NOTE 1: Statement of accounting policies

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Reporting entity

These non-departmental schedules and statements present financial information on public funds managed by the Ministry on behalf of the Crown.

The Ministry’s responsibility is to manage the revenue, expenditure, assets and liabilities on behalf of the Crown. The non-departmental balances are consolidated into the Crown financial statements. For a full understanding of the Crown’s financial position and the results of its operations and cash flows for the year, reference should be made to the consolidated audited Crown financial statements for the year ended 30 June 2014.

The schedules in respect of the activities administered by the Ministry on behalf of the Crown comprise:

  • collection of indirect tax revenues
  • collection of other revenues
  • payment of refunds on claims received
  • jointventure airports.

The schedules and statements have been prepared pursuantto section 35 of the Public Finance Act 1989.

Basis of preparation

The non-departmental schedules and statements have been prepared in accordance with the government’s accounting policies as set out in the Financial Statements of the Government, and in accordance with the 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 a public benefit entity.

The accounting policies set out below have been applied consistently to all years presented in these schedules and statements. The following particular accounting policies have been applied:

Significant accounting policies

Budget figures

The budget figures are consistent with the financial information in the Main Estimates. In addition, these schedules and statements also present the updated budget information from the Supplementary Estimates.

Revenue

Revenues from road user charges, motor vehicle licensing fees and tolling revenue are recognised on an accrual basis. Revenues from infringement fees are recognised on a cash basis.

Debtors and other receivables

Debtors and other receivables are initially measured at fair value and subsequently measured at amortised cost using the effective interest rate, less impairment changes.

Impairment of a receivable is established when there is objective evidence that the Crown will not be able to collect amounts due according to the original terms of the receivable. Indicators that the debtor is impaired include the significant financial difficulties of the debtor, the probability that the debtor will enter into bankruptcy, and any default in payments. The amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted using the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the schedule of non-departmental expenses. When a debtor is not collectible, it is written off against the allowance account for debtors. Overdue receivables that are renegotiated are reclassified as current (not past due).

Investments in joint venture airports

Investments represent the Crown’s investment in joint venture airports. Investments in the joint venture airports are accounted using the equity method, consolidating the post acquisition net asset increase or decrease into these non- departmental schedules.

Creditors and other payables

Creditors and other payables are initially measured at fair value and subsequently measured at amortised cost using the effective interest method.

Financial instruments

Crown Vote Transport is party to financial instruments as part of its normal operations. These financial instruments include cash and bank balances, accounts receivable and accounts payable. Revenue and expenses in relation to all financial instruments are recognised in the schedule of non-departmental revenue and receipts and the schedule of non-departmental expenses. All financial instruments are recognised in the schedule of non-departmental assets and the schedule of non-departmental liabilities.

Goods and services tax (GST)

All items in the financial statements, including appropriation statements, are stated 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.

Commitments

Future expenses and liabilities to be incurred on non-cancellable contracts that have been entered into at balance date are disclosed as commitments to the extent that there are equally unperformed obligations.

Contingent liabilities

Contingent liabilities are disclosed at the point at which the contingency is evident.

Changes in accounting policies

The accounting policies have been applied consistently to all years presented in these schedules and statements.

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NOTE 2: Indirect taxation

Actual
2012/13
$000

 

Actual
2013/14
$000

Main Estimates
2013/14
$000

Supplementary Estimates
2013/14
$000

173,844

Motor vehicle registration fees

187,112

186,707

185,665

1,066,192

Road user charges

1,204,502

1,163,642

1,162,446

1,240,036

Sub-total

1,391,614

1,350,349

1,348,111

(36,251)

Fuel excise duty refunds

(42,324)

(37,357)

(38,481)

1,203,785

Total indirect taxation

1,349,290

1,312,992

1,309,630

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NOTE 3: Other ‘Sovereign Power’ revenue

Actual
2012/13
$000

 

Actual
2013/14
$000

Main Estimates
2013/14
$000

Supplementary Estimates
2013/14
$000

1,626

Infringement fees –tolls and other

1,525

1,400

1,400

1,626

Total other ‘sovereign power’ revenue

1,525

1,400

1,400

NOTE 4: Other operational revenue

Actual
2012/13
$000

 

Actual
2013/14
$000

Main Estimates
2013/14
$000

Supplementary Estimates
2013/14
$000

11,009

Road user charges administration fees

11,080

13,204

11,401

2,066

Other revenue

28,206

-

28,170

7,116

Tolling revenue (note 10)

7,648

7,200

7,200

20,191

Total other operational revenue

46,934

20,404

46,771

The increase in other revenue is due to the payment to the Crown of the settlement proceeds paid by the insurer of the MV Rena.

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NOTE 5: Non-departmental output classes

Actual
2012/13
$000

 

Actual
2013/14
$000

Main Estimates
2013/14
$000

Supplementary Estimates
2013/14
$000

1,907,641

This expense item is equal to the appropriations for non-departmental output classes listed in the statement of non-departmental expenditure and appropriations

1,981,513

1,937,948

1,981,817

1,907,641

Total non-departmental output classes

1,981,513

1,937,948

1,981,817

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NOTE 6: Purchase or development of captial assets

Actual
2012/13
$000

 

Actual
2013/14
$000

Main Estimates
2013/14
$000

Supplementary Estimates
2013/14
$000

607,265

This expenditure is for the construction of, and improvement to the State highway network including pavement rehabilitation and seal widening

776,227

761,010

776,227

607,265

Total purchase or development of capital assets

776,227

761,010

776,227

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NOTE 7: Other expenses to be incurred by the Crown

Actual
2012/13
$000

 

Actual
2013/14
$000

Main Estimates
2013/14
$000

Supplementary Estimates
2013/14
$000

142,963

Auckland rail development MYA

53,100

21,833

63,978

-

Auckland Transport package –fair value write-down of loan

113,885

-

122,000

611

Membership of international organisations

569

743

573

3,270

Rail – public policy projects

3,270

3,270

3,270

500

Rail – railway safety

500

500

500

22,755

SuperGold Card – public transport concessions for cardholders

23,905

23,905

23,905

2,318

Tauranga maritime incident response

537

940

1,683

5,415

Rail – metro rail rolling stock and infrastructure (Wellington)

-

-

-

177,832

Total other expenses to be incurred by the Crown

195,766

51,191

215,909

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NOTE 8: Receivables and advances

Actual
2012/13
$000

 

Actual
2013/14
$000

Main Estimates
2013/14
$000

Supplementary Estimates
2013/14
$000

46,609

Motor vehicle registration fees

39,017

42,171

39,869

10,210

Road user charge revenue

29,370

12,687

9,201

1,691

Tolling revenue

1,882

2,213

1,537

394

Infringement revenue

471

100

548

-

Ministry of Transport

118

-

-

58,904

Sub-total

70,858

57,171

51,155

(10,051)

Provision for doubtful debts

(6,705)

-

-

48,853

Total receivables and advances

64,153

57,171

51,155

The carrying value of receivables and advances approximates their fair value. No debtor is past due, and the Ministry has assessed that no provision for impairment is required at 30 June 2014 (30 June 2013: $nil).

For motor vehicle fees and road user charge revenue, debts are assessed for impairment regularly and provision made for non-collectable debts as shown above. The NZ Transport Agency which collects this revenue has amended the application of its revenue recognition policy and only fees that are likely to be collected are recognised as revenue. This has reduced the provision for doubtful debt.

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NOTE 9: Investment in joint venture airports

Actual
2012/13
$000

 

Actual
2013/14
$000

11,676

New Plymouth

11,910

3,681

Taupo

3,634

5,086

Wanganui

5,027

922

Westport

854

538

Whakatane

519

2,476

Whangarei

2,458

24,379

Total investment in joint venture airports

24,402

The Crown has a 50 percent interest in each airport, with the other 50 percent held by the local council. The value of the investment at 30 June 2014 is based on the annual financial statements of each airport for the year ended 30 June 2013 (2013: 30 June 2012), plus capital contributions from the Crown during the year ended 30 June 2014.

The investment was reduced by $93,000 for losses incurred by the airports during the year ended 30 June 2013 (2012:

$376,000 reduction) and increased for capital payments made during 2013/14 of $116,000 (2012: $397,000).

The net result is a $23,000 increase in the Crown’s equity position for the year ended 2014 (2013: $21,000 increase).

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NOTE 10: Investment in the Northern Gateway toll road

The Northern Gateway toll road project was completed with a contribution from the Crown of $158 million. The Crown issued infrastructure bonds to fund the project and the bonds are shown within the financial statements of the Treasury. The toll revenue from the road is intended to cover the costs of the bonds. The charging of a toll began in February 2009 and the tolling revenue is recorded as other operational revenue in Vote Transport (note 4).

It was agreed that a notional account would be kept of the ‘cost’ of the project using an estimated interest rate charged on the $158 million advanced. The interest charge is calculated daily, based on the outstanding balance of money advanced, plus interest, less tolling revenue received. The interest rate used is 6.45 percent which is the average rate for the infrastructure bonds issued to fund the contribution, plus 15 basis points. The project was modelled using an estimated rate of 6.4 percent. The two tables below show the project since the start and then for the current year. Further information is available www.tollroad.govt.nz.(external link)

Since the commencement of the project

Actual
2012/13
$000

 

Actual
2013/14
$000

158,000

Funding provided for construction

158,000

63,131

Interest charged since funding first drawn

75,784

(28,053)

Tolling revenue since February 2009

(35,701)

193,078

Balance at 30 June

198,083

Current year

Actual
2012/13
$000

 

Actual
2013/14
$000

187,813

Balance at 1 July

193,078

12,381

Interest charge for the year

12,653

(7,116)

Tolling revenue for the year

(7,648)

193,078

Balance at 30 June

198,083

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NOTE 11: Payables

Actual
2012/13
$000

 

Actual
2013/14
$000

Main Estimates
2013/14
$000

Supplementary Estimates
2013/14
$000

352,223

National Land Transport Fund revenue payable to the New Zealand Transport Agency

329,662

250,000

300,000

13,848

GST payable

16,334

14,585

13,848

30,443

Motor vehicle registration third party collections

16,069

32,030

31,557

1,638

Output funding payable to the New Zealand Railways Corporation

4,262

10,259

1,638

20

Road user charges refunds

1,971

1,232

1,208

470

Output funding payable to Maritime New Zealand

110

-

-

-

Output funding payable to Meteorological Service

-

1,741

-

398,642

Total payables

368,408

309,847

348,251

Payables are non-interest bearing and are normally settled on 30-day terms, therefore the carrying value of payables approximates their fair value.

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NOTE 12: Financial instruments

The carrying amounts of financial assets and financial liabilities in each of the NZ IAS 39 categories are as follows:

Actual
2012/13
$000

 

Actual
2013/14
$000

 

Loans and receivables

 

31,400

Cash and cash equivalents

19,584

48,853

Receivables and advances

64,153

80,253

Total loans and receivables

83,737

 

Financial liabilities measured at amortised cost

 

398,642

Payables

368,408

Credit risk

Credit risk is the risk that a third party will default on its obligation, causing a loss to be incurred. Credit risk arises from debtors and deposits with banks.

Funds must be deposited with Westpac, a registered bank.

The maximum credit exposure for each class of financial instruments is represented by the total carrying amount of cash and cash equivalents and net debtors. There is no collateral held as security against these financial instruments, including those instruments that are overdue or impaired. Other than Westpac Bank, there are no significant concentrations of credit risk.

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NOTE 13: Major budget changes

Changes were made to the non-departmental budgets in the 2013/14 Supplementary Estimates. Explanations for significant variances only are provided below.

Revenue and receipts

 

Main Estimates
$000

Supplementary Estimates
$000

Cumulative Vote
$000

Tax revenue

     

Motor vehicle registration

186,707

(1,042)

185,665

Road user charges

1,163,642

(1,196)

1,162,446

Fuel excise duty refunds

(37,357)

(1,124)

(38,481)

 

1,312,992

(3,362)

1,309,630

Other operational revenue

     

Road user charges administration fees

13,204

(1,803)

11,401

Recovery relating to the Rena

-

28,170

28,170

Tolling fees

7,200

-

7,200

 

20,404

26,367

46,771

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Tax revenue and related fees

The National Land Transport Fund Revenue Forecasting Group meets on a six monthly basis to reforecast the tax revenue that is expected for the National Land Transport Fund, based on the current economic forecasts. The changes reflect the result of this process. The administration revenue is also forecast as part of this.

Recovery relating to the Rena

This amount was not included in the Estimates as it was not certain. It was recognised once the position became clear.

Non-departmental expenditure and capital appropriations

 

Main Estimates
$000

Supplementary Estimates
$000

Cumulative Vote
$000

Appropriations for non-departmental output expenses

     

Construction of passing opportunities on State highway 2 between Napier and Gisborne

3,000

350

3,350

Licensing activities

3,483

62

3,545

National Land Transport Programme PLA

1,867,600

12,147

1,879,747

Policy advice and related outputs – maritime MCOA

6,510

1,077

7,587

Reinstatement of local roads in Canterbury

-

30,800

30,800

Road user charges collection

13,773

288

14,061

Road user charges investigation and enforcement

6,279

(855)

5,424

Non-departmental other expenses

     

Auckland rail development MYA

21,833

42,145

63,978

Auckland Transport Package -fair value write-down of loan

-

122,000

122,000

Bad debt provision – motor vehicle registration/ licenses and road user charges

6,000

(2,000)

4,000

Membership of international organisations

743

(170)

573

Tauranga maritime incident response

940

743

1,683

Capital expenditure

     

Aviation Security Service

-

200

200

Joint venture airports - Crown contribution MYA

500

550

1,050

KiwiRail equity injection

-

25,000

25,000

Maritime NZ capital expenditure PLA

-

381

381

Maritime NZ – oil response

-

100

100

National Land Transport Programme – new infrastructure for and renewal of State highways PLA

761,010

15,217

776,227

Rail – Loan for Auckland metro rail electric multiple unit package

130,000

8,000

138,000

Roading - reinstatement of earthquake damaged roads in Christchurch - Loan

-

20,000

20,000

Tauranga Eastern Link loan

120,000

(120,000)

-

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Explanations for the major changes were outlined in the 2013/14 Supplementary Estimates (pages 757 onwards). They were:

Construction of passing opportunities on State highway 2 between Napier and Gisborne

This appropriation was increased due to an expense transfer from 2012/13.

Licensing activities

Two elements of this appropriation were adjusted.

Driver licence stop order implementation was completed during 2013/14 below expected cost, and the balance of

$108,000 was reprioritised to drug and alcohol assessments to cover the expected costs.

Drug and alcohol assessments are a demand driven activity and the cost has been increasing in recent years due to new legislation. To cover these costs in 2013/14 and 2014/15:

  • $108,000 was reprioritised from within the appropriation as noted above (increase),
  • $100,000 was an expense transfer from 2012/13 (increase),
  • $170,000 was reprioritisedto here from elsewhere inVoteTransport (increase), and then
  • $208,000 was an expense transfer to 2014/15 (decrease).

National Land Transport Programme PLA, and National Land Transport Programme – new infrastructure for and renewal of State highways PLA

The NZ Transport Agency is responsible for the National Land Transport Programme which delivers the government objectives laid out in the Government Policy Statement on Land Transport Funding. Road tax revenue is allocated to the fund by legislation and is appropriated in these two appropriations – one operating and one capital.

There are three main reasons for the changes in these appropriations:

  • Funding is transferred to the operating appropriation from the capital oneto fund it for planned activity in a year.
  • Road tax revenue isforecast every six months. The State highway capital appropriation is adjusted as required as revenue increases or decreases.
  • Unspent funding from the previous year may be appropriated.

Any shortfall in funding that will be coveredby the loan facilities is reflected in the capital appropriation. This is for simplicity and is consistent with prior years.

The increase in the operating appropriation is a transfer from the capital appropriation to cover planned expenditure. The increase in the capital appropriation of $15.217 million is due to:

  • $30 million for surplus funds in the National Land Transport Fund from previous years (increase)
  • $1.403 million from changes in the road tax revenue forecasts (increase)
  • $12.147 million transferred to the operating appropriation as above (decrease)
  • $4.039 million (net) appropriated to other outputs that are funded from road tax revenue (decrease).

Policy advice and related outputs - maritime MCOA

The Maritime Incident Response output class was created during 2013/14 with funding of $1.077 million for 2013/14. This is to fund the building of capability to deal with maritime incidents involving oil and other pollutants, in conjunction with the new Maritime NZ - oil response capital appropriation.

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Maritime NZ – oil response

$100,000 was appropriated to provide capital for oil pollution prevention and control, in conjunction with the new Maritime Incident Response output class above.

Reinstatement of local roads in Canterbury

The appropriation increased due to an expense transfer from 2012/13.

Road user charges collection

The appropriation increased during the year by $288,000. The increase is the net of:

  • $584,000 was reprioritised from elsewhere in Vote Transport for agreed costs (increase)
  • $296,000 was an expense transfer to 2014/15 (decrease).

Road User Charges investigation and enforcement

The appropriation decreased during the year by $855,000 because of reprioritisation to related appropriations within Vote Transport to meet forecast costs.

Auckland rail development MYA

The appropriation increased during the year by $42.145 million. This is the total of:

  • $26 million new funding to meet increased costs for the Auckland Rail Electrification Project
  • $16.145 million unspent funding transferred from 2012/13.

Auckland Transport Package - fair value write-down of loan

This appropriation was created during 2013/14 to reflect the interest free loan to the NZ Transport Agency for the delivery of the Auckland Transport Package. The write-down is a book entry in accordance with generally accepted accounting practice, and the expense was recognised once the loan paperwork was finalised. No cash will be paid.

Bad debt provision – Motor vehicle registration/ licences and Road user charges

The appropriation decreased by $2 million because the NZ Transport Agency has changed the application of its revenue recognition policy. Revenue unlikely to be received will not be recognised, which will result in a reduction in the bad debt write-off.

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Membership of international organisations

The appropriation decreased by $170,000 as funding was reprioritised to other appropriations in Vote Transport.

Tauranga maritime incident response

The appropriation increased by $743,000 as the net of an expense transfer of $1.043 million from 2012/13 to 2013/14 (increase), and an expense transfer of $300,000 from 2013/14 to 2014/15 (decrease) to match planned expenditure.

Aviation Security Service

This appropriation increased due to an expense transfer from 2012/13.

Joint venture airports - Crown contribution MYA

This appropriation increased due to an expense transfer from 2012/13.

KiwiRail equity injection

$25 million was appropriated as an equity injection to meet cash flow requirements.

Maritime New Zealand capital expenditure PLA

$381,000 was appropriated to reimburse Maritime NZ for high search and rescue costs in 2012/13.

Rail – loan for Auckland metro rail electrical multiple unit package

The appropriation increased due to an expense transfer from 2012/13.

Roading - reinstatement of earthquake damaged roads in Christchurch - Loan

$183.42 million was appropriated over 2013/14 to 2015/16 to fund this work by way of a loan.

Tauranga Eastern Link loan

The appropriation was reduced to zero in 2013/14 by:

  • an expense transfer of $90 million to 2014/15; and
  • a reduction of $30 million, as the NZ Transport Agency does not require the full loan.

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NOTE 14: Major budget to actual variances

The significant variances between actual results and the Supplementary Estimates forecasts were:

Schedule of non-departmental revenue and receipts

Total revenue and receipts were $39.9 million higher than forecast with the main variance in actual indirect taxation - $39.7 million higher than forecast. These revenues are demand driven and so difficult to forecast.

Schedule of non-departmental expenses

Total expenses were $22 million less than appropriated in the Supplementary Estimates. The significant variances relate to following appropriations:

Auckland rail development MYA: work that was expected to be completed this year will now occur in 2014/15.

Auckland Transport Package - fair value write down: the budget was based on assumptions about when loan amounts would be drawn and repaid, and those assumptions changed - an underspend of $8.1 million.

Schedule of non-departmental assets

Non-departmental assets were $11.6 million higher than forecast. Receivables and advances are higher then forecast by $13 million. These vary depending on demand and are difficult to forecast.

Schedule of non-departmental liabilities

Payables were $20.1 million higher than forecast. Non-departmental payables relate to timing of payments to Crown agencies under Vote Transport. The agencies generally request sufficient cash to cover their expenditure for the month and this can vary.

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