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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 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 2011.

The schedules 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 schedules and statements have been prepared pursuant to 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 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 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 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
2009/10
$000
Actual
2010/11
$000
Main
Estimates
2010/11
$000
Supplementary
Estimates
2010/11
$000
171,295 Motor vehicle registration fees 171,529 174,548 168,987
909,900 Road user charges 1,015,779 955,402 995,446
1,081,195 Sub-total 1,187,308 1,129,950 1,164,433
(32,515) Fuel excise duty refunds (35,636) (38,312) (34,750)
1,048,680 Total indirect taxation 1,151,672 1,091,638 1,129,683

Note 3: Other 'sovereign power' revenue

Actual
2009/10
$000
Actual
2010/11
$000
Main
Estimates
2010/11
$000
Supplementary
Estimates
2010/11
$000
88 Infringement fees 1,340 100 100
88 Total other 'sovereign power' revenue 1,340 100 100

During 2010/11, the Crown began to receive revenue from infringment penalties ($1.2 million) from the Northern Gateway toll road. This revenue was not budgeted due to the uncertainty about its level.

Note 4: Other operational revenue

Actual
2009/10
$000
Actual
2010/11
$000
Main
Estimates
2010/11
$000
Supplementary
Estimates
2010/11
$000
6,057 Tolling fees from the Northern Gateway toll road (note 11) 6,150 4,000 5,803
44,734 Motor vehicle registration administration fees 46,751 45,838 45,327
13,772 Road user charges administration fees 14,176 14,728 15,137
11,264 Motor vehicle registration recoveries 8,997 10,500 10,500
75,827 Total other operational revenue 76,074 75,066 76,767

Note 5: Non-departmental output classes

Actual
2009/10
$000
Actual
2010/11
$000
Main
Estimates
2010/11
$000
Supplementary
Estimates
2010/11
$000
1,972,573 This expense item is equal to the appropriations for non-departmental output classes listed in the statement of non-departmental expenditure and appropriations 1,803,962 1,820,384 1,813,186
1,972,573 Total non-departmental output classes 1,803,962 1,820,384 1,813,186

Note 6: Purchase or development of capital assets

Actual
2009/10
$000
Actual
2010/11
$000
Main
Estimates
2010/11
$000
Supplementary
Estimates
2010/11
$000
693,200 This expenditure is for the construction of, and improvement to, the State highway network including pavement rehabilitation and seal widening 760,659 719,181 760,659
693,200 Total purchase or development of capital assets 760,659 719,181 760,659

Note 7: Other expenses to be incurred by the Crown

Actual
2009/10
$000
Actual
2010/11
$000
Main
Estimates
2010/11
$000
Supplementary
Estimates
2010/11
$000
178,580 Auckland rail development MYA 171,578 217,758 183,155
19,627 Enhanced public transport concessions for SuperGold card holders 20,735 17,300 21,865
743 International memberships 743 743 743
- Metro rail networks costs 21,139 7,046 21,139
38,376 Metro rail rolling stock and infrastructure (Wellington) 102,182 177,000 139,624
3,270 New Zealand Railways Corporation public policy projects 3,270 3,270 3,270
30,923 Rail network and rolling stock upgrade MYA 70,761 65,726 70,761
500 Railway safety 500 500 500
76,572 Wellington rail development MYA 17,170 25,742 17,170
348,591 Total other expenses to be incurred by the Crown 408,078 515,085 458,227

Note 8: Write back of National Land Transport Fund balance

At the end of each year, the Crown usually holds a balance due to the National Land Transport Fund (the NLTF). In the years to 30 June 2008, the balance was reflected in the Crown financial statements as owed to the NLTF 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 NLTF and so the balance has remained at $55.8 million as at 30 June 2008. A corresponding debtor is held in the books of the NZTA which administers the NLTF. 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
2009/10
$000
Actual
2010/11
$000
Main
Estimates
2010/11
$000
Supplementary
Estimates
2010/11
$000
40,074 Motor vehicle registration fees 43,685 65,054 40,074
221 Prepayments 12,106 292 221
12,006 Road user charge revenue 12,687 10,364 12,006
1,450 Tolling revenue 1,461 - -
- Infringement revenue 548 - -
53,751 Sub-total 70,487 75,710 52,301
(8,406) Provision for doubtful debts (7,171) (28,547) (14,406)
45,345 Total receivables and advances 63,316 47,163 37,895

Except for motor vehicle fees and road user charges 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 2011 (30 June 2010: $nil).

For motor vehicle fees and road user charges revenue, debts are assessed for impairment regularly and provision made for non-collectable debts as shown above.

Note 10: Investment in joint venture airports

 

Actual
2009/10
$000
Actual
2010/11
$000
12,875 New Plymouth 12,838
3,303 Taupo 3,368
4,964 Wanganui 4,845
427 Westport 770
357 Whakatane 435
2,524 Whangarei 2,472
24,450 Total investment in joint venture airports 24,728

The value of the investments in the airports is based on the annual financial statements of each airport for the year ending 30 June 2010 (2010: 30 June 2009). The Crown has a 50 percent interest in each airport.

Note 11: Investment in the Northern Gateway Toll Road

The Alpurt B2 roading project was completed during 2008/09 with a contribution from the Crown of $158 million. The road is now known as the Northern Gateway toll road. 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 the tolling revenue is recorded as other operational revenue (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 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 in the future as all of the bonds have been issued. 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(external link).

Since commencement of project

Actual
2009/10
$000
Actual
2010/11
$000
158,000 Funding provided for construction 158,000
27,089 Interest charged since funding first drawn 38,720
(8,372) Tolling revenue since February 2009 (14,522)
176,717 Balance at the year end 182,198

Current Year

Actual
2009/10
$000
Actual
2010/11
$000
171,487 Balance brought forward 176,717
11,287 Interest cost for the year 11,631
(6,057) Tolling revenue for the year (6,150)
176,717 Balance at the year end 182,198

Note 12: Payables

Actual
2009/10
$000
Actual
2010/11
$000
Main Estimates
2010/11
$000
Supplementary
Estimates
2010/11
$000
296,001 National Land Transport Fund revenue payable to the NZ Transport Agency 204,369 478,472 196,001
50 Output funding payable to Maritime New Zealand - - 50
20,335 Output funding payable to New Zealand Railways Corporation 27,322 - 20,335
1,741 Output funding payable to Meterological Service 1,741 1,645 1,741
11,284 GST payable 14,353 10,341 11,285
25,187 Motor vehicle registration third party collections 28,291 26,831 25,187
- Capital funding payable to Aviation Security Service 410 - -
7,137 Output funding payable to Greater Wellington Regional Council - - 7,137
- Wanganui Airport 154 - -
1,007 Road user charges refunds 1,232 861 1,007
362,742 Total payables 277,872 518,150 262,743

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
2009/10
$000
Actual
2010/11
$000
  Loans and receivables  
23,853 Cash and cash equivalents 22,395
45,345 Receivables and advances 63,316
69,198 Total loans and receivables 85,711
  Financial liabilities measured at amortised cost  
362,742 Payables 277,872

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.

Note 14: Major Budget Changes

Changes were made to the non-departmental budgets in the 2010/11 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 174,548 (5,561) 168,987
Road user charges 955,402 40,044 995,446
Fuel excise duty refunds (38,312) 3,562 (34,750)
  1,091,638 38,045 1,129,683
Other operational revenue      
Motor vehicle registration administration fees 45,838 (511) 45,327
Road user charges administration fees 14,728 409 15,137
Tolling fees 4,000 1,803 5,803
  64,566 1,701 66,267

The National Land Transport Fund Revenue Forecasting Group meets on a 6-monthly basis to reforecast the tax revenue that is expected for the NLTF based on the current economic forecasts. The changes reflect the result of this process. The administration revenue is also forecast as part of this.

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 cardholders scheme 700 (565) 135
Motor vehicle registry 35,991 6,320 42,311
National Land Transport Programme:      
   Demand management and community programmes PLA 40,444 1,000 41,444
   Maintenance and operation of State highways PLA 308,000 2,000 310,000
   Management of the funding allocation system PLA 34,136 (3,377) 30,759
   Public transport infrastructure PLA 57,000 (16,000) 41,000
   Public transport services PLA 210,000 7,600 217,600
   Rail and coastal freight PLA 1,000 (500) 500
   Transport planning PLA 33,000 1,000 34,000
   Walking and cycling facilities PLA 15,000 (2,000) 13,000
Regional development transport funding 10,000 1,000 11,000
Search and rescue and recreational boating safety activities PLA 5,409 (876) 4,533
Waikato rail funding 2,800 (2,800) -
Non-departmental other expenses      
Auckland rail development MYA 217,758 (34,603) 183,155
Enhanced public transport concessions for SuperGold cardholders 17,300 4,565 21,865
Metro rail network costs 7,046 14,093 21,139
Metro rail rolling stock and infrastructure (Wellington) 177,000 (37,376) 139,624
Rail network and rolling stock upgrade MYA 65,726 5,035 70,761
Wellington rail development MYA 25,742 (8,572) 17,170
Capital expenditure      
Aviation Security Service 283 4,073 4,356
Civil Aviation Authority loan - 4,340 4,340
Kiwirail Turnaround Plan funding 230,000 20,000 250,000
Maritime New Zealand capital expenditure PLA - 167 167
NLTF Borrowing facility for short-term advances - 250,000 250,000
New infrastructure for and renewal of State highways PLA 680,416 36,682 717,098
New and improved infrastructure for State highways - Crown contribution 5,065 4,796 9,861
New Zealand Railways Corporation loans 67,000 1,231 68,231
Joint venture airports - Crown contribution MYA 50 481 531

Explanations for the major changes were outlined in the 2010/11 Supplementary Estimates (pages 870 onwards). They were:

Administration of the public transport concessions for SuperGold cardholders scheme and Enhanced public transport concessions for SuperGold cardholders

The decrease in the SuperGold card administration appropriation reflects the decision by Cabinet to reduce this element of the funding and reallocate $0.5 million to the concession appropriation. Cabinet also agreed to provide additional funding of $4 million for the concessions.

Motor vehicle registry

The increase reflects the funding of $2.1 million carried forward from 2009/10 and additional funding of $4.2 million approved during the year to cover ongoing costs.

Auckland rail development MYA, Aviation security service, Joint venture airports – Crown contribution MYA, KiwiRail turnaround plan funding, Metro rail rolling stock and infrastructure (Wellington), New Zealand Railways Corporation loans, Rail network and rolling stock upgrade MYA, Regional development transport funding, Waikato rail funding, Wellington rail development MYA

The increase/decrease reflects the net of funding carried forward from 2009/10 and any funding transferred to 2011/12 so that the funding matches the expenditure profile.

Search and rescue and recreational boating safety activities PLA

The decrease reflects a transfer to the departmental appropriation Search and rescue activity coordination PLA to fund activities managed by the department.

Civil Aviation Authority loan

The increase reflects the decision by Cabinet to approve a loan of $4.3 million.

NLTF borrowing facility for short-term advances

The increase reflects the decision to allow the NZTA to obtain short-term advances to allow it to manage variations between revenue inflows into the NLTF and cash outlays.

New and improved infrastructure for State highways — Crown contribution

The motor vehicle registry and the road user charges systems are funded by administration fees. Once the year is complete, any excess fees are calculated and appropriated to the NLTF using the Crown contribution appropriation. During 2010/11, the surplus fees from 2009/10 were calculated at $9.9 million, which was added to the Crown contribution appropriation. Subsequently $0.9 million was transferred to a departmental appropriation to fund improvements to the road user charges system and $4.2 million was transferred to Non-departmental output class Motor vehicle registry to cover ongoing costs.

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 6 months. The State highway capital appropriation is adjusted as required as revenue increases or decreases.
  • The NZTA manages the delivery of the National Land Transport Programme. Changes were made to the related 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 Maritime New Zealand capital expenditure PLA was created in 2009/10 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.

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

Actual indirect taxation was $22 million higher than forecast. This is mainly due to greater revenue from road user charges ($20 million) and motor vehicle registration fees ($2 million), as shown in note 2. These revenues are forecast on a 6-monthly basis.

Actual other ‘sovereign power’ revenue was $1 million higher due to $1 million from tolling infringement fees. This is the first year that this revenue was received, so no budget had been provided due to the uncertainty.

Schedule of non-departmental expenses

Expenditure on non-departmental output classes was $10 million below the Supplementary Estimates. The significant underspends were:

  • National Land Transport Programme – public transport services PLA ($23 million)
  • National Land Transport Programme – demand management and community programme PLA ($8 million)
  • National Land Transport Programme – renewal of local roads PLA ($32 million)
  • National Land Transport Programme – sector training and research PLA ($2.6 million)
  • National Land Transport Programme – transport planning PLA ($11 million)

netted off by some significant overspends:

  • National Land Transport Programme – maintenance and operation of local roads PLA ($39 million)
  • National Land Transport Programme – maintenance and operation of State highways PLA ($18 million)
  • National Land Transport Programme – new and improved infrastructure for local roads PLA ($9 million)
  • National Land Transport Programme – public transport infrastructure PLA ($2 million)

The above variances are due to the NZTA managing the different activities within the National Land Transport Programme and responding to demand and timing differences.
Other expenses were $50 million lower than the Supplementary Estimates. This is the net result of under expenditure on the following appropriations:

  • Metro rail rolling stock and infrastructure ($37 million)
  • Auckland rail development ($12 million)
  • enhanced public transport concessions for SuperGold cardholders ($1 million)

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

Schedule of non-departmental assets

Non-departmental assets were higher than forecast by $17 million. There were a number of reasons for this, but the most significant was the $26 million increase in receivables and advances due to:

  • a prepayment to a third party of $12 million that was not forecast
  • a lower provision for doubtful debts by $7 million
  • the motor vehicle registration fee receivable being $3 million greater than forecast

Schedule of non-departmental liabilities

Payables were $15 million above forecast due to the two major creditors being higher than forecast due to the timing of payment:

  • the NZTA by $8 million
  • New Zealand Railways Corporation by $7 million

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