The Department has a series of policies to manage the risks associated with financial instruments and seeks to minimise exposure from financial instruments. These policies do not allow any transactions that are speculative in nature to be entered into.

Market Risk

Currency Risk

Currency risk is the risk that accounts receivable and accounts payable due in foreign currency will fluctuate because of changes in foreign exchange rates. Foreign exchange forward contracts are used to manage foreign exchange exposures. For more details see note 10.

The Department maintains bank accounts denominated in foreign currencies. Balances are regularly cleared to minimise exposure risk.

Sensitivity Analysis

The following table shows the impact on the Department as at balance date, if the New Zealand dollar had weakened or strengthened by 5 percent against the currencies in which the Department has denominated derivative financial instruments.

Sensitivity Analysis
Sensitivity	NET SURPLUS IMPACT FROM FX MOVEMENT IN $NZD 000
Sensitivity	Total $000	AUD $000	GBP $000	USD $000
2010/11
5% Lower (New Zealand dollar weakened)	(289)	(182)	(21)	(86)
5% Higher (New Zealand dollar strengthened)	262	165	19	78
2009/10
5% Lower (New Zealand dollar weakened)	(120)	(106)	(14)	–
5% Higher (New Zealand dollar strengthened)	108	96	12	–

Interest Rate Risk

Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. This could impact on the return on investment or the cost of borrowing.

Under Section 46 of the Public Finance Act 1989, the Department cannot raise a loan without approval of the Minister of Finance. Equipment leases are identified as finance leases in accordance with NZ IAS 17 Leases. The Department has received the approval of the Minister of Finance for this lease. The fixed interest rate on the term of these leases reduces the exposure on borrowed funds.

Credit Risk

Credit risk is the risk that a third party will default on its obligations to the Department, causing the Department to incur a loss.

Financial instruments, which potentially subject the Department to credit risk, consist of cash and bank balances and trade receivables.

The Department banks with Treasury approved financial institutions.

The Department holds cash with Westpac Banking Corporation (Westpac). Westpac is part of the Crown Retail Deposit Guarantee Scheme and so all deposits up to $1.000 m held with Westpac are guaranteed by the Crown.

Credit evaluations are undertaken on customers requiring credit. Collateral or other security is not generally required to support financial instruments with credit risk. Other than cash and bank balances and trade receivables, the Department does not have any significant credit risk.

Maximum Exposures to Credit Risk
ACTUAL 2009/10 $000		ACTUAL 2010/11 $000
42,843	Cash and Cash Equivalents	51,721
3,592	Accounts Receivable	25,271
46,435	Total Exposure to Credit Risk	76,992

Cash and cash equivalents excludes any cash physically held including as petty cash as cash is not exposed to credit risk.

Liquidity Risk

Liquidity risk is the risk that the Department will encounter difficulty raising liquid funds to meet commitments as they fall due.

In meeting its liquidity requirements, the Department closely monitors its forecast cash requirements with expected draw downs from the New Zealand Debt Management Office. The Department maintains a target level of available cash to meet liquidity requirements.

The table below analyses the Department’s financial liabilities that will be settled based on the remaining period at balance date to the contractual maturity date. The amounts disclosed are the contractual undiscounted cash flows.

Liquidity Risk
2010/11
	TOTAL	LESS THAN 6 MONTHS	BETWEEN 6 MONTHS AND 1 YEAR	BETWEEN 1 YEAR AND 5 YEARS	OVER 5 YEARS
Accounts Payable	30,284	30,284	–	–	–
Derivative Financial Instruments – Assets	15	15	–	–	–
Derivative Financial Instruments – Liabilities	81	81	–	–	–
2009/10
Accounts Payable	19,288	19,288	–	–	–
Derivative Financial Instruments – Liabilities	21	21	–	–	–

24. Categories of Financial Instruments

The carrying amounts of financial assets and financial liabilities in each of the NZ IAS 39 categories are as follows:

Carrying amounts of financial assets and financial liabilities in each of the NZ IAS 39 categories
Loans and receivables
ACTUAL 2009/10 $000		ACTUAL 2010/11 $000
42,843	Cash and Cash Equivalents	51,721
3,592	Accounts Receivable	25,271
46,435	Total Loans and Receivables	76,992
Fair Value Through Profit and Loss
21	Derivative Financial Instrument Liabilities	(81)
–	Derivative Financial Instrument Assets	15
21	Total Fair Value Through Profit and Loss	(66)
Financial Liabilities Measured at Amortised Cost
19,288	Accounts Payable	30,284

25. Fair Value Hierarchy Disclosures

For those financial instruments recognised at fair value in the Statement of Financial Position, fair values are determined using the following hierarchy:

Level 1 – Quoted market price – financial instruments with quoted prices for identical instruments in active markets.
Level 2 – Valuation technique using observable inputs – financial instruments with quoted prices for similar instruments in active markets or quoted prices for identical instruments in inactive markets and financial instruments valued using models where all significant inputs are observable.
Level 3 – Valuation techniques with significant non-observable inputs – financial instruments valued using models where one or more significant inputs are not observable.

The following table analyses the basis of the valuation of classes of instruments measured at fair value in the Statement of Financial Position.

Basis of the valuation of classes of instruments measured at fair value in the Statement of Financial Position
	TOTAL $000	QUOTED MARKET PRICE $000	OBSERVABLE INPUTS $000	SIGNIFICANT NON-OBSERVABLE INPUTS $000
	VALUATION TECHNIQUE
2010/11
Financial Assets
Foreign Exchange Derivatives	15	–	15	–
Financial Liabilities
Foreign Exchange Derivatives	81	–	81	–
2009/10
Financial Assets
Foreign Exchange Derivatives	–	–	–	–
Financial Liabilities
Foreign Exchange Derivatives	21	–	21	–

There were no transfers between the different levels of the fair value hierarchy.

26. Capital Management

The Department’s capital is its taxpayers’ funds, which comprise general funds and revaluation reserves. Equity is represented by net assets.

The Department manages its revenues, expenses, assets, liabilities and general financial dealings prudently. The Department’s taxpayers’ funds are largely managed by a by-product of managing income, expenses, assets, liabilities and compliance with the Government Budget processes and with Treasury instructions.

The objective of managing the Department’s taxpayers’ funds is to ensure the Department effectively achieves its goals and objectives for which it has been established, while remaining a going concern.

27. Explanation of Significant Variances against Budget

Statement of Comprehensive Income

Variance between the Main Estimates and the Supplementary Estimates

The changes in the budgets between the Main Estimates and the Supplementary Estimates, together with explanations for the significant variances between actual expenditure and the Supplementary Estimates, are detailed, by output expense, in the revenue and output expense section.

The primary factors contributing to the overall increase in the revenue and expense budgets between the Main Estimates and the Supplementary Estimates of $59.693 m include:

Primary factors contributing to the overall increase in the revenue and expense budgets between the Main Estimates and the Supplementary Estimates of $59.693 m
REASON FOR BUDGET CHANGE	$000
Expense transfers from 2009/10 to 2010/11	3,536
Expense transfers from 2010/11 to 2011/12	(3,265)
Transfer of funding from Vote National Archives and Vote National Library	45,683
New funding in 2010/11	12,285
Decreased demand for passport and citizenship products	(1,500)
Increased demand for information technology services	1,135
Other changes	1,819
Total Budget Change	59,693

Variance between Actual 2010/11 and the Supplementary Estimates

Actual expenditure was 7 percent lower than the Supplementary Estimates. The overall under-expenditure of $21.199 m is primarily attributable to the following factors:

in principle expense transfers ($9.471 m), which represent delayed expenditure in a number of work programmes, including the Building a Library for the 21st Century project, Aotearoa People’s Network Kaharoa, the Get Ready, Get Thru Public Education Programme and the work programmes of the Royal Commissions of Inquiry on the Pike River Mine Tragedy and the Building Failure Caused by the Canterbury Earthquakes
under-expenditure in third party funded activities ($8.483 m) reflecting reduced demand in some areas, e.g. Electronic Procurement in Collaboration, VIP transport and Language Line, together with savings in other areas, primarily identity products and gaming regulations, mainly due to efficiencies and delayed expenditure on projects
lower levels of expenditure on Crown funded activities across the Department ($1.040 m) primarily due to the impact of vacancies, lower travel costs and unutilised legal costs, together with efficiency savings from productivity initiatives
lower level of write-off of assets damaged by the Canterbury earthquakes than anticipated ($2.204 m).

The changes between the Supplementary Estimates and actual expenditure are further detailed by output expenses in the Statement of Service Performance.

Statement of Financial Position

The primary factors contributing to the increase in general funds between the Main Estimates and the Supplementary Estimates of $166.669 m include:

Primary factors contributing to the increase in general funds between the Main Estimates and the Supplementary Estimates of $166.669 m
REASON FOR BUDGET CHANGE	$000
1 July 2010 used in the Main Estimates, which assumed the drawdown of additional capital injections in 2009/10	(1,313)
An increase in capital contributions in 2010/11	24,664
Transfer of general funds from Vote National Archives and Vote National Library	153,607
Forecast net deficit for 2010/11	(10,541)
Prior period adjustment for restatement of Vote National Library assets	318
Other changes	(66)
Total Budget Change	166,669

28. Significant Events after Balance Date

On 1 August 2011, Cabinet decided to disestablish the Charities Commission and transfer its functions to the Department. It is anticipated that this transfer will take effect from 1 July 2012, subject to the progress of legislation. An estimate of the costs of the integration with the Commission and the transfer of its functions to the Department cannot be made at this time.

There were no other significant events after the balance date that would have led to an amended view of the values of assets or liabilities at the date of the balance sheet.

The Department of Internal Affairs

Te Tari Taiwhenua

Building a safe, prosperous and respected nation

Part C: Financial Statements – Departmental

On this page

Comprehensive Income

Financial Position

Movements in Taxpayers’ Funds

Cash Flows

Net Surplus to Net Cash Flow from Operating Activities

Commitments

Capital Commitments

Non-Cancellable Lease Commitments

Non-Cancellable Contracts for Goods and Services

Contingent Assets and Liabilities

Statement of Contingent Assets and Liabilities as at 30 June

Unquantified Contingent Liabilities

Unquantified Contingent Assets

Unappropriated Expenditure

Statement of Unappropriated Expenditure and Capital Expenditure for the year ended 30 June

Memorandum Accounts

Actions Taken to Address Surpluses and Deficits

New Zealand Gazette (Established 30 June 2002)

Use of Facilities and Access to Lake Taupo by Boat Users (Established 30 June 2002)

Passport Products (Established 30 June 2002)

Citizenship Products (Established 30 June 2002)

Marriage Products (Established 30 June 2002)

Births, Deaths and Marriages Certificates, and Other Products (Established 30 June 2002)

Administration of Non-casino Gaming (Established 30 June 2002)

Kotui Library Services (Established 30 January 2011)

Infrastructure as a Service (IaaS) (Established 1 January 2011)

Departmental Appropriations and Expenditure

Notes to the Financial StatementsNotes to the Financial Statements for the year ended 30 June

1. Statement of Accounting Policies

Reporting Entity

Transfer of Assets from other Government Departments

Transfer of Other Functions from Other Government Departments

Reporting Period

Basis of Preparation

Statement of Compliance

Budget Figures

Changes in Accounting Policies

Comparatives

Critical Accounting Judgements and Estimates

Long Service, Sick and Retirement Leave

Finance Leases

Effects from Accounting Standard Adoption

Standards, Amendments, and Interpretations Issued that are not yet Effective and have not been Early Adopted

Functional and Presentation Currency

Significant Accounting Policies

Revenue

Revenue Crown

Third Party Revenue

Donated or Subsidised Assets

Revenue Received in Advance

Expenses

Statement of Cost Accounting Policies

Criteria for Direct and Indirect Costs

Cost Allocation Policy

Method of Assigning Costs to Outputs

Cash and Cash Equivalents

Accounts Receivable

Provision for Doubtful Debts

Inventories

Accounting for Derivative Financial Instruments, Hedging Activities and Foreign Currency Transactions

Property, Plant and Equipment

Additions

Disposals

Impairment

Revaluations

Specific Asset Class Policies

Land and Buildings

Collections

Other Property, Plant and Equipment

Depreciation

Intangible Assets

Additions

Disposal

Impairment

Amortisation