The Department of Internal Affairs

The Department of Internal Affairs

Te Tari Taiwhenua

Building a safe, prosperous and respected nation

 

Resource material › Corporate Publications › Part Five: Forecast Financial Statements

Financial Summary

Revenue

The Department of Internal Affairs expects to receive $197.070 million in revenue made up of:

  • 41% Crown
  • 6% government departments
  • 53% third parties.

Expenditure

The Department expects to incur expenses of $195.141 million to deliver goods and services through 18 Departmental output expenses across six Votes.

Investment

The Department expects to receive a capital injection from the Crown of $5.042 million in the 2006/07 financial year:

  • $3.019 million is to fund the Department's information technology infrastructure
  • $2.010 million is to fund a database to secure and protect New Zealanders' identity information
  • $0.013 million is to fund equipment required for monitoring of the Ruapehu Lahar.

Financial Forecast

2005/06 Budget (Supplementary Estimates) $000 2005/06 Estimated Actual $000 2006/07 Forecast (Main Estimates) $000 
Revenue Crown 83,892 83,892 81,122
Revenue third parties 99,076 95,076 115,948
Total Revenue 182,968 178,968 197,070
Less total expenses 187,317 181,317 195,141
Net Surplus/(Deficit) (4,349) (2,349) 1,929
Taxpayers' funds* 38,086 40,086 45,128

* (Crown's investment in the Department)

Percentage of Departmental Expense by Vote for 2006/07

Pie chart showing the percentage of departmental funds spent by Vote for 2006/07

Major Financial Changes

The main movements in Crown revenue between 2005/06 Supplementary Estimates ($83.892 million) and 2006/07 Main Estimates ($81.122 million) include:

  • a decrease in funding of $2.457 million relating to the Commission of Inquiry into Police Conduct
  • a decrease in funding of $925,000 relating to the Confidential Forum for Former Inpatients
  • a decrease in funding of $800,000 due to the National Civil Defence and Emergency Management Public Education Programme
  • a decrease in funding of $500,000 relating to the Working Group on Concerns of Viet Nam Veterans
  • an increase in funding of $841,000 to enhance the capability of the Ministry of Civil Defence and Emergency Management
  • a decrease in funding of $500,000 for the direct costs associated with anticipated visits and ceremonies, and the Commemorative Event Programme
  • an increase in funding of $500,000 for the “public good” components of the marriage and civil union registration processes
  • an increase in funding of $500,000 for additional staff to support the incoming Executive of the current Parliament
  • an increase in funding of $360,000 to increase the staff capacity and capability within the Visits and Ceremonial Office
  • an increase in funding of $200,000 for updating and providing ongoing support for the website CommunityNet Aotearoa
  • an increase in funding of $200,000 for development of Evidence of Identity technical infrastructure
  • an increase in funding of $100,000 for Evidence of Identity Custodianship of Standard.

Statement of Significant Underlying Assumptions

These forecast financial statements comply with generally accepted accounting practice.

The measurement base applied is historical cost adjusted for revaluations of assets. Revaluations are made to reflect the forecast service potential or economic benefit to be obtained through the control of assets.

These statements have been prepared on an ongoing basis for the period 1 July 2006 to 30 June 2007. Accrual accounting has been used to prepare these financial statements.

Statement of Significant Accounting Policies

Reporting Framework

The forecast financial statements for the Department of Internal Affairs have been prepared in accordance with section 38 of the Public Finance Act 1989.

The reporting entity is the Department of Internal Affairs. The reporting entity consists of those activities represented by outputs supplied by the Department and related assets, liabilities and taxpayers' funds.

The forecast financial statements show the financial performance and financial position after eliminating all significant intra-entity transactions between output expenses.

Actual results for 2006/07 are likely to vary from the information presented and the variations could be material. These variations would be mainly attributed to changes in the level of demand for services produced by the Department.

Inventories

Inventories or stock holdings are stated at the lower of cost or net realisable value. Costs are determined on a “first in, first out” basis.

Accounts Receivable

Accounts receivable are shown at expected net realisable value after making allowance for doubtful debts.

Financial Instruments

The Department is party to financial instrument arrangements as part of its daily operations. These include bank balances, accounts receivable, accounts payable and provisions, accrued expenses and foreign currency. Financial instruments are recognised in the Statement of Forecast Financial Position, except for foreign-exchange contracts.

All revenue and expenses in relation to financial instruments are recognised in the Statement of Forecast Financial Performance.

Capital Expenditure

The Departmental capital expenditure is incurred in accordance with section 24 of the Public Finance Act 1989.

Property, Plant and Equipment

Land and buildings are recorded at fair value, which has been determined by reference to the highest and best use of those assets, with buildings subsequently depreciated over their useful lives. Valuations are undertaken on a systematic basis, with sufficient regularity to ensure that no individual item of property, plant or equipment within a class is included at a valuation that is materially different from its fair value, at a minimum of every five years. Antiques and works of art are recorded at fair value and are not depreciated. All other fixed assets costing more than $3,000 are capitalised at cost and subsequently depreciated over their useful lives. Capital work in progress is recognised as costs are incurred. Depreciation is not recorded until the asset is fully acceptance tested and operational.

Depreciation

Depreciation is charged on all fixed assets except land, antiques and works of art, and capital work in progress. Assets are depreciated on a straight-line basis over their estimated useful life after allowing for residual values where appropriate. Revalued assets are depreciated on their revalued amount on a straight-line basis over their estimated useful life.

The estimated useful life of the different categories of assets owned by the Department is:

Buildings 33 years
Plant and equipment 5-20 years
Furniture and fittings 5-10 years
Office equipment 5-10 years
Motor vehicles 4-6 years
Information technology equipment 3-5 years
Information technology software 3-5 years
Births, Deaths and Marriages Historical Records Database 10 years

The cost of leasehold improvements is capitalised and amortised over the unexpired period of the lease or the estimated remaining useful life of the improvements, whichever is the shorter.

Capital work in progress is not depreciated. The total cost of the capital project is transferred to the appropriate asset on its completion and then depreciated.

Leases

The Department leases accommodation, motor vehicles and office equipment.

Operating Leases

The accommodation and motor vehicle leases are operating leases, where the lessor effectively retains substantial risks and benefits of ownership of the leased items. Operating lease costs are expensed in the period in which they are incurred.

Finance Leases

Leases which effectively transfer to the Department substantially the entire risks and benefits resulting from ownership of the leased items are classified as finance leases. These are capitalised at the lower of the fair value of the asset or the present value of the minimum lease payments. The leased assets and the corresponding lease liabilities are recognised in the Statement of Forecast Financial Position. The leased assets are depreciated over the life of the lease. Office equipment leases are identified as finance leases.

Employee Entitlements

Employee entitlements are recognised for annual leave at the time of entitlement based on current rates of pay. Retirement and long service leave are recognised on an actuarial basis according to entitlement based on service to date after making allowance for the average attrition rate.

Revenue Received in Advance

Revenue received in advance arises from services, such as passports and citizenship applications, required to be paid for at the time of application but are not delivered immediately. Revenue is recognised at time of service delivery.

Cost Allocation

The methods used in the allocation of costs are consistent between projected (budgeted) and actual figures. Costs of outputs are derived using the following cost-allocation system:

“Direct costs” are those costs directly attributed to an output and are treated as follows.

  • Personnel costs are allocated on the basis of estimated time engaged in the delivery of a particular output.
  • Operating costs are allocated on the basis of usage.
  • Depreciation and capital charge are allocated on the basis of estimated asset utilisation.
  • Accommodation costs are allocated on the basis of floor space occupied.

“Indirect costs” are those costs incurred by support units that are not directly attributable to an output.

  • Indirect costs are allocated to outputs on an activity-costing basis reflecting a mix of perceived benefit, personnel numbers, floor space and estimated allocation of time.

Taxation

The Department is exempt from the payment of income tax in terms of the Income Tax Act 1994. 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 (PAYE) tax.

Goods and Services Tax

The Departmental financial statements are prepared GST exclusive. The amount of GST owing to or from Inland Revenue at balance date is included in accounts receivable or payable as appropriate.

Foreign Currency Transactions

Foreign-exchange contracts are entered into for the primary purpose of reducing material exposure to fluctuations in foreign-currency exchange rates. The rates specified in foreign-exchange contracts are used to convert the transaction into New Zealand currency at the date of settlement. No exchange gains or losses resulting from the difference between the foreign-exchange contract rate and the spot-exchange rate on dates of settlement are recognised. Unhedged transactions in foreign currencies are converted into New Zealand currency using the exchange rate on the date of the transaction.

Monetary assets denominated in a foreign currency are translated to New Zealand dollars at the closing midpoint exchange rate.

Unrealised foreign-exchange gains and losses on overseas cash balances are recognised at balance date in the Statement of Forecast Financial Performance.

Changes in Accounting Policies

There are no changes in accounting policies for the 2006/07 financial year. The accounting policies have been applied on a basis consistent with the previous year.

Forecast Financial Performance

Statement of Forecast Financial Performance

for the year ending 30 June 2007

2005/06 Budget (Supplementary Estimates) $000 2005/06 Estimated Actual $000 2006/07 Forecast (Main Estimates) $000 
Revenue
Crown 83,892 83,892 81,122
Departments 10,980 10,980 10,939
Other 88,096 84,096 105,009
Total Revenue 182,968 178,968 197,070
Expenses
Personnel 97,401 94,901 99,374
Operating 81,144 77,644 83,011
Depreciation 6,302 6,302 9,573
Capital charge 2,470 2,470 3,183
Total Output Expenses 187,317 181,317 195,141
Net Surplus/(Deficit) (4,349) (2,349) 1,929

Forecast Financial Position

Statement of Forecast Financial Position

as at 30 June 2007

2005/06 Budget (Supplementary Estimates) $000 2005/06 Estimated Actual $000 2006/07 Forecast (Main Estimates) $000 
Assets
Current Assets
Cash and bank balances 20,898 22,898 31,187
Prepayments 110 110 85
Inventories 2,316 2,316 2,316
Accounts receivable 2,687 2,687 2,685
Total Current Assets 26,011 28,011 36,273
Non-current Assets
Leased assets 42 42 0
Property, plant and equipment 40,909 40,909 46,166
Total Non-current Assets 40,951 40,951 46,166
Total Assets 66,962 68,962 82,439
Liabilities
Current Liabilities
Accounts payable 4,872 4,872 8,281
Provisions 2,190 2,190 2,190
Provision for payment of surplus 0 0 1,929
Accrued expenses 10,763 10,763 13,778
Finance leases 42 42 0
Revenue received in advance 10,500 10,500 10,500
Total Current Liabilities 28,367 28,367 36,678
Term Liabilities
Employee entitlements 509 509 633
Total Term Liabilities 509 509 633
Total Liabilities 28,876 28,876 37,311
Taxpayers' Funds
General funds 37,269 39,269 44,311
Revaluation reserve 817 817 817
Total Taxpayers' Funds 38,086 40,086 45,128
Total Liabilities and Taxpayers' Funds 66,962 66,962 82,439

Forecast Cash Flows

Statement of Forecast Cash Flows

for the year ending 30 June 2007

2005/06 Budget (Supplementary Estimates) $000 2005/06 Estimated Actual $000 2006/07 Forecast (Main Estimates) $000 
Cash Flows from Operating Activities
Cash provided from:
Supply of outputs to:
Crown 83,892 83,892 81,122
Departments 12,223 12,223 10,939
Other 87,347 83,347 105,011
Cash disbursed to:
Cost of producing outputs:
Output expenses (183,200) (177,200) (175,854)
Capital charge (2,470) (2,470) (3,183)
Net Cash Flows from Operating Activities (2,208) (208) 18,035
Cash Flows from Investing Activities
Cash provided from:
Sale of property, plant and equipment 1,130 1,130 440
Cash disbursed to:
Purchase of property, plant and equipment (21,502) (21,502) (15,228)
Net Cash Flows from Investing Activities (20,372) (20,372) (14,788)
Cash Flows from Financing Activities
Cash provided from:
Capital injection from the Crown 11,856 11,856 5,042
Cash disbursed to:
Payment of surplus to the Crown (217) (217) 0
Net Cash Flows from Financing Activities 11,639 11,639 5,042
Net increase/(decrease) in cash held (10,941) (8,941) 8,289
Total cash balances as at 1 July 31,839 31,839 22,898
Closing Total Cash Balances as at 30 June Projected 20,898 22,898 31,187

Reconciliation of Forecast Net Cash Flows

Reconciliation of Forecast Net Cash Flows

from operating activities to net surplus/(deficit) in the Statement of Forecast Financial Performance for the year ending 30 June 2007

2005/06 Budget (Supplementary Estimates) $000 2005/06 Estimated Actual $000 2006/07 Forecast (Main Estimates) $000 
Surplus/(Deficit) from Statement of Financial Performance (4,349) (2,349) 1,929
Add non-cash items
Depreciation 6,302 6,302 9,573
Movements in working capital items
(Increase)/Decrease in accounts receivable 485 485 2
(Increase)/Decrease in prepayments 52 52 25
(Increase)/Decrease in inventories (315) (315) 0
Increase/(Decrease) in accounts payable (3,731) (3,731) 3,409
Increase/(Decrease) in provisions 257 257 0
Increase/(Decrease) in accrued expenses 1,054 1,054 3,015
Increase/(Decrease) in finance leases (215) (215) (42)
Increase/(Decrease) in revenue received in advance (1,019) (1,019) 0
Increase/(Decrease) in employee entitlements (365) (365) 124
Non-operating items included above
(Increase)/Decrease in accounts payable for property, plant and equipment 225 225 0
Transfer of non-cash current assets and liabilities to other departments (589) (589) 0
Net Cash Flows from Operating Activities (2,208) (208) 18,035

Forecast Movement in Taxpayers' Funds

Statement of Forecast Movement in Taxpayers' Funds (Equity)

for the year ending 30 June 2007

2005/06 Budget (Supplementary Estimates) $000 2005/06 Estimated Actual $000 2006/07 Forecast (Main Estimates) $000 
Net surplus/(deficit) for the year (4,349) (2,349) 1,929
Total Recognised Revenue and Expenses (4,349) (2,349) 1,929
Capital injection 11,856 11,856 5,042
Provision for payment of surplus 0 0 (1,929)
Asset/Liability transfers between departments (603) (603) 0
Movement in Taxpayers' Funds for the Year 6,904 8,904 5,042
Taxpayers' Funds as at 1 July 31,182 31,182 40,086
Taxpayers' Funds as at 30 June 38,086 40,086 45,128

Forecast Property, Plant and Equipment

Statement of Forecast Property, Plant and Equipment

by category for the year ending 30 June 2007

Estimated Actual 30 June 2006 Forecast 30 June 2007
Cost or Valuation $000 Accumulated Depreciation $000 Carrying Amount $000 Cost or Valuation $000 Accumulated Depreciation $000 Carrying Amount $000
Land 3,930 0 3,930 3,930 0 3,930
Buildings 2,669 57 2,612 2,669 133 2,536
Building alterations 6,505 2,013 4,492 6,505 3,274 3,231
Antiques and works of art 408 0 408 408 0 408
Furniture and fittings 577 386 191 587 418 169
Office equipment 1,046 708 338 1,176 820 356
Plant and equipment 963 390 573 966 466 500
Information technology hardware 12,095 8,415 3,680 15,254 9,631 5,623
Information technology software 32,672 10,288 22,384 43,647 16,402 27,245
Leased equipment 427 385 42 427 427 0
Motor vehicles 3,994 1,693 2,301 4,078 1,910 2,168
Total Property, Plant and Equipment 65,286 24,335 40,951 79,647 33,481 46,166

Capital Expenditure

Capital Expenditure Summary

for the period 2001/02 to 2006/07

2001/02 Actual $000 2002/03 Actual $000 2003/04 Actual $000 2004/05 Actual $000 2005/06 Estimated Actual $000 2006/07 Forecast (Main Estimates) $000 
Building alterations 142 1,707 1,217 312 3,410 90
Information technology hardware 99 20 108 963 2,570 3,145
Information technology software 4,857 2,599 5,706 4,660 13,004 10,891
Motor vehicles 1,144 875 1,677 691 1,916 948
Plant and equipment 209 37 254 163 377 154
Total Capital Expenditure 6,451 5,238 8,962 6,789 21,277 15,228

The majority of capital expenditure forecast for 2006/07 is for the upgrade and development of information systems, databases and infrastructural information technology systems to enable the Department to provide quality information in an efficient manner and therefore aid in the production of efficient and effective services and quality policy advice.

Financial Results

Forecast Financial Results for the Department

for the year ending 30 June 2007

Unit 2005/06 Budget (Supplementary Estimates) 2005/06 Estimated Actual 2006/07 Forecast (Main Estimates)
Operating Results
Revenue: other $000 88,096 84,096 105,009
Revenue: Department $000 10,980 10,980 10,939
Total expenses $000 187,317 181,317 195,141
Operating surplus before capital charge $000 (1,879) 121 5,112
Net Surplus/(Deficit) $000 (4,349) (2,349) 1,929
Working Capital
Liquid ratio 0.74:1 0.81:1 0.85:1
Current ratio 0.92:1 0.99:1 0.99:1
Average debtors outstanding Days 11 11 8
Average creditors outstanding Days 30 32 29
Resource Utilisation
Property, plant and equipment
Property, plant and equipment as % of total assets % 61 59 56
Additions as % of property, plant and equipment % 53 53 33
Taxpayers' funds
Level at year-end $000 38,086 40,086 45,128
Forecast Net Cash Flows
Surplus/(Deficit) from operating activities $000 (2,208) (208) 18,035
Deficit from investing activities $000 (20,372) (20,372) (14,788)
Surplus/(Deficit) from financing activities $000 11,639 11,639 5,042
Net increase/(decrease) in cash held $000 (10,941) (8,941) 8,289

Forecast Statement of Commitments

Forecast Statement of Commitments

as at 30 June 2007

2005/06 Estimated Actual $000 2006/07 Forecast (Main Estimates) $000 
OPERATING COMMITMENTS
Non-cancellable Accommodation Leases
Less than one year 7,091 5,833
One to two years 6,367 1,996
Two to five years 6,234 3,468
Over five years 1,102 319
Total Accommodation Commitments 20,794 11,616
Other Non-cancellable Leases
Less than one year 438 357
One to two years 269 11
Two to five years 11 0
Total Other Lease Commitments 718 368
Non-cancellable Contracts for the Supply of Goods and Services 
Less than one year 1,369 1,343
Total Supply Commitments 1,369 1,343
Total Commitments 22,881 13,327

Memorandum Accounts

Forecast for the year ending 30 June 2007

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

Forecast Closing Balance 30/06/2006 $000 Forecast Movement During 2006/07 $000 Forecast Closing Balance 30/06/2007 $000
New Zealand Gazette 16 0 16
Use of facilities and access to Lake Taupo by boat users 39 (24) 15
Passport products 1,056 4,362 5,418
Citizenship products (2,439) (59) (2,498)
Marriage products 438 (152) 286
Issue of birth, death and marriage certificates and other products 1,646 (276) 1,370
Administration of non-casino gaming (3,580) (2,889) (6,469)

This statement is to be read in conjunction with the Statement of Accounting Policies and Notes to the Financial Statements. The Memorandum Accounts were established on 30 June 2002.

Action Taken to Address Surpluses and Deficits

New Zealand Gazette

The cost of publishing and distributing the New Zealand Gazette is recovered through third party fees. The surplus generated in any one year is to be offset against costs in future years. The accumulated surplus will be examined in the next pricing review.

Use of Facilities and Access to Lake Taupo by Boat Users

The Department of Internal Affairs manages marina berths, jetties and boat ramps located around Lake Taupo. Fees are charged to third parties who use marina berths and boat ramps. Fee income is applied to recover the maintenance and administration cost of these facilities. The accumulated surplus will be applied to maintenance of facilities. Major items of maintenance occur at irregular intervals and may be deferred due to unfavourable climatic or lake conditions.

Passport Products

The purpose of this account is 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. The current fees schedule was introduced on 4 November 2005. The forecast accumulated surplus on this account, along with underlying assumptions about the forecast number of passports to be issued, will be examined in the next pricing review.

Citizenship Products

The purpose of this account is to support a strategy to stabilise fees based on full cost recovery over a four to five-year planning horizon. The accumulated forecast deficit in this account reflects the period of time when citizenship fees were not based on full cost recovery and volumes were lower than those used for pricing purposes. The current fees schedule was introduced on 1 September 2003 based on full cost recovery. The forecast accumulated deficit in this account will be examined in the next pricing review.

Marriage Products

The current fees schedule for marriage products was introduced on 1 September 2003 based on full cost recovery. The small forecast surplus in this account reflects volume increases over levels assumed for pricing purposes. The purpose of this account is to support a strategy to stabilise fees based on full cost recovery over a four to five-year planning horizon. The forecast accumulated surplus in this account will be examined in the next pricing review.

Issue of Birth, Death and Marriage Certificates and Other Products

The fees schedule for birth, death and marriage products was introduced on 1 September 2003 based on full cost recovery. The small forecast deficit in this account reflects volume decreases over levels assumed for pricing purposes. The purpose of this account is to support a strategy to stabilise fees based on full cost recovery over a four to five-year planning horizon. The forecast accumulated surplus in this account will be examined in the next pricing review.

Administration of Non-casino Gaming

Fees established to recover the cost of administration and regulation of non-casino gaming are reflected in specific licence fees for various types of gaming activity and the registration of gaming machines. The fees schedule has recently been implemented as part of the implementation of the Gambling Act 2003 with effect from 1 July 2004. In setting the fees, costs and revenue were forecast to offset over a six-year planning horizon as the electronic monitoring of gaming machines is phased in during 2006/07.

Forecast Financial Performance for Each Output Expense

Forecast Financial Performance for Each Output Expense

for the year ending 30 June 2007

Departmental Output Expense Revenue Crown $000 Revenue Depts $000 Revenue Other $000 Total Expenses $000 Surplus/ (Deficit) $000 Output Expense Descriptions Links
Vote Community and Voluntary Sector
Administration of Grants 4,340 465 7,102 11,905 2 Link
Community Advisory Services 5,402 114 9 5,526 (1) Link
Policy Advice – Community 1,660 24 0 1,685 (1) Link
Vote Emergency Management
Management of National Emergency Readiness, Response and Recovery 3,312 24 0 3,336 0 Link
Policy Advice – Emergency Management 1,766 14 0 1,780 0 Link
Support Services, Information and Education 5,509 28 0 5,539 (2) Link
Vote Internal Affairs
Gaming and Censorship Regulatory Services 1,916 219 18,277 22,340 (1,928) Link
Identity Services 8,416 1,085 77,552 83,175 3,878 Link
Information and Advisory Services 498 642 594 1,733 1 Link
Policy Advice – Internal Affairs 4,811 90 0 4,901 0 Link
Services for Ethnic Affairs 2,660 518 0 3,179 (1) Link
Contestable Services 0 144 791 935 0 Link
Vote Local Government
Information, Support and Regulatory Services 3,999 91 562 4,670 (18) Link
Policy Advice – Local Government 7,317 69 0 7,386 0 Link
Vote Ministerial Services
Support Services to Ministers 25,908 303 35 26,245 1 Link
VIP Transport 0 7,093 82 7,175 0 Link
Visits and Official Events Coordination 3,396 12 5 3,414 (1) Link
Vote Racing
Policy Advice – Racing 212 4 0 217 (1) Link
TOTAL DEPARTMENT 81,122 10,939 105,009 195,141 1,929