Notes to the Financial Statements for the Year Ended 30 June 2002
- 1. Revenue Crown
- 2. Revenue Other
- 3. Interest Revenue
- 4. Personnel
- 5. Operating
- 6. Restructuring
- 7. Depreciation
- 8. Capital Charge
- 9. Taxpayers' Funds
- 10. Short-Term Deposits
- 11. Debtors and Receivables
- 12. Fixed Assets
- 13. Creditors and Payables
- 14. Provisions
- 15. Unearned Income
- 16. Provision for Employee Entitlements
- 17. Provision for Payment of Net Surplus
- 18. Related Parties
- 19. Financial Instruments
- 20. Major Budget Variances
- Statement of Financial Performance
- Revenue Crown
- Vote: Communications, Output Class D1 - Policy Advice - Communications
- Vote: Consumer Affairs, Output Class D1 - Policy Advice on Consumer Issues
- Vote: Consumer Affairs, Output Class D2 - Information and Education Services for Consumers and Traders
- Vote: Energy, Output Class D3 - Administration of Gas and Electricity Regulations
- Vote: Government Superannuation Fund (GSF), Output Class D1 - Management of the GSF
- Vote: Industry and Regional Development, Output Class D1 - Policy Advice: Industry and Regional Development
- Vote: Sport, Fitness and Leisure, Output Class D1 - Policy Advice - Sport, Fitness and Leisure
- Vote: Tourism, Output Class D1 - Policy Advice: Tourism
- Vote: Tourism, Output Class D2 - Wairakei Tourist Park - Development and Management
- Other Revenue
- Interest Revenue
- Output Expenses
- Statement of Financial Position (and Cash Flows)
- 21. Discontinued Activities
- 22. Events after Balance Date
1. Revenue Crown
Revenue Crown represents services provided to the Crown by the Ministry of Economic Development.
2. Revenue Other
| | 2002 | 2001 |
|---|
| | $000 | $000 |
| Fees and fines | 44,601 | 45,649 |
| Electrical levies | 3,783 | 3,199 |
| Inter-departmental revenue | 1,337 | 2,113 |
| Petroleum fuels monitoring levy | 1,196 | 1,093 |
| Rental from sub-let of office space | 405 | 761 |
| Gas levies | 827 | 741 |
| Sale of publications | 69 | 87 |
| Miscellaneous | 288 | 1,272 |
| Total Other Revenue | 52,506 | 54,915 |
For further breakdown of fees and fines, see information under each output class.
3. Interest Revenue
Until October 2001 the Ministry invested surplus cash on term deposit with the New Zealand Debt Management Office (NZDMO) and earned interest at variable rates.
From November 2001 this facility has ceased to operate and no investments have been made.
4. Personnel
| | 2002 | 2001 |
|---|
| | $000 | $000 |
| Salaries and wages | 40,558 | 38,481 |
| ACC levy | 298 | 415 |
| Pension expenses - GSF | 562 | 591 |
| Recruitment costs | 763 | 907 |
| Fringe benefit tax | 40 | 43 |
| Total Personnel | 42,221 | 40,437 |
5. Operating
| | 2002 | 2001 |
|---|
| | $000 | $000 |
| Rental and operating lease costs | 7,397 | 8,045 |
| Professional services | 4,548 | 8,821 |
| Technical services | 3,966 | 3,016 |
| Travel - domestic and overseas | 2,770 | 3,140 |
| Premises costs4 | 1,809 | 1,834 |
| Staff training | 711 | 895 |
| Maintenance and repairs of fixed assets | 1,382 | 1,835 |
| Audit fees to auditors for audit of the financial statements | | |
| - Deloitte Touche Tohmatsu for GSF | - | 95 |
| - Audit New Zealand | 160 | 155 |
| Other services provided by auditors | | |
| - Deloitte Touche Tohmatsu for GSF | - | 19 |
| - Audit New Zealand | - | 39 |
| Fixed asset write-offs | - | 246 |
| Leasehold improvements revaluation loss | - | 120 |
| Change in provision for doubtful debts | - | (4) |
| Entertainment expenses | 163 | 141 |
| Bad debts written off | 41 | 56 |
| Other operating costs | 18,720 | 21,811 |
| Total Operating | 41,667 | 50,264 |
6. Restructuring
| | 2002 | 2001 |
|---|
| | $000 | $000 |
| Review of Corporate Finance Accounts Group | 44 | - |
| Review of Radio Spectrum Management Group | 267 | - |
| Review of Electrical Workers Licensing Group | 250 | - |
| Transition of Government Superannuation Fund to Crown entity | (25) | 426 |
| Review of Companies Office Services | 31 | 75 |
| Review of Intellectual Property Office | - | 65 |
| Review of Insolvency and Trustee Service | - | 108 |
| Operations Branch Support Services | - | 176 |
| Regulatory and Competition Policy Branch Support Services | - | 75 |
| Total Restructuring | 567 | 925 |
7. Depreciation
| | 2002 | 2001 |
|---|
| | $000 | $000 |
| Buildings | 2 | 2 |
| Leasehold improvements | 562 | 500 |
| Computer equipment | 3,017 | 2,662 |
| Furniture | 463 | 501 |
| Office equipment | 270 | 278 |
| Test equipment | 244 | 212 |
| Motor vehicles | 245 | 266 |
| Total Depreciation | 4,803 | 4,421 |
8. Capital Charge
The Ministry pays a capital charge to the Crown on its taxpayers' funds as at 31 December and 30 June each year. The capital charge rate for the year ended 30 June 2002 was 9 percent (30 June 2001, 10 percent).
9. Taxpayers' Funds
Taxpayers' funds comprises two components:
| | 2002 | 2001 |
|---|
| | $000 | $000 |
| General Funds | | |
| General funds as at 1 July | 2,399 | 2,064 |
| Net operating surplus | 4,249 | 7,417 |
| | 6,648 | 9,481 |
| Provision for repayment of surplus to the Crown | (4,249) | (7,417) |
| Capital contribution from the Crown for the development of a Personal Property Securities Register | 627 | 599 |
| Transfer from Department of Internal Affairs associated with the transfer of net assets of the Office of Tourism and Sport from 1 July 2000 | - | 81 |
| Capital withdrawal associated with establishment of the Energy Efficiency Conservation Authority as a stand-alone Crown entity from 1 July 2000 | - | (345) |
| Capital withdrawal associated with establishment of the Government Superannuation Fund Authority as a stand-alone Crown entity from 1 October 2001 | (155) | - |
| Total Taxpayers' Funds as at 30 June | 2,871 | 2,399 |
10. Short-Term Deposits
As at balance date the following term deposit had been placed with the New Zealand Debt Management Office (NZDMO):
2001
Actual | | Counterparty | Interest
Rate | Term | 2002
Actual |
|---|
| $000 | | | % | | $000 |
| 7,000 | | NZDMO | | | |
| 3,000 | | NZDMO | | | |
| 1,000 | | NZDMO | | | |
| 11,000 | | | | | NIL |
11. Debtors and Receivables
| | 2002 | 2001 |
|---|
| | $000 | $000 |
| Third party debtors | 4,140 | 4,638 |
| Less: Provision for doubtful debts | (312) | (312) |
| Net | 3,828 | 4,326 |
| Interest accrued | - | 2 |
| Inter-departmental debtors | 1 | 43 |
| Total Debtors and Receivables | 3,829 | 4,371 |
12. Fixed Assets
| | Cost or
Valuation
as at
30 June 2002 | Accu-
mulated
Depre-
ciation
as at
30 June 2002 | Net Carrying
Amount
as at
30 June 2002 | Cost or
Valuation
as at
30 June 2001 | Accu-
mulated
Depre-
ciation
as at
30 June 2001 | Net Carrying
Amount
as at
30 June 2001 |
|---|
| | $000 | $000 | $000 | $000 | $000 | $000 |
| Buildings | 38 | 29 | 9 | 38 | 27 | 11 |
| Leasehold improvements | 2,151 | 630 | 1,521 | 1,358 | - | 1,358 |
| Computer equipment | 17,920 | 11,451 | 6,469 | 16,000 | 9,196 | 6,804 |
| Furniture | 3,461 | 2,617 | 844 | 3,817 | 2,445 | 1,372 |
| Office equipment | 2,137 | 1,612 | 525 | 2,201 | 1,630 | 571 |
| Test equipment | 3,240 | 1,927 | 1,313 | 3,179 | 1,851 | 1,328 |
| Motor vehicles | 1,672 | 1,028 | 644 | 1,645 | 834 | 811 |
| Work in progress | 1,127 | - | 1,127 | 1,195 | - | 1,195 |
| Total Fixed Assets | 31,746 | 19,294 | 12,452 | 29,433 | 15,983 | 13,450 |
Leasehold improvements are stated at net current values determined by an independent registered valuer. A revaluation of all leasehold improvements was completed by Lockwood & Associates on 30 June 2001. Leasehold improvements are revalued every three years.
All other fixed assets costing $1,000 (excluding GST) or more are capitalised and recorded at historical cost.
13. Creditors and Payables
| | Note | 2002 | 2001 |
|---|
| | | $000 | $000 |
| Trade creditors | | 3,200 | 2,570 |
| Levies refundable | | 553 | 1,172 |
| Accrued operating expenses | | 6,677 | 8,778 |
| Provisions | 14 | 685 | 941 |
| GST payable | | 405 | 351 |
| | | 11,520 | 13,812 |
| Accruals for fixed assets | | 131 | 704 |
| Total Creditors and Payables | | 11,651 | 14,516 |
14. Provisions
| | 2002 | 2001 |
|---|
| | $000 | $000 |
| Restructuring provision | | |
| Opening balance | 941 | 348 |
| Additional provisions made during the year | 560 | 814 |
| Charged against the provision in the year | (816) | (221) |
| Unused amounts reversed during the year | - | - |
| Total Provisions | 685 | 941 |
The restructuring provision arises from various organisational reviews being conducted within the Ministry.
15. Unearned Income
| | 2002 | 2001 |
|---|
| | $000 | $000 |
| Radio operations | 6,153 | 5,621 |
| Energy inspection | 527 | 889 |
| Other unearned income | 22 | 5 |
| Total Unearned Income | 6,702 | 6,515 |
Unearned income for Radio Operations relates to annual licence fees invoiced at the beginning of the period to which they relate and are received in advance of being recognised as income. Crown Minerals unearned income relates to income received in advance for annual licences and permits. Energy Inspection unearned income includes income received in advance for electrical workers' practising licences.
16. Provision for Employee Entitlements
| | 2002 | 2001 |
|---|
| | $000 | $000 |
| Non-current liabilities | | |
| Retirement and long service leave | 2,071 | 2,041 |
| Total non-current portion | 2,071 | 2,041 |
| Current liabilities | | |
| Retirement and long service leave | 648 | 570 |
| Annual leave | 2,254 | 2,030 |
| Total current portion | 2,902 | 2,600 |
| Total Provision for employee entitlements | 4,973 | 4,641 |
The current liability represents the amount due for potential settlement within the next 12 months.
17. Provision for Payment of Net Surplus
| | 2002 | 2001 |
|---|
| | $000 | $000 |
| Net surplus/(deficit) | 4,249 | 7,417 |
| Add: Other expenses (not for production of outputs) | - | - |
| Total Provision for Payment of Net Surplus | 4,249 | 7,417 |
18. Related Parties
The Ministry is a wholly owned entity of the Crown. The Government significantly influences the roles of the Ministry as well as being a major source of its revenue.
The Ministry enters into numerous transactions with other government departments, Crown agencies and state-owned enterprises on an arm's-length basis. These transactions are not considered to be related party transactions.
Apart from those transactions described above, the Ministry has not entered into any related party transactions.
19. Financial Instruments
The Ministry is party to financial instrument arrangements as part of its everyday operations. These include instruments such as bank balances, investments, accounts receivable, trade creditors and foreign currency forward contracts.
Credit Risk
Credit risk is the risk that a third party will default on its obligations to the Ministry, causing the Ministry to incur a loss. In the normal course of its business, the Ministry incurs credit risk from trade debtors, and transactions with financial institutions and the New Zealand Debt Management Office (NZDMO).
The Ministry does not require any collateral or security to support financial instruments with financial institutions that the Ministry deals with, or with the NZDMO, as these entities have high credit ratings. For its other financial instruments, the Ministry does not have significant concentrations of credit risk.
Fair Value
The fair value of all financial instruments is equivalent to the carrying amount disclosed in the Statement of Financial Position.
Currency Risk
Currency risk is the risk that debtors and creditors due in foreign currency will fluctuate because of changes in foreign exchange rates.
The Ministry uses foreign currency forward contracts to manage foreign exchange exposures. All individual payments above the equivalent of NZ$50,000 must be made via foreign currency forward contracts. The maximum exposure for all other foreign exchange transactions that the Ministry may have at any one time is NZ$250,000.
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 investments or the cost of borrowing. The Ministry has no significant exposure to interest rate risk on its financial instruments.
Under section 46 of the Public Finance Act the Ministry cannot raise a loan without Ministerial approval and no such loans have been raised. Accordingly, there is no interest rate exposure for funds borrowed.
20. Major Budget Variances
Statement of Financial Performance
Revenue Crown
The overall reduction in output class expenses and consequential reduction in Crown Revenue principally result from changes in the following output classes (all exclusive of GST):
Vote: Communications, Output Class D1 - Policy Advice - Communications
The appropriation for this output class was reduced by $94,000. This relates to a transfer to Vote: Arts, Culture and Heritage relating to responsibility for policy advice on broadcasting content standards, and to Vote: Energy to meet costs associated with additional work being undertaken due to the 2001 dry winter and issues relating to electricity governance respectively.
Vote: Consumer Affairs, Output Class D1 - Policy Advice on Consumer Issues
The appropriation for this output class was increased by $136,000. This provided for the costs associated with meeting funding pressures associated with work on policy issues, and to provide cost realignment relating to consumer affairs activities.
Vote: Consumer Affairs, Output Class D2 - Information and Education Services for Consumers and Traders
The appropriation for this output class was reduced by $114,000. This provided for cost realignment relating to consumer affairs activities.
Vote: Energy, Output Class D3 - Administration of Gas and Electricity Regulations
The appropriation for this output class was reduced by $123,000. This related to transfers to output classes D1 and D4 in Vote: Energy for additional work undertaken due to the 2001 dry winter and issues relating to electricity governance, and costs relating to the collection, compilation and analysis of data on climate change, energy efficiency and conservation.
Vote: Government Superannuation Fund (GSF), Output Class D1 - Management of the GSF
The appropriation for this output class was increased by $954,000 to meet expenditure incurred by the Ministry of Economic Development up to 1 October 2001. This expenditure principally related to costs incurred in establishing the GSF Authority prior to it coming into existence on 2 October 2001.
Vote: Industry and Regional Development, Output Class D1 - Policy Advice: Industry and Regional Development
The appropriation for this output class was reduced by $900,000. This mainly relates to a transfer to the budget contingency to contribute to specific education initiatives offset by costs incurred to encourage a culture of enterprise and entrepreneurship through the Innovate conference.
Vote: Sport, Fitness and Leisure, Output Class D1 - Policy Advice - Sport, Fitness and Leisure
The appropriation for this output class was reduced by $145,000. This mainly relates to the transfer of the responsibility for policy advice to Vote: Arts, Culture and Heritage and a transfer of funding to Vote: Tourism for costs associated with the America's Cup Regatta 2003 "One Stop Shop".
Vote: Tourism, Output Class D1 - Policy Advice: Tourism
The appropriation for this output class was reduced by $104,000. This mainly reflects expense transfers into the 2002/2003 fiscal year for the America's Cup "One Stop Shop" project and two applied research projects. These are partly offset by increases relating to a study of Hot Water Beach risks to tourism, secretariat support for regional tourism, and set up costs for an international visitor survey, Māori Tourism Advisory Group and Regional Tourism Organisational costs, and a transfer of research responsibilities from Tourism New Zealand.
Vote: Tourism, Output Class D2 - Wairakei Tourist Park - Development and Management
The appropriation for this output class was reduced by $57,000. This relates to a transfer to output class D1 in Vote: Tourism to meet costs incurred for a study of Hot Water Beach risks to tourism, secretariat support for regional tourism, and set up costs for an international visitor survey.
Other Revenue
Provision was made in the Supplementary Estimates for increases in third party revenue and associated increases in expenses and GST for appropriation purposes as follows:
Vote: Commerce, Output Classes D1 - Policy Advice - Business and Competition, for the New Zealand Stock Exchange Restructuring Bill; D4 - Registration and Granting of Intellectual Property Rights, for processing of increased patent applications and trademark activity; and D7 - Registration and Provision of Statutory Information, reflecting forecasting changes related to increased activity in the respective output classes. The last two of these output classes are demand driven.
Vote: Energy, Output Class D3 - Administration of Gas and Electricity Regulations, recognising additional work arising from diesel engine filter blockages and promotion of joint Australia/New Zealand electricity standards.
Vote: Industry and Regional Development, Output Class D1 - Policy Advice - Industry and Regional Development, recognising the costs of a viability study for the Southerner Rail Passenger Service.
Other revenue is below budget for Vote: Commerce, Output Class D2 - Administration of Part II Tariff Concessions, due to less than anticipated income derived from Concession Fees; Vote: Commerce, Output Class D5 - Administration of Insolvencies, due to less than anticipated income derived from commission from bankruptcies and liquidations; Vote: Communications, Output Class D2 - Management and Enforcement of the Radiocommunications Act, due to less than anticipated activity in radio frequency registrations and spectrum licences; Vote: Energy, Output Class D2 - Management of the Crown Mineral Estate due to a decrease in Petroleum and Mineral Permit Fees; and Vote: Energy, Output Class D4 - Energy and Resource Information Services due to a decrease in Petroleum Monitoring Levies received.
Interest Revenue
Interest revenue was generated up to the point that the New Zealand Debt Management Office no longer allowed interest to be derived by departments.
Output Expenses
Output expenses have decreased mainly due to the corresponding expenses associated with the changes referred to above.
Statement of Financial Position (and Cash Flows)
The decrease in cash and short-term deposits mainly reflects the decrease in current liabilities and reduced third party revenue.
21. Discontinued Activities
Vote: Government Superannuation Fund (GSF), Output Class: Management of the GSF
This output class provides services including the purchase of policy advice, Ministerial servicing, investment management, contract management and statutory decision-making in respect of GSF schemes. From 2 October 2001 these activities transferred to the GSF Authority under Vote: Finance. The GSF Authority is a Crown entity responsible for managing the GSF assets and administering the GSF schemes on behalf of the Crown.
Vote: Sport, Fitness and Leisure, Output Class: Policy Advice: Sport, Fitness and Leisure
This output class provides advice on sport, fitness and leisure including the impact of other policies, international sporting events, the purchase of high performance sports and drug testing services, the governments interest as owner of the Hillary Commission and the Sports Drug Agency, and payments from the Minister's discretionary fund. From 1 January 2002 the administration of these activities transferred to the Ministry for Culture and Heritage.
22. Events after Balance Date
No events have occurred between the balance date and date of signing these financial statements that materially affect the financial statements.
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