Part 4: Financial statements 2006/07
Contents
- Audit report
- Statement of responsibility
- Statement of accounting policies
- Statement of financial performance
- Statement of movements in taxpayers’ funds (equity)
- Statement of financial position
- Statement of cash flows
- Statement of commitments
- Statement of contingent liabilities
- Statement of appropriations
- Statement of unappropriated expenditure
- Statement of trust money
- Notes to the financial statements
Audit report
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| AUDIT REPORT TO THE READERS OF THE CONTROLLER AND AUDITOR-GENERAL’S FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 We have been appointed by the House of Representatives to carry out the audit of the financial statements of the Controller and Auditor-General for the year ended 30 June 2007. Unqualified Opinion In our opinion the financial statements of the Controller and Auditor-General, comprising:
The audit was completed on 18 September 2007, and is the date at which our opinion is expressed. The basis of our opinion is explained below. In addition, we outline the responsibilities of the Controller and Auditor-General and our responsibilities, and explain our independence. Basis of Opinion We carried out the audit in accordance with New Zealand Auditing Standards. We planned and performed the audit to obtain all the information and explanations we considered necessary in order to obtain reasonable assurance that the financial statements did not have material misstatements, whether caused by fraud or error. Material misstatements are differences or omissions of amounts and disclosures that would affect a reader’s overall understanding of the financial statements. If we had found material misstatements that were not corrected, we would have referred to them in our opinion. The audit involved performing procedures to test the information presented in the financial statements. We assessed the results of those procedures in forming our opinion. Audit procedures generally include:
We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements. We evaluated the overall adequacy of the presentation of information in the financial statements. We obtained all the information and explanations we required to support our opinion above. Responsibilities of the Controller and Auditor-General and the Auditor The Controller and Auditor-General is responsible for preparing financial statements in accordance with generally accepted accounting practice in New Zealand. Those financial statements must fairly reflect the financial position of the Controller and Auditor-General as at 30 June 2007. They must also fairly reflect the results of its operations and cash flows and service performance achievements for the year ended on that date. This responsibility arises from sections 45A, 45B, and 45F of the Public Finance Act 1989. We are responsible for expressing an independent opinion on the financial statements and reporting that opinion to you. This responsibility arises from section 38 of the Public Audit Act 2001 and sections 45D and 45F of the Public Finance Act 1989. Independence When carrying out the audit we followed the independence requirements of the New Zealand Institute of Chartered Accountants. We carry out audit assignments on behalf of the Controller and Auditor-General. The level of work from these assignments is no greater than the level of work prior to our appointment as auditor. Other than the audit and these assignments, we have no relationship with or interests in the Controller and Auditor-General.  CST Nexia Audit Chartered Accountants Manukau City, New Zealand |
| MATTERS RELATING TO THE ELECTRONIC PRESENTATION OF THE AUDITED FINANCIAL STATEMENTS This audit report relates to the financial statements of the Controller and Auditor-General for the year ended 30 June 2007 included on the Controller and Auditor-General’s web site. The Controller and Auditor General is responsible for the maintenance and integrity of the Controller and Auditor-General’s web site. We have not been engaged to report on the integrity of the Controller and Auditor-General’s web site. We accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the web site. The audit report refers only to the financial statements named above. It does not provide an opinion on any other information, which may have been hyperlinked to/from these financial statements. If readers of this report are concerned with the inherent risks arising from electronic data communication, they should refer to the published hard copy of the audited financial statements and related audit report dated 18 September 2007 to confirm the information included in the audited financial statements presented on this web site. Legislation in New Zealand governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. |
Statement of responsibility
As Controller and Auditor-General, I am responsible for the accuracy and judgements used in the preparation of the financial statements, and for establishing and maintaining systems of internal control designed to provide ongoing assurance of the integrity and reliability of financial reporting.
Appropriate systems of internal control have been employed to ensure that:
- all transactions are executed in accordance with authority;
- all transactions are correctly processed and accounted for in the financial records; and
- the assets of the office are properly safeguarded.
In my opinion, the information set out in the financial statements and attached notes to those statements (on pages 32-36, 40-43, 48-54 and 69-89) fairly reflects our service performance, financial activities, and cash flows for the year ended 30 June 2007, and our financial position as at that date.
| Signed: | Countersigned: |
 |
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| K B Brady Controller and Auditor-General 18 September 2007 |
M J Viviers Financial Controller 18 September 2007 |
Statement of accounting policies
for the year ended 30 June 2007
Reporting entity
These are the financial statements of the Controller and Auditor-General, prepared in accordance with sections 45A, 45B, and 45F of the Public Finance Act 1989.
The Controller and Auditor-General is a corporation sole established by section 10(1) of the Public Audit Act 2001, and is an Office of Parliament for the purposes of the Public Finance Act 1989.
The Controller and Auditor-General’s activities include work carried out by the Office of the Auditor-General (OAG) and Audit New Zealand (referred to collectively as “the Office”), and contracted audit service providers.
Measurement base
The financial statements have been prepared on a historical cost basis.
Accounting policies
Revenue
The Office derives revenue from the Crown for outputs provided to Parliament, from audit fees for the audit of public entities’ financial statements, and from other assurance work carried out by Audit New Zealand at the request of public entities.
Crown funding is recognised in the period to which it relates. Audit fee and other assurance revenue earned by the OAG and Audit New Zealand is recognised based on the stage of completion of audit and other assurance work.
Audit fee revenue from audits carried out by contracted audit service providers is recognised based on the stage of completion of audit work as advised by the contracted audit service providers.
All audit service providers (including Audit New Zealand) invoice and collect audit fees directly from public entities.
Expenses
The remuneration of the Auditor-General and the Deputy Auditor-General, which is a charge against a permanent appropriation in terms of clause 5 of Schedule 3 of the Public Audit Act 2001, is recognised as an expense of the Office.
Revenue in advance
Revenue in advance is recognised where invoiced audit fees exceed the value of time allocated based on the stage of completion of audit and other assurance work.
Output cost allocation
Direct costs are those costs that are directly attributable to a single output.
Direct costs that can readily be identified with a single output are assigned directly to the relevant output class. For example, the cost of audits carried out by contracted audit service providers is charged directly to Output Class: Provision of audit and other assurance services.
Indirect costs are all other costs. These costs include: payroll costs; variable costs such as travel; and operating overheads such as property costs, depreciation, and capital charges.
Indirect costs are allocated according to the time charged to a particular activity.
Receivables and work in progress
Receivables and work in progress are stated at estimated realisable value, after providing for non-recoverable amounts.
Leases
Where substantially all of the risks and rewards of ownership are retained by the lessor, leases are classified as operating leases. Operating lease costs are expensed on a systematic basis over the period of the lease.
Plant and equipment
Plant and equipment are recorded at cost, which is the value of the consideration given to acquire or create the asset, plus any directly attributable costs of bringing the asset into working condition for its intended use.
All plant and equipment costing more than $500 are capitalised.
Depreciation
Depreciation of plant and equipment is provided on a straight-line basis to allocate the cost of the assets, less their residual value, over their expected useful lives. The estimated useful lives are:
| Furniture and fittings | 4 years | |
| Office equipment | 2.5-5 years | |
| IT hardware | 2.5-5 years | |
| IT software | 2.5-5 years | |
| Motor vehicles | 3-4 years |
Provision for employee entitlements
Annual leave and time off in lieu of overtime worked are recognised as they accrue to employees, based on current rates of pay. Long service leave and retiring or resigning leave are recognised on an actuarial basis. In calculating the present value of the estimated future cash outflows, the assumptions used in valuing the Government Superannuation Fund liability have been adopted.
Statement of cash flows
Cash means cash balances on hand, held in bank accounts, and deposits with the New Zealand Debt Management Office.
Operating activities include cash received from all income sources, and record the cash payments made for the supply of goods and services.
Investing activities are those activities relating to the acquisition and disposal of non-current assets.
Financing activities comprise capital injections by, or repayment of capital to, the Crown.
Foreign currency
Foreign currency transactions, relating primarily to subscriptions and travel, are recorded at the New Zealand dollar exchange rate at the date of the transaction.
Financial instruments
Financial instruments primarily comprise bank balances, receivables, and payables, which are recognised in the Statement of financial position. Revenue and expenses in relation to all financial instruments are recognised in the Statement of financial performance.
Goods and Services Tax
Amounts in the financial statements are reported exclusive of Goods and Services Tax (GST), except for:
- payables and receivables in the Statement of financial position, which include GST; and
- figures in the Statement of appropriations, which include GST unless noted.
The amount of GST owing to or from the Inland Revenue Department at balance date, being the difference between Output GST and Input GST, is included in payables or receivables (as appropriate).
Income tax
The Office is exempt from paying income tax in terms of section 43 of the Public Audit Act 2001. Accordingly, no charge for income tax has been provided for.
Commitments
Future payments relating to contractual obligations at balance date are disclosed as commitments to the extent that they are not recorded as liabilities.
Commitments relating to employment contracts are not disclosed unless they had vested at balance date, in which case they are reflected in the item “Provision for employee entitlements” in the Statement of financial position.
Contingent liabilities
Contingent liabilities are disclosed at the point at which the contingency is evident.
Changes in accounting policies
To provide more relevant information about the effect of contracted audit service provider transactions on the statement of financial performance, the Office now recognises audit fee revenue from audits carried out by contracted audit service providers based on the stage of completion. The assessment of the stage of completion is based on the advice from the contracted audit service providers. Formerly, audit fee revenue from audits carried out by contracted audit service providers was recognised on the completion of the audits.
The effect of the change is an additional $8.4 million in both revenue and expenditure in the current financial year. There is no effect on the surplus for the year; nor on any Statement of financial position items. Costs equal to the revenue are recognised, and there is no cash received or disbursed. Contracted audit service providers invoice and collect audit fees directly from public entities. The effect of this change in accounting policy on the comparative figures for revenue and expenditure is not practical to estimate.
There have been no other changes in accounting policies from those contained in the last audited financial statements.
Statement of financial performance
for the year ended 30 June 2007
This statement reports the revenue and expenses relating to all outputs (goods and services) produced by the Office. Supporting statements showing the revenue and expenditure of each output class are on pages 36 and 54.
| Notes | 2006/07 actual $000 |
2006/07 forecast* $000 |
2005/06 actual $000 |
|
|---|---|---|---|---|
| Continuing activities | ||||
| Revenue | ||||
| Crown funding | 2 | 9,335 | 9,335 | 9,103 |
| Audit fees and other revenue | 3 | 58,339 | 59,696 | 42,737 |
| Total revenue | 67,674 | 69,031 | 51,840 | |
| Expenses | ||||
| Personnel costs | 27,496 | 28,353 | 26,401 | |
| Operating costs | 4 | 38,569 | 39,376 | 23,956 |
| Depreciation | 5 | 1,154 | 1,175 | 1,220 |
| Capital charge | 6 | 126 | 120 | 123 |
| Total expenses | 67,345 | 69,024 | 51,700 | |
| Surplus | 329 | 7 | 140 | |
*See Note 1 on page 81.
The accounting policies on pages 69-72 and notes on pages 81-89 form part of these statements.
Statement of movements in taxpayers’ funds (equity)
for the year ended 30 June 2007
This statement combines information about the surplus with other aspects of the financial performance of the Office, to give a measure of comprehensive income.
| Notes | 2006/07 actual $000 |
2006/07 forecast* $000 |
2005/06 actual $000 |
|
|---|---|---|---|---|
| Taxpayers funds brought forward at 1 July | 3,586 | 3,586 | 3,586 | |
| Movements during the year | ||||
| Surplus | 329 | 7 | 140 | |
| Total recognised revenues and expenses for the year | 329 | 7 | 140 | |
| Flows to and from the Crown | ||||
| Surplus payment due to the Crown | 7 | (329) | (7) | (140) |
| Taxpayers' funds at 30 June | 3,586 | 3,586 | 3,586 | |
*See Note 1 on page 81.
The accounting policies on pages 69-72 and notes on pages 81-89 form part of these statements.
Statement of financial position
as at 30 June 2007
This statement reports total assets and liabilities. The difference between the assets and liabilities is called taxpayers' funds.
| Notes | 30 June 2007 actual $000 |
30 June 2007 forecast* $000 |
30 June 2006 actual $000 |
|
|---|---|---|---|---|
| Taxpayers funds | ||||
| General funds | 3,586 | 3,586 | 3,586 | |
| Total taxpayers' funds | 3,586 | 3,586 | 3,586 | |
| Represented by: | ||||
| Current assets | ||||
| Cash and bank balances | 8 | 3,844 | 2,928 | 2,992 |
| Prepayments | 389 | 350 | 362 | |
| Work in progress | 1,525 | 1,158 | 1,378 | |
| Receivables | 9 | 4,103 | 3,500 | 3,510 |
| Total current assets | 9,861 | 7,936 | 8,242 | |
| Non-current assets | ||||
| Plan and equipment | 10 | 2,389 | 2,300 | 2,505 |
| Total non-current assets | 2,389 | 2,300 | 2,505 | |
| Total assets | 12,250 | 10,236 | 10,747 | |
| Current liabilities | ||||
| Payables and accruals | 11 | 5,008 | 3,693 | 3,613 |
| Provision for payment to the Crown | 7 | 469 | 7 | 140 |
| Provision for employee entitlements | 12 | 2,475 | 2,500 | 2,951 |
| Total current liabilities | 7,952 | 6,200 | 6,704 | |
| Term liabilities | ||||
| Provision for employee entitlements | 12 | 712 | 450 | 457 |
| Total term liabilities | 712 | 450 | 457 | |
| Total liabilities | 8,664 | 6,650 | 7,161 | |
| Net assets | 3,586 | 3,586 | 3,586 | |
*See Note 1 on page 88.
The accounting policies on pages 69-72 and notes on pages 81-89 form part of these statements.
Statement of cash flows
for the year ended 30 June 2007
This statement summarises the cash movements in and out of the Office during the year. It takes no account of money owed to the Office or owing by the Office, and therefore differs from the Statement of Financial Performance.
| Notes | 2006/07 actual $000 |
2006/07 forecast* $000 |
2005/06 actual $000 |
|
|---|---|---|---|---|
| Operating activities | ||||
| Cash received from: | ||||
| The Crown | 9,335 | 9,335 | 9,208 | |
| Others** | 30,833 | 31,020 | 27,145 | |
| Cash disbursed on: | ||||
| Production of outputs** | (35,019) | (39,196) | (32,181) | |
| Net GST paid | (3,156) | - | (3,056) | |
| Finance charges | - | - | (9) | |
| Capital charge | (126) | (120) | (123) | |
| Net cash flow from operating activities | 13 | 1,867 | 1,039 | 984 |
| Investing activities | ||||
| Cash received from: | ||||
| Sale of plant and equipment | 207 | 278 | 142 | |
| Cash disbursed on: | ||||
| Purchase of plant and equipment | (1,222) | (1,241) | (1,510) | |
| Net cash flow from investing activities | (1,015) | (963) | (1,368) | |
| Financing activities | ||||
| Cash disbursed on: | ||||
| Surplus payment to the Crown | - | (140) | (775) | |
| Repayment of finance lease | - | - | (162) | |
| Net cash flow from financing activities | - | (140) | (937) | |
| Total net increase in cash held | 852 | (64) | (1,321) | |
| Add opening cash balance at 1 July | 2,992 | 2,992 | 4,313 | |
| Closing cash balance at 30 June | 3,844 | 2,928 | 2,992 | |
*See Note 1 on page 81.
**The Statement of Cash Flows does not include the contracted audit service provider audit fees, as these do not involve any cash transactions within the Office.
The accounting policies on pages 69-72 and notes on pages 81-89 form part of these statements.
Statement of commitments
as at 30 June 2007
This statement records those expenditures to which the Office is contractually committed at 30 June 2007.
The Office has long-term operating leases on its premises. The annual property lease payments are subject to regular reviews, ranging from 3-yearly to 9-yearly.
Equipment lease commitments include leases of telephone exchange systems, facsimile machines, and photocopiers.
| 30 June 2007 actual $000 |
30 June 2006 actual $000 |
|
|---|---|---|
| Operating lease commitments | ||
| Property lease commitments | ||
| Less than one year | 1,835 | 1,096 |
| One to 2 years | 1,096 | 966 |
| 2 to 5 years | 1,609 | 1,786 |
| More than 5 years | 316 | 472 |
| Total property lease commitments | 5,595 | 5,024 |
| Equipment lease commitments | ||
| Less than one year | 234 | 273 |
| One to 2 years | 33 | 220 |
| 2 to 5 years | 19 | 18 |
| Total equipment lease commitments | 286 | 511 |
| Total operating lease commitments | 5,881 | 5,535 |
The accounting policies on pages 69-72 and notes on pages 81-89 form part of these statements.
Statement of contingent liabilities
as at 30 June 2007
This statement discloses situations that existed at 30 June 2007, the ultimate outcome of which is uncertain and will be confirmed only on the occurrence of one or more future events after the date of approval of the financial statements.
The Office did not have any contingent liabilities as at 30 June 2007 (nil as at 30 June 2006). There is potential for claims to arise against the Office because of defalcations and other losses within entities of which the Auditor-General is the auditor. No demands for compensation have been made by any party as at the date of these financial statements. It is therefore impracticable to estimate any potential financial effect. The Office has professional indemnity insurance.
There were no contingent assets as at 30 June 2007 (nil as at 30 June 2006).
The accounting policies on pages 69-72 and notes on pages 81-89 form part of these statements.
Statement of appropriations
for the year ended 30 June 2007
This statement reports actual expenses incurred against each appropriation administered by the Office.
| Operating flows | Output Expenses GST exclusive $000 |
Appropriations GST exclusive $000 |
|---|---|---|
| Annual appropriations | ||
| Legislative auditor: | ||
| Parliamentary services | 2,095 | 2,212 |
| Performance audits and inquiries | 5,992 | 6,295 |
| Provision of audit and assurance services | 58,581 | 59,840 |
| Total annual appropriations | 66,668 | 68,347 |
| Other appropriations: | ||
| Other parliamentary services1 | 677 | 677 |
| Total other appropriations | 677 | 677 |
| Total output expenses as reported in the Statement of Financial Performance | 67,345 | |
| Total appropriations | 69,024 | |
1: Costs incurred pursuant to clause 5 of Schedule 3 of the Public Audit Act 2001.
The accounting policies on pages 69-72 and notes on pages 81-89 form part of these statements.
Statement of unappropriated expenditure
for the year ended 30 June 2007
The Office incurred no unappropriated expenditure during the year ended 30 June 2007 (nil for the year ended 30 June 2006).
Statement of trust money
for the year ended 30 June 2007
On 1 November 1996, the Office was appointed Secretary-General of the South Pacific Association of Supreme Audit Institutions (SPASAI). SPASAI encourages, promotes, and advances co-operation among its public audit members.
A trust account records the financial transactions the Office carries out on behalf of SPASAI. All trust money transactions are recorded on a cash basis.
None of the transactions associated with the SPASAI trust account are recorded within the Statement of financial performance or the Statement of financial position.
| 2006/07 actual $000 |
2005/06 actual $000 |
|
|---|---|---|
| Opening balance at 1 July | 28 | 25 |
| Receipts | 6 | 385 |
| 34 | 410 | |
| Payments | (12) | (382) |
| Closing balance at 30 June | 22 | 28 |
The accounting policies on pages 69-72 and notes on pages 81-89 form part of these statements.
Notes to the financial statements
for the year ended 30 June 2007
Note 1: Budget estimates
The estimate and forecast information for the year is extracted from the Estimates of Appropriations approved by Parliament, the changes made in conjunction with the Supplementary Estimates approved by Parliament, and the aggregate budget estimates, all of which are unaudited.
| 2006/07 Main budget estimates $000 |
2006/07 Supplementary estimate changes $000 |
2006/07 Final forecast estimates $000 |
2006/07 Estimated actuals (forecast) $000 |
|
|---|---|---|---|---|
| Revenue | ||||
| Crown | 9,294 | 41 | 9,335 | 9,335 |
| Other | 42,162 | 17,534 | 59,696 | 59,696 |
| Total revenue | 51,456 | 17,575 | 69,031 | 69,031 |
| Expenses | ||||
| Personnel costs | 25,428 | 2,925 | 28,353 | 28,353 |
| Operating costs | 24,424 | 14,952 | 39,376 | 39,376 |
| Depreciation | 1,227 | (52) | 1,175 | 1,175 |
| Capital charge | 122 | (2) | 120 | 120 |
| Total expenses | 51,201 | 17,823 | 69,024 | 69,024 |
| Surplus | 255 | (248) | 7 | 7 |
Forecasts represent the estimated actuals prepared in March 2007 as part of the 2007/08 Central Government budget process.
The increase in other revenue and operating expenses between the main budget estimates and final forecast estimates relate to:
- the change in accounting policy relating to recognition of audit fee revenue from audits carried out by contracted audit service providers; and
- increases in audit fee levels as a result of a mix of increases in hours and charge-out rates, plus additional work relating to the implementation of NZ IFRS. These increases apply to audits completed by Audit New Zealand and those completed by contracted audit service providers.
Note 2: Crown funding
The Crown provides revenue to meet the costs of the Office in assisting Parliament in its role of ensuring accountability for public resources. The services provided to Parliament include reports to Parliament and other constituencies, reports and advice to select committees, responding to taxpayer and ratepayer enquiries, advice to government bodies, professional bodies, and other agencies, administering the provisions of the Local Authorities (Members’ Interests) Act 1968, and writing a history of the Audit Office.
Note 3: Audit fees and other revenue
| 2006/07 actual $000 |
2006/07 forecast* $000 |
2005/06 actual $000 |
|
|---|---|---|---|
| Audit fees - departments | 7,781 | 10,147 | 7,685 |
| Audit fees - other | 50,533 | 49,549 | 35,044 |
| Miscellaneous | 25 | - | 8 |
| Total other revenue | 58,339 | 59,696 | 42,737 |
* See Note 1 on page 81.
Note 4: Operating costs
| 2006/07 actual $000 |
2006/07 forecast* $000 |
2005/06 actual $000 |
|
|---|---|---|---|
| (Profit)/Loss on sale of plant and equipment | (23) | (7) | (10) |
| (Decrease)/Increase in provision for doubtful receivables | (104) | 30 | (102) |
| Fees to auditors for the audit of the Office's financial statements | 78 | 78 | 79 |
| Fees to auditors for other services provided to the Office | 17 | 9 | 19 |
| Finance lease costs | - | - | 9 |
| Equipment lease costs | - | 63 | |
| Property lease costs | 1,777 | 2,129 | 1,600 |
| Fees paid to contracted auditors for audits of public entities | 27,718 | 27,578 | 14,521 |
| Fees paid to the Office’s auditors for audits of other public entities | 87 | 87 | 98 |
| Other expenses | 9,019 | 9,472 | 7,679 |
| Total operating costs | 38,569 | 39,376 | 23,956 |
* See Note 1 on page 81.
Note 5: Depreciation
| 2006/07 actual $000 |
2005-06 forecast* $000 |
2005/06 actual $000 |
|
|---|---|---|---|
| Furniture and fittings | 329 | 337 | 261 |
| Office equipment | 20 | 21 | 79 |
| IT hardware | 358 | 349 | 300 |
| IT software | 175 | 186 | 333 |
| Motor vehicles | 272 | 282 | 247 |
| Total depreciation charge | 1,154 | 1,175 | 1,220 |
* See Note 1 on page 81.
Note 6: Capital charge
The Office pays a capital charge to the Crown on its average taxpayers’ funds as at 30 June and 31 December each year. The capital charge rate for the year ended 30 June 2007 was 7.5% (in 2005/06, it was 8.0%).
During the year, the Office continued to participate in a pilot differential capital charge scheme. Under the scheme, interest earned on cash and bank balances at 4.5% (in 2005/06, it was 4.8%) was offset against the capital charge. For the year ended 30 June 2007, the capital charge reduced by $152,670 (in 2005/06, it reduced by $157,070) because of the scheme.
Note 7: Surplus payment due to the Crown
The Office is not permitted to retain operating surpluses under the Public Finance Act 1989. Thus, the surplus for the year of $329,000 is repayable to the Crown.
| 30 June 2007 actual $000 |
30 June 2006 actual $000 |
|
|---|---|---|
| Surplus current year | 329 | 140 |
| Surplus brought forward | 140 | 775 |
| Payment to the Crown | - | (775) |
| Total provision for payment to the Crown | 469 | 140 |
Note 8: Overdraft facility
The Office has the use of an overdraft facility to manage its seasonal cash flows during the second half of the financial year. The overdraft limit is $500,000, and interest is charged on the daily balance at Westpac Banking Corporation’s Prime Lending Rate.
During this financial year, no funds were drawn down under the facility (and none were drawn down in 2005/06).
Note 9: Receivables
| 30 June 2007 actual $000 |
30 June 2006 actual $000 |
|
|---|---|---|
| Trade receivables | 4,319 | 3,821 |
| Provision for doubtful receivables | (216) | (320) |
| Net trade receivables | 4,103 | 3,501 |
| Crown debtor | - | 1 |
| Other receivables | 0 | 8 |
| Total receivables | 4,103 | 3,510 |
Note 10: Plant and equipment
| 30 June 2007 | 30 June 2006 | |||||
|---|---|---|---|---|---|---|
| At cost $000 |
Accumulated depreciation $000 |
Net carrying value $000 |
At cost $000 |
Accumulated depreciation $000 |
Net carrying value $000 |
|
| Furniture and fittings | 2,422 | 1,713 | 709 | 2,678 | 1,718 | 960 |
| Office equipment | 202 | 159 | 43 | 1,066 | 966 | 100 |
| IT hardware | 2,541 | 1,965 | 576 | 1,711 | 1,264 | 447 |
| IT software | 2,695 | 2,341 | 354 | 2,693 | 2,430 | 263 |
| Motor vehicles | 1,094 | 387 | 707 | 1,061 | 326 | 735 |
| 8,954 | 6,565 | 2,389 | 9,209 | 6,704 | 2,505 | |
Note 11: Payables and accruals
| 30 June 2007 actual $000 |
30 June 2006 actual $000 |
|
|---|---|---|
| Trade payables | 2,371 | 1,977 |
| Revenue in advance | 2,281 | 1,240 |
| Accruals | 356 | 396 |
| Total payables and accruals | 5,008 | 3,613 |
Note 12: Provision for employee entitlements
| 30 June 2007 actual $000 |
30 June 2006 actual $000 |
|
|---|---|---|
| Current liabilities | ||
| Annual leave | 1,430 | 1,292 |
| Long service leave | 79 | 58 |
| Time off in lieu of overtime worked | 86 | 61 |
| Salary and other accruals | 843 | 1,164 |
| Retiring leave | 37 | 376 |
| Total current liabilities | 2,475 | 2,951 |
| Non-current liabilities | ||
| Long service leave | 34 | 80 |
| Retiring/resigning leave | 678 | 377 |
| Total non-current liabilities | 712 | 457 |
| Total provision for employee entitlements | 3,187 | 3,408 |
Note 13: Reconciliation of surplus to net cash flow from operating activities
This reconciliation discloses the non-cash adjustments applied to the surplus reported in the Statement of financial performance on page 73, to arrive at the net cash flow from operating activities disclosed in the Statement of cash flows on page 76.
| 2006/07 actual $000 |
2006/07 forecast* $000 |
2005/06 actual $000 |
|
|---|---|---|---|
| Surplus | 329 | 7 | 140 |
| Non-cash items | |||
| Depreciation | 1,154 | 1,175 | 1,220 |
| Total net non-cash Items | 1,154 | 1,175 | 1,220 |
| Working capital movements | |||
| (Increase)/decrease in prepayments | (27) | 12 | 26 |
| (Increase)/decrease in receivables | (593) | 10 | 123 |
| (Increase)/decrease in work in progress | (147) | 220 | (948) |
| (Decrease)/increase in payables | 1,395 | 80 | 81 |
| (Decrease)/increase in employee entitlements | (476) | (451) | 460 |
| (Decrease)/increase in property lease liabilities | (111) | ||
| Total net working capital movements | 152 | (129) | (369) |
| Investing activity items | |||
| Loss/(profit) on sale of plant and equipment | (23) | (7) | (10) |
| Total investing activity items | (23) | (7) | (10) |
| Other items | |||
| Increase/(decrease) in non-current employee entitlements | 255 | (7) | 3 |
| Increase/(decrease) in non-current property lease liabilities | - | - | (111) |
| Total other items | 255 | (7) | 3 |
| Net cash flow from operating activities | 1,867 | 1,039 | 984 |
See Note 1 on page 81.
Note 14: Financial instruments
The Office is a party to financial instrument arrangements as part of its everyday operations. These include instruments such as bank balances, receivables, and payables.
Credit risk
In the normal course of its business, the Office incurs credit risk from receivables and from transactions with financial institutions and the New Zealand Debt Management Office of the Treasury.
The Office has no significant concentrations of credit risk. No collateral or security is held or given to support financial instruments.
Interest rate risk
The Office has no interest rate risk.
Currency risk
The Office has no exposure to currency risk, as all financial instruments are in New Zealand dollars.
Fair values
The estimated fair values of all financial assets and liabilities are
Note 15: Related party information
The Crown provides 13.8% of the Office’s revenue directly (see Note 2 on page 88), and a further 11.5% is provided indirectly through fees for the audit of government departments (see Note 3 on page 82). Also, the Office obtains revenue through fees for the audit of other public entities included in the financial statements of the Government of New Zealand.
The revenue provided by the Crown is for the operation of the Office, including the provision of outputs to Parliament, which is provided within a normal supplier/ recipient relationship.
Fees for the audit of public entities, including government departments, are charged on a commercial basis at “arm’s-length”.
There are numerous other transactions the Office enters into with entities controlled by the Crown – for example, travel with Air New Zealand and postage with New Zealand Post. All of these other transactions are carried out on a commercial basis at “arm’s-length”.
Note 16: Office accommodation statistics
The following statistics are provided in accordance with directives issued by the Government to chief executives in 1991 on the management of departmental accommodation.
| 30 June 2007 actual |
30 June 2006 actual |
|
|---|---|---|
| Area | 6173m2 | 6283m2 |
| Number of staff (FTE) | 288 | 263 |
| Space allocation per person | 21m2 | 24m2 |
| Total costs of leased office accommodation | $1,777,229 | $1,600,154 |
| Rent costs per person | $5,820 | $5,709 |
| Utility costs per person | $355 | $375 |
| Vacant accommodation | - | - |
Note 17: Adoption of New Zealand equivalents to International Financial Reporting Standards
The Accounting Standards Review Board announced in December 2002 that reporting entities must adopt New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) for periods beginning on or after 1 January 2007, with earlier adoption optional. The Minister of Finance announced in 2003 that the Crown will first adopt NZ IFRS for its financial year beginning 1 July 2007.
The Treasury is managing the adoption of NZ IFRS for the consolidated financial statements of the Government reporting entity. Individual entities included within the consolidated financial statements of the Government reporting entity are responsible for ensuring their own NZ IFRS preparedness. The Treasury provides guidance to these entities, and facilitates implementation on common issues.
As part of the Government reporting entity, the Office adopted NZ IFRS on 1 July 2007. We will release our first full set of NZ IFRS financial statements for the year ending 30 June 2008. For the 2008 financial statements, NZ IFRS requires full restatement of comparative balances for the year ending 30 June 2007. Adjustments required to restate the opening NZ IFRS balance sheet at 1 July 2006 will be made directly to taxpayers’ funds.
Based on the standards as they are currently, we expect little effect on our financial statements, having identified employee entitlements as the one area where NZ IFRS accounting policies significantly differ. Currently, sick leave is not recognised until the period in which it is taken. Under NZ IFRS, a liability for sick leave is recognised in the Statement of financial position to the extent that compensated absences in the coming year are expected to be greater than the sick leave entitlements in the coming year. Non-current assets are reclassified to separately report intangible assets, which are currently included in plant and equipment. Intangible assets held by the Office are computer software programs. It is possible that future changes to the standards will change the nature of the adjustments required by the time we report our first financial statements under NZ IFRS.
The following table shows the expected adjustments to the balance sheet at 30 June 2006 and 30 June 2007. No other potential effect has been identified from the adoption of NZ IFRS.
Reconciliation of taxpayers’ funds, assets, and liabilities
| Current reporting 30/6/07 |
Estimated NZ IFRS adjustments |
Estimated NZ IFRS 30/6/07 |
Current reporting 30/6/06 |
Estimated NZ IFRS adjustments |
Estimated NZ IFRS 30/6/06 |
|
|---|---|---|---|---|---|---|
| Taxpayers’ funds | ||||||
| General funds | 3,586 | (64) | 3,522 | 3,586 | (21) | 3,565 |
| Surplus for the year | 0 | 0 | 0 | 0 | 0 | 0 |
| Total taxpayers’ funds | 3,586 | (64) | 3,522 | 3,586 | (21) | 3,565 |
| Current assets | ||||||
| Cash and bank balances | 3,844 | 0 | 3,844 | 2,992 | 0 | 2,992 |
| Prepayments | 389 | 0 | 389 | 362 | 0 | 362 |
| Work in progress | 1,525 | 0 | 1,525 | 1,378 | 0 | 1,378 |
| Receivables | 4,103 | 0 | 4,103 | 3,510 | 0 | 3,510 |
| Total current assets | 9,861 | 0 | 9,861 | 8,242 | 0 | 8,242 |
| Non-current assets | ||||||
| Plant and equipment | 2,389 | (355) | 2,034 | 2,505 | (264) | 2,241 |
| Intangible Assets | 0 | 355 | 355 | 0 | 264 | 264 |
| Total non-current assets | 2,389 | 0 | 2,389 | 2,505 | 0 | 2,505 |
| Total assets | 12,250 | 0 | 12,250 | 10,747 | 0 | 10,747 |
| Current liabilities | ||||||
| Payables and accruals | 5,008 | 0 | 5,008 | 3,613 | 0 | 3,613 |
| Surplus payment to the Crown | 469 | 0 | 469 | 140 | 0 | 140 |
| Provision for employee entitlements | 2,475 | 64 | 2,539 | 2,951 | 21 | 2,972 |
| Total current liabilities | 7,952 | 64 | 8,016 | 6,704 | 21 | 6,725 |
| Term liabilities | ||||||
| Provision for employee entitlements | 712 | 0 | 712 | 457 | 0 | 457 |
| Total term liabilities | 712 | 0 | 712 | 457 | 0 | 457 |
| Total liabilities | 8,664 | 64 | 8,728 | 7,161 | 21 | 7,182 |
| Net assets | 3,586 | (64) | 3,522 | 3,586 | (21) | 3,565 |