Annual Report of the Treasury for the Year Ended 30 June 2009

Chief Executive's Introduction#

The world in which the Treasury operates changed markedly in 2008/09, and the face of the Treasury has changed with it. In the past year we have had to call on all our strengths as the Government's lead advisor on economic and financial issues, demonstrate public sector leadership as a Central Agency (alongside the State Services Commission (SSC) and Department of the Prime Minister and Cabinet (DPMC)) and take on important new operational roles.

In 2008/09, New Zealand was in the midst of the most difficult economic conditions we have experienced in generations as a deep, synchronised, global recession coincided with our own protracted domestic recession. That has meant facing challenges and thinking about some issues in new ways.

In the political environment, a change of government has led to new priorities and different performance expectations. Ministers are looking for the Treasury to take a lead in improving public sector performance - acting as a catalyst for sector-wide change as well as being an effective deliverer of services ourselves.

These developments in the economic and political landscape reinforce the importance of the longstanding core of work the Treasury undertakes to lift economic growth and raise living standards. Demands for practical economic advice and robust forecasts are stronger than ever. It is critical that we continue to advise effectively on policies and strategies that matter for New Zealand's long-term economic performance. We need to help maintain a stable and sustainable economy during the most unstable conditions for decades. We also have to keep driving public sector performance that reflects fiscal reality and delivers on the Government's objectives for smarter, better public services for less.

2008/09 Developments and Challenges#

In addition to this longer-term work, a number of developments within the Treasury during the year serve as examples of just some of the ways we are addressing formidable economic challenges and focusing on the Government's priorities.

Among the most pressing issues as the global economic and financial crisis unfolded was the need to maintain depositors' confidence in New Zealand's financial sector, and to ensure the sector continues to have access to funding. Since October 2008 the Treasury has administered the Crown Retail Deposit Guarantee Scheme[1], a role which involves assessing and approving financial institutions, monitoring compliance with the Scheme and ensuring eligible depositors receive their entitlements if the guarantee is called on. The Treasury also administers the Wholesale Funding Guarantee Facility[2], which was put in place to facilitate improved access to international funding markets for New Zealand's investment-grade financial institutions. The retail and wholesale guarantee schemes represent substantial new operational areas of work for us.

Another way New Zealand responded to the crisis was to expand our assistance to New Zealand exporters. After private trade credit insurers reduced their line of cover (making it harder for many of our exporters to continue trade in some countries), the New Zealand Export Credit Office (NZECO) introduced a short-term trade credit guarantee in February 2009. Owing to strong demand, the facility for the short-term trade credit guarantee has risen from $50 million to $150 million. The financial crisis has also generated greater interest from exporters in a range of other NZECO products.

Complementing our immediate responses to the global downturn were other developments during 2008/09 that have bolstered the Treasury's role in helping position New Zealand to come out of the recession with higher productivity and stronger economic growth.

Among the Government's objectives is for New Zealand's infrastructure to be a means to permanently lift the sustainable growth rate of the economy, through increased productivity and improved management of Crown assets. The National Infrastructure Unit was established within the Treasury to take a national overview of the Government's infrastructure priorities - providing cross-government coordination, planning and expertise. The Unit is assisting the Government to produce its first 20-year National Infrastructure Plan with the intention thereafter of updating this every three years. This will present a high-level view of the state of New Zealand's infrastructure and include a stock-take of existing infrastructure and anticipated future requirements. The Plan will help Ministers, agencies, local government and the private sector identify needs and prioritise investments to lift growth.

In mid-2008 the Government took decisions to strengthen the regulatory management system, and put in place a more strategic approach to managing the impact of regulation on economic performance. From November 2008, the Treasury took on three new roles. First, all proposals with regulatory implications are referred to the Treasury for possible scrutiny. The Treasury's Regulatory Impact Analysis Team (RIAT) is responsible for independent assessment of regulatory impact analyses and statements for proposals likely to have a significant impact on economic growth. Second, the Treasury is tasked with advising the Government on a prioritised regulatory review programme and coordinating across government agencies to deliver on this programme. The third main area is strategic coordination of the regulatory quality system, including recommending improvements to the system and Cabinet and parliamentary processes related to regulations and regulatory reform.

Lifting our Performance#

Current circumstances make it more important than ever that our longstanding work and new responsibilities are performed to the highest standards. We aim to strengthen our performance across all of our activities, both because of, and in the face of, a rapidly-changing economic environment. I believe the Treasury has responded well to the challenges so far. Our successes during 2008/09 have reaffirmed the steps we have taken in recent years to focus on results and operate more flexibly and nimbly. We need to continue down this track, as there is always more we can do to sharpen our performance. In particular, we have to ensure we can continue to respond to the leadership role demanded of the Treasury as a Central Agency, and ensure we are well placed to help form and inform public debate on major economic and State sector issues.

Looking Ahead#

The Treasury has great quality staff with which to meet the priorities of the Government, the demands of the economy and the aims of the organisation. It is imperative that we make the most of the skills and expertise of our people as we take on challenges and opportunities over the coming year. Most notably, we will be marshalling our efforts to achieve results in some key areas: the financial crisis, medium-term economic strategy, State sector performance, infrastructure, regulatory reform, macroeconomic stability, the Crown balance sheet, debt management and organisational performance.

I would like to thank all staff for their hard work and dedication in 2008/09 and their continuing commitment and professionalism in the year ahead.

John Whitehead
Secretary to the Treasury

What We Do#

The Treasury's overall vision is to be a world-class Treasury working for higher living standards for New Zealanders. We aim to raise the country's capacity to deliver on people's aspirations for a better quality of life, through making an impact on the issues that are important to New Zealand's economic performance and State sector management.

Guiding the Treasury's work is our focus on achieving three main outcomes, all of which are necessary to attaining higher living standards for New Zealanders:

• improved economic performance
• improved State sector performance, and
• a stable and sustainable macroeconomic environment.

The Treasury also has five core roles that underpin what we do:

• Economic role - concentrates on issues with policy implications that may have a significant and therefore pervasive impact on the performance of the economy as a whole.
• Financial role - concentrates on issues that have significant fiscal implications both now and in the longer term, and financial management and standards (including financial probity issues).
• Regulatory role - concentrates on improving the quality of government regulation with a particular focus on removing the barriers to growth and improving productivity.
• Central Agency role - concentrates on helping the Government develop its overall strategy and manage significant issues that emerge.
• Operational role - concentrates oncore operational functions such as those carried out by the New Zealand Debt Management Office (NZDMO) and NZECO. In the 2008/09 year this role expanded with the establishment of the wholesale and retail guarantee schemes and the National Infrastructure Unit.

As these roles suggest, the Treasury is uniquely placed to provide the Government with advice that integrates economic and financial perspectives including interests in institutions, macroeconomic performance and structural policy issues. We bring it together in a way that helps the Government focus on what really matters to raise living standards. We operate in partnership with other agencies that have more specific responsibilities, as well as our fellow Central Agencies to ensure that the public service overall is well placed to fulfil the Government's priorities.

The Treasury also engages with stakeholders across the public and private sectors to strengthen our analysis and to identify where our efforts to raise living standards can best be targeted. Our engagement and analysis have helped us prioritise four strategic result areas where our advice over the next three to five years can have the most impact:

• Skills - to achieve a substantive increase in the economic performance by enhancing New Zealand's collective skills base.
• International connections - to achieve a sustained increase in New Zealand's economic growth through our international connections.
• Natural resource management - to ensure the New Zealand economy uses its natural resources sustainably and productively.
• Long-term fiscal sustainability - to empower decision-makers to determine appropriate action to meet New Zealand's long-term fiscal challenges.

Crown Company Monitoring Advisory Unit#

The Crown Company Monitoring Advisory Unit (CCMAU) is a stand-alone unit within the Treasury responsible for maintaining and enhancing the Crown's ownership interest in a range of Crown Research Institutes (CRIs), State-Owned Enterprises (SOEs), Crown companies and other entities. The Executive Director of the Unit is directly accountable to the Secretary to the Treasury for the Crown's investment in CCMAU, and for CCMAU's performance.

Our Outcome Performance for 2008/09#

This section reports on progress we made in our three outcome areas: Improved overall economic performance, Stable and sustainable macroeconomic environment and Improved State sector performance. These three outcomes reflect those areas where we feel we can have most influence towards achieving the Government's goals.

The Treasury's main output, or service, is policy advice. This policy advice, as well as the other services we provide, is captured in our six output classes. As the diagram below illustrates, these individual output classes may contribute to one or more of the three outcomes.

The nine output classes contribute directly to results we want to achieve. These result areas are selected because they represent the areas where we can have the greatest impact, and our aim in focusing on them is to maximise the impact that we have and to enhance our effectiveness as a department.

Success in achieving our portfolio of results involves engaging effectively internally, and with our key external customers, providing good-quality policy advice and operations and being flexible in our approach so that we can respond to changes in our operating environment.

The Treasury's Outcome Performance for 2008/09

Source:  The Treasury

Outcome: Improved Overall Economic Performance#

The Treasury brings an overall perspective, including interests in institutions, macroeconomics and microeconomics, to advise Ministers on what really matters for New Zealand's economic performance.

Common with most Organisation for Economic Cooperation and Development (OECD) countries, recent economic performance has been poor. New Zealand's financial institutions have weathered the financial crisis well; however, this has not allowed the economy to escape the effects of global recession: real Gross Domestic Product (GDP) and real Gross National Product (GNP) fell 1% and 1.9% respectively in the year to March 2009 and unemployment increased by 1.2 percentage points.

As New Zealand and the global economy return to positive growth, it is important that two structural weaknesses are addressed:

• New Zealand's low level of GDP per hour worked (labour productivity), and
• macroeconomic imbalances (persistent current account deficits and very high net external indebtedness) that increase our vulnerability to any future external shocks.

Strong GDP performance since 2000 has masked two broad underlying weaknesses in the economy. The majority of GDP growth (around 1.8% p.a.) has been sourced from increased labour utilisation, and whilst this offers both social and economic benefits, it is not sustainable. Labour productivity grew at an average of just 1.3% p.a. between 2000 and 2008, falling from the 2% average achieved in the period from 1978. Accelerating labour productivity growth will be critical to achieving progress toward the Government's goal of reducing the income gap with Australia and other countries.

Further, economic growth has primarily been associated with rising consumption and significant macroeconomic imbalances. In particular, New Zealand has experienced a combination of a shortfall in national saving relative to investment over a very long period of time and a relatively high level of net external indebtedness. This tends to be associated with increased vulnerabilities, upward pressure on interest rates and can contribute to large swings in the exchange rate.

Future policy action should be focused on achieving the twin objectives of accelerating productivity growth and reducing macroeconomic imbalances. Shifting to a more balanced growth path driven by a greater contribution from productivity will require sustained effort on multiple fronts. However, the policies to achieve these twin aims are likely to be complementary in many cases: an environment that promotes increased saving and investment will also help to promote productivity growth and improve standards of living.

Overview of Progress in 2008/09#

Some of the areas in which we have had a significant impact through our work this year include:

• Provided advice on medium-term economic and fiscal policy options and implementing a productivity-focused economic agenda.
• Provided advice on the October 2008 and April 2009 personal tax reduction packages and advice on pressures and directions for medium-term tax reform.
• Provided advice and support to Ministers on the Government's response to the financial crisis, including implementation of the Crown Deposit Guarantee Scheme and Crown Wholesale Guarantee Facility.
• Coordinated the Government's regulatory review agenda, provided advice on regulatory quality management, including measures to improve regulatory quality, and established the RIAT within the Treasury to independently assess the quality of regulatory impact analyses for significant regulatory proposals.
• Established the National Infrastructure Unit to assist the Government in developing an infrastructure programme that is both strategically sound and helps build a more competitive, more productive economy.
• Advised the Minister on climate change issues, including the economic impact of a range of target levels for reducing greenhouse gas emission levels relative to other countries, and options regarding an Emissions Trading Scheme.

Outcome: Improved Overall Economic Performance (continued)#

Outcome: Improved Overall Economic Performance (continued)#

Key NZECO performance targets for 2008/09 relating to increased exports through direct provision of NZECO.

Outcome: Stable and Sustainable Macroeconomic Environment#

The Treasury provides advice on macroeconomic conditions and fiscal policy. We also provide economic and fiscal forecasts and produce the Crown Accounts.

A stable and sustainable macroeconomic environment contributes to higher economic growth by allowing individuals, businesses and the Government to plan more effectively for the longer term. This improves the quality and quantity of investment in physical and human capital and helps to raise productivity, and ultimately contributes to higher economic growth and higher living standards for New Zealanders.

Our focus throughout this year has been on areas where our work is likely to have the most impact on the performance of the macroeconomy, and in particular, the institutional frameworks that promote macrostability, and the sound operation of fiscal policy.

Overview of Progress in 2008/09#

Macroeconomic conditions were particularly challenging in 2008/09. This was primarily owing to volatile international economic and financial market conditions, stemming initially from a meltdown of the US sub-prime mortgage market, and then the flow-on of this into the real economy around the world and in New Zealand. This impact came at a time when the domestic economy was already showing weakness as previous imbalances, particularly high house prices and high interest rates, unwound and the agricultural sector was only just starting to recover from the effects of the 2007/08 summer drought. The impact of these forces on the New Zealand economy significantly reduced tax revenue, leading to a marked deterioration in the fiscal position as projected under policies in place at the time of the Pre-election Economic and Fiscal Update (PREFU). These factors also led to a heightened degree of uncertainty about New Zealand's macroeconomic prospects and required additional effort to be applied to monitoring, forecasting and advising on economic developments.

In the event, economic activity declined sharply in the second half of 2008 and the economy continued to contract in the first half of 2009. The rate of decline in economic activity is forecast to slow in the second half of 2009 followed by a slow increase in forecast growth during 2010 and 2011. The current account deficit reduced slowly in line with these forecasts. However, inflation pressures have turned out to be lower and as a result monetary policy has loosened well in excess of earlier forecasts.

This environment formed the backdrop for the Treasury's advice on fiscal policy for Budget 2009, with a particular focus on advising the Government on initial ways to address the consequent deterioration in the fiscal outlook. Decisions taken in Budget 2009 markedly improved the fiscal outlook and avoided a credit ratings downgrade (although more latterly one agency, Fitch, has placed New Zealand on negative outlook). While Budget 2009 delivered the necessary set of decisions to stabilise and improve the fiscal outlook and begin a focus on baseline spending, more emphasis on this will be needed in the future. Looking forward, the public sector, supported by the Treasury, will need to find new ways of thinking about service delivery and funding priorities.

The fiscal strategy announced in Budget 2009 has also given renewed prominence to the long-term (40-year) fiscal projections. The decisions taken to address the medium-term fiscal position have brought the long-term pressures more to the fore in terms of individual spending areas - the reductions in growth necessary to live with the new fiscal strategy will require choices that can begin to address some of the longer-term challenges.

The NZDMO's work during 2008/09 was dominated by this worsening fiscal position (and consequent increase in forecast government debt) and the international financial markets crisis. A range of measures was introduced to support the increase in debt issuance, including increasing tender frequency from fortnightly to weekly, the introduction of tap tenders, and reverse tap tenders, and the introduction of a new long bond. NZDMO also adopted a more proactive approach to investor relations and marketing, and placed increased emphasis on relationships with credit rating agencies.

Looking forward, risks remain around the re-emergence of imbalances in the economy as part of the recovery, and the Treasury will be providing advice on policy choices to prevent or mitigate those risks.

Measuring Progress on our Results#

The Treasury monitors the stability and sustainability of the macroeconomic environment through the Economic and Fiscal Updates and the Financial Statements of the Government of New Zealand, which include both fiscal and macroeconomic indicators of economic performance. As mentioned above, the economy contracted during the second half of 2008 and the first half of 2009. This should be seen in the context of a domestic economy that has had the longest period of economic growth since World War II, and a world economy where most developed economies faced multiple quarters of declining growth during 2008/09.

Like virtually all other forecasters, the Treasury did not foresee the speed or depth of the recession; however, for the whole of the 2000 to 2008 period we were the most accurate of 12 regular forecasters of the New Zealand economy. Compared with our target of ±3%, the forecast error for 2008/09 was -3.1%. However, the Budget did not forecast the extent of the shock in international financial markets and flow-on economic impacts, and was prepared with no knowledge of the SME package announced in February 2009, the April 2009 tax cuts or the outcome of the decision in a major court case between the IRD and the Bank of New Zealand (BNZ).

The fiscal outlook is weaker than was forecast in Budget 2008 owing to the decrease in revenue resulting from the recession. However, the Government's decisions in Budget 2009 meant that this deterioration in the fiscal outlook is not as large as it would have been had no action been taken to address the outlook - net Crown debt with no policy response was projected to reach over 60% of GDP by 2023 and still be trending upwards, compared to final Budget 2009 projections forecasting net debt at close to 30% of GDP by 2023, then trending down.

During the year, debt issuance was increased to its highest levels since 1991/92. Bonds issued under the domestic borrowing programme reached $5.5 billion by year end, compared with $1.9 billion in 2007/08.

Outcome: Stable and Sustainable Macroeconomic Environment (continued)#

Outcome: Stable and Sustainable Macroeconomic Environment (continued)#

Measuring Progress - Crown Debt and Related Financial Asset Management#

NZDMO's objective is to manage Crown debt and related financial assets in order to maximise the long-term net return on the Crown's financial asset and debt portfolios, within an appropriate risk management framework. Our priority for 2008/09 was to manage the impact of the financial markets crisis, and to respond to the deteriorating fiscal position. Debt issuance was increased to its highest levels since 1991/92.

Performance measures have been developed to assess the amount of return (value added) and risk incurred by these portfolios. The goal is to maximise net return while reducing risk as much as possible. These activities should also be managed as cost-effectively as possible.

Our performance against these measures is discussed below. The measures are not intended to be interpreted with reference to any particular benchmark, but are rather to be seen as highlighting trends in performance in key result areas over time. The trends demonstrate that value add has remained strong, largely as a result of the flight to quality which raised demand for government securities, and an increase in foreign exchange risk management activity. Risk, as measured by monthly VaR, was higher than in recent years, but has been maintained well within target limits. Settlement errors remain low by historical standards, even while the volume of transactions has increased. The Treasury will continue to measure itself in these areas.

Cost-effectiveness#

Value added generated for the Crown

Annual value-added result

Source:  The Treasury

The value-added figure is derived from NZDMO's management reporting, which is calculated on a different basis from the financial statement reporting. The value-added result for 2008/09 is the highest since the measure was introduced, owing primarily to:

• higher demand for government securities in 2008/09, and
• substantially increased foreign exchange risk management activity on behalf of Crown clients.

Market risk#

Monthly VaR

Source:  The Treasury

NZDMO measures market risk (interest rate and foreign exchange rate risk) using VaR. VaR measures the worst expected loss over a given time interval under recent market movements at a given confidence level. The monthly VaR limit at the 95% confidence level is set at $14 million.

Owing to extreme market volatility, VaR increased significantly over the past year. VaR peaked in the March quarter and then reduced as market volatility eased. The average VaR for 2008/09 is $714,000; this is more than double the average VaR for 2007/08.

Accuracy of settlement#

Settlement errors against number of cash flows settled

Source:  The Treasury

In 2009, NZDMO settled a total of 27,000 cash flows, being an average of 520 cash-related transactions per week. Over the year, there were two settlement processing errors by NZDMO and 52 settlement errors by NZDMO's settlement counterparties.

Gross payments against gross cost of settlement errors

Source:  The Treasury

In 2009, the total gross value of cash payments settled by NZDMO was $290 billion. The financial cost relating to NZDMO's settlement processing errors was $2,775.

Outcome: State Sector Performance#

The Treasury provides advice to ensure the work of the State sector represents value for money in achieving the Government's aims and objectives. This includes advice on policy and regulatory settings, the public management system and the management of, and return on, the Crown's assets and liabilities.

Our focus over the longer term is on ensuring that we have a sustainable public sector that represents value for money in meeting the Government's priorities and generates the maximum possible benefit for taxpayers for a given level of expenditure.

The State sector is a significant part of the economy in its own right. Because of its size, improvements in performance, for example through increases in labour and capital productivity or through delivering services in a more cost-effective way, will have an impact on economic growth. Improved performance will also place less stress on fiscal policy, assisting in finding fiscal headroom to progress priority areas, and contributing to the Treasury's stable and sustainable macroeconomic environment outcome.

Initially, we have chosen to focus on performance in the fiscally significant areas, for example, in health, education and the benefit system, as a matter of priority. In these areas we are developing measures of performance and options to improve performance and manage longer-run fiscal pressures over time.

Overview of Progress in 2008/09#

To achieve our longer-term aim of having a sustainable public sector that represents value for money means that, in the short to medium term, our focus is on improving our ability to measure performance and advising Ministers on how they can get better results.

We prioritised our efforts on those areas of performance that are most critical to the Government's objectives and where we were likely to get the greatest returns for improved performance. In 2008/09 this included the following fiscally significant areas:

• health
• education
• maintaining the revenue base
• the benefit system, and
• roading/transport.

In addition, we focused on improving the performance of agencies that significantly impact on the priorities as reflected in our economic performance or macro performance outcomes:

• firms/economic transformation
• skills/social mobility
• transport
• Auckland, and
• climate change.

In terms of system-wide improvements, we sought to improve agencies' performance in capital and asset management and in providing sound performance information for decision-makers. We also pursued a system-wide approach to better manage State sector remuneration pressures. In progressing the above priorities, we have worked alongside other Central Agencies to target and strengthen our collective efforts.

Key highlights for 2008/09 have been in the following areas:

• Skills: analysing future skill requirements to support higher productivity and growth. This analysis was used to support advice on lifting youth achievement and on improving outcomes from tertiary education more broadly.
• Value-for-money: managing and supporting a series of line-by-line reviews prior to Budget 2009. We also provided recommendations on further reviews and other actions, on an individual agency basis.
• Capital asset management: promulgating best practices amongst capital intensive agencies and reporting to Ministers on aggregate capital intentions. The latter supported budget strategy processes.
• Health: providing ongoing advice on fiscal and performance challenges in the health sector, and in-depth analysis of primary care policy settings.
• Benefit system: reviewing the effectiveness of Work and Income interventions for job seekers, in partnership with MSD.
• Central Agencies: developing a Performance Improvement Framework to assess agency and sector performance.

Measuring Progress on our Results#

The changing economic and fiscal environment has further highlighted the importance of improving the performance of agencies with significant impact on fiscal settings and economic growth. Treasury advice on State sector performance provided a robust base for ministerial decisions in Budget 2009 and assisted with the delivery of the necessary set of decisions to stabilise and improve the fiscal outlook and begin a focus on baseline spending. Treasury support of the Cabinet Expenditure Control Committee and its ongoing assessment of agency performance through performance improvement actions have enabled the Minister to assess fiscally significant sectors' management of baselines. Looking forward, the public sector, supported by the Treasury, will need to find new ways of thinking about service delivery and funding priorities.

The Review of Accountability Documents (RoADs) project has resulted in providing more accessible information that assists Ministers, MPs and select committees. For Estimates examination in early 2008/09 most select committees needed to deal with only the new slim Estimates volume plus one or two of the sector volumes of Information Supporting the Estimates. In addition, most Statements of Intent (SOIs) follow a common structure making it easier to find core information across different departments' SOIs. There has been less progress than we would have liked in improving the quality of the performance information; there was progress in Budget 2009 and this will continue to need attention. The Treasury and other Central Agencies will continue to work with the Office of Auditor General to complement their work on performance information reporting.

Senior Ministers have high expectations of and rely on the Central Agencies to lead the wider State sector through a difficult period. There has been a strong focus on working with chief executives to improve State sector performance and strengthening the leadership of the State sector. This has been done in various ways, including closer involvement by chief executives in the preparation of budget advice through the Senior Executives group, and the development of a common performance improvement framework to pilot stage. Measurement of whether Central Agencies are adding value to State sector performance was done through a survey of State sector agency leaders, and feedback from Central Agency Ministers. Chief executives were interviewed in 2008 and feedback from chief executives has been positive on their greater involvement in system-wide issues, such as the Budget.

Maintaining and Monitoring the Quality of our Policy Advice#

The Treasury revised its Quality Standards for Policy Advice in 2008. The revised Standards (refer pages 116 and 117) have been used since then as the basis for measuring our performance. An external desktop quality review was commissioned in April 2009 to provide an independent assessment of performance against the Standards.

The objectives of the review were to:

• benchmark the quality of our written advice against the Quality Standards, as the basis for tracking progress over time
• follow through on our commitment to deliver high-quality policy advice, and to report on our performance in the Annual Report 2009, and
• foster “continuous improvement” in our performance: the external review would help in building a picture of the quality of our advice allowing us to learn from our successes, and identifying areas for future improvements.

Key Findings#

Fifteen streams of policy advice were reviewed. All were rated as being “satisfactory” or better.

In the opinion of the reviewer, the Treasury's advice displayed the following strengths:

• A breadth of institutional knowledge in many areas of policy and spending.
• A robust approach to identifying and defining problems and issues.
• Advice was contextualised with strong understanding about the role of the Minister of Finance, the Government and the processes of government.
• Advice was supported by analysis, clear reasoning and evidence.
• Advice was communicated concisely and clearly.
• A clear sense of the long-run consequences of current trends such as spending pressures or a continuing relative decline in New Zealand's productivity performance.

The reviewer identified that there was scope for lifting the quality of our advice by having greater emphasis on broader decision-making frameworks, a stronger results orientation, wider and more forward-looking approach to evidence and a greater emphasis on systemic factors and change management.

We are sharing the review findings with Treasury managers and teams, and working with them to address those areas identified as offering the greatest scope for lifting performance.

Organisational Development and Capability#

Our Organisational Strategic Direction - Progress with Stepping Up#

Our major change programme, Stepping Up, implemented in November 2006, involved a fundamental look at the Treasury's strategic direction, how we organise ourselves, how we operate and how we engage most effectively with stakeholders. The changes were driven by a desire to improve our effectiveness and efficiency - in order to increase our impact as an organisation. We decided to concentrate our efforts on a smaller set of strategic issues - those areas where we can have greatest influence and impact and increase our ability to help frame and shape the economic agenda.

During 2008/09 we continued to build on the progress made as a result of the Stepping Up changes. Significant early success, in terms of getting better at identifying our Minister's current and future needs and in having a strong results focus (having a clear focus on what is important across the organisation, and making sure that drives what we do on a day-by-day basis), was maintained and incrementally improved. In addition, as in 2007/08, we targeted change in four key areas: leadership and management; quality; strategic policy leadership; and external engagement.

Leadership and Management Development#

During 2008/09 we invested significant effort to create developmental strategies designed to lift management and leadership capability. We continued to roll out the Lominger competency framework (initiated in 2007/08 with the development of role profiles for deputy secretaries and assistant secretaries) with the development of role profiles for managers. In addition, managers received 360° feedback based on their performance relative to these role profiles as a mechanism for establishing individual development plans. Individual plans have included development options such as secondments, greater use of on-the-job training, peer review and one-on-one coaching for specific skill gaps. Creating competency role profiles and the 360° feedback process will be further cascaded throughout the organisation over the next couple of years.

In reflecting on the implications of changes to our external environment, new ministerial expectations and what this means for Treasury roles, and the extent of progress made towards Stepping Up objectives, the Secretary also initiated a review of the Treasury's leadership to ensure that the Treasury is positioned to meet the challenges we face. The review aims to conclude in September 2009 and any changes will be implemented in 2009/10.

Quality#

Ensuring consistent quality in both policy advice and operations is key to maximising our impact as an organisation. In 2007/08 we rolled out a revised and updated Quality Standards for Policy Advice. The new Standards were published in the Statement of Intent 2008-13. In 2008/09 we undertook an external review of a selection of our written advice in order to formally assess our performance against the Quality Standards - for a discussion of the findings of this review see page 29. We also conducted two internal reviews of specific pieces of work undertaken during the year. These helped identify specific lessons as well as foster a culture of continuous improvement. The focus for the future will be to use the learning from the internal and external quality reviews to further develop the expertise, tools and systems we need to deliver the best advice to Ministers that we can.

Strategic Policy Leadership#

The focus of the Treasury's strategic policy leadership efforts in 2008/09 was around post-election preparedness and advice to the incoming Government. We finalised and delivered briefing papers “Guide to the Treasury”, “Responding to Your Priorities” and “Medium-term Economic Challenges”. These were used to frame early conversations on how the Treasury could best support the Minister and his staff to take forward the Government's economic priorities in the short term (first 100 days) andto develop a longer-term programme of action. A series of “hot-topic” briefings developed as part of the Post-election Preparedness (PEP) process were used extensively and successfully to provide more in-depth, issues-based advice for the Minister of Finance and other Ministers with economic portfolios. Investment we had made in 2007/08 in our Strategic Result Areas – International Connections, Long-term Fiscal Sustainability, Natural Resource Management and Skills – meant that we were well placed to deliver strategic post-election advice.

External Engagement#

Bringing a stronger external focus to our work has been a priority for the past couple of years. In the course of developing our post-election advice the Treasury engaged with a range of private sector stakeholders, which helped with the depth and rigour of our analysis. We have a continuing programme of engagement with individuals and groups from the private sector, which has ranged from addresses by Treasury leaders to sector conferences, to boardroom meetings with small groups of directors or law firm clients. They are important opportunities to provide input into the direction and tenor of debate, as well as hear from those operating at the cutting edge of the economy.

A number of key speeches were delivered by the Secretary to the Treasury during the 2008/09 year. These included his address to the February Jobs Summit, which underlined the need for new ideas and practical solutions to help New Zealand ride out the recession in the best possible shape. The Secretary's pre-Budget address to an audience of public sector leaders, analysts and market commentators gave a forthright and comprehensive account of the setting in which the Budget was framed, and was accordingly well received. So too was an outline of the Treasury's thinking on tax, delivered to the Tax Working Group in June. These are examples of the organisation engaging with key players, and informing the discussions that will help determine policy decision-making.

Value for Money and Organisational Efficiency#

Our organisation changed as a result of Stepping Up, and the Organisational Performance Group (OPG) needed to evolve with that to ensure that corporate support functions were well aligned with business priorities. During 2008 we reviewed OPG's performance, its configuration and its level of resourcing, and implemented changes during 2008/09. The objectives of the review were to ensure we had “back office” teams that were customer focused, operated efficiently, delivered value for money services and provided “joined-up” advice to the rest of the business that enabled quality decision-making. Key improvements in 2008/09 as a result of the OPG review include more integrated, higher-quality decision-support to senior managers, a number of initiatives to improve our customer focus (all OPG managers and staff participated in customer focus workshops) and the development of a results framework that improves our ability to deliver joined-up and seamless services to internal clients. The review also produced savings of $500,000 per annum through a reduction in back office resources. The quest for value for money and organisational efficiency is ongoing and we will continue to seek organisational efficiency improvements in the year ahead.

The OPG Review, in combination with work we had done to assess our internal capability to deliver on the priorities of an incoming Government, meant that the Treasury was well placed to respond to the Government's “Line-by-Line” Review. We provided an analysis of historical changes in our baseline and work programme and identified potential efficiency gains. As the primary driver of Treasury expenditure is related to policy tasks, we presented the Minister with a menu of options around policy advice he could purchase from the Treasury. This informed a subsequent budget initiative that used a combination of reprioritisation and new funding to address government priorities, especially in the areas of infrastructure, regulatory quality, State sector performance and value for money.

Our People#

The change in Government in November 2008 resulted in the Treasury being asked to focus on different priorities and also to undertake additional responsibilities (for example, the set up of the National Infrastructure Unit). To ensure we could deliver on these expectations we assessed our capability and identified current capability strengths and gaps. These findings are informing our recruitment and development strategies for 2009/10 to ensure we have the right capability in place at the right time. Following on from this, we have also begun to develop a three- to five-year people strategy to ensure the Treasury has the robust core capability we need to deliver across all our roles over the medium term.

The Treasury employed 343 full-time equivalent employees (FTEs) at the end of June 2009. This included seven staff on secondment to other government agencies, three to Ministers' offices and three staff on secondment to international institutions.

We have continued our focus on being an employer of choice by ensuring our work environment, culture, policies and procedures are fair and equitable. We reviewed and updated our flexi-working arrangement policy and procedures in response to the changes in employment relations law in 2008. As a result we have seen an increase in requests for flexi-working arrangements which has contributed to the increase of part-time staff employed from 10.5% in 2007/08 to 13% in 2008/09.

Staff Experience#

The Treasury recognises that an engaged workforce contributes to quality productivity and retaining and attracting talent. At the end of 2008/09 we started our engagement programme with the launch of the Gallup Engagement Survey. The results and subsequent action plans will be delivered during 2009/10.

The average use of sick leave by Treasury staff increased from 4.19 days in 2007/08 to 4.48 days in 2008/09. Average annual leave balances increased by two days to 18.15 in 2008/09.

Staff Training and Experience#

As a knowledge-based organisation, our success in contributing to our outcomes depends on maintaining and developing a talented workforce and making full use of its experience and expertise.

During 2008/09 we delivered a range of development across the organisation including managers being able to complete a Diploma in Frontline Management run in-house; staff could attend a number of in-house courses ranging from cost-benefit analysis to effective writing skills to improved computer skills.

We recognised that the majority of development comes from actually doing the work, so as part of the Lominger framework we have started to place greater emphasis on on-the-job development through work allocation. Peer review groups have also been started to assist with on-the-job style development.

We also started to create Lominger competency role profiles for roles below managers (for example, senior analysts) to help identify critical skills gaps and create development plans that specifically address these gaps.

Vote Finance Output Class Performance#

Statement of Objectives and Service Performance Section 45A of the Public Finance Act 1989#

This section provides information about the outputs (services and activities) that the Treasury provided during the 2008/09 year.

Descriptions of the Treasury's nine output classes follow, along with some significant highlights of the 2008/09 year.

Through introducing results specification in all areas of our work, we are endeavouring to develop better measures of our performance.

Administration of Guarantees and Indemnities given by the Crown PLA#

Scope of Appropriation#

This appropriation is limited to expenses incurred in connection with administering of guarantees and indemnities given by the Crown, as authorised by section 65ZG of the Public Finance Act 1989.

Output Class Description#

This appropriation covers the expenses incurred in managing the Crown's interests in default events covered by the Crown Deposit Guarantee Scheme, the Crown Wholesale Guarantee Facility and NZECO.

Administering this appropriation involves the timely, effective and efficient management of any claims under the relevant schemes, consistent with policy objectives. This appropriation requires the active management of the Crown's interests in relation to defaults of specific institutions. The Treasury will also seek to achieve recovery of Crown interests in default and receivership processes to minimise long-run loss to the taxpayer.

Significant Work Completed During 2008/09#

• Development of payout processes.
• Management of the payout process for the two entities whose defaults triggered the Retail Deposits Guarantee.

This appropriation is incurred under permanent legislative authority.

Actual 2008/09 output class expenditure was $136,000 or 19% over Supplementary Estimates budgets owing to the unpredictable nature of these costs. The appropriation for this output class was increased by $730,000 in the Supplementary Estimates owing to establishment of the Deposit Guarantee Scheme in October 2008.    

Debt and Related Financial Asset Management (NZDMO)#

Scope of Appropriation#

Operational management of the Crown's sovereign-issued debt portfolio, associated financial investments (including departmental cash management) and lending and derivatives transactions with government-related entities.

Output Class Description#

The overall result in this area is effective and efficient debt and financial asset management. This includes issuing government bonds, Treasury Bills and Kiwi bonds, managing overall net cash flows and managing some of its interest-bearing assets within an appropriate risk management framework. The NZDMO also provides advice to the Government on the policy issues that have strategic importance to delivering these results.

Significant Work Completed During 2008/09#

• NZDMO's work during 2008/09 was dominated by the international financial markets crisis and the widening fiscal deficit position.
• During the year debt issuance was increased to its highest levels since 1991/92. Bonds issued under the domestic borrowing programme were increased twice from $3.4 billion (announced in Budget 2008) to $5.5 billion (by year end).
• A range of measures was introduced to support the increase in debt issuance, including increasing tender frequency from fortnightly to weekly, the introduction of tap tenders and reverse tap tenders and the introduction of a new long-dated bond.
• NZDMO also adopted a more proactive approach to investor relations and marketing. Relationships with the credit rating agencies were a particularly high priority in the face of the deteriorating fiscal position.
• Significant policy work included advice on the funding profile for the increase to the borrowing programme, and advice on the introduction of the Wholesale Guarantee Facility.
• In volatile market conditions, NZDMO achieved a record value-added result of $68 million for the tactical portfolio. This was driven by the flight to quality boosting demand for Crown securities, and an increase in both value and volume of foreign exchange risk management activity on behalf of clients. (The value-added figure is derived from NZDMO's management reporting, which is calculated on a different basis from the financial statement reporting.)
• Owing to extreme market volatility, portfolio risk increased significantly over the year. The average monthly VaR figure for the tactical portfolio in 2008/09 was $714,000. This is more than double the figure for last year, but remains well within the policy limit of $14 million. Further information on this is provided on pages 21 and 22.
• Market volatility also resulted in a number of instances where NZDMO exceeded its credit exposure limits, owing to exchange rate movements causing large fluctuations in asset valuations from day to day.
• No credit-related losses were realised - a notable result given credit market conditions during the year.
• NZDMO processed over 27,000 transactions, with total cash-related payments of around $290 billion.

Actual 2008/09 output class expenditure was $624,000 or 7% under Supplementary Estimates budgets owing to vacancies and cost savings.

The appropriation for this output class was increased by $337,000 in the Supplementary Estimates largely owing to a higher demand for Kiwi bonds, resulting in a corresponding increase in commissions to agents.

Policy Advice and Management: Macroeconomic#

Scope of Appropriation#

Provision of macroeconomic policy advice and management including budget management; macroeconomic, tax and fiscal forecasting; advice on fiscal policy and strategy; and fiscal reporting and departmental financial management controls including the development and application of generally accepted accounting practice to the Crown.

Output Class Description#

This class of outputs involves the provision of policy advice and services related to helping the Government maintain a stable and sustainable macroeconomic environment. Such an environment allows individuals, businesses and the Government to plan more effectively for the longer term, contributing to higher economic growth and higher living standards for New Zealanders.

By creating an appropriate environment for sustainable growth, macroeconomic performance is fundamental to all of the Government's policy objectives. Through the Budget process, the Treasury plays a key role in helping Ministers prioritise initiatives, ensuring that additional government spending is oriented towards achieving priorities through fiscally sustainable, value-for-money initiatives.

The Treasury focuses on areas where work is likely to have the greatest impact on the performance of the macroeconomy, and on supporting Ministers in their priority outcome areas. The performance of the State sector is also fundamental to achieving this outcome as public sector productivity and the spending path in key sectors such as health, education and welfare have significant impacts on the macroeconomic environment.

Significant Work Completed During 2008/09#

• The support and advice that the Treasury provided to the Minister of Finance assisted him to deliver a Budget $300 million less than the allowance in the 2008 BPS.
• An improved process was adopted to capture and report fiscal risks in Economic and Fiscal Updates.
• Delivered the BPS and FSR, including advice on the Government's response to the significantly deteriorating outlook.
• Developed the Government's response to the FEC inquiry into the future monetary policy framework.
• Completed the implementation of NZ IFRS, the basis for preparing the Financial Statements of the Government of New Zealand. In October 2008 we published the first set of audited annual financial statements under NZ IFRS and this has increased the quality and usefulness of government fiscal reporting.
• Produced the economic, tax and fiscal forecasts for the 2008 PREFU, December 2008 Economic and Fiscal Forecasts (EFF) and 2009 Budget Economic and Fiscal Update.We provided sufficient commentary to aid decision-making and enable stakeholders to understand the forecasts.
• Provided input into international and domestic accounting standard setting boards with new Treasury appointments to both the International Public Sector Accounting Standards Board (IPSASB) and the New Zealand Financial Reporting Standards Board (FRSB). These appointments support these boards in producing reporting standards that are “fit for purpose” (with particular regard to public benefit entities).
• Provided monthly and weekly Economic Updates for the Minister of Finance.
• Provided commentaries and previews on key data releases for the Minister of Finance.
• Organised and hosted the IMF Article IV visit to New Zealand, and contributed to the IMF's Article IV report on New Zealand.
• Provided macro and fiscal input into the annual visits of Moody's Investor Services, Standard & Poor's and Fitch rating agencies which saw New Zealand's sovereign ratings remain unchanged for Moody's and Standard & Poors, but put on negative outlook for Fitch.

Actual 2008/09 output class expenditure was $381,000 or 3% under Supplementary Estimates budgets owing to vacancies.

The appropriation for this output class was increased by $1,000 in the Supplementary Estimates owing to minor forecasting changes  

Crown Deposit Guarantee Scheme#

Scope of Appropriation#

This appropriation is limited to the implementation and operation of the Crown Deposit Guarantee Scheme excluding expenses incurred in connection with administering claims under a guarantee or indemnity given under the Scheme.

Output Class Description#

This class of outputs involves the provision of policy advice to Ministers and the management of operations to establish and monitor guarantees. Policy advice includes recommendations on responses in the event of financial system instability or the failure of a systemic institution and advice on options for the transition and exit from the current retail deposit guarantee. Operational processes are focused on the establishment of risk monitoring processes to actively manage the Crown's interests in guaranteed entities and planning for default events. The central objective is to maintain depositor confidence in New Zealand's financial system.

This work will require ongoing monitoring of financial stability and liquidity and reporting to Ministers to ensure that they are well-appraised of developments in credit conditions and financial stability and their significance.

Significant Work Completed During 2008/09#

• Set up the Crown Deposit Guarantee Scheme.
• Established deeds of guarantee for retail deposit institutions.
• Established a risk monitoring process for retail institutions.
• Established a fee management process.

This output class belongs to a multi-output class appropriation.

Actual 2008/09 output class expenditure was $236,000 or 14.2% under Supplementary Estimates budgets owing to part-year vacancies during the establishment of the scheme and some cost savings identified.

The appropriation for this output class was increased by $1,661,000 in the Supplementary Estimates owing to establishment of the scheme in October 2008.

Crown Wholesale Guarantee Facility#

Scope of Appropriation#

This appropriation is limited to the implementation and operation of the Crown Wholesale Guarantee Facility.

Output Class Description#

This class of outputs involves the provision of policy advice to Ministers and the establishment of guarantees to facilitate the access of investment grade financial institutions to international financial markets. The central objective is to ensure a stable and liquid financial system that supports economic growth.

This work requires ongoing monitoring of the state of the economy and reporting to Ministers to ensure that they are well-appraised of developments in credit conditions and financial stability. It also includes monitoring of eligible financial institutions to minimise Crown exposure, developing options for responding to systemic financial risk and developing contingency measures should credit/liquidity conditions worsen.

Significant Work Completed During 2008/09#

• Established processes for the Crown Wholesale Guarantee Facility.
• Set up the required risk assessment processes to be applied before any wholesale issuance is guaranteed.
• Established a fee management process for wholesale facility fees.

This output class belongs to a multi-output class appropriation.

Actual 2008/09 output class expenditure was $1,029,000 or 55% under Supplementary Estimates budgets owing to part-year vacancies during the establishment of the facility and some cost savings identified.

The appropriation for this output class was increased by $1,878,000 in the Supplementary Estimates owing to establishment of the facility in November 2008.    

Management of Liabilities, Claims Against the Crown and Crown Properties#

Scope of Appropriation#

Management of contractual or Treaty of Waitangi-related claims against the Crown and the management of New Zealand House, London.

Output Class Description#

This class of outputs involves managing a range of commercial, contractual, legal and Treaty of Waitangi-related claims against the Crown. In practice, these are often relatively small, ongoing issues of a commercial nature, and the result we are seeking in relation to each usually relates to ensuring the appropriate protection of Crown interests in an efficient manner within the context of broader government objectives. In many cases, the Treasury contracts with third parties for the delivery of specific outputs.

Specific outputs include:

• Protect the Crown's cash flows and minimise the Crown's exposure to any litigation related to the 1973 Maui Gas Contract.
• Achieve efficient management of the Crown's liability arising from holding its geothermal assets, and transfer or disposal of these assets in Treaty settlements or by sale as appropriate.
• Discharge the Crown's obligations under the SOE Act 1986 to transfer legal land titles to SOEs as efficiently as possible.
• Achieve durable Treaty settlements at the lowest long-run fiscal and economic cost.
• Efficient and effective defence of building weather-tightness claims against the Crown, related to the Building Industry Association's regulation of the building industry.

Significant Work Completed During 2008/09#

• Undertook ongoing management of the transfer of legal titles to SOEs and of the Crown's day-to-day contractual obligations.
• Provided advice on the following Treaty settlement proposals: Tūranganui-a-Kiwa (Gisborne), Ngāti Apa, Ngāti Kahu, Ngāti Porou, Te Tau Ihu, Te Hiku (Far North), Ngāti Pahauwera, Waikato-Tainui River, Ngāti Manawa, Ngāti Makino, Waitaha, Central North Island Forest, Te Roroa, Taranaki Whānui ki te Upoko o te Ika, Ngāi Tūhoe, Ngāti Whare. Progressed arrangements regarding the CNI collective settlement (including commercial discovery process, establishment of Central North Island (CNI) Holdings Ltd and iwi governance entities) for transfer of forest assets on 1 July 2009.
• Provided advice to Ministers on the implications of financial and commercial redress proposals and undertook analysis of overall fiscal trends and implications for settling remaining Treaty claims by 31 December 2014.
• Provided advice on various aspects of Rugby New Zealand 2011 Limited (RNZ 2011), including advice on Eden Park funding issues, variations to the Shareholders Agreement, the tournament budget for the 2011 Rugby World Cup.
• Undertook ongoing management of day-to-day contractual obligations regarding the 1973 Maui Gas Contract. Specific work this year included management of allocation disputes.
• Provided ongoing advice on debt restructuring options for Taitokerau Forests Limited.

This output class belongs to a multi-output class appropriation.

Actual 2008/09 output class expenditure was $231,000 or 8% over Supplementary Estimates budgets owing to increased work in this area such as Maui Gas margin disputes and Terralink as well as increased external costs in relation to the transfer of legal land titles to SOEs and Treaty settlements.

The appropriation for this output class was decreased by $3,046,000 in the Supplementary Estimates largely owing to the return to the Crown of $3 million for the management of litigation against the former Building Industry Authority, relating to the weather-tightness of homes.

New Zealand Export Credit Office (NZECO)#

Scope of Appropriation#

Implementation of the Government's Export Credit Guarantees policy and operation of NZECO.

Output Class Description#

This class of outputs involves the provision of export credit guarantees and managing and operating NZECO in accordance with the delegated authority from the Minister of Finance. Outputs contribute to greater export activity within the bounds of the Government’s financial risk parameters set out in the Delegation.

Specific outputs include:

• Providing export credit insurance, bonding and working capital products to exporters. Annual performance targets for NZECO's portfolio of products are set out in the NZECO SOI.

Significant Work Completed During 2008/09#

• Introduction, implementation and delivery of the short-term trade credit guarantee to address gaps in the provision of short-term trade credit insurance (and finance) in response to the global financial crisis.
• Increased education to exporters, financiers and industry organisations (both government and non-government) regarding the availability of NZECO guarantees to address key risks associated with non-payment by overseas buyers, and to provide overseas buyers with innovative solutions to exploit trade opportunities.
• Increased utilisation of NZECO guarantees by exporters and banks, with actual exposures increasing from $37 million to $155 million, supporting exports totalling $382 million.
• Achieved the 2008/09 operational targets agreed with the Minister.

This output class belongs to a multi-output class appropriation.

Actual 2008/09 output class expenditure was $358,000 or 16% under Supplementary Estimates budgets owing to less demand than anticipated for contract bond products in the 2008/09 year.

The appropriation for this output class was increased by $683,000 in the Supplementary Estimates largely owing to the establishment of the ST-TCG scheme.

Policy Advice: Economic Performance#

Scope of Appropriation#

Policy advice on the Government's economic strategy and policy settings and their effect on New Zealand's economic growth.

Output Class Description#

This class of outputs involves the provision of policy advice and services relating to helping the Government to improve New Zealand's economic performance. This includes helping Ministers, the Government and State agencies understand policies that are important for economic growth and the connections between overall economic performance and other desired outcomes when developing strategies and evaluating intervention options.

The Treasury works alongside other government agencies, such as MED, to achieve this outcome.

The advice the Treasury provided included:

• analysis and advice to Ministers on broad economic strategies to promote economic growth and their impact on living standards
• analysis of the drivers of productivity growth and advice to Ministers on the policies, regulations and institutional arrangements that best achieve improved overall economic performance, and
• advice on trade-offs between these and other government outcomes.

Raising New Zealand's productivity performance is crucial for a better standard of living, and relies on better use of the country's capital, skills and international connections. Consistent with our objectives, we are seeking to achieve higher GDP per capita, higher productivity and higher living standards. Two of the four strategic result areas (SRAs) set out in the SOI 2008-13 fall under the Economic Performance outcome and its associated class of outputs. These are:

• Strengthening international connections, and
• Sustainable use of natural resources.

The Skills SRA, which also significantly affects economic performance, is allocated to the State Sector Performance outcome and its associated class of outputs in this plan.

Beyond the focus on SRAs, we have prioritised advice on the following specific policy areas which have a significant and pervasive impact on New Zealand's economic performance:

• productivity
• financial markets, investment and savings
• competition and regulatory frameworks
• tax policy
• infrastructure - including transport and telecommunications, and
• innovation.

Significant Work Completed During 2008/09#

• Advice to Ministers on:
  • the reform of the Resource Management Act 1991 and other natural resource management policies
  • medium-term economic and fiscal policy options, implementing a productivity-focused economic agenda and options for a New Zealand Productivity Commission-style institution
  • the direction of innovation policy including structures, governance, funding incentives and assessment of the research and development tax credit
  • SEM initiatives: double-tax agreement, pension portability, CER investment protocol
  • options for change to the overseas investment regime: delegations, regulations, fees and initial work on a legislative review, and
  • medium-term tax reform issues and options, changes to the international tax regime and various other tax issues.
• Published a productivity paper on “International Connections and Productivity: Making Globalisation Work for New Zealand”.
• Provided advice and support to Ministers regarding the Government's response to the financial crisis. This included measures to give depositors confidence in New Zealand's financial system (Crown Deposit Guarantee Scheme) and to enable New Zealand institutions to access wholesale funding markets (Crown Wholesale Guarantee Facility), providing support to the Job Summit and developing a package of measures to assist business through the financial crisis.
• Established and serviced the Regulatory Responsibility Taskforce, coordinated the Government's regulatory review agenda, which comprises reviews of 13 major and pervasive regulatory regimes, and provided advice on regulatory quality management, including measures to improve regulatory quality.
• Established RIAT to independently assess the quality of regulatory impact analyses and regulatory impact statements for significant regulatory proposals.
• Established the National Infrastructure Unit to assist the Government in developing an infrastructure programme that is both strategically sound and helps build a more competitive, more productive economy.
• Advised the Minister on climate change issues, including the economic impact of a range of target levels for reducing greenhouse gas emission levels relative to other countries; and options regarding an Emissions Trading Scheme.

This output class belongs to a multi-output class appropriation.

Actual 2008/09 output class expenditure was $142,000 or 1% under Supplementary Estimates budgets owing to vacancies and cost savings.

The appropriation for this output class was increased by $520,000 in the Supplementary Estimates to enable the Treasury to perform the Regulatory Impact Analysis function and to take on strategic leadership of the regulatory quality assurance system.

Policy Advice: State Sector Performance#

Scope of Appropriation#

Policy advice on the effective and efficient use of State resources including improved decision-making and performance management systems and the efficient management of Crown assets.

Output Class Description#

This class of outputs involves the provision of policy advice related to ensuring the work of the State sector represents value for money in achieving the Government's aims and objectives. This includes advice on:

• enhancing economic growth and living standards by lifting the standard and utilisation of New Zealand's collective skill base
• fiscal and financial management of all government agencies
• specific agency or entity performance, including Crown entities, Crown companies, CFIs and SOEs
• in-depth performance analysis of priority agencies or sectors, and
• the overall performance of the public management system including thematic and cross-cutting analysis, eg, CAM, State sector remuneration, Crown entity monitoring.

For all departments and Votes, Treasury advice and services included:

• management of core government Budget processes
• efficient support of good financial management and probity within agencies, and
• maintaining an informed overview to foresee significant emerging financial or performance risks.

The Treasury differentiates the level of advice and service routinely provided on, or to, different government agencies and sectors. Priority is given to agencies and sectors that offer significant gains in terms of State sector performance, fiscal management or economic performance. For these sectors and agencies, Treasury advice extends to in-depth performance analysis, including a focus on the most efficient and effective policies, regulation, administration and delivery to achieve the Government's aims and objectives. Priority sectors and agencies for 2008/09 were:

• health
• justice
• defence and security
• the benefit system
• Central Agency performance
• CFIs, and
• transport, competition and regulatory policy and management of natural resources.

Empirical and analytical research is undertaken as required to inform policy advice.

Significant Work Completed During 2008/09#

• Provided advice on the direction and approach for developing the Youth Guarantee and tertiary work programmes.
• Provided modelling of the skill levels we need to increase economic growth, the likely future skills gaps and options for addressing them.
• Advice on the justice sector volumes forecast and cost of meeting capacity requests.
• The Defence Review includes consideration of the economic and fiscal context.
• Development of the Performance Improvement Actions (PIAs) programme. In particular, we delivered a series of reports and briefings for the Minister on State sector value for money. These resulted in the development of the PIA programme which was approved and implemented by the ECC. The PIA programme has resulted in specific PIAs being generated by State sector agencies, with key agencies reporting regularly to ECC as well as six-monthly and annual reporting of performance by the Treasury.
• Expectations for pay and employment conditions in the State sector set within the fiscal and economic contexts and advice to SSER was coordinated with SSC which has resulted in clearer messaging to departments on their responsibilities in negotiating within the expectations, contributed to lowered demand for capability bids in Budget 2009 and ensured that Ministers are positioned for setting high-level messages on salaries and conditions.
• Worked in collaboration with SSC and DPMC to advance the Performance Information Framework (PIF) programme to drive performance improvement across State services through the use of a single comprehensive way of looking at performance, indicators of what constitutes good performance, greater consistency in performance evaluation and identifying actions to improve that performance. This programme included the completion of a pilot project.
• Prepared reports on the financial performance of the CFIs, including advice on the appointment of directors to the boards of certain institutions.
• Through its CAM change management project, the Treasury continued to foster improvements in asset management in capital intensive agencies by, for example:
  • reating visibility over the long-term capital spending intentions of 15 capital intensive departments and Crown entities over a 10-year horizon to assist budget strategy processes
  • promulgating best practices and asset management leadership, and
  • providing a regular forum to promote the sharing of knowledge and expertise on asset management issues.

This output class belongs to a multi-output class appropriation.

Actual 2008/09 output class expenditure was $165,000 or 1% over Supplementary Estimates budgets owing to vacancies and cost savings.

The appropriation for this output class was decreased by $1,221,000 in the Supplementary Estimates largely owing to changes in forecast assumptions.  

Ministerial Servicing Performance 2008/09#

Following the 2008 General Election, the Treasury acquired new responsibilities for servicing the Minister for Regulatory Reform and the Minister for Infrastructure. The additional volumes of correspondence and servicing requirements impacted on the ability of the Treasury to meet performance expectations. Following successful integration of new responsibilities, the performance of Ministerial servicing has improved. With agreement of the Office of the Minister of Finance, answers to 25 parliamentary questions were delivered late, one day after the formal deadline. In addition, the Treasury has responded to a large number of public enquiries about the operation of the Deposit Guarantee Scheme, introduced in 2008. While these enquiries have been handled by resources allocated to Ministerial servicing, they are not included in the figures for Ministerial servicing.

The category Policy Advice: Economic Performance also includes the three output classes added during 2008/09.

Crown Company Monitoring Advisory Unit (CCMAU)#

Executive Summary#

During 2008/09, CCMAU maintained its role in the ownership monitoring of the wide range of SOEs, Crown companies and entities in its portfolio. The performance of these companies and entities, which form a significant part of the Crown's balance sheet, is critical to the performance of the wider economy.

We have been involved in assessing and advising shareholding Ministers on a wide range of matters this year. Many of these matters have involved important ownership and performance monitoring issues.

CCMAU was closely involved in advising Ministers on the actions they could take to enhance SOE performance. This led to SOEs being expected to produce much more informative Statements of Corporate Intent (SCIs) with more demanding financial targets, higher and more predictable dividend yield and more transparent commercial valuations.

CCMAU's Science and Innovation Team evaluated the business case that resulted in the merger of Crop & Food Research and HortResearch.

Our Appointments and Governance Team contributed actively to the significant changes that the new Government made to SOE and Crown Research Institute (CRI) boards in the second half of the year. CCMAU's relationship with Massey University's Graduate School of Business, our governance training provider, continued to evolve and, based on the feedback we have received, the suite of programmes provided is highly regarded. In March 2009, we launched our new online board and candidate management system (accessible at www.boardappointments.co.nz).

We have enjoyed a stable workforce this year which enabled us to ensure Ministers' expectations continued to be met. The skills and experience of CCMAU's staff have enabled us to respond positively to the revised expectations of our key stakeholders.

CCMAU is well placed to build on current expertise to more effectively contribute to the greater emphasis on financial analysis and disclosure of performance information sought by the Government.

What we do#

Our Mission

CCMAU aims to be the New Zealand Government's ownership advisor of choice in the provision of commercial and wider ownership advice.

Our Purpose

CCMAU provides services in the following areas:

• Ownership environment management - maintaining a strategic perspective over the ownership environment and assisting Ministers to improve the clarity and awareness of the owner's expectations with a focus on performance.
• Performance monitoring - increasing the evaluation of performance against agreed targets and external measures and, where necessary, advising Ministers on actions they can take (or are being taken by the companies and entities themselves) to address performance that is below expectations.
• Issues management - assisting Ministers to respond to correspondence, parliamentary questions and Official Information Act requests, and ensuring the companies and entities take responsibility for managing issues that could impact on their performance.
• Governance - identifying and screening potential directors, managing the board appointment process and director fee-setting in the context of desired ownership outcomes and taking a leading role in ensuring best practice corporate governance of SOEs, CRIs and Crown companies and entities is achieved.

Relationship with the Treasury

The Executive Director of CCMAU is directly accountable to the Secretary to the Treasury for the Crown's investment in CCMAU, and for CCMAU's performance in providing the output classes Ministers seek.

The Year in Review

CCMAU has contributed to a wide range of activities and initiatives this year. The key achievements in each sector were:

Maintaining and Developing Capability#

The skills and experience of CCMAU's staff are vital determinants of the quality of the outputs produced. The average length of service of CCMAU staff has gradually increased over the past five years and staff turnover is at an all-time low.

CCMAU is committed to ensuring that staff are fully equipped to meet Ministers' expectations. During the year we maintained our commitment to staff training and development, and reviewed our staff policies to ensure that they are consistent with those of the Treasury.

CCMAU has continued to benefit from its leadership role in the international network of ownership monitoring agencies it helped establish. Equally, opportunities to learn from how other jurisdictions manage their Crown companies and entities have arisen during the year and were taken up.

Over the past five years, measures of staff statistics and satisfaction have been as follows:

Ministerial servicing#

As part of its outputs, CCMAU drafts replies to parliamentary questions, Ministerial correspondence and Official Information Act requests. The estimated draft replies are based on previous years' activity. Although volumes were generally at or below estimated levels, CCMAU completed virtually all of its draft replies within agreed deadlines.

Murray Wright

Executive Director

CCMAU Output Class Performance#

Statement of Objectives and Service Performance Section 45A of the Public Finance Act 1989

Vote Crown Research Institutes#

Crown company monitoring advice to the Minister of Research, Science and Technology (RS&T) and Minister for Economic Development.

This appropriation is limited to provision by CCMAU of ownership monitoring advice to, and management of issues on behalf of, the Minister of RS&T and the Minister for Economic Development in respect of the Ministers' responsibilities as shareholders in CRIs, REANNZ and NZVIF.[12]

Output Class Description

This output includes:

• advising the Minister of RS&T, the Minister for Economic Development and the Minister for SOEs on the strategic direction of CRIs, REANNZ, NZVIF and NZFF Fund respectively and the commercial and fiscal risks associated with Crown ownership
• providing advice that assists the Minister of RS&T, Minister for Economic Development and the Minister for SOEs to set ownership objectives and targets for CRIs, REANNZ, NZVIF and NZFF Fund
• advising the Minister of RS&T, Minister for Economic Development and the Minister for SOEs on the performance of CRIs, REANNZ, NZVIF and NZFF Fund against these objectives and targets
• advising the Minister for SOEs on the establishment and disestablishment of NZFF Fund
• providing policy advice on, and managing issues arising from, the ownership of CRIs, REANNZ, NZVIF and NZFF Fund including residual implementation issues
• managing, on behalf of the responsible Ministers, the appointment of CRI, REANNZ, NZVIF and NZFF Fund directors and monitoring the performance of those directors and boards, and
• assisting the responsible Minister in the formulation of shareholders' expectations in relation to the governance practices and structures companies adopt.

Maintaining and enhancing the Crown's ownership interest in these companies contributes to the efficient management of the Crown's assets and liabilities. The CRIs, NZVIF, REANNZ and NZFF Fund have an important role to play in the New Zealand innovation system, thereby contributing to improving New Zealand's overall economic performance.

Significant Work Completed During 2008/09

• Analysed and reported on each company's draft SCI/SOI and Strategic Plan so that shareholding Ministers were able to provide informed advice to boards.
• Completed quarterly performance reports for the June, September, December and March quarters, which were presented to Cabinet.
• Contributed to the 2009 Outline of Shareholder Expectations for CRIs and outlook letters (letters of expectations) for the CRIs and NZVIF.
• Provided a briefing to the incoming Minister of RS&T.
• Managed various company issues, and provided advice to Ministers on such issues.
• Continued to take a lead agency role in the International Network of Government Ownership Agencies (INGOA), including organising and chairing the annual meeting of members in October 2008.
• Hosted three core training programmes for recently appointed or aspiring directors.
• Hosted six professional development updates for existing Crown directors (two series of three workshops on board evaluation and governance in an economic downturn).
• Hosted a one‐day induction seminar for new CRI directors.
• Commissioned a new director appointment and board management database.
• Managed expressions of interest from candidates wishing to be considered for Crown governance roles.
• Continued to provide assistance to other agencies regarding nominations.
• Provided advice to Ministers on a number of appointments and governance issues, including:
  • the 2008/09 CRI appointment round, and
  • the level of director fees for 2008/09.

Actual 2008/09 output class expenditure was $77,000 or 7% under Supplementary Estimates budgets.

Vote State-Owned Enterprises#

Crown company monitoring advice to the Minister for State-Owned Enterprises and other responsible Ministers.

This appropriation is limited to provision by CCMAU of ownership monitoring advice to, and management of issues on behalf of, the Minister for SOEs and other responsible Ministers in respect of the Ministers’ shareholder responsibilities.

Output Class Description#

This output includes:

• advising the Minister for SOEs and other responsible Ministers on the strategic direction of SOEs; the commercial and fiscal risks associated with Crown ownership; proposals to establish and restructure SOEs; and the processes and outcomes of significant SOE divestments and acquisitions
• providing advice which assists Ministers to set ownership objectives and targets for SOEs
• monitoring and advising Ministers of SOEs' performance against these objectives and targets
• providing policy advice on, and managing issues arising out of, the ownership of SOEs, including residual implementation issues
• managing, on behalf of responsible Ministers, the appointment of SOE directors and monitoring the performance of those directors and boards, and
• assisting responsible Ministers in the formulation of shareholders' expectations in relation to the governance practices and structures companies adopt.

Maintaining and enhancing the Crown's ownership interest in these entities contributes to the efficient management of the Crown's assets and liabilities.

Significant Work Completed During 2008/09#

• Analysed and reported on each company's draft SCI/SOI and Business Plan so that shareholding Ministers were able to communicate informed expectations to boards.
• Completed quarterly performance reports for the June, September, December and March quarters, which were presented to Cabinet.
• Provided a briefing to the incoming Minister for SOEs (and other responsible Ministers).
• Provided advice on the Government's response to the Commerce Select Committee's report on “Inquiry into Valuation Methodology and Practice for Valuing State-Owned Enterprises”.
• Provided advice on actions to enhance SOE performance and a proposed framework for engagement during the 2009 business planning round.
• Received notification of various company issues and provided advice to Ministers on such issues.
• Continued to take a lead agency role in the INGOA, including organising and chairing the annual meeting of members in October.
• Hosted three core training programmes for recently appointed or aspiring directors.
• Hosted six professional director updates for existing Crown directors (two series of three workshops on board evaluation and governance in an economic downturn).
• Hosted a one‐day induction seminar for new SOE directors.
• Commissioned a new director appointment and board management database.
• Managed expressions of interest from candidates wishing to be considered for Crown governance roles.
• Continued to provide assistance to other agencies regarding nominations.
• Provided advice to Ministers on a number of appointments and governance issues, including:
  • the 2008/09 appointment rounds, and
  • the level of director fees for 2008/09.

Actual 2008/09 output class expenditure was $51,000 or 2% under Supplementary Estimates budgets.

The appropriation for this output class was increased by $100,000 in the Supplementary Estimates to cover the cost of monitoring an expanded New Zealand Railways Corporation (following the acquisition of KiwiRail).

Statement of Responsibility#

Pursuant to sections 45 and 45C of the Public Finance Act 1989, the Secretary to the Treasury is responsible for the preparation of the Department's financial statements and non-departmental supplementary schedules, and the judgements made in the process of producing these financial statements and supplementary schedules.

The Department's internal control procedures provide reasonable assurance as to the integrity and reliability of its financial reporting.

In the opinion of the Secretary to the Treasury:

• The Department's financial statements and statements of service performance fairly reflect its financial position and operations for the financial year ended 30 June 2009.
• The supplementary schedules fairly reflect the assets, liabilities, contingencies and commitments managed by the Treasury on behalf of the Crown as at 30 June 2009 and revenues and expenses managed by the Treasury on behalf of the Crown for the year ended on that date.

  

  John Whitehead
  Secretary to the Treasury

  30 September 2009

  

  Kathryn McBride
  Acting Chief Financial Officer
  (countersigned)

  30 September 2009

  

  Philip Combes
  Treasurer - NZDMO
  (countersigned)

  30 September 2009

  Financial Statements – Departmental#

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  Overview of Departmental Financial Results#

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  for the year ended 30 June 2009

  The following significant movements in actual results between the 2008/09 and 2007/08 years, and actual results against the 2008/09 Supplementary Estimates budget, are explained below:

  Overview of Departmental Financial Results

  2008 Actual $000		2009 Actual $000	2009 Supp. Estimates $000
  	Revenue
  55,893	Crown	59,687	62,108
  	Expenses
  38,489	Personnel	40,887	41,704
  	Current Assets
  1,650	Accounts receivable	627	510
  	Non-current Assets
  4,734	Property, plant and equipment	4,604	4,800
  571	Intangible assets	718	799
  	Current Liabilities
  5,085	Creditors and other payables	5,239	4,450
  4,768	Provision for employee entitlements	4,542	5,053
  	Non-current Liabilities
  223	Provision for employee entitlements	1,151	230

  Significant Movements Between 2007/08 and 2008/09

  Revenue Crown for departmental outputs increased by $3.8 million, mainly owing to an underspend of $0.6 million in 2007/08 and increased funding for the Crown Deposit Guarantee Scheme, Wholesale Funding Guarantee Facility and NZECO for 2008/09.

  Personnel increased by $2.4 million mainly owing to market or performance increases in salaries and growth in annual leave liability.

  Accounts receivable has decreased by $1 million mainly owing to 2007/08 recovery of costs from other departments for work undertaken by the Treasury on the Central North Island settlement and climate change programmes.

  Provision for employee entitlements current and non-current have moved between these categories by $0.9 million owing to the change in the actuarial methodology and assumptions used across the public sector. In addition, annual leave provision included within the provision for employee entitlements current, increased owing to higher average staff numbers.

  Significant Variances Between 2008/09 Actuals and Supplementary Estimates Budget

  Revenue Crown for departmental outputs decreased by $2.4 million, mainly owing to less demand for the Wholesale Funding Guarantee Facility, NZECO Bonds and New Zealand government bond products than originally forecast.

  Creditors and other payables have increased by $0.8 million primarily owing to ongoing rent review negotiations.

  Statement of Financial Performance#

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  for the year ended 30 June 2009

  The Statement of Financial Performance details the revenue and expenses relating to all outputs (goods and services) produced by the Department, including CCMAU, during the financial year ended 30 June 2009. Total expenses equals total departmental output classes expenditure and appropriations in the Statement of Expenditure and Appropriations on page 72.

  Statement of Financial Performance

  2008 Actual $000		Notes	2009 Actual $000	2009 Main Estimates $000	2009 Supp. Estimates $000
  	Revenue
  55,893	Revenue Crown	2	59,687	60,467	62,108
  1,078	Revenue other	3	1,109	1,054	1,054
  56,971			60,796	61,521	63,162
  	Expenses
  38,489	Personnel	4	40,887	39,758	41,704
  14,612	Operating	5	15,737	16,884	16,756
  1,968	Consultants		2,037	2,488	2,471
  1,185	Depreciation	7	1,341	1,441	1,359
  148	Amortisation	8	270	429	351
  569	Capital charge	6	524	521	521
  56,971			60,796	61,521	63,162
  -	Net Surplus		-	-	-

  Explanations of significant variances against budget are detailed in the Overview of Departmental Financial Results on page 64.

  The accompanying accounting policies and notes form part of these financial statements.

  Statement of Movements in Taxpayers' Funds#

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  for the year ended 30 June 2009

  The Statement of Movements in Taxpayers' Funds combines information about the net surplus with other aspects of the financial performance of the Department, including CCMAU, to give a measure of comprehensive income.

  Statement of Movements in Taxpayers' Funds

  2008 Actual $000		2009 Actual $000	2009 Main Estimates $000	2009 Supp. Estimates $000
  7,840	Taxpayers' funds at the beginning of the year	7,240	7,240	7,240
  	Movements during the year
  -	Net surplus	-	-	-
  7,840	Total Recognised Revenue and Expenses for the Year	7,240	7,240	7,240
  -	Capital contributions from the Crown	308	-	308
  (600)	Capital withdrawal repaid to the Crown	(600)	(600)	(600)
  7,240	Taxpayers' Funds at the End of the Year	6,948	6,640	6,948

  The accompanying accounting policies and notes form part of these financial statements.

  Statement of Financial Position#

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  as at 30 June 2009

  The Statement of Financial Position reports the total assets and liabilities of the Department, including CCMAU, as at 30 June 2009. Taxpayers' funds are represented by the difference between the assets and liabilities.

  Statement of Financial Position

  2008 Actual $000		Notes	2009 Actual $000	2009 Main Estimates $000	2009 Supp. Estimates $000
  	Taxpayers' Funds
  7,240	General funds		6,948	6,640	6,948
  7,240	Total Taxpayers' Funds		6,948	6,640	6,948
  	Represented by:
  	Assets
  	Current Assets
  3,614	Cash and bank balances		3,794	2,872	3,446
  505	Prepayments		439	468	430
  1,650	Accounts receivable		627	394	510
  6,244	Debtor - Crown		7,698	6,696	6,696
  12,013			12,558	10,430	11,082
  	Non-current Assets
  4,734	Property, plant and equipment	7	4,604	4,796	4,800
  571	Intangible assets	8	718	868	799
  5,305			5,322	5,664	5,599
  17,318	Total Assets		17,880	16,094	16,681
  	Less:
  	Liabilities
  	Current Liabilities
  5,085	Creditors and other payables	9	5,239	4,300	4,450
  4,768	Provision for employee entitlements	10	4,542	4,764	5,053
  2	Finance lease liability		-	-	-
  9,855			9,781	9,064	9,503
  	Non-current Liabilities
  223	Provision for employee entitlements	10	1,151	390	230
  223			1,151	390	230
  10,078	Total Liabilities		10,932	9,454	9,733
  7,240	Net Assets		6,948	6,640	6,948

  The accompanying accounting policies and notes form part of these financial statements.

  Statement of Cash Flows#

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  for the year ended 30 June 2009

  The Statement of Cash Flows summarises the cash movements in and out of the Department during the financial year. It takes no account of money owed to the Department or owing by the Department and therefore differs from the Statement of Financial Performance on page 65.

  Statement of Cash Flows

  2008 Actual $000		Notes	2009 Actual $000	2009 Main Estimates $000	2009 Supp. Estimates $000
  	Cash Flows from Operating Activities
  	Cash was provided from:
  55,320	Supply of outputs to the Crown		58,233	60,467	61,656
  1,050	Supply of outputs to third parties		1,097	1,084	1,086
  56,370			59,330	61,551	62,742
  	Cash was disbursed to:
  37,930	Personnel		40,184	36,721	38,993
  16,524	Operating		16,670	22,209	21,118
  569	Capital charge		524	521	521
  55,023			57,378	59,451	60,632
  1,347	Net Cash Flows from Operating Activities	11	1,952	2,100	2,110
  	Cash Flows from Investing Activities
  	Cash was provided from:
  1	Sale of property, plant and equipment		-	-	-
  1			-	-	-
  	Cash was disbursed to:
  (861)	Purchase of property, plant and equipment		(1,218)	(983)	(1,450)
  (210)	Purchase of intangible assets		(392)	(544)	(579)
  (1,071)			(1,610)	(1,527)	(2,029)
  (1,070)	Net Cash Flows from Investing Activities		(1,610)	(1,527)	(2,029)
  	Cash Flows from Financing Activities
  	Cash was provided from:
  -	Capital contribution		283	-	308
  41	Goods and services tax (net)		155	(50)	43
  41			438	(50)	351
  	Cash was disbursed to:
  (600)	Capital withdrawal		(600)	(600)	(600)
  (559)	Net Cash Flows from Financing Activities		(162)	(650)	(249)
  (282)	Net movement in cash and bank balances		180	(77)	(168)
  3,896	Cash and bank balances at the beginning of the year		3,614	2,949	3,614
  3,614	Cash and Bank Balances at the End of the Year		3,794	2,872	3,446

  The accompanying accounting policies and notes form part of these financial statements.

  Statement of Commitments#

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  as at 30 June 2009

  2008 Actual $000		2009 Actual $000
  	Capital Commitments
  576	Property, plant and equipment	-
  	Non-cancellable Operating Lease Commitments
  3,474	Not later than one year	3,450
  13,796	Later than one year and not later than five years	13,763
  13,875	Later than five years	10,434
  31,145	Total Non-cancellable Operating Lease Commitments	27,647
  	Other Non-cancellable Commitments
  575	Not later than one year	378
  34	Later than one year and not later than five years	-
  -	Later than five years	-
  609	Total Other Non-cancellable Commitments	378
  32,330	Total Commitments	28,025

  Capital Commitments#

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  There are no capital commitments for this year.

  Non-cancellable Operating Lease Commitments#

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  The Department has non-cancellable leases on its principal premises at No 1 The Terrace, Wellington (the Treasury) and Floor 2, No 3 The Terrace (CCMAU) until 2017. These operating lease commitments have been recorded at their gross values in the Statement of Commitments.

  Other Non-cancellable Commitments#

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  The Department has other operating commitments consisting of computer maintenance contracts, building services contracts and contracts for service.

  The accompanying accounting policies and notes form part of these financial statements.

  Statement of Contingent Liabilities and Contingent Assets#

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  as at 30 June 2009

  Unquantifiable Contingent Liabilities#

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  The Department has the following unquantifiable contingent liabilities:

  • Carpark licence (Pastoral House) - In relation to the one carpark leased by the Treasury at Pastoral House, the Crown indemnified AMP NZ Office Pastoral Ltd against certain damages or loss caused by our use of that carpark.
  • Carpark licence (No 3 The Terrace) - In relation to the eight carparks leased by the Treasury at No 3 The Terrace, the Crown indemnified AMP NZ Office 1 The Terrace Ltd against certain damages or loss caused by our use of those carparks.`
  • Deed of Lease (No 1 The Terrace) - In relation to the lease by the Treasury of levels 5-14, the basement and the sub-basement of the building at No 1 The Terrace, the Crown indemnified AMP NZ Office 1 The Terrace Ltd against certain damages or loss in relation to our lease of the premises.
  • Research in Motion Limited - In accordance with a delegation from the Minister of Finance dated 23 May 2005, the Treasury has granted an indemnity to Research in Motion Limited under a licence agreement for software used in conjunction with Blackberry mobile email devices, covering breach of the licence agreement, intellectual property rights, claims arising from incorrect use of the software, defamation type actions and breach of export restrictions.
  • Reuters Services Contract - The Treasury has indemnified Reuters Group PLC and its subsidiaries against any losses arising from the Treasury's use of certain Reuters services or arising from a breach of the Services Contract relating to the provision of financial information services. Further the Treasury indemnified Lipper (a Reuters company) in respect of third party copyright and intellectual property rights.

  Quantifiable Contingent Liabilities#

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  As at 30 June 2009, the Department had no quantifiable departmental contingent assets and liabilities (30 June 2008: nil).

  The accompanying accounting policies and notes form part of these financial statements.

  Departmental Capital Expenditure#

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  for the year ended 30 June 2009

  Departmental capital expenditure incurred in accordance with section 24 of the Public Finance Act 1989

  Departmental Capital Expenditure

  	2002 Actual $000	2003 Actual $000	2004 Actual $000	2005 Actual $000	2006 Actual $000	2007 Actual $000	2008 Actual $000	2009 Actual $000	2009 Main Estimates $000	2009 Supp. Estimates $000
  Property, Plant and Equipment
  Computer hardware	734	897	912	610	873	160	800	1,088	909	1,320
  Furniture and fittings	-	-	32	884	126	3	7	74	40	53
  Leasehold improvements	-	-	2,664	1,927	433	33	39	37	40	37
  Leased equipment	-	-	-	-	56	-	-	-	-	-
  Office machinery and electrical equipment	-	15	52	-	5	27	21	12	75	15
  Total Property, Plant and Equipment	734	912	3,660	3,421	1,493	223	867	1,211	1,064	1,425
  Intangibles
  Computer software - internally generated	-	-	-	-	-	295	195	-	244	-
  Computer software - other	634	9	16	-	278	17	15	500	300	579
  Total Intangibles	634	9	16	-	278	312	210	500	544	579
  Total Capital Expenditure	1,368	921	3,676	3,421	1,771	535	1,077	1,711	1,608	2,004

  The accompanying accounting policies and notes form part of these financial statements.

  Statement of Departmental Expenses and Capital Expenditure Against Appropriations#

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  for the year ended 30 June 2009

  The Statement of Expenditure and Appropriations details expenditure against appropriations. Total Departmental Output Classes Expenditure and Appropriations equals total expenses in the Statement of Financial Performance on page 65.

  Statement of Departmental Expenses and Capital Expenditure Against Appropriations

  2008 Actual $000		2009 Actual $000	2009 Main  Estimates $000	2009 Supp. Estimates $000
  	Vote Finance: Departmental Output Classes
  -	Administration of Guarantees and Indemnities given by the Crown[13]	866	-	730
  8,080	Debt and Related Financial Asset Management	8,714	9,001	9,338
  12,586	Policy Advice and Management: Macroeconomic	12,380	12,762	12,761
  	State Sector and Economic Performance Policy Advice and Management (multi-class output appropriation)
  -	Crown Deposit Guarantee Scheme	1,425	-	1,661
  -	Crown Wholesale Guarantee Facility	849	-	1,878
  2,901	Management of Liabilities, Claims against the Crown, Contractual Liabilities and Crown Properties	2,971	5,786	2,740
  1,209	New Zealand Export Office	1,919	1,594	2,277
  16,002	Policy Advice: Economic Performance	15,836	15,458	15,978
  12,492	Policy Advice: State Sector Performance	12,322	13,378	12,157
  32,604		35,322	36,216	36,691
  53,270	Total Vote Finance: Departmental Output Classes	57,282	57,979	59,520
  	Vote Crown Research Institutes: Departmental Output Classes
  1,062	Crown Company Monitoring Advice to the Minister for Crown Research Institutes, the Minister for Economic Development and the Minister for Research, Science and Technology	997	1,074	1,074
  	Vote State-Owned Enterprises: Departmental Output Classes
  2,639	Crown Company Monitoring Advice to the Minister for State-Owned Enterprises and Other Responsible Ministers	2,517	2,468	2,568
  56,971	Total Departmental Output Classes Expenditure and Appropriation	60,796	61,521	63,162
  	Capital Expenditure
  867	Property, plant and equipment	1,211	1,064	1,425
  210	Intangibles	500	544	579
  1,077	Total Departmental Capital Expenditure	1,711	1,608	2,004

  There was no unappropriated expenditure incurred during 2008/09 (2007/08: nil).

  The accompanying accounting policies and notes form part of these financial statements.

  Notes#

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  • [13]These expenses or capital expenditures have permanent legislative authority.

  Notes to the Financial Statements#

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  for the year ended 30 June 2009

  1 - Statement of Accounting Policies#

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  Reporting entity

  The Treasury is a government department (the Department) as defined by section 2 of the Public Finance Act 1989 and is domiciled in New Zealand.

  In addition, the Department has reported on Crown activities and trust monies which it administers.

  The primary objective of the Department is to provide services to the public rather than making a financial return. Accordingly, the Department has designated itself as a public benefit entity for the purposes of New Zealand equivalents to International Financial Reporting Standards (NZ IFRS).

  The financial statements of the Department are for the year ended 30 June 2009. The financial statements were authorised for issue by the Secretary to the Treasury on 30 September 2009.

  Basis of preparation

  These financial statements have been prepared in accordance with, and comply with, NZ IFRS and other Financial Reporting Standards, as appropriate for public benefit entities.

  The financial statements have been prepared on a historical cost basis.

  The financial statements are presented in New Zealand dollars and all values are rounded to the nearest thousand dollars ($000). The functional currency of the Department is New Zealand dollars.

  Standards, amendments and interpretations that are not yet effective and have not been early adopted

  The Treasury has elected to early adopt all NZ IFRSs and Interpretations that had been approved by the New Zealand Accounting Standards Review Board as at 30 June 2009 that are not yet applicable, except NZ IAS 1: Presentation of Financial Statements (revised) approved by the Accounting Standards Review Board in November 2007. This Standard becomes effective for periods commencing on or after 1 January 2009, and was adopted in the forecast financial statements presented with the 2009 Budget, but not those presented with the 2008 Budget, against which these financial statements are compared. The adoption of NZ IAS 1: Presentation of Financial Statements (revised) results in presentation changes only.

  The early adoption of these standards did not have a material impact on the financial statements.

  Revenue

  Revenue is measured at the fair value of consideration received.

  Revenue Crown

  Revenue earned from the supply of outputs to the Crown is recognised as revenue when earned.

  State Sector Retirement Superannuation and KiwiSaver Schemes revenue

  This revenue included reimbursements by SSC for contributions made by the Department to the State Sector Retirement Superannuation Scheme and the KiwiSaver Scheme, and tax credits for contributions to KiwiSaver received from IRD.

  Rental income

  Lease receipts under an operating sub-lease have been recognised as income on a straight line basis over the lease term.

  Sale of publications

  Sale of publications is recognised when the product is sold to the customer. The recorded revenue is the gross amount of the sale.

  Capital charge

  The capital charge is recognised as an expense in the period to which the charge relates.

  Operating lease

  The Department leased office premises during the year ending 30 June 2009. Substantially all the risks and benefits of ownership were retained by the lessor, and therefore these leases are classified as operating leases. Operating lease costs are written off to the Statement of Financial Performance over the period of the lease.

  Financial instruments

  Financial assets and financial liabilities are initially measured at fair value plus transaction costs unless they are carried at fair value through profit and loss in which case the transaction costs are recognised in the Statement of Financial Performance.

  Financial instruments primarily comprise cash and bank balances, accounts receivable and payables. All financial instruments are recognised in the Statement of Financial Position at cost. Revenues and expenses in relation to all financial instruments are recognised in the Statement of Financial Performance.

  Cash and cash equivalents

  Cash includes cash on hand and funds on deposits with banks.

  Debtors and other receivables

  Debtors and other receivables are initially measured at fair value and subsequently measured at amortised cost using the effective interest rate, less impairment charges.

  Impairment of a receivable is established when there is objective evidence that the Department will not be able to collect amounts due according to the original terms of the receivable.

  Property, plant and equipment

  Property, plant and equipment consists of leasehold improvements, computer hardware, furniture and fittings and office equipment.

  Property, plant and equipment is stated at cost less accumulated depreciation and impairment losses. All computer equipment assets costing over $1,000 and all other assets costing more than $5,000 are capitalised.

  Additions

  The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits or service potential associated with the item will flow to the Department and the cost of the item can be measured reliably.

  Disposals

  Gains and losses on disposals are determined by comparing the proceeds with the carrying amount of the asset. Gains and losses are recorded in the Statement of Financial Performance.

  Subsequent costs

  Costs incurred subsequent to initial acquisition are capitalised only when it is probable that future economic benefits or service potential associated with the item will flow to the Department and the cost of the item can be measured reliably.

  Depreciation

  Depreciation of property, plant and equipment is provided on a straight line basis so as to allocate the cost of property, plant and equipment, less their estimated residual values, over their estimated useful lives. The useful lives and associated depreciation rates of major classes of assets have been estimated as follows:

  Depreciation

  Furniture and fittings:	Shelving Other	10 years 5 years
  Leasehold improvements:		12 years
  Office machinery and electrical equipment:	Photocopiers Other Electronic white boards Facsimile machines	5 years 5 years 3 years 3 years
  Computer hardware:	UPS/Air conditioning Cabling PCs, terminals and printers Other hardware	5 years 5 years 3 years 3 years

  Leasehold improvements are depreciated over the unexpired period of the lease or the estimated remaining useful lives of the improvements, whichever is the shorter.

  The residual value and useful life of an asset is reviewed, and adjusted if applicable, at each financial year end.

  1 - Statement of Accounting Policies (continued)#

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  Intangible assets#

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  Software acquisition and development

  Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software.

  Costs associated with maintaining computer software are recognised as an expense when incurred. Costs that are directly associated with the development of software for internal use by the Department are recognised as an intangible asset. Direct costs include the software development and employee costs.

  Amortisation

  The carrying value of an intangible asset with a finite life is amortised on a straight line basis over its useful life. Amortisation begins when the asset is available for use and ceases at the date that the asset is derecognised. The amortisation charge for each period is recognised in the Statement of Financial Performance.

  The useful lives and associated amortisation rates of major classes of intangible assets have been estimated as follows:

  Amortisation

  Computer software:	Internally generated software	3 years
  	System software	3 years

  Creditors and other payables#

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  Creditors and other payables are measured at cost.

  Employee entitlements#

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  Short-term employee entitlements

  Employee entitlements that the Department expects to be settled within 12 months of balance date are measured at nominal values based on accrued entitlements at current rates of pay. These include salaries and wages accrued up to balance date, annual leave earned but not yet taken at balance date, retiring and long service leave entitlements expected to be settled within 12 months and sick leave.

  The Department recognises a liability for sick leave to the extent that absences in the coming year are expected to be greater than the sick leave entitlements earned in the coming year. The amount is calculated based on the unused sick leave entitlement that can be carried forward at balance date, to the extent that the Department anticipates it will be used by staff to cover those future absences.

  The Department recognises a liability and an expense for bonuses where it is contractually obliged to pay them, or where there is a past practice that has created a constructive obligation.

  Long-term employee entitlements

  Entitlements that are payable beyond 12 months, such as long service leave and retiring leave, have been calculated on an actuarial basis. The calculations are based on:

  • likely future entitlements based on years of service, years to entitlement, the likelihood that staff will reach the point of entitlement and contractual entitlements information, and
  • the present value of the estimated future cash flows. A weighted average discount rate of 3.35% and a salary inflation factor of 0% to 3.5% were used. The discount rate is based on the weighted average of government bonds with terms to maturity similar to those of the relevant liabilities. The inflation factor is based on the expected long-term increase in remuneration for employees.

  Superannuation schemes#

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  Defined contribution schemes

  Obligations for contributions to the State Sector Retirement Savings Scheme, KiwiSaver and the Government Superannuation Fund are accounted for as defined contribution schemes and are recognised as an expense in the Statement of Financial Performance as incurred.

  Provisions#

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  The Department recognises a provision for future expenditure of uncertain amount or timing when there is a present obligation (either legal or constructive) as a result of a past event, it is probable that an outflow of future economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not recognised for future operating losses.

  Taxpayers' funds#

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  Taxpayers' funds is the Crown's investment in the Department and is measured as the difference between total assets and total liabilities.

  Commitments#

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  Expenses yet to be incurred on non-cancellable contracts that have been entered into on or before balance date are disclosed as commitments to the extent that there are equally unperformed obligations.

  Cancellable commitments that have penalty or exit costs explicit in the agreement on exercising that option to cancel are included in the Statement of Commitments at the value of that penalty or exit cost.

  Goods and services tax#

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  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. Where GST is not recoverable as input tax, then it is recognised as part of the related asset or expense.

  The net amount of GST recoverable from, or payable to, IRD is included as part of receivables or payables in the Statement of Financial Position.

  The net GST paid to, or received from, IRD, including the GST relating to investing and financing activities, is classified as an financing activity cash flow in the Statement of Cash Flows.

  Commitments and contingencies are disclosed exclusive of GST.

  Income tax#

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  Government departments are exempt from income tax as public authorities. Accordingly, no charge for income tax has been provided for.

  Budget figures#

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  The budget figures are those included in the Department's SOI for the year ended 30 June 2009, which are consistent with the financial information in the Main Estimates. In addition, the financial statements also present the updated budget information from the Supplementary Estimates.

  Statement of cost allocation policies#

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  The Statement of Cost Allocation Policies was in place for the 2008/09 year. The details of the policy are outlined as follows:

  Direct costs are costs that can be identified with a single output/result. Where possible, costs are assigned directly to outputs/results.

  Indirect costs are costs that cannot be identified with an output in an economically feasible manner. They are incurred for the common benefit of more than one output. Indirect costs are pooled as overhead costs and allocated to outputs/results based on the actual hours worked at a predetermined standard cost rate.

  A time recording system is used to collect the information of actual hours worked on each output/result.

  The predetermined standard cost per hour is set at the beginning of the year and is derived from dividing expected indirect costs for the year, including salaries and overheads, across expected hours to be worked for the year.

  As the standard cost per hour is set at the beginning of the year, differences in costs and hours worked result in either an under or over recovery of costs during the year. This difference is allocated to outputs/results based on the hours worked on each output/result at the end of each month.

  Critical accounting estimates and assumptions#

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  In preparing these financial statements the Department has made estimates and assumptions concerning the future. These estimates and judgements may differ from the subsequent actual results. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. These estimates and judgements do not have a material impact on the carrying amounts of assets and liabilities.

  2 - Revenue - Crown#

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  This is revenue earned for the supply of outputs to the Crown.

  3 - Other Revenue#

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  3 - Other Revenue

  2008 Actual $000		2009 Actual $000	2009 Main Estimates $000	2009 Supp. Estimates $000
  32	Rental income	-	-	-
  1,026	State Sector Retirement Superannuation and KiwiSaver Schemes	1,074	1,054	1,045
  20	Miscellaneous	35	-	9
  1,078		1,109	1,054	1,054

  4 - Personnel Costs#

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  4 - Personnel Costs

  2008 Actual $000		2009 Actual $000	2009 Main Estimates $000	2009 Supp. Estimates $000
  36,708	Salaries and wages	37,434	36,466	37,976
  1,466	Employer contributions to defined contribution plans	1,516	1,436	1,456
  77	Increase in employee entitlements	514	70	191
  238	Other	1,423	1,786	2,081
  38,489		40,887	39,758	41,704

  5 - Operating Expenses#

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  5 - Operating Expenses

  2008 Actual $000		2009 Actual $000	2009 Main Estimates $000	2009 Supp. Estimates $000
  2,973	Lease of premises	3,477	3,458	3,502
  	Fees to KPMG for audit of the Department and NZDMO
  255	- GAAP	344	281	264
  25	- NZ IFRS	-	-	-
  	Fees to Office of Auditor-General for audit of the Financial Statements of the Government
  160	- GAAP	112	252	51
  114	- NZ IFRS	-	-	-
  71	Fees for other services to Department and NZDMO auditors (KPMG)	21	-	-
  3	Provisions for onerous lease	-	-	-
  1	Finance charges on finance lease	-	-	-
  2,412	Process management services	2,366	5,374	2,926
  1,252	Transport and travel	1,163	1,395	1,446
  879	Information costs	990	1,161	1,011
  875	Data processing costs	669	679	651
  48	Furniture/office equipment purchases	21	31	29
  5,544	Other operating costs	6,574	4,253	6,876
  14,612		15,737	16,884	16,756

   

  6 - Capital Charge#

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  The Treasury pays a capital charge to the Crown on its average taxpayers' funds for the six months ended 30 June and 31 December.

  The capital charge rate for the financial year ended 30 June 2009 was 7.5% (30 June 2008: 7.5%).

  7 - Property, Plant and Equipment#

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  The following categories of property, plant and equipment were used by the Department:

  7 - Property, Plant and Equipment

  2008 Actual $000		2009 Actual $000	2009 Main Estimates $000	2009 Supp. Estimates $000
  	Computer Hardware
  	Cost
  4,048	Opening balance as at 1 July	4,594	5,061	4,649
  800	Additions	1,088	909	1,320
  (254)	Disposals	(444)	(350)	(488)
  4,594	Closing balance as at 30 June	5,238	5,620	5,481
  	Accumulated depreciation
  3,404	Opening balance as at 1 July	3,673	3,655	3,726
  521	Depreciation	695	758	715
  (252)	Disposals	(446)	(350)	(488)
  3,673	Closing balance as at 30 June	3,922	4,063	3,953
  921	Carrying amounts	1,316	1,557	1,528
  	Furniture and Fittings
  	Cost
  1,078	Opening balance as at 1 July	1,085	1,078	1,085
  7	Additions	74	40	53
  -	Disposals	-	-	-
  1,085	Closing balance as at 30 June	1,159	1,118	1,138
  	Accumulated depreciation
  558	Opening balance as at 1 July	767	768	767
  209	Depreciation	215	210	214
  -	Disposals	-	-	-
  767	Closing balance as at 30 June	982	978	981
  318	Carrying amounts	177	140	157
  	Leasehold Improvements
  	Cost
  5,058	Opening balance as at 1 July	5,097	5,058	5,097
  39	Additions	37	40	37
  -	Disposals	-	-	-
  5,097	Closing balance as at 30 June	5,134	5,098	5,134
  	Accumulated depreciation
  1,228	Opening balance as at 1 July	1,642	1,643	1,642
  414	Depreciation	418	423	418
  -	Disposals	-	-	-
  1,642	Closing balance as at 30 June	2,060	2,066	2,060
  3,455	Carrying amounts	3,074	3,032	3,074
  	Leased Equipment
  	Cost
  56	Opening balance as at 1 July	56	-	-
  -	Additions	-	-	-
  -	Disposals	(56)	-	-
  56	Closing balance as at 30 June	-	-	-
  	Accumulated depreciation
  36	Opening balance as at 1 July	54	-	-
  18	Depreciation	-	-	-
  -	Disposals	(54)
  54	Closing balance as at 30 June	-	-	-
  2	Carrying amounts	-	-	-
  	Office Machinery and Electrical Equipment
  	Cost
  674	Opening balance as at 1 July	682	700	682
  21	Additions	12	75	15
  (13)	Disposals	(47)	(200)	(47)
  682	Closing balance as at 30 June	647	575	650
  	Accumulated depreciation
  634	Opening balance as at 1 July	644	658	644
  23	Depreciation	13	50	12
  (13)	Disposals	(47)	(200)	(47)
  644	Closing balance as at 30 June	610	508	609
  38	Carrying amounts	37	67	41
  4,734	Total Property, Plant and Equipment	4,604	4,796	4,800
  	Summary
  	Cost
  10,914	Opening balance as at 1 July	11,514	11,897	11,513
  867	Additions	1,211	1,064	1,425
  (267)	Disposals	(547)	(550)	(535)
  11,514	Closing balance as at 30 June	12,178	12,411	12,403
  	Accumulated depreciation
  5,860	Opening balance as at 1 July	6,780	6,724	6,779
  1,185	Depreciation	1,341	1,441	1,359
  (265)	Disposals	(547)	(550)	(535)
  6,780	Closing balance as at 30 June	7,574	7,615	7,603
  4,734	Total Property, Plant and Equipment	4,604	4,796	4,800

  8 - Intangible Assets#

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  The following categories of intangible assets were used by the Department:

   

  8 - Intangible Assets

  2008 Actual $000		2009 Actual $000	2009 Main Estimates $000	2009 Supp. Estimates $000
  	Computer Software - Internally Generated
  	Cost
  519	Opening balance as at 1 July	714	748	714
  195	Additions	-	244	-
  -	Disposals	-	-	-
  714	Closing balance as at 30 June	714	992	714
  	Accumulated amortisation
  64	Opening balance as at 1 July	171	173	171
  107	Amortisation	210	269	211
  -	Disposals	-	-	-
  171	Closing balance as at 30 June	381	442	382
  543	Carrying amounts	333	550	332
  	Computer Software - Acquired
  	Cost
  1,162	Opening balance as at 1 July	1,177	1,335	1,177
  15	Additions	392	300	579
  -	Transfer in from other government department	108	-	-
  -	Disposals	-	(130)	-
  1,177	Closing balance as at 30 June	1,677	1,505	1,756
  	Accumulated amortisation
  1,108	Opening balance as at 1 July	1,149	1,157	1,149
  41	Amortisation	60	160	140
  -	Transfer in from other government department	83	-	-
  -	Disposals	-	(130)	-
  1,149	Closing balance as at 30 June	1,292	1,187	1,289
  28	Carrying amounts	385	318	467
  571	Total Intangible Assets	718	868	799

  9 - Creditors and Other Payables#

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  9 - Creditors and Other Payables

  2008 Actual $000		2009 Actual $000	2009 Main Estimates $000	2009 Supp. Estimates $000
  2,426	Creditors	1,136	1,500	1,500
  22	Creditors for property, plant and equipment	-	-	-
  65	Receipts in advance	32	-	-
  2,164	Accrued expenses	3,490	2,400	2,500
  408	GST payable	581	400	450
  5,085	Total Creditors and Other Payables	5,239	4,300	4,450

  Creditors and other payables are non-interest-bearing and are normally settled on 30-day terms, therefore the carrying value of creditors and other payables approximates fair value.

  10 - Provision for Employee Entitlements#

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  10 - Provision for Employee Entitlements

  2008 Actual $000		2009 Actual $000	2009 Main Estimates $000	2009 Supp. Estimates $000
  1,346	Retirement, resigning and long service leave	1,404	1,522	1,420
  2,559	Annual leave	2,999	2,750	2,750
  71	Sick leave	87	87	71
  409	Accrued salaries	556	500	600
  212	Accrued performance payments	122	200	192
  394	Accrued other entitlements	525	95	250
  4,991		5,693	5,154	5,283
  	Represented by:
  4,768	Current	4,542	4,764	5,053
  223	Non-current (relating to retirement and long service leave)	1,151	390	230
  4,991		5,693	5,154	5,283

  11 - Reconciliation of the Net Surplus to the Net Cash Flows from Operating Activities#

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  This reconciliation discloses the non-cash adjustments applied to the net surplus reported in the Statement of Financial Performance on page 65 to arrive at the net cash flows from operating activities disclosed in the Statement of Cash Flows on page 68.

  11 - Reconciliation of the Net Surplus to the Net Cash Flows from Operating Activities

  2008 Actual $000		2009 Actual $000	2009 Main Estimates $000	2009 Supp. Estimates $000
  -	Net Surplus from Statement of Financial Performance	-	-	-
  	Non-cash items:
  1,333	Depreciation and amortisation	1,611	1,870	1,710
  	Add/(less) working capital movements:
  (99)	Decrease/(increase) in advances and prepayments	66	37	75
  (1,190)	(Increase)/decrease in accounts receivable	1,023	1,256	1,140
  (573)	Decrease/(increase) in debtor - Crown	(1,454)	(452)	(452)
  1,953	Increase/(decrease) in payables, accrued expenses and provisions	(220)	(776)	(368)
  (19)	Increase/(decrease) in other current liabilities	(2)	(2)	(2)
  (59)	(Decrease)/increase in non-current liabilities	928	167	7
  1	Net loss/(gain) on sale of property, plant and equipment	-	-	-
  1,347	Net Cash Flows from Operating Activities	1,952	2,100	2,110

  12 - Financial Instruments#

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  The Department is party to financial instrument arrangements as part of its everyday operations. These financial instruments include cash and bank balances, advances, accounts receivable, debtor-Crown and creditors and other payables.

  Credit risk#

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  In the normal course of its business the Department is subject to credit risk from debtors other than the Crown.

  The Department does not require any collateral or security to support financial instruments with financial institutions with which the Department deals, as these entities have high credit ratings. For its other financial instruments the Department does not have significant concentrations of credit risk.

  Fair value#

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  The fair value of financial instruments is equivalent to the carrying amount disclosed in the Statement of Financial Position.

  Currency and interest rate risk#

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  The Department has no significant exposure to currency exchange loss risk and its financial instruments are not interest rate sensitive.

  Liquidity risk#

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  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 drawdowns from NZDMO. The Department maintains a target level of available cash to meet liquidity requirements.

  All of the Department's financial liabilities (creditors and payables) will be settled in less than six months from the balance date.

  13 - Related Party Information#

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  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.

  The Department enters into transactions with other government departments, Crown entities and SOEs on an arm's length basis. Those transactions that occur within a normal supplier or client relationship on terms and conditions no more or less favourable than those which it is reasonable to expect the Department would have adopted if dealing with that entity at arm's length in the same circumstances are not disclosed.

  Key management personnel compensation (includes the Chief Executive and his direct reports)

  2008 Actual $000		2009 Actual $000
  2,222	Salaries and other short-term employee benefits	2,138
  138	Post-employment benefits	117
  1	Other long-term benefits	1
  2,361	Total Key Management Personnel Compensation	2,256

  14 - Events Subsequent to Balance Date#

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  There were no events subsequent to balance date that required adjustment to the financial statements or disclosure (2008: none).

  15 - Capital Management#

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  The Department's capital is its equity (or taxpayers' funds). Equity is represented by net assets. The Department manages its expenses, revenues, 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 Treasury Instructions.

  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.

  16 - Explanation of Major Variances Against Budget – refer Department Overview#

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  Supplementary Financial Schedules - Non-Departmental#

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  for the year ended 30 June 2009

  The following supplementary financial schedules record the expenses, revenue and capital receipts, assets and liabilities that the Department manages on behalf of the Crown. These supplementary financial schedules include NZDMO balances reported on pages 104 and 105.

  The Department administered $5,537 million of expenses, $3,632 million of revenue, $433 million of capital receipts, $4,467 million of capital expenditure, $30,341 million of assets and $57,968 million of liabilities on behalf of the Crown for the year ended 30 June 2009.

  The financial information reported in these schedules is consolidated into the Financial Statements of the Government, and therefore readers of these schedules should also refer to the Financial Statements of the Government for the year ended 30 June 2009.

  Overview#

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  Capital Charge#

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  Capital charge receipts in 2008/09 increased by 8.6% compared with 2007/08. This was primarily owing to an increase in the capital base of departments as a result of revaluations of property, plant and equipment.

  Crown Guarantee Schemes: Crown Retail Deposit Guarantee Scheme and Wholesale Funding Guarantee Facility#

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  The Government provides two guarantee schemes in relation to financial institution deposits: the Retail Deposit Guarantee Scheme and the Wholesale Funding Guarantee Facility. Information on the Government's exposure as a result of these schemes, the management of these exposures and the impact of these schemes is detailed below.

  Retail Deposit Guarantee Scheme#

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  On 12 October 2008 the Minister of Finance initiated an opt-in Retail Deposit Guarantee Scheme. The objective of this scheme is to ensure ongoing retail depositor confidence in New Zealand's financial system given the international financial market turbulence. Under the Retail Deposit Guarantee Scheme, fees are payable to the Government by participating institutions if they hold significant deposits (ie, greater than $5 billion) or if they experience significant growth in deposits (ie, greater than 10% per annum). Approved deposit takers to date are listed on the Treasury website.

  The Government is managing its exposure to this risk both through the prudential regulation processes for registered banks, and by requiring other deposit takers who sign the guarantee to agree to certain controls on their business including:

  • some restrictions on distributions to shareholders
  • some assurance that the business dealings of the deposit taker are on arm's-length terms
  • the ability for the Crown to appoint an inspector
  • the ability for the Crown to withdraw the guarantee if the business is being deliberately operated in a way to undermine the intention of the guarantee, and
  • personal undertakings from directors to ensure the non-bank deposit takers comply with the guarantee.

  In addition, the Crown has established a monitoring regime to continually assess the risk associated with the scheme as it develops.

  As at 30 June 2009, 73 financial institutions had joined the scheme and deposits totalling $124.2 billion had been guaranteed. This is the maximum exposure and does not include any offset resulting from the recovery of the remaining assets of the financial institution in the event the guarantee is called upon. The Crown assesses the potential loss to be associated with the entities that hold significant deposits (ie, greater than $5 billion) as being remote. It is recognising the revenue received from these institutions over the guarantee period and has made no provision for any loss associated with these entities.

  For other entities within the scheme (ie, entities that hold deposits of less than $5 billion) a provision has been made both when guarantees have been triggered and to provide for losses that are more likely than not to occur. Guarantees have been triggered for two entities and the estimated total cost of payments associated with these guarantees of $70 million has been included in Other Expenses Incurred by the Crown - Payment in Respect of Guarantees and Indemnities (page 93). The payments are offset by expected recoveries of $34 million included within Other Current Revenue (page 96). The Crown also continually updates the likelihood of further default actions triggering the guarantee and assesses the expected loss given default. Based on these assessments, the Crown has provided for $816 million as at 30 June 2009 for future payments under this scheme. The provision has been made applying the assumption that the Retail Deposit Guarantee Scheme will finish in October 2010, the policy position as at 30 June 2009. The policy decision to extend and amend the Retail Deposit Guarantee Scheme announced on Tuesday 25 August 2009 represents a change in conditions that arose after the reporting period, it has not led to an adjustment of the provision. This decision would however be unlikely to significantly impact the amount of the provision.

  The Treasury notes that while the provision represents a best estimate of likely loss, a significant range of outcomes are possible under the scheme in terms of which entities may default and the eventual loss to the Crown following an event of default. This reflects the significant uncertainty as to the value that can be realised from an entity's assets following an event of default. Except as provided on the Treasury website, further information on the Retail Deposit Guarantee Scheme cannot be provided due to commercial sensitivity.

  >

  Summary of Retail Deposit Guarantee Scheme  disclosures in the Supplementary Schedules - Non-Departmental

  	$m
  Schedule of Expenditure and Appropriations - Payments in Respect of Guarantees and Indemnities (gross expense for entities in default) ((page 93)	70
  Schedule of Expenditure and Appropriations - Payments in Respect of Guarantees and Indemnities  (provision for future loss given default) (page 93)	816
  Schedule of Revenue - Crown Retail Deposit Guarantee Scheme (fees) (page 96)	67
  Schedule of Revenue - Other current revenue (expected recoveries) (page 96)	34
  Schedule of Assets - Accounts receivable (expected recoveries) (page 98)	34
  Schedule of Liabilities - Deferred Revenue (retail deposit guarantee fees) (page 99)	23
  Schedule of Liabilities - Guarantee scheme payable/provision (page 99)	831

  Wholesale Funding Guarantee Facility#

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  On 1 November 2008 the Minister of Finance initiated an opt-in Wholesale Funding Guarantee Facility. The objective of the opt-in Wholesale Funding Guarantee Facility is to facilitate access to international financial markets by New Zealand financial institutions, in a global environment where international investors remain highly risk averse and where many other governments have offered guarantees on their banks' wholesale debt. Under the Wholesale Funding Guarantee Facility, the Government receives a fee from each participating institution based on the institution's credit rating and the term and amount of guaranteed debt issued. Fees of $6 million were recognised for the 2008/09 year (page 96) and deferred revenue for this scheme of $131 million appears on the Schedule of Liabilities (page 99).

  Deposit-taking financial institutions utilising the Wholesale Funding Guarantee Facility have applied for a guarantee under the Crown Retail Deposit Guarantee Scheme. In addition to the risk management under the retail scheme, the Government further manages its risk exposure by:

  • limiting the availability of the scheme to financial institutions that have an investment grade credit rating (BBB- or better), and have substantial New Zealand borrowing and lending operations (but not to institutions that are simply financing a parent or related company)
  • limiting the amount of debt covered by the guarantee to debt up to 125% of the total stock of eligible types of debt in issue prior to the intensification of the crisis
  • establishing additional capital buffers by requiring an additional 2% Tier 1 capital buffer above the 4% regulatory minimum, and
  • requiring the debt issuer to hedge and manage any foreign exchange risk.

  As at 30 June 2009, $5.7 billion wholesale securities had been guaranteed. No provision is made in these financial statements for losses under this scheme as these are considered remote.

  Dividends#

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  SOE dividends decreased by $246 million from 2007/08 (page 96), primarily owing to a reduction in dividends from Meridian Energy from those paid in previous years. The aggregate dividend reductions were owing to numerous factors including changes in economic and hydrological conditions.

  Net Foreign Exchange (Losses)/Gains#

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  Net foreign exchange gains were $21 million in 2008/09, compared with $7 million in 2007/08, as a result of movements in exchange rates affecting the value of New Zealand's shareholding in the Asian Development Bank and the World Bank (page 96). The increase in value of these investments is also reflected in Other Share Investments (page 98). NZDMO incurred net foreign exchange losses of $5 million in 2008/09, compared with net losses of $15 million in 2007/08 owing to movements in foreign exchange rates.

  Overview (continued)#

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  Goodwill#

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  Goodwill in relation to Air New Zealand ($258 million) has been tested for impairment at June 2009 based on a value in use discounted cash flow valuation. Cash flow forecasts were prepared for five years using the Air New Zealand Board reviewed business plans. Key assumptions include exchange rates, jet fuel costs, passenger load factors and route yields. These assumptions have been based on historical data and current market information. The cash flow forecasts are particularly sensitive to fluctuations in fuel prices and exchange rates and are extrapolated using an average growth rate of approximately 2%. The cash flow projections are discounted using post-tax discount rate scenarios of 8.8% to 9.6%. The valuation confirmed that there was no impairment required to the goodwill asset.

  Government Superannuation Fund (GSF) Unfunded Liabilities#

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  The Government operates a defined benefit superannuation plan for qualifying employees who are members of the GSF. The members' entitlements are defined in the Government Superannuation Fund Act 1956. Members make regular payments to GSF and in return, on retirement, receive a defined level of income. GSF is closed to employees who were not members at 1 July 1992.

  The GSF obligation has been calculated by the Government Actuary as at 30 June 2009. A Projected Unit Credit Method, based on balance-date membership data, is used for the valuation. This method requires the benefits payable from GSF in respect of past service to be estimated and then discounted back to the valuation date.

  GSF unfunded liability as at 30 June 2009 was $8,988 million (page 99), an increase of $732 million compared with 30 June 2008. This is primarily owing to:

  • an actuarial loss recognised in the year (page 92) of $695 million owing to movements in the economic assumptions used in calculating the liability
  • contributions made by the Crown against the liability (including taxation) during 2008/09 of $923 million, and
  • this has been partially offset by an increase in the additional current service costs and interest expenses (appropriated under Other Expenses to be Incurred by the Crown - GSF Unfunded Liability) (page 93) of $961 million.

  The Government expects to make a contribution of $648 million to GSF in the year ended 30 June 2010.

  In addition to its obligations to past and present employees, because GSF is liable to income tax under section HJ 1 of the Income Tax Act 2004, the Crown will be required to make additional contributions equivalent to the tax on future investment income. Additional detailed note disclosures required under NZ GAAP for this liability are included in the Financial Statements of the Government.

  International Financial Institutions#

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  Contributions of $274 million were made to the IMF for the Financial Transaction Plan lending programme in 2008/09 (page 94) compared with a contribution of $1 million in the 2007/08 year. This reflects the cyclical nature of the IMF lending programme and response by the IMF to the international financial crisis.

  Landcorp Protected Land Agreement#

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  The capital expenditure in relation to the Landcorp Protected Land Agreement for 2008/09 was $26 million (page 94) made up of the Crown's ongoing purchase of redeemable preference shares in payment for land transferred into the Protected Land Agreement in 2007/08 of $13 million and $13 million payment for the inclusion of a new farm agreement. Expenditure of $64 million in 2007/08 was for the initial purchase of redeemable preference shares in Landcorp.

  Maui Gas Contract#

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  The Crown's revenues from Maui Gas contracts have decreased by $26 million as a result of reduced gas drawn and the contract expiring on 30 June 2009. The decrease in revenues is offset by a reduction in Other Expenses Incurred by the Crown for Maui Gas Contracts of $29 million (page 96).

  National Provident Fund (NPF) Defined Benefit Plan (Annuitants) Scheme Provision#

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  The Government has guaranteed superannuation schemes managed by the National Provident Fund (NPF). As at 30 June 2009 the NPF's DBP Annuitants' Scheme was in a net deficit position of $947 million (2008: $907 million), represented by a gross estimated pension obligation of $994 million (2008: $1,020 million) with net investment assets valued at $47 million (2008: $113 million). No additional provision was required in the year for other pension schemes managed by NPF under the Government's guarantee under section 60 of the National Provident Fund Restructuring Act 1990.

  The increase in the Crown's liability for the NPF DBP(A) Scheme under Crown guarantee as at 30 June 2009 was primarily owing to:

  • the unwinding of the interest expense (appropriated under Other Expenses to be Incurred by the Crown - NPF Schemes - Liability under Crown Guarantee (page 93) of $71 million
  • payments made against the liability by the Crown during the year $9 million, and

  offset by:

  • the actuarial gain recognised for the year (page 96) of $22 million resulting from movements in the economic assumptions used in calculating the provision.

  Additional detailed note disclosures required under NZ GAAP are included in the Financial Statements of the Government for this liability.

  National Provident Fund (NPF) - Crown Liability for Scheme Deficiency#

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  The Crown is liable for the deficiency in the accounts of NPF schemes established pursuant to section 38A(6) of the National Provident Fund Act 1950, authorised by section 72 of the National Provident Fund Restructuring Act 1990. There was a call against this appropriation for 2008/09 of $34 million to 31 March 2009 and a provision of $7 million for the three months to 30 June 2009 (page 93). There was no expenditure in 2007/08.

  New Zealand Debt Management Office (NZDMO) Interest from Investments and Other Income#

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  NZDMO's interest from investments decreased by $373 million primarily owing to lower interest rates and changes in investment activity levels.

  NZDMO's other income decreased by $130 million primarily owing to reduced interest income on lending to Housing New Zealand Corporation as interest rates have fallen, and negative fair value revaluations on Crown lending to the Reserve Bank of New Zealand.

  Other Expenses - NZDMO#

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  Fair value adjustments on derivatives are disclosed as remeasurements within Other Expenses - NZDMO. These have decreased by $495 million from the 2007/08 year owing primarily to the impact of interest rate movements on the fair value of derivatives.

  Other Current Revenue#

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  Other current revenue has increased by $52 million in 2008/09. This primarily relates to gain on sale of investments and estimated recovery of government guarantee payments.

  Port Nicholson Block Settlement Trust Loan#

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  This loan of $15 million (page 94) to the Port Nicholson Block Settlement Trust was for the purchase of properties at Shelly Bay, Wellington.

  Reserve Bank Surplus#

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  The Reserve Bank's “notional surplus income” payable to the Crown decreased from $193 million to $168 million. The notional surplus income is calculated under section 158 of the Reserve Bank Act 1989. This calculation excludes unrealised gains and losses. As foreign currency loans do not mature on a regular basis, the amount of notional surplus income will vary from year to year, often quite substantially (page 96).

  Overview (continued)#

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  Rail Issues#

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  Acquisition of Toll NZ Ltd

  On 1 July 2008, negotiations were completed and an agreement was signed for the purchase of 100% of the shares in Toll NZ Ltd. Prior to the acquisition, assets and operations not integral to the rail operation were separated out of Toll NZ Ltd. On acquisition by the Government, the company was renamed KiwiRail Holdings Limited (KiwiRail). The cost of acquisition of the company was $690 million (page 94), settled in cash on 1 July 2008.

  On 1 October 2008, the Crown sold the shares in KiwiRail to the New Zealand Railway Corporation (NZRC). The transfer price was $388 million, based on the fair value of the assets and liabilities held by KiwiRail as at 1 October 2008. The valuation was performed by PricewaterhouseCoopers and completed in May 2009.

  Based on the fair value exercise as at 1 October 2008, it has been calculated that the fair value of the assets acquired and liabilities assumed through this purchase on acquisition (1 July) was $370 million. The difference of $320 million between the fair value ($370 million) and the cost of acquisition ($690 million) appears in the Other Expenses Incurred by the Crown - Loss on Acquisition of Toll NZ Ltd (page 93).

  Summary

  	$m
  Total purchase price of shares in Toll NZ Ltd (page 94)	690
  Less loss on acquisition of Toll NZ Ltd at 1 July 2008 (page 93)	(320)
  Add Crown Rail Operator equity injection (page 94)	6
  Add gain on transfer to NZRC included in Other Current Revenue (page 96)	12
  NZRC increase in capital to fund purchase of Crown Rail Operator (page 94)	388

  Other rail expenditure

  During the year, the Crown restructured the funding arrangement with NZRC (trading as ONTRACK). The changes in Other Expenses Incurred by the Crown (page 93) from 2007/08 include:

  • an increase of $68 million for the purchase of non-commercial rail services
  • an increase of $26 million to increase transport growth on the rail network through the upgrade, renewal and maintenance of its fleet, terminals, systems and infrastructure
  • an increase of $6 million for the construction of a rail siding and associated works at the Wiri Inland Port
  • an increase of $5 million to reimburse NZRC for the transaction costs of purchasing Toll NZ Ltd
  • an increase of $83 million for the renewal and upgrades of the Auckland rail network “below track” infrastructure. This is a multi-year appropriation and the unspent balance is carried forward
  • an increase of $57 million for the electrification, upgrades and maintenance of the Auckland and Wellington metropolitan rail networks. This is a multi-year appropriation and the unspent balance is carried forward
  • a reduction of $21 million on upgrading the national rail network, and
  • a reduction of $7 million on the operating and maintenance costs of ONTRACK not recoverable through the National Rail Access Agreement.

  The restructured loan funding arrangement for capital expenditure in relation to Rail (page 94), resulted in total loan funding of $185 million in 2008/09, being an increase of $81 million from 2007/08. These loans were for the purchase of new locomotives, providing short-term capital, servicing contract buy-out obligations and refinancing debt.

  Taitokerau Forests Limited Loan Write Down#

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  The Crown agreed to write down the existing loans to Taitokerau Forests Limited in 2008/09 by $37 million as part of their loan renegotiations (page 93).

  Statement of Accounting Policies#

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  for the year ended 30 June 2009

  Measurement and recognition rules applied in the preparation of these non-departmental supplementary financial schedules are consistent with NZ GAAP and Crown accounting policies and are detailed in the Financial Statements of the Government except for:

  • The investment in State-Owned Enterprises and Crown entities is recognised in Vote Finance at the lower of historic cost and fair value. The net assets of these entities are consolidated in the Financial Statements of the Government and the Crown's investment is eliminated.

  The financial information reported in these schedules is consolidated into the Financial Statements of the Government, and therefore readers of these schedules should also refer to the Financial Statements of the Government for the year ended 30 June 2009.

  Subsequent Events#

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  A provision for the expected loss given default under the Retail Deposit Guarantee Scheme has been made applying the assumption that the Scheme will finish in October 2010, the policy position as at 30 June 2009. The policy decision to extend and amend the Retail Deposit Guarantee Scheme was subsequently announced on Tuesday 25 August 2009. As this represents a change in conditions that arose after the reporting period, it has not led to an adjustment of the provision. However the decision would be unlikely to significantly impact the amount of the provision.

  Schedule of Expenses#

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  for the year ended 30 June 2009

  The Schedule of Expenses summarises expenses that the Department administers on behalf of the Crown. Details of non-departmental expenditure and appropriations are provided on pages 93 and 94.

  Schedule of Expenses

  2008 Actual $000		2009 Actual $000	2009 Supp. Estimates $000
  2,044	Non-departmental output classes	68,928	92,004
  2,049,665	Borrowing expenses	2,087,220	2,106,000
  1,367,116	Other expenses incurred by the Crown	2,659,771	1,896,846
  	Remeasurements:
  1,097,504	-   Change in GSF unfunded liability - actuarial (gains)/losses	694,948	2,245,176
  (16,789)	-   Change in Rugby World Cup provision	2,979	-
  6,581	-   Realised loss/(gain) on sale of assets	-	-
  15,690	-   SOE/CE impairments	55,560	257,950
  15,477	-   Foreign exchange losses/(gains) incurred by NZDMO	4,950	-
  -	-   Taitokerau Forest Loan write down previously recognised as a remeasurement to fair value	(37,000)	-
  4,537,288		5,537,356	6,597,976
  	Vote Crown Research Institutes
  1,347	Other expenses incurred by the Crown	-	764
  1,347		-	764
  4,538,635	Total Non-departmental Expenses	5,537,356	6,598,740

   

  The Statement of Accounting Policies is an integral part of these supplementary financial schedules.

  Statement of Expenditure and Appropriations#

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  for the year ended 30 June 2009

  The Statement of Expenditure and Appropriations details expenditure and capital payments incurred against appropriations. The Department administers these appropriations on behalf of the Crown.

  Statement of Expenditure and Appropriations

  2008 Actual $000		2009 Actual $000	2009 Supp. Estimates $000
  	Vote Finance
  	Non-departmental Output Classes
  352	Management of New Zealand House, London	416	1,000
  81	Management of Crown's Obligations for Geothermal Wells	88	351
  1,611	Guardians of New Zealand Superannuation	384	487
  -	New Zealand Railways Corporation Support	68,000	90,000
  -	Regulatory Responsibility Taskforce	40	166
  2,044		68,928	92,004
  	Benefits and Other Unrequited Expenses
  -	GSFA Subsidies to GSF Schemes	-	-
  -		-	-
  	Borrowing Expenses
  2,049,665	Debt Servicing[14]	2,087,220	2,106,000
  2,049,665		2,087,220	2,106,000
  	Other Expenses Incurred by the Crown
  23,000	Atihau-Whanganui Incorporation Ex-gratia Payment	-	-
  97,719	Auckland Rail Development	180,887	187,036
  500	Crown Contribution to Atihau-Whanganui Incorporation Negotiation Costs	-	-
  11,792	Crown Overseas Properties	14,537	16,200
  31	Crown Residual Liabilities	40	674
  -	Geothermal Liabilities	-	500
  -	Government Superannuation Appeals Board	12	50
  21,000	Government Superannuation Fund and National Provident Fund Cost of Living Indexation	-	-
  15,591	Government Superannuation Fund Authority - Crown's Share of Expenses14	18,415	23,500
  1,027,253	Government Superannuation Fund Unfunded Liability14	960,808	968,610
  -	Impairment of Loans to Taitokerau Forest Ltd	-	1,700
  -	Invercargill Airport Suspensory Loan	-	300
  178	Kaingaroa Forest Road Easements	-	-
  -	Loss on Acquisition of Toll NZ Ltd	320,462	330,000
  41,496	Maui Gas Contracts	12,236	13,218
  -	National Rail Network Improvements	6,250	6,250
  -	New Zealand Railways Corporation Transaction Costs of Purchasing Toll NZ Ltd	4,972	5,000
  -	NZRC Wiri Inland Port Rail Link	6,000	6,000
  74,000	National Provident Fund Schemes - Liability under Crown Guarantee 14	71,000	71,000
  -	National Provident Fund - Crown Liability for Scheme Deficiency 14	40,726	33,200
  12,800	ONTRACK Operating and Maintenance Costs	6,259	7,000
  -	Payments in Respect of Guarantees and Indemnities 14	885,813	69,335
  -	Rail Transport Upgrade and Growth	26,495	33,475
  -	Taitokerau Forests Limited Loan Write Down	37,000	37,000
  26,928	Upgrade of Rail Network	-	-
  15	Unclaimed Money[15]	13	250
  7	Unclaimed Trust Money15	-	250
  5,231	Urban Rail Development	62,241	78,078
  548	Wellington Railway Station Expenses	-	-
  5,847	Wellington Regional Council Suspensory Loan	5,587	8,202
  3,180	Write-off of Capital Charge Receivable	18	18
  1,367,116		2,659,771	1,896,846
  	Capital Expenditure
  195	Ag Research Equity Injection	-	-
  -	Crown Rail Operator Equity Injection	6,774	6,774
  -	Crown Rail Operators Loan	140,000	140,000
  -	Hawkes Bay Airport Equity Injection	-	8,000
  8,000	Industrial Research Limited Equity Injection	4,500	4,500
  691	International Financial Institutions	274,000	645,000
  -	Invercargill Airport Suspensory Loan	-	1,500
  64,200	Landcorp Protected Land Agreement	26,208	26,208
  2,103,000	New Zealand Superannuation Fund - Contributions	2,242,000	2,242,000
  -	New Zealand Railways Corporation Increase in Capital for Purchase of Crown Rail Operator	388,294	690,000
  -	New Zealand Railways Corporation Loans	45,000	55,000
  34,140	ONTRACK - Equity Injection	-	-
  70,000	ONTRACK - Loans	-	-
  -	Port Nicholson Block Settlement Trust Loan	15,268	15,268
  -	Public Trust Capital Injection	20,000	20,000
  -	Purchase of Toll NZ Ltd's Rail Business and Associated Costs	690,000	690,000
  -	Reserve Bank of NZ Equity Injection	600,000	600,000
  -	Taitokerau Forests	-	1,700
  2,000	Timberlands West Coast Ltd Equity Injection	3,800	3,800
  784	Wellington Railway Station Upgrade	-	-
  11,334	Wellington Regional Council Suspensory Loan	11,330	13,408
  2,294,344		4,467,174	5,163,158
  5,713,169	Total Vote Finance	9,283,093	9,258,008
  	Vote Crown Research Institutes
  	Other Expenses Incurred by the Crown
  1,347	CRI Residual Liabilities	-	764
  -	CRI Non-excluded Liabilities	-	-
  1,347	Total Vote Crown Research Institutes	-	764
  5,714,516	Total Non-departmental Expenditure and Appropriations	9,283,093	9,258,772

   

  The Statement of Accounting Policies is an integral part of these supplementary financial schedules.

  Notes#

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  • [14]These expenses or capital expenditures have permanent legislative authority.
  • [15]These expenses or capital expenditures have permanent legislative authority.

  Statement of Unappropriated Expenditure#

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  for the year ended 30 June 2009

  There were no items of unappropriated expenditure in Vote Finance in the year ended 30 June 2009.

  The Statement of Accounting Policies is an integral part of these supplementary financial schedules.

  Schedule of Revenue#

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  for the year ended 30 June 2009

  Schedule of Revenue

  2008 Actual $000		2009 Actual $000	2009 Supp. Estimates $000
  	Vote Finance
  1,437,103	Capital charge	1,560,582	1,556,757
  (60,000)	Change in NPF DBP(A) Scheme provision under Crown Guarantee	22,000	(16,547)
  1,554	Contact Energy Ltd Crown margin interest	3,669	4,482
  -	Crown Retail Deposit Guarantee Scheme	67,295	65,000
  -	Crown Wholesale Funding Guarantee Facility	6,249	3,982
  -	Dividends from Crown entities	10,301	10,301
  522,435	Dividends from SOEs	275,815	242,015
  2,751	Dividends - other	3,320	3,320
  10,000	Earthquake Commission guarantee fee	10,000	10,000
  46,547	Employers' superannuation contributions	38,652	40,000
  1,515	Export Credit Office	2,494	2,630
  760,013	Interest from investments	386,619	432,000
  20,442	Interest income - other	29,472	29,000
  259,444	Other income - NZDMO	128,570	692,000
  308,864	Other expenses - NZDMO (incl gains on derivatives)	803,654	906,000
  37,439	Maui Gas Contracts	11,018	12,000
  14,218	Rentals from Crown overseas properties	14,049	15,800
  193,000	Reserve Bank of New Zealand notional surplus	168,000	168,000
  7,815	Sale of goods and services	2,355	2,300
  6,869	Foreign exchange gains/(losses)	21,142	-
  4,759	Other current revenue	57,163	33,139
  347	Unclaimed money	582	500
  3,575,115		3,623,001	4,212,679
  	Vote Crown Research Institutes
  887	Dividends from CRIs	9,303	2,654
  887		9,303	2,654
  3,576,002	Total Non-departmental Revenue	3,632,304	4,215,333

   

  The Statement of Accounting Policies is an integral part of these supplementary financial schedules.

  Schedule of Capital Receipts#

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  for the year ended 30 June 2009

  The Schedule of Capital Receipts details non-departmental capital receipts that the Department administers on behalf of the Crown.

  Schedule of Capital Receipts

  2008 Actual $000		2009 Actual $000	2009 Supp. Estimates $000
  	Vote Finance
  -	Capital Withdrawals Crown cost	401,312	400,593
  31,547	Contact Energy Ltd Crown margin	31,549	31,549
  500	Loan repayments from other parties	500	500
  23,540	Sale of Wellington Railway Station to NZRC	-	-
  55,587	Total Capital Receipts	433,361	432,642

  The Statement of Accounting Policies is an integral part of these supplementary financial schedules.

  Schedule of Assets#

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  as at 30 June 2009

  The Schedule of Assets summarises the assets that the Department administers on behalf of the Crown.

  Schedule of Assets

  2008 Actual $000		2009 Actual $000	2009 Supp. Estimates $000
  6,944,125	Cash and cash equivalents	9,455,325	5,505,554
  170,390	Accounts receivable	481,669	48,856
  6,896,419	Advances	6,938,367	7,927,122
  -	Derivatives	457	389
  6,651,943	Marketable securities, deposits and derivatives in gain	6,161,488	10,167,000
  -	Capital charge receivable	94	18
  1,218	Inventory	-	-
  31,271	Prepayments	32,092	-
  257,950	Intangibles and goodwill	257,950	-
  6,159,885	Investments in SOEs, CEs and CRIs	6,539,306	6,562,165
  154,890	Other share investments	175,964	154,890
  179,346	Other equity accounted investments	175,555	187,346
  99,717	Property, plant and equipment	122,508	121,783
  27,547,154	Total Non-departmental Assets	30,340,775	30,675,123

  The Statement of Accounting Policies is an integral part of these supplementary financial schedules.

  Schedule of Liabilities#

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  as at 30 June 2009

  The Schedule of Liabilities summarises the liabilities that the Department administers on behalf of the Crown.

  Schedule of Liabilities

  2008 Actual $000		2009 Actual $000	2009 Supp. Estimates Voted $000
  3,957,620	Crown balances with Westpac	3,609,422	2,945,000
  58,898	Payables and accrued expenses	57,217	49,710
  32,951,881	Borrowings	43,351,822	43,047,000
  -	Deferred revenue	154,897	72,320
  -	Guarantee scheme payable/provision	830,657	-
  1,319	Insurance premiums received in advance	4,491	5,160
  8,256,661	Government Superannuation Fund unfunded liability	8,988,449	10,557,371
  907,453	NPF DBP(A) Scheme unfunded provision	947,203	977,800
  -	NPF Crown liability for scheme deficiency s72	7,000	-
  17,004	Rugby World Cup provision	17,262	17,004
  46,150,836	Total Non-departmental Liabilities	57,968,420	57,671,365

   

  The Statement of Accounting Policies is an integral part of these supplementary financial schedules.

  Schedule of Commitments#

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  as at 30 June 2009

  Schedule of Commitments

  2008 $000		2009 $000
  	Operating Commitments
  	By type
  1,658	Non-cancellable property lease	1,581
  400,698	Auckland rail development	-
  28,224	National rail network upgrades	-
  569,769	Urban rail development	-
  469	Other non-cancellable operating commitments	306
  1,000,818		1,887
  	By term
  325,335	Less than one year	194
  405,464	One to two years	194
  268,570	Two to five years	122
  1,449	More than five years	1,377
  1,000,818	Total Commitments	1,887

   

  All rail appropriations have now been transferred to Vote Transport from 1 July 2009.

  The Statement of Accounting Policies is an integral part of these supplementary financial schedules.

  Schedule of Contingent Liabilities#

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  as at 30 June 2009

  Schedule of Contingent Liabilities

  2008 $000		2009 $000
  	Quantifiable Contingent Liabilities
  18,776	Guarantees and indemnities	18,035
  2,164,386	Uncalled capital	2,462,076
  132	Legal proceedings and disputes	132
  1,764,561	Other contingent liabilities	1,916,958
  3,947,855		4,397,201

  Contingent liabilities are costs which the Crown will have to face if a particular event occurs. Typically, contingent liabilities consist of guarantees and indemnities, uncalled capital, legal disputes and claims. The contingent liabilities managed by the Department on behalf of the Crown are a mixture of operating and balance sheet risks and they vary greatly in magnitude and likelihood of realisation. In general, if a contingent liability were realised it would have a negative impact on the operating balance, net Crown debt and net worth. However, in the case of contingencies for uncalled capital, the negative impact would be restricted to net Crown debt.

  Where contingent liabilities have arisen as a consequence of legal action being taken against the Crown, the amount included is the amount claimed and thus the maximum potential cost. It does not represent either an admission that the claim is valid or an estimation of the possible amount of any award against the Crown.

  The majority of the quantified contingent liabilities shown above arise from the uncalled capital element of the Crown's investments in the Asian Development Bank and the World Bank, and promissory notes issued in favour of the IMF.

  Significant increases in contingent liabilities are owing to exchange rate fluctuations and from the sales of NZECO products (2009: $154 million, 2008: $37 million). This was partially offset by encashment of promissory notes, equivalent to payments made to the IMF under the Financial Transactions Plan.

  The Crown's exposure to the Retail Deposit Guarantee Scheme and Wholesale Funding Guarantee Facility is detailed in the Supplementary Financial Schedules - Overview on pages 86 and 87.

  Unquantifiable Contingent Liabilities#

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  The Treasury also administers a number of contingent liabilities which cannot be quantified. These arise primarily from institutional guarantees and indemnities. Readers are referred to the Financial Statements of the Government for further details.

  The Statement of Accounting Policies is an integral part of these supplementary financial schedules.

  Statement of Trust Monies#

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  as at 30 June 2009

  Statement of Trust Monies

  2008 $000		2009 $000
  941	Balance at the beginning of the year	1,720
  769	Contribution	208
  (68)	Distribution	(311)
  78	Interest earned on trust money	102
  -	Unclaimed money returned to the Crown	-
  1,720	Balance at the End of the Year	1,719

  The Trust Account is established pursuant to section 67 of the Public Finance Act 1989, for the purposes of depositing money paid to the Crown under section 77 of the Trustee Act 1956.

  The source of funds is principally estates of deceased persons where the beneficiaries cannot be traced. Funds are retained in the Trust Account for six years, and are then transferred to the Crown as unclaimed money.

  Details of funds held in the Trust Account are gazetted annually.

  The Statement of Accounting Policies is an integral part of these supplementary financial schedules.

  New Zealand Debt Management Office (NZDMO)#

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  NZDMO is part of the New Zealand Treasury and is responsible for the efficient management of the Crown's debt and associated assets within an appropriate risk management framework. NZDMO's strategic objective is to maximise the long‐term economic return on the Crown's financial assets and debt in the context of the Government's fiscal strategy, particularly its aversion to risk.

  NZDMO's major responsibilities involve:

  • financing the Crown's borrowing requirement and managing a portfolio of assets and liabilities
  • disbursing cash to departments
  • advancing funds to government entities in accordance with government policy, and
  • providing capital markets services and derivative transactions for departments and Crown entities.

  NZDMO managed $22.8 billion of assets, $47 billion of liabilities, $0.5 billion of revenue and $1.3 billion of expenses on behalf of the Crown for the year ended 30 June 2009. Further information on NZDMO's performance in managing the Crown's sovereign‐issued debt and related financial assets is provided in the Vote Finance Output Class Performance section of this report on pages 36 and 37.

  To facilitate a greater level of transparency regarding NZDMO operations, the following supplementary financial schedules report the activity of NZDMO as though it were a stand‐alone entity. Cross‐holdings or other financial positions between NZDMO and other government entities are not eliminated. The financial information reported in these schedules is consolidated into the Crown financial statements.

  Schedule of Assets and Liabilities#

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  as at 30 June 2009

  2008			2009
  Carrying Value $m	Fair Value $m		Carrying Value $m	Fair Value $m
  		Assets
  		Cash, cash equivalents and receivables
  6,903	6,903	Crown settlement account	8,320	8,320
  18	18	Foreign cash and cash equivalents[16]	1,105	1,105
  99	99	Debtors and receivables	396	396
  		Advances
  3,539	3,539	RBNZ	3,170	3,170
  1,287	1,287	Crown Financing Agency	1,401	1,401
  1,809	1,809	Housing New Zealand	1,813	1,813
  221	221	New Zealand Railways Corporation	399	399
  40	40	Non-Crown	65	65
  		Financial assets
  5,004	5,004	Marketable securities	3,424	3,424
  748	748	External deposits	442	442
  680	680	Derivatives in gain	1,842	1,842
  188	188	IMF reserve position	454	454
  20,536	20,536	Total Assets	22,831	22,831
  		Liabilities
  		Overdrafts and payables
  3,958	3,958	Crown balances with Westpac	3,609	3,609
  -	-	Creditors and payables	5	5
  		Financial liabilities
  1,487	1,487	Treasury bills - market	7,442	7,442
  154	154	Treasury bills - non-market	5	5
  19,459	19,455	Government bonds - market[17]	22,486	22,871
  7,487	7,433	Government bonds - non-market	7,144	7,349
  1,482	1,591	Inflation-indexed bonds - market	1,552	1,707
  445	475	Inflation-indexed bonds - non-market	466	510
  423	422	Kiwi bonds	491	494
  689	689	Foreign currency debt	993	993
  70	70	Collateral	889	889
  790	790	Derivatives in loss	1,333	1,333
  77	77	Departmental deposits	117	117
  304	304	IMF allocation	336	336
  81	81	Immigration investor policy bonds	96	96
  4	4	Other	2	2
  36,910	36,990	Total Liabilities	46,966	47,758
  (16,374)	(16,454)	Net Assets/(Liabilities)	(24,135)	(24,927)

  Notes

  • [16]Foreign cash and cash equivalents include cash equivalent deposits of $1,044 million at June 2009. Previously, similar deposits to those now categorised as cash equivalents were included with external deposits. The value of the equivalent deposits included in external deposits at June 2008 was $261 million. The June 2008 figures have not been restated.
  • [17]Government bonds – market includes $395 million of infrastructure bonds at June 2009 (June 2008: $295 million).

  Schedule of Revenues and Expenses#

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  for the year ended 30 June 2009

  Schedule of Revenues and Expenses

  2008 $m		2009 $m
  	Revenue
  	Cash, cash equivalents  and receivables
  339	Crown settlement account	110
  -	Foreign cash and cash equivalents	3
  	Advances
  164	RBNZ	(56)
  104	Crown Financing Agency	136
  152	Housing New Zealand	109
  17	New Zealand Railways Corporation	16
  (3)	Non-Crown	(2)
  	Financial assets
  224	Marketable securities	215
  41	External deposits	16
  2	IMF reserve position	1
  1,040	Total Revenue	548
  	Expenses
  149	Treasury bills - market	142
  13	Treasury bills - non-market	46
  1,258	Government bonds - market	1,325
  457	Government bonds - non-market	429
  111	Inflation-indexed bonds - market	141
  33	Inflation-indexed bonds - non-market	42
  26	Kiwi bonds	33
  85	Foreign currency debt	71
  12	Collateral	1
  (426)	Derivatives[18]	(968)
  10	IMF allocation	5
  2	Immigration investor policy bonds	3
  17	Other	19
  1,747	Total Expenses	1,289
  (15)	Net FX Gains/(Losses)	(5)
  (722)	Net Revenue/(Expenses)	(746)

  Classes and categories of financial instruments#

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  NZDMO designates its financial assets and liabilities under the following IFRS categories:

  2008 $m					2009 $m
  Amortised Cost[19]	Held for Trading	Fair Value Through Profit or Loss	Carrying Value		Amortised Cost[19]	Held for Trading	Fair Value Through Profit or Loss	Carrying Value
  				Financial Assets
  				Cash, cash equivalents and receivables
  6,903	-	-	6,903	Crown settlement account	8,320	-	-	8,320
  18	-	-	18	Foreign cash and cash equivalents	61	-	1,044	1,105
  99	-	-	99	Debtors and receivables	396	-	-	396
  				Advances
  -	-	3,539	3,539	RBNZ	-	-	3,170	3,170
  -	-	1,287	1,287	Crown Financing Agency	-	-	1,401	1,401
  1,158	-	651	1,809	Housing New Zealand	979	-	834	1,813
  -	-	221	221	New Zealand Railways Corporation	-	-	399	399
  40	-	-	40	Non-Crown	65	-	-	65
  				Financial assets
  -	-	5,004	5,004	Marketable securities	-	-	3,424	3,424
  -	-	748	748	External deposits	-	-	442	442
  -	680	-	680	Derivatives in gain	-	1,842	-	1,842
  188	-	-	188	IMF reserve position	454	-	-	454
  8,406	680	11,450	20,536	Total Financial Assets by Designation	10,275	1,842	10,714	22,831
  				Financial Liabilities
  3,958	-	-	3,958	Crown balances with Westpac	3,609	-	-	3,609
  -	-	-	-	Creditors and payables	5	-	-	5
  -	-	1,487	1,487	Treasury bills - market	7,294	-	148	7,442
  154	-	-	154	Treasury bills - non-market	5	-	-	5
  13,812	-	5,647	19,459	Government bonds - market	17,709	-	4,777	22,486
  7,487	-	-	7,487	Government bonds - non-market	7,144	-	-	7,144
  1,482	-	-	1,482	Inflation-indexed bonds - market	1,552	-	-	1,552
  445	-	-	445	Inflation-indexed bonds - non-market	466	-	-	466
  423	-	-	423	Kiwi bonds	491	-	-	491
  -	-	689	689	Foreign currency debt	-	-	993	993
  -	-	70	70	Collateral	-	-	889	889
  -	790	-	790	Derivatives in loss	-	1,333	-	1,333
  -	-	77	77	Departmental deposits	-	-	117	117
  304	-	-	304	IMF allocation	336	-	-	336
  81	-	-	81	Immigration investor policy bonds	96	-	-	96
  4	-	-	4	Other	2	-	-	2
  28,150	790	7,970	36,910	Total Financial Liabilities by Designation	38,709	1,333	6,924	46,966

  Derivatives#

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  As at 30 June 2009, the value of derivatives was as follows:

  2008					2009
  Carrying Value in Gain $m	Carrying Value in Loss $m	Net Carrying Value $m	Notional Value $m		Carrying Value in Gain $m	Carrying Value in Loss $m	Net Carrying Value $m	Notional Value $m
  				Derivatives
  179	(231)	(52)	18,323	Foreign exchange contracts	1,043	(960)	83	19,930
  320	(402)	(82)	4,174	Cross currency swaps	144	(259)	(115)	4,763
  181	(157)	24	10,309	Interest rate swaps	655	(114)	541	9,976
  -	-	-	154	Futures	-	-	-	-
  680	(790)	(110)	32,960	Total Derivatives	1,842	(1,333)	509	34,669

  Notes

  • [18]Net derivatives includes both net interest (receipts and payments) and fair value movements on all derivatives, including both derivatives in gain and derivatives in loss at balance date. Net derivatives may be a net revenue or net expense result for a reporting period. The net result is reported under expenses for reasons of consistency. FX gains/losses on these derivatives are reported as part of the overall Net FX Gains/(Losses) line.
  • [19]NZDMO's amortised cost assets are all designated as loans and receivables.

  Risk Management#

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  NZDMO operates within a risk management framework that is approved by the Minister of Finance. The framework specifies NZDMO's policies for managing market risk, credit risk, liquidity risk, funding risk and operational risk.

  The risk management framework is subject to continuous improvement as information technology and analytical techniques advance. NZDMO's risk management framework and practices are subject to regular audit review, and are also reviewed periodically by the NZDMO Advisory Board, by the Controller and Auditor-General and by external experts commissioned by NZDMO.

  The risk management framework sets out the governance framework for NZDMO's operations, including the legislative provisions governing NZDMO's borrowing and investment activities. Internal operations are governed by an established risk culture, body of policies, ethical guidelines, defined responsibilities and formal delegations, segregated duties and reporting and performance management requirements.

  Funding Risk#

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  Funding risk refers to the inability to raise funds at an acceptable price and tenor.

  NZDMO's funding policy is designed to spread refinancing risk over time, and to diversify funding sources by maintaining access to a range of funding markets. To manage interest rate risk and lower the cost of the New Zealand-dollar portfolio, NZDMO maintains a mix of fixed‐rate and floating‐rate debt, and uses interest rate swaps. Inflation‐indexed debt makes up a component of the portfolio and is issued when it is cost‐effective to do so.

  Bonds are issued into benchmark lines to improve liquidity in the domestic bond market and, consequently, reduce the Crown's cost of borrowing. NZDMO limits the tranche size of each maturity of marketable bonds issued in New Zealand dollars. Benchmark size trades off between improving liquidity and managing refinancing risk, and it is reviewed regularly.

  Liquidity Risk#

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  Liquidity risk is defined as not being able to meet expected and unexpected cash flow needs. The objective of NZDMO's liquidity policy is to ensure that NZDMO can meet all cash obligations as they fall due. To manage liquidity risk in its foreign currency portfolios, liquid assets are required to be held in each currency to cover cash flow obligations over one-day, two-day and six-week intervals. For New Zealand-dollar liquidity risk, NZDMO has established cash management arrangements with the Reserve Bank of New Zealand to support effective management of overall Crown cash flows.

  Liquidity Management

  As at 30 June 2009	Contractual Cash Flows $m	0-12 Months $m	1-2 Years $m	2-5 Years $m	5-10 Years $m	> 10 Years $m
  Overdrafts and Payables
  Crown balances with Westpac	3,609	3,609	-	-	-	-
  Creditors and payables	5	5	-	-	-	-
  Financial Liabilities
  Treasury bills - market	7,500	7,500	-	-	-	-
  Treasury bills - non-market	5	5	-	-	-	-
  Government bonds - market	28,371	5,432	1,089	10,710	10,132	1,008
  Government bonds - non-market	8,772	2,002	332	3,652	2,755	31
  Inflation-indexed bonds - market	2,074	72	72	215	1,715	-
  Inflation-indexed bonds - non-market	619	21	21	64	513	-
  Kiwi bonds	500	413	87	-	-	-
  Foreign currency debt	1,063	196	105	551	211	-
  Collateral	889	889	-	-	-	-
  Departmental deposits	117	117	-	-	-	-
  IMF allocation	336	336	-	-	-	-
  Immigration investor policy bonds	96	1	6	89	-	-
  Other	7	6	1	-	-	-
  Total Non-derivative Liabilities	53,963	20,604	1,713	15,281	15,326	1,039
  Derivative Inflows[20]
  Foreign exchange contracts	19,930	19,633	152	145	-	-
  Foreign exchange options	-	-	-	-	-	-
  Cross currency swaps	6,007	454	192	2,363	2,998	-
  Interest rate swaps	2,571	520	463	956	632	-
  Total Derivative Inflows	28,508	20,607	807	3,464	3,630	-
  Derivative Outflows[20]
  Foreign exchange contracts	19,840	19,561	147	132	-	-
  Foreign exchange options	-	-	-	-	-	-
  Cross currency swaps	5,755	363	81	2,185	3,126	-
  Interest rate swaps	2,000	251	304	838	607	-
  Total Derivative Outflows	27,595	20,175	532	3,155	3,733	-

  Notes

  • [20]Derivative flows include both derivatives in gain and derivatives in loss.

  Credit Risk#

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  Credit risk is defined as the risk of loss in portfolio value owing to the downgrade or default of an institution or security issuer.

  NZDMO is exposed to credit loss when the issuer of a debt instrument defaults on interest or principal payments, or when a counterparty in a transaction such as a swap agreement defaults on an obligation. Credit-related loss in the value of the portfolio also occurs when the market value of a debt instrument falls owing to an increase in credit risk.

  Financial instruments that subject NZDMO to credit risk include bank balances, advances, investments, interest rate swaps, currency swaps and foreign exchange forward contracts.

  NZDMO manages credit risk through the credit screening of counterparties, use of credit exposure limits and counterparty collateral obligations. Credit exposures are maintained only with highly rated institutions for which the probability of default is low. To diversify credit exposure, NZDMO limits its exposure to any one institution. The creditworthiness of counterparties is continuously monitored. Credit risk is further controlled by incorporating credit support annexes into master swap agreements with swap and foreign exchange counterparties.

  NZDMO lending to government entities, and to entities to which NZDMO is exposed as a matter of government policy, is not managed under the credit policy.

  2008 $m	Credit Risk Management	2009 $m
  20,536	Total NZDMO financial assets	22,831
  	Less:
  13,909	Crown-related balances	15,297
  6,627	Total Credit Exposure for Financial Assets	7,534

  Concentration of Credit Exposure as at 30 June 2009#

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  By Credit Rating	AAA $m	AA $m	A $m	Other $m	Non-rated $m	Credit Exposure $m
  Foreign cash and cash equivalents	1,043	60	2	-	-	1,105
  Debtors and receivables	-	396	-	-	-	396
  Advances to non-Crown	16	-	-	-	49	65
  Marketable securities	2,461	963	-	-	-	3,424
  External deposits	-	442	-	-	-	442
  Derivatives in gain	83	1,202	353	-	10	1,648
  IMF reserve position	-	-	-	-	454	454
  Total Credit Exposure by Credit Rating	3,603	3,063	355	-	513	7,534

  By Industry	Sovereign Issuers $m	Supra- National $m	NZ Banking Sector $m	Foreign Banking Sector $m	Other $m	Credit Exposure $m
  Foreign cash and cash equivalents	1,045	-	58	2	-	1,105
  Debtors and receivables	-	-	396	-	-	396
  Advances to non-Crown	16	-	-	-	49	65
  Marketable securities	1,320	498	520	630	456	3,424
  External deposits	-	-	442	-	-	442
  Derivatives in gain	-	-	1,153	401	94	1,648
  IMF reserve position	-	454	-	-	-	454
  Total Credit Exposure by Industry	2,381	952	2,569	1,033	599	7,534

  By Geographical Area	United States of America $m	Europe $m	Japan $m	Australia $m	New Zealand $m	Supra- National $m	Other $m	Credit Exposure $m
  Foreign cash and cash equivalents	1,042	-	3	2	58	-	-	1,105
  Debtors and receivables	-	-	-	-	396	-	-	396
  Advances to non-Crown	-	-	-	-	65	-	-	65
  Marketable securities	127	1,371	231	609	520	498	68	3,424
  External deposits	-	-	-	-	442	-	-	442
  Derivatives in gain	247	225	-	12	1,163	-	1	1,648
  IMF reserve position	-	-	-	-	-	454	-	454
  Total Credit Exposure by Geographical Area	1,416	1,596	234	623	2,644	952	69	7,534

  Concentration of Credit Exposure as at 30 June 2008#

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  By Credit Rating	AAA $m	AA $m	A $m	Other $m	Non-Rated $m	Credit Exposure $m
  Foreign cash and cash equivalents	1	17	-	-	-	18
  Debtors and receivables	-	99	-	-	-	99
  Advances to non-Crown	-	-	-	-	40	40
  Marketable securities	3,807	1,054	143	-	-	5,004
  External deposits	261	487	-	-	-	748
  Derivatives in gain	54	458	11	-	7	530
  IMF reserve position	-	-	-	-	188	188
  Total Credit Exposure by Credit Rating	4,123	2,115	154	-	235	6,627

  By Industry	Sovereign Issuers $m	Supra- national $m	NZ Banking Sector $m	Foreign Banking Sector $m	Other $m	Credit Exposure $m
  Foreign cash and cash equivalents	1	-	-	17	-	18
  Debtors and receivables	-	-	50	49	-	99
  Advances to non-Crown	-	-	-	-	40	40
  Marketable securities	728	326	-	1,721	2,229	5,004
  External deposits	261	-	259	228	-	748
  Derivatives in gain	-	-	155	315	60	530
  IMF reserve position	-	188	-	-	-	188
  Total Credit Exposure by Industry	990	514	464	2,330	2,329	6,627

  By Geographical Area	United States of America $m	Europe $m	Japan $m	Australia $m	New Zealand $m	Supra- national $m	Other $m	Credit Exposure $m
  Foreign cash and cash equivalents	1	-	-	17	-	-	-	18
  Debtors and receivables	-	-	-	49	50	-	-	99
  Advances to non-Crown	-	-	-	-	40	-	-	40
  Marketable securities	383	2,639	-	1,656	-	326	-	5,004
  External deposits	261	75	1	-	259	-	152	748
  Derivatives in gain	131	131	-	106	161	-	1	530
  IMF reserve position	-	-	-	-	-	188	-	188
  Total Credit Exposure by Geographical Area	776	2,845	1	1,828	510	514	153	6,627

  Operational Risk#

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  Operational risk refers to the risk of loss owing to an event that could impact on NZDMO's ability to produce its outputs to the quality, quantity and cost specified. Risk events include resource failures or constraints, control and security breaches or failures, transaction errors, compliance breaches, the breakdown of key relationships and disasters.

  NZDMO's generic objectives in respect of operational risk are to:

  • mitigate the financial and reputational loss arising from operational failure by effectively managing operational risks where it is cost-effective to do so, and
  • establish a culture of continuous improvement of operational policies and practices.

  Operational risks in NZDMO are managed in a number of ways. Controls include general Treasury policies, NZDMO-specific policies, reporting and performance management requirements, delegations and systems access restrictions. They are supported by close communications and regular management meetings that, in turn, reinforce a strong team ethic. Independent experts, such as external auditors, provide additional support in managing operational risk.

  Market Risk#

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  Market risk is defined as the impact of changes in interest rates or exchange rates on portfolio value.

  The objective of NZDMO’s market risk management is to limit this risk within parameters that allow for the achievement of its other financial objectives, including earning a satisfactory rate of return on liquid assets and adding value in its foreign currency execution activities.

  NZDMO has implemented an asset and liability matching (ALM) policy to manage risk within its portfolios. The intent of this policy is to minimise the currency and interest rate risks to NZDMO's revenues and balance sheet, by matching the characteristics of its assets to those of its liabilities, where practicable. The range of instruments used to minimise exposure to market risk includes debt instruments, financial assets, foreign exchange contracts, currency swaps, interest rate swaps and futures contracts.

  NZDMO is exposed to market risk when assets and liabilities are imperfectly matched. It is managed through the use of Value at Risk (VaR) limits and stop-loss limits.

  The VaR limit is expressed over daily, monthly and annual time horizons at 95% confidence level and reflects the risk tolerance of the Government in respect of NZDMO's activities. NZDMO uses back‐testing to evaluate the performance of the VaR model, and stress‐testing is carried out to understand how extreme or unusual events would impact on the portfolio. Monthly, quarterly and annual stop‐loss limits are in place to protect NZDMO from further losses once actual losses reach a certain point.

  Because NZDMO's liabilities exceed its assets, it also incurs market risk associated with the net volume of outstanding government debt. Fluctuations in the net market value of New Zealand-dollar debt as a result of interest rate movements are not actively managed, and unmatched debt is accounted for on an amortised cost basis.

  Foreign Currency Risk Management#

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  NZDMO's net foreign currency debt position is kept close to zero, as indicated in the schedules below.

  As at 30 June 2009	NZD $m	USD $m	Yen $m	Euro $m	AUD $m	Other $m	Carrying Value $m
  Cash, Cash Equivalents and Receivables
  Crown settlement account	8,320	-	-	-	-	-	8,320
  Foreign cash and cash equivalents	-	1,043	4	17	17	24	1,105
  Debtors and receivables	396	-	-	-	-	-	396
  Advances
  RBNZ	-	1,963	-	1,207	-	-	3,170
  Crown Financing Agency	1,401	-	-	-	-	-	1,401
  Housing New Zealand	1,813	-	-	-	-	-	1,813
  New Zealand Railways Corporation	399	-	-	-	-	-	399
  Non-Crown	65	-	-	-	-	-	65
  Financial Assets
  Marketable securities	1,492	792	231	341	483	85	3,424
  External deposits	226	13	20	29	97	57	442
  Derivatives in gain	12,112	(6,626)	(377)	(1,124)	(891)	(1,252)	1,842
  IMF reserve position	7	197	49	152	-	49	454
  Total Financial Assets	26,231	(2,618)	(73)	622	(294)	(1,037)	22,831
  Overdrafts and Payables
  Crown balances with Westpac	3,609	-	-	-	-	-	3,609
  Creditors and payables	5	-	-	-	-	-	5
  Financial Liabilities
  NZD government securities	39,586	-	-	-	-	-	39,586
  Foreign currency debt	-	623	353	-	-	17	993
  Collateral	-	889	-	-	-	-	889
  Derivatives in loss	7,060	(4,306)	(464)	436	(295)	(1,098)	1,333
  Departmental deposits	-	27	-	74	11	5	117
  IMF allocation	-	148	37	114	-	37	336
  Immigration investor policy bonds	96	-	-	-	-	-	96
  Other	2	-	-	-	-	-	2
  Total Financial Liabilities	50,358	(2,619)	(74)	624	(284)	(1,039)	46,966
  Net Currency Holdings	(24,127)	1	1	(2)	(10)	2	(24,135)

  Audit Report#

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  To the readers of the Treasury's Financial Statements and Statement of Service Performance for the year ended 30 June 2009#

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  The Auditor-General is the auditor of The Treasury (the Department). The Auditor-General has appointed me, Godfrey Boyce, using the staff and resources of KPMG, to carry out the audit of The Treasury, for the year ended 30 June 2009. The audit covers the financial statements, statement of service performance and schedules of non-departmental activities included in the annual report of the Department for the year ended 30 June 2009.

  Unqualified Opinion

  In our opinion:

  • The financial statements of the Department on pages 63 to 84:
    • comply with generally accepted accounting practice in New Zealand; and
    • fairly reflect:
    • the Department's financial position as at 30 June 2009;
    • the results of its operations and cash flows for the year ended on that date;
    • its expenses and capital expenditure incurred against each appropriation administered by the Department and each class of outputs included in each output expense appropriation for the year ended 30 June 2009; and
    • its unappropriated expenses and capital expenditure for the year ended 30 June 2009.
    • The schedules of non-departmental activities on pages 92 to 102 and 104 to 113 fairly reflect the assets, liabilities, revenues, expenses, contingencies, commitments and trust monies managed by the Department on behalf of the Crown for the year ended 30 June 2009.
    • The statement of service performance tables of the Department on pages 34 to 51 and 58 to 61:
    • complies with generally accepted accounting practice in New Zealand; and
    • fairly reflects for each class of outputs:
    • its standards of delivery performance achieved, as compared with the forecast standards included in the statement of forecast service performance adopted at the start of the financial year; and
    • its actual revenue earned and output expenses incurred, as compared with the forecast revenues and output expenses included in the statement of forecast service performance adopted at the start of the financial year.

  The audit was completed on 30 September 2009, and is the date at which our opinion is expressed.

  The basis of our opinion is explained below. In addition, we outline the responsibilities of the Secretary of the Treasury and the Auditor, and explain our independence.

  Basis of Opinion

  We carried out the audit in accordance with the Auditor-General's Auditing Standards, which incorporate the New Zealand Auditing Standards.

  We planned and performed the audit to obtain all the information and explanations we considered necessary in order to obtain reasonable assurance that the financial statements and statement of service performancedid not have material misstatements, whether caused by fraud or error.

  Material misstatements are differences or omissions of amounts and disclosures that would affect a reader's overall understanding of the financial statements and statement of service performance. If we had found material misstatements that were not corrected, we would have referred to them in our opinion.

  The audit involved performing procedures to test the information presented in the financial statements and statement of service performance. We assessed the results of those procedures in forming our opinion.

  Audit procedures generally include:

  • determining whether significant financial and management controls are working and can be relied on to produce complete and accurate data;
  • verifying samples of transactions and account balances;
  • performing analyses to identify anomalies in the reported data;
  • reviewing significant estimates and judgements made by the Secretary of the Treasury;
  • confirming year-end balances;
  • determining whether accounting policies are appropriate and consistently applied; and
  • determining whether all financial statement and statement of service performance disclosures are adequate.

  We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements and statement of service performance.

  We evaluated the overall adequacy of the presentation of information in the financial statements and statement of service performance. We obtained all the information and explanations we required to support our opinion above.

  Responsibilities of the Secretary of the Treasury and the Auditor

  The Secretary of the Treasury is responsible for preparing the financial statements and statement of service performance in accordance with generally accepted accounting practice in New Zealand. The financial statements must fairly reflect the financial position of the Department as at 30 June 2009 and the results of its operations and cash flows for the year ended on that date.

  The financial statements must also fairly reflect the expenses and capital expenditure incurred against each appropriation administered by the Department and each class of outputs included in each output expense appropriation for the year ended 30 June 2009. The financial statements must also fairly reflect the Department's unappropriated expenses and capital expenditure for the year ended on that date.

  In addition, the Secretary of the Treasury is responsible for preparing schedules of non-departmental activities, in accordance with the Treasury Instructions 2008 that must fairly reflect the assets, liabilities, revenues, expenses, contingencies, commitments and trust monies managed by the Department on behalf of the Crown for the year ended 30 June 2009.

  The statement of service performance must fairly reflect, for each class of outputs, the Department's standards of delivery performance achieved and revenue earned and expenses incurred, as compared with the forecast standards, revenue and expenses adopted at the start of the financial year. The Secretary of the Treasury's responsibilities arise from sections 45A and 45B of the Public Finance Act 1989.

  We are responsible for expressing an independent opinion on the financial statements and statement of service performance and reporting that opinion to you. This responsibility arises from section 15 of the Public Audit Act 2001 and section 45D(2) of the Public Finance Act 1989.

  Independence

  When carrying out the audit we followed the independence requirements of the Auditor-General, which incorporate the independence requirements of the Institute of Chartered Accountants of New Zealand.

  In addition to the audit we have carried out assignments in the areas of general accounting and advisory, which are compatible with independence requirements. Other than the audit and these assignments, we have no relationship with or interests in the Department.

   

  Godfrey Boyce
  KPMG
  On behalf of the Auditor-General
  Wellington, New Zealand

   

  Matters Relating to the Electronic Presentation of the Audited Financial Statements

  This audit report relates to the financial statements of The Treasury for the year ended 30 June 2009 included on The Treasury’s website.  The Secretary to the Treasury is responsible for the maintenance and integrity of The Treasury’s website.  We have not been engaged to report on the integrity of The Treasury’s website.  We accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. 

  The audit report refers only to the financial statements named above.  It does not provide an opinion on any other information which may have been hyperlinked to or from the financial statements.  If readers of this report are concerned with the inherent risks arising from electronic data communication they should refer to the published hard copy of the audited financial statements and related audit report dated 30 September 2009 to confirm the information included in the audited financial statements presented on this website.

  Legislation in New Zealand governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.

  Quality Standards for Policy Advice#

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  Quality policy advice is fit for purpose

  This Quality Standard for Policy Advice sets out the characteristics or dimensions of policy advice that will best enable it to promote well-informed high-quality decision-making by Ministers. However the quality dimensions below are not a checklist and not all dimensions will be equally important in every case - judgements are required at the outset about how to apply and balance the quality dimensions to ensure a particular piece of advice is fit for purpose in achieving the result sought. When undertaking a piece of work, explicit consideration needs to be given to the following: What point are Ministers at in their decision-making process? Can the Treasury add value? What are our opportunities to have an impact? What result are we seeking by providing a piece of advice? How should the quality dimensions below be applied and balanced to achieve this result? What is the relative priority of this piece of work? What level of investment is warranted?

  Dimensions of quality policy advice
  Analytically rigorous (Analysis)	Set in a wider strategic context (Applied analysis)	Customer focused and persuasive (Advice)
  Relevant frameworks Appropriate analytical frameworks are used, and: knowledge is up-to-date and informed by recent thinking and literature in the field assumptions behind the frameworks used are explicit and consideration has been given to how they will be expected to play out in the real world (a world which includes information and transaction costs, market failure, government failure, etc), and consideration has been given to less traditional frameworks and whether they would add innovative or useful perspectives.	Strategic Advice is set in the context of the Treasury’s results and informed by a strategic view about what is important. We are explicit about the relative importance and materiality of the issue, in fiscal, economic and strategic terms. Connections across policy issues are made, ensuring that Ministers receive a whole-of-government perspective. Advice considers the long-term implications of decisions and provides a perspective that goes beyond immediate impacts. We frame issues and help set the agenda.	Clear Advice is compellingly presented. It is: brief and concise – key messages should be readily apparent to the reader easy to read – has a clear and logical structure, avoids technical jargon and uses visual devices such as charts and tables where possible pitched to suit the target audience – uses appropriate language, style and level of detail, and framed in terms of how it fits with previous advice and communications with the Minister.
  Robust reasoning and logic Advice has a clear purpose, problem definition, evaluation of options against criteria and assessment of risks and opportunities. We come to a conclusion and give action-oriented recommendations.	Practical Issues of implementation, technical feasibility, practicality and timing are considered and advice accurately identifies compliance, transitional, legislative, revenue and administrative implications and costs.	Timely Reports should meet Ministers' need for advice that helps in the decision-making process (even if it means, at times, that advice is not fully developed) and indicate when a decision is required.
  Evidence-based Analysis is supported by relevant evidence: Empirical methods are sound, data gaps are identified and the level of confidence/certainty in our empirical base is explicit. We draw on New Zealand experience of current and past policy interventions and, where relevant, the experience of other countries. We give our best judgement despite data imperfections; we acknowledge information limitations and advise within them.	Public sector consultation Ministers receive advice that enables them to engage with their colleagues on a fully informed basis because: thorough and timely consultation with other government departments has occurred and points of difference, and the reasons for these, are set out, and where possible, advice is developed in conjunction with relevant government agencies.	Politically aware Advice: demonstrates awareness of the wider environment and political situation is based on a clear understanding of the desired outcomes of the Minister/ Government relates to the perspectives of Ministers, even if suggesting something that tests those perspectives, and recognises choices and constraints Ministers face, and includes a range of options to address these.
  Free and frank Our advice is honest, impartial and politically neutral - we have a duty to alert Ministers to the possible consequences of following particular policies, whether or not such advice accords with Ministers' views. Good free and frank advice is offered with an understanding of its political context and the constraints within which the Minister is operating.	Perspectives of wider stakeholders We understand and advise Ministers on the perspective of groups outside the public sector, consult with key stakeholders and provide advice on communications where appropriate.	Solution focused We are proactive, anticipating, as well as responding to, Ministers' needs. Advice suggests a clear way forward (“Here is what you can do” as well as “Here is a problem”) and includes a range of practical options (first best advice, but also second and third).

  Quality involves continuous improvement
  At the end: Did we achieve the result we were seeking? Were our judgements about what would be fit for purpose correct? What would we do differently next time? How can we capture and share this learning?

  Research and Policy Publications#

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  for the year ended 30 June 2009

  The Treasury's research and policy publications contain work in progress on a variety of economic, financial, trade and social issues. Our aim in publishing is to make papers available to a wider audience, and to inform and encourage public debate. All papers can be viewed on our website: www.treasury.govt.nz/publications/research-policy

  Papers added during 2008/09 include:

  Publishing Date and Paper Number	Working Papers 2008/09
  January 2009 (WP: 09/01)	Multi-Product Exporters and Product Turnover Behaviour of New Zealand Exporters
  Publishing Date and Paper Number	Policy Perspectives Papers 2008/09
  January 2009 (PP: 09/01)	Spending Through the Tax System: Tax Expenditures
  Publishing Date and Paper Number	Productivity Papers 2008/09
  January 2009 (TPRP: 09/01)	International Connections and Productivity: Making Globalisation Work for New Zealand

  Legislation#

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  as at 30 June 2009

  Budget legislation administered by the Treasury during the year:#

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  • Appropriation Act(s)
  • Imprest Supply Act(s)

  Other legislation administered by the Treasury:#

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  • Bank of New Zealand Act 1988
  • Crown Entities Act 2004 (Part 4)
  • Crown Forests Assets Act 1989
  • Crown Research Institutes Act 1992
  • Export Guarantee Act 1964
  • Farm and Fishing Vessel Ownership Savings Schemes Closure Act 1998
  • Finance Acts (various)
  • Government Superannuation Fund Act 1956
  • Hawkes Bay Earthquake Act 1931
  • Institute of Chartered Accountants of New Zealand Act 1996
  • International Finance Agreements Act 1961
  • KiwiSaver Act 2006 (section 177 jointly with MED)
  • National Expenditure Adjustment Act 1932
  • National Provident Fund Restructuring Act 1990
  • New Zealand Council Planning Dissolution Act 1991
  • New Zealand Government Property Corporation Act 1953
  • New Zealand Railways Corporation Act 1981
  • New Zealand Railways Corporation Restructuring Act 1990
  • New Zealand Railways Staff Welfare Society Dissolution Act 1999
  • New Zealand Superannuation and Retirement Income Act 2001 (various provisions)
  • Overseas Investment Act 2005
  • Post Office Bank Act 1987
  • Public Audit Act 2001
  • Public Finance Act 1989
  • Radio New Zealand Act (No 2) 1995
  • Rural Banking and Finance Corporation of New Zealand Act 1989
  • Southland Electricity Act 1993
  • State Insurance Act 1990
  • State-Owned Enterprises Act 1986
  • State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Act 2007
  • Superannuation Schemes Act 1989
  • Tourist Hotel Corporation of New Zealand Act 1989
  • Treasurer (Statutory References) Act 1997

  Delegated legislation administered by the Treasury:#

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  • Bank of New Zealand Order 1989
  • Cityline (NZ) Vesting Order 1992
  • Crown Entities (Financial Powers) Regulations 2005
  • Crown Entities (Financial Powers) Amendment Regulations 2006
  • Crown Research Institutes Act Commencement Order 1998
  • Export Guarantee Amendment Act Commencement Order 1990
  • Finance Act Order (various)
  • Government Superannuation Orders and Regulations (various)
  • Institute of Chartered Accountants of New Zealand Act Commencement Order 2002
  • International Finance Agreements Amendment Act Commencement Order 1978
  • International Finance Agreements Amendment Act Commencement Order 1993
  • New Zealand Superannuation (Political Commitment) Order 2003
  • New Zealand Superannuation (Political Commitment) Order 2004
  • National Provident Fund (Approval Restructuring Proposal) Order 1991
  • National Provident Fund (Approval of Amendments to Restructuring Proposal) Order 1993
  • National Savings Investment Account Regulations (various)
  • New Zealand Railways Corporation Restructuring Act Orders (various)
  • New Zealand Staff Welfare Society Dissolution Act Commencement Order 1999
  • Overseas Investment Act Commencement Order 2005
  • Overseas Investment Regulations 2005
  • Overseas Investment Amendment Regulations (various)
  • Post Office Bank Amendment Act Orders (various)
  • Public Audit (West Coast Development Trust) Order 2002
  • Public Finance Act Orders (various)
  • Public Finance (Departmental Guarantees and Indemnities) Regulations 2007
  • Rural Banking and Finance Corporation of New Zealand Act Commencement Order 1989
  • Social Security (Rates of Benefits and Allowances) Order (various)
  • Southland Electricity Act Commencement Order 1994
  • State Insurance Act (Vesting) Order 1990
  • State-Owned Enterprises Act Orders (various)
  • Tourist Hotel Corporation of New Zealand Act Commencement Order 1990
  • Tower Corporation Act Commencement Order 1990

  Monitoring of Crown Agencies#

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  The Treasury has sole monitoring responsibility for the following:#

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  • Earthquake Commission (EQC)
  • National Provident Fund (NPF)
  • New Zealand Superannuation Fund (NZSF)
  • Government Superannuation Fund (GSF)
  • Air New Zealand Ltd

  CCMAU has sole monitoring responsibility for the following:#

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  • New Zealand Lotteries Commission (Lotteries)
  • Pacific Forum Line Ltd (PFL)

  CCMAU has a lead monitoring role with support from the Treasury for the following:#

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  State-Owned Enterprises:

  • Airways Corporation of New Zealand Ltd (Airways)
  • Animal Control Products Ltd (ACP)
  • AsureQuality Ltd (AsureQuality)
  • Electricity Corporation of New Zealand Ltd (ECNZ) (the residual company)
  • Genesis Power Ltd (Genesis)
  • Kordia Group Ltd (Kordia)
  • Landcorp Farming Ltd (Landcorp)
  • Learning Media Ltd (LML)
  • Meridian Energy Ltd (Meridian)
  • Meteorological Service of New Zealand Ltd (MetService)
  • Mighty River Power Ltd (Mighty River Power)
  • New Zealand Post Ltd (NZ Post)
  • New Zealand Railways Corporation (KiwiRail Group)
  • Quotable Value Ltd (Quotable Value)
  • Solid Energy New Zealand Ltd (Solid Energy)
  • Timberlands West Coast Ltd (Timberlands)
  • Transpower New Zealand Ltd (Transpower)

  Other Crown companies:

  • New Zealand Fast Forward Fund Ltd (NZFF Fund)
  • New Zealand Venture Investment Fund Ltd (NZVIF)
  • Radio New Zealand Ltd (RNZ)
  • Research and Education Advanced Network New Zealand Ltd (REANNZ)
  • Television New Zealand Ltd (TVNZ)

  Crown Research Institutes:

  • AgResearch Ltd (AgResearch)
  • Industrial Research Ltd (IRL)
  • Institute of Environmental Science & Research Ltd (ESR)
  • Institute of Geological & Nuclear Sciences Ltd (GNS Science)
  • Landcare Research New Zealand Ltd (Landcare Research)
  • National Institute of Water & Atmospheric Research Ltd (NIWA)
  • New Zealand Forest Research Institute Ltd (Scion)
  • The New Zealand Institute for Plant & Food Research Ltd (Plant & Food Research)

  Other:

  • Christchurch International Airport Ltd (CIAL)
  • Dunedin International Airport Ltd (DIAL)
  • Invercargill Airport Ltd (IAL)

  Crown entity:

  • Public Trust (Public Trust)