PART THREE: Annual Financial Performance Forecasts
Statement of Responsibility
Introduction and Highlights
Forecast Statement of Accounting Policies for the Year Ended 30 June 2008
The information contained in this Statement of Intent for the Department of Conservation has been prepared in accordance with section 38 of the Public Finance Act 1989.
As Director-General of the Department of Conservation, I acknowledge, in signing this statement, my responsibility for the information contained in this statement of intent.
The performance forecast for each class of outputs in the statement of forecast service performance is as agreed with the Minister responsible for Vote: Conservation administered by the Department of Conservation.
The financial performance forecast for the Department of Conservation in the forecast financial statements and the statement of forecast service performance is as agreed by the Minister of Conservation, who is the Minister responsible for the financial performance of the Department of Conservation.
The information contained in this Statement of Intent is consistent with existing appropriations, and with the appropriations set out in the Appropriation (2007/08) Estimates Bill.
Alastair Morrison
Director-General
27 April 2007
Andrew Gavriel
Chief Financial Officer
27 April 2007
Prospective Information
The forecast information presented in the report is based on assumptions that the Department reasonably expects to occur. The very nature of the prospective information suggests that the actual results are likely to vary from the information presented and that the variations may be material.
This information is prepared pursuant to section 38 of the Public Finance Act 1989. It is not intended, and should not be used, for any other purpose. The Department will not present an update of this forecast information in similar format.
Significant Underlying Assumptions
These statements have been compiled on the basis of Government policies and the Estimates of Appropriation relating to Vote Conservation presented by the Government. They reflect decisions made by the Government during the 2007/08 budget process up to April 2007.
The primary underlying assumption upon which this financial information has been prepared is that there will be no changes in Government policy during the period forecast.
A significant percentage of the forecast outputs to be produced by the Department are subject to uncertainty given that they are largely driven by events of nature - for example, the number of whale/dolphin strandings or number of forest fires. The potential financial effect of this uncertainty may result in resources being reallocated.
These forecast financial statements contain the following statements:
- a statement of responsibility from the Director-General of Conservation in respect of the statements contained in this report
- a financial overview of the Department's budget
- a forecast statement of accounting policies
- forecast financial statements for the year ending 30 June 2008, including:
- forecast statement of financial performance
- forecast statement of movements in taxpayers' funds
- forecast statement of financial position
- forecast statement of cash flows
- forecast reconciliation of operating surplus from net cash flows and operating activities
- detail of fixed assets by category.
Financial Overview
The 2007/08 budget figures include the following Crown funding increases:
- $2 million for intensive, integrated biodiversity management at new sites on conservation land
- $1 million for meeting treaty settlement objectives while managing risks to conservation values
- $0.297 million for maintaining Department of Conservation capability.
The following table shows changes in the funding available to the Department since 1995/1996. Significant changes include changes in purchases through revenue Crown, funding for the New Zealand Biodiversity Strategy (from 2000/2001) and funding for the previously unrecognised or undervalued recreational and other assets (from 2002/2003).
Financial Funding
|
Crown
$000
|
Other
(Excluding Interest)
$000
|
Total
$000
|
|
1995/1996
|
102,588
|
29,904
|
132,492
|
|
1996/1997
|
112,854
|
27,607
|
140,461
|
|
1997/1998
|
132,749
|
20,836
|
153,585
|
|
1998/1999
|
139,406
|
17,246
|
156,652
|
|
1999/2000
|
134,777
|
18,291
|
153,068
|
|
2000/2001
|
150,814
|
18,678
|
169,492
|
|
2001/2002
|
156,106
|
18,211
|
174,317
|
|
2002/2003
|
206,354
|
19,026
|
225,380
|
|
2003/2004
|
222,846
|
18,281
|
241,127
|
|
2004/2005
|
223,083
|
23,225
|
246,308
|
|
2005/2006
|
237,180
|
31,649
|
268,829
|
|
2006/2007 estimated actual
|
251,175
|
29,693
|
280,868
|
|
2007/2008 forecast
|
257,401
|
29,508
|
286,909
|
Reporting entity
The Department of Conservation is a Government department as defined by section 2 of the Public Finance Act 1989. These are the financial statements of the Department of Conservation prepared pursuant to section 38 of the Public Finance Act 1989.
Measurement Base
The statements have been prepared on a historical cost basis, modified by the revaluation of certain fixed assets.
Acccounting policy
The following particular accounting policies, which materially affect the measurement of financial results and financial position, have been applied.
Forecast and budget figures
The forecast figures for 30 June 2008 are those presented by the Minister of Finance in the Budget night documents (Estimates of Appropriations for the Government of New Zealand). The budget figures are those presented in the Supplementary Estimates for 30 June 2007.
Revenue
The Department derives revenue through the provision of outputs to the Crown, for services to third parties and donations. This revenue is recognised when earned and is reported in the financial period to which it relates.
Cost allocation
The Department has determined the cost of outputs using a cost allocation system which is outlined below.
Direct costs are those costs directly attributed to an output. Indirect costs are those costs that cannot be identified, in an economically feasible manner, with a specific output.
Direct costs assigned to outputs
Direct costs are charged directly to outputs. Depreciation and capital charges are charged on the basis of asset utilisation. Personnel costs are charged on the basis of actual time incurred.
Indirect and corporate costs assigned to outputs
Indirect costs are assigned to business units based on the proportion of direct staff hours for each output.
Receivables
Receivables are recorded at estimated realisable value, after providing for doubtful debts.
Inventories
Inventories are valued at the lower of cost or net realisable value on a first-in-first-out basis. Standard costs that include production overheads are used for valuing nursery stocks.
Leases
The Department leases vehicles, office premises and office equipment. As all the risks and benefits of ownership are retained by the lessor, these leases are classified as operating leases and are expensed in the period in which the costs are incurred.
Depreciation
Depreciation of fixed assets, other than freehold land and work in progress, is provided on a straight line basis so as to allocate the cost (or valuation) of assets to their estimated residual value over their useful lives.
The useful lives of assets have been estimated as follows:
|
Asset category
|
Estimated useful life
|
|
Visitor assets
- Amenity areas
- Signs
- Structures
- Roads (surface only)
- Tracks
- Huts and toilets
- Other buildings
|
10-25 years
5-10 years
25-50 years
10-22 years and 6 months
6-25 years
20-50 years
35-50 years
|
|
Buildings
|
20-40 years
|
|
Infrastructure
- Industrial fire equipment
- Landscape
- Roads
- Sewerage
- Solid waste
- Stream control
- Water supply
|
45 years
44 years
10-100 years
64 years
38 years
98 years
60 years
|
|
Vessels
- Electronics
- Engines
- Hulls
|
4 years and 2 months
10 years
15 years
|
|
Furniture, computers and
other office equipment
|
5 years
|
|
Motor vehicles
|
6 years and 8 months with a salvage value of 30%
|
|
Plant and field equipment
|
10 years
|
|
Radio equipment
|
5-10 years
|
Fixed assets
- Visitor assets are stated at fair value using optimised depreciated replacement cost as valued by an independent registered valuer on
an annual basis. When a visitor asset is under construction the actual cost is accumulated in a work-in-progress account. On completion of the project, assets are recorded at fair value and any difference between the actual cost and the fair value is transferred to the revaluation reserve.
- Freehold land and administrative buildings are stated at fair value
as determined by an independent registered valuer. Fair value
is determined using market-based evidence where available, or depreciated replacement cost. Land and buildings are revalued at least every five years.
- The cost of developing, purchasing and upgrading software is capitalised. Where the software is an integral part of the hardware (i.e. computer cannot operate without that specific software) it is treated as part of the equipment.
- Infrastructure assets are valued by independent valuers at least every five years and are stated at fair value.
- Vessels are recognised at fair value. Fair value is determined using market-based evidence where available, or depreciated replacement cost. Vessels are revalued at least every five years.
- Cultural assets are shown at estimated replacement cost.
- Heritage Assets: The Department is the custodian of 12,000 historic places situated on public conservation land throughout New Zealand. These assets are held for the duration of their physical lives because of their unique cultural, historical, geographical, scientific, or environmental attributes. In accordance with Reporting Standards the Department elected not to re-value these assets in the Statement of Financial Position.
All other fixed assets, or groups of assets forming part of a network which are material in aggregate, costing more than $5,000 are capitalised and recorded at historical cost. Any write-down of an item to its recoverable amount is recognised in the Forecast Statement of Financial Performance.
Any increase in value of a class of revalued assets is recognised directly in the revaluation reserve unless it offsets a previous decrease in value recognised in the Forecast Statement of Financial Performance, in which case it is recognised in the Forecast Statement of Financial Performance. A decrease in value relating to a class of revalued assets is recognised in the Forecast Statement of Performance where it exceeds the increase previously recognised in the revaluation reserve. When an asset is revalued, the accumulated depreciation of that asset is restated using the latest valuation figures.
Community assets
The nation's land and historic buildings managed by the Department are the nation's natural and historic heritage. Typically this land includes national and forest parks as well as Crown Reserve land. As these community assets belong to the Crown, their valuation is not reflected in these financial statements.
Statement of cash flows
Cash means cash balances on hand, held in bank accounts and in short term deposits.
Operating activities include cash received from all income sources of the Department and 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.
Goods and services tax (GST)
The Forecast Statement of Financial Position is GST exclusive except for payables and receivables. All other statements are GST exclusive.
The net amount of GST payable to the Inland Revenue Department at balance date, being the difference between output GST, and input GST is shown as a current asset or current liability as appropriate in the Forecast Statement of Financial Position.
Taxation
Government departments are exempt from the payment of income tax in terms of the Income Tax Act 1994. Accordingly, no charge for income tax has been provided for.
Donation receipts
The Department receives unsolicited donations, gifts and grants from individuals, groups and companies. The treatment of these depends on their nature:
- Donations which are received without a specific purpose are recognised as revenue in the period of receipt.
- Donations received for specific purposes where a written agreement specifies the purpose for which the funds must be used are matched against related expenditure when it has been incurred. Where the expenditure has not been incurred the unspent balance is treated as revenue in advance.
- Donations received for specified purposes under section 33 of the Conservation Act 1987, section 18 of the New Zealand Walkways Act 1990 or section 78(3) of the Reserves Act 1977 are held in trust accounts established by section 67 of the Public Finance Act 1989. If the Department incurs expenditure in relation to achieving these specific purposes, the funds are transferred to the Department as revenue when the expenditure is incurred.
Employee entitlements
Provision is made in respect of the Department's liability for annual, long service, retirement leave, time off in lieu and sick leave. Annual leave and time off in lieu are recognised as they accrue to the employee. Retirement, long service leave and sick leave provisions have been calculated on an actuarial basis based on the present value of expected future entitlements.
Financial instruments
The Department is party to financial instruments as part of its normal operations. These financial instruments include bank accounts, accounts payable, and receivable.
All revenues and expenses in relation to financial instruments are recognised in the Forecast Statement of Financial Performance.
All financial instruments are recognised in the Forecast Statement of Financial Position at their estimated fair value.
Taxpayers' funds
This is the Crown's net investment in the Department.
Implementation of New Zealand International Financial Reporting Standards
The forecast financial statements for the year ended 30 June 2008 have been prepared under NZ IFRS. The financial statements for the year ended 30 June 2007 have been prepared under Generally Accepted Accounting Practice (GAAP).
Changes in accounting policies
There have been no changes in accounting policies, including cost allocation accounting policies, since the date of the last audited financial statements. All policies have been applied on a basis consistent with the previous year.
Forecast Statement of Financial Performance for the year ended 30 June 2008
|
30/06/08
Forecast
$000
|
30/06/07
Estimated Actual
$000
|
30/06/07
Budget
$000
|
|
Revenue
|
257,401
29,508
|
251,175
29,693
|
251,175
29,693
|
|
Total revenue
|
286,909
|
280,868
|
280,868
|
|
Expenses
- Personnel
- Operating
- Depreciation
- Capital charge
|
114,846
117,834
23,950
30,979
|
124,792
109,465
20,930
29,459
|
124,792
109,465
20,930
29,459
|
|
Total expenses
|
287,609
|
284,646
|
284,646
|
|
Net surplus/(deficit)
|
(700)
|
(3,778)
|
(3,778)
|
Statement of Movements in Taxpayers' Funds for the year ended 30 June 2008
|
30/06/08
Forecast
$000
|
30/06/07
Estimated Actual
$000
|
30/06/07
Budget
$000
|
|
Total taxpayers' funds at
the beginning of the year
|
392,547
|
387,412
|
387,412
|
|
|
(700)
|
(3,778)
|
(3,778)
|
|
|
(1)
|
2
|
2
|
- Assets transfers from other government departments
|
2,000
|
2,000
|
2,000
|
|
|
17,593
|
7,274
|
7,274
|
|
Total taxpayers' funds
at the end of the year
|
411,439
|
392,910
|
392,910
|
Note: Forecast opening 'Total Taxpayers' funds' recognises employee sick leave liabilities
of $363,000 as required by New Zealand International Financial Reporting Standards (NZ IAS 19).
Forecast Statement of Financial Position as at 30 June 2008
|
30/06/08
Forecast
$000
|
30/06/07
Estimated Actual
$000
|
30/06/07
Budget
$000
|
|
Current assets
- Cash and bank balances
- Receivables & prepayments
- Inventories
- Debtor Crown
|
19,821
4,782
1,342
48,772
|
19,823
7,873
1,342
52,765
|
19,823
7,873
1,342
52,765
|
|
Total current assets
|
74,717
|
81,803
|
81,803
|
|
Non-current assets
|
380,442
|
357,096
|
357,096
|
|
Total non-current assets
|
380,442
|
357,096
|
357,096
|
|
Total assets
|
455,159
|
438,899
|
438,899
|
|
Current liabilities
- Creditors and payables
- Provision for employee entitlements
- Revenue in advance
|
23,934
7,647
2,049
|
26,566
7,284
2,049
|
26,566
7,284
2,049
|
|
Total current liabilities
|
33,630
|
35,899
|
35,899
|
|
Non-current liabilities
- Provision for employee entitlements
|
10,090
|
10,090
|
10,090
|
|
Total non-current liabilities
|
10,090
|
10,090
|
10,090
|
|
Total liabilities
|
43,720
|
45,989
|
45,989
|
|
Taxpayers' funds
- General funds
- Revaluation reserve
|
325,694
85,745
|
307,165
85,745
|
307,165
85,745
|
|
Total taxpayers' funds
|
411,439
|
392,910
|
392,910
|
|
Total liabilities and
taxpayers' funds
|
455,159
|
438,899
|
438,899
|
Forecast Statement of Cash Flows for the year ended 30 June 2008
|
30/06/08
Forecast
$000
|
30/06/07
Estimated Actual
$000
|
30/06/07
Budget
$000
|
|
Cash flows - operating activities
Cash provided from:
- Supply of outputs to Crown
- Supply of outputs to customers
Cash disbursed to:
Produce outputs
- Personnel
- Operating
- Capital charge
|
261,394
28,966
114,846
116,833
30,979
|
253,322
29,087
124,792
106,881
29,459
|
253,322
29,087
124,792
106,881
29,459
|
|
Net cash inflow from
operating activities
|
27,702
|
21,277
|
21,277
|
|
Cash flows - investing activities
Cash disbursed to:
|
45,297
|
30,728
|
30,728
|
|
Net cash outflow
from investing activities
|
(45,297)
|
(30,728)
|
(30,728)
|
|
Cash flows - financing activities
Cash provided from:
|
17,593
|
7,274
|
7,274
|
|
Net cash inflow/(outflow)
from financing activities
|
17,593
|
7,274
|
7,274
|
|
Net increase in cash held
|
(2)
|
(2,177)
|
(2,177)
|
|
Add opening cash balance
|
19,823
|
22,000
|
22,000
|
|
Closing cash and bank balances
|
19,821
|
19,823
|
19,823
|
Forecast Reconciliation of Net Surplus / (Deficit) and Net Cash Flows from Operating Activities for the year ended 30 June 2008
|
30/06/08
Forecast
$000
|
30/06/07
Estimated Actual
$000
|
30/06/07
Budget
$000
|
|
Net surplus/(deficit)
|
(700)
|
(3,778)
|
(3,778)
|
|
|
23,950
|
20,930
|
20,930
|
|
Total non-cash items
|
23,950
|
20,930
|
20,930
|
|
Working Capital Movement
|
4,452
|
2,125
|
2,125
|
|
Net Loss on Sale of Fixed Assets
|
-
|
2,000
|
2,000
|
|
Net cash inflow/(outflow)
from operating activities
|
27,702
|
21,277
|
21,277
|
Detail of Fixed Assets by Category as at June 2008
|
30/06/08
Forecast
$000
|
30/06/07
Estimated Actual
$000
|
30/06/07
Budget
$000
|
|
Visitor assets and Buildings
|
|
|
|
|
At valuation
|
691,436
|
658,018
|
658,018
|
|
Accumulated depreciation
|
(371,119)
|
(352,434)
|
(352,434)
|
|
Visitor assets - net carrying value
|
320,317
|
305,584
|
305,584
|
|
Freehold land
|
|
|
|
|
At valuation
|
16,852
|
14,852
|
14,852
|
|
Land - net carrying value
|
16,852
|
14,852
|
14,852
|
|
Infrastructural Assets
|
|
|
|
|
At valuation
|
27,799
|
27,070
|
27,070
|
|
Accumulated depreciation
|
(15,906)
|
(15,460)
|
(15,460)
|
|
Infrastructural assets -
net carrying value
|
11,893
|
11,610
|
11,610
|
|
Vessels
|
|
|
|
|
At cost
|
8,859
|
8,818
|
8,818
|
|
Accumulated depreciation
|
(5,009)
|
(4,565)
|
(4,565)
|
|
Vessels - net carrying value
|
3,850
|
4,253
|
4,253
|
|
Furniture, computers, other office equipment and software
|
|
|
|
|
At cost
|
3,943
|
3,767
|
3,767
|
|
Accumulated depreciation
|
(3,012)
|
(2,833)
|
(2,833)
|
|
Furniture, computers, other office equipment and software -
net carrying value
|
931
|
934
|
934
|
|
Motor vehicles
|
|
|
|
|
At cost
|
21,149
|
20,067
|
20,067
|
|
Accumulated depreciation
|
(10,938)
|
(9,865)
|
(9,865)
|
|
Vehicles - net carrying value
|
10,211
|
10,202
|
10,202
|
|
Plant, field and radio equipment
|
|
|
|
|
At cost
|
32,253
|
22,403
|
22,403
|
|
Accumulated depreciation
|
(15,865)
|
(12,742)
|
(12,742)
|
|
Plant, field and radio equipment - net carrying value
|
16,388
|
9,661
|
9,661
|
|
Total fixed assets
|
|
|
|
|
At cost and valuation
|
802,291
|
754,995
|
754,995
|
|
Accumulated depreciation
|
(421,849)
|
(397,899)
|
(397,899)
|
|
Total carrying value fixed assets
|
380,442
|
357,096
|
357,096
|
Departmental Capital Expenditure (to be incurred in accordance with section 24 of the Public Finance Act 1989)
|
Departmental Capital Expenditure
|
$000
|
|
Actual 2002/03
|
14,240
|
|
Actual 2003/04
|
20,256
|
|
Actual 2004/05
|
17,679
|
|
Actual 2005/06
|
20,321
|
|
Budget 2006/07
|
30,728
|
|
Estimated Actual 2006/07
|
30,728
|
|
Forecast 2007/08
|
45,297
|
The forecast capital expenditure for the 2007/08 financial year is primarily in line with the replacement and upgrade of the Department's existing asset categories, which predominantly relate to visitor assets. The capital expenditure supports the Department's production of outputs set out in this Statement of Intent.
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