Notes to the Financial Statements
For the year ended 30 June 2006
Note 1: Revenue Other
| Actual June 2005 $(000) |
Actual June 2006 $(000) |
|
|---|---|---|
| Statutory fees and charges | ||
| 15,760 | NZFSA regulatory standards | 17,438 |
| 31,624 | Verification services to the animal products industries | 33,303 |
| 18,822 | Quarantine services | 18,134 |
| 1,835 | Other statutory fees and charges | 1,787 |
| 68,041 | Total statutory fees and charges | 70,662 |
| Sale of goods and services | ||
| 2,365 | Discretionary monitoring and inspection services carried out at the border | 1,615 |
| 1,004 | State sector retirement savings scheme recovery from SSC | 2,232 |
| 5,121 | Laboratory tests | 738 |
| 504 | Facilitation of market access | 879 |
| 1,815 | Administrative services and rental of surplus property | 1,978 |
| 75 | Gain on sale of fixed assets | 14 |
| 2,331 | Other miscellaneous sales | 2,039 |
| 13,215 | Total sale of goods and services | 9,495 |
| 81,256 | Total revenue other | 80,157 |
Note 2: Personnel Costs
| Actual June 2005 $(000) |
Actual June 2006 $(000) |
|
|---|---|---|
| 98,663 | Salaries and wages | 108,414 |
| 1,592 | Employer superannuation contributions | 2,929 |
| 1,385 | Annual, retirement and long service leave | 2,081 |
| 5,531 | Other personnel costs | 6,410 |
| 107,171 | Total personnel costs | 119,834 |
Note 3: Operating Costs
| Actual June 2005 $(000) |
Actual June 2006 $(000) |
|
|---|---|---|
| 139 | Audit fees for audit of financial statements | 146 |
| 35 | Audit fees for other services provided | 40 |
| 968 | Advertising and publicity | 2,254 |
| 3,057 | Consultancy | 2,698 |
| 52,984 | Contracts | 64,352 |
| 279 | Finance lease interest costs | 194 |
| 7,823 | Operating lease rentals | 8,227 |
| 9,315 | Travel | 10,738 |
| 32 | Bad debts written-off | 209 |
| 475 | Fixed asset write-offs | - |
| 230 | Increase/(decrease) in provision for doubtful debts | (54) |
| 25,137 | Other operating costs | 19,330 |
| 100,474 | Total operating costs | 108,134 |
Note 4: Depreciation
| Actual June 2005 $(000) |
Actual June 2006 $(000) |
|
|---|---|---|
| 39 | Buildings | 53 |
| 439 | Leasehold improvements | 789 |
| 3,313 | Plant and equipment | 4,412 |
| 2,439 | Leased plant and equipment | 2,279 |
| 1,130 | Motor vehicles | 1,171 |
| 7,360 | Total depreciation | 8,704 |
Note 5: Capital Charge
The Ministry pays a capital charge to the Crown on its taxpayers' funds as at 30 June and 31 December each year. The capital charge rate for the year ended 30 June 2006 was 8 percent (2005: 8 percent).
Note 6: Other Expenses
| Actual June 2005 $(000) |
Actual June 2006 $(000) |
|
|---|---|---|
| (66) | Restructuring expenses | 36 |
| (66) | Total other expenses | 36 |
Note 7: Taxpayers' Funds
Taxpayers' funds comprise two components:
| Actual June 2005 $(000) |
Actual June 2006 $(000) |
|
|---|---|---|
| General Funds | ||
| 3,589 | General funds as at 1 July | 15,194 |
| 3,278 | Net operating surplus/(deficit) | (1,437) |
| - | Revaluation reserve reversal on disposal | (44) |
| Capital contributions from the Crown for: | ||
| - | Part acquisition of AgResearch's Wallaceville campus | 7,691 |
| - | Software to map public access rights along water courses | 575 |
| 3,017 | Integrated document management system | 2,191 |
| 338 | Vessel compliance information system | 169 |
| 2,250 | Foot-and-mouth vaccine | - |
| 6,000 | Fit-out and furnishing of new Head Office accommodation | - |
| - | Capital withdrawal | (595) |
| 18,472 | 23,744 | |
| (3,278) | Provision for repayment of surplus to the Crown | (14) |
| 15,194 | General funds as at 30 June | 23,730 |
| Actual June 2005 $(000) |
Land June 2006 $(000) |
Buildings June 2006 $(000) |
Total June 2006 $(000) |
|
|---|---|---|---|---|
| Revaluation Reserve | ||||
| 318 | Balance as at 1 July | 175 | 143 | 318 |
| - | Revaluation reserve reversal on disposal | 44 | 44 | |
| 318 | Balance at 30 June | 175 | 187 | 362 |
Note 8: Debtors and Receivables
| Actual June 2005 $(000) |
Actual June 2006 $(000) |
|
|---|---|---|
| Current debtors and receivables | ||
| 6,508 | Trade debtors | 6,132 |
| (414) | Less provision for doubtful debts | (360) |
| 6,094 | Net trade debtors | 5,772 |
| 1,788 | Crown debtor | 5,128 |
| 3,666 | Accrued revenue | 4,028 |
| - | GST owing from Inland Revenue Department | 113 |
| 11,548 | Total current debtors and receivables | 15,041 |
| Non-Current debtors and receivables | ||
| 1,143 | Accrued revenue | 2,792 |
| 12,691 | Total debtors and receivables | 17,833 |
Note 9: Inventory
| Actual June 2005 $(000) |
Actual June 2006 $(000) |
|
|---|---|---|
| Inventory held for distribution | ||
| - | Foot-and-mouth vaccine | 3,008 |
| 275 | Btk spray | 275 |
| - | Tamiflu | 44 |
| 275 | Total inventory held for distribution | 3,327 |
| Inventory held for use | ||
| 29 | Inventory held for use in the provision of goods and services | 70 |
| 304 | Total inventory | 3,397 |
Note 10: Property, Plant and Equipment
| Actual June 2005 $(000) |
Actual June 2006 $(000) |
|
|---|---|---|
| Land | ||
| 175 | At valuation - 30 June 2002 | 1,561 |
| buildings | ||
| 1,965 | At valuation - 30 June 2002 | 7,353 |
| (118) | Accumulated depreciation | (431) |
| 1,847 | Buildings - net current value | 6,922 |
| Leasehold Improvements | ||
| 1,651 | At cost | 9,250 |
| (552) | Accumulated depreciation | (971) |
| 1,099 | Leasehold improvements - net book value | 8,279 |
| Plant and equipment | ||
| 24,449 | At cost | 28,458 |
| (12,111) | Accumulated depreciation | (13,470) |
| 12,338 | Plant and equipment - net book value | 14,988 |
| Leased Plant equipment | ||
| 6,093 | At capitalised amount | 6,186 |
| (2,410) | Accumulated depreciation | (515) |
| 3,683 | Leased plant and equipment - net book value | 5,671 |
| Motor Vehicles | ||
| 6,742 | At cost | 6,886 |
| (2,313) | Accumulated depreciation | (2,466) |
| 4,429 | Motor vehicles - net book value | 4,420 |
| Items under construction | ||
| 1,956 | At cost | 5,689 |
| Total Property, plant and equipment | ||
| 43,031 | At cost, valuation and capitalised amount | 65,383 |
| (17,504) | Accumulated depreciation | (17,853) |
| 25,527 | Total carrying amount of property, plant and equipment | 47,530 |
Freehold land and buildings have been valued at fair value as at 30 June 2002 by an independent registered valuer, DTZ New Zealand Ltd. Legal ownership of leased plant and equipment remains with the lessor.
Note 11: Creditors and Payables
| Actual June 2005 $(000) |
Actual June 2006 $(000) |
|
|---|---|---|
| 7,152 | Trade creditors | 5,669 |
| 13,852 | Accrued expenses | 16,860 |
| 181 | GST payable to Inland Revenue Department | - |
| 21,185 | Total creditors and payables | 22,529 |
Note 12: Employee Entitlements
| Actual June 2005 $(000) |
Actual June 2006 $(000) |
|
|---|---|---|
| Current | ||
| 740 | Salaries and wages | 625 |
| 7,209 | Annual leave | 7,779 |
| 291 | Long service leave | 353 |
| 111 | Retiring leave | 60 |
| 8,351 | Total current portion | 8,817 |
| Non-current | ||
| 683 | Long service leave | 827 |
| 6,156 | Retiring leave | 6,854 |
| 6,839 | Total non-current portion | 7,681 |
| 15,190 | Total employee entitlements | 16,498 |
Note 13: Unearned Revenue
| Actual June 2005 $(000) |
Actual June 2006 $(000) |
|
|---|---|---|
| 4,444 | NZFSA regulatory standards | 4,123 |
| 1,697 | Verification services to the animal products industries | 2,369 |
| 2,493 | Electronic certification | 2,756 |
| 1,600 | Contribution towards Pastoral House fit-out costs | 1,467 |
| 318 | Other miscellaneous revenue | 345 |
| 10,552 | Total unearned revenue | 11,060 |
Note 14: Provisions
| Actual June 2005 $(000) |
Actual June 2006 $(000) |
|
|---|---|---|
| Current | ||
| 762 | Restructurings | 14 |
| 1,279 | Onerous accommodation contracts | 67 |
| 497 | Compensation under the Biosecurity Act 1993 | 265 |
| - | NZFSA executive director awards | 59 |
| 2,538 | Total current portion | 405 |
| Non-current | ||
| 9 | Restructurings | - |
| 57 | Onerous accommodation contracts | - |
| 300 | Site restoration | 300 |
| 366 | Total non-current portion | 300 |
| 2,904 | Total provisions | 705 |
| Actual June 2005 $(000) |
Provision for Restructurings | Actual June 2006 $(000) |
|---|---|---|
| 266 | Opening balance | 771 |
| 751 | Additional provision made during the year | - |
| (11) | Charged against provision for the year | (716) |
| (235) | Reclassified under onerous accommodation contracts provision | - |
| - | Unused amounts reversed during year | (41) |
| 771 | Closing balance | 14 |
| 762 | Current | 14 |
| 9 | Non-current | - |
The restructuring provision arises from organisational reviews conducted during 2004/05 by the Policy Group, Quarantine Services and the New Zealand Food Safety Authority. The provision represents the Ministry's best estimate of the cost of the restructurings. It is anticipated all costs associated with the restructurings will be incurred over the next year.
| Actual June 2005 $(000) |
Provision for Onerous Accommodation Contracts | Actual June 2006 $(000) |
|---|---|---|
| - | Opening balance | 1,336 |
| 1,238 | Additional provision made during the year | - |
| (32) | Charged against provision for the year | (1,269) |
| 235 | Reclassified from restructuring provision | - |
| (105) | Unused amounts reversed during year | |
| 1,336 | Closing balance | 67 |
| 1,279 | Current | 67 |
| 57 | Non-current | - |
This provision relates to non-cancellable contracts for surplus accommodation at Palmerston North and Wellington. Surplus accommodation has been sublet where possible. The provision provides for our best estimate of our residual obligations under each lease agreement. The liability will be incurred over the next year.
| Actual June 2005 $(000) |
Provision for NZFSA Executive Director Awards | Actual June 2006 $(000) |
|---|---|---|
| 28 | Opening balance | - |
| - | Additional provisions made during the year | 82 |
| (28) | Charged against provision for the year | (23) |
| - | Closing balance | 59 |
| - | Current | 59 |
| - | Non-current |
This provision relates to awards being established to improve NZFSA's leadership capability and its ability to deliver a world-leading food regulatory programme. The liability will be incurred over the next year.
| Actual June 2005 $(000) |
Provision for Site Restoration | Actual June 2006 $(000) |
|---|---|---|
| 300 | Opening balance | 300 |
| - | Additional provisions made during the year | - |
| 300 | Closing balance | 300 |
| - | Current | - |
| 300 | Non-current | 300 |
The provision for site restoration relates to requirements to restore leased accommodation to its original condition at the end of the lease. The restoration work is expected to be carried out by 2011.
| Actual June 2005 $(000) |
Provision for Compensation under the Biosecurity Act 1993 | Actual June 2006 $(000) |
|---|---|---|
| - | Opening balance | 497 |
| 497 | Additional provisions made during the year | - |
| - | Charged against provision for the year | (232) |
| 497 | Closing balance | 265 |
| 497 | Current | 265 |
| - | Non-current | - |
This provision provides for compensation payable under section 162A of the Biosecurity Act 1993, as a result of the exercise of powers to manage or eradicate organisms. Compensation is payable where the exercise of these powers causes verifiable losses as a result of the damage or destruction of a person's property or restrictions on the movement of a person's goods. The provision represents the Ministry's best estimate of the cost of settling current compensation claims. The compensation payments are expected to be settled by the end of 2007.
Note 15: Finance Lease Liability
| Actual June 2005 $(000) |
Actual June 2006 $(000) |
|
|---|---|---|
| Finance leases | ||
| 2,095 | Current | 1,921 |
| 1,642 | Non-current | 3,701 |
| 3,737 | Total | 5,622 |
| Repayable as follows | ||
| 2,315 | Not later than one year | 2,256 |
| 1,650 | Later than one year but not later than two years | 2,256 |
| 60 | Later than two years but not later than five years | 1,693 |
| 4,025 | 6,205 | |
| (288) | Future finance charges | (583) |
| 3,737 | Net finance lease liability | 5,622 |
The effective interest rate on the leases range from 5.65 percent to 5.7 percent. Ownership of the assets remains with the lessor.
Note 16: Reconciliation of Net Surplus to Net Cash Flows from Operating Activities
| Actual June 2005 $(000) |
Actual June 2006 $(000) |
|
|---|---|---|
| 3,278 | Net surplus/(deficit) | (1,437) |
| Add/(less) non-cash items | ||
| 7,360 | Depreciation | 8,704 |
| 475 | Write-downs | - |
| 7,835 | Total non-cash items | 8,704 |
| Add/(less) working capital movements | ||
| 53 | (Increase)/decrease in inventories | (3,093) |
| 8,197 | (Increase)/decrease in accounts receivable | (5,142) |
| (273) | (Increase)/decrease in prepayments | (99) |
| (1,109) | Increase/(decrease) in accounts payable | 1,344 |
| 1,563 | Increase/(decrease) in unearned revenue | 508 |
| 1,458 | Increase/(decrease) in employee entitlements | 1,308 |
| 2,310 | Increase/(decrease) in other provisions | (2,199) |
| 12,199 | Working capital movements - net | (7,373) |
| Add/(less) investing activities items: | ||
| (75) | Net (gain)/loss on sale of fixed assets | (14) |
| 23,237 | Net cash flow from operating activities | (120) |
Note 17: Provision for Repayment of Surplus to the Crown
| Actual June 2005 $(000) |
Actual June 2006 $(000) |
|
|---|---|---|
| 3,278 | Operating surplus | - |
| - | Net gain on sale of plant, property and equipment | 14 |
| 3,278 | Total provision for repayment of surplus to the Crown | 14 |
Note 18: Related Parties
The Ministry is a wholly owned entity of the Crown. The Government significantly influences the roles of the Ministry as well as being a major source of revenue.
The Ministry enters into numerous transactions with other government departments, Crown agencies and state-owned enterprises on an arm's length basis. Where those parties are acting in the course of their normal dealings with the department, related party disclosures have not been made for transactions of this nature.
Apart from those transactions described above, the Ministry has not entered into any related party transactions.
Note 19: Financial Instruments
The Ministry is party to financial instrument arrangements as part of its everyday operations. These include instruments such as bank balances, accounts receivable, trade creditors and foreign currency forward contracts.
Credit Risk
Credit risk is the risk a third party will default on its obligations to the Ministry, causing the Ministry to incur a loss. In the normal course of its business, the Ministry incurs credit risk from trade debtors, and transactions with financial institutions and the New Zealand Debt Management Office (NZDMO).
The Ministry does not require any collateral or security to support financial instruments with financial institutions it deals with, or with the NZDMO, as these entities have high credit ratings. For its other financial instruments, the Ministry does not have significant concentration of credit risk.
Fair Value
The fair value of all financial instruments is equivalent to the carrying amount disclosed in the Statement of Financial Position.
Currency Risk
Currency risk is the risk debtors and creditors due in foreign currency will fluctuate because of changes in foreign exchange rates. The Ministry uses foreign exchange forward contracts to manage foreign exchange exposures.
Interest Rate Risk
Interest rate risk is the risk the value of a financial instrument will fluctuate due to changes in market interest rates. This could impact on the return on investments or the cost of borrowing. The Ministry has no significant exposure to interest rate risk on its financial instruments.
Note 20: Post Balance Date Events
There have been no significant post balance date events
Note 21: Major Budget Variances
The following significant movements between the initial Budget Day Estimates and the actual results for 2005/06 are explained below.
| Main Estimates June 2005 $(000) |
Actual June 2006 $(000) |
Variance $(000) |
|
|---|---|---|---|
| Main | |||
| Estimates | Actual | ||
| June 2006 | June 2006 | Variance | |
| $(000) | $(000) | $(000) | |
| Statement of Financial Performance | |||
| Revenue Crown | 147,345 | 156,355 | 9,010 |
| Revenue other | 84,025 | 80,157 | (3,868) |
| Personnel costs | 112,628 | 119,834 | 7,206 |
| Capital charge | 1,852 | 1,241 | (611) |
| Statement of Financial Position | |||
| Cash | 13,756 | 10,908 | (2,848) |
| Debtors and receivables | 12,416 | 17,833 | 5,417 |
| Property, plant and equipment | 44,009 | 47,530 | 3,521 |
| Employee entitlements | 15,250 | 16,498 | 1,248 |
| Unearned revenue | 7,500 | 11,060 | 3,560 |
| Finance lease liability | 1,590 | 5,622 | 4,032 |
| Taxpayers' funds | 26,568 | 24,092 | (2,476) |
Revenue Crown was $9.010 million higher than budget due mainly to additional funding for:
- continued response to the incursion of didymosphenia geminata in the South Island $4.7 million;
- response to the marine pest styela clava $3 million;
- continued monitoring of painted apple moth in west Auckland $3.7 million;
- continued surveillance for fall webworm in south Auckland $2.9 million;
- passenger clearance at regional international airports $0.5 million;
- food safety functions $0.4 million;
- expense transfers from 2004/05 $2.2 million.
This was partly offset by $8.7 million of expense transfers to 2006/07 mainly for MAF Quarantine Services capability, generic forestry marketing development and sustainable management of SILNA forests.
Revenue other was $3.868 million lower than the original budget. Revenue received from biosecurity quarantine services ($0.700 million lower) and food safety regulatory standards ($3.7 million lower) were both below the original budget. This was partly offset by a $0.9 million increase in revenue received from sublet surplus accommodation.
Personnel costs were $7.2 million higher than the Budget Day forecast. The main factors contributing to this increase were the collective employment settlement having a higher than anticipated fiscal impact and an increase in employee numbers during the year.
Capital charge was $0.611 million below the original budget due to a reduction to taxpayers' funds and the timing of capital contributions.
Cash at 30 June 2006 was lower than anticipated due to the 2005/06 operating deficit and increase in year-end debtors.
Debtors and receivables were higher mainly due to an increase in debtor Crown as outlined in note 8.
Property, plant and equipment increased due to changes to the 2005/06 capital programme since the original budget was set.
Employment entitlements increased due to the collective employment settlement having a higher than anticipated fiscal impact and an increase in employee numbers during the year.
Unearned revenue increased by $3.560 million due to NZFSA fees over recovering costs. NZFSA expenditure was below budget due to recruitment difficulties following the restructuring in 2005.
Finance lease liability was higher due to the renegotiation of computer equipment leases during the 2005/06 for an extended period.
Note 22: International Financial Reporting Standards
The New Zealand Accounting Standards Review Board announced in December 2002 New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) will apply to all New Zealand reporting entities for periods commencing on or after 1 January 2007. Entities have the option to adopt NZ IFRS for periods on or after 1 January 2005. The Minister of Finance announced in 2003 government departments will first adopt NZ IFRS for the year beginning 1 July 2007.
Planning for the transition to NZ IFRS
To ensure preparedness for NZ IFRS MAF has started a process to:
- Assess the key differences in accounting policies under NZ IFRS and current accounting policies.
- Review the financial statements to ascertain differences between current GAAP and NZ IFRS.
- Review NZ IFRS to ascertain what new disclosures are required.
- Determine and implement processes to deal with any related business impact.
- Prepare a Statement of Financial Position as at 30 June 2006 under both current NZ GAAP and NZ IFRS.
- Collate information required for NZ IFRS on an ongoing monthly basis from 1 July 2006.
Impact of adopting NZ IFRS
Sick leave, intangibles, and ACC self-insurance are areas identified as impacting on MAF's financial statements. Although the financial impacts of adopting NZ IFRS have yet to be quantified, MAF does not envisage any material impact to the financial statements.
Contact for Enquiries
Strategy and Performance Group
Ministry of Agriculture and Forestry
Pastoral House
25 The Terrace
PO Box 2526, Wellington
Tel: +64 4 894 0100
Fax: +64 4 894 0738
Contact this person
