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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.

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 Financial Statements of the government. For a full understanding of the Crown’s financial position, the results of its operations and cash flows for the year, reference should be made to the consolidated audited Financial Statements of the government for the year ended 30 June 2010.

The non-departmental schedules of the government in respect of the activities administered by the Ministry on behalf of the Crown comprise:

  • collection of indirect tax revenues
  • payment of refunds on claims received
  • joint venture airports.

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

Accounting policies

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.

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, motor vehicle licensing fees and tolling revenue are 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 any provision for impairment.

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 (ie 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 schedules including appropriation statements are exclusive of GST, except for receivables and payables, which are stated on a GST inclusive basis.

The amount of GST owing to the 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 2008/09
$000
  Actual 2009/10
$000
 Main Estimates
2009/10
$000
 Supplementary Estimates
2009/10
$000
170,606  Motor vehicle registration fees  171,295  166,651  169,932 
867,649  Road user charges 909,900  885,421  894,079 
1,038,255  Sub-total 1,081,195  1,052,072  1,064,011 
(34,681)  Fuel excise duty refunds (32,515)  (79,533)  (36,398) 
1,003,574  Total indirect taxation 1,048,680  972,539  1,027,613 

Note 3: Other ‘sovereign power' revenue

 

 Actual 2008/09
$000
  Actual 2009/10
$000
 Main Estimates 2009/10
$000
 Supplementary Estimates
2009/10
$000
124  Infringement fees  88  10  100 
124  Total other 'sovereign power' revenue 88  10  100 

Note 4: Other operational revenue

 

Actual 2008/09 $000  Actual 2009/10 $000 Main Estimates 2009/10 $000 Supplementary Estimates 2009/10 $000 
2,315  Tolling revenue from ALPURT B2 (note 11)  6,057  4,000 
43,725  Motor vehicle registration administration revenue 44,734  40,190  44,454 
13,030  Road user charges administration revenue 13,772  13,012  13,782 
11,545  Motor vehicle registration recoveries 11,264  10,500  10,500 
70,615  Total other operational revenue 75,827  63,702  72,736 

Note 5: Non-departmental output classes

 

Actual 2008/09 $000   Actual 2009/10 $000 Main Estimates 2009/10 $000 Supplementary Estimates 2009/10 $000 
1,727,599  This expense item is equal to the appropriations for non-departmental output classes listed in the Statement of non-departmental expenditure and appropriations  1,972,573  1,514,508  1,980,393 
1,727,599  Total non-departmental output classes 1,972,573  1,514,508  1,980,393 

Note 6: Purchase or development of capital asset classes

 

Actual 2008/09 $000 Actual 2009/10 $000 Main Estimates 2009/10 $000 Supplementary Estimates 2009/10 $000 
905,390  This expenditure is for the construction of, and improvement to, the State highway network including pavement rehabilitation and seal widening  693,200  1,009,064  629,805 
905,390  Total purchase or development of capital assets 693,200  1,009,064  629,805 

Note 7: Other expenses to be incurred by the Crown

 

Actual 2008/09 $000  Actual 2009/10 $000  Main Estimates 2009/10 $000  Supplementary Estimates 2009/10 $000 
Auckland rail development MYA  178,580  297,132  184,884 
13,300  Enhanced public transport concessions for SuperGold card holders 19,627  17,300  19,300 
743  International memberships 743  743  743 
Metro rail rolling stock and infrastructure (Wellington) 38,376  81,000 
3,270  New Zealand Railways Corporation public policy projects 3,270  3,270  3,270 
Rail network and rolling stock upgrade MYA 30,923  84,725  46,105 
500  Railway safety 500  500  500 
Wellington rail development MYA 76,572  59,339  68,000 
17,813  Total other expenses to be incurred by the Crown 348,591  463,009  403,802 

Note 8: Write back of National Land Transport Fund balance

At the end of each year, the Crown is usually holding a balance due to the National Land Transport Fund (the Fund). In the years up to 30 June 2008, the balance was reflected in the Crown financial statements as owed to the Fund and the movement in the balance was reflected in the schedule of non-departmental expenses. This was a requirement of the previous Land Transport Management Act. This Act was amended from 1 August 2008 and the balance was no longer required to be reflected. In the year to 30 June 2009, the Vote Transport Crown financial statements did not update the balance for the movement in the Fund and the balance has remained at $55.8 million as at 30 June 2008. A corresponding debtor is held in the books of the NZ Transport Agency which administer the Fund. At 30 June 2010, it was agreed that both sides should remove the balance from their books as it is no longer required. Thus the adjustment is fiscally neutral to the Crown once the Crown consolidation has taken place.

Note 9: Receivables and advances

 

Actual 2008/09 $000  Actual 2009/10 $000 Main Estimates 2009/10 $000 Supplementary Estimates 2009/10 $000 
65,054  Motor vehicle registration fees  40,074  49,810  65,054 
20  Other
6,075  Over payment for motor vehicle registry expenditure
292  Prepayments 221  324  292 
10,364  Road user charges 12,006  6,259  10,364 
871  Tolling revenue 1,450 
82,676  Sub-total 53,751  56,393  75,710 
(12,547)  Provision for doubtful debts (8,406)  (15,423)  (22,547) 
 70,129 Total receivables and advances 45,345 40,970 53,163

The carrying value of receivables and advances approximates their fair value. A provision for doubtful debts has been made against the motor vehicle registration fees and road user charges.The Ministry has assessed that no provision for impairment is required at 30 June 2010 for other balances (2009: $nil).

Note 10: Investment in joint venture airports

 

Actual 2008/09 $000  Actual 2009/10 $000 
7,400  Hawke's Bay 
12,752  New Plymouth 12,875 
3,393  Taupo 3,303 
5,114  Whanganui 4,964 
493  Westport 427 
313  Whakatane 357 
1,843  Whangarei 2,524 
31,308  Total investment in joint venture airports 24,450 

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 2009 (2009: 30 June 2008). The Crown has an interest of 50 percent in each airport.

Note 11: Investment in ALPURT B2

The Alpurt B2 project was completed during 2008/09 with a contribution from the Crown of $158 million. The charging of a toll for using the road began in February 2009. The Crown 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.

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. This is 6.45 percent and this will not change as all of the bonds have been issued. The project was modelled using an estimated rate of 6.4 percent. The two tables show the project over its full life to date and then for the current year. Further information is available at www.tollroad.govt.nz.

Life of project to date

 

Actual 2008/09 $000  Actual 2009/10 $000 
158,000  Expenditure over the life of the project  158,000 
15,802  Interest over the life of the project 27,089 
(2,315)  Tolling revenue since February 2009 (8,372) 
171,487  Balance at the year end 176,717 

Current year

 

Actual 2008/09 $000  Actual 2009/10 $000 
163,450  Balance brought forward  171,487 
10,352  Interest cost for the year 11,287 
(2,315)  Tolling revenue for the year (6,057) 
171,487  Balance at the year end 176,717 

Note 12: Payables

 

Actual 2008/09 $000  Actual 2009/10 $000 Main Estimates 2009/10 $000 Supplementary Estimates 2009/10 $000 
478,415  National Land Transport Fund revenue payable to the NZ Transport Agency  296,001  423,463  478,472 
Output funding payable to Maritime New Zealand 50 
Output funding payable to New Zealand Railways Corporation 20,335 
1,645  Output funding payable to Meterorological Service 1,741  1,642  1,645 
10,345  GST payable 11,284  10,352  10,341 
26,832  Motor vehicle registration third party collections 25,187  17,257  26,831 
Output funding payble to Greater Wellington Regional Council 7,137 
56  Other creditors
861  Road user charges refunds 1,007  651  861 
518,154  Total payables 362,742  453,365  518,150 

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: Financial instruments

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

 

Actual 2008/09 $000  Actual 2009/10 $000 
  Loans and receivables   
5,642  Cash and cash equivalents 23,853 
70,129  Receivables and advances 45,345 
75,771  Total loans and receivables 69,198 
  Financial liabilities measured at amortised cost  
518,154  Payables 362,742 

 

Credit risk

Credit risk is the risk that a third party will default on its obligation, causing a loss to be incurred. It 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.

Note 14: Major budget changes

Changes were made to the non-departmental budgets in the 2009/10 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 fees 166,651  3,281  169,932 
Road user charges 885,421  8,658  894,079 
Fuel excise duty refunds (79,533)  43,135  (36,398) 
  972,539  55,074  1,027,613 
Other operational revenue       
Motor vehicle registration administration revenue 40,190  4,264  44,454 
Road user charges administration revenue 13,012  770  13,782 
Tolling revenue 4,000  4,000 
  53,202  9,034  62,236 

Tax Revenue and administration revenue

The National Land Transport Fund Revenue Forecasting Group meets on a six-monthly basis to reforecast the tax revenue that is expected for the 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.

Tolling revenue

Tolling revenue has only being collected since February 2009. In error, a budget figure was not included in the Main Estimates 2009 but this was corrected during the year.

Non-departmental expenditure and capital appropriations

 Main Estimates $000 Supplementary Estimates $000 Cumulative Vote $000 
Appropriations for non-departmental output expenses      
Administration of the public transport concessions for SuperGold cardholders scheme 700  400  1,100 
Canterbury transport project 10,000  4,500  14,500 
Licensing activities 2,475  1,000  3,475 
Motor vehicle registry 35,991  5,695  41,686 
National Land Transport Programme:      
-Demand management and community programmes PLA 47,000  (5,656)  41,344 
-Maintenance and operations of local roads PLA 245,000  (30,000)  215,000 
-Maintenance and operations of State highways PLA 287,000  33,900  320,900 
-Management of funding allocation system PLA 36,000  (260)  35,740 
-New and improved infrastructure for local roads PLA 196,000  (21,000)  175,000 
-Public transport infrastructure PLA 27,000  108,000  135,000 
-Public transport services PLA 201,000  (1,000)  200,000 
-Renewal of local roads PLA 222,000  (4,000)  218,000 
-State highway renewals PLA 380,000  380,000 
-Transport planning PLA 37,000  (7,000)  30,000 
-Walking and cycling PLA 16,000  4,000  20,000 
Regional development transport funding 10,000  2,000  12,000 
Search and rescue activities 7,188 306  7,494 
Waikato rail funding 5,000  (5,000) 
Non-departmental other expenses      
Auckland rail development MYA 297,132  (112,248)  184,884 
Enhanced public transport concessions for SuperGold cardholders 17,300  2,000  19,300 
Metro rail rolling stock and infrastructure (Wellington) 81,000  81,000 
Motor vehicle registration/licences and road user charges bad debt provision 5,000  5,000  10,000 
Rail network and rolling stock upgrade MYA 84,725  (38,620)  46,105 
Wellington rail development MYA 59,339  8,661  68,000 
Capital expenditure      
Accelerated State highway construction 73,700  5,000  78,700 
Joint venture airports - Crown contribution MYA 489  414  903 
KiwiRail Turnaround Plan funding 20,000  20,000 
Maritime New Zealand capital expenditure PLA 900  900 
Metro rail rolling stock and infrastructure (Wellington) 146,000  (146,000) 
New and improved infrastructure for State highways - Crown contribution 5,065  (3,763)  1,302 
New infrastructure for and renewal of State highways PLA 930,299  (380,496)  549,803 
New Zealand Railway Corporation loans 85,000  320,000  405,000 

Explanations for the major changes were outlined in the 2009/10 Information Supporting the Supplementary Estimates (pages 383 to 399). They were:

Administration of the public transport concessions for SuperGold cardholders scheme, Enhanced public transport concessions for SuperGold cardholders, Canterbury transport project, licensing activities, Regional development transport funding, Search and rescue activities, Accelerated State highway construction, Joint venture airports – Crown contribution MYA

These increases reflect funding carried forward from 2008/09.

Auckland rail development MYA, Rail network and rolling stock upgrade MYA, Wellington rail development MYA

These appropriations formerly existed as part of Vote Finance and were transferred to Vote Transport on 1 July 2009. The changes during the year are a combination of funding carried forward from Vote Finance and funding being transferred to or from outyears to match the expenditure profile.

 

 Estimates $000 Carry forward from Vote Finance $000 Transfer from/(to) outyears $000 Supplementary Estimates $000 
Auckland rail development MYA  297,132  19,722  (131,970)  184,884 
Rail network and rolling stock upgrade MYA 84,725  6,980  (45,600)  46,105 
Wellington rail development MYA 59,339  2,264  6,397  68,000 

National land Transport Programme output expense PLA appropriations, New infrastructure for and renewal of State highways PLA, Maritime New Zealand capital expenditure PLA

There are five reasons for the changes in these appropriations which relate to how this funding is managed.

  • Road tax revenue is forecast every six months. The State highway capital appropriation is adjusted as required as revenue increases or decreases.
  • The National Land Transport Programme for 2009–2012 was published after the Estimates 2009. Changes were made to the appropriations to match the planned programme of expenditure for the year. Additional funding is sourced from the capital State highway appropriation as required.
  • Some expenditure was transferred to 2010/11 to reflect updated expenditure profiles.
  • The State highway renewals appropriation was created to remedy the deficit in NZ Transport Agency’s operating statement caused by State highway depreciation which is an operating expense but was being funded by a capital appropriation. The funding was created by a fiscally neutral transfer from the capital appropriation: New infrastructure for and renewal of State highways PLA.
  • The Maritime New Zealand capital expenditure PLA was created in the current year under section 9(1) of the Land Transport Management Act 2003. Funding was provided by a fiscally neutral transfer from capital appropriation: New infrastructure for and renewal of State highways PLA.

Metro rail rolling stock and infrastructure (Wellington)

This appropriation was originally created as capital in error and so had to be recreated as an operating expense during the year and the funding transferred. In addition, $65 million was carried forward to 2010/11 to reflect the updated expenditure profile.

New Zealand Railways Corporation loans

The increase of $320 million reflects:

  • $10 million being carried forward from a Vote Finance appropriation
  • a loan of $170 million being rolled over twice (totalling $340 million)
  • $30 million being carried forward to 2010/11.

KiwiRail Turnaround Plan

This appropriation was established as part of Budget 2010 to allow KiwiRail to progress the objectives detailed in the KiwiRail Turnaround Plan.

New and improved infrastructure for State highways — Crown contribution, Motor Vehicle Registry

The activities of the Motor Vehicle Registry are funded by administration fees and any excess fees are appropriated to the National Land Transport Fund using the Crown contribution appropriation. During the year, the surplus fees from 2008/09 were calculated and $1.9 million was added to the Crown contribution appropriation. Subsequently additional funding of $5.7 million was approved for the Motor Vehicle Registry and that amount was transferred from the Crown contribution appropriation to the Motor Vehicle Registry one.

Waikato rail funding

The funding was transferred to 2010/11 and 2011/12 to reflect the updated expenditure profile.

Motor vehicle registration/licence and road user charges bad debt provision

The increase reflects the updated forecast expense.

Note 15: 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 $21 million more than forecast. This is mainly due to lower fuel excise duty refunds ($4 million), higher revenue from road user charges ($16 million) and higher motor vehicle registration fees ($1 million), as shown in Note 2. All of these revenues are forecast on a six monthly basis to be as accurate as possible.

Other revenue was $3 million higher than forecast mainly due to the variance of $2 million from ALPURT B2 tolling revenue. Tolling revenue has only been collected for two years and its level is still difficult to forecast.

Schedule of non-departmental expenses

Expenditure on non-departmental output classes was $7.4 million below the Supplementary Estimates. The only significant underspends were:

  • regional development transport fund ($3 million)
  • motor vehicle register ($2 million)
  • licensing activities ($1 million).

The first two variances relate to the timing of projects and the approval of the Minister of Finance has been received to carry the funding forward to 2010/11.

Other expenses were $58.6 million lower than the Supplementary Estimates.

This is the net result of under expenditure on the following appropriations:

  • metro rail rolling stock and infrastructure ($43 million)
  • rail network and rolling stock upgrade ($15 million)
  • Auckland rail development ($6 million)
  • motor vehicle registration and road user charges bad debt provision ($2 million)

netted off over expenditure of $9 million on the Wellington rail development MYA.

The rail variances relate to the timing of contracts and payments.

Schedule of non-departmental assets

Non-departmental assets were higher than forecast by $12 million due to a combination of cash and bank being $21 million higher than forecast because of other account movements; and receivables and advances being $8 million lower than the forecast due to a decrease in the provision for doubtful debts.

Schedule of non-departmental liabilities

Payables were $155 million lower than forecast.

$182 million of this was due to the reduction in the National Land Transport Fund balance payable to the NZ Transport Agency and there are two components of this variance.

  • In 2007/08, the NZ Transport Agency’s predecessor entity drew down too much funding from the Fund and since then has been reducing this by only drawing cash as required. High expenditure by the NZ Transport Agency in 2009/10 has resulted in the reserves being utilised so the amount owed to the NZ Transport Agency is lower than last year. The forecast had been based on the 2008/09 figure.
  • In addition, as described in note 8, an amount of $55.8 million payable by the Crown to the NZ Transport Agency was written back at 30 June. This balance had been included in the forecast.

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