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NOTE 1: STATEMENT OF ACCOUNTING POLICIES
Reporting entity
These non-departmental schedules and statements present financial information on public funds managed by the Ministry on behalf of the Crown.
These non-departmental balances are consolidated into the Financial Statements of the Government for the year ended 30 June 2016. For a full understanding of the Crown’s financial position, results of operations, and cash flows for the year, refer to the Financial Statements of the Government.
The Ministry’s responsibility is to manage the revenue, expenditure, assets and liabilities on behalf of the Crown. The schedules in respect of the activities administered by the Ministry on behalf of the Crown comprise:
- collection of indirect tax revenues
- collection of other 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 statements and schedules have been prepared in accordance with the accounting policies of the Financial Statements of the Government, Treasury Instructions, and Treasury Circulars.
Measurement and recognition rules applied in the preparation of these non-departmental statements and schedules are consistent with New Zealand generally accepted accounting practice (Tier 1 Public Sector Public Benefit Entity Accounting Standards) as appropriate for public benefit entities.
These non-departmental statements and schedules are the first prepared in accordance with the new PBE accounting standards. There are no material adjustments arising on transition to the new PBE accounting standards.
Significant accounting policies
Budget figures
The 2016 budget figures are for the year ended 30 June 2016, which are consistent with the best estimate financial information submitted to Treasury for the Budget Economic and Fiscal Update for the year ended 30 June 2016.
Revenue and receipts
Indirect taxation is deemed to be non-exchange revenue, for the purposes of these financial statements. All other revenue is deemed to be exchange.
Revenues from road user charges, and motor vehicle licensing fees are recognised on an accrual basis.
Revenues from tolling and infringement fees are recognised on a cash basis.
Debtors and other receivables
Receivables are initially measured at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment.
Impairment of a receivable is established when there is objective evidence the Ministry will not be able to collect amounts due according to the original terms of the receivable. Significant financial difficulties of the debtor, probability that the debtor will enter into insolvency, bankruptcy, receivership, or liquidation, and default in payments, are considered indicators the receivable is impaired.
For receivables not individually impaired, a collective assessment of impairment is also carried out.
This considers past practice of collection history across the receivables portfolio. 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 debt is uncollectible, it is written off against the allowance account for debtors. Overdue receivables that are renegotiated are reclassified as current (that is, 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.
New Plymouth airport is being considered for divestment and so has been valued by an independent valuer, on a commercial basis, consistent with fair market value standard.
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.
GST is returned on revenue received on behalf of the Crown, where applicable. However, an input tax deduction is not claimed on non-departmental expenses. Instead, the amount of GST applicable to non-departmental expense is recognised as a separate expense and eliminated against GST revenue on consolidation of the Financial Statements of the Government.
Commitments
Commitments are future expenses and liabilities to be incurred on contracts entered into at balance date. Information on non-cancellable capital and lease commitments are reported in the statement of commitments.
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 2014/15 $000 | Actual 2015/16 $000 | Main Estimates 2015/16 $000 | Unaudited Supplementary Estimates 2015/16 $000 | |
| 1,282,969 | Road user charges | 1,381,114 | 1,338,835 | 1,344,587 |
| 180,974 | Motor vehicle registration fees | 214,128 | 200,337 | 207,427 |
| 1,463,943 | Sub-total | 1,595,242 | 1,539,172 | 1,552,014 |
| (50,752) | Fuel excise duty refunds | (58,676) | (44,605) | (53,412) |
| 1,413,191 | Total indirect taxation | 1,536,566 | 1,494,567 | 1,498,602 |
NOTE 3: OTHER ‘SOVEREIGN POWER’ REVENUE
| Actual 2014/15 $000 | Actual 2015/16 $000 | Main Estimates 2015/16 $000 | Unaudited Supplementary Estimates 2015/16 $000 | |
| 1,351 | Infringement fees - tolls and other | 985 | 1,300 | 1,300 |
| 1,351 | Total other 'sovereign power' revenue | 985 | 1,300 | 1,300 |
NOTE 4: OTHER OPERATIONAL REVENUE
| Actual 2014/15 $000 | Actual 2015/16 $000 | Main Estimates 2015/16 $000 | Unaudited Supplementary Estimates 2015/16 $000 | |
| 8,056 | Tolling revenue (note 10) | 9,108 | 8,200 | 8,200 |
| 4,006 | Road user charges administration fees | 313 | - | 360 |
| - | Other revenue | 200 | - | 200 |
| 12,062 | Total other operational revenue | 9,621 | 8,200 | 8,760 |
NOTE 5: NON-DEPARTMENTAL OUTPUT CLASSES
| Actual 2014/15 $000 | Actual 2015/16 $000 | Main Estimates 2015/16 $000 | Unaudited Supplementary Estimates 2015/16 $000 | |
| 2,038,714 | This expense item is equal to the appropriations for non-departmental output classes listed in the appropriation statements | 2,027,873 | 2,051,581 | 2,090,510 |
| 2,038,714 | Total non-departmental output classes | 2,027,873 | 2,051,581 | 2,090,510 |
NOTE 6: PURCHASE OR DEVELOPMENT OF CAPITAL ASSETS
| Actual 2014/15 $000 | Actual 2015/16 $000 | Main Estimates 2015/16 $000 | Unaudited Supplementary Estimates 2015/16 $000 | |
| 1,074,033 | This expenditure is for the construction of, and improvement to the State highway network | 857,295 | 1,008,270 | 902,842 |
| 1,074,033 | Total purchase or development of capital assets | 857,295 | 1,008,270 | 902,842 |
NOTE 7: OTHER EXPENSES TO BE INCURRED BY THE CROWN
| Actual 2014/15 $000 | Actual 2015/16 $000 | Main Estimates 2015/16 $000 | Unaudited Supplementary Estimates 2015/16 $000 | |
| 577 | Membership of international organisations | 650 | 743 | 653 |
| 3,270 | Rail – public policy projects | 3,270 | 3,270 | 3,270 |
| 500 | Rail – railway safety | 500 | 500 | 500 |
| 26,116 | SuperGold Card – public transport concessions for cardholders | 28,264 | 28,129 | 28,529 |
| 1,250 | Tauranga maritime incident response | 930 | 200 | 1,036 |
| 5,000 | Urban cycleways – local routes | 6,457 | 20,000 | 10,000 |
| 10,878 | Auckland rail development | - | - | - |
| 90,000 | Rail – Auckland metro rail electric multiple unit package | - | - | - |
| 137,591 | Total other expenses to be incurred by the Crown | 40,071 | 52,842 | 43,988 |
NOTE 8: RECEIVABLES
| Actual 2014/15 $000 | Actual 2015/16 $000 | Main Estimates 2015/16 $000 | Unaudited Supplementary Estimates 2015/16 $000 | |
| Non-exchange revenue | ||||
| 46,577 | Motor vehicle registration fees | 28,944 | 48,995 | 54,810 |
| 29,276 | Road user charge revenue | 19,041 | 12,687 | 9,201 |
| 75,853 | Total non-exchange revenue receivables | 47,985 | 61,682 | 64,011 |
| Exchange revenue | ||||
| 1,960 | Tolling revenue | 2,307 | 2,371 | 1,883 |
| 471 | Infringement revenue | 84 | 100 | 548 |
| 2,431 | Total exchange revenue receivables | 2,391 | 2,471 | 2,431 |
| 78,284 | Sub-total | 50,376 | 64,153 | 66,442 |
| (11,842) | Provision for doubtful debts | (11,287) | - | - |
| 66,442 | Total receivables | 39,089 | 64,153 | 66,442 |
For motor vehicle fees and road user charge revenue, debts are assessed for impairment regularly and provision made for non-collectable debts as shown above.
The carrying value of other receivables approximates their fair value. The Ministry has assessed no provision for impairment is required at 30 June 2016 (30 June 2015: $nil) except as above.
The ageing profile of receivables is shown below.
| 2014/2015 | 2015/2016 | |||||
| Gross $000 | Impairment $000 | Net $000 | Gross $000 | Impairment $000 | Net $000 | |
| 64,194 | (6,176) | 58,018 | Not past due | 37,078 | (2,103) | 34,975 |
| 5,284 | (1,057) | 4,227 | Past due 1-90 days | 4,759 | (3,287) | 1,472 |
| 3,366 | (1,010) | 2,356 | Past due 91-180 days | 2,839 | (1,961) | 878 |
| 4,155 | (2,493) | 1,662 | Past due 181-365 days | 3,341 | (2,307) | 1,034 |
| 1,285 | (1,106) | 179 | past due >365 days | 2,359 | (1,629) | 730 |
| 78,284 | (11,842) | 66,442 | Total | 50,376 | (11,287) | 39,089 |
NOTE 9: INVESTMENT IN JOINT VENTURE AIRPORTS
| Actual 2014/15 $000 | Actual 2015/16 $000 | |
| 11,880 | New Plymouth | 3,250 |
| 3,736 | Taupo | 3,664 |
| 5,087 | Whanganui | 5,087 |
| 800 | Westport | 727 |
| 795 | Whakatane | 941 |
| 2,458 | Whangarei | 2,869 |
| 24,756 | Total investment in joint venture airports | 16,538 |
The Crown has a 50 percent interest in each airport, with the other 50 percent held by the local council. The value of the investment at 30 June 2016 is based on the annual financial statements of each airport for the year ended 30 June 2015 (except for Whanganui and New Plymouth – see below), plus capital contributions from the Crown during the year ended 30 June 2016.
For Whanganui airport, the Ministry is using the accounts to 30 June 2014, because these are the most recent accounts available.
For New Plymouth airport, the Crown is currently discussing with New Plymouth District Council the possible divestment of the airport to it.
The change in investment value shown above reflects:
| Actual 2014/15 $000 | Actual 2015/16 $000 | |
| - | Change in valuation of New Plymouth airport | (8,630) |
| (30) | Gains/(losses) generated by the other airports | 202 |
| (30) | Share of net asset increase/(decrease) in joint venture airports | (8,428) |
| 384 | Capital payments made during the year | 210 |
| 354 | Total change in investment value | (8,218) |
NOTE 10: INVESTMENT IN THE NORTHERN GATEWAY TOLL ROAD
The Crown contributed $158 million to the construction of the Northern Gateway toll road. It issued infrastructure bonds to fund this and the bonds are shown in the Treasury’s financial statements. The toll revenue from the road is intended to cover the costs of the bonds. Tolling revenue is recorded as other operational revenue in Vote Transport (note 4).
It was agreed a notional account would be kept of the ‘cost’ of the project, with an estimated interest rate charged on the contribution. The interest charge is calculated daily, based on the outstanding balance, plus interest, less tolling revenue received. The interest rate used is 6.45 percent – the average rate on the bonds issued to fund the project, plus 15 basis points. The project was modelled using an estimated rate of 6.4 percent. Further information is available at www.tollroad.govt.nz .
Since the commencement of the project
| Actual 2014/15 $000 | Actual 2015/16 $000 | |
| 158,000 | Funding provided for construction | 158,000 |
| 88,799 | Notional interest charged since funding first drawn | 102,164 |
| (43,757) | Tolling revenue since February 2009 | (52,865) |
| 203,042 | Balance at 30 June | 207,299 |
Current year
| Actual 2014/15 $000 | Actual 2015/16 $000 | |
| 198,083 | Balance at 1 July | 203,042 |
| 13,015 | Notional interest charge for the year | 13,365 |
| (8,056) | Tolling revenue for the year | (9,108) |
| 203,042 | Balance at 30 June | 207,299 |
NOTE 11: PAYABLES
| Actual 2014/15 $000 | Actual 2015/16 $000 | Main Estimates 2015/16 $000 | Unaudited Supplementary Estimates 2015/16 $000 | |
| 453,282 | National Land Transport Fund revenue payable to the New Zealand Transport Agency | 356,297 | 300,000 | 400,000 |
| 17,194 | GST payable | 18,594 | 16,334 | 17,194 |
| 15,771 | Motor vehicle registration third party collections | 14,616 | 16,808 | 16,231 |
| 4,219 | Output funding payable to KiwiRail | 398 | 4,262 | 4,219 |
| 1,532 | Road user charges refunds | 1,300 | 1,232 | 1,208 |
| 987 | Output funding payable to Maritime New Zealand | 537 | - | - |
| 600 | Output funding payable to other parties | 82 | - | - |
| 493,585 | Total payables | 391,824 | 338,636 | 438,852 |
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 liabilities in each of the NZ IAS 39 categories are as follows:
| Actual 2014/15 $000 | Actual 2015/16 $000 | |
| Loans and receivables | ||
| 5,345 | Cash and cash equivalents | 25,238 |
| 66,442 | Receivables and advances | 39,089 |
| 71,787 | Total loans and receivables | 64,327 |
| Financial liabilities measured at amortised cost | ||
| 493,585 | Payables | 364,070 |
Credit risk
Credit risk is the risk 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, there are no significant concentrations of credit risk.
NOTE 13: MAJOR BUDGET CHANGES
Changes were made to the non-departmental budgets in the 2015/16 Supplementary Estimates. Explanations for significant variances are provided below.
| Unaudited Main Estimates $000 | Unaudited Supplementary Estimates $000 | Cumulative Vote $000 | |
| Indirect taxation | |||
| Road user charges | 1,338,835 | 5,752 | 1,344,587 |
| Motor vehicle registration | 200,337 | 7,090 | 207,427 |
| Fuel excise duty refunds | (44,605) | (8,807) | (53,412) |
| Total | 1,494,567 | 4,035 | 1,498,602 |
Indirect taxation
The National Land Transport Fund Revenue Forecasting Group meets two or three times a year to reforecast the tax revenue expected for the National Land Transport Fund, based on the current economic forecasts. The changes reflect the result of this process.
Non-departmental expense and capital expenditure appropriations
| Unaudited Main Estimates $000 | Change in Supplementary Estimates $000 | Cumulative Vote $000 | |
| Appropriations for non-departmental output expenses | |||
| National Land Transport Programme PLA | 2,006,000 | 38,200 | 2,044,200 |
| Policy advice and related outputs – maritime MCA | 7,243 | 612 | 7,855 |
| Policy advice and related outputs – civil aviation MCA | 2,219 | 468 | 2,687 |
| Search and rescue and recreational boating safety activities PLA | 7,478 | 529 | 8,007 |
| SuperGold card – administration of the public transport concessions scheme | 95 | 200 | 295 |
| Non-departmental other expenses | |||
| Bad debt provision – motor vehicle registration/ licenses and road user charges | 4,000 | 1,000 | 5,000 |
| Membership of international organisations | 743 | (90) | 653 |
| SuperGold Card – public transport concessions for cardholders | 28,129 | 400 | 28,529 |
| Tauranga maritime incident response | 200 | 836 | 1,036 |
| Urban cycleways – local routes | 20,000 | (10,000) | 10,000 |
| Capital expenditure | |||
| Auckland Transport Package loan | 145,000 | 4,000 | 149,000 |
| Joint venture airports – Crown contribution MYA | - | 750 | 750 |
| Maritime New Zealand | 3,100 | 3,518 | 6,618 |
| National Land Transport Programme – new infrastructure for and renewal of State highways PLA | 1,008,270 | (105,428) | 902,842 |
| Rail – KiwiRail equity injection | 29,000 | (5,990) | 23,010 |
| Rail – Wellington metro rail network upgrade | 12,023 | 4,490 | 16,513 |
| Regional state highways MYA | 74,000 | (30,000) | 44,000 |
| Roading – reinstatement of earthquake damaged roads in Christchurch – loan | 123,420 | (66,000) | 57,420 |
| Urban cycleways – crown assets | 15,000 | (13,000) | 2,000 |
Explanations for the major changes were outlined in the 2015/16 Supplementary Estimates (pages 711 onwards). They were:
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. Road tax revenue is allocated to the Fund by legislation and is appropriated in these two appropriations – one operating and one capital.
There are three main reasons for the changes in these appropriations:
- Funding is transferred to the operating appropriation from the capital one, to fund the former for planned activity in a year
- Road tax revenue is forecast two to three times a year. The State highway capital appropriation is adjusted as required as revenue increases or decreases
- Unspent funding from previous years may be appropriated.
Any shortfall in funding to be covered by the loan facilities is reflected in the capital appropriation. This is for simplicity and is consistent with prior years. The increase in the operating appropriation is a transfer from the capital appropriation to cover planned expenditure. The decrease in the capital appropriation of $105.428 million is due to:
- $93.401 million for the balance in the National Land Transport Fund at 1 July 2015 (decrease)
- $46.351 million from changes in the road tax revenue forecasts (increase)
- $38.2 million transferred to the operating appropriation as above (decrease)
- $18.533 million transferred to the Road Policing Programme appropriation in Vote Police (decrease)
- $1.645 million appropriated to other outputs within Vote Transport that are funded from road tax revenue (decrease).
SuperGold card – administration of the public transport concessions scheme
The appropriation increased by $0.2 million due to increased administration costs.
Search and rescue and recreational boating safety activities PLA
The appropriation increased by $0.529 million due to additional funding for changes to VHF radio and NowCasting services.
Policy advice and related outputs – civil aviation MCA
The appropriation increased by $0.468 million due to additional funding to allow the Civil Aviation Authority to implement its increased responsibilities under the new Health and Safety at Work Act 2015.
Policy advice and related outputs – maritime MCA
The appropriation increased by $0.612 million. This increase was made up of:
- $0.512 million to allow Maritime New Zealand to implement its increased responsibilities under the new Health and Safety at Work Act 2015
- $0.1 million was an expense transfer from 2014/15.
Bad debt provision – Motor vehicle registration/ licences and Road user charges
The appropriation increased by $1 million because the NZ Transport Agency has reduced its debt collection threshold, which has resulted in more uncollectable debt.
Membership of international organisations
The appropriation decreased by $0.09 million as unspent funding was returned to the Crown.
SuperGold Card – public transport concessions for cardholders
The appropriation increased by $0.4 million to provide for the forecast increased cost of the scheme.
Tauranga maritime incident response
The appropriation increased by $0.836 million due to:
- $0.316 million was an expense transfer from 2014/15 (increase)
- $0.4 million reprioritised from other appropriations in Vote Transport (increase)
- $0.12 million transferred from other government departments (increase).
Urban cycleways – local routes
This appropriation was reduced by $10 million due to:
- $4.12 million was an expense transfer from 2014/15 (increase)
- $12.57 million re-phased to 2016/17 (decrease)
- $1.55 million transferred to the urban cycleways capital appropriation to fund planned activity (decrease)
Auckland Transport Package loan
This appropriation increased by $4 million as a net result of re-phasing the loan profile over years.
Joint venture airports – Crown contribution MYA
This appropriation increased by $0.750 million due to:
- $1.05 million was an expense transfer from 2014/15 (increase)
- $0.3 million transferred to other appropriations in Vote Transport.
Maritime New Zealand
This appropriation increased by $3.518 million due to an expense transfer from 2014/15.
Urban cycleways – crown assets
This appropriation reduced by $13 million due to:
- $11.67 million transferred to the operational appropriation (decrease)
- $1.33 million re-phased to 2016/17 (decrease)
Rail – KiwiRail equity injection
This appropriation reduced by $5.990 million to meet forecast expenditure.
Rail – Wellington metro rail network upgrade
This appropriation increased by $4.490 million due to:
- $7.49 million was an expense transfer from 2014/15 (increase)
- $3 million was re-phased to outyears to match planned expenditure.
Regional State highways MYA
This appropriation reduced by $30 million due to a re-phasing of expenditure to match planned expenditure.
Roading – reinstatement of earthquake damaged roads in Christchurch – loan
This appropriation decreased by $66 million due to:
- $48 million was an expense transfer from 2014/15 (increase)
- $114 million was re-phased to outyears to match planned loan draw downs (decrease).
NOTE 14: MAJOR BUDGET TO ACTUAL VARIANCESNOTE 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 $30 million lower than forecast, mainly in indirect taxation. These revenues are demand driven and so difficult to forecast.
Schedule of non-departmental expenses
Total expenses were $113 million lower than forecast. The National Land Transport Fund spent less than forecast.
Schedule of non-departmental assets
Non-departmental assets were $31 million lower than forecast. Receivables are lower than forecast by $27 million. There are a number of factors causing this variance, for example revenue and receipts are lower than forecast.
Schedule of non-departmental liabilities
Payables were $47 million lower than forecast. This relates to the National Land Transport Fund spending less than forecast as noted under expenses above.