For the year ended 30 June 2012

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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 2012.

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, infringement fees and tolling revenue are recognised on an accrual basis.

Debtors and other receivables

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

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

Investments in joint venture airports

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

Creditors and other payables

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

Financial instruments

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

Goods and services tax (GST)

All items in the financial statements, including appropriation statements, are stated exclusive of GST, except for receivables and payables, which are stated on a GST-inclusive basis. In accordance with Treasury Instructions, GST is returned on revenue received on behalf of the Crown, where applicable. However, an input tax deduction is not claimed on non-departmental expenditure. Instead, the amount of GST applicable to non-departmental expenditure is recognised as a separate expense and eliminated against GST revenue on consolidation of the Financial Statements of the Government.

Commitments

Future expenses and liabilities to be incurred on non-cancellable contracts that have been entered into at balance date are disclosed as commitments to the extent that 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
2010/11
$000
Actual
2011/12
$000  
Main
Estimates
2011/12
$000 
Supplementary
Estimates
2011/12
$000 
171,529  Motor vehicle registration fees  174,655  167,811  173,655 
1,015,779  Road user charges  1,044,600  1,049,109  1,038,245 
1,187,308  Sub-total  1,219,255  1,216,109  1,211,900 
(35,636)  Fuel excise duty refunds  (35,093)  (37,178)  (35,380) 
1,151,672  Total indirect taxation  1,184,162  1,179,742  1,176,520 

Note 3: Other 'Sovereign Power' revenue

Actual
2010/11
$000
 Actual
2011/12
$000 
Main
Estimates
2011/12
$000 
Supplementary
Estimates
2011/12
$000 
 1,340 Tolling and other infringement fees 2,182  100  1,100
 1,340 Total other 'Sovereign power' revenue 2,182  100  1,100 

Note 4: Other operational revenue

Actual
2010/11
$000
 Actual
2011/12
$000 
Main
Estimates
2011/12
$000 
Supplementary
Estimates
2011/12
$000 
6,150  Tolling fees from the Northern Gateway toll road (note 10) 6,415  7,000  6,200 
46,751  Motor vehicle registration administration fees  47,002  46,206  46,708 
14,176  Road user charges administration fees  14,401  16,886  14,283 
8,997  Motor vehicle registration recoveries  6,467  10,500  6,400 
76,074  Total other operational revenue  74,285   80,592 73,591 

Note 5: Non-departmental output class

Actual
2010/11
$000 
 Actual
2011/12
$000 
Main
Estimates
2011/12
$000 
Supplementary
Estimates
2011/12
$000 
1,803,962  This expense item is equal to the appropriations for non-departmental output classes listed in the statement on non-departmental expenditure and appropriations 1,889,348  1,886,441  1,946,732 
1,803,962  Total non-departmental output classes 1,889,348  1,886,441  1,946,732 

Note 6: Purchase or development of capital assets

Actual
2010/11
$000
Actual
2011/12
$000
Main
Estimates
2011/12
$000
Supplementary
Estimates
2011/12
$000
760,659  This expenditure is for the construction of, and improvement to the State highway nextwork including pavement rehabilitation and seal widening 625,661  671,633 629,587
760,659  Total purchase or development of capital assets 625,661 671,633  629,587

Note 7: Other expenses to be incurred by the Crown

Actual
2010/11
$000
 Actual
2011/12
$000 
Main
Estimates
2011/12
$000 
Supplementary
Estimates
2011/12
$000 
171,578   Auckland rail development MYA 132,498  248,202  133,686 
 Loan for Auckland metro rail electric multiple unit package fair value write-down 43,454  50,600 
743   Membership of international organisations 685  743  743 
21,139   Metro rail network costs
102,182   Rail - metro rail rolling stock and infrastructure (Wellington) 112,027  80,000  117,442 
3,270   Rail - public policy projects 3,270  3,270  3,270 
70,761   Rail network and rolling stock upgrade MYA 10,147  10,147  10,147 
500   Rail - railway safety 500  500  500 
20,735   SuperGold Card - public transport concessions for cardholders 21,339  22,905  22,905 
 Tauranga maritime incident response 32,179  35,000 
17,170   Wellington rail develoment MYA
408,078   Total other expenses to be incurred by the Crown 356,099  365,767  374,293 

Note 8: Receivables and advances

Actual
2010/11
$000 
 Actual
2011/12
$000 
Main
Estimates
2011/12
$000 
Supplementary
Estimates
2011/12
$000 
43,685  Motor vehicle registration fees  53,597  40,074  43,685 
12,106  Prepayments  221  12,106 
12,687  Road user charges revenue  9,201  12,002  12,687 
1,461  Tolling revenue  1,639  1,350  1,910 
548  Infringement revenue  674  100  100 
70,487  Sub-total  65,111  53,751  70,488 
(7,171)  Provision for doubtful debts  (7,939)  (20,406)  (7,171) 
63,316  Total receivables and advances  57,172  33,345  63,317 

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 2012 (30 June 2011: $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 9: Investment in joint venture airports

Actual
2010/11
$000
 Actual
2011/12
$000 
12,838  New Plymouth  11,726 
3,368  Taupo  3,726 
4,845  Wanganui  5,135 
770  Westport  716 
435  Whakatane  584 
2,472  Whangarei  2,471 
24,728  Total investment in joint venture airports  24,358 

The Crown has a 50 percent interest in each airport. The value of the investment at 30 June 2012 is based on the annual financial statements of each airport for the year ending 30 June 2011 (2011: 30 June 2010) plus adjustments for equity movements and capital payments made during 2011/12. These adjustments amounted to a $1.374 million reduction in the Crown’s equity position for the year ended 30 June 2012 (2010/11: $0.278 million increase).

Note 10: 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 the project
Actual
2010/11
$000 
 Actual
2011/12
$000 
 158,000  Funding provided for construction 158,000 
 38,720  Interest charged since funding first drawn 50,750 
 (14,522)  Tolling revenue since February 2009 (20,937) 
 182,198  Balance at the year end 187,813 
Current year
Actual
2010/11
$000 
 Actual
2011/12
$000 
176,717  Balance brought forward  182,198 
11,631  Interest cost for the year  12,030 
(6,150)  Tolling revenue for the year  (6,415) 
182,198  Balance at the year end  187,813 

Note 11: Payables

Actual
2010/11
$000
 Actual
2011/12
$000 
Main
Estimates
2011/12
$000 
Supplementary
Estimates
2011/12
$000 
 204,369 National Land Transport Fund revenue payable to the New Zealand Transport Agency 279,515  196,001  200,000 
 - Output funding payable to Maritime new Zealand 753  50 
 27,322 Output funding payable to New Zealand Railways Corporation  18,727  20,335  13,414 
 1,741 Output funding payable to Meteorological Service  1,741  1,741  1,741 
 14,353 GST payable  14,585  11,285  14,352 
 28,291 Motor vehicle registration third party collections  32,055  32,324  28,445 
 410 Capital funding payable to Aviation Secrity Service 
 154 Wanganui Airport 
 1,232 Road user charges refunds  1,208  1,007  1,232 
 277,872 Total payables  348,584  262,743  259,184 

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

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
2010/11
$000
 Actual
2011/12
$000 
  Loans and receivables   
22,395  Cash and cash equivalents  20,119 
63,316  Receivables and advances  57,172 
85,711  Total loans and receivables  77,291 
  Financial liabilities measured at amortised cost   
277,872  Payables  348,583 

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 13: Major budget changes

Changes were made to the non-departmental budgets in the 2011/12 Supplementary Estimates. Explanations for significant variances only are provided below.

 Main Estimates 
$000
Supplementary
Estimates
$000 
Cumulative
Vote
$000 
Tax revenue       
Motor vehicle registration  167,811  5,844  173,655 
Road user charges  1,049,109  (10,864)  1,038,245 
Fuel excise duty refunds  (37,178)  1,798  (35,380) 
  1,179,742  (3,222)  1,176,520 
Other 'sovereign power' revenue       
Tolling and other infringement fees  100  1,000  1,100 
Other operational revenue       
Motor vehicle registration administration fees  46,206  502  46,708 
Road user charges administration fees  16,886  (2,603)  14,283 
Motor vehicle registration recoveries  10,500  (4,100)  6,400 
Tolling fees  7,000  (800)  6,200 
  80,592  (7,001)  73,591 

Tax revenue and related fees

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

Tolling revenue and tolling infringement fees

Infringements on tolling revenue began to be earned in 2010/2011. The level of toll infringements on an ongoing basis is uncertain at this time.

Non-departmental expenditure and capital appropriations
 Main
Estimates
$000
Supplementary
Estimates
$000 
Cumulative
Vote
$000 
Appropriations for non-departmental output expenses       
Motor vehicle registry  40,016  7,950   47,966
National Land Transport Programme PLA  1,792,653  (49,853)   1,742,800
Policy advice on safety regulation and monitoring - maritime  5,689  1,543   7,232
Rail - Waikato network funding 5,415  (1,591)   3,824
Reinstatement of local roads in Canterbury  102,000   102,000
Non-departmental other expenses        
Auckland rail development MYA  248,202  (114,516)  133,686 
Bad debt provision - motor vehicle registration/licenses and road user charges  6,000  1,000  7,000 
Loan for Auckland metro rail electric multiple unit package fair value write-down  50,600  50,600 
Rail - metro rail rolling stock and infrastructure (Wellington)  80,000  37,442  117,442 
Tauranga maritime incident response  35,000  35,000 
Capital expenditure       
National Land Transport Programme - New infrastructure for and Renewal of State highways PLA  671,134  (45,473)  625,661 
NLTF borrowing facility for a short-term advance in 2011/12 180,000  180,000 
New and improved infrastructure for State highways - Crown contribution  529  3,397  3,926 
Rail - Loan for Auckland metro rail electric multiple unit package  200,000  200,000 
Rail - New Zealand Railways Corporation loans 330,769  (80,769)  250,000 
Wellington metro rail network upgrade 8,552  3,161  11,713 

Explanations for the major changes were outlined in the 2011/12 Supplementary Estimates (pages 817 onwards). They were:

Motor vehicle registry

The increase comprises $0.85 million carried forward from 2010/11 for delayed system work and additional funding of $7.1 million approved during the year to make up an amount of third party revenue not received, and ensure that funding was sufficient to cover costs.

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.
There are two main reasons for the changes in these appropriations:

  • road tax revenue is forecast every six months. The State highway capital appropriation is adjusted as required as revenue increases or decreases.
  • funding is moved between the two appropriations to reflect the planned levels of operating and capital expenditure for the year.

Policy advice on safety regulation and monitoring – maritime

The increase reflects $1.25 million transferred from Ministry of Transport departmental funding to enable Maritime New Zealand to deliver its planned day-to-day operations while also managing the response to the grounding of the Rena off Tauranga, and $0.293 million to meet an increased capital charge.

Waikato rail funding
Auckland rail development MYA
Rail – metro rail rolling stock and infrastructure (Wellington), and Wellington metro rail network upgrade

The agencies responsible for the funding have requested transfers between financial years to match the timing of planned expenditure in these appropriations.

Reinstatement of local roads in canterbury

This is a new appropriation to fund the restoration costs of roads within the Canterbury region that have been damaged
by the earthquakes.

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

The increase reflects a rise on the anticipated levels of Crown revenue bad debt write off.

Rail – loan for Auckland metro rail electrical multiple unit package fair value write-down

This is a new appropriation to reflect the accounting adjustments that arise from Auckland Council receiving a loan at below market rates.

Tauranga maritime incident response

This is a new appropriation for the costs of the response to the grounding of the Rena off Tauranga.

NLTF borrowing facility for short-term advances in 2011/12

This is a new appropriation to provide additional loan funding to the New Zealand Transport Agency to manage cash flow variations between funding available in the National Land Transport Fund and the expenditure committed under the National Land Transport Programme.

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 National Land Transport Fund, using this 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.

Rail – Loan for Auckland metro rail electrical multiple unit package

This is a new appropriation that replaces part of the Rail – NZ Railways Corporation Loans appropriation. It is to assist the Auckland Council with the purchase of new trains and a depot for the Auckland metropolitan rail network.

Rail – NZ Railways Corporation Loans

As noted above, this appropriation was reduced when the Rail – Loan for Auckland Metro Rail Electrical Multiple Unit Package appropriation was established. $80.769 million was transferred to the new appropriation in 2011/12.

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 $9.4 million higher than forecast due to the following:

  • actual indirect taxation was $7.6 million higher than forecast. These revenues are forecast on a 6-monthly basis
  • actual other ‘sovereign power’ revenue was $1 million higher, due to greater than forecast receipt of tolling infringement fees
  • other operational revenue was $0.7 million higher than forecast. This revenue covers toll revenue and administration fees paid with motor vehicle registration charges and road user charges.

Schedule of non-departmental expenses

Total expenses were $76.4 million less than appropriated in Supplementary Estimates. The significant variances relate to following appropriations:

  • Reinstatement of local roads in Canterbury: costs were incurred more slowly than expected and funds will be carried forward to 2012/13 – an underspend of $57 million
  • New and improved infrastructure for State Highways – Crown contribution: There has been no funding drawn in 2011/12 – an underspend of $3.9 million
  • Tauranga maritime incident response: costs were lower than budgeted and funds will be carried forward to 2012/13 –
    an underspend of $2.8 million
  • Metro rail rolling stock and infrastructure (Wellington): contractual delays meant that costs were lower than budgeted and funds will be carried forward to 2012/13 – an underspend of $5.4 million
  • Rail – Loan for Auckland metro rail electrical multiple unit package fair value write-down: The actual accounting adjustment was $43.4 million – an underspend of $7.2 million.

Schedule of non-departmental assets

Non-departmental assets were $10 million higher than forecast due to following:

  • cash and bank balances are higher by $16.5 million as the NZ Transport Agency accrued expenditure at higher levels than previously
  • receivables and advances are $4.5 million lower due to:
    • no prepayments this year
    • tolling and infringement revenue is lower then forecast by$5 million
    • motor vehicle register fees received are higher by $6.0 million
    • the provision for doubtful debts reduced by $6.5 million
  • investment in joint venture airports is $2 million lower than budget (note 10).

Schedule of non-departmental liabilities

Payables were $82 million higher than forecast. Non-departmental payables relate to timing of payments to Crown agencies under Vote Transport. The agencies generally request sufficient cash to cover their expenditure for the month and this can vary.

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