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Note 1: Statement of accounting policies

REPORTING ENTITY
These non-department 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 for the year, reference should be made to the consolidated audited Crown Financial Statements for the year ended 30 June 2009.

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

  • collection of indirect tax 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.

ACCOUNTING POLICIES
The non-department 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:

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
Revenue from road user charges and motor vehicle licensing fees is recognised when payment for the charge or fee is made.

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 by 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 (ie not past due).

INVESTMENTS
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 financial statements.

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 schedules including appropriation statements are exclusive of GST.

The amount of GST owing to Inland Revenue Department at balance date, being net GST on motor vehicle registration activities, is included in payables.

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 they 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.

Note 2: Indirect taxation

 

Actual
2007/08
$000         
                                                  Actual 
2008/09
$000         
Main Estimates 
2008/09
$000         
Supplementary Estimates 
2008/09
$000
         
226,026  Motor vehicle registration fees  170,606  228,519  171,481 
850,949  Road user charges 867,649  939,601  882,608 
1,076,975  Sub-total 1,038,255  1,168,120  1,054,089 
(34,525)  Fuel excise duty refunds (34,681)  (74,448)  (68,403) 
1,042,450  Total indirect taxation 1,003,574  1,093,672  985,686 

Note 3: Other 'sovereign power' revenue

 

Actual
2007/08    
$000 
 
  Actual 
2008/09    
$000 
 
Main Estimates 
2008/09
$000   
 
Supplementary Estimates 
2008/09
$000
   
150  Infringement fees                                         124  10  10 
150  Total other 'sovereign power' revenue 124  10  10 

Note 4: Other operational revenue

 

Actual
2007/08    
$000
 
                                                Actual 
2008/09    
$000 
 
Main Estimates 
2008/09
$000 
 
Supplementary
Estimates 
2008/09
$000
  
Tolling revenue from ALPURT B2 (Note 11)  2,315 
Motor vehicle registration administration review 43,725  41,746 
Road user charges administration review 13,030  13,140 
12,908  Motor vehicle registration recoveries  11,545 10,500  10,500 
12,908  Total other operational revenue  70,615 10,500  65,386 

A component of the motor vehicle registration fee and the road user charge is to cover the costs of administration. In previous years, the administration fee was included as part of the Indirect Taxation revenue (note 2 above) that was credited to the National Land Transport Fund. With the creation of the NZ Transport Agency on 1 August 2008 and the transfer of the Motor Vehicle Register and registry functions to the Agency on that day, the treatment of the administration component changed. It is no longer credited to the National Land Transport Fund but is used to pay for the appropriations relating to the Motor Vehicle Register, road user charge collection, investigation and enforcement, fuel excise duty refunds and land transport revenue forecasting and strategy work.

Note 5: Proceeds from sale of land

During 2007/08, the Ministry received $4.3 million, being the Crown’s share of sale proceeds from land at New Plymouth airport.

Note 6: Non-departmental output classes

 

Actual
2007/08    
$000
  
                                                  Actual 
2008/09    
$000 
 
Main Estimates 
2008/09
$000 
 
Supplementary
Estimates 
2008/09
$000
  
1,359,416  This expense item is equal to the appropriations for non-departmental output classes listed in the Statement of Non-Departmental Expenditure and Appropriations.  1,727,599  1,404,527  1,787,599 
1,359,416  Total non-departmental output classes  1,727,599  1,404,527  1,787,599 

 Note 7: Purchase or development of capital assets

 

Actual
2007/08    
$000
   
                                                 Actual 
2008/09    
$000 
 
Main Estimates 
2008/09
$000 
  
Supplementary Estimates 
2008/09
$000
 
582,232  This expenditure is for the construction of, and improvement to the state highway network including pavement rehabilitation and seal widening.  905,390  1,120,758  910,390 
582,232  Total purchase or development of capital assets  905,390  1,120,758  910,390 

 Note 8: Other expenses to be incurred by the Crown

 

Actual
2007/08    
$000
  
                                              Actual 
2008/09    
$000
 
Main
Estimates 
2008/09
$000
 
Supplementary
Estimates 
2008/09
$000
 
500  Railway Safety  500  500  500 
674  International memberships 743  743  743
3,270  New Zealand Railways Corporation 3,270  3,270  3,270 
Enhanced public transport concessions for SuperGold cardholders 13,300  18,000  16,900 
4,444  Total other expenses to be incurred by the Crown 17,813  22,513  21,413 

Note 9: Receivables and advances

Actual
2007/08    
$000
  
                                              Actual 
2008/09    
$000
  
Main Estimates 
2008/09
$000
 
Supplementary Estimates 
2008/09
$000
 
50,135  Motor vehicle registration fees  65,054  45,974  49,810 
322  Prepayments  292  262  324 
800  Receivable from the NZ Transport Agency 6,946 
6,259  Road user charges 10,364  5,944  6,259 
Other 20 
57,516  Sub-total 82,676  52,180  56,393 
(5,423)  Provision for doubtful debts (12,547)  (5,423)  (10,423) 
52,093  Total receivables and advances 70,129  46,757  45,970 

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 2009 (30 June 2008: $nil). 

Note 10: Investment in joint venture airports

 

Actual 2007/08
$000 
                                                  Actual 2008/09
$000
 
8,446  Hawke's Bay                          7,400 
7,515  New Plymouth 12,752 
1,887  Taupo 3,393 
3,648  Wanganui 5,114 
493  Westport 493 
371  Whakatane 313 
1,834  Whangarei 1,843 
24,194  Total investment in joint venture airports 31,308 

The Hawke’s Bay airport was corporatised on 1 July 2009 and the assets transferred to a new company. The Crown has a 50 percent shareholding in the new company. PriceWaterhouseCoopers were retained by the joint venture partners to value the airport for the purposes of corporatisation. The valuation of $7.4 million shown is 50 percent of the final valuation as at 30 June 2009.

The value of the investments in the other airports is based on the annual financial statements of each airport for the year ending 30 June 2008 (2008: 30 June 2007). The Crown has an interest of 50 percent in each airport.

The increase in the valuation of the New Plymouth airport is due to the revaluation of assets during 2007/08. The revaluation adjustment for that year amounted to $10.3 million (2007:$nil).

Note 11: Investment in ALPURT B2

The ALPURT B2 project was completed during the year with a total contribution from the Crown of $158 million. The charging of a toll for using the road began in February 2009. The Crown has issued infrastructure bonds to fund the project and the toll revenue is intended to cover the costs of the bonds. The bonds are shown within the financial statements of the Treasury and tolling revenue is recorded by the Ministry of Transport.

It was agreed that a notional account would be kept of the ‘cost’ of the project using an estimated interest rate charged on the balance 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 the average infrastructure bond rate plus 15 basis points. At 30 June 2009: 6.45 percent (30 June 2008: 6.51 percent). The balance is represented in the table below.

 

Actual 2007/08
$000 
                                                                      Actual 2008/09
$000
 
133,052  Expenditure over the lifetime of the project  158,000 
5,449  Interest over the life of the project 15,802 
Tolling revenue (2,315) 
138,501  Balance at the end of the year 171,487 

Note 12: Payables

 

Actual
2007/08        
$000
 
                                  Actual
2008/09       
$000
  
Main Estimates
2008/09
$000 
Supplementary
Estimates
2008/09
$000 
409,064  National Land Transport Fund revenue payable to the NZ Transport Agency  478,415 89,155  423,463 
14,337  Transit New Zealand  -
1,607  Output funding payable to Meteorological Service  1,645 1,387  1,642 
97  International subscriptions  -
10,352  GST payable   10,345 9,573  10,352 
17,257  Motor vehicle registration third party collections  26,832 17,333  17,257 
Other creditors  56
651  Road user charge refunds  861 777  651 
453,365  Total payables  518,154 118,225  453,365 

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

Note 13: Major Budget changes

Changes were made to the non-departmental budgets in the 2008/09 Supplementary Estimates. Explanations for significant variances are provided below.

Revenue and receipts

                                          Main Estimates
$000                 
Supplementary Estimates
$000 
Cumulative Vote
$000
 
Tax Revenue       
Motor vehicle registration  228,519  (57,038)  171,481 
Road user charges  939,601  (56,993)  882,608 
Fuel excise duty refunds (74,448)  6,045  (68,403) 
  1,093,672  (107,986)  958,686 
Other operational revenue       
Motor vehicle registration administration revenue 41,746  41,746 
Road user charges administration revenue 13,140  13,140 
  54,886  54,886 


There are two major reasons for the above adjustments: the change in treatment of the administration fee and the reforecasting of road tax revenue.

Change in treatment of the administration revenue
As explained in Note 4, the component of the motor vehicle registration fee and the road use charge that is to cover the costs of administration has been treated differently from 1 August 2008. In previous years, it was included as part of the Indirect Taxation revenue but from 1 August 2008, it is shown separately as Operational Revenue. In the main Estimates, this change was not reflected and so the budget was zero. The fee was subsequently split out and the tax revenue dropped correspondingly.

Reforecasting of road tax revenue
The National Land Transport Fund Revenue Forecasting Group meets on a six-monthly basis to reforecast the revenue that is expected for the Fund, based on the current economic forecasts. The changes reflect the result of this process, as well as the change in treatment of the administration component explained in the previous paragraph.

Non-departmental expenditure and capital appropriations

 

                                                         Budget Estimates
$000 
Supplementary 
Estimates
$000 
Cumulative Vote
$000
 
Appropriations for non-departmental output expenses 
Administration of the public transport concessions for SuperGold card holders scheme 1,100  1,100 
Implementation of regional fuel tax  300  300 
Licensing activities 2,475  800  3,275 
Maintainance of local roads PLA 193,159  47,463  240,622 
Maintenance of State highways PLA 76,553  76,553 
Management of funding allocation system PLA 73,633  523  74,156 
Motor vehicle registry 37,078  37,078 
New and improve infrastructure for local roads PLA 339,432  13,632  353,064 
Passenger transport service PLA 224,785  89,015  313,800 
Promotion, information and education PLA 34,948  (4,403)  30,545 
Rail and sea freight PLA 2,000  6,000  8,000 
Regional land transport PLA 214,500  104,620  319,120 
Regulatory enforcement PLA 2,704  3,117  5,821 
Research and performance monitoring PLA 4,502  7,274  11,776 
Non department other expenses
Enhanced public transport concessions for SuperGold cardholders 18,000  (1,100)  16,900 
Motor vehicle registration/licenses and road user charges bad debt provision 5,000  5,000 

 

                                                          Budget Estimates
$000 
Supplementary 
Estimates
$000 
Cumulative Vote
$000
 
Capital Expenditure 
Accelerated State highway contruction  35,000  35,000 
ALPURT B2 24,948  24,948 
New and improved infrastructure for State highways - Crown contribution 347,000  380,065  727,065 
New and improved State highway infrastructure PLA  710,758  (640,333)  70,425 
NZ Transport Agency 20,540,280  6,990  20,547,270 
Realignment of Buckle Street 5,333  (5,333) 
State highway construction programme guarantee 63,000  14,900  77,900 

Explanations for the major changes were outlined in the 2008/09 Supplementary Estimates. They were:

Administration of the public transport concessions for Supergold cardholders scheme
Enhanced public transport concessions for Supergold cardholders

The enhanced public transport concessions appropriation of $18 million was established as part of Budget 2008. It was subsequently realised that the scope of this appropriation did not allow for the payment of administration costs. Therefore, the Administration appropriation was established and $1.1 million was transferred from the enhanced public transport concession appropriation to fund administration.

ALPURT B2
This project was expected to be completed in 2007/08 and so there was no provision in the Estimates 2008 for it. Funding unspent in 2007/08 was transferred to 2008/09 to allow the project to be completed.

Maintenance of local roads PLA, maintenance of State highways PLA, new and improved infrastructure for local roads PLA, passenger transport services PLA, regional land transport PLA, new and improved State highway infrastructure PLA
The 2009 National Land Transport Programme was completed after the publication of the Estimates 2008. As part of the Baseline Update process, the appropriations above were rebalanced to be in line with the Programme. The last appropriation in the list was reduced by transfers to the other appropriations.

The results of the six monthly road tax revenue forecasting process are adjusted through the New and Improved State Highway Infrastructure appropriation. $242 million of this appropriation was also transferred to 2009/10 as the funding was not required in 2008/09.

Motor Vehicle Registry
This appropriation was created from 1 August 2008 after the transfer of Motor Vehicle Register from the Ministry to the NZ Transport Agency. It and three new departmental appropriations replaced one existing departmental appropriation – Motor Vehicle Register and Revenue Management.

Rail and sea freight
Additional funding of $6 million was approved as part of Budget 2008 but not reflected in the Budget figures, in error.

Motor vehicle registration/licences and road user charges bad debt provision
This appropriation was created in 2007/08 to reflect the nature of the expenses being incurred. In error at that time, funding was not allocated to outyears. This was corrected during 2008/09.

Realignment of Buckle Street
This appropriation was reduced to zero as part of Budget 2009. The project will proceed with alternative funding.

State highway construction programme guarantee
The increase reflects funding carried forward from 2007/08.

Accelerated State highway construction
This appropriation was created during 2008/09 to fund the government plan to bring forward the timing of some key projects.

New and improved infrastructure for State highways – Crown contribution
The increase reflects funding carried forward from 2007/08 from disestablished appropriations.

NZ Transport Agency
The adjustment to the appropriation is to reflect the funding of the transfer of the Motor Vehicle Register to the NZ Transport Agency.

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
Indirect taxation was $18 million more than forecast. This is mainly due to lower fuel excise duty refunds ($34 million), offset by lower revenue from Road User Charges ($15 million).

Other revenue was $13 million higher than forecast mainly due to an unbudgeted receipt of $2.3 million from ALPURT B2 tolling revenue and a $7.1 million increase in the valuation of the joint venture airports (revaluations are not budgeted by the Crown).

Schedule of non-departmental expenses
Expenditure on non-departmental output classes was $60 million lower than forecast mainly due to variances on the following appropriations:

  • new and improved infrastructure for local roads ($40 million)
  • rail and sea freight ($5.5 million)
  • Canterbury transport project ($4.5 million)
  • Motor Vehicle Register ($5.4 million)
  • regional development transport fund ($2 million)

Expenditure on purchase or development of capital assets was $5 million lower than forecast due to lower expenditure on the Accelerated State highway construction appropriation.

Schedule of non-departmental assets
Non-departmental assets were higher than forecast due to a combination of cash and bank being $12.7 million lower than forecast, due to a combination of other account movements; and receivables and advances being $24.2 million higher than forecast due to higher motor vehicle registrations and road user charges.

Schedule of non-departmental liabilities
Payables were $64.8 million higher than forecast. This was mainly due to the balance owed to the NZ Transport Agency. Cash had been withheld from them at the year end as they did not require it and the forecast used in the Supplementary Estimates was too low as figures were still being worked through.


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