The Department of Internal Affairs

The Department of Internal Affairs

Te Tari Taiwhenua

Building a safe, prosperous and respected nation

 

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Financial Information

Accounting Policies
Financial Performance
Financial Position
Cash Flows
Net Surplus to Net Cash Flow from Operating Activities
Movements in Taxpayers’ Funds
Commitments
Contingent Assets and Liabilities
Unappropriated Expenditure
Memorandum Accounts
Departmental Appropriations and Expenditure

(in Section 5 - Notes):

Notes to the Financial Statements
Departmental Financial Results
Non-Departmental Statement of Accounting Policies
Non-Departmental Financial Statements and Schedules
Non-Departmental Schedule of Expenses
Schedule of Non-Departmental Expenditure and Appropriations
Statement of Non-Departmental Unappropriated Expenditure
Schedule of Non-Departmental Assets
Schedule of Non-Departmental Liabilities
Statement of Non-Departmental Commitments
Statement of Non-Departmental Contingent Assets and Liabilities
Notes to the Non-Departmental Financial Statements
Trust Money Administered on behalf of the Crown


Statement of Accounting Policies
For the year ended 30 June 2005

Reporting Entity

The Department of Internal Affairs is a Government Department as defined by the Public Finance Act 1989. These financial statements have been prepared in accordance with the Public Finance Act 1989.

In addition, the Department has reported the Crown activities and trust monies which it administers.

Measurement Base

The measurement base adopted is that of historical cost, modified by the revaluation of land, buildings, antiques and works of art.

Accounting Policies

The following particular accounting policies which materially affect the measurement of financial results and financial position have been applied.

Budget Figures

The budget figures are those presented in the Budget Night Estimates (Main Estimates) and those amended by the Supplementary Estimates (Supp Estimates).

Revenue

The Department derives revenue through the provision of outputs to the Crown, and for services to third parties. Such revenue is recognised when earned and is reported in the financial period to which it relates.

Taxpayers’ Funds

This is the Crown’s net investment in 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.

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, 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 the 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 lives are as follows:

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
IT Equipment and 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 incident to 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 Financial Position. The leased assets and leased liabilities depreciate over the period the Department is expected to benefit from their use. 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.

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.

For the year ended 30 June 2005, direct costs accounted for 86% of the Department’s costs (2003/04 85%). Direct costs include personnel, operating, capital charge, accommodation and depreciation.

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 tax (PAYE).

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 liabilities are disclosed at the time at which the contingency becomes evident. These are disclosed in the Statement of Contingent Assets and Liabilities.

Goods and Services Tax (GST)

The Statement of Appropriations is GST inclusive. The Statement of Financial Position is exclusive of GST, except for creditors and payables and debtors and receivables, which are GST inclusive. All other statements are GST exclusive.

The amount of GST owing to or from Inland Revenue at balance date is included in accounts receivable or payable (as appropriate).


Financial Instruments

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

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

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 mid-point exchange rate.

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

Changes in Accounting Policies

There have been no changes in accounting policies since the last audited financial statements. The accounting policies have been applied on a basis consistent with the previous year.







Statement of Financial Performance
For the year ended 30 June 2005
Note
Actual
Main
Supp.
Actual
Estimates
Estimates
18a
2004/05
2004/05
2004/05
2003/04
$000
$000
$000
$000
Revenue
Crown
77,860
71,543
77,861
68,787
Third Parties
1
78,033
70,769
81,597
70,347
Revaluation Gain
0
0
0
728
Total Revenue
155,893
142,312
159,458
139,862
Expenses
Personnel
81,965
76,432
84,640
74,716
Operating
2
66,409
62,156
72,103
57,502
Depreciation
3
5,019
5,282
5,333
3,863
Capital Charge
4
2,283
2,184
2,283
2,321
Total Operating Expenses
155,676
146,054
164,359
138,402
Net Surplus/(Deficit)
217
(3,742)
(4,901)
1,460

The above statement is to be read in conjunction with the notes to the financial statements.




Statement of Financial Position
As at 30 June 2005
Note
Actual
Main
Supp.
Actual
Estimates
Estimates
18b
2004/05
2004/05
2004/05
2003/04
$000
$000
$000
$000
Assets
Current Assets
Cash and Bank Balances
5
31,839
5,855
14,220
25,335
Accounts Receivable
6
3,172
1,204
1,222
1,911
Inventories
7
2,001
3,998
611
1,531
Prepayments
162
11
67
192
Total Current Assets
37,174
11,068
16,120
28,969
Non Current Assets
8
Leased Assets
257
295
243
565
Property, Plant and Equipment
26,863
26,117
33,980
25,121
Total Non Current Assets
27,120
26,412
34,223
25,686
Total Assets
64,294
37,480
50,343
54,655
Liabilities and Taxpayers' Funds
Current Liabilities
Accounts Payable
10
8,603
2,653
2,723
6,039
Provisions
11
1,933
1,056
1,704
1,382
Revenue Received in Advance
11,519
4,336
8,485
6,408
Accrued Expenses
12
9,709
8,163
10,174
10,067
Finance Leases
9
217
230
202
322
Provision for Payment of Surplus
13a
217
0
0
870
Total Current Liabilities
32,198
16,438
23,288
25,088
Term Liabilities
Finance Leases
9
40
65
41
243
Employee Entitlements
14
874
623
782
782
Total Term Liabilities
914
688
823
1,025
Total Liabilities
33,112
17,126
24,111
26,113
Taxpayers' Funds
15
General Funds
30,365
20,096
25,464
27,774
Revaluation Reserve
817
258
768
768
Total Taxpayers' Funds
31,182
20,354
26,232
28,542
Total Liabilities and Taxpayers' Funds
64,294
37,480
50,343
54,655


The above statement is to be read in conjunction with the notes to the financial statements.





Statement of Cash Flows
For the year ended 30 June 2005
Note
Actual
Main
Supp.
Actual
Estimates
Estimates
18c
2004/05
2004/05
2004/05
2003/04
$000
$000
$000
$000
Cash Flows from Operating Activities
Cash was Provided from:
Supply of Outputs to the Crown
77,860
71,543
77,861
68,787
Supply of Outputs to Third Parties
81,883
71,439
82,301
74,497
159,743
142,982
160,162
143,284
Cash was Disbursed to:
Costs of Producing Outputs
(145,738)
(140,513)
(156,252)
(129,781)
Capital Charge
(2,283)
(2,184)
(2,283)
(2,321)
(148,021)
(142,697)
(158,535)
(132,102)
Net Cash Flows from Operating Activities
11,722
285
1,627
11,182
Cash Flows from Investing Activities
Cash was Provided from:

Sale of Property, Plant and Equipment
354
527
346
1,487
Cash was Disbursed to:
Purchase of Property, Plant and Equipment
(7,293)
(6,425)
(14,947)
(8,962)
Net Cash Flows from Investing Activities
(6,939)
(5,898)
(14,601)
(7,475)
Cash Flows from Financing Activities
Cash was Provided from:
Capital Contribution
2,591
637
2,591
0
Cash was Disbursed to:
Payment of Net Surplus
(870)
0
(730)
(4,459)
Net Cash Flows from Financing Activities
1,721
637
1,861
(4,459)
Net Increase/(Decrease) in Cash Held
6,504
(4,976)
(11,113)
(752)
Add Opening Cash
25,335
10,831
25,333
26,087
Closing Cash and Bank Balances
31,839
5,855
14,220
25,335


The above statement is to be read in conjunction with the notes to the financial statements.





Reconciliation of Net Surplus to Net Cash Flow from Operating Activities
For the year ended 30 June 2005
Actual
Main
Supp.
Actual
Estimates
Estimates
2004/05
2004/05
2004/05
2003/04
$000
$000
$000
$000
Surplus From Statement of Financial Performance
217
(3,742)
(4,901)
1,460
Add/(Deduct) Non Cash Items
Depreciation
5,019
5,282
5,333
3,863
Revaluation Gain on Properties
0
0
0
(728)
Increase/(Decrease) in Employee Entitlements
(132)
0
0
(1,256)
Unrealised Foreign Exchange (Gain)/Loss
0
0
0
0
4,887
5,282
5,333
1,879
Add/(Deduct) Movements in Working Capital Items
(Increase)/Decrease in Accounts Receivable
(1,261)
679
814
(159)
(Increase)/Decrease in Inventories
(470)
(1,841)
920
317
(Increase)/Decrease in Prepayments
30
0
0
102
Increase/(Decrease) in Accounts Payable
2,765
(1,365)
(3,290)
917
Increase/(Decrease) in Revenue Received
in Advance
5,111
0
0
3,788
Increase /(Decrease) in Accrued Expenses
(134)
1,272
2,750
2,672
Increase /(Decrease) in Provisions
551
0
0
891
Movement in Working Capital
6,592
(1,255)
1,194
8,528
Add/(Deduct) Items Classified as Investing Activities
Loss/(Gain) on Sale of Property, Plant
and Equipment
31
0
1
(264)
(Increase)/Decrease in Accounts Payable for
Property, Plant and Equipment
(5)
0
0
(421)
26
0
1
(685)
Net Cash Flows From Operating Activities
11,722
285
1,627
11,182

The above statement is to be read in conjunction with the notes to the financial statements.





Statement of Movements in Taxpayers’ Funds
For the year ended 30 June 2005
Note
Actual
Main
Supp.
Actual
Estimates
Estimates
2004/05
2004/05
2004/05
2003/04
$000
$000
$000
$000
Net Surplus/(Deficit) for the year
13a
217
(3,742)
(4,901)
1,460
Net transfers from Revaluation Reserve
0
0
0
140
Increase/(decrease) in Revaluation Reserve
49
0
0
510
Total Recognised Revenue and Expenses
266
(3,742)
(4,901)
2,110
Capital Contribution
13b
2,591
637
2,591
0
Provision for Payment of Surplus
13a
(217)
0
0
(870)
Movement in Taxpayers' Funds for the year
2,640
(3,105)
(2,310)
1,240
Taxpayers’ Funds as at 1 July
28,542
23,459
28,542
27,302
Taxpayers’ Funds as at 30 June
31,182
20,354
26,232
28,542


The above statement is to be read in conjunction with the notes to the financial statements.




Statement of Commitments
As at 30 June 2005
Actual
Actual
2004/05
2003/04
$000
$000
Operating Commitments
Non-Cancellable Accommodation Leases
Less than one year
6,584
6,167
One to two years
5,899
5,374
Two to five years
7,211
10,183
Over five years
1,184
1,404
Total Accommodation Commitments
20,878
23,128
Other Non-Cancellable Leases
Less than one year
555
234
One to two years
330
87
Two to five years
264
3
Total Other Lease Commitments
1,149
324
Non-Cancellable Contracts for
Goods and Services
Less than one year
3,421
5,731
One to two years
0
3,090
Two to five years
0
13
Total Goods and Services Commitments
3,421
8,834
Total Commitments
25,448
32,286






Statement of Contingent Assets and Liabilities
As at 30 June 2005
Actual
Actual
2004/05
2003/04
$000
$000
Legal Proceedings and Disputes
Personnel Issues
0
20
Legal Disputes
69
197
Total Contingent Liabilities
69
217

Unquantified Contingent Liabilities
There are several personal grievance cases brought or pending against the Department which have not been quantified due to the nature of the issues and the uncertainty of the outcomes. While an estimate of the financial effect cannot be made, management believes the resolution of these cases will not have a materially adverse effect on the financial statements of the Department.

There were no Contingent Assets for the year ended 30 June 2005 or the previous financial year.




Statement of Unappropriated Expenditure
For the year ended 30 June 2005

The Statement of Unappropriated Expenditure details the amount of expenditure incurred above appropriation.

There was no departmental unappropriated expenditure for the year ended 30 June 2005 or the previous financial year.





Memorandum Accounts
For the year ended 30 June 2005

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.

Closing
Movement
Closing
Balance
During
Balance
30/06/2004
2004/05
30/06/2005
$000
$000
$000
New Zealand Gazette
216
(163)
53
Use of facilities and access to Lake Taupo by boat users
25
7
32
Passport products
7,404
(3,843)
3,561
Citizenship products
(4,603)
695
(3,908)
Marriage products
216
193
409
Issue of Birth, Death and Marriage certifications and other products
(291)
974
683
Administration of non-casino gaming
(567)
(661)
(1,228)

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 year is to be offset against costs in future years. Fees are reviewed regularly.

Use of facilities and access to Lake Taupo by boat users

The Department of Internal Affairs manages marina berths, jetties and boat ramps located about 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. Operating surpluses in any year will be applied in the subsequent financial year to offset maintenance that may have been 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 4 to 5 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 approved with effect from 1 September 2003. The accumulated surplus is expected to continue to reduce in 2005/06 as the set-up costs of new systems are incurred.

Citizenship Products

The opening deficit in this account reflects the current level of citizenship fees that are not based on full cost recovery. The purpose of this account is to support a strategy to stabilise fees based on full cost recovery over a 4 to 5 year planning horizon.

The current fees schedule was approved with effect from 1 September 2003 to recover full costs. The trend of a reducing accumulated deficit is expected to continue.

Marriage Products

The purpose of this account is to support a strategy to stabilise fees based on full cost recovery over a 4 to 5 year planning horizon.

The current fees schedule was approved with effect from 1 September 2003 to recover full costs.

Births, Deaths and Marriages Certificates, and Other Products

The purpose of this account is to support a strategy to stabilise fees based on full cost recovery over a 4 to 5 year planning horizon. This strategy includes the introduction of new technologies that allow greater access by applicants through the internet.

The current fees schedule was approved with effect from 1 September 2003 to recover full costs.

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 differing types of gaming activity and the registration of gaming machines. The accumulated deficit is expected to reduce to zero over time.

The current fees schedule was approved with effect from 1 July 2004.





Statement of Departmental Appropriations and Expenditure
For the year ended 30 June 2005
(Figures are GST inclusive)
Note
Actual
Main
Supp.
Actual
Estimates
Estimates
2004/05
2004/05
2004/05
2003/04
$000
$000
$000
$000
Appropriations for Classes of Outputs
to be supplied by the Department
Vote Internal Affairs
17a
D1Policy Advice- Internal Affairs
4,108
3,911
4,653
4,845
D2Information and Advisory Services
3,798
3,038
3,936
2,653
D3Gaming and Censorship Regulatory Services
18,372
17,202
18,376
15,073
D4Identity Services
59,976
54,030
64,564
56,341
D5Services relating to Ethnic Affairs
2,777
2,606
2,781
2,093
D6Weathertight Homes Resolution Service
17,285
15,315
18,448
10,968
D7Contestable Services
1,712
936
1,684
1,355
Vote Emergency Management
17b
D1Policy Advice - Emergency Management
1,225
748
1,228
781
D2Support Services, Information and Education
3,557
3,877
3,563
3,842
D3Management of National Emergency Readiness, Response and Recovery
2,004
1,683
2,016
1,598
Vote Local Government
17c
D1Policy Advice - Local Government
4,627
5,042
5,173
3,577
D2Information, Support and Regulatory Services - Local Government
4,565
4,472
5,479
3,117
Vote Ministerial Services
17d
D1Support Services to Ministers
24,607
24,870
24,910
23,096
D2Visits and Official Events Co-ordination
3,253
2,386
3,165
2,688
D3VIP Transport
6,368
6,093
6,387
6,357
Vote Racing
17c
D1Policy Advice – Racing
212
216
217
200
Vote Community and Voluntary Sector
17e
D1Policy Advice – Community
1,273
1,259
1,323
765
D2Administration of Grants
11,185
11,076
11,292
11,344
D3Community Advisory Services
4,916
5,085
5,098
4,961
Total Appropriations for Classes of Outputs to be Supplied by the Department
19
175,820
163,845
184,293
155,654
Total Department Appropriations
175,820
163,845
184,293
155,654

Vote Internal Affairs – D7 Contestable Services
Expenditure above budget is permitted for this Mode B output class under the Public Finance Act 1989.

Vote Ministerial Services – D2 Visits and Official Events Co-ordination
Expenditure above budget was addressed through a fiscally neutral transfer which was approved after Supplementary Estimates. Details of this follow.

Fiscally neutral transfers under the Public Finance Act 1989
Actual
Supp.
Transfers
Final
Estimates
Voted
2004/05
2004/05
2004/05
2004/05
$000
$000
$000
$000
Vote Ministerial Services
D1Support Services to Ministers
24,607
24,910
(119)
24,791
D2Visits and Official Events Co-ordination
3,253
3,165
119
3,284


During the 2004/05 year there were a number of unanticipated guests of government visits. The programme was reviewed in April 2005 and an additional $0.779m was approved in the Supplementary Estimates. This additional funding did not fully meet expenditure requirements. The Minister Responsible for Ministerial Services approved the transfer of funding from Output Class: Support Services to Ministers to Output Class: Visits and Official Events Co-ordination under the Public Finance Act 1989.