Corporate Publications Statements of Intent Annual Reports

Resource material › Corporate Publications › Annual Report 2013-14Pūrongo ā Tau

Part C: Financial Statements – Departmental

Comprehensive Income

Statement of Comprehensive Income for the year ended 30 June 2014
Income
ACTUAL 2013 $000		NOTE	ACTUAL 2014 $000	MAIN EST 2014 $000	SUPP EST 2014 $000
213,125	Crown		221,498	205,797	221,499
157,949	Other Revenue	2	161,341	180,370	162,480
371,074	Total Income		382,839	386,167	383,979
Expenditure
180,245	Personnel Costs	3	197,295	186,619	196,121
33,243	Depreciation and Amortisation Expense	11,12	34,929	33,404	33,423
21,466	Capital Charge	6	21,935	22,362	23,344
277	Finance Costs	5	267	264	264
131,619	Other Operating Expenses	4	143,842	151,388	161,071
1,080	Loss on Sale of Property, Plant and Equipment		–	–	–
367,930	Total Expenditure		398,268	394,037	414,223

3,144	Net Surplus/(Deficit)		(15,429)	(7,870)	(30,244)

Other Comprehensive Income
12,192	Revaluation Gains (Loss)	19	–	–	–
15,336	Total Comprehensive Income		(15,429)	(7,870)	(30,244)

Explanations of significant variances against budget are detailed in note 26.

The accompanying notes form part of these financial statements.

Financial Position

Statement of Financial Position as at 30 June 2014
Assets
ACTUAL 2013 $000		NOTE	ACTUAL 2014 $000	MAIN EST 2014 $000	SUPP EST 2014 $000
Current Assets
50,858	Cash and Cash Equivalents	7	37,428	21,536	13,403
17,346	Debtors and Other Receivables	8	23,808	16,492	16,771
1,673	Inventories	9	1,701	1,497	1,650
5,447	Prepayments		4,108	3,943	4,943
75,324	Total Current Assets		67,045	43,468	36,767
Non-Current Assets
213,588	Property, Plant and Equipment	11	204,032	218,906	210,177
69,922	Intangible Assets	12	68,387	79,921	72,711
283,510	Total Non-Current Assets		272,419	298,827	282,888
358,834	Total Assets		339,464	342,295	319,655
Liabilities and Taxpayers’ Funds
Current Liabilities
33,642	Creditors and Other Payables	13	36,574	27,685	28,635
3,721	Provisions	14	4,972	4,115	4,115
7,389	Revenue Received in Advance	15	8,672	8,500	8,500
10,092	Employee Entitlements	16	10,281	14,348	14,548
1,322	Finance Leases	17	551	549	549
6,103	Provision for Repayment of Surplus	18	5,366	–	–
62,269	Total Current Liabilities		66,416	55,197	56,347
Non-Current Liabilities
210	Provisions	14	210	–	–
1,874	Employee Entitlements	16	1,937	1,728	1,878
551	Finance Leases	17	–	–	–
2,635	Total Non-Current Liabilities		2,147	1,728	1,878
64,904	Total Liabilities		68,563	56,925	58,225

293,930	Net Assets		270,901	285,370	261,430

Equity
235,667	Taxpayer’s Funds	19	233,445	257,732	222,727
19,560	Memorandum Accounts	19	(1,235)	–	–
38,703	Revaluation Reserves	19	38,691	27,638	38,703
293,930	Total Equity		270,901	285,370	261,430

Explanation of significant variances against budget are detailed in note 26.

The accompanying notes form part of these financial statements.

Changes in Equity

Statement of Changes in Equity for the year ended 30 June 2014
Transfers of General Funds and Revaluation Reserves between Government Entities
ACTUAL 2013 $000		NOTE	ACTUAL 2014 $000	MAIN EST 2014 $000	SUPP EST 2014 $000
3,144	Surplus/(deficit) for the year		(15,429)	(7,870)	(30,244)
12,192	Other Comprehensive Income		–	–	–
15,336	Total Comprehensive Income		(15,429)	(7,870)	(30,244)
–	Capital Injections	20	413	383	413
(15,000)	Capital Withdrawals	20		–	(2,669)
(6,103)	Provision for Payment of Surplus	18	(5,366)	–	–
2,199	Charities Commission		–	–	–
–	Department of the Prime Minister and Cabinet		(2,635)	–	–
(200)	Parliamentary Services		–	–	–
–	Ministry of Justice		(12)	–	–
1,999	Total Transfers of General Funds and Revaluation Reserves between Government Departments		(2,647)	–	–
(3,768)	Movement in Equity for the year		(23,029)	(7,487)	(32,500)
297,698	Add Equity as at 1 July		293,930	292,857	293,930
293,930	Equity as at 30 June		270,901	285,370	261,430

Explanation of significant variances against budget are detailed in note 26.

The accompanying notes form part of these financial statements.

Cash Flows

Statement of Cash Flows for the year ended 30 June 2014
Cash Flows from Operating Activities
ACTUAL 2013 $000		NOTE	ACTUAL 2014 $000	MAIN EST 2014 $000	SUPP EST 2014 $000
Cash was Provided from:
213,125	Supply of Outputs to the Crown		221,498	205,797	221,499
155,045	Supply of Outputs to Third Parties		156,162	180,257	162,760
585	Goods and Services Tax (Net)		–	–	–
368,755			377,660	386,054	384,259
Cash was Disbursed to:
(318,667)	Suppliers and Employees		(324,894)	(339,660)	(356,913)
(21,466)	Capital Charge	6	(21,935)	(22,362)	(23,344)
–	Goods and Services Tax (Net)		(254)	–	(681)
(340,133)			(347,083)	(362,022)	(380,938)
28,622	Net Cash Flows from Operating Activities		30,577	24,032	3,321
Cash Flows from Investing Activities
Cash was Provided from:
3,123	Sale of Property, Plant and Equipment Held for Sale		–	–	–
548	Sale of Property, Plant and Equipment		174	910	910
3,671			174	910	910
Cash was Disbursed to:
(12,078)	Purchase of Property, Plant and Equipment		(6,417)	(22,095)	(13,584)
(18,537)	Purchase of Intangibles		(29,523)	(22,596)	(21,776)
(30,615)			(35,940)	(44,691)	(35,360)
(26,944)	Net Cash Flows from Investing Activities		(35,766)	(43,781)	(34,450)
Cash Flows from Financing Activities
Cash was Provided from:
–	Capital Contribution	19,20	413	383	413
1,545	Transfers from Government Entities		–	–	–
1,545			413	383	413
Cash was Disbursed to:
(15,000)	Capital Withdrawal	19,20	–	–	–
–	Transfers to Government Departments		(962)	–	(637)
(10,317)	Repayment of Net Surplus		(6,103)	–	(6,103)
–	Payment of Finance Leases		(1,589)	–	–
(25,317)			(8,654)	–	(6,740)
(23,772)	Net Cash Flows from Financing Activities		(8,241)	383	(6,327)
Movement in Cash
72,952	Opening Cash and Cash Equivalents		50,858	40,902	50,859
(22,094)	Add Net Increase/(Decrease) in Cash Held		(13,430)	(19,366)	(37,456)
50,858	Closing Cash and Cash Equivalents	7	37,428	21,536	13,403

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 2014
Add/(Deduct) Non-Cash Items
ACTUAL 2013 $000		NOTE	ACTUAL 2014 $000	MAIN EST 2014 $000	SUPP EST 2014 $000
15,336	Total Comprehensive income		(15,429)	(7,870)	(30,244)
33,243	Depreciation and Amortisation		34,929	33,404	33,423
(12,192)	Asset Revaluation Loss/(Gain)		–	–	–
–	Non-cash Personnel Costs associated with Transfer to Government Departments		339	–	–
–	Impairment of Intangible Assets		2,515	–	–
–	Loss on write off of Assets		4,518	–	–
10	Interest Unwind on Leased Premises		267	–	–
21,061			42,568	33,404	33,423
Add/(Deduct) Items Classified as Investing Activities
1,080	Loss/(Gain) on Sale of Property, Plant and Equipment		–	(382)	(382)
1,080			–	(382)	(382)
Add/(Deduct) Movements in Working Capital Items
(1,798)	(Increase)/Decrease in Debtors and Other Receivables		(6,462)	269	1,166
(1,759)	(Increase)/Decrease in Other Current Assets		1,311	47	23
(3,280)	Increase/(Decrease) in Creditors and Other Payables		6,059	(400)	313
(798)	Increase/(Decrease) in Other Current Liabilities		2,467	(1,036)	(978)
(1,220)	Increase/(Decrease) in Non-Current Liabilities		63	–	–
(8,855)			3,438	(1,120)	524
28,622	Net Cash Flows From Operating Activities		30,577	24,032	3,321

The accompanying notes form part of these financial statements.

Commitments

Statement of Commitments as at 30 June 2014
Capital Commitments
ACTUAL 2013 $000		ACTUAL 2014 $000
Capital Contracts for Goods and Services
249	Less than one year	9,322
–	One to two years	–
–	Two to five years	–
249	Total Capital Contracts for Goods and Services	9,322
249	Total Capital Commitments	9,322
Operating Commitments
Non-Cancellable Leases
10,933	Less than one year	11,677
8,125	One to two years	11,174
16,812	Two to five years	15,076
12,226	Over five years	10,657
48,096	Total Operating Commitments	48,584

48,345	Total Commitments	57,906

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 and office equipment. The non-cancellable leasing period for these leases varies.

The accompanying notes form part of these financial statements.

Contingent Assets and Liabilities

Statement of Contingent Assets and Liabilities as at 30 June 2014

Quantifiable Contingent Assets
ACTUAL 2013 $000		ACTUAL 2014 $000
3,309	Insurance Recoveries from Canterbury Earthquakes	–
3,309	Total Contingent Assets	–

The Department has no quantifiable contingent assets as at 30 June 2014. In 2013 these related to business interruption and material damage insurance claims due to the Department following the 2010/11 Canterbury earthquakes.

Non-quantifiable Contingent Assets

As at 30 June 2014, the Department had one non-quantifiable contingent asset relating to an insurance claim for building damage as a consequence of the 2010/11 Canterbury earthquakes.

As at 30 June 2013 the Department had one non-quantifiable contingent asset relating to yet to be quantified insurance recoveries as a consequence of the 2010/11 Canterbury earthquakes.

Quantifiable Contingent Liabilities

There were no quantifiable contingent liabilities as at 30 June 2014 (2013: Nil).

Non-quantifiable Contingent Liabilities

There were no non-quantifiable contingent liabilities as at 30 June 2014 (2013: Nil).

The accompanying notes form part of these financial statements.

Unappropriated Expenditure

Statement of Unappropriated Expenditure and Capital Expenditure for the year ended 30 June 2014

There was no unappropriated expenditure for the year ended 30 June 2014. (2013: $Nil)

Statement of Departmental Expenditure and Capital Appropriations for the year ended 30 June 2014
Appropriations for Output Expenses
EXPEND- ITURE AFTER REMEAS- UREMENT 2013 $000		EXPEND- ITURE BEFORE REMEAS- UREMENT 2014 $000	REMEASURE- MENT 2014 $000	EXPEND- ITURE AFTER REMEAS- UREMENT 2014 $000	APPROP- RIATION VOTED 2014* $000
Vote Internal Affairs
Multi-Class Output Appropriation: Civic Information Services
127,064	Managing and Accessing Identity Information	139,749	(3)	139,746	150,130
87,440	Managing and Accessing Knowledge Information	96,688	52	96,740	92,720
1,022	Publishing Civic Information	1,017	(2)	1,015	1,018
215,526	Total Civic Information Services	237,454	47	237,501	243,868
Multi-Class Output Appropriation: Community Information and Advisory Services
5,136	Advisory and Information Services to Ethnic Communities	5,536	(6)	5,530	5,490
123	Community Archives Support	69	–	69	115
5,688	Community Development and Engagement Advice	4,768	(1)	4,767	4,884
1,570	Community Information – Civil Defence Emergency Management	1,220	–	1,220	1,220
12,517	Total Community Information and Advisory Services	11,593	(7)	11,586	11,709
Multi-Class Output Appropriation: Emergency Management Services
3,721	Emergency Sector Support and Development	3,377	–	3,377	3,377
4,235	Management of National Emergency Management Readiness, Response and Recovery	3,196	–	3,196	3,196
7,956	Total Emergency Management Services	6,573	–	6,573	6,573
Multi-Class Output Appropriation: Information and Technology Services
6,639	Cross-Government Service Delivery and ICT Investment Proposals	13,505	(7)	13,498	15,786
13,768	Government Information and Technology Services	13,488	(36)	13,452	17,059
–	Government Chief Privacy Officer	262	–	262	463
20,407	Total Information and Technology Services	27,255	(43)	27,212	33,308
Multi-Class Output Appropriation: Ministerial Support Services
675	Crown Entity Monitoring	730	–	730	969
174	Ministerial Support Services – Community and Voluntary Sector	204	–	204	185
254	Ministerial Support Services – Emergency Management	240	–	240	240
97	Ministerial Support Services – Ethnic Affairs	96	–	96	87
326	Ministerial Support Services – Internal Affairs	405	–	405	420
352	Ministerial Support Services – Local Government	532	–	532	511
175	Ministerial Support Services – Ministerial Services	193	1	194	208
51	Ministerial Support Services – Racing	57	–	57	60
2,104	Total Ministerial Support Services	2,457	1	2,458	2,680
Multi-Class Output Appropriation: Policy Advice
1,041	Policy Advice – Community and Voluntary Sector	583	–	583	649
582	Policy Advice – Emergency Management	431	–	431	431
722	Policy Advice – Ethnic Affairs	745	–	745	782
4,046	Policy Advice – Internal Affairs	4,279	1	4,280	4,460
5,284	Policy Advice – Local Government	5,402	(7)	5,395	6,007
175	Policy Advice – Racing	169	–	169	196
11,850	Total Policy Advice	11,609	(6)	11,603	12,525
Multi-Class Output Appropriation: Regulatory Services
5,902	Charities Administration	6,350	(8)	6,342	6,348
30,732	Regulatory Services	33,682	(8)	33,674	34,096
36,634	Total Regulatory Services	40,032	(16)	40,016	40,444
Multi-Class Output Appropriation: Services Supporting the Executive
4,600	Coordination of Official Visits and Events	5,061	1	5,062	5,593
24,565	Support Services to Members of the Executive	25,986	(11)	25,975	25,868
7,684	VIP Transport Services	7,479	1	7,480	7,415
36,849	Total Services Supporting the Executive	38,526	(9)	38,517	38,876
Multi-Class Output Appropriation: Support to Statutory and Other Bodies
5,086	Commissions of Inquiry & Similar Bodies	2,032	(1)	2,031	2,359
70	Statutory and Advisory Body Support – National Archives	100	–	100	116
3	Statutory and Advisory Body Support – National Library	62	–	62	105
894	Statutory Body Support – Gambling Commission	835	–	835	1,158
1,190	Statutory Body Support – Local Government Commission	2,047	–	2,047	1,872
322	Support for Grant Funding Bodies – Community and Voluntary Sector	322	1	323	307
9,265	Support for Grant Funding Bodies – Internal Affairs	9,572	–	9,572	10,143
16,830	Total Support to Statutory and Other Bodies	14,970	–	14,970	16,060
Departmental Output Expenses
3,588	Administration of Grants	3,761	2	3,763	3,788
2,781	Local Government Services	2,361	3	2,364	2,572
888	Contestable Services	1,023	3	1,026	1,010
–	Film Archive Services	–	–	–	100
–	Machinery of Government Transition Costs	679	–	679	710
7,257	Total Departmental Output Expenses	7,824	8	7,832	8,180
367,930	Total Departmental Appropriations for Output Expenses	398,293	(25)	398,268	414,223
Appropriation for Capital Expenditure
24,756	Department of Internal Affairs	32,689	–	32,689	35,360
24,756	Total Department Appropriations for Capital Expenditure	32,689	–	32,689	35,360
392,686	Total Department Appropriations	421,982	(25)	430,957	449,583

* This includes adjustments made in the Supplementary Estimates and transfers under section 26A of the Public Finance Act

The accompanying notes form part of these financial statements.

Notes to the Financial Statements
for the year ended 30 June

1. Statement of Accounting Policies

Reporting Entity

The Department of Internal Affairs (the Department) is a government department as defined by Section 2 of the Public Finance Act 1989 and is domiciled in New Zealand.

The Department has also reported the Crown activities and trust money which it administers.

Transfer of Ministry of Civil Defence and Emergency Management functions

On 11 November 2013 Cabinet approved the transfer of the Ministry of Civil Defence and Emergency Management from the Department to the Department of Prime Minister and Cabinet (DPMC) from 1 April 2014. As a result of this decision the carrying values of related assets were transferred to DPMC on 1 April 2014.

Reporting Period

The reporting period for these financial statements is the year ended 30 June 2014. The financial statements were authorised for issue by the Chief Executive of the Department on 30 September 2014.

Basis of Preparation

Statement of Compliance

The financial statements of the Department have been prepared in accordance with the requirements of the Public Finance Act 1989, which include the requirement to comply with New Zealand generally accepted accounting practice (NZ GAAP), and Treasury Instructions.

These financial statements have been prepared in accordance with NZ GAAP as appropriate for public benefit entities and they comply with NZ IFRS.

Measurement Base

The financial statements have been prepared on an historical cost basis, modified by the revaluation of land and buildings, antiques and art, and derivative financial instruments to fair value.

Budget Figures

The budget figures are those presented in the Budget Estimates of Appropriation (Main Est) for the Department and also the Supplementary Estimates (Supp Est). The budgets also include other amendments made through the course of the Supplementary Estimates process.

Budgets are prepared consistently with NZ GAAP and accounting policies used in the financial statements.

Changes in Accounting Policies

There have been no changes in accounting policies during the financial year.

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 is 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 outlined below:

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 not adopted any new revisions to accounting standards during the financial year.

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 outlined below:

The Minister of Commerce has approved a new Accounting Standards Framework (incorporating a Tier Strategy) developed by the External Reporting Board (XRB). Under this Accounting Standards Framework, the Department is classified as a Tier 1 reporting entity and it will be required to apply full Public Benefit Entity Accounting Standards (PAS). These standards have been developed by the XRB based on current International Public Sector Accounting Standards. The effective date for the new standards for public sector entities is for reporting periods beginning on or after 1 July 2014. This means the Department will transition to the new standards in preparing its 30 June 2015 financial statements.

Due to the change in the Accounting Standards Framework for public benefit entities, it is expected that all new NZ IFRS and amendments to existing NZ IFRS will not be applicable to public benefit entities. Therefore, the XRB has effectively frozen the financial reporting requirements for public benefit entities up until the new Accounting Standard Framework is effective. Accordingly, no disclosure has been made about new or amended NZ IFRS that exclude public benefit entities from their scope.

The Department anticipates that these standards will have no material impact on the financial statements in the period of initial application. It is likely that the changes arising from this framework will affect the disclosures required in the financial statements. However, it is not practical to provide a reasonable estimate until a detailed review has been completed.

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).

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 particular accounting policies that have been applied are outlined below:

Revenue

Revenue is measured at the fair value of consideration received or receivable.

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 the 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 outputs based on cost drivers and related activity/usage information.

There were no changes in cost allocation policies since the last audited financial statements.

Method of Assigning Costs to Outputs

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

Direct charging of costs 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 2014, 80% of output costs were direct costs (2012/13: 80%).

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 2014, indirect costs accounted for 20% of the Department’s costs (2012/13: 20%).

Cash and Cash Equivalents

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

Debtors and Other Receivables

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 re-measured 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 $0.003m 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.

Under the Department’s Assets Grouping Policy plant and equipment that individually cost less than $0.003m and are acquired as a group purchase with a total cost in excess of $0.030m will be treated as a capital acquisition and capitalised as a fixed asset.

Work in progress is recognised at cost less impairment and is not depreciated.

In most instances, an item of property, plant and equipment is recognised at its cost. Where an asset is acquired at no cost, or for a nominal cost, it is recognised at fair value as at the date of acquisition.

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 property, plant 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. 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 asset class specific policies that have been applied are outlined below:

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, antiques, 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	30–90 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	5–50 Years
Plant and Equipment	5–60 Years
Furniture and Fittings	5–30 Years
Office Equipment	5–10 Years
Motor Vehicles	3–6 Years
IT Equipment	3–5 Years
Leased Assets	3 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 recognised 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:

ASSET CATEGORY	ASSET LIFE
Computer Software	3–8 Years
Births, Deaths and Marriages Historical Records Databases	10 Years
Digitised Collections	8–20 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 Entities

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.

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 finance charge is charged to the surplus or deficit over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Determining whether a lease agreement is a finance lease or an operating lease requires judgement as to whether the agreement transfers substantially all the risks and rewards of ownership to the Department. Judgement is required on various aspects that include, but are not limited to, the fair value of the leased asset, the economic life of the leased asset, whether or not to include renewal options in the lease term, and determining an appropriate discount rate to calculate the present value of the minimum lease payments. Classification as a finance lease means the asset is recognised in the statement of financial position as property, plant and equipment, whereas with an operating lease no such asset is recognised.

The Department has exercised its judgement on the appropriate classification of an equipment 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, taking into account the likelihood of staff reaching the point of entitlement.

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 as per note 16. The current portion is recognised as a current liability.

Defined Contribution Superannuation Schemes

Obligations for contributions to the State Sector Retirement Savings Scheme, Kiwi Saver 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.

Capital Charge

The capital charge is recognised as an expense in the period to which the charge relates.

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.

Equity

Equity is the Crown’s investment in the Department and is measured as the difference between total assets and total liabilities. Equity is disaggregated and classified as taxpayers’ funds, memorandum accounts and property revaluation reserves.

Memorandum Accounts

Memorandum accounts reflect the cumulative surplus/(deficit) on those departmental services provided that are intended to be fully cost recovered from third parties through fees, levies, or charges. The balance of each memorandum account is expected to trend toward zero over time.

Property Revaluation Reserve

These reserves relate to the revaluation of land and buildings and works of art and antiques to fair value.

Provisions

A provision is recognised for future expenditure of uncertain amount or timing when there is a present obligation (either legal or constructive) as a result of a past event, it is probable that an outflow of future economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are not recognised for future operating losses.

Provisions are measured at the present value of the expenditure to be required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as a finance cost.

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.

Commitments and contingencies are disclosed exclusive of GST.

Critical Accounting Estimates and Assumptions

In preparing these financial statements, estimates and assumptions have been made concerning the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

2. Other Revenue

Other Revenue
ACTUAL 2013 $000		ACTUAL 2014 $000	MAIN EST 2014 $000	SUPP EST 2014 $000
80,189	Passport Fees	77,548	87,328	79,312
13,065	Citizenship Fees	12,644	13,044	12,850
10,253	Birth, Death, Marriage and Civil Union Fees	10,496	10,387	10,260
17,098	Non-casino Gaming Licences and Fees	14,663	16,341	16,058
5,353	Casino Operators' Levies	4,992	5,242	5,242
7,053	VIP Transport	7,054	7,415	7,415
8,239	Recovery from New Zealand Lottery Grants Board	8,885	9,617	9,232
902	New Zealand Gazette	876	1,000	937
896	Translation Services	1,030	900	1,010
1,189	Language Line Interpreter Services	1,323	1,291	1,356
3,161	e-Government Development and Operations	859	7,195	2,912
2,660	Electronic Purchasing in Collaboration (EPIC)	2,413	2,691	2,411
1,323	Te Puna Catalogue and Interloan Library Services	1,322	3,974	1,336
1,195	Kotui Library Services	1,050	1,238	1,394
769	Charities Registrations	802	852	852
–	Result 10 Service Transformation	2,400	2,400	2,400
789	Authentications	1,361	895	928
–	Insurance Recoveries relating to Christchurch Earthquakes	6,019	–	–
3,815	Other Third Party Revenue	5,604	8,470	6,575
157,949	Total Other Revenue	161,341	180,370	162,480

3. Personnel Costs

Personnel Costs
ACTUAL 2013 $000		ACTUAL 2014 $000
172,166	Salaries, Wages and Contractors	187,749
3,350	Employer Contribution to Defined Contribution Plans	4,276
785	Increase/(Decrease) in Employee Entitlements	626
–	Restructuring Costs	1,043
3,944	Other Personnel Costs	3,601
180,245	Total Personnel Costs	197,295

The increase in Personnel between 2013 and 2014 is mainly due to the increases in funding for personnel costs associated with:

The Software Acquisition Strategy;
Better Public Services Seed funded projects including Result 10 Digital Service Council, ICT Contact Centre Optimisation, ICT nz.govt.nz redevelopment and ICT Government Online Engagement;
Improving Government Information and Communications Technology Assurance;
The Government Chief Privacy Officer;
The Royal Visit – Duke and Duchess of Cambridge; and
The Government Inquiry into the Whey Protein Concentrate Contamination Incident.

Employer contributions to defined contribution plans include contributions to the State Sector Retirement Savings Scheme, Kiwi saver, the Government Superannuation Fund and the National Provident Fund.

4. Other Operating Expense

Other Operating Expense
ACTUAL 2013 $000		ACTUAL 2014 $000	MAIN EST 2014 $000	SUPP EST 2014 $000
10,332	Agency Fees	11,998	10,631	10,725
27,449	Computer Costs	31,513	33,127	30,520
6,681	Consultants	6,015	5,926	4,833
17,730	Inventory Costs	18,560	20,539	18,480
13,453	Office Expenses	13,906	14,137	13,613
12,021	Professional Fees	9,387	11,399	9,936
2,034	Publicity and Promotion	1,331	2,218	1,909
12,602	Rental and Leasing Costs	12,152	17,312	18,114
2,534	Staff Development	2,024	2,855	2,985
3,505	Library Resources and Subscriptions	3,652	3,758	3,758
6,641	Travel Expenses	6,520	6,108	6,957
299	Fee for Auditor (for the Financial Statement Audit)	351	292	292
8	Fees to Auditor (for Assurance and Related Services)	34	–	–
–	Increase/(Decrease) in Provision for Doubtful Debts	150	–	–
72	Realised Foreign Exchange Losses	–	–	–
(21)	Unrealised Foreign Exchange Losses/(Gains)	–	–	–
–	Impairment of Intangible Assets	2,515	–	–
–	Loss on Write off of assets	4,518	–	–
16,279	Other Departmental Operating Costs	19,216	23,086	38,949
131,619	Total Operating Expenses	143,842	151,388	161,071

The fees for assurance services were for witness duties connected with Citizenship ceremonies.

5. Finance Costs

Other Finance Costs
ACTUAL 2013 $000		ACTUAL 2014 $000
267	Interest on Finance Leases	267
10	Make Good on Lease Premises	–
277	Total Finance Costs	267

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 2013/14 was 8.0% (2012/13: 8.0%).

7. Cash and Cash Equivalents

Cash and Cash Equivalents
Overseas Bank Accounts
ACTUAL 2013 $000		ACTUAL 2014 $000
49,870	New Zealand Bank Accounts	36,398
353	Australian Bank Accounts	246
635	UK Bank Accounts	784
50,858	Total Cash and Cash Equivalents	37,428

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

8. Debtors and Other Receivables

Debtors and Other Receivables
ACTUAL 2013 $000		ACTUAL 2014 $000
6,703	Trade Receivables	7,296
–	Insurance Receivables relating to Christchurch Earthquakes	6,019
10,650	Debtor Crown	10,650
(7)	Less Provision for Doubtful Debts	(157)
17,346	Total Accounts Receivable	23,808

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.

GROSS $000	IMPAIRMENT $000	NET $000		GROSS $000	IMPAIRMENT $000	NET $000
2013				2014
16,143	–	16,143	Not past due	22,266	–	22,266
693	–	693	Past due 1–30 days	1,390	–	1,390
142	–	142	Past due 31–60 days	20	–	20
169	–	169	Past due 61–90 days	89	–	89
206	(7)	199	Past due > 91 days	200	(157)	43
17,353	(7)	17,346	Total Accounts Receivable	23,965	(157)	23,808

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 2013 $000		ACTUAL 2014 $000
(7)	Opening Doubtful Debts as at 1 July	(7)
8	Additional Provisions Made During the Year	(150)
–	Provisions Released During the Year	–
(8)	Trade Receivables Written Off	–
(7)	Closing Doubtful Debts as at 30 June	(157)

9. Inventories

Inventories
Birth, Death and Marriage Certificates
ACTUAL 2013 $000		ACTUAL 2014 $000
62	Stock on Hand	41
Citizenship
49	Stock on Hand	52
571	Work in Progress	524
National Library
48	Stock on Hand	48
Passports
26	Stock on Hand	10
917	Work in Progress	1,026
1,673	Total Inventories	1,701

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

10. Derivative Financial Instruments

There were no outstanding forward exchange contracts at balance date. (2013: Nil)

11. Property, Plant and Equipment

Cost or Valuation 2014
Asset Class	Balance at 1 July $000	Additions $000	Revaluations/ Impairments $000	Disposals $000	Transfers $000	Balance at 30 June $000
Land	49,815	–	–	–	–	49,815
Buildings	115,873	291	–	(52)	355	116,467
Leasehold Improvements	13,680	319	–	(298)	(137)	13,564
Antiques and Works of Art	1,056	–	–	(22)	–	1,034
Furniture and Fittings	11,418	783	–	(258)	(6)	11,937
General Collections	27,876	787	–	–	–	28,663
Schools Collections	14,742	1,180	–	–	–	15,922
Office Equipment	5,670	173	–	(379)	(188)	5,276
Motor Vehicles	7,900	369	–	(328)	(244)	7,697
Plant and Equipment	13,310	883	–	(90)	(425)	13,678
IT Equipment	34,608	1,642	–	(14,706)	1,753	23,297
Leased Assets	6,608	–	–	–	–	6,608
Total Cost	302,556	6,427	–	(16,133)	1,108	293,958

Accumulated Depreciation 2014
Asset Class	Balance at 1 July $000	Additions $000	Revaluations/ Impairments $000	Disposals $000	Transfers $000	Balance at 30 June $000
Land	–	–	–	–	–	–
Buildings	274	4,434	–	–	–	4,708
Leasehold Improvements	9,602	1,202	–	(286)	(90)	10,428
Antiques and Works of Art	–	–	–	–	–	–
Furniture and Fittings	6,535	543	–	(255)	(5)	6,818
General Collections	16,928	1,388	–	–	–	18,316
Schools Collections	11,678	1,180	–	–	–	12,858
Office Equipment	4,947	243	–	(378)	(190)	4,622
Motor Vehicles	3,853	1,242	–	(192)	(48)	4,855
Plant and Equipment	4,826	522	–	(75)	(52)	5,221
IT Equipment	25,589	4,653	(1,880)	(12,274)	(46)	16,042
Leased Assets	4,736	1,322	–	–	–	6,058
Total Accumulated Depreciation	88,968	16,729	(1,880)	(13,460)	(431)	89,926

Cost or Valuation 2013
Asset Class	Balance at 1 July $000	Additions $000	Revaluations/ Impairments $000	Disposals $000	Transfers $000	Balance at 30 June $000
Land	49,825	–	(10)	–	–	49,815
Buildings	108,454	6,120	1,275	–	24	115,873
Leasehold Improvements	14,141	31	–	(14)	(478)	13,680
Antiques and Works of Art	1,193	63	–	–	(200)	1,056
Furniture and Fittings	11,822	476	–	(977)	97	11,418
General Collections	27,097	779	–	–	–	27,876
Schools Collections	13,449	1,293	–	–	–	14,742
Office Equipment	5,261	481	–	(124)	52	5,670
Motor Vehicles	8,097	866	–	(1,063)	–	7,900
Plant and Equipment	12,537	737	–	(58)	94	13,310
IT Equipment	43,531	1,223	–	(9,052)	(1,094)	34,608
Leased Assets	6,608	–	–	–	–	6,608
Total Cost	302,015	12,069	1,265	(11,288)	(1,505)	302,556

Accumulated Depreciation 2013
Asset Class	Balance at 1 July $000	Additions $000	Revaluations/ Impairments $000	Disposals $000	Transfers $000	Balance at 30 June $000
Land	–	–	–	–	–	–
Buildings	7,791	3,683	(11,149)	(51)	–	274
Leasehold Improvements	8,978	1,188	–	(9)	(555)	9,602
Antiques and Works of Art	–	–	–	–	–	–
Furniture and Fittings	6,887	512	–	(938)	74	6,535
General Collections	15,540	1,388	–	–	–	16,928
Schools Collections	10,508	1,170	–	–	–	11,678
Office Equipment	4,778	256	–	(118)	31	4,947
Motor Vehicles	3,084	1,384	–	(615)	–	3,853
Plant and Equipment	4,526	538	–	(50)	(188)	4,826
IT Equipment	29,621	4,799	–	(9,051)	220	25,589
Leased Assets	3,414	1,322	–	–	–	4,736
Total Accumulated Depreciation	95,127	16,240	(11,149)	(10,832)	(418)	88,968

* Transfers include transfers between government entities.

Summary of Property, Plant and Equipment
2013			Asset Class	2014
Cost or Valuation $000	Accumulated Depreciation $000	Carrying Value $000	Asset Class	Cost or Valuation $000	Accumulated Depreciation $000	Carrying Value $000
49,815	–	49,815	Land	49,815	–	49,815
115,873	274	115,599	Buildings	116,467	4,708	111,759
13,680	9,602	4,078	Leasehold Improvements	13,564	10,428	3,136
1,056	–	1,056	Antiques and Works of Art	1,034	–	1,034
11,418	6,535	4,883	Furniture and Fittings	11,937	6,818	5,119
27,876	16,928	10,948	General Collections	28,663	18,316	10,347
14,742	11,678	3,064	School Collections	15,922	12,858	3,064
5,670	4,947	723	Office Equipment	5,276	4,622	654
7,900	3,853	4,047	Motor Vehicles	7,697	4,855	2,842
13,310	4,826	8,484	Plant and Equipment	13,678	5,221	8,457
34,608	25,589	9,019	IT Equipment	23,297	16,042	7,255
6,608	4,736	1,872	Leased Assets	6,608	6,058	550
302,556	88,968	213,588	Total Property, Plant and Equipment	293,958	89,926	204,032

Leased Assets

The net carrying amount of the leased assets (Passport Printers) held under finance lease is $0.550m (2012/13: $2.093m).

Capital Work in Progress

The total amount of property, plant and equipment in the course of construction is $0.881m (2012/13: $1.158m).

Revaluation Movement

Details of valuations and revaluation movements are contained in note 19.

Impairment Losses

Adjustments have been made within the accounts for all potential impairment losses resulting from IT Equipment obsolescence. The impairment for RealMe assets totalled $1.880m.

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

As at 30 June 2014 there were no non-current assets held for sale (2012/13 $nil).

12. Intangible Assets

Cost or Valuation 2014


Asset Class	Balance at 1 July $000	Additions $000	Revaluations/ Impairments $000	Disposals $000	Transfers $000	Balance at 30 June $000
Cost
Software Acquired	56,975	1,804	–	(10,719)	(19,288)	28,772
Software Internally Generated	100,254	26,837	–	(15,568)	15,184	126,707
Total Software Cost	157,229	28,641	–	(26,287)	(4,104)	155,479


Asset Class	Balance at 1 July	Amortisation	Revaluations/ Impairments	Disposals	Transfers	Balance at 30 June
Less Accumulated Amortisation
Software Acquired	29,586	701	56	(8,728)	(246)	21,369
Software Internally Generated	57,721	17,498	2,459	(11,648)	(307)	65,723
Total Software Amortisation	87,307	18,199	2,515	(20,376)	(553)	87,092
Net Book Value	69,922					68,387

Cost or Valuation 2013


Asset Class	Balance at 1 July $000	Additions $000	Revaluations/ Impairments $000	Disposals $000	Transfers $000	Balance at 30 June $000
Cost
Computer Software	135,384	23,091	–	(4,188)	2,942	157,229


Asset Class	Balance at 1 July	Amortisation	Revaluations/ Impairments	Disposals	Transfers	Balance at 30 June
Less Accumulated Amortisation
Computer Software	72,224	17,003	–	(3,108)	1,188	87,307
Net Book Value	63,160					69,922

Capital Work in Progress

The total amount of intangibles in the course of construction is $17.886m (2012/13: $17.875m).

Impairment Losses

Total impairment losses for the year are $2.515m (2012/13: $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. Creditors and Other Payables

Creditors and Other Payables
ACTUAL 2013 $000		ACTUAL 2014 $000
5,423	Creditors	7,892
19,356	Accrued Expenses	19,236
6,583	Accrued Salaries	7,420
2,280	GST Payable	2,026
33,642	Total Accounts Payable	36,574

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
Current portion
ACTUAL 2013 $000		ACTUAL 2014 $000
488	Restructuring	2,493
427	Lease Make Good	387
2,806	Other	2,092
3,721	Total current portion	4,972
Non-current portion
210	Lease Make Good	210
210	Total non-current portion	210
3,931	Total Provisions	5,182

2013
	Restructuring $000	Lease Make Good $000	Other $000	TOTAL $000
Balance as at 1 July	876	736	2,571	4,183
Additional provisions made	30	–	405	435
Charge against provision for the year	(398)	(52)	(170)	(620)
Unused provisions reversed	(20)	(57)	–	(77)
Discount unwind (see note 5)	–	10	–	10
Balance as at 30 June	488	637	2,806	3,931

2014
	Restructuring $000	Lease Make Good $000	Other $000	TOTAL $000
Balance as at 1 July	488	637	2,806	3,931
Additional provisions made	2,100	–	672	2,772
Charge against provision for the year	(95)	(40)	(1,386)	(1,521)
Unused provisions reversed	–	–	–	–
Discount unwind (see note 5)	–	–	–	–
Balance as at 30 June	2,493	597	2,092	5,182

Restructuring Provision

The 2013 provision represents one-off costs for remaining integration activities related to Machinery of Government changes and other minor restructuring across the Department which are ongoing.

The 2014 provision includes $2.100m for transforming business and financial performance across the Department.

Lease Make Good Provision

A number of the Department’s property leases require, at the expiry of the lease term, restoration of the properties to an agreed condition, repairing any damage and removing any fixtures and fittings installed by the Department. A provision has been recorded to recognise this liability.

Other Provisions

The rental savings from the Canterbury earthquakes and the Executive Leadership Team Development fund are the major components of the other provisions.

15. Revenue Received in Advance

Revenue Received in Advance
ACTUAL 2013 $000		ACTUAL 2014 $000
3,236	Identity Products	3,252
1,612	Licensing Fees	2,022
670	Kotui	883
1,798	Electronic Purchasing in Collaboration (EPIC)	2,132
73	Other	383
7,389	Total Revenue Received in Advance	8,672

16. Employee Entitlements

Employee Entitlements
Current Entitlements
ACTUAL 2013 $000		ACTUAL 2014 $000
8,989	Annual Leave	9,475
89	Sick Leave	104
1,014	Long Service and Retirement Leave	702
10,092	Total Current Entitlements	10,281
Term Entitlements
1,874	Long Service and Retirement Leave	1,937
1,874	Total Term Entitlements	1,937
11,966	Total Entitlements	12,218

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 Mark Channon, 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
	2013	2014
Long Service Leave	3.78%	4.02%
Retiring Leave	2.92%	3.42%
Salary Inflation Factor
Salary Inflation Factor	3.50%	3.50%

17. Finance Leases

Finance Leases
Total Minimum Lease Payments Payable
ACTUAL 2013 $000		ACTUAL 2014 $000
1,589	Not later than one year	662
708	Later than one year and not later than five years	–
2,297	Total Minimum Lease Payments	662
(424)	Future Finance Charges	(111)
1,873	Present Value of Minimum Lease Payments	551
Present Value of Minimum Lease Payments Payable
1,322	Not later than one year	551
551	Later than one year and not later than five years	–
1,873	Total Present Value of Minimum Lease Payments	551
Represented by:
1,322	Current	551
551	Non-Current	–
1,873	Total Finance Leases	551

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%.

18. Return of Operating Surplus

Return of Operating Surplus
ACTUAL 2013 $000		ACTUAL 2014 $000
15,336	Total Comprehensive Income	(15,429)
(12,192)	Revaluation Loss/(Gain)	–
2,959	(Surplus)/deficit on Memorandum Accounts	20,795
6,103	Total Return of Operating Surplus	5,366

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

19. Equity

Equity
Taxpayers’ Funds
ACTUAL 2013 $000		ACTUAL 2014 $000
247,541	Opening balance at 1 July	235,667
15,336	Total Comprehensive Income	(15,429)
1,999	Transfer of General Funds between Government Departments	(2,647)
(12,192)	Revaluation losses/(gains)	–
1,127	Transfer Revaluation Reserve to Taxpayers’ Funds on Disposal	12
2,959	Transfer of Memorandum Account net (surplus)/deficit for the year	20,795
–	Capital Injections	413
(15,000)	Capital Withdrawals	–
(6,103)	Return of operating surplus to the Crown	(5,366)
235,667	Balance at 30 June	233,445
Memorandum Accounts
22,519	Opening Balance 1 July	19,560
(2,959)	Net Memorandum Account surpluses/(deficits) for the year	(20,795)
19,560	Balance at 30 June	(1,235)
Revaluation Reserves
27,638	Opening Balance 1 July	38,703
12,192	Revaluation gains/(losses)	–
(1,127)	Transfer to Taxpayers’ Funds on Disposal	(12)
38,703	Balance at 30 June	38,691
293,930	Total Equity at 30 June	270,901
Revaluation Reserves Consist of:
12,669	Land Revaluation Reserve	12,669
25,322	Buildings Revaluation Reserve	25,322
712	Antiques and Works of Art	700
38,703	Total Revaluation Reserves	38,691

Transfers of General Funds between Government Departments includes $2.635m to the Department of the Prime Minister and Cabinet relating to the transfer of Ministry of Civil Defence and Emergency Management and $0.012m to the Ministry of Justice for the transfer of artworks.

Land and Buildings – Ministerial Properties and Department Accommodation

Darroch Ltd, a Licensed Real Estate Agent (REAA 2008) and registered independent valuer, conducted a valuation of ministerial properties and Departmental land and buildings in March 2013, with valuations effective 30 June 2013.

The 2012/13 revaluation reserve transfer to Taxpayers’ Funds is a result of the sale of two ministerial properties.

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.

Memorandum Accounts

Memorandum accounts are 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
New Zealand Gazette
ACTUAL 2013 $000		ACTUAL 2014 $000
516	Balance at 1 July	424
930	Revenue Movement for the year	876
1,022	Expense Movement for the year	1,016
(92)	Net Memorandum Account surpluses/(deficits) for the year	(140)
424	Balance at 30 June	284
Use of Facilities and Access to Lake Taupo by Boat Users
(183)	Balance at 1 July	(183)
459	Revenue Movement for the year	538
459	Expense Movement for the year	452
–	Net Memorandum Account surpluses/(deficits) for the year	86
(183)	Balance at 30 June	(97)
Passport Products
27,368	Balance at 1 July	20,843
80,405	Revenue Movement for the year	77,548
86,930	Expense Movement for the year	92,102
(6,525)	Net Memorandum Account surpluses/(deficits) for the year	(14,554)
20,843	Balance at 30 June	6,289
Citizenship Products
3,226	Balance at 1 July	8,743
13,095	Revenue Movement for the year	12,644
7,578	Expense Movement for the year	11,597
5,517	Net Memorandum Account surpluses/(deficits) for the year	1,047
8,743	Balance at 30 June	9,790
Marriage and Civil Union Products
(566)	Balance at 1 July	(876)
2,843	Revenue Movement for the year	3,066
3,153	Expense Movement for the year	2,873
(310)	Net Memorandum Account surpluses/(deficits) for the year	193
(876)	Balance at 30 June	(683)
Issue of Birth, Death and Marriage Certifications and other Products
672	Balance at 1 July	1,620
7,412	Revenue Movement for the year	7,430
6,464	Expense Movement for the year	9,007
948	Net Memorandum Account surpluses/(deficits) for the year	(1,577)
1,620	Balance at 30 June	43
Administration of Non-casino Gaming
(6,958)	Balance at 1 July	(6,719)
17,637	Revenue Movement for the year	14,663
17,398	Expense Movement for the year	17,117
239	Net Memorandum Account surpluses/(deficits) for the year	(2,454)
(6,719)	Balance at 30 June	(9,173)
Infrastructure as a Service (IaaS)
(2,318)	Balance at 1 July	(2,453)
253	Revenue Movement for the year	980
388	Expense Movement for the year	342
(135)	Net Memorandum Account surpluses/(deficits) for the year	638
(2,453)	Balance at 30 June	(1,815)
Kotui Library Services
762	Balance at 1 July	837
1,211	Revenue Movement for the year	1,050
1,136	Expense Movement for the year	1,148
75	Net Memorandum Account surpluses/(deficits) for the year	(98)
837	Balance at 30 June	739
All-of-Government Adoption of Cloud Computing
–	Balance at 1 July	(2,964)
–	Revenue Movement for the year	–
2,964	Expense Movement for the year	3,346
(2,964)	Net Memorandum Account surpluses/(deficits) for the year	(3,346)
(2,964)	Balance at 30 June	(6,310)
Electronic Purchasing in Collaboration (EPIC)
–	Balance at 1 July	288
2,665	Revenue Movement for the year	2,413
2,377	Expense Movement for the year	2,703
288	Net Memorandum Account surpluses/(deficits) for the year	(290)
288	Balance at 30 June	(2)
Result 10
–	Balance at 1 July	–
–	Revenue Movement for the year	2,400
–	Expense Movement for the year	2,030
–	Net Memorandum Account surpluses/(deficits) for the year	370
–	Balance at 30 June	370
Common Capability Products
–	Balance at 1 July	–
–	Revenue Movement for the year	579
–	Expense Movement for the year	1,249
–	Net Memorandum Account surpluses/(deficits) for the year	(670)
–	Balance at 30 June	(670)

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: The surplus is expected to reduce as project costs to improve the New Zealand Gazette’s online capability are incurred to transition the Gazette to online publication. Fees will be reviewed and any fee changes resulting from the review are expected to come into effect from 1 July 2015.

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 and, over time, to cover costs relating to depreciation on Crown assets utilised and the rental paid to the Tuwharetoa Māori Trust Board for the portions of the lake bed used for berths, jetties and boat ramps.

Actions: Staggered fee increases were approved in July 2012 designed to move fees towards full cost recovery, including the Crown costs identified above. A review of fees is expected to be completed in 2015/16.

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 has reduced significantly from $20.843m at 1 July 2013 to $6.289m at 30 June 2014 due to the reduction in passport fees. Passport fees were reduced in November 2012 to below cost.

The balance in this account is also affected by fluctuating volumes and the timing of system changes. The Passport Redevelopment Programme was completed in March 2014 to replace ageing technology and to handle the progressive increase in passport application volumes resulting from the 2005 move to a five-year passport.

Other initiatives to improve the passport services and to extend the online passport application service to child applicants will be rolled out over the next two years.

Passport fees will be reviewed to reinstate fees to full cost recovery.

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 for citizenship products 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 for permanent residence.

The balance in the Citizenship memorandum account is expected to contribute to the costs of replacing ageing technology, including system process improvement and integrity. Citizenship fees are likely to be reviewed in 2014/15 following the completion of this programme of work.

Marriage and Civil Union Products (Established 30 June 2002, amended to include Civil Unions 1 July 2012)

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 Births, Deaths and Marriages (BDM) systems within that timeframe.

Actions: The basis for the current fees schedule for marriages and civil unions was approved with effect from 1 September 2003 to recover full costs.

The favourable movement in 2013/14 reflects lower costs since fees were last reviewed and higher than expected revenue for Marriage Licences and Civil Unions.

Work is expected to commence in 2014/15 to upgrade or replace the ageing legacy Life data system including developing access to marriage/civil union licence/registration on line. Marriage product fees will be reviewed in 2014/15 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 unfavourable movement in 2013/14 is due to changes to the Marriages (Definition of Marriages) Amendment Act 2013, and consequential impacts on the births and deaths registration processes. Work is expected to commence in 2014/15 to upgrade/replace the ageing BDM legacy Life data system used for registering and accessing BDM data by customers.

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 current fees schedule was approved with effect from 1 February 2008. Since that time, permanent reductions in the number of gaming machines has resulted in lower than anticipated fees income over a number of years. Cost pressures and specific expenditure on a major investigation have also contributed to the memorandum account deficit. The lower revenue in 2013/14 compared with 2012/13 reflects the lower number of gaming machines in use. A review of fees is expected to be completed in 2014/15.

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

Purpose: IaaS was established to provide government agencies with access to shared storage, computing and data center 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 can join the initiative in a staged way as existing infrastructure assets require replacement or as new capacity is required.

This approach consolidates Public Sector 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: Uptake was constant through 2013/14 with 54 agencies signed up for IaaS services at 30 June 2014. It is projected that the establishment costs will be fully recovered by 2017/18 at which point the Agency fee will be reduced.

Kōtui Library Services (Established 30 January 2011)

Purpose: The National Library provides Kōtui as a shared service of integrated library management and resource discovery systems for public libraries. The business model is a subscription service where public libraries pay a one-off license fee followed by annual subscription charges.

Actions: The Kōtui shared library and resource discovery service was launched to public libraries in September 2011. Kōtui is a shared library service and one of the effects it has had is to increase collaborative opportunities between geographically dispersed libraries and realise the resulting efficiencies. This allows library staff around New Zealand to participate in experts’ groups to help shape the development of the service into the future.

All of Government Adoption of Cloud Computing (Established 2012)

Purpose: Establish the foundational capabilities of cloud computing for All-of-Government use. The Department will recover all capital and operating costs incurred in implementing the cloud initiative, including establishing the foundational capabilities and implementing specific services from agencies through service charges on individual deployments.

Actions: The deficit is increasing because the service is in establishment phase. When the service moves into the operational support phase there will be a decrease in expenses and an increase in revenue as agencies take up the service provided via the deployment of cloud initiatives. The rate of recovery will depend on the take up rate by agencies, and the recovery charges set.

EPIC (Electronic Purchasing in Collaboration) (Established 2012)

Purpose: The purpose of EPIC is to negotiate group licenses to electronic resources and to provide member libraries and all New Zealand schools with access to high quality subscription electronic resources at more favorable rates than they would be able to achieve individually.

Actions: EPIC Operations are funded through an administration component of member libraries’ subscriptions. Fees are reviewed annually and are based on member uptake and vendor costs.

Result 10 (Established 2013)

Purpose: This memorandum account was established to manage funding from agencies and expenditure associated with supporting Result 10 to enable New Zealanders to complete their most common transactions with Government easily in a digital environment.

Actions: In 2014/15, Result 10 will be funded by seven contributing agencies.

Common Capability Products (Established 2013)

Purpose: This memorandum account was established to record both the amount of revenue received from agencies for Government ICT Common Capability products (GCC) products, not otherwise accounted for via separate memorandum accounts, and the amount of expenses incurred in supporting the development (where not funded separately), delivery, operation and renewal of these GCC products.

The products are funded through fees charged to consuming agencies.

Actions: A number of services are in the establishment phase. A fee recovery is in place across a range of Common Capability products and these fees will be regularly reviewed.

20. Capital Injections and Withdrawals

Capital Injections and Withdrawals
2013 $000		2014 $000
–	Result 10 Digital Service Council	30
–	Archives New Zealand – Government Digital Archive	383
–	Total Capital Injections	413
15,000	Capital to Operating Swap	–
15,000	Total Capital Withdrawals	–

The capital withdrawal in 2013 was the result of a fiscally neutral adjustment between capital and operating for the department to support a shift from funding owned assets to purchasing services.

21. Related Parties Transactions and Key Management Personnel

All related party transactions have been entered into on an arms’ length basis.

The Department is a government department and is wholly owned and controlled by the Crown. The Government significantly influences the roles of the Department as well as being its major source of revenue.

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 undertakes a number of trading activities with the Crown, other government departments, Crown entities and state-owned enterprises who are similarly related to the Crown. Purchases from these entities for the year ended 30 June totalled $6.695m (2012/13 $4.489m). These purchases included the purchase of electricity from Meridian, air travel from Air New Zealand, legal services from the Crown Law Office, auditing and assurance services from Audit New Zealand, postal services from New Zealand Post and other services from the Privacy Commissioner, Learning State Ltd, Leadership Development Centre, Statistics New Zealand, Research and Education Advanced Network, Office of Film and Literature Classification and Agresearch Limited.

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

Transactions with Key Management Personnel and Their Close Family Members

Key Management Personnel Compensation.
ACTUAL 2013 $000		ACTUAL 2014 $000
2,332	Salaries and Other Short-term Employee Benefits	2,692
72	Post-employment Benefits	69
9	Other Long-term Benefits	8
–	Termination Benefits	–
2,413	Total Key Management Personnel Compensation	2,769

In 2013/14 key management personnel of the Department comprised nine ministers, the Chief Executive Officer and six members of the Executive Leadership Team (ELT).

In 2012/13 key management personnel of the Department comprised seven ministers, the Chief Executive Officer and six members of the Executive Leadership Team (ELT).

Key management personnel compensation excludes the remuneration and other benefits of the Responsible Ministers for the Department. For 2013/14 these were Hon Chris Tremain, Hon Nathan Guy, Hon Nikki Kaye, Rt Hon John Key, Hon Jo Goodhew, Hon Judith Collins, Hon Peter Dunne, Hon Paula Bennett and Hon Hekia Parata. For 2012/13 these were Hon Chris Tremain, Rt Hon John Key, Hon Judith Collins, Hon David Carter, Hon Nathan Guy, Hon Nikki Kaye, and Hon Jo Goodhew. 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 Members of Parliament (Remuneration and Services) Act 2013 and are paid under Permanent Legislative Authority.

Related party transactions involving key management personnel (or their close family members)

Treasury has confirmed that there were no related party transactions with the Responsible Ministers of the Department.

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.

The Department purchased goods and services from entities that some key management personnel have a relationship with. Purchases from these related entities are set out in the table below:


ACTUAL 2013 $000		ACTUAL 2014 $000	OUTSTANDING BALANCE 2014 $000
594	Deloitte	631	20

22. 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.

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

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 $1.000m 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 2013 $000		ACTUAL 2014 $000
50,858	Cash and Cash Equivalents	37,428
17,346	Debtors and Other Receivables	23,808
68,204	Total Exposure to Credit Risk	61,236

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 drawdowns 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
2014
	Total $000	Less Than 6 Months $000	Between 6 Months & 1 Year $000	Between 1 Year & 5 Years $000	Over 5 Years $000
Creditors and Other Payables	36,574	36,574	–	–	–
Derivative Financial Instruments – Assets	–	–	–	–	–
Derivative Financial Instruments – Liabilities	–	–	–	–	–
2013
Creditors and Other Payables	33,642	33,642	–	–	–
Derivative Financial Instruments – Assets	–	–	–	–	–
Derivative Financial Instruments – Liabilities	–	–	–	–	–

23. Categories of Financial Instruments

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

The carrying amounts of financial assets and financial liabilities in each of the NZ IAS 39 categories
Loans and receivables
ACTUAL 2013 $000		ACTUAL 2014 $000
50,858	Cash and Cash Equivalents	37,428
17,346	Debtors and Other Receivables	23,808
68,204	Total Loans and Receivables	61,236
Fair Value Through Profit and Loss
–	Derivative Financial Instrument Liabilities	–
–	Total Fair Value Through Profit and Loss	–
Financial Liabilities Measured at Amortised Cost
33,642	Creditors and Other Payables	36,574

24. 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.

There are no Fair Value Hierarchy Disclosures for the 2013/14 year (12/13 year: Nil)

25. 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 and the Public Finance Act 1989.

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.

26. 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 expense budgets between the Main Estimates and the Supplementary Estimates of $20.186 million are outlined below:

Statement of Comprehensive Income – Variance between the Main Estimates and the Supplementary Estimates
REASON FOR BUDGET CHANGE	$000
Expense transfers from 2012/13 to 2013/14	6,051
New funding in 2013/14 for Information and Technology Services	7,755
New funding in 2013/14 for the Government Chief Privacy Officer	463
New funding in 2013/14 for Machinery of Government	710
New funding in 2013/14 for the Visit by the Duke and Duchess of Cambridge	1,200
New funding in 2013/14 for the Government Inquiry into the Whey Protein Concentrate Contamination	749
Increased expenditure associated with gaming activities	1,749
Transfer of emergency management functions to the Department of the Prime Minister and Cabinet	(2,468)
Increased demand for services	3,654
Decrease in expenditure associated with the 2012 passport fee reduction	(1,200)
Other changes	1,523
Total Budget Change	20,186

Variance between Actual 2013/14 and the Supplementary Estimates

Other Revenue

Other Revenue is $1.139 million lower than budgeted. This reflects lower gaming activity, lower than expected revenue from All-of-Government Products and reduced demand for services provided by the National Library and identity products, offset by insurance recoveries relating to the Christchurch Earthquakes.

Other Operating Expenses

Other Operating Expenses were less than budgeted by $17.229 million primarily due to lower than anticipated expenditure associated with identity products and delays in a number of projects for which in-principle expense transfers were sought.

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

Variance between the Main Estimates and the Supplementary Estimates

The primary factors contributing to the decrease in general funds between the Main Estimates and the Supplementary Estimates of $23.940 million are outlined below:

Statement of Financial Position – Variance between the Main Estimates and the Supplementary Estimates
REASON FOR BUDGET CHANGE	$000
Movement in opening balance is mainly due to the revaluation of the National Library building in Wellington. This was partially offset by movements in the 2012/13 net surplus and the provision for repayment of surplus	(28,745)
Increase in capital contribution for Result 10	30
Capital withdrawal in 2013/14, mainly reflects the transfer of net assets associated with the transfer of Ministry of Civil Defence and Emergency Management functions to the Department of the Prime Minister and Cabinet	(2,669)
Movement in forecast net deficit for 2013/14	(22,374)
Total Budget Change	(23,940)

Variance between Actuals and the Supplementary Estimates

Explanations for significant variances between actual and the Supplementary Estimates are outlined below:

Current Assets

Current Assets are above budget by $30.278 million mainly due to higher cash and cash equivalents as a result of lower operating and capital expenditure, and insurance receivables related to the Christchurch Earthquakes.

Non-Current Assets

Non-Current Assets are below budget by $10.469 million primarily due delays in the timing of capital expenditure and higher than anticipated retirement of IT hardware and software.

Current Liabilities

Current Liabilities are above budget by $10.069 million mainly due to increased creditors and other payables activity in June 2014, and a provision for repayment of surplus related to insurance recoveries.

Equity

Equity was $9.471 million higher than budgeted due to 2013/14 operating loss being lower than forecasted, therefore resulting in a lower reduction to the Department’s Taxpayer’s Funds.

27. Significant Events after Balance Date

There were no 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

Changes in Equity

Cash Flows

Net Surplus to Net Cash Flow from Operating Activities

Commitments

Capital Commitments

Non-Cancellable Lease Commitments

Contingent Assets and Liabilities

Statement of Contingent Assets and Liabilities as at 30 June 2014

Non-quantifiable Contingent Assets

Quantifiable Contingent Liabilities

Non-quantifiable Contingent Liabilities

Unappropriated Expenditure

Statement of Unappropriated Expenditure and Capital Expenditure for the year ended 30 June 2014

Notes to the Financial Statements for the year ended 30 June

1. Statement of Accounting Policies

Reporting Entity

Transfer of Ministry of Civil Defence and Emergency Management functions

Reporting Period

Basis of Preparation

Statement of Compliance

Measurement Base

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

Debtors and Other Receivables

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

Non-Current Assets Held for Sale

Treatment of Non-Current Assets Transferred from Other Government Entities

Financial Instruments

Financial Liabilities

Leases

Finance Leases

Operating Leases

Employee Entitlements

Long Service, Retirement and Sick Leave

Defined Contribution Superannuation Schemes

Other Liabilities and Provisions

Capital Charge

Notes to the Financial Statements
for the year ended 30 June