1 Introduction to Treasury Instructions
1.1 General
This document comprises:
(1) a summary of the relevant provisions of the Public Finance Act 1989 (the Act);
(2) a set of instructions in bold to be known as Treasury Instructions (the Treasury Instructions); and
(3) some guidance on the Instructions and the provisions of the Act.
The Treasury Instructions are issued under the authority of section 80 of the Act and are to be read in conjunction with the Act (all terms have the same meaning as in section 2 of the Act).
1.2 Date of issue
The Treasury Instructions contained within this document were issued on 30 June 2011, and apply as from 1 July 2011. All previous Treasury Instructions applying to departments as defined in the Act are hereby revoked.
1.3 Structure of Treasury Instructions
This document comprises six sections:
Section one: Introduction to the Treasury Instructions.
Section two: Principles for the development of accounting policies for external financial reporting. This section of the Treasury Instructions is to be complied with by the Government and departments when developing accounting policies for external financial reporting.
Section three: Accounting policies for external financial reporting by the Government of New Zealand. This section of the Treasury Instructions is to be complied with when providing reports on Crown revenue, expenditure, assets or liabilities, and when providing information for the preparation of the Financial Statements of the Government of New Zealand and Forecasts.
Section four: Accounting policy parameters for external financial reporting by departments. Departments must select their accounting policies within the parameters specified in this section of the Treasury Instructions.
Section five: Cost accounting policy parameters. Departments are required to provide a clear and concise statement of cost accounting policies in external financial reports, and this section of the Treasury Instructions provides criteria for disclosing cost accounting policies.
Section six: Operating instructions. This section of the Treasury Instructions is to be complied with when determining and operating departmental accounting and management systems.
A number of publications have been developed to assist departmental Chief Executives with the development and maintenance of appropriate accounting policies and systems. Departments can obtain these publications through the Treasury web site www.treasury.govt.nz.
1.4 Application of Treasury Instructions
The Treasury Instructions apply, subject to the provisions of the Act and of any regulations made under the Act, to all Chief Executives and all employees of any department as defined in the Act. It is the responsibility of every Chief Executive to ensure that the Treasury Instructions are complied with.
1.5 Access to Treasury Instructions
The current and only official version of the Treasury Instructions is on Treasury's web site (www.treasury.govt.nz).
Chief Executives are to ensure that all employees have sufficient access to the Act and to the current Treasury Instructions issued under the Act.
1.6 Review of Treasury Instructions
The Treasury Instructions are reviewed and updated annually. They are effective from 1 July of the year in which they are published. Each new version of the Treasury Instructions issued in this manner supersedes all previous versions of the Treasury Instructions.
1.7 Changes since last update
The changes to the Treasury Instructions since the previous version (1 July 2010) are summarised in the tables below. Substantive changes are included in the first table, changes to guidance material are provided in the second table and the final table summarises the technical and wording changes.
Key changes from the previous version of Treasury Instructions:
| Section reference | Section name | Change |
|---|---|---|
| 4.4.3 | Provision for return of operating surplus | Changes to calculation resulting from amendments to the memorandum account rules. |
| 6.3.7 | Memorandum accounts | Section renumbered and updated to reflect changes in the operation of memorandum accounts. |
Areas where guidance changed or additional guidance provided:
| Section reference | Section name | Change |
|---|---|---|
| 2.3.6.2 | Liabilities | Additional guidance added. |
| 3.5.7 | Financial instruments | Reference to Treasury's central table of risk-free rates and CPI assumptions added and some minor wording changes to reflect actual practice. |
| 3.5.15 | Employee benefits | Reference to Treasury's central table of risk-free rates and CPI assumptions added. |
| 3.5.16 | Insurance contracts | Reference to Treasury's central table of risk-free rates and CPI assumptions added. |
| 4.3.2.1 | Insurance proceeds | Extra guidance provided specifically with regards to the treatment of insurance proceeds. |
| 4.3.3 | Losses arising from natural disasters | New sections added regarding accounting for destroyed and damaged assets, and repairing assets that have been impaired. |
| 4.5 & 4.5.1 | Forecasting Policies | Added emphasis on the importance of forecasting. |
| 4.5.5 | Forecasting departmental net assets | New section added including information on the net asset table and potential issues when forecasting deficits. |
| 6.3.1 | Managing departmental expenditure | Additional paragraphs added summarising the process to follow where it is known expenditure will exceed the original appropriation. |
| 6.3.2 | Emergency expenditure requiring Minister of Finance approval | Emergency expenditure split out from other expenditure requiring the Minister's approval. This section has been updated to reflect the actual practice followed arising from the first use of section 25 of the Act. |
| 6.3.8 | Management of Departmental assets | New section added. |
| 6.4 | Departmental other expenses | Previously included in Part 5 - Operating instructions: Cost accounting policy parameters. |
| 6.4.5 | Asset write-off and impairment expenses arising from natural disasters | New section added. |
| 6.4.7 | Summary | Updated to include reference to new section 6.4.5. |
| 6.5.5.2 | Delegation of authority to write off Crown assets | References to cabinet office circular on Capital Asset Management added. |
Other changes of a minor nature are summarised below:
| Section reference | Section name | Change |
|---|---|---|
| 1.8 | Relationship between Treasury Instructions and Treasury Circulars | Minor wording changes. |
| 2.3 | New Zealand generally accepted accounting practice | Minor wording changes to reflect changes to the New Zealand accounting standard setting boards. |
| 2.3.5 | Materiality | Minor wording changes to use correct terminology. |
| 3.4 | Judgements and estimations | Minor wording changes. |
| 3.5.1 & 3.5.2 | Reporting and forecasting period; and Basis of combination | Minor wording changes to remove repetitive clauses. |
| 3.5.3.2 | Revenue earned through operations | Minor wording changes. |
| 3.5.3.6 | Donated or subsidised assets | Minor wording changes. |
| 3.5.5 | Foreign currency | Reference to the Statement of Comprehensive Income added. |
| 3.5.7.2 | Financial liabilities | Minor wording changes to reflect actual practice. |
| 3.5.7.4 | Hedging | Minor wording changes. |
| 3.5.10 | Equity accounted investments | Minor wording changes. |
| 3.5.11 | Biological assets | Minor wording changes. |
| 3.5.12 | Intangible assets | Minor wording changes to remove repetitive clauses. |
| 3.5.14 | Investment property | Minor wording changes. |
| 3.5.22 | Segment analysis | Minor wording changes for clarity |
| 3.5.23 | Related parties | Minor wording changes. |
| 4.2.2 | Combination of sub-entities | Minor wording change for clarity. |
| 4.2.3 | Goods and Services Tax | Minor wording changes for clarity around non-departmental statements. |
| 4.3.4 | Capital charge | Section renumbered and link to capital charge information on Treasury website included. |
| 4.4.2.1 | Computer software | Removed outdated example. |
| 4.4.4 | Liability for capital withdrawals | Minor wording changes for clarity. |
| 4.5.4 | Forecasting policies for property, plant and equipment | Forecasting for leasehold improvements shifted to this section (previously in section 4.5.6). |
| 4.5.6 | Other forecasting policies | Section renumbered and forecasting for leasehold improvements shifted to section 4.5.4. |
| 5.6 | Definition of terms | Section renumbered. |
| 6.1 | Financial responsibility of Chief Executives | Minor wording changes including clarification of delegations for non-departmental transactions. |
| 6.2.1.2 | Annual financial statements of departments - Non-departmental activity | Minor wording changes. |
| 6.2.2 | Provision of reports to Ministers | Minor wording changes for accuracy and clarity. |
| 6.2.3 | Provision of reports to the Treasury | Included reference to the Ministerial certification of related party transactions. |
| 6.3.3 | Other expenditure requiring Minister of Finance approval | Split into separate section and renumbered. Added references to the Act for accuracy and clarification. |
| 6.3.4 | Foreign exchange exposure management | Section renumbered. |
| 6.3.5 | Departmental insurance and risk management | Section renumbered. |
| 6.3.6 | Prohibition on investing, borrowing or lending | Section renumbered. |
| 6.3.6.1 | Obtaining authority to enter into finance leases | Section renumbered and Cabinet Office circular reference updated. |
| 6.5 | Crown revenue, expenditure, assets and liabilities | Section renumbered. |
| 6.5.2 | Authority to operate Crown bank accounts | Reference to the Act corrected. |
| 6.5.3 | Collection of Crown revenue | Updated to clarify actual practice. |
| 6.5.4 | Disbursement of Crown expenditure | Minor wording changes to clarify delegations. |
| 6.5.5 | Management of Crown assets | Section renumbered. |
| 6.5.6 | Management of Crown liabilities | Section renumbered. |
| 6.6 | Banking | Section renumbered. |
| 6.6.2 | Bank accounts | Minor wording changes. |
| 6.6.4 | New Zealand dollar Crown bank accounts | Example of a transfer between bank accounts added for clarity. |
| 6.6.8 | Cash payment schedule | Minor wording changes |
| 6.7 | Trust money | Section renumbered. |
| 6.7.2 | Notice of appointment | Minor wording changes |
| 6.8 | Contingent liabilities | Section renumbered. |
| 6.8.3 | Register of Contingent Assets and Liabilities | Minor wording changes to include contingent assets. |
| 6.8.5 | Power to give guarantees and Indemnities | Reference to the latest guidance document included and reference to s63 of the Act removed as not relevant to this section. |
1.8 Relationship between Treasury Instructions and Treasury Circulars
Treasury Instructions are issued under section 80(1) of the Act. Treasury may issue instructions to departments for the purpose of:
- requiring information to be supplied to Treasury to enable the Treasury to fulfil properly the functions imposed upon it by the Government or any Act;
- prescribing the processes and data standards to be used when supplying the information required;
- prescribing particular accounting policies and financial statement representations that Ministers, departments, Offices of Parliament, Crown entities or organisations named or described in Schedule 4 to the Act must apply in their financial reporting;
- prescribing the terms and conditions that must apply to the guarantees or indemnities referred to under section 81(1)(bb) of the Act;
- prescribing any other matters relating to the guarantees or indemnities referred to under section 81(1)(bb) of the Act;
- regulating the collection, receipt, custody, issue, expenditure, control and management of public money or trust money;
- regulating the accounting and financial management and control procedures relating to contracts of the Crown; and
- regulating the custody and control by the Crown of public securities and securities representing the investment of public money; and providing for the appointment of custodians of such securities and prescribing their functions, duties and powers.
Treasury Instructions generally specify what the Chief Executive of a department of the Government must do. Treasury Instructions are signed on behalf of the Secretary to the Treasury and all Chief Executives are required to comply with them to the extent that they apply to the relevant department.
The main purpose of Treasury Circulars is to provide guidance and information, and to request financial information. Treasury Circulars may cover matters that are outside the scope of Treasury Instructions, such as the budget timetable. Since Treasury Instructions are updated annually, Treasury Circulars may also cover matters that are to take effect immediately (but may later be incorporated within Treasury Instructions as part of an annual update).
Treasury Circulars are intended principally for departmental (and sometimes Crown Entities and State-owned enterprises) use and they are usually addressed to Chief Executives/Chief Financial Officers (CEs/CFOs).
For a list of current, publicly-available Treasury Circulars, please click here.
