Resource material › Corporate Publications › Annual Report 2011-12Pūrongo ā Tau
Part C: Notes to the Non-Departmental Financial Schedules
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1. Statement of Accounting Policies
Reporting Entity
These Non-Departmental schedules and statements present financial information on public funds managed by the Department of Internal Affairs (the Department) on behalf of the Crown.
These Non-Departmental balances are consolidated into the Financial Statements of the Government for the year ended 30 June 2012. For a full understanding of the Crown’s financial position, results of operations and cash flows for the year, reference should also be made to the consolidated Financial Statements of the Government.
Basis of Preparation
The Non-Departmental schedules have been prepared in accordance with the Government’s accounting policies as set out in the Consolidated Financial Statements of the Government, and in accordance with relevant Treasury Instructions and Treasury circulars.
Measurement and recognition rules applied in the preparation of these non-departmental schedules and statements are consistent with New Zealand generally accepted accounting practice as appropriate for public benefit entities.
The accrual basis of accounting has been used unless otherwise stated.
The accounting policies set out below have been applied consistently to all periods presented in these financial statements.
Budget Figures
The budget figures are those presented in the Budget Estimates of Appropriation (Main Est) for the Department.
The Supplementary Estimates (Supp Est) figures incorporate the Department’s full year estimates. The budgets also include other amendments made through the course of the Supplementary Estimates process.
Comparatives
When presentation or, classifications of items in the financial schedules are amended, or accounting policies are changed voluntarily, comparative figures are restated to ensure consistency with the current period unless it is impracticable to do so.
Functional and Presentation Currency
The functional currency of the Department is New Zealand dollars. The financial statements are presented in New Zealand dollars and all values are rounded to the nearest thousand dollars ($000). All notes are presented in >millions (m).
Significant Accounting Policies
The following particular accounting policies have been applied:
Revenue
Revenues from the supply of services are recognised when earned in the Non-Departmental Schedule of Revenue on a straight-line basis over the specified period for the services.
Donation Revenue
When a heritage collection asset is acquired, by donation or legal deposit, for nil or nominal consideration the fair value of the asset received is recognised as revenue in the Non-Departmental Schedule of Revenue.
Expenses
Grants
Discretionary grants are only recognised when a constructive obligation exists. This is deemed to occur both when the grant has been approved and the approval has been communicated to the recipient. Non-discretionary grants are recognised when specified criteria have been fulfilled and notice has been given to the Department.
Cash
Cash includes cash in transit and bank accounts.
Debtors and Other Receivables
Accounts receivable have been designated as loans and receivables. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are recognised initially at fair value plus transaction costs and subsequently measured at amortised cost using the effective interest rate method. Loans and receivables entered into with duration of less than 12 months are recognised at their nominal value. At each balance date, the Department assesses whether there is any objective evidence that any loans and receivables are impaired. Any impairment losses are recognised in the Non-Departmental Schedule of Expenses.
Shares
Where the Department holds a non-controlling, minority interest, the shares are valued at cost in the financial statements. Associates are entities in which the Department has significant influence, but not control over their operating and financial policies. In the Department’s financial statements, the Crown investment in associates has been valued by the equity method.
Property, Plant and Equipment
Disposal
Realised gains and losses arising from disposal of land and property are recognised in the Non-Departmental Schedule of Revenue and Expenditure in the period in which the transaction occurs.
Impairment
The carrying amounts of land and property are reviewed at least annually to determine if there is any indication of impairment. Where an asset’s recoverable amount is less than its carrying amount, it will be reported at its recoverable amount and an impairment loss will be recognised. Losses resulting from impairment are reported in the Schedule of Revenue and Expenditure, unless the asset is carried at a revalued amount, in which case any impairment loss is treated as a revaluation decrease.
Revaluations
Unrealised gains and losses arising from changes in the value of land and buildings are recognised as at balance date. To the extent that a gain reverses a loss previously charged to the Schedule of Revenue and Expenditure for the asset class, the gain is credited to the Schedule of Revenue and Expenditure. Otherwise, gains are credited to an asset revaluation reserve for that class of asset. To the extent that there is a balance in the asset revaluation reserve for the asset class any loss is debited to the reserve. Otherwise, losses are reported in the Schedule of Revenue and Expenditure.
Accumulated depreciation at revaluation date is eliminated against the gross carrying amount so that the carrying amount after revaluation equals the revalued amount.
Specific Asset Class Policies
The following asset class specific policies have been applied:
Land and Buildings
Land and buildings are revalued at least every five years or whenever the carrying amount differs materially to fair value.
Revaluations are carried out for land and buildings to reflect the service potential or economic benefit obtained through control of these assets. Land and buildings are recorded at fair value less impairment losses and, for buildings, less depreciation accumulated since the assets were last revalued. Valuations undertaken in accordance with the standards issued by the New Zealand Property Institute are used.
Depreciation on buildings is charged on a straight-line basis at rates calculated to allocate the cost or valuation of an item of property, less any estimated residual value, over its estimated useful life. The estimated useful lives for buildings range from 10 to 50 years. Depreciation is not charged on land.
Alexander Turnbull Library Heritage Collections
Section 11 of the National Library of New Zealand (Te Puna Mātauranga o Aotearoa) Act 2003 requires the Crown to own the collections held in the Alexander Turnbull Library in perpetuity.
The Alexander Turnbull Library (ATL) Heritage Collections are measured at fair value. Due to the unique nature of the Heritage Collections it is not always practical or possible to obtain a market valuation. In these circumstances collections have been adjusted by the movement in the Consumers Price Index to better reflect their current value. There are also difficulties associated with obtaining an objective valuation for the specified cultural and heritage assets.
The carrying value includes the value of purchases for the collections since the last revaluation and the value of material received through donations and legal deposits.
A valuation is performed every three years. The collections are not depreciated.
National Archives Collection
Non-exceptional National Archives Collection items are revalued every three years using a methodology that divided the collection into categories by format and age, to associate records that together could be said to have a broad commonality of value. Benchmark valuations were obtained from an independent valuer through market assessments and from other collections of a similar nature to Government archives. Accessions since the date of valuation are valued on the basis of these benchmarks.
Independent valuations of other exceptional items, including the Treaty of Waitangi, are conducted every three years and are based on market assessments from similar nature collections.
The valuation of the National Archives Collection includes only public archives in the possession of Archives New Zealand. Public archives held in other approved repositories do not form part of the valuation.
The collection is not depreciated.
Financial Liabilities
Financial liabilities are recognised initially at fair value less transaction costs and subsequently measured at amortised cost using the effective interest rate method.
Financial liabilities entered into with duration of less than 12 months are recognised at their nominal value.
Other Liabilities and Provisions
Other liabilities and provisions are recorded at the best estimate of the expenditure required to settle the obligation. Liabilities and provisions to be settled beyond 12 months are recorded at their present value.
The balance of provisions represents the estimated value of future benefits payable to Former Governors-General and Former Prime Ministers over their expected lives payable under the Governors-General Act 2010 and the Civil List Act 1979.
Commitments
Operating and capital commitments arising from non-cancellable contractual or statutory obligations are disclosed within the Schedule of Commitments to the extent that both parties have not performed their obligations.
Contingent Assets and Liabilities
Contingent assets and contingent liabilities are recorded in the Schedule of Contingent Assets and Contingent Liabilities at the point at which the contingency is evident. Contingent assets are disclosed if it is probable that the benefits will be realised. Contingent liabilities are disclosed when there is a possibility that they will crystallise.
Goods and Services Tax (GST)
Amounts in the financial statements, including appropriation schedules, are reported exclusive of GST, except for receivables and payables, which are stated on a GST-inclusive basis. In accordance with Treasury Instructions, GST is returned on revenue received on behalf of the Crown, where applicable. However, an input tax deduction is not claimed on non-departmental expenditure. Instead, the amount of GST applicable to non-departmental expenditure is recognised as a separate expense and eliminated against GST revenue on consolidation of the Financial Statements of the Government.
2. Debtors and Other Receivables
| ACTUAL 2011 $000 |
ACTUAL 2012 $000 |
|
|---|---|---|
| 174 | Accounts Receivable | 343 |
| 8,504 | Current Loan to Auckland Transition Authority | – |
| – | Current Loan to Charities Commission | 1,796 |
| 1,796 | Non-Current Loan to Charities Commission | – |
| 450 | Non-Current Loan for Local Government Funding Agency | – |
| 10,924 | Total Debtors and Other Receivables | 2,139 |
The carrying value of receivables approximates their fair value.
3. Shares
Local Government Funding Agency
The Crown holds $5.000 m of the $25.000 m paid-up capital of the Local Government Funding Agency (LGFA). The shares have been valued by the equity method as, although the Crown does not have direct representation on the LGFA Board of Directors, it may solely appoint, remove and replace one member of the Shareholders’ Council, which, in turn, makes recommendations to Shareholders as to the appointment, removal, re-election, replacement and remuneration of Directors. The share value has therefore been adjusted to reflect the Crown’s share of any changes in the net assets of the LGFA.
LGFA Net Assets at 30 June 2012 were $20.757 m. The Crown’s share of the net assets is $4.151 m.
The summarised financial information of LGFA is:
| Revenues | $10.894 million |
|---|---|
| Assets | $943.019 million |
| Liabilities | $922.262 million |
| Surplus/(deficit) | $(4.243) million |
The Crown is not a guarantor of the LGFA and has no share of any contingent liabilities of the LGFA.
4. Fixed Assets
| Asset Class | Balance 1 July $000 |
Additions $000 |
Revaluations/ Impairments $000 |
Disposals $000 |
Transfers* $000 |
Balance 30 June $000 |
|---|---|---|---|---|---|---|
| Cost or Valuation | ||||||
| Property, Plant and Equipment | ||||||
| Land | 10,800 | – | – | – | – | 10,800 |
| Buildings – Residential | 6,841 | – | – | – | (298) | 6,543 |
| Buildings – Commercial | 4,515 | 325 | – | – | 298 | 5,138 |
| Total Cost or Valuation of Property, Plant and Equipment | 22,156 | 325 | – | – | – | 22,481 |
| Heritage Collections | ||||||
| Archives Heritage Collection | ||||||
| Archives Heritage Collection | 440,104 | 5,741 | – | – | – | 445,845 |
| Alexander Turnbull Library Heritage Collections | ||||||
| Cartographic | 24,711 | 15 | – | – | – | 24,726 |
| Children’s Historical | 1,437 | 132 | – | – | – | 1,569 |
| Drawing and Prints | 63,322 | 203 | – | – | – | 63,525 |
| Ephemera | 4,613 | 59 | – | – | – | 4,672 |
| Formed | 446 | – | – | – | – | 446 |
| General | 99,171 | 10 | – | – | – | 99,181 |
| Manuscript/Archives | 72,508 | 290 | – | – | – | 72,798 |
| Music | 1,576 | 28 | – | – | – | 1,604 |
| Newspapers | 44,752 | 51 | – | – | – | 44,803 |
| New Zealand and Pacific | 29,253 | 371 | – | – | – | 29,624 |
| Oral History | 12,596 | 167 | – | – | – | 12,763 |
| Others | 429 | – | – | – | – | 429 |
| Photographic | 65,749 | 318 | – | – | – | 66,067 |
| Serials | 39,314 | 253 | – | – | – | 39,567 |
| Short Title | 4,583 | 34 | – | – | – | 4,617 |
| Rare Books and Fine Prints | 379,418 | 364 | – | – | – | 379,782 |
| Total Alexander Turnbull Library Heritage Collections | 843,878 | 2,295 | – | – | – | 846,173 |
| Total Cost of Collections | 1,283,982 | 8,036 | – | – | – | 1,292,018 |
| Total Cost | 1,306,138 | 8,361 | – | – | – | 1,314,499 |
| Accumulated Depreciation | ||||||
| Property, Plant and Equipment | ||||||
| Buildings – Residential | – | 198 | – | – | – | 198 |
| Buildings – Commercial | 311 | 140 | – | – | – | 451 |
| Total Accumulated Depreciation | 311 | 338 | – | – | – | 649 |
| Net Book Value | ||||||
| Property, Plant and Equipment | 21,845 | (13) | – | – | – | 21,832 |
| Collections | 1,283,982 | 8,036 | – | – | – | 1,292,018 |
| Total Net Book Value | 1,305,827 | 8,023 | – | – | – | 1,313,850 |
- *
- Transfers between Government Departments.
| Asset Class | Balance 1 July $000 |
Additions $000 |
Revaluations/ Impairments $000 |
Disposals $000 |
Transfers* $000 |
Balance 30 June $000 |
|---|---|---|---|---|---|---|
| Cost or Valuation | ||||||
| Property, Plant and Equipment | ||||||
| Land | 9,950 | – | 850 | – | – | 10,800 |
| Buildings – Residential | 5,574 | – | 1,267 | – | – | 6,841 |
| Buildings – Commercial | 4,886 | – | (371) | – | – | 4,515 |
| Total Cost or Valuation of Property, Plant and Equipment | 20,410 | – | 1,746 | – | – | 22,156 |
| Heritage Collections | ||||||
| Archives Heritage Collection | ||||||
| Archives Heritage Collection | – | 10,162 | (98,491) | – | 528,433 | 440,104 |
| Alexander Turnbull Library Heritage Collections | ||||||
| Cartographic | – | 6 | (3,701) | – | 28,406 | 24,711 |
| Children’s Historical | – | 69 | (144) | – | 1,512 | 1,437 |
| Drawing and Prints | – | 49 | (9,332) | – | 72,605 | 63,322 |
| Ephemera | – | 29 | (656) | – | 5,240 | 4,613 |
| Formed | – | – | (67) | – | 513 | 446 |
| General | – | 5 | (14,898) | – | 114,064 | 99,171 |
| Manuscript/Archives | – | 154 | (10,772) | – | 83,126 | 72,508 |
| Music | – | 20 | (215) | – | 1,771 | 1,576 |
| Newspapers | – | 90 | (6,664) | – | 51,326 | 44,752 |
| New Zealand and Pacific | – | 170 | (4,181) | – | 33,264 | 29,253 |
| Oral History | – | 86 | (1,792) | – | 14,302 | 12,596 |
| Others | – | – | (64) | – | 493 | 429 |
| Photographic | – | 182 | (9,746) | – | 75,313 | 65,749 |
| Serials | – | 138 | (5,820) | – | 44,996 | 39,314 |
| Short Title | – | 24 | (617) | – | 5,176 | 4,583 |
| Rare Books and Fine Prints | – | 65 | (56,903) | – | 436,256 | 379,418 |
| Total Alexander Turnbull Library Heritage Collections | – | 1,087 | (125,572) | – | 968,363 | 843,878 |
| Total Cost of Collections | – | 11,249 | (224,063) | – | 1,496,796 | 1,283,982 |
| Total Cost | 20,410 | 11,249 | (222,317) | – | 1,496,796 | 1,306,138 |
| Accumulated Depreciation | ||||||
| Property, Plant and Equipment | ||||||
| Buildings – Residential | 289 | 145 | (434) | – | – | – |
| Buildings – Commercial | 186 | 137 | (12) | – | – | 311 |
| Total Accumulated Depreciation | 475 | 282 | (446) | – | – | 311 |
| Net Book Value | ||||||
| Property, Plant and Equipment | 19,935 | (282) | 2,192 | – | – | 21,845 |
| Collections | – | 11,249 | (224,063) | – | 1,496,796 | 1,283,982 |
| Total Net Book Value | 19,935 | 10,967 | (221,871) | – | 1,496,796 | 1,305,827 |
- *
- Transfers between Government Departments.
5. Financial Instruments
The carrying amounts of financial assets and financial liabilities in each of the NZ IAS 39 categories are as follows:
| ACTUAL 2011 $000 |
ACTUAL 2012 $000 |
|
|---|---|---|
| Financial Assets at Fair Value Through Profit or Loss | ||
| – | Shares | 4,151 |
| – | Total Financial Assets at Fair Value Through Profit or Loss | 4,151 |
| Loans and Receivables | ||
| 35,056 | Cash and Cash Equivalents | 139,749 |
| 10,924 | Debtors and Other Receivables | 2,139 |
| 45,980 | Total Loans and Receivables | 141,888 |
| Financial Liabilities Measured at Amortised Cost | ||
| 142,081 | Creditors and Other Payables | 110,207 |
The Department is party to financial instrument arrangements as part of its daily operations. These include cash and cash equivalents, accounts receivable, accounts payable and provisions, accrued expenses, term accrued expenses and foreign currency forward contracts.
The Department’s activities expose it to a variety of financial instrument risks, including market risk, credit risk and liquidity risk. The Department has a series of policies to manage the risks associated with financial instruments and seeks to minimise exposure from financial instruments. These policies do not allow any transactions that are speculative in nature to be entered into.
Credit Risk
Credit risk is the risk that a third party will default on its obligations, causing a loss to be incurred. Credit risk arises from debtors and deposits with banks. Funds must be deposited with Westpac, a registered bank.
Credit evaluations are undertaken on customers requiring credit. Collateral or other security is not generally required to support financial instruments with credit risk. Other than cash and bank balances and trade receivables, the Department does not have any significant credit risk.
| ACTUAL 2011 $000 |
ACTUAL 2012 $000 |
|
|---|---|---|
| 35,056 | Cash and Cash Equivalents | 139,749 |
| 174 | Accounts Receivable | 343 |
| 8,504 | Loan to Auckland Transition Authority | – |
| 450 | Loan for Local Authority Debt Vehicle | – |
| – | Investment in Local Government Funding Agency | 4,151 |
| 44,184 | Total Exposure to Credit Risk | 144,243 |
Cash and cash equivalents excludes any cash physically held including as petty cash as cash is not exposed to credit risk.
Liquidity Risk
Liquidity risk is the risk that the Department will encounter difficulty raising liquid funds to meet commitments as they fall due.
In meeting its liquidity requirements, the Department closely monitors its forecast cash requirements with expected draw downs from the New Zealand Debt Management Office. The Department maintains a target level of available cash to meet liquidity requirements.
The table below analyses the Department’s financial liabilities that will be settled based on the remaining period at balance date to the contractual maturity date. The amounts disclosed are the contractual undiscounted cash flows.
| TOTAL $000 |
LESS THAN 6 MONTHS $000 |
BETWEEN 6 MONTHS AND 1 YEAR $000 |
BETWEEN 1 YEAR AND 5 YEARS $000 |
OVER 5 YEARS $000 |
|
|---|---|---|---|---|---|
| 2012 | |||||
| Creditors and Other Payables | 110,207 | 110,207 | – | – | – |
| 2011 | |||||
| Creditors and Other Payables | 139,658 | 33,423 | 106,235 | – | – |
6. Creditors and Other Payables
| ACTUAL 2011 $000 |
ACTUAL 2012 $000 |
|
|---|---|---|
| 33,332 | Accrued Expenses | 19,846 |
| 108,457 | Accrued Canterbury Earthquake Expenses | 90,361 |
| 292 | Accrued Heritage Collection Purchases | – |
| 142,081 | Total creditors and other payables | 110,207 |
The carrying value of creditors and other payables approximates their fair value. Other payables and Accrued Heritage Collection purchases are non-interest bearing and are normally settled on 30-day terms and Accrued Canterbury Earthquake expenses are expected to be settled through the course of 2012/13.
7. Revaluation of Plant, Property and Equipment
| Balance 1 July $000 |
Transfers from Other Government Departments |
Revaluation Movement |
Balance 30 June |
|
|---|---|---|---|---|
| Land and Buildings | 10,735 | – | – | 10,735 |
| Archives Heritage Collection | – | – | – | – |
| Alexander Turnbull Library Heritage Collections | 285,388 | – | – | 285,388 |
| Total Revaluation Reserves | 296,123 | – | – | 296,123 |
On advice of independent third parties and Department management, there have been no material changes to the carrying value of the Department’s assets as at 30 June 2012.
| Balance 1 July $000 |
Transfers from Other Government Departments |
Revaluation Movement |
Balance 30 June |
|
|---|---|---|---|---|
| Land and Buildings | 8,543 | – | 2,192 | 10,735 |
| Archives Heritage Collection | – | 15,607 | (15,607) | – |
| Alexander Turnbull Library Heritage Collections | – | 410,960 | (125,572) | 285,388 |
| Total Revaluation Reserves | 8,543 | 426,567 | (138,987) | 296,123 |
Land and Buildings
Ministerial Properties
Darroch Ltd, a Licensed Real Estate Agent (REAA 2008), a registered independent valuer, conducted a valuation of Non-Departmental Ministerial Properties land and buildings during May 2011 with valuations effective 30 June 2011.
The Ministerial Properties comprising Premier House, Vogel House and Bolton Street are restricted for Government use. The carrying value of the restricted use land and buildings is $15.022 m (2010/11: $15.200 m).
Lake Taupo Boating and Building Facilities
Building Facilities
Building facilities were valued by Darroch Ltd, a Licensed Real Estate Agent (REAA 2008), registered independent valuer, who conducted a valuation during May 2011 with valuations effective 30 June 2011.
Boating Facilities
Boating facilities were valued by DTZ New Zealand Ltd (MREINZ), a registered independent valuer, in May 2009 with valuations effective 30 June 2009.
National Archives Collection
The National Archives Collection was revalued as at 30 June 2011, by an independent valuer, Dunbar Sloane, through market assessments and from other collections of a similar nature to government archives.
The Treaty of Waitangi was revalued as at 30 June 2011 by an independent valuer, Sotheby’s (London).
Other exceptional items are based on a valuation as at 30 June 2011 from Dunbar Sloane. These valuations were based on market assessments and from other collections of a similar nature.
Alexander Turnbull Library Heritage Collections
The Alexander Turnbull Library Heritage Collections were revalued as at 30 June 2011 by National Library staff. The revaluations were made based on an assessment of the change in the market price of similar collections between the date of the last valuation conducted on 30 June 2008 and 30 June 2011.
8. Explanation of Significant Variances against Budget
Variance between the Main Estimates and the Supplementary Estimates
Non-Departmental Appropriations
The significant variances for Appropriated Expenditure are explained below:
Vote Community and Voluntary Sector
Community Development Scheme
The decrease in the budget between the Main Estimates and the Supplementary Estimates of $0.235 m was due to an expense transfer from 2011/12 to 2012/13 due to delays in the development and approval of community-led initiatives ($0.635 m), partially offset by a reprioritisation of funding from Community Advisory Services to support initiatives to build local community networks ($0.400 m).
Digital Literacy and Connection
The increase in the budget between the Main Estimates and the Supplementary Estimates of $1.100 m was due to an increase in funding for community-based initiatives focused on increasing digital literacy and connection.
Vote Emergency Management
Canterbury Earthquakes – Payments in respect of Indemnity for response and Recovery Costs PLA
The increase in the budget between the Main Estimates and the Supplementary Estimates of $81.814 m was due to the recognition of a liability relating to the Canterbury earthquakes indemnity provided under section 65ZD of the Public Finance Act ($593.394 m), funding for the reimbursement of Christchurch City Council response costs relating to the February 2011 earthquake ($25.000 m), reimbursement of Council response costs as a result of the September 2010 Christchurch earthquake ($6.814 m), an increase in funding to meet the cost of additional claims from the Christchurch City Council for the Crown’s share of response relating to the February and June 2011 Canterbury earthquakes ($50.000 m), partially offset by a transfer of funding to the Canterbury Earthquake Recovery Authority for recovery costs relating to the Canterbury earthquakes ($593.394 m).
Emergency Expenses
The increase in the budget between the Main Estimates and the Supplementary Estimates of $5.275 m was due to expense transfers from 2010/11 to 2011/12 for assistance to Environment Bay of Plenty and Whakatane District Council for hazard mitigation work following civil defence emergency events in 2004 and 2005 (increase of $2.775 m) and to provide assistance to homeowners affected by flooding in Kaeo (increase of $0.500 m) and an increase in funding for the reimbursement of response and recovery costs incurred by local authorities as a result of the 2012 Nelson-Tasman flood events ($2.000 m).
February 2011 Canterbury Earthquake National Controller Costs
The increase in the budget between the Main Estimates and the Supplementary Estimates of $0.643 m was due to expense transfers from 2010/11 to 2011/12 for costs incurred at the discretion of the National Controller Civil Defence.
Subsidies to Local Government
The increase in the budget between the Main Estimates and the Supplementary Estimates of $0.397 m was due to expense transfers from 2010/11 to 2011/12 for the Civil Defence Emergency Management Resilience Fund ($0.397 m).
Vote Internal Affairs
Pike River Royal Commission of Inquiry – Legal Representation and Assistance
The decrease in the budget between the Main Estimates and the Supplementary Estimates of $0.074 m was due to an expense transfer from 2011/12 to 2012/13 due to an extension of reporting dates for the Royal Commission of Inquiry into Building Failure caused by the Canterbury Earthquakes and the Royal Commission of Inquiry on the Pike River Coal Mine Tragedy ($0.600 m), partially offset by an expense transfer from 2010/11 to 2011/12 for the Royal Commission of Inquiry on the Pike River Coal Mine Tragedy ($0.526 m).
Public Inquiries
The increase in the budget between the Main Estimates and the Supplementary Estimates of $1.637 m was due to an increase in funding for the Royal Commission of Inquiry into Building Failure caused by the Canterbury Earthquakes ($0.781 m), an expense transfer from 2010/11 to 2011/12 for both the Royal Commission of Inquiry on the Canterbury Earthquakes ($0.155 m) and the Royal Commission of Inquiry on the Pike River Coal Mine Tragedy ($0.127 m) and an increase in funding for Commissioner’s fees for the Royal Commission of Inquiry into Building Failure caused by the Canterbury Earthquakes and the Royal Commission of Inquiry on the Pike River Coal Mine Tragedy due to an extension in reporting dates ($0.574 m).
Vote Local Government
Chatham Islands Council
The increase in the budget between the Main Estimate and the Supplementary Estimates of $0.354 m was due to an expense transfer from 2010/11 to 2011/12 for the Chatham Islands solid waste management programme.
Loan to the Auckland Transition Agency
The increase in the budget between the Main Estimates and the Supplementary Estimates of $1.270 m was due to capitalisation of the interest on the loan to Auckland Transition Agency for Auckland Governance Reforms.
Te Oneroa a Tohe Beach Management
In 2011/12 funding of $0.400 m was provided for this new appropriation. However, due to delays in the legislation to put in place the Treaty Settlement, an expense transfer was approved from 2011/12 to 2012/13 ($0.300 m).
Capital Investments – Lake Taupo
The increase in the budget between the Main Estimate and the Supplementary Estimates of $0.034 m was due to a capital transfer from 2010/11 to 2011/12 for the completion of the project plan for extensions to the boat ramp and jetty at Omori, Taupo.
Local Government Debt Vehicle
The increase in the budget between the Main Estimate and the Supplementary Estimates of $4.550 m was due to a capital transfer from 2010/11 to 2011/12 for the Local Government Funding Agency.
Vote Ministerial Services
Depreciation on Official Residences
The increase in the budget between the Main Estimates and the Supplementary Estimates of $0.046 m was due to higher ongoing depreciation costs as a result of a revaluation of official residences.
Executive Council and Members of the Executive – Salaries and Allowances PLA
The increase in the budget between the Main Estimates and the Supplementary Estimates of $0.150 m was due to an increase in costs pursuant to the Parliamentary Salaries and Allowances Determination.
Vote National Library
Public Lending Right for New Zealand Authors
The increase in the budget between the Main Estimates and the Supplementary Estimates of $0.010 m was due to a transfer of funding from Departmental Output Expense Access to Information to cover payments to all eligible authors.
Schedule of Non-Departmental Assets
The significant variances within the Schedule of Non-Departmental Assets are explained below:
The decrease in the budget between the Main Estimates and the Supplementary Estimates for the loan to the Auckland Transition Agency of $8.125 m reflects the repayment of the loan. The decrease in the budget between the Main Estimates and the Supplementary Estimates for heritage collections of $0.208 m reflects the expected value of the National Archives and National Library heritage collections as at 30 June 2012.
Schedule of Non-Departmental Liabilities
The significant variance within the Schedule of Non-Departmental Assets is explained below:
The decrease in the budget between the Main Estimates and the Supplementary Estimates for the Revaluation Reserve reflects the expected value of the Revaluation reserves as at 30 June 2012.
Variance between the Actual 2011/12 and the Supplementary Estimates
Actual expenditure was 9.79% lower than the Supplementary Estimates. The overall under-expenditure of $21.861 m is primarily attributable to the following factors as outlined in the vote commentary below.
Vote Emergency Management
Canterbury Earthquakes – Payments in respect of Indemnity for Response and Recovery Costs PLA
Actual expenditure was $1.276 m lower than the Supplementary Estimates for these appropriations incurred under Permanent Legislative Authority (PLA). The forecast in the Supplementary Estimates contained an inherent level of uncertainty around the quantum and timing of claims, the timing of the submission of claims and the eligibility for reimbursement of costs incurred by affected councils for emergency events. The decrease in actual expenditure was due to the quantum of claims and rates of eligibility of claims being lower than forecast.
Emergency Expenses
Actual expenditure was $5.001 million lower than Supplementary Estimates mainly due to:
- Timing of progress on hazard mitigation works associated with the RangitaikiM River flood protection scheme, for which an in-principle expense transfer from 2011/12 to 2012/13 was approved
- response costs for flooding in the Nelson-Tasman region, for which an in-principle expense transfer from 2011/12 to 2012/13 was approved
- the majority of the contingency funding for emergency expenses was not required.
February 2011 Canterbury Earthquake National Controller Costs
Actual expenditure was $0.281 m lower than Supplementary Estimates mainly due to some expenses relating to response activities being paid for by the Canterbury Earthquake Recovery Authority (CERA).
Subsidies to Local Government
Actual expenditure was $0.263 m lower than Supplementary Estimates due to the level of claims submitted by local authorities for emergency management preparation.
Vote Local Government
Chatham Islands Council
Actual expenditure was lower than Supplementary Estimates by $2.141 m mainly due to delays in identifying and consenting to a suitable landfill site for the Chatham Islands solid waste management programme, for which an in-principle expense transfer from 2011/12 to 2012/13 was approved.
Crown-owned Assets at Lake Taupo – Maintenance Costs
Actual expenditure was lower than Supplementary Estimates by $1.455 m mainly due to delays in the completion of the multi-year project to remedy deferred maintenance of the Crown-owned Lake Taupo boating facilities, for which an in-principle expense transfer from 2011/12 to 2012/13 was approved.
Rates Rebate Scheme
Actual expenditure was lower than Supplementary Estimates by $7.511 m mainly due to lower than anticipated take up of the rates rebate scheme in 2011/12.
Vote Community and Voluntary Sector
Community Development Scheme
Actual expenditure was lower than Supplementary Estimates by $0.614 m mainly due to delays in the development of community-led initiatives for which an in-principle expense transfer from 2011/12 to 2012/13 was approved.
Vote Internal Affairs
Pike River Royal Commission of Inquiry – Legal representation and assistance
Actual expenditure was lower than Supplementary Estimates by $0.362 m mainly due to a change in the timing of the work programme for the Royal Commission of Inquiry on the Pike River Coal Mine Tragedy, for which an in-principle expense transfer from 2011/12 to 2012/13 was approved.
Public Inquiries
Actual expenditure was lower than Supplementary Estimates by $0.478 million mainly due to a change in the timing of the work programmes for the Royal Commission of Inquiry on the Pike River Coal Mine Tragedy and the Royal Commission of Inquiry into Building Failure caused by the Canterbury Earthquakes, for which an in-principle expense transfers from 2011/12 to 2012/13 was approved.
Vote Ministerial Services
Members of the Executive – Travel
Actual expenditure was lower than Supplementary Estimates by $0.992 m mainly due to lower than anticipated Ministerial travel.
Capital Expenditure
Vote Local Government
Capital Investments Lake Taupo
Actual capital expenditure was lower than Supplementary Estimates by $0.687 million mainly due to delays in the upgrade and development of Crown-owned boating facilities at Lake Taupo, for which an in-principle capital transfer from 2011/12 to 2012/13 was approved.
Vote National Library
Heritage Collections – Annual
Actual capital expenditure was lower than Supplementary Estimates by $0.286 million, mainly reflecting delays in the issuance of an export order to enable the Katherine Mansfield and John Middleton Murry papers to leave the United Kingdom, for which an in-principle capital transfer from 2011/12 to 2012/13 was approved.
Non-Departmental Schedule of Revenue
Actual revenue was higher than Supplementary Estimates primarily reflecting the value of accessions of documents received by National Archives during 2011/12.
Schedule of Non-Departmental Assets and Liabilities
The actual cash balance as at 30 June 2012 was $119.188 million higher than Supplementary Estimates, primarily due to the high level of claims submitted by affected councils in the Canterbury region as a result of the Canterbury earthquakes that are still being processed and remain unpaid. This is reflected in the higher level of Accounts Payable.
9. Emergency Expenditure for Canterbury Earthquakes
The Canterbury region was significantly affected by two major earthquakes and a number of aftershocks during the 2010/11 and 2011/12 financial years, resulting in significant damage to property and infrastructure. The two major earthquakes were a magnitude 7.1 on 4 September 2010 and a magnitude 6.3 on 22 February 2011. Significant aftershocks that caused further damage occurred on 26 December 2010 and on 13 June 2011.
These Non-Departmental financial statements include expenses incurred in relation to these earthquakes, under Non-Departmental Other Expenses in Vote Emergency Management.
| Actual 2011 $000 |
Actual 2012 $000 |
Actual Since Feb 2011 $000 |
|
|---|---|---|---|
| National Controller Direct Response Expenses | |||
| February 2011 Christchurch Earthquake National Controller Costs | 3,324 | 362 | 3,686 |
| Section 25 Public Finance Act | 19,281 | – | 19,281 |
| Total National Controller Direct Response Expenses | 22,605 | 362 | 22,967 |
| Canterbury Local Authorities’ Response and Recovery Expenses | |||
| Expenses recognised in respect of Indemnity for Response and Recovery Costs – Section 65ZG Public Finance Act | 108,457 | 80,539 | 188,996 |
| Emergency Expenses | 15,849 | 46 | 15,895 |
| Section 25 Public Finance Act | 8,696 | – | 8,696 |
| Total Canterbury Local Authorities’ Response and Recovery Expenses | 133,002 | 80,585 | 213,587 |
| Total Canterbury Earthquake Expenses | 155,607 | 80,947 | 236,554 |
The Canterbury Local Authorities’ Response and Recovery expenses for 2011/12 include two further advances totalling $90.000 m paid under section 65ZG of the Public Finance Act. These advances are in addition to the $8.696 m advance paid during 2010/11.
National Controller Direct Response Expenses
Following the 22 February earthquake, and declaration of a State of National Emergency, the National Controller incurred necessary expenses in response to the emergency during 2010/11. These included expenses for freighting in emergency supplies and teams, chemical toilets, emergency fences and specialist equipment. The bulk of this expenditure was approved when the Minister of Finance invoked section 25 of the Public Finance Act 1989 (expenses may be incurred in emergencies) immediately following the February earthquake.
National Controller Direct Response Expenses incurred in 2011/12 totalling $0.362 million (2010/11 $3.324 million) have arisen as a result of claims against the Crown for actions incurred during the State of National Emergency.
Local Authorities’ Response and Recovery Expenses
Under current Government policy settings, outlined in the National Civil Defence Emergency Management Plan (‘the Plan’) and Guide to the National Civil Defence Emergency Management Plan[67] (‘the Guide’), the four affected Canterbury local authorities will be reimbursed, in whole or part, for certain types of response and recovery costs incurred as a result of the earthquakes. Under the Plan and the Guide, primary responsibility for managing these claims rests with the Department.
The Government provided an indemnity in favour of the four affected Canterbury authorities under section 65ZD of the Public Finance Act 1989 for these costs. The indemnity formalises the implicit guarantee under the Guide.
In March 2012 the indemnity was extended to include the Canterbury Earthquake Recovery Authority (CERA) for recovery costs, along with transfer of the responsibility for assessment and management of these claims. The indemnity enables both the Department and CERA to recognise their respective obligations in respect of response and recovery costs without further appropriation.
The Department has therefore not recorded any liability for recovery costs at 30 June 2012.
Response Costs – Four Affected Canterbury Authorities
Under the Guide the standard financial support policy is for the Government to:
- fully reimburse response costs associated with caring for displaced people
- reimburse 60% of response costs associated with precautionary measures to reduce immediate danger and temporary repairs to essential infrastructure.
The Government subsequently decided to fully reimburse Christchurch City Council for costs associated with temporary repairs to essential infrastructure because of the earthquakes.
Following the initial advance of $8.696 m to the Christchurch City Council in February 2011, a further two advances have been agreed by the Government and paid, $25.000 m in July 2011 and $65.000 m in October 2011. Advances paid to the Christchurch City Council will be offset against subsequent claims submitted by the Council.
Response Costs – Other Councils Assisting
The Government has also agreed to reimburse costs totalling $0.035 m for other councils that provided assistance to the four affected Canterbury authorities in the immediate aftermath of the September 2010 and February 2011 earthquakes. The other Councils assisting were reimbursed for travel, accommodation, food and minor incidental costs for staff and volunteers who provided on-the-ground support during the immediate post-quake response periods.
Recovery Costs
Recovery costs shown by the Department are those that were settled with the affected Councils prior to transfer of responsibility to CERA. Following transfer of responsibility for the recovery cost claims process to CERA, the Department no longer records any liability for recovery cost claims.
| Christchurch City Council $000 |
Waimakariri District Council $000 |
Environment Canterbury $000 |
Selwyn District Council $000 |
Other Councils Assisting $000 |
Total | |
|---|---|---|---|---|---|---|
| Claims from Councils | ||||||
| Emergency expenses | 11,712 | 3,774 | 182 | 181 | – | 15,849 |
| Response costs claims lodged | 107,652 | 714 | 1,584 | 2,267 | – | 112,217 |
| Estimated response costs | – | – | 4,936 | – | – | 4,936 |
| Total Claims | 119,364 | 4,488 | 6,702 | 2,448 | – | 133,002 |
| Less payments made to Councils | ||||||
| Emergency expenses | (11,712) | (3,774) | (182) | (181) | – | (15,849) |
| Response costs | (8,696) | – | – | – | – | (8,696) |
| Total Payments | (20,408) | (3,774) | (182) | (181) | – | (24,545) |
| Claims accrued at 30 June 2011 | 98,956 | 714 | 6,520 | 2,267 | – | 108,457 |
| Christchurch City Council $000 |
Waimakariri District Council $000 |
Environment Canterbury $000 |
Selwyn District Council $000 |
Other Councils Assisting $000 |
Total | |
|---|---|---|---|---|---|---|
| Claims carried forward | 98,956 | 714 | 6,520 | 2,267 | – | 108,457 |
| Claims from Councils | ||||||
| Emergency expenses | – | – | 11 | – | 35 | 46 |
| Response costs claims lodged | 81,156 | 588 | – | – | – | 81,744 |
| Estimated response costs | 22,236 | – | – | – | – | 22,236 |
| Total Claims for the year | 103,392 | 588 | 11 | – | 35 | 104,026 |
| Total claims since Feb 2011 | 202,348 | 1,302 | 6,531 | 2,267 | 35 | 212,483 |
| Less payments made to Councils | ||||||
| Emergency expenses claims lodged | – | – | (11) | – | (35) | (46) |
| Less payments made to Councils | (94,471) | (1,302) | (2,817) | (45) | – | (98,635) |
| Total Payments | (94,471) | (1,302) | (2,828) | (45) | (35) | (98,681) |
| Less claims declined or requiring special policy decisions | (17,516) | – | (3,703) | (2,222) | – | (23,441) |
| Claims accrued at 30 June 2012 | 90,361 | – | – | – | – | 90,361 |
Footnotes
[67] The Guide is issued by the Director of Civil Defence Emergency Management (CDEM) under section 9 of the Civil Defence Emergency Management Act 2002.