Notes to the Financial Statements for the Year Ended 30 June 2005
1. Revenue Crown
Revenue Crown represents payments for services provided to the Crown by the Ministry of Economic Development.
2. Revenue Other
| | 2005
$000 (thousands of dollars) | 2004
$000 (thousands of dollars) |
|---|
| Fees and fines | 37,351 | 47,428 |
|---|
| Electrical levies | 3,350 | 3,419 |
|---|
| Inter-departmental revenue | 925 | 558 |
|---|
| Petroleum fuels monitoring levy | 1,537 | 1,338 |
|---|
| Rental from sublet of office space | - | 65 |
|---|
| Gas levies | 815 | 837 |
|---|
| Sale of publications | 35 | 46 |
|---|
| Miscellaneous | 582 | 377 |
|---|
| Total Other Revenue | 44,595 | 54,068 |
|---|
For further breakdown of fees and fines, see information under each output class.
3. Personnel
| | 2005
$000 (thousands of dollars) | 2004
$000 (thousands of dollars) |
|---|
| Salaries and wages | 46,868 | 44,760 |
|---|
| ACC levy | 276 | 331 |
|---|
| Pension expenses - GSF | 399 | 438 |
|---|
| 424 | 97 |
| Recruitment costs | 1,075 | 1,250 |
|---|
| Fringe benefit tax | 11 | 7 |
|---|
| Total Personnel | 49,053 | 46,883 |
|---|
4. Operating
| | 2005
$000 (thousands of dollars) | 2004
$000 (thousands of dollars) |
|---|
| Rental and operating lease costs | 5,994 | 6,657 |
|---|
| Professional services | 10,491 | 8,066 |
|---|
| IT costs and technical IT support | 10,405 | 7,669 |
|---|
| Technical services | 3,530 | 4,145 |
|---|
| Travel - domestic and overseas | 3,706 | 2,855 |
|---|
| Premises costs2 | 1,378 | 1,855 |
|---|
| Staff training | 1,526 | 1,484 |
|---|
| Maintenance and repairs of fixed assets | 801 | 1,598 |
|---|
| Audit fees to auditors for audit of the financial statements - Audit New Zealand | 182 | 158 |
|---|
| Other services provided by auditors - Audit New Zealand | - | 7 |
|---|
| Fixed asset write-offs | 332 | 79 |
|---|
| Entertainment expenses | 234 | 172 |
|---|
| Bad debts written off | 20 | 37 |
|---|
| Doubtful debts provisions adjustments | (30) | - |
|---|
| Other operating costs | 10,889 | 11,226 |
|---|
| Total Operating | 49,458 | 46,008 |
|---|
5. Restructuring
| | 2005
$000 (thousands of dollars) | 2004
$000 (thousands of dollars) |
|---|
| Corporate IT Group | 515 | 216 |
|---|
| Business Services Branch Corporate Support | 364 | - |
|---|
| Intellectual Property Office | 117 | - |
|---|
| Corporate Support | 18 | 178 |
|---|
| Crown Minerals Group | - | 493 |
|---|
| Resources and Networks Branch | - | 118 |
|---|
| Ministry of Consumer Affairs | - | 82 |
|---|
| Radio Spectrum Management Group | - | 44 |
|---|
| Total Restructuring | 1,014 | 1,131 |
|---|
6. Depreciation
| | 2005
$000 (thousands of dollars) | 2004
$000 (thousands of dollars) |
|---|
| Buildings | 2 | 2 |
|---|
| Leasehold improvements | 576 | 492 |
|---|
| Computer equipment | 2,682 | 2,912 |
|---|
| Furniture | 555 | 328 |
|---|
| Office equipment | 180 | 186 |
|---|
| Test equipment | 228 | 229 |
|---|
| Motor vehicles | 175 | 163 |
|---|
| Total Depreciation | 4,398 | 4,312 |
|---|
7. 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 2005 was 8.0% (30 June 2004, 8.5%).
8. Taxpayers' Funds
| Taxpayers' funds comprises: | 2005
$000 (thousands of dollars) | 2004
$000 (thousands of dollars) |
|---|
| General Funds | | |
|---|
| General funds as at 1 July | 4,578 | 3,457 |
|---|
| Net operating surplus | (5,082) | 6,726 |
|---|
| Provision for repayment of surplus to the Crown | (2,544) | (7,121) |
|---|
| Capital contribution from the Crown for working capital funding | 10,000 | - |
|---|
| Capital contribution from the Crown for memorandum account deficit funding | 7,626 | 395 |
|---|
| Capital contribution from the Crown for the development of the Motor Vehicle Traders Register | - | 664 |
|---|
| Capital contribution from the Crown for the upgrade of the Companies Office Electronic Register (REGIS) to a web browser based system | - | 457 |
|---|
| Total Taxpayers' Funds as at 30 June | 14,578 | 4,578 |
|---|
9. Receivables and Advances
| | 2005
$000 (thousands of dollars) | 2004
$000 (thousands of dollars) |
|---|
| Third party debtors | 5,724 | 4,533 |
|---|
| Less: Provision for doubtful debts | (121) | (151) |
|---|
| Net | 5,603 | 4,382 |
|---|
| Inter-departmental debtors | 111 | 423 |
|---|
| Total Receivables and Advances | 5,714 | 4,805 |
|---|
10. Fixed Assets
| | Cost or Valuation as at 30 June 2005 | Accumulated Depreciation as at 30 June 2005 | Net Carrying Amount as at 30 June 2005 | Cost or Valuation as at 30 June 2004 | Accumulated Depreciation as at 30 June 2004 | Net Carrying Amount as at 30 June 2004 |
|---|
| Buildings | 39 | 35 | 4 | 38 | 33 | 5 |
|---|
| Leasehold improvements | 5,921 | 799 | 5,122 | 4,712 | 1,512 | 3,200 |
|---|
| Computer equipment | 21,553 | 15,450 | 6,103 | 21,074 | 15,648 | 5,426 |
|---|
| Furniture | 3,147 | 779 | 2,368 | 4,282 | 2,863 | 1,419 |
|---|
| Office equipment | 1,128 | 779 | 349 | 2,265 | 1,805 | 460 |
|---|
| Test equipment | 2,335 | 1,143 | 1,192 | 3,361 | 2,242 | 1,119 |
|---|
| Motor vehicles | 1,489 | 755 | 734 | 1,460 | 781 | 679 |
|---|
| Work in progress | 4,790 | - | 4,790 | 1,569 | - | 1,569 |
|---|
| Total Fixed Assets | 40,402 | 19,740 | 20,662 | 38,761 | 24,884 | 13,877 |
|---|
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 five years.
Bespoke software (custom built in-house major registry applications) developed in-house (including work undertaken by IT outsource partners) with a total development cost of under $20,000 (GST exclusive) is expensed. In these cases any expenditure is to be treated as "software - minor enhancements". Other items of computer software costing $5,000 (excluding GST) or more are capitalised and recorded at historical cost.
All other fixed assets costing $2,000 (excluding GST) or more are capitalised and recorded at historical cost.
Work in progress includes items of fixed assets that are either under construction or not completed at balance date. It consists predominantly of computer system development and hardware ($4.317 million) and leasehold improvements ($0.455 million).
11. Creditors and Payables
| | Note | 2005
$000 (thousands of dollars) | 2004
$000 (thousands of dollars) |
|---|
| Trade creditors | | 3,555 | 4,255 |
|---|
| Levies refundable | | 1,040 | 794 |
|---|
| Accrued operating expenses | | 7,904 | 6,692 |
|---|
| Provisions | 12 | 853 | - |
|---|
| GST payable | | 482 | 188 |
|---|
| Subtotal | | 13,834 | 11,929 |
|---|
| Accruals for fixed assets | | 445 | 369 |
|---|
| Total Creditors and Payables | | 14,279 | 12,298 |
|---|
12. Provisions
| | Note | 2005
$000 (thousands of dollars) | 2004
$000 (thousands of dollars) |
|---|
| Restructuring provision | | | |
|---|
| Opening balance | | - | 126 |
|---|
| Additional provision made in the year | | 1,014 | - |
|---|
| Charged against the provision in the year | | (387) | (52) |
|---|
| Unused amounts reversed during the year | | - | (74) |
|---|
| Total Restructuring Provision | | 627 | - |
|---|
| Provision for onerous contracts | 16 | | |
|---|
| Opening balance | | - | - |
|---|
| Additional provision made in the year | | 226 | - |
|---|
| Charged against the provision in the year | | - | - |
|---|
| Unused amounts reversed during the year | | - | - |
|---|
| Total Onerous Contract Provisions | | 226 | - |
|---|
| Total Provisions | | 853 | - |
|---|
The restructuring provision arises from various organisational reviews being conducted within the Ministry.
The onerous contract provision arises from non-cancellable leases where income from sub-tenants is less than the cost of the lease.
13. Unearned Income
| | 2005
$000 (thousands of dollars) | 2004
$000 (thousands of dollars) |
|---|
| Radio Operations | 3,539 | 2,272 |
|---|
| Energy Inspection | 954 | 914 |
|---|
| Crown Minerals | - | 114 |
|---|
| Total Unearned Income | 4,493 | 3,300 |
|---|
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. Energy Inspection unearned income includes income received in advance for electrical workers' practising licences. Crown Minerals unearned income relates to income received in advance for annual licences and permits.
14. Provision for Employee Entitlements
| | 2005
$000 (thousands of dollars) | 2004
$000 (thousands of dollars) |
|---|
| Non-current liabilities | | |
|---|
| Retirement and long service leave | 2,664 | 2,167 |
|---|
| Total non-current portion | 2,664 | 2,167 |
|---|
| Current liabilities | | |
|---|
| Retirement and long service leave | 487 | 428 |
|---|
| Annual leave | 2,393 | 2,105 |
|---|
| Total current portion | 2,880 | 2,533 |
|---|
| Total Provision for Employee Entitlements | 5,544 | 4,700 |
|---|
The current liability represents the amount due for potential settlement within the next 12 months.
15. Provision for Payment of Net Surplus
| | 2005
$000 (thousands of dollars) | 2004
$000 (thousands of dollars) |
|---|
| Net surplus/(deficit) | (5,082) | 6,726 |
|---|
| Add back deficit in: | | |
|---|
| Registration and Provision of Statutory Information memorandum account | 5,426 | - |
|---|
| Administration of Licensed Building Practitioners memorandum account | 280 | - |
|---|
| Motor Vehicle Trader Register and Information Programme memorandum account | - | 395 |
|---|
| Management and Enforcement of the Radiocommunications Act 1989 memorandum account | 1,920 | - |
|---|
| Total Provision for Payment of Net Surplus | 2,544 | 7,121 |
|---|
16. Provision for Onerous Contracts
| | 2005
$000 (thousands of dollars) | 2004
$000 (thousands of dollars) |
|---|
| Opening balance | - | - |
|---|
| Additional provision made in the year | 619 | - |
|---|
| Charged against the provision in the year | - | - |
|---|
| Unused amounts reversed during the year | - | - |
|---|
| Total Provision for Onerous Contracts | 619 | - |
|---|
| Represented by: | - | - |
|---|
| Current | 226 | - |
|---|
| Non-current | 393 | - |
|---|
| Total Provision for Onerous Contracts | 619 | - |
|---|
The Ministry has two non-cancellable leases. These are for six floors of 47 Boulcott Street in Wellington and vacant space in a storage facility at Toop Street in Seaview, Lower Hutt. The Ministry no longer occupies the Boulcott Street floors and is not able to utilise the vacant space at Toop Street. Five of the six Boulcott Street floors have been sublet. Owing to market conditions, the rental income achieved is much lower than the rental expense being incurred. The net obligation under these lease agreements has been provided for as an onerous contract. The liability for Toop Street will be incurred over the next year while the Boulcott Street liability will be incurred over the next three years.
17. 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.
18. 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.
The Ministry does not require any collateral or security to support financial instruments with financial institutions that the Ministry deals with, 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 the Public Finance Act 1989, the Ministry cannot raise a loan without Minister of Finance approval and no such loans have been raised. Accordingly, there is no interest rate exposure for funds borrowed.
19. Discontinued Activities
There were no discontinued activities for the 2004/2005 financial year.
20. 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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