for the year ended 30 June 2015

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NOTE 1: STATEMENT OF ACCOUNTING POLICIES

Reporting entity

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

These non-departmental balances are consolidated into the Financial Statements of the Government for the year ended 30 June 2015. For a full understanding of the Crown’s financial position, results of operations, and cash flows for the year, refer to the Financial Statements of the Government.

The Ministry’s responsibility is to manage the revenue, expenditure, assets and liabilities on behalf of the Crown. 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
  • joint venture airports

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

Basis of preparation

The non-departmental statements and schedules have been prepared in accordance with the accounting policies of the Financial Statements of the Government, Treasury Instructions, and Treasury Circulars.

Measurement and recognition rules applied in the preparation of these non-departmental statements and schedules are consistent with New Zealand generally accepted accounting practice (Tier 1 Public Sector Public Benefit Entity Accounting Standards) as appropriate for public benefit entities.

These non-departmental statements and schedules are the first prepared in accordance with the new PBE accounting standards. There are no material adjustments arising on transition to the new PBE accounting standards.

Significant accounting policies

Budget figures

The 2015 budget figures are for the year ending 30 June 2015, which are consistent with the best estimate financial information submitted to Treasury for the BEFU for the year ending 2014/15.

Revenue and receipts

Indirect taxation is deemed to be non-exchange revenue, for the purposes of these financial statements. All other revenue is deemed to be exchange. 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

Receivables are initially measured at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment.

Impairment of a receivable is established when there is objective evidence the Ministry will not be able to collect amounts due according to the original terms of the receivable. Significant financial difficulties of the debtor, probability that the debtor will enter into insolvency, bankruptcy, receivership, or liquidation, and default in payments, are considered indicators the receivable is impaired. For receivables not individually impaired, a collective assessment of impairment is also carried out. This considers past practice of collection history across the receivables portfolio. 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 debt is uncollectible, it is written off against the allowance account for debtors. Overdue receivables that are renegotiated are reclassified as current (that is, 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. GST is returned on revenue received on behalf of the Crown, where applicable. However, an input tax deduction is not claimed on non-departmental expenses. Instead, the amount of GST applicable to non-departmental expense is recognised as a separate expense and eliminated against GST revenue on consolidation of the Financial Statements of the Government.

Commitments

Commitments are future expenses and liabilities to be incurred on contracts entered into at balance date. Information on non-cancellable capital and lease commitments are reported in the statement of commitments.

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 2013/14
$000

 

Actual 2014/15
$000

Unaudited Main Estimates 2014/15
$000

Unaudited Supplementary Estimates 2014/15
$000

1,204,502

Road user charges

1,282,969

1,267,674

1,265,144

187,112

Motor vehicle registration fees

180,974

195,394

198,621

1,391,614

Sub-total

1,463,943

1,463,068

1,463,765

(42,324)

Fuel excise duty refunds

(50,752)

(43,712)

(46,536)

1,349,290

Total indirect taxation

1,413,191

1,419,356

1,417,229

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NOTE 3: OTHER ‘SOVEREIGN POWER’ REVENUE

Actual 2013/14
$000

 

Actual 2014/15
$000

Unaudited Main Estimates 2014/15
$000

Unaudited Supplementary Estimates 2014/15
$000

1,525

Infringement fees – tolls and other

1,351

1,400

1,400

1,525

Total other ‘sovereign power’ revenue

1,351

1,400

1,400

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NOTE 4: OTHER OPERATIONAL REVENUE

Actual 2013/14
$000

 

Actual 2014/15
$000

Unaudited Main Estimates 2014/15
$000

Unaudited Supplementary Estimates 2014/15
$000

11,080

Road user charges administration fees

4,006

11,783

3,928

28,206

Other revenue

-

-

-

7,648

Tolling revenue (note 10)

8,056

8,000

8,000

46,934

Total other operational revenue

12,062

19,783

11,928

The decrease in other revenue is mainly due to the payment to the Crown of the settlement proceeds paid by the insurer of the MV Rena in 2013/14. This was a one-off payment that did not recur in 2014/15.

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NOTE 5: NON-DEPARTMENTAL OUTPUT CLASSES

Actual 2013/14
$000

 

Actual 2014/15
$000

Unaudited Main Estimates 2014/15
$000

Unaudited Supplementary Estimates 2014/15
$000

1,981,513

This expense item is equal to the appropriations for non- departmental output classes listed in the appropriation statements

2,038,714

1,968,967

2,070,642

1,981,513

Total non-departmental output classes

2,038,714

1,968,967

2,070,642

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NOTE 6: PURCHASE OR DEVELOPMENT OF CAPITAL ASSETS

Actual 2013/14
$000

 

Actual 2014/15
$000

Unaudited Main Estimates 2014/15
$000

Unaudited Supplementary Estimates 2014/15
$000

776,227

This expenditure is for the construction of, and improvement to the State highway network

1,074,033

936,543

886,216

776,227

Total purchase or development of capital assets

1,074,033

936,543

886,216

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NOTE 7: OTHER EXPENSES TO BE INCURRED BY THE CROWN

Actual 2013/14
$000

 

Actual 2014/15
$000

Unaudited Main Estimates 2014/15
$000

Unaudited Supplementary Estimates 2014/15
$000

-

Auckland rail development

10,878

-

10,878

53,100

Auckland rail development MYA

-

-

-

113,885

Auckland Transport package – fair value write-down of loan

-

-

-

569

Membership of international organisations

577

743

583

3,270

Rail – public policy projects

3,270

3,270

3,270

500

Rail – railway safety

500

500

500

23,905

SuperGold Card – public transport concessions for cardholders *

26,116

25,905

26,100

537

Tauranga maritime incident response

1,250

300

1,566

-

Rail – Auckland metro rail electric multiple unit package

90,000

90,000

90,000

-

Urban cycleways – local routes

5,000

-

10,000

195,766

Total other expenses to be incurred by the Crown

137,591

120,718

142,897

*Approval to spend more than the Supplementary Estimates amount was given by the Minister of Finance. The approval was given prior to the expenditure being incurred, under section 26B of the Public Finance Act 1989.

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NOTE 8: RECEIVABLES AND ADVANCES

Actual 2013/14
$000

 

Actual 2014/15
$000

Unaudited Main Estimates 2014/15
$000

Unaudited Supplementary Estimates 2014/15
$000

39,017

Motor vehicle registration fees

46,577

36,383

52,481

29,370

Road user charge revenue

29,276

12,687

9,201

1,882

Tolling revenue

1,960

1,985

1,923

471

Infringement revenue

471

100

548

118

Other

-

-

-

70,858

Sub-total

78,284

51,155

64,153

(6,705)

Provision for doubtful debts

(11,842)

-

-

64,153

Total receivables and advances

66,442

51,155

64,153

The carrying value of receivables and advances approximates their fair value. No debtor is past due, and the Ministry has assessed no provision for impairment is required at 30 June 2015 (30 June 2014: $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 aging profile of receivables and advances is shown below. Comparative 2014 information is not available:

2014

 

2015

Gross
$000

Impairment
$000

Net
$000

 

Gross
$000

Impairment
$000

Net
$000

     

Not past due

64,194

(6,176)

58,018

     

Past due 1-90 days

5,284

(1,057)

4,227

     

Past due 91-180 days

3,366

(1,010)

2,356

     

Past due 181-365 days

4,155

(2,493)

1,662

     

Past due >365 days

1,285

(1,106)

179

70,858

(6,705)

64,153

Total

78,284

(11,842)

66,442

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NOTE 9: INVESTMENT IN JOINT VENTURE AIRPORTS

Actual 2013/14
$000

 

Actual 2014/15
$000

11,910

New Plymouth

11,880

3,634

Taupo

3,736

5,027

Wanganui

5,087

854

Westport

800

519

Whakatane

795

2,458

Whangarei

2,458

24,402

Total investment in joint venture airports

24,756

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 2015 is based on the annual financial statements of each airport for the year ended 30 June 2014 (2013/14: 30 June 2013), plus capital contributions from the Crown during the year ended 30 June 2015.

The investment was reduced by $30,000 for losses incurred by the airports during the year ended 30 June 2014 (2013/14: $93,000 reduction) and increased for capital payments made during 2014/15 of $384,000 (2013/14: $116,000).

The net result is a $354,000 increase in the Crown’s equity position for 2014/15 (2013/14: $23,000 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 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 – 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 at www.tollroad.govt.nz.

Since the commencement of the project

Actual 2013/14
$000

 

Actual 2014/15
$000

158,000

Funding provided for construction

158,000

75,784

Interest charged since funding first drawn

88,799

(35,701)

Tolling revenue since February 2009

(43,757)

198,083

Balance at 30 June

203,042

Current year

Actual 2013/14
$000

 

Actual 2014/15
$000

193,078

Balance at 1 July

198,083

12,653

Interest charge for the year

13,015

(7,648)

Tolling revenue for the year

(8,056)

198,083

Balance at 30 June

203,042

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NOTE 11: PAYABLES

Actual 2013/14
$000

 

Actual 2014/15
$000

Unaudited Main Estimates 2014/15
$000

Unaudited Supplementary Estimates 2014/15
$000

329,662

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

453,282

300,000

300,000

16,334

GST payable

17,194

13,848

16,334

16,069

Motor vehicle registration third party collections

15,771

31,533

16,832

4,262

Output funding payable to the KiwiRail

4,219

1,638

4,262

1,971

Road user charges refunds

1,532

1,232

1,208

110

Output funding payable to Maritime New Zealand

987

-

-

-

Output funding payable to other parties

600

-

-

368,408

Total payables

493,585

348,251

338,636

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 2013/14
$000

 

Actual 2014/15
$000

 

Loans and receivables

 

19,584

Cash and cash equivalents

5,345

64,153

Receivables and advances

66,442

83,737

Total loans and receivables

71,787

 

Financial liabilities measured at amortised cost

 

368,408

Payables

493,585

Credit risk

Credit risk is the risk 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 2014/15 Supplementary Estimates. Explanations for significant variances are provided below.

Revenue and receipts

 

Unaudited Main Estimates
$000

Unaudited Supplementary Estimates
$000

Cumulative Vote
$000

Indirect taxation

     

Motor vehicle registration

195,394

3,227

198,621

Road user charges

1,267,674

(2,530)

1,265,144

Fuel excise duty refunds

(43,712)

(2,824)

(46,536)

Total

1,419,356

(2,127)

1,417,229

Other operational revenue

     

Road user charges administration fees

11,783

(7,855)

3,928

Tolling fees

8,000

-

8,000

Total

19,783

(7,855)

11,928

Tax revenue and related fees

The National Land Transport Fund Revenue Forecasting Group meets two or three times a year to reforecast the tax revenue expected for the National Land Transport Fund, based on the current economic forecasts. The changes reflect the result of this process.

Non-departmental expense and capital expenditure appropriations

 

Unaudited Main Estimates
$000

Unaudited Supplementary Estimates
$000

Cumulative Vote
$000

Appropriations for non-departmental output expenses

     

Accident or incident investigation and reporting

3,865

95

3,960

National Land Transport Program PLA

1,913,650

110,350

2,024,000

Policy advice and related outputs – maritime MCA

7,708

121

7,829

Road user charges collection

13,569

(8,849)

4,720

Search and rescue and recreational boating safety activities PLA

6,943

79

7,022

Non-departmental other expenses

     

Auckland rail development

-

10,878

10,878

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

4,000

500

4,500

Membership of international organisations

743

(160)

583

SuperGold Card – public transport concessions for cardholders

25,905

195

26,100

Tauranga maritime incident response

300

1,266

1,566

Urban cycleways – local routes

-

10,000

10,000

Capital expenditure

     

Auckland Transport Package loan

55,000

(55,000)

-

Joint venture airports – Crown contribution MYA

500

934

1,434

Maritime New Zealand

5,900

880

6,780

Maritime New Zealand capital expenditure PLA

-

673

673

Maritime New Zealand – oil response

-

183

183

NLTF borrowing facility for short-term advances

750,000

(250,000)

500,000

Rail – KiwiRail equity injection

-

46,000

46,000

Rail – Wellington metro rail network upgrade

16,343

12,709

29,052

Regional state highways MYA

-

12,000

12,000

Roading – reinstatement of earthquake damaged roads in Christchurch – loan

100,000

(40,000)

60,000

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

936,543

(50,327)

886,216

Explanations for the major changes were outlined in the 2014/15 Supplementary Estimates (pages 769 onwards). They were:

Accident or incident investigation and reporting

This appropriation increased during the year by $0.095 million, due to reprioritisation within Vote Transport.

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 one to fund it for planned activity in a year
  • Road tax revenue is forecast two to three times a year. The State highway capital appropriation is adjusted as required as revenue increases or decreases
  • Unspent funding from previous years may be appropriated.

Any shortfall in funding to be covered by 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 decrease in the capital appropriation of $50.327 million is due to:

  • $85 million for surplus funds in the National Land Transport Fund at 1 July 2014 (increase)
  • $13.679 million from changes in the road tax revenue forecasts (decrease)
  • $110.350 million transferred to the operating appropriation as above (decrease)
  • $11.298 million (net) appropriated to other outputs that are funded from road tax revenue (decrease).

Policy advice and related outputs – maritime MCA

The appropriation was increased $0.121 million. This increase was made up of:

  • $304,000 was an expense transfer from 2013/14 (increase)
  • $183,000 was transferred to the capital appropriation to fund planned activity (decrease).

Road user charges collection

The reduction of $8.849 million is due to the appropriation being disestablished.

Search and rescue and recreational boating safety activities PLA

The appropriation increased $79,000, due to the approval of additional funding to meet the operating costs of the new ground station to pick up search and rescue distress beacon signals.

Auckland rail development

The appropriation was established during the year to hold $10.878 million of unspent funding from the expired multi- year appropriation for the same purpose.

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

The appropriation increased by $500,000 because the NZ Transport Agency has reduced the threshold for ‘auto’ invoicing, which has meant more debt and more write-offs.

Membership of international organisations

The appropriation decreased by $160,000 as unspent funding was returned to the Crown.

SuperGold Card – public transport concessions for cardholders

The appropriation increased by $195,000 as funding was reprioritised from other appropriations in Vote Transport to cover forecast costs.

Tauranga maritime incident response

The appropriation increased by $1.266 million as the net of

  • an expense transfer of $1.146 million from 2013/14 (increase)
  • $200,000 reprioritised from other appropriations in Vote Transport
  • an expense transfer of $200,000 to 2015/16 (decrease) to match planned expenditure
  • $120,000 funding transferred from the Ministry for the Environment (increase).

Urban cycleways – local routes

This appropriation was created during 2014/15 to fund expenses incurred on the investigation, design and construction of urban cycleways that will become the responsibility of local authorities.

Auckland Transport Package loan

This appropriation has been carried forward to 2015/16 to match expenditure.

Joint venture airports – Crown contribution MYA

This appropriation increased due to an expense transfer from 2013/14.

Maritime New Zealand

This appropriation was increased by $880,000 due to an expense transfer from 2013/14.

Maritime New Zealand capital expenditure PLA

$673,000 was appropriated to reimburse Maritime NZ for high search and rescue costs in 2013/14.

Maritime NZ – oil response

$183,000 was appropriated to provide capital for oil pollution prevention and control.

NLTF borrowing facility for short-term advances

The appropriation was reduced by $250,000 to reflect a more realistic level.

Rail – KiwiRail equity injection

This appropriation was established during 2014/15 to recognise increases in equity in KiwiRail Holdings Limited due to property transactions.

New Zealand Railways Corporation holds land and other property on behalf of the KiwiRail Group. If it sells this property, the sale proceeds must be paid to KiwiRail Holdings Limited and this generates an increase in equity of that state- owned enterprise. Increases in equity of State-owned enterprises require an appropriation.

Rail – Wellington metro rail network upgrade

The $12.709 million increase is due to an expense transfer from 2013/14 and re-phasing of funding between years to match planned expenditure.

Regional State highways MYA

This appropriation was established during 2014/15 for the investigation, design and construction of regional State highways.

Roading – reinstatement of earthquake damaged roads in Christchurch – loan

The appropriation was reduced by $40 million with an expense transfer to 2015/16 to match requirements.

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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 $4 million lower than forecast, mainly in actual indirect taxation. These revenues are demand driven and so difficult to forecast.

Schedule of non-departmental expenses

Total expenses were $155 million higher than forecast. The National Land Transport Fund earned more than forecast, which it was entitled to spend.

Schedule of non-departmental assets

Non-departmental assets were $13.4 million lower than forecast. Cash and bank balances are lower than forecast by $14.6 million. There are a number of factors causing this variance (for example revenue and receipts are lower than forecast).

Schedule of non-departmental liabilities

Payables were $155 million higher than forecast. This is the additional amount payable to the National Land Transport Fund noted above under expenses.

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