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Notes to the Financial Statements for the Year Ended 30 June 2007


This Document is Archived


Annual Report of the Ministry of Economic Development for the Year Ended 30 June 2007

[ Last Updated 12 October 2007 ]


Within this section…

1 Revenue Crown

Revenue Crown represents payments for services provided to the Crown by the Ministry of Economic Development.

2 Revenue other

2007
$000		 2006
$000
Fees and fines 39,522 39,161
Electrical levies 3,104 3,698
Inter-departmental revenue 1,354 1,454
Petroleum fuels monitoring levy 1,532 1,529
Gas levies 735 801
Sale of publications 12 22
Miscellaneous 203 242
Total Revenue other 46,462 46,907

For further breakdown of fees and fines, see information under each output expense in Section Two.

3 Personnel

2007
$000		 2006
$000
Salaries and wages 51,638 50,372
ACC levy 377 (435)
Pension expenses – GSF 393 396
Pension expenses – SSRSS 1,032 896
Recruitment costs 1,183 990
Fringe benefit tax 3 4
Total Personnel 54,626 52,223

4 Operating

2007
$000		 2006
$000
Rental and operating lease costs 5,093 5,266
Professional services 5,424 5,703
Tourism sector research 3,009 3,377
IT costs and technical IT support 14,993 14,228
Technical services 6,611 3,943
Travel – domestic and overseas 3,668 4,214
Premises costs2 1,424 1,348
Staff training 1,694 1,964
Maintenance and repairs of property, plant and equipment 1,211 759
Audit fees to auditors for audit of the financial statements
Audit New Zealand 200 191
Other services provided by auditors
Audit New Zealand 73 -
Loss on sale of property, plant and equipment 178 -
Property, plant and equipment write-offs - 254
Revaluation of property, plant and equipment - 559
Photocopier rental 250 232
IT equipment rental 16 4
Entertainment expenses 168 235
Bad debts written off 11 16
Doubtful debts provisions adjustments (50) -
Other operating costs 11,412 11,685
Total Operating 55,385 53,978

5 Restructuring

2007
$000		 2006
$000
IPONZ 107 -
Business Services Branch Corporate Support 71 56
Corporate Support 46 34
Effective Markets Branch 34 -
Energy Statistics Group - 65
Total Restructuring 258 155

6 Depreciation/amortisation

2007
$000		 2006
$000
Buildings 1 5
Leasehold improvements 653 726
Computer equipment 2,193 1,769
Furniture 733 678
Office equipment 143 152
Test equipment 213 232
Motor vehicles 174 181
Computer software 2,047 1,813
Total Depreciation/amortisation 6,157 5,556

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 2007 was 7.5% (30 June 2006, 8.0%).

8 Taxpayers' Funds

Taxpayers' Funds comprises:

Note 2007
$000		 2006
$000
General Funds
General funds as at 1 July 19,878 14,578
Net operating surplus/(deficit) (4,559) (5,773)
Provision for repayment of surplus to the Crown (3,320) (3,391)
Capital contribution from the Crown for working capital funding - 4,000
Capital contribution from the Crown for climate change register 1,200 1,300
Capital contribution from the Crown for memorandum account deficit funding 7,879 9,164
Asset/liability transfers between departments 19 (139) -
Total Taxpayers' Funds as at 30 June 20,939 19,878

9 Receivables and advances

2007
$000		 2006
$000
Third party debtors 4,757 3,953
Less: Provision for doubtful debts - (110)
Net 4,757 3,843
Inter-departmental debtors 629 250
Total Receivables and advances 5,386 4,093

10 Property, plant and equipment

Cost or Valuation
as at 30 June 2007
$000		 Accumulated Depreciation
as at 30 June 2007
$000		 Net Carrying Amount
as at 30 June 2007
$000		 Cost or Valuation
as at 30 June 2006
$000		 Accumulated Depreciation
as at 30 June 2006
$000		 Net Carrying Amount
as at 30 June 2006
$000
Buildings 43 41 2 43 40 3
Leasehold improvements 6,554 692 5,862 6,003 62 5,941
Computer equipment 16,260 10,804 5,456 14,437 8,636 5,801
Furniture and fittings 3,556 1,891 1,665 3,632 1,401 2,231
Office equipment 1,101 889 212 1,190 817 373
Test equipment 2,586 1,579 1,007 2,377 1,369 1,008
Motor vehicles 1,286 881 405 1,475 869 606
Work in progress 2,111 - 2,111 (94) - (94)
Total Property, plant and equipment 33,497 16,777 16,720 29,063 13,194 15,869

Leasehold improvements are stated at net current values determined by an independent registered valuer. A revaluation of all leasehold improvements was completed by Williams Valuations Ltd on 30 June 2006. Leasehold improvements are revalued every five years.

All other items of property, plant and equipment costing $2,000 (excluding GST) or more are capitalised and recorded at historical cost.

Work in progress is items of capital expenditure that are either under construction or not completed at balance date. It consists predominantly of computer equipment.

11 Intangible assets

Cost or Valuation
as at 30 June 2007
$000		 Accumulated Amortisation
as at 30 June 2007
$000		 Net Carrying Amount
as at 30 June 2007
$000		 Cost or Valuation
as at 30 June 2006
$000		 Accumulated Amortisation
as at 30 June 2006
$000		 Net Carrying Amount
as at 30 June 2006
$000
Computer software 17,433 8,656 8,777 14,132 6,610 7,522
Work in progress 4,881 - 4,881 2,993 - 2,993
Total Intangible assets 22,314 8,656 13,658 17,125 6,610 10,515

Bespoke software (custom-built in-house major registry applications), 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.

Work in progress is items of capital expenditure that are either under construction or not completed at balance date.

12 Creditors and payables

Note 2007
$000		 2006
$000
Trade creditors 5,380 5,012
Levies refundable 1,112 650
Accrued operating expenses 10,679 6,488
Provisions other 13 236 222
GST payable 415 362
17,822 12,734
Accruals for property, plant and equipment and intangible assets 54 613
Total Creditors and payables 17,876 13,347

13 Provisions other

2007
$000		 2006
$000
Restructuring provision
Opening balance - 627
Additional provision made in the year - 155
Charged against the provision in the year - (782)
Unused amounts reversed during the year - -
Total Restructuring provision - -

The restructuring provision arises from various organisational reviews being conducted in 2005/06 within the Ministry.

2007
$000		 2006
$000
Provision for onerous contracts
Opening balance 510 619
Additional provision made in the year - 326
Charged against the provision in the year (222) (226)
Unused amounts reversed during the year - (209)
Total Provision for onerous contracts 288 510
Represented by:
Current 182 222
Non-current 106 288
Total Provision for onerous contracts 288 510

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 three years, while the Boulcott Street liability will be incurred over the next year.

13 Provisions other (continued)

2007
$000		 2006
$000
Provision for rent
Opening balance - -
Additional provision made in the year 303 -
Charged against the provision in the year - -
Unused amounts reversed during the year - -
Total Provision for rent 303 -
Represented by:
Current 54 -
Non-current 249 -
Total Provision for rent 303 -

The rent provision arises from the rent-free period included in the lease of the IPONZ offices at 205 Victoria St, Wellington.

Note 2007
$000		 2006
$000
Provisions
Represented by:
Current 12 236 222
Non-current 355 288
Total Provisions 591 510

14 Unearned income

2007
$000		 2006
$000
Radio operations 3,873 3,226
Energy inspection - 1,152
Crown Minerals - 303
Total Unearned income 3,873 4,681

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.

15 Provision for employee entitlements

2007
$000		 2006
$000
Current liabilities
Retirement and long service leave 708 590
Annual leave 3,098 3,173
Total current portion 3,806 3,763
Non-current liabilities
Retirement and long service leave 3,325 2,794
Total non-current portion 3,325 2,794
Total Provision for employee entitlements 7,131 6,557

The current liability represents the amount due for potential settlement within the next 12 months.

16 Provision for payment of net surplus

2007
$000		 2006
$000
Net surplus/(deficit) (4,559) (5,773)
Add back deficit in:
Registration and Provision of Statutory Information memorandum account 5,941 7,233
Management and Enforcement of the Radiocommunications Act 1989 memorandum account 1,938 1,931
Total Provision for payment of net surplus 3,320 3,391

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 section 46 of 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

Following the 2005/06 review of the Electrical Workers Registration Board, the activities of this output expense were transferred to the Department of Building and Housing on 1 September 2006.

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.

2 Includes rates, power and water, cleaning services and other utility charges.


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