In the “Annual Report for year ended 30 June 2015

Note 1: Major budget variations

Significant variances between Actual and Revised Budget

Statement of comprehensive revenue and expense

Revenue was $6.4 million less than the Revised Budget mainly due to contingent revenue budgets not being achieved, with operating cost savings to match.

Actual expenses for the year were $17.3 million less than the Revised Budget mainly due to a deferral of field operation costs to the 2015/16 year and operating cost savings resulting from contingent revenue budgets not being achieved.

Statement of financial position

Current assets were $31.2 million more than the Revised Budget mainly due to lower than planned cash expenditure and higher than planned trade receivables.

Non-current assets were $42.6 million less than the Revised Budget mainly due to lower than planned levels of capital expenditure.

Current liabilities were $17.1 million less than the Revised Budget mainly due to lower than planned trade payables as a result of timely payment of creditors under agreed commercial terms.

Statement of cash flows

Net cash flow from investing activities was $33.6 million less than the Revised Budget due to lower than planned levels of capital expenditure.

Note 2: Other revenue
 

30/06/14
Actual
$000

30/06/15
Actual
$000

Recreational and tourism charges

13,792

14,751

Leases and rents

405

526

Retail sales

2,423

2,612

Resource sales

499

867

Donations and sponsorships

7,865

9,396

Permissions cost recoveries

3,134

4,501

Administration cost recoveries

9,343

11,103

Other

2

-

Total other revenue

37,463

43,756

Note 3: Personnel costs
 

30/06/14
Actual
$000

30/06/15
Actual
$000

Salaries and wages

135,578

145,013

Termination entitlements

1,061

261

Annual, long service and retiring leave provisioning

(677)

1,683

Superannuation subsidies

4,406

4,795

Recruitment

547

468

Uniforms

301

343

ACC Partnership Programme

888

1,041

Other

7,196

4,418

Total personnel costs

149,300

158,022

Note 4: Operating costs
 

30/06/14
Actual
$000

30/06/15
Actual
$000

Professional fees

14,282

14,617

Contractors

41,762

34,189

Fees paid to auditors:

   

Fees for financial statement audit

252

253

Fees for assurance services

-

-

Grants

2,819

5,410

Communications and computer expenses

7,873

7,274

Travel

7,480

6,569

Motor vehicle and vessel expenses

4,907

4,895

Accommodation

3,186

4,797

Office supplies

1,835

1,765

Field supplies

15,031

12,085

Lease expenses

10,872

11,609

Printing

1,241

1,217

Other

4,706

3,441

Total operating costs

116,246

108,121

Note 5: Capital charge

The Department pays a capital charge to the Crown twice yearly on the balance of taxpayer funds, including revaluation reserve, as at 1 July and 1 January. The capital charge rate for the year ended 30 June 2015 was 8.0% (2014: 8.0%).

Note 6: Return of operating surplus to the Crown
 

30/06/14
Actual
$000

30/06/15
Actual
$000

Net surplus for the year

1,958

8,946

Add/(less)

   

Donated assets

-

(1,227)

Other expenses

(524)

(1,386)

Remeasurement (gains)/losses on long service and retirement leave

(444)

681

Total return of operating surplus

990

7,014

Other expenses relate to expenses on the Canterbury earthquake recovery less insurance proceeds.

The repayment of surplus is required to be paid by 31 October each year.

Note 7: Trade and other receivables
 

30/06/14
Actual
$000

30/06/15
Actual
$000

Trade receivables

6,732

7,995

Less provision for impairment

(186)

(252)

Net trade receivables

6,546

7,743

Accrued income and advances

2,282

5,077

Total trade and other receivables

8,828

12,820

Note 8: Debtor Crown

The Debtor Crown balance of $44.813 million (2014: $24.813 million) consists of $24.813 million (2014: $24.813 million) of visitor asset accumulated depreciation funding and $20.000 million (2014: nil) of operating funding (GST inclusive) not drawn down as a result of the timing of cash requirements.

Note 9: Property, plant and equipment
 

Land
$000

Buildings
$000

Plant and equipment
$000

Infrastructure
$000

Fencing
$000

Vessels
$000

Motor vehicles
$000

Furniture and fittings
$000

Visitor and cultural assets
$000

Land formation
$000

Total
$000

Cost or valuation

Balance at 1 July 2013

14,384

143,055

32,356

34,598

83,836

8,200

24,191

14,029

611,978

113,250

1,079,877

Additions

-

213

1,704

8

1,507

539

1,544

649

22,492

1,109

29,765

Revaluation movement

(61)

-

-

-

-

-

-

-

38,238

-

38,177

Disposals

-

(30)

(489)

(11)

(37)

(135)

(1,398)

(72)

(3,283)

-

(5,455)

Balance at 30 June 2014

14,323

143,238

33,571

34,595

85,306

8,604

24,337

14,606

669,425

114,359

1,142,364

Balance at 1 July 2014

14,323

143,238

33,571

34,595

85,306

8,604

24,337

14,606

669,425

114,359

1,142,364

Additions

-

545

1,312

1,995

2,437

163

2,768

578

10,225

862

20,885

Revaluation movement

(516)

11,332

-

-

-

-

-

-

(9)

-

10,807

Disposals

(670)

(313)

(93)

(214)

(8)

(37)

(2,365)

(226)

(6,644)

-

(10,570)

Balance at 30 June 2015

13,137

154,802

34,790

36,376

87,735

8,730

24,740

14,958

672,997

115,221

1,163,486

Accumulated depreciation and impairment losses

Balance at 1 July 2013

-

82,300

22,187

13,728

27,096

5,087

10,507

7,510

365,776

-

534,191

Depreciation expense

-

1,897

2,686

725

5,144

531

2,244

1,279

15,710

-

30,216

Revaluation movement

-

-

-

-

-

-

-

-

23,558

-

23,558

Disposals

-

(20)

(448)

(10)

(15)

(111)

(918)

(72)

(2,288)

-

(3,882)

Balance at 30 June 2014

-

84,177

24,425

14,443

32,225

5,507

11,833

8,717

402,756

-

584,083

Balance at 1 July 2014

-

84,177

24,425

14,443

32,225

5,507

11,833

8,717

402,756

-

584,083

Depreciation expense

-

1,910

2,357

726

5,214

474

1,984

1,304

17,386

-

31,355

Revaluation movement

-

6,806

-

-

-

-

-

-

-

-

6,806

Disposals

-

(255)

(66)

(214)

(3)

(37)

(1,545)

(108)

(5,423)

-

(7,651)

Balance at 30 June 2015

-

92,638

26,716

14,955

37,436

5,944

12,272

9,913

414,719

-

614,593

Carrying amounts

At 30 June 2013

14,384

60,755

10,169

20,870

56,740

3,113

13,684

6,519

246,202

113,250

545,686

At 30 June 2014

14,323

59,061

9,146

20,152

53,081

3,097

12,504

5,889

266,669

114,359

558,281

At 30 June 2015

13,137

62,164

8,074

21,421

50,299

2,786

12,468

5,045

258,278

115,221

548,893

Basis of valuations

Valuations for assets other than land within asset classes valued at fair value effective as at 30 June 2015 have been determined by applying the indexation model and using the appropriate capital goods index as published by Statistics New Zealand.

Due to the nature, location and purpose of the Department's assets, fair value is determined using depreciated replacement cost because no reliable market data is available.

Significant assumptions applied in deriving depreciated replacement cost include:

  • Historical cost adjusted by movements in consumer price indices reflects the present replacement cost.
  • The remaining useful life of assets is estimated.
  • Straight-line depreciation has been applied in determining the depreciated replacement cost value of the asset.

The asset values determined using this methodology were certified as fair value by an independent registered valuer.

a) Land and buildings

Land is initially recognised at cost and is revalued annually based on assessments as provided by Quotable Value Limited. Land not matched to an assessment is valued using an average per hectare rate. These values were certified as fair value by an independent registered valuer. The valuation is effective as at 30 June 2015.

Administration buildings were valued at fair value effective as at 30 June 2015.

b) Visitor assets

A number of different asset classes are included under the grouping 'Visitor Assets', including tracks, structures, buildings (predominantly huts) and signs. These asset classes are valued individually in accordance with the Department's accounting policy.

The land formation costs of tracks, car parks and roads ($115 million as at 30 June 2015) have been included as a separate class in the financial statements and are not depreciated or revalued.

Tracks were valued at fair value effective as at 30 June 2013. Buildings, structures, campgrounds/amenity areas and signs were valued at fair value effective as at 30 June 2014.

c) Other property, plant and equipment

Fencing and infrastructure assets were valued at fair value effective as at 30 June 2013.

Property, plant and equipment under construction

The total amount of property, plant and equipment under construction is $6.9 million (2014: $16.3 million).

Note 10: Intangible assets
 

Acquired software
$000

Internally generated software
$000

Total
$000

Cost or valuation

Balance at 1 July 2013

7,252

16,495

23,747

Additions

2,083

1,822

3,905

Disposals

(30)

-

(30)

Balance at 30 June 2014

9,305

18,317

27,622

Balance at 1 July 2014

9,305

18,317

27,622

Additions

1,341

547

1,888

Disposals

-

-

-

Balance at 30 June 2015

10,646

18,864

29,510

Accumulated depreciation and impairment losses

Balance at 1 July 2013

2,027

11,922

13,949

Amortisation expense

933

1,621

2,554

Disposals

(26)

-

(26)

Impairment losses

-

-

-

Balance at 30 June 2014

2,934

13,543

16,477

Balance at 1 July 2014

2,934

13,543

16,477

Amortisation expense

1,089

1,716

2,805

Disposals

-

-

-

Impairment losses

-

942

942

Balance at 30 June 2015

4,023

16,201

20,224

Carrying amounts

At 30 June 2013

5,225

4,573

9,798

At 30 June 2014

6,371

4,774

11,145

At 30 June 2015

6,623

2,663

9,286

There are no restrictions over the title of the Department's intangible assets, nor are any intangible assets pledged as security for liabilities.

During the year, the carrying value of the iBex customer chargeables system was impaired by $942,000 to its deemed fair value.

Note 11: Employee entitlements
 

30/06/14
Actual
$000

30/06/15
Actual
$000

Current portion

Accrued salaries and wages

4,264

1,854

Long service and retiring leave

1,600

1,523

Other employee entitlements

11,704

11,262

Total employee entitlements (current portion)

17,568

14,639

The reduction in accrued salaries and wages is due to the timing of the actual payment date being closer to balance date.

Other employee entitlements include accrued annual leave, time-off-in-lieu and vested long service leave.

 

30/06/14
Actual
$000

30/06/15
Actual
$000

Non-current portion: Retiring leave

12,504

13,138

Non-current portion: Long service leave

2,579

2,751

Total non-current portion

15,083

15,889

Less: Current portion of long service and retiring leave

(1,600)

(1,523)

Total employee entitlements (non-current portion)

13,483

14,366

The measurement of the retirement and long service leave obligations depends on factors that are determined on an actuarial basis using a number of assumptions. Two key assumptions used in calculating this liability are the salary growth factor and the discount rate. Any changes in these assumptions will affect the carrying amount of the liability.

Discount rates and CPI rates used in the actuarial valuation are as specified by the New Zealand Treasury for valuations of this type and are effective for valuations as at 30 June 2015. The table below shows the impact that varying the assumed rate of salary growth and discount rates has on the valuation result if all other assumptions are constant.

The demographic assumptions used are based on New Zealand population mortality and the experience of superannuation arrangements in New Zealand and Australia.

Changes in assumptions

Increase/(decrease) in surplus/(deficit)
($000's)

Salary growth

1% below assumed

1,242

1% above assumed

(1,424)

Discount rates

1% above assumed

1,208

1% below assumed

(1,407)

Note 12: Provisions
 

30/06/14
Actual
$000

30/06/15
Actual
$000

Current portion

Environmental

11,653

3,566

ACC Partnership Programme

152

174

Onerous contracts

50

49

Total current portion

11,855

3,789

Non-current portion

Environmental

-

327

ACC Partnership Programme

315

427

Onerous contracts

224

175

Total non-current portion

539

929

Total provisions

12,394

4,718

Movements in Environmental provisions:

Balance at 1 July

936

11,653

Provision utilised or reversed during the year

(361)

(10,206)

Provision made during the year

11,078

2,446

Balance at 30 June

11,653

3,893

Battle for our Birds

During the year, the Department implemented the 'Battle for our Birds' predator control programme. A provision of $8.2 million for the cost of this programme which was made in 2013/14 has now been fully utilised.

Cleaning up contaminated sites

$2.2 million has been recognised by the Department as the future cost of the decontamination of the Prohibition Ball Mill and Alexander Gold Mine sites at Waiuta on the West Coast. Testing at the old mine site in the Victoria Forest Park has identified very high levels of arsenic in the soil and water that poses a risk to people and the environment. The Prohibition Mine site was contaminated through the processing of ore for gold when the mill was operating between 1938 and 1951.

Waikato–Tainui Waikato River Conservation Accord

Provision has been made for $0.8 million as the Department's share of the clean-up cost associated with the obligations arising under the above accord.

Note 13: Taxpayers' funds
 

30/06/14
Actual
$000

30/06/15
Actual
$000

General funds

Balance at 1 July

457,285

456,880

Net surplus for the year

1,958

8,946

Transfers from revaluation reserve on disposal

(1,580)

1,769

Return of operating surplus to the Crown

(990)

(7,014)

Asset transfers between Department and Crown

207

779

Balance at 30 June

456,880

461,360

Property, plant and equipment revaluation reserves

Balance at 1 July

118,315

134,514

Revaluation gains

14,619

4,001

Transfer to general funds on disposal

1,580

(1,769)

Balance at 30 June

134,514

136,746

Total taxpayers' funds at 30 June

591,394

598,106

Revaluation reserves consist of:

Land revaluation reserve

13,390

12,224

Buildings revaluation reserves

33,146

37,498

Visitor assets revaluation reserves

83,638

82,685

Other revaluation reserves

4,340

4,339

Total revaluation reserve

134,514

136,746

Note 14: Reconciliation of net surplus to net cash flow from operating activities
 

30/06/14
Actual
$000

30/06/15
Actual
$000

Net surplus

1,958

8,946

Add non-cash items

Depreciation, amortisation and impairment expenses

32,770

35,102

Donated assets

(214)

(314)

Total non-cash items

32,556

34,788

Add items classified as investing or financing activities

Net loss on disposal of property, plant and equipment

388

1,165

Add/(less) working capital movements

(Inc)/dec in prepayments

(85)

(349)

(Inc)/dec in inventories

(133)

307

(Inc)/dec in trade and other receivables

(1,310)

(3,992)

(Inc)/dec in debtor Crown

3,927

(20,000)

Inc/(dec) in trade and other payables

4,223

(5,227)

Inc/(dec) in GST payable

(892)

322

Inc/(dec) in employee entitlements

(7,566)

(2,046)

Inc/(dec) in other provisions

10,609

(7,676)

Inc/(dec) in revenue in advance

1,211

586

Net working capital movement

9,984

(38,075)

Net cash flow from operating activities

44,886

6,824

Note 15: Financial instrument risks

The Department's activities expose it to a variety of financial instrument risks, including credit risk and liquidity risk. The Department has a series of policies to manage the risks associated with financial instruments and seeks to minimise exposure from financial instruments. These policies do not allow any transactions that are speculative in nature to be entered into.

Credit risk

Credit risk is the risk that a third party will default on its obligation to the Department, causing the Department to incur a loss. In the normal course of its business, credit risk arises from debtors and deposits with banks.

The Department is only permitted to deposit funds with Westpac, a registered bank, and enter into foreign exchange forward contracts with the New Zealand Debt Management Office. These entities have high credit ratings. For its other financial instruments, the Department does not have significant concentrations of credit risk.

The Department's maximum credit exposure for each class of financial instrument is represented by the total carrying amount of cash and net receivables. There is no collateral held as security against these financial instruments, including those instruments that are overdue or impaired.

Liquidity risk

Liquidity risk is the risk that the Department will encounter difficulty raising liquid funds to meet commitments as they fall due.

In meeting its liquidity requirements, the Department closely monitors its forecast cash requirements with expected cash draw-downs from the New Zealand Debt Management Office. The Department maintains a target level of available cash to meet liquidity requirements.

The following table analyses the Department's financial liabilities that will be settled based on the remaining period at the statement of financial position date to the contractual maturity date. The amounts disclosed are the contractual undiscounted cash flows.

Financial instrument risks

Liquidity risks

Less than 6 months
$000

Between 6 months and 1 year
$000

Between 1 and 5 years
$000

Over 5 years
$000

2014

Trade and other payables

18,006

-

-

-

Finance leases

372

372

878

-

2015

Trade and other payables

12,840

-

-

-

Finance leases

392

285

588

-

The carrying amounts of financial assets is represented by: Cash $43.6 m (2014: $58 m), Trade and other receivables $12.8 m (2014: $8.8 m) and Debtor Crown $44.8 m (2014: $24.8 m). The carrying amounts of financial liabilities is represented by: Trade and other payables $12.8 m (2014: $18 m) and Finance leases $1.2 m (2014: $1.5 m).

Note 16: Related party transactions and key management personnel

The Department is a wholly owned entity of the Crown. The Government significantly influences the roles of the Department as well as being its major source of revenue.

Two employees of the Department are close family members of members of the Department's Senior Leadership Team. The terms and conditions of their employment contracts are no more favourable than the Department would have adopted if there was no relationship to those staff members. No other transactions were carried out with related parties of the Department's Senior Leadership Team.

Key management personnel compensation

30/06/14
Actual
$000

30/06/15
Actual
$000

Salaries and other short-term benefits*

2,251

2,516

Other long-term benefits

-

143

Termination benefits

187

178

Total key management personnel compensation

2,438

2,837

* The Director-General's remuneration is determined and paid by the State Services Commission.

Key management personnel compensation includes the Director-General and the eight members of the Senior Leadership Team. Long-term benefits include long service leave and retiring leave.

A member of the Department's Risk and Assurance Committee is a director of OPUS International Consultants Limited. The Department of Conservation purchased engineering services from OPUS at a cost of $274,966 (2014: $330,872). There is a balance of $27,436 (2014: $31,936) outstanding at year end.

The Director-General of the Department of Conservation is a member of the Te Urewera Board and the Kiwi Trust Board (Kiwis for kiwi). A grant of $150,000 was made to Te Urewera Board, this being the Department's share of the Board's operating costs (2014: nil). $280,000 was paid to Kiwis for kiwi (2014: $150,000).

Note 17: Capital management

The Department's capital is its equity (or taxpayers' funds), which comprise general funds and revaluation reserves. Equity is represented by net assets.

The Department manages its revenues, expenses, assets, liabilities and general financial dealings prudently. The Department's equity is largely managed as a by-product of managing income, expenses, assets, liabilities and compliance with the Government Budget processes and with instructions issued by the New Zealand Treasury.

The objective of managing the Department's equity is to ensure the Department effectively achieves its goals and objectives for which it has been established, whilst remaining a going concern.

Note 18: Events after balance date

No significant events that may impact on the financial statements have occurred between year-end and the signing of these financial statements (2014: none).

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