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Annual Report of the Treasury for the Year Ended 30 June 2010

Administration of Derivative Transactions PLA

Scope of Appropriation

This appropriation is limited to expenses incurred in connection with administering derivative transactions of the Crown, as authorised by section 65H(2) of the Public Finance Act 1989.

Significant Work Completed During 2009/10

  • NZDMO uses a relatively small set of vanilla derivatives to manage interest-rate and currency risk in the portfolio. During 2009/10, new derivative transactions entered into included currency swaps and interest-rate swaps.
  • Risk associated with the changing market value of derivative positions was successfully managed within NZDMO’s average monthly VaR target for the investment and derivatives portfolio.
Statement of Service Performance for Output Class: Administration of Derivative Transactions PLA
Performance Dimensions Target Performance for 2009/10
All policy outputs comply with the Treasury's Quality Standards for Policy Advice, as assessed by the Minister three times during the year. Rated as meeting and frequently exceeding expectations

Not assessed in 2009/10.

Refer to page 60 for further information on the application of the policy standard during 2009/10.

Compliance with risk management policies and parameters for portfolio management and debt issuance. For other standards in this output class see the standards listed in the Administration of Crown Borrowing PLA output expense above

Performance targets for Administration of Derivative Transactions PLA, the Administration of Crown Borrowing PLA and Administration of Public Borrowing PLA have been aggregated. The performance targets were specified as a total for activity across these output classes because this provided a more meaningful measure of the outputs produced by NZDMO.

The full set of measures and targets for the 2009/10 year and relevant notes are published in the Administration of Crown Borrowing PLA.

Cost - Administration of Derivative Transactions PLA
  2009/10
Actual
$000
Supp. Estimates
- Voted
$000
Main Estimates
$000
2008/09
Actual
$000
Expenses 1,249 1,308 3,893
Funded by:        
Revenue Crown 1,227 1,285 3,819
Other Revenue 22 23 74

In 2009/10, the Debt and Related Financial Asset Management output class was split across three PLA appropriations, and one annual output class. A summary of the PLA financials and the 2008/09 comparatives are provided on page 50.

Actual 2009/10 output class expenditure was $59,000 or 5% under the Supplementary Estimates budget owing to minor cost savings.

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