Formats and related files
Presented to the House of Representatives Pursuant to Section 44 of the Public Finance Act.
Read the related Treasury media statement: Treasury's Annual Report shows confidence and collaboration in its 175th year (21 October 2015).
Previous annual reports are available from Archive of Annual Reports.
The Relationship Between Strategic Intentions, Outputs and Appropriations#
Reporting Against Departmental Appropriations#
This section of the report describes the groups of outputs that the Treasury was funded to deliver in 2014/15 and reports on what was achieved with each appropriation against what was intended to be achieved and how performance would be assessed as set out in the supporting information to the 2014/15 Estimates and 2014/15 Supplementary Estimates.
The output appropriations support the achievement of the strategic intentions set out on pages 9 to 25 of this Annual Report. Those pages provide readers with further information on the significant progress and key achievements we made using expenditure from these appropriations.
Policy Advice - Finance#
What is intended to be achieved with this appropriation#
This appropriation is intended to enable and facilitate ministerial decision-making that achieves improved economic performance, a high-performing State sector and a stable and sustainable macroeconomic environment for New Zealand.
What was achieved with this appropriation#
Performance Dimensions | Target for 2014/15 | Performance for 2014/15 | Forecast for 2015/16 |
---|---|---|---|
Technical quality of policy advice papers assessed by a survey with a methodical robustness of 90%. See page 30 for the summary findings of the policy review. |
At least an average of 70% | 68% | 70% |
The satisfaction of the Minister of Finance with the policy advice service, as per the common satisfaction survey. | At least 70% | 78.3% | 70% |
The total cost per hour of producing outputs. | $203 | $183 | $203 |
The welfare system operates further in line with the investment approach, based on the external valuation. | Achieved | Achieved | Achieved |
Budget decisions are in line with short-term fiscal intentions in the BPS. | Achieved | Some risks to the return to surplus intention | Achieved |
Significant Regulatory Impact Statements (RIS) meet most or all of Regulatory Impact Analysis (RIA) requirements. | 90% | 63% - This and other indicators of RIS quality do not indicate perceptible improvements in the quality RISs across government. The Treasury is re-looking at the indicators, investigating the barriers to improved performance and developing initiatives to address them. | 90% |
Tax revenue forecast error on one-year-ahead forecasts. | Less than +/-3% | Achieved: +0.3% | Less than +/-3% |
Production of advice that provides options which allow the Government to deliver a credible fiscal strategy consistent with the fiscal prudence provisions of the Public Finance Act 1989. Where this advice is underpinned by modelling, major models are externally quality assured and, where appropriate, assumptions are tested with suitably qualified external experts. | Achieved | Achieved | Achieved |
2014 Actual $000 |
2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
2016 Unaudited Forecast as per BEFU 2015 $000 |
|
---|---|---|---|---|---|
31,892 | Expenses | 34,582 | 34,704 | 34,954 | 33,037 |
Funded by: | |||||
31,811 | Revenue - Crown | 34,882 | 34,692 | 34,882 | 33,025 |
81 | Other revenue | 51 | 12 | 72 | 12 |
Further information on what has been achieved with this appropriation is provided in the reporting against the following strategic intentions:
- New Zealand has an internationally connected and competitive business environment
- People have the capability and opportunities to participate in society and the economy
- The State sector efficiently and effectively delivers results for New Zealanders
- There is a faster improvement in Māori living standards
- The economic cycle is managed in a way that supports sustainable growth, and
- The Crown balance sheet is managed effectively and efficiently.
The Quality of the Treasury's Policy Advice#
The Treasury has a quality standard for policy advice that is applied to all appropriations. The Quality Standards for Policy Advice are published in the Information Supporting the Estimates.
Review of the quality of the Treasury's policy advice 2014/15#
As in previous years, a panel of experienced policy leaders within the Treasury was commissioned to review a sample of the Treasury's policy advice for the 2014/15 year. The intent of the review was to assess the quality of a sample of advice against the Treasury's Quality Standards for Policy Advice, identify examples of best practice and identify areas for potential improvement.
The panel was run jointly with SSC, which ensures an external perspective to the assessment of advice. The panel looked at a representative sample of advice selected using a randomised methodology.
The review found that the average grade for assessed reports was 6.8 out of 10, compared with last year's grade of 7.
These results mean we have not achieved our target of an average of at least 70%, or 7 out of 10. While the distance between our target and our actual score is unlikely to be statistically significant, and our score is not notably out of step with results from prior years, we take this result as an indication that we need to do more work to ensure that our Quality Standards for Policy Advice are being consistently applied across the Treasury.
Overall, the panel found that the reports included in the review generally showed a deep understanding of the issues involved, used evidence well and were well written. The reports that received the lower scores did so for a number of different reasons, including having limited discussion of alternative options, lacking detail on how conclusions were reached and failing to set advice within a broader strategic context. Some reports, while containing good analysis, were not laid out in the most user-friendly way and lost points for that reason.
We plan to develop a series of recommendations for the future based on using reports that scored well as examples of best practice. We will also look more closely at the reports that scored less well in order to decide whether they are representative of more systemic issues.
Provision of Financial Operations Services and Operational Advice#
What is intended to be achieved with this appropriation#
This appropriation is intended to improve economic performance and financial stewardship across the State sector, export and financial markets, through provision of relevant and timely operational support, services and advice.
What was achieved with this appropriation#
Performance Measure | Target for 2014/15 | Performance for 2014/15 | Forecast for 2015/16 |
---|---|---|---|
Management of liabilities and investigation of mechanisms to discharge the Crown's obligations in a timely manner ensuring any costs from the materialisation of liabilities are contained (see Measurement Standards). | Achieved | Achieved | Achieved |
Agencies comply with Cabinet's capital approval requirements and the Better Business Cases standard. | 100% | 65% - A significant number of decisions were made as part of the Budget process. | N/A |
All new significant operating expenditure proposals received during the Budget process are subject to cost benefit analysis or similar. | 100% |
Not achieved - 44% While the Treasury analysed and provided advice to Budget Ministers on all significant operating initiatives, cost benefit analysis was not always completed by departments. This was often owing to initiatives for new funding which were developed late, or outside of, the planned Budget process. The Treasury continues to look for opportunities to improve performance in this area including furthering work done and initiated during 2014/15 to develop cost benefit analysis tools. |
100% |
Improvement in BASS' effectiveness and efficiency indicators. | Achieved | Partially achieved - Agencies reported improvements in capability indicators across all five functions while there were mixed results across other effectiveness indicators. In looking at efficiency indicators, there continues to be significant variability in results across agencies with no noticeable improvement in overall efficiency across all functions. | N/A |
Audit opinion issued by the Controller and Auditor-General on the Financial Statements of the Government. | Unqualified | Unqualified | Unqualified |
Two Economic and Fiscal Updates produced, clearly explained and with conclusions tested with external panels. | Achieved | Achieved - Three updates were produced. The additional one was a Pre-election Fiscal Update. | Achieved |
Monthly Financial Statements of the Government produced in accordance with the Public Finance Act 1989 requirements and free from material errors. | Achieved | Achieved | Achieved |
Compliance with risk management policies and parameters for management of Crown lending and Crown bank accounts. | No breaches | No breaches | No breaches |
Provide advice to Ministers on the risk status of major monitored projects and options for mitigation of those risks, through the tri-annual reporting process for all monitored projects and through interim briefings as required. | 100% of advice and reports are provided | 100% of advice and reports are provided | N/A |
Maintain Gateway as the essential assurance methodology for major capital investments in the system. | Complete at least 24 reviews and 85% of Senior Responsible Owners agree “Review was beneficial and will impact positively on the outcome of the programme/project” and “Report's recommendations will enable me to achieve improvements in the project's outcomes”. |
30 reviews completed. 100% comprising 21% of Senior Responsible Owners who agreed the “Review was beneficial and will impact positively on the outcome of the programme/project” and a further 79% who strongly agreed with this. 99% comprising 32% of Senior Responsible Owners agreed the “Report's recommendations will enable me to achieve improvements in the project's outcomes” and a further 67% strongly agreed. |
24 reviews and 85% |
National Infrastructure Plan 2015 produced by 30 June 2015. | Achieved | Ministers have agreed to publication of the National Infrastructure Plan in August 2015. | N/A |
Enhance the collection and use of agreed asset-based performance information. | Achieved | Achieved | Achieved |
Percentage of Four-year Plans submitted by agencies that meet the criteria expected of a credible medium-term strategic plan. | 60% target | 48% of agencies submitted a 2015 Four-year Plan that met the criteria expected of a credible medium-term strategic plan. We have continued to see improvement in the quality of the Four-year Plans submitted this year with a further 45% of Plans sitting just below meeting the criteria for a credible medium-term strategic plan. | 75% |
New Zealand Export Credit Office |
|||
New export credit policies underwritten. | 80 | 50 | 70 |
New exports supported. | $300 million | $513 million | $320 million |
New exposure of export credit policies. | $120 million | $158 million | $120 million |
Compliance with International Guidelines (OECD and WTO) and Delegated Mandate. | 100% | 100% | 100% |
Forecast total external engagements. | 420 | 520 | 420 |
Five-year Loss Ratio (Claims Paid & Reserved/Premium Earned). | Lower than 35% |
Not achieved - 160% (see note following table) |
Lower than 35% |
Since inception Loss Ratio (Total Claims Paid & Reserved/Total Premium Earned). | Lower than 35% |
Not achieved - 123% (see note following table) |
N/A |
Note:
NZECO charges risk-weighted premiums and fees in respect to its export credit insurance and financial guarantee solutions. A key performance measurement is that NZECO's premiums and fees cover its operating costs and claims paid. Typical of an export credit agency whose role is to underwrite risks on countries, markets and businesses where the private sector's risk appetite is limited, NZECO's risks and claims can be lumpy and, accordingly, this measurement has a longer-term perspective.
2014 Actual $000 |
Provision of Financial Operations Services and Operational Advice | 2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
2016 Unaudited Forecast as per BEFU 2015 $000 |
---|---|---|---|---|---|
31,078 | Expenses | 29,198 | 29,251 | 31,231 | 28,840 |
Funded by: | |||||
27,437 | Revenue - Crown | 26,235 | 27,050 | 26,235 | 26,639 |
3,239 | Other revenue | 4,295 | 2,201 | 4,996 | 2,201 |
Notes:
The main elements of this variance include an underspend against NZECO ($765,000) owing to variable demand-related costs and an underspend against the Government Investment portfolio's cost recovered activities ($473,000) which is offset by an under-recovery of these costs within revenue.
Further information on what has been achieved with this appropriation is provided in the reporting against the following strategic intentions:
- New Zealand has an internationally connected and competitive business environment
- People have the capability and opportunities to participate in society and the economy
- The State sector efficiently and effectively delivers results for New Zealanders
- The economic cycle is managed in a way that supports sustainable growth, and
- The Crown balance sheet is managed effectively and efficiently.
Administration of Crown Borrowing, Securities, Derivative Transactions and Investment Permanent Legislative Authority#
What is intended to be achieved with this appropriation#
This appropriation is intended to achieve the administration of the Crown's financing requirements so as to raise sufficient funds to finance the Crown's cash deficit while minimising the cost to the Crown of such borrowing.
What was achieved in this appropriation#
Performance Measure | Target for 2014/15 | Performance for 2014/15 | Forecast for 2015/16 |
---|---|---|---|
New core borrowing is achieved at an acceptable cost relative to a dynamic benchmark, as defined within the Portfolio Management Policy. | New core borrowing cost is less than 25 basis points over the benchmark. | Not achieved - Actual borrowing cost was 28 points over the benchmark owing to the need to overweight funding early in the 2014/15 year to ensure sufficient funding was in place to meet the April 2015 bond maturity. | N/A |
Compliance with risk management policies and parameters for portfolio management and debt issuance. | No more than four breaches. | Achieved | No more than four breaches |
Number of settlement errors, and financial value of losses arising from settlement errors. | No more than six errors; losses do not exceed $10,000. | Achieved | No more than six errors or $10,000 cost |
Borrowing programme is spread across the year. | Issued bonds volume variance to average requirement does not fall more than 10% behind the full-year programme volume. | Achieved | N/A |
2014 Actual $000 |
2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
2016 Unaudited Forecast as per BEFU 2015 $000 |
|
---|---|---|---|---|---|
Administration of Crown Borrowing PLA |
|||||
4,634 | Expenses | ||||
Funded by: | |||||
4,634 | Revenue - Crown | ||||
- | Other revenue | ||||
Administration of Derivative Transactions PLA |
|||||
950 | Expenses | ||||
Funded by: | |||||
950 | Revenue - Crown | ||||
- | Other revenue | ||||
Administration of Investment of Public Money PLA |
|||||
543 | Expenses | ||||
Funded by: | |||||
543 | Revenue - Crown | ||||
Administration of Crown Borrowing and Investment PLA |
|||||
- | Expenses | 7,593 | 8,917 | 7,982 | 8,917 |
Funded by: | |||||
- | Revenue - Crown | 7, 979 | 8,917 | 7,979 | 8,914 |
- | Other revenue | 4 | 3 | 3 | 3 |
Notes:
Expenditure is $389,000 under the Supplementary Estimates budget.
The costs of administering debt servicing and the development of the Business Information Hub were lower than expected.
Further information on what has been achieved with this appropriation is provided in the reporting against the “Crown balance sheet is managed effectively and efficiently” strategic intention.
Administration of Guarantees and Indemnities given by the Crown Permanent Legislative Authority#
What is intended to be achieved with this appropriation#
This appropriation is intended to achieve efficient and effective administration of the Crown's Guarantees and Indemnities, including the Wholesale and Retail Deposit Guarantee Schemes.
What was achieved with this appropriation#
Performance Measure | Target for 2014/15 | Performance for 2014/15 | Forecast for 2015/16 |
---|---|---|---|
Meet our legal obligations under the Wholesale Guarantee Funding Facility and Retail Deposit Guarantee Scheme. | Achieved | Achieved | Achieved |
2014 Actual $000 |
2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
2016 Unaudited Forecast as per BEFU 2015 $000 |
|
---|---|---|---|---|---|
322 | Expenses | 34 | 110 | 110 | 309 |
Funded by: | |||||
322 | Revenue - Crown | 110 | 110 | 110 | 309 |
Notes:
Expenditure is $76,000 under the Supplementary Estimates budget. This funding provides for any residual activity after the closure of the Deposit Guarantee Scheme but was not required during 2014/15.
Further information on what has been achieved with this appropriation is provided in the reporting against the “State sector efficiently and effectively delivers results for New Zealanders” strategic intention.
Crown Company Monitoring Advice to the Minister for State-Owned Enterprises and Other Responsible Ministers#
What is intended to be achieved with this appropriation#
This appropriation is intended to ensure appropriate financial and social returns, and long-term value is achieved from SOEs, Crown entity companies and Crown entities monitored under this appropriation.
What was achieved with this appropriation#
Performance Measure | Target for 2014/15 | Performance for 2014/15 | Forecast for 2015/16 |
---|---|---|---|
Board appointments completed for directors of SOEs and directors for other entities. | 38 SOEs' directors and 29 directors/board members for other entities | 36 SOEs' directors and 44 directors/board members for other entities | 30 SOEs' directors and 64 directors/ board members for other entities |
Technical quality of operational advice papers regarding ownership, performance monitoring and governance as assessed through the general Treasury policy advice quality assessment process. | At least an average of 70% | 69% | 70% |
Annual Portfolio Report produced, which enables assessment of Crown company and Crown Financial Institution (CFI) performance. | Achieved | Not achieved - In favour of placing a higher priority of producing more commercially usable and timely advice on Crown company and CFIs for shareholding Ministers. | N/A |
2014 Actual $000 |
2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
2016 Unaudited Forecast as per BEFU 2015 $000 |
|
---|---|---|---|---|---|
5,154 | Expenses | 4,606 | 4,508 | 5,295 | 5,098 |
Funded by: | |||||
5,146 | Revenue - Crown | 5,289 | 4,508 | 5,289 | 5,098 |
8 | Other revenue | 6 | - | 6 | - |
Notes:
Expenditure is $689,000 under the Supplementary Estimates budget owing to staff vacancies after the restructure of the Commercial Operation group.
Further information on what has been achieved with this appropriation is provided in the reporting against the “Crown balance sheet is managed effectively and efficiently” strategic intention.
Crown Company Monitoring Advice to the Minister of Science and Innovation and the Minister for Economic Development#
What is intended to be achieved with this appropriation#
This appropriation is intended to ensure appropriate financial and social returns, and long-term value is achieved from Crown research institutes and Crown entities monitored under this appropriation.
What was achieved with this appropriation#
Performance Measure | Target for 2014/15 | Performance for 2014/15 | Forecast for 2015/16 |
---|---|---|---|
Board appointments completed for Crown research institutes and other entities. | 25 directors | 20 | 13 |
Technical quality of operational advice papers regarding ownership, performance monitoring and governance as assessed through the general Treasury policy advice quality assessment process. | At least an average of 70% | N/A - No papers from this appropriation met the criteria for inclusion in the 2014/15 review of the quality of policy advice. | 70% |
2014 Actual $000 |
2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
2016 Unaudited Forecast as per BEFU 2015 $000 |
|
---|---|---|---|---|---|
448 | Expenses | 380 | 484 | 432 | 414 |
Funded by: | |||||
448 | Revenue - Crown | 432 | 484 | 432 | 414 |
Notes:
Expenditure is $52,000 under the Supplementary Estimates budget owing to staff vacancies after the restructure of the Commercial Operation group.
Further information on what has been achieved with this appropriation category is provided in the reporting against the “Crown balance sheet is managed effectively and efficiently” strategic intention.
Provision of Financial Services to the New Zealand Local Government Funding Agency (Revenue-dependent Appropriation)#
What is intended to be achieved with this appropriation#
This appropriation is intended to deliver high-quality administrative services to the LGFA to enable it to optimise the debt funding terms and conditions for participating local authorities.
This Service Level Agreement (SLA) was initiated to provide support during the establishment phase of the New Zealand LGFA. The SLA expired on 30 June 2015 as these services were no longer required. In the absence of any change to this situation, the Treasury will seek, as part of the 2015/16 Supplementary Estimates, to have this appropriation discontinued.
What was achieved with this appropriation#
Performance Measure | Target for 2014/15 | Performance for 2014/15 | Forecast for 2015/16 |
---|---|---|---|
Agreed service level standards are met. | Achieved | Achieved | Achieved |
2014 Actual $000 |
2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
2016 Unaudited Forecast as per BEFU 2015 $000 |
|
---|---|---|---|---|---|
154 | Expenses | 149 | 165 | 165 | 165 |
Funded by: | |||||
154 | Other revenue | 149 | 165 | 165 | 165 |
Shared Support Services#
What is intended to be achieved with this appropriation#
This appropriation is intended to achieve quality, efficient support services for other agencies.
What was achieved in this appropriation#
Performance Measure | Target for 2014/15 | Performance for 2014/15 | Forecast for 2015/16 |
---|---|---|---|
Service level standards are met to the standards and timeframes agreed with the three central agencies. | Achieved | Achieved | Achieved |
2014 Actual $000 |
2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
2016 Unaudited Forecast as per BEFU 2015 $000 |
|
---|---|---|---|---|---|
7,430 | Expenses | 10,676 | 10,400 | 11,730 | 10,400 |
Funded by: | |||||
7,430 | Other revenue | 10,676 | 10,400 | 11,730 | 10,400 |
Notes:
Expenditure is $1.054 million under-spent against the Supplementary Estimates budget and is offset by a corresponding under-recovery of revenue for these services from the central agencies. This underspend is owing to delays in the CASS Development Programme as well as an underspend against the Transition of the Ministry of Civil Defence.
Further information on what has been achieved with this appropriation is provided in the reporting against the “Treasury is a higher-performing organisation” strategic intention.
The Treasury - Capital Expenditure PLA#
What is intended to be achieved with this appropriation#
This appropriation is intended to achieve the renewal, upgrade or redesign of assets in support of the delivery of Treasury services.
What was achieved with this appropriation#
2015 Actual $000 |
2015 Main Estimates $000 |
|
---|---|---|
Property, plant and equipment | 1,877 | 5,344 |
Intangibles | 2,557 | 4,161 |
Total appropriation | 4,434 | 9,505 |
Notes:
Property, plant and equipment expenditure is $3.467 million underspent against the agreed budget owing to delays in the CASS Development Programme to rationalise IT hardware across the three central agencies.
Intangibles are underspent by $1.604 million against the agreed budget owing to delays in the CASS Development Programme to rationalise IT systems across the three central agencies as well as delays experienced with the Debt Management Office's Business Information Hub redevelopment programme.
The underspends for these programmes have been carried forward to 2015/16 as the work continues.
Further information on what has been achieved with this appropriation is provided in the reporting against the “Treasury is a higher-performing organisation” strategic intention.
Ministerial Servicing Performance 2014/15#
The Treasury drafts responses to Parliamentary Questions for Written Answer (PQs), Ministerial Correspondence (MC) and Official Information Act requests (MOIAs) for consultation with, or approval by, the responsible Minister. We also respond to Official Information Act requests received by the Treasury (TOIAs).
The Treasury provides these services to the Minister of Finance, Associate Ministers of Finance and/or other Ministers on referral from the Minister of Finance or an Associate Minister of Finance; the Minister of Science and Innovation; and the Minister for State Owned Enterprises.
MC | PQ | MOIA | TOIA | |
---|---|---|---|---|
Total for all Votes (estimated volume for full year) | 1000 | 400 | 150 | 250 |
Actual volume of replies completed to 30 June 2015 | 418 | 245 | 114 | 231 |
Target % answered by due date | 95% | 100% | 100% | 100% |
Actual % answered by due date | 65% | 64% | 67% | 83% |
Target % first draft accepted | 95% | 100% | 95% | N/A |
Actual % first draft accepted | 76% | 91% | 96% | N/A |
Timeframe | Quality Indicator |
---|---|
Ministerial Correspondence |
|
Unless otherwise agreed with the Minister's Office, submit a reply to:
|
At least 95% of replies will be acceptable to the Minister and will not require amendment. |
Parliamentary Questions |
|
Replies to written PQs will be submitted to the Minister's Office by 12.00pm on the due date specified by the Office. Replies to oral PQs will be due at the Minister's Office by 12.30pm on the due date specified by the Office. |
Replies will be consistent with Standing Order 377. |
Replies to Official Information Act requests made to the Minister |
|
All MOIA requests and Ombudsman investigations will be handled within the time limits prescribed by the Act. Replies will be delivered to the Minister at least 5 working days before the relevant statutory time limit, unless otherwise agreed with the Minister's Office. |
All replies will be complete and accurate in the information they convey and will be prepared with appropriate consultation of relevant parties. Advice on, handling of and replies to MOIA requests will accord with the provisions of the Official Information Act 1982. At least 95% of MOIA replies will be acceptable to the Minister and will not require amendment. |
Replies to Official Information Act requests made to the Treasury |
|
All TOIA requests and Ombudsman investigations will be handled within the time limits prescribed by the Act. The Treasury will consult and inform the Minister, and/or other Ministers, on replies to TOIAs, as appropriate and within agreed timeframes. |
All replies will be complete and accurate in the information they convey. Advice on, handling of and replies to TOIA requests will accord with the provisions of the Official Information Act 1982. Consultation on proposed replies will be appropriate and acceptable to the Minister. |
Reporting Against Multi-category Appropriations#
Social Housing Reform MCA#
The Social Housing Reform Programme is coordinated by the Treasury and its costs are met from the departmental output expense category of this multi-category appropriation.
What is intended to be achieved with this appropriation
This appropriation is intended to achieve the development of a variety of social housing in New Zealand and grow the community housing sector by making the HNZC stock available to social providers.
What was achieved with this appropriation and each of its categories
Performance Measure | Target for 2014/15 | Performance for 2014/15 | Forecast for 2015/16 |
---|---|---|---|
Social Housing Reform |
|||
The Social Housing Reform Programme is developed to allow the progress of transactions in 2015/16. | Achieved | Achieved | Achieved |
Implementation of the Social Housing Reform Programme |
|||
Deliver policy, legal documentation and legislation required to commence transactions in 2015/16. | Achieved | Achieved | Achieved |
Direct Sale Costs for Implementing the Social Housing Reform Programme |
|||
Undertake due diligence on properties identified for initial transactions. | Achieved | Achieved - Work on this continues through 2015/16. | Achieved |
2014 Actual $000 |
Departmental | 2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
2016 Unaudited Forecast as per BEFU 2015 $000 |
---|---|---|---|---|---|
- | Expenses | 1,915 | - | 4,500 | 4,600 |
Funded by: | |||||
- | Other revenue | 4,500 | - | 4,500 | 4,600 |
2014 Actual $000 |
Non-departmental | 2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
2016 Unaudited Forecast as per BEFU 2015 $000 |
---|---|---|---|---|---|
- | Expenses | - | - | 1,000 | 7,900 |
Notes:
Actuals were lower than the final budgeted amount for 2014/15 primarily owing to lower expenditure for the implementation of the Social Housing Reform Programme as this project experienced delays in recruiting staff.
Further information on what has been achieved with this appropriation is provided in the reporting against the following strategic intentions:
- “The State sector efficiently and effectively delivers results for New Zealanders”, and
- “The Crown balance sheet is managed effectively and efficiently”.
Inquiries into Research and Productivity-related Matters MCA#
The overarching purpose of this appropriation is to provide for inquiries into, and research and promotion of, productivity-related matters. In particular:
- inquiries in accordance with the New Zealand Productivity Commission Act 2010, and
- research in accordance with the Productivity Commission Act 2010.
What is intended to be achieved with this appropriation#
This appropriation is intended to provide advice to the Government on improving productivity in a way that is directed to supporting the overall wellbeing of New Zealanders through undertaking in-depth inquiries, carrying out productivity-related research and promoting understanding of productivity-related issues.
What was achieved with this appropriation and each of its categories#
Performance Measure | Target for 2014/15 | Performance for 2014/15 | Forecast for 2015/16 |
---|---|---|---|
The Board of the New Zealand Productivity Commission will meet to manage and administer in accordance with their Statement of Intent. | Achieved | Achieved | Achieved |
Inquiries into Productivity-related Matters |
|||
The Commission's recommendations are agreed and implemented - as a result of their recommendations (typically through inquiry work), better decisions are made that lead to improved productivity. | Achieved | Achieved | Achieved |
Improved productivity analysis and advice in New Zealand - scarce resources for productivity work are better coordinated, leading to more influential and effective research outcomes. | Achieved | Achieved | Achieved |
Improved public understanding of productivity issues - people and organisations gain a better understanding of what productivity is and why it is important, increasing the likelihood that productivity improvements are made. | Achieved | Achieved | Achieved |
Research into and Promotion of Productivity-related Matters |
|||
Define and undertake research on, and promote understanding of, productivity-related matters. The Commission will publish research papers and further the development of collaborative research partnerships. As part of their collaboration, they will work with other government agencies and the wider research community through chairing the Productivity Hub. | Achieved | Achieved | Achieved |
2014 Actual $000 |
Non-departmental | 2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
2016 Unaudited Forecast as per BEFU 2015 $000 |
---|---|---|---|---|---|
5,030 | Expenses | 5,030 | 5,030 | 5,030 |
Further information on what has been achieved with this appropriation will be provided in the annual report of the New Zealand Productivity Commission.
Statements of Expenses and Capital Expenditure#
Statement of Budgeted and Actual Expenses and Capital Expenditure Incurred Against Appropriations#
for the year ended 30 June 2015
The Statement of Departmental and Non-departmental Expenses and Capital Expenditure Against Appropriations details expenditure against appropriations. Total Departmental Output Classes Expenditure and Appropriations equal total expenses in the Statement of Comprehensive Revenue and Expenses on page 48. Total Non-departmental Output Classes Expenditure and Appropriations equal total expenses in the Schedule of Expenses on page 59.
2014 Actual $000 |
Note | 2015 Actual $000 |
2015 Supp. Estimates $000 |
Location of end-of-year performance information | |
---|---|---|---|---|---|
Vote Finance |
|||||
Departmental output expenses | |||||
322 | Administration of Guarantees and indemnities given by the Crown PLA | 34 | 110 | The Treasury's Annual Report | |
- | Administration of Crown Borrowing and Investment PLA | 7,593 | 7,982 | ||
448 | Crown Company Monitoring Advice to the Minister for Science and Innovation and the Minister for Economic Development | 380 | 432 | ||
5,154 | Crown Company Monitoring Advice to the Minister for State-Owned Enterprises and Other Responsible Ministers | 4,606 | 5,295 | ||
31,892 | Policy Advice - Finance | 34,582 | 34,954 | ||
31,078 | Provision of Financial Operations Services and Operational Advice | 29,198 | 31,231 | ||
154 | Provision of Financial Services to the New Zealand Local Government Funding Agency Revenue-dependent Appropriation | 149 | 165 | ||
7,430 | Shared Support Services | 10,676 | 11,730 | ||
76,478 | Total departmental output expenses | 87,218 | 91,899 | ||
Departmental capital expenditure | |||||
5,350 | Total departmental capital expenditure | 4,434 | 9,505 | ||
Non-departmental output expenses | |||||
201 | Management of New Zealand House, London | 253 | 1,700 | Exempt | |
106 | Management of Crown's Obligations for Geothermal Wells | 24 | 340 | ||
351 | Management of the New Zealand Superannuation Fund | 326 | 528 | The Guardians of the NZSF Annual Report | |
5,688 | Total non-departmental output classes | 603 | 2,568 | ||
Non-departmental borrowing expenses | |||||
3,549,500 | Debt servicing[8] | 3(c) | 3,619,582 | 3,604,001 | N/A |
3,549,500 | Total non-departmental borrowing expenses | 3,619,582 | 3,604,001 | ||
Non-departmental other expenses | |||||
12,066 | New Zealand House, London | 10,207 | 12,734 | Exempt | |
49 | Crown Residual Liabilities | 60 | 86 | ||
- | Geothermal Wells Fund | - | 1,000 | ||
2 | Government Superannuation Appeals Board | - | 50 | ||
28,758 | Government Superannuation Fund Authority (GSFA) - Crown's Share of Expenses8 | 27,932 | 29,000 | GSFA Annual Report | |
613,744 | Government Superannuation Fund Unfunded Liability8 | 684,125 | 691,030 | Exempt | |
261 | Impairment of Loans to Taitokerau Forests Limited | - | 6,891 | ||
- | Impairment of Southern Response Earthquake Services Ltd (SRESL) Uncalled Capital | 5 | 333,000 | 500,000 | |
- | Stadium Southland | 2,000 | 2,000 | ||
557 | Landcorp Protected Land Agreement - Operating | - | 1,500 | ||
32,778 | Direct Sale Costs for Implementing the Mixed Ownership Model Multi-year Appropriation (MYA) | 635 | 2,103 | N/A | |
27,408 | National Provident Fund Schemes - Liability Crown Under Crown Guarantee[9] | 32,865 | 35,000 | ||
- | Local Government Risk Authority | - | 230 | Reported in the same document as the Treasury's Annual Report | |
187 | Renegotiation of New Zealand House Lease | 190 | 1,000 | ||
1,412 | Payments in respect of NZECO Guarantees and Indemnities9 | 5,402 | 3,500 | Exempt | |
- | Solid Energy New Zealand Limited Environmental Rehabilitation Indemnity9 | 107,731 | 107,000 | ||
- | Taitokerau Forests Limited Grant | 697 | 1,000 | ||
98 | Unclaimed Money9 | 8 | 250 | ||
- | Unclaimed Trust Money9 | - | 250 | ||
8,514 | Unwind of Discount Rate used in the Present Value Calculation of Payment under Crown Deed of Support with AMI Insurance Ltd | 5 | 15,857 | 24,091 | |
725,834 | Total non-departmental other expenses | 1,220,709 | 1,418,715 | ||
Non-departmental capital expenditure | |||||
- | SRES Uncalled Capital | 5 | 333,000 | 500,000 | Exempt |
25,310 | International Financial Institutions9 | 1 | 34,103 | 247,819 | |
1,622 | Landcorp Protected Land Agreement - Capital | 1,178 | 4,000 | ||
- | New Zealand House, London - Capital | - | 1,500 | ||
- | Solid Energy New Zealand Limited Loan Facility | 6 | - | 87,000 | |
1,200 | Taitokerau Forests | 1,000 | 1,800 | ||
- | Loan Facility for Tamaki Redevelopment Company MYA | - | 50,000 | Tamaki Redevelopment Company Annual Report | |
61,191 | Total non-departmental capital expenditure | 369,281 | 892,119 | ||
Multi-category expenses and capital expenditure | |||||
5,030 | Inquiries and Research into Productivity-related Matters | 5,030 | 5,030 | ||
Non-departmental output expenses | |||||
4,527 | Inquiries into Productivity-related Matters | 4,401 | 4,401 | The Treasury's Annual Report | |
503 | Research into and Promotion of Productivity-related Matters | 629 | 629 | ||
- | Social Housing Reform (MCA) | 1,915 | 5,500 | ||
Departmental output expenses | |||||
- | Implementation of the Social Housing Reform | 1,915 | 4,500 | The Treasury's Annual Report | |
Non-departmental output expenses | |||||
- | Direct Costs of Social Housing Programme | - | 1,000 | ||
1,200 | Total multi-category expenses and capital expenditure | 6,945 | 10,530 | ||
4,423,407 | Total non-departmental expenditure and appropriations | 5,308,772 | 6,092,337 |
The accompanying accounting policies and notes form part of these financial statements.
Statement of Expenses and Capital Expenditure Incurred Without, or in Excess of, Appropriation of Other Authority#
for the year ended 30 June 2015
Expenses and capital expenditure incurred in excess of appropriation#
Nil.
Expenses and capital expenditure incurred without appropriation or outside scope or period of appropriation#
Nil.
Statement of Capital Injections#
for the year ended 30 June 2015
2014 Actual $000 |
2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
|
---|---|---|---|---|
120 | Leasehold improvement requirements for the Analysis for Outcomes initiative | - | - | - |
3.572 | Provided for IT capital to implement the transfer of emergency management functions from Department of Internal Affairs to the Department of the Prime Minister and Cabinet | - | - | - |
700 | Business Information Hub | 700 | 700 | 700 |
Financial Statements - Departmental#
for the year ended 30 June 2015
Statement of Comprehensive Revenue and Expenses#
for the year ended 30 June 2015
The Statement of Comprehensive Revenue and Expenses details the revenue and expenses relating to all outputs (goods and services) produced by the Treasury during the financial year ended 30 June 2015. Total expenses equals total departmental output classes expenditure and appropriations in the Statement of Departmental Expenses and Capital Expenditure Against Appropriations on page 44.
2014 Before Adj. Actual $000 |
2014 After Adj. IPSAS 23 Actual $000 |
Note | 2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
2016 Unaudited Forecast (as per BEFU 2015) $000 |
|
---|---|---|---|---|---|---|---|
Income |
|||||||
81,333 | 90,491 | Revenue Crown - Non-exchange | 2 | 79,427 | 75,758 | 79,427 | 77,969 |
10,912 | 10,912 | Other revenue - Exchange | 4 | 15,187 | 12,781 | 16,972 | 13,811 |
92,245 | 101,403 | Total income | 94,614 | 88,539 | 96,399 | 91,780 | |
Expenditure |
|||||||
55,260 | 55,260 | Personnel costs | 5 | 58,680 | 57,587 | 58,840 | 59,522 |
2,840 | 2,840 | Depreciation and amortisation expense | 7 | 3,343 | 2,588 | 4,079 | 5,703 |
717 | 717 | Capital charge | 1,068 | 1,013 | 1,068 | 1,125 | |
33,830 | 33,830 | Other operating expenses | 6 | 26,042 | 27,351 | 32,412 | 25,430 |
92,647 | 92,647 | Total expenditure | 89,133 | 88,539 | 96,399 | 91,780 | |
(402) | 8,756 | Net surplus/(deficit) and comprehensive revenue and expenses | 3 | 5,481 | - | - | - |
Revenue adjusted for IPSAS 23 - Revenue from Non-exchange Transactions.
Explanations of significant variances against budget are detailed in note 11.
Statement of Changes in Equity#
for the year ended 30 June 2015
2014 Before Adj. Actual $000 |
2014 After Adj. IPSAS 23 Actual $000 |
Note | 2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
2016 Unaudited Forecast (as per BEFU 2015) $000 |
|
---|---|---|---|---|---|---|---|
8,957 | 8,957 | Balance as at 1 July 2014 | 13,349 | 12,660 | 13,349 | 14,049 | |
(402) | 8,756 | Comprehensive revenue and expenses | 5,481 | - | - | - | |
402 | (8,756) | Return of operating surplus to the Crown | 3 | (5,481) | - | - | - |
4,392 | 4,392 | Owner transactions | 700 | 700 | 700 | - | |
13,349 | 13,349 | Balance as at 30 June 2015 | 14,049 | 13,360 | 14,049 | 14,049 |
The accompanying accounting policies and notes form part of these financial statements.
Statement of Financial Position#
as at 30 June 2015
The Statement of Financial Position reports the total assets and liabilities of the Treasury as at 30 June 2015. Taxpayers' funds are represented by the difference between the assets and liabilities.
2014 Actual $000 |
2014 After Adj. IPSAS 23 Actual $000 |
Note | 2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
2016 Unaudited Forecast (as per BEFU 2015) $000 |
|
---|---|---|---|---|---|---|---|
Assets |
|||||||
Current assets | |||||||
13,288 | 13,288 | Cash and cash equivalents | 4,833 | 3,815 | 3,519 | 3,215 | |
2,654 | 2,654 | Debtors and other receivables | 1,808 | 1,400 | 1,400 | 1,400 | |
314 | 314 | Prepayments | 826 | 903 | 292 | 292 | |
886 | 10,044 | Debtor Crown | 3 | 15,252 | 7,000 | 7,000 | 7,000 |
17,142 | 26,300 | Total current assets | 22,719 | 13,118 | 12,211 | 11,907 | |
Non-current assets | |||||||
3,929 | 3,929 | Property, plant and equipment | 7 | 3,801 | 4,833 | 6,779 | 5,625 |
3,741 | 3,741 | Intangible assets | 4,960 | 6,267 | 6,317 | 6,875 | |
7,670 | 7,670 | Total non-current assets | 8,761 | 11,100 | 13,096 | 12,500 | |
24,812 | 33,970 | Total assets | 31,480 | 24,218 | 25,307 | 24,407 | |
Liabilities |
|||||||
Current liabilities | |||||||
5,216 | 5,216 | Creditors and other payables | 7,271 | 4,758 | 5,158 | 4,258 | |
- | 9,158 | Repayment of surplus | 3 | 5,481 | - | - | - |
5,451 | 5,451 | Employee entitlements | 3,913 | 5,200 | 5,200 | 5,200 | |
10,667 | 19,825 | Total current liabilities | 16,665 | 9,958 | 10,358 | 9,458 | |
Non-current liabilities | |||||||
796 | 796 | Employee entitlements | 766 | 900 | 900 | 900 | |
796 | 796 | Total non-current liabilities | 766 | 900 | 900 | 900 | |
11,463 | 20,621 | Total liabilities | 17,431 | 10,858 | 11,258 | 10,358 | |
13,349 | 13,349 | Net assets | 14,049 | 13,360 | 14,049 | 14,049 | |
Equity |
|||||||
13,349 | 13,349 | Taxpayers' funds | 14,049 | 13,360 | 14,049 | 14,049 | |
13,349 | 13,349 | Total equity | 14,049 | 13,360 | 14,049 | 14,049 |
The accompanying accounting policies and notes form part of these financial statements.
Statement of Cash Flows#
for the year ended 30 June 2015
The Statement of Cash Flows summarises the cash movements in and out of the Treasury during the financial year. It takes no account of money owed to the Treasury or owing by the Treasury and therefore differs from the Statement of Comprehensive Revenue and Expenses on page 48.
2014 Actual $000 |
Note | 2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
2016 Unaudited Forecast (as per BEFU 2015) $000 |
|
---|---|---|---|---|---|---|
Cash flows from operating activities |
||||||
88,932 | Receipts from Crown | 65,062 | 74,919 | 76,894 | 77,130 | |
9,707 | Receipts from other revenue | 15,899 | 12,781 | 16,972 | 12,781 | |
(33,156) | Payments to suppliers | (25,484) | (29,002) | (38,306) | (32,860) | |
(54,993) | Payments to employees | (60,035) | (54,193) | (55,444) | (52,318) | |
(717) | Payments for capital charge | (1,068) | (1,013) | (1,068) | (1,125) | |
77 | Goods and services tax (net) | 905 | 397 | (12) | 397 | |
9,850 | Net cash flows from operating activities | 8 | (4,721) | 3,889 | (964) | 4,005 |
Cash flows from investing activities |
||||||
(1,802) | Purchase of property, plant and equipment | (1,877) | (2,593) | (5,344) | (1,820) | |
(1,752) | Purchase of intangible assets | (2,557) | (2,240) | (4,161) | (2,489) | |
(3,554) | Net cash flows from investing activities | (4,434) | (4,833) | (9,505) | (4,309) | |
Cash flows from financing activities |
||||||
2,066 | Capital contributions | 700 | 700 | 700 | - | |
2,066 | Net cash flows from financing activities | 700 | 700 | 700 | - | |
8,362 | Net (decrease)/increase in cash | (8,455) | (244) | (9,769) | (304) | |
4,926 | Cash at the beginning of the year | 13,288 | 4,059 | 13,288 | 3,519 | |
13,288 | Cash at the end of the year | 4,833 | 3,815 | 3,519 | 3,215 |
The accompanying accounting policies and notes form part of these financial statements.
Statement of Commitments#
2014 Actual $000 |
2015 Actual $000 |
|
---|---|---|
Non-cancellable operating lease commitments |
||
3,983 | Not later than 1 year | 4,085 |
7,049 | Later than 1 year and not later than 5 years | 3,869 |
- | Later than 5 years | - |
11,032 | Total non-cancellable operating lease commitments | 7,954 |
11,032 | Total commitments | 7,954 |
Capital commitments#
There are no capital commitments for this year (30 June 2014: Nil).
Non-cancellable operating lease commitments#
The Treasury has non-cancellable operating leases on its principal premises at No 1 The Terrace, Wellington until 2017. These operating lease commitments have been recorded at their gross values in the Statement of Commitments.
Statement of Contingent Liabilities and Contingent Assets#
Unquantifiable contingent liabilities#
The Department has unquantifiable contingent liabilities for carpark licences and Deed of Lease against certain damages or loss caused by our use of those carparks and premises.
The Treasury has also granted an indemnity to Research on Motion Limited and Rueters Services Contract in breach of licence agreements and contracts.
Quantifiable contingent liabilities and assets#
As at 30 June 2015, the Department had no quantifiable departmental contingent assets and liabilities (30 June 2014: Nil).
The accompanying accounting policies and notes form part of these financial statements.
Notes to the Departmental Financial Statements and Non-departmental Schedules#
for the year ended 30 June 2015
1 Statement of Accounting Policies#
The Treasury is a New Zealand government department as defined by section 2 of the Public Finance Act 1989.
In addition, the Treasury has reported separately on the Non-departmental Schedules which present financial information on public funds managed by the Treasury on behalf of the Crown, and Trust monies which it administers on behalf of the Crown.
The primary objective of the Treasury is to provide services to the public rather than making a financial return. Accordingly, the Treasury has designated itself as a Public Benefit Entity for the purposes of New Zealand Public Benefit Entity International Public Sector Accounting Standards (NZ PBE IPSAS).
The Financial Statements of the Treasury are for the year ended 30 June 2015. The unaudited Forecast Financial Statements are for the year ended 30 June 2016. These Financial Statements were authorised for issue by the Secretary to the Treasury on 30 September 2015.
The Departmental Financial Statements and the financial information reported in the Non-departmental Schedules are 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 2015.
Statement of compliance
The Financial Statements and unaudited Forecast Financial Statements of the Treasury and the Non-departmental Schedules have been prepared in accordance with the requirements of the Public Finance Act 1989, which includes the requirement to comply with New Zealand Generally Accepted Accounting Practices (NZ GAAP), Treasury Instructions and Treasury Circulars. Measurement and recognition rules applied in the preparation of the Non-departmental Supplementary Financial Schedules are consistent with NZ GAAP and Crown accounting policies and are detailed in the Financial Statements of the Government. These Financial Statements have been prepared in accordance with Tier 1 NZ PBE accounting standards.
Basis of preparation
The principal accounting policies applied in the preparation of the Financial Statements and Non-departmental Schedules are set out in Note 2.
Measurement base
The Financial Statements have been prepared on an historical cost basis, modified by the revaluation of derivative financial instruments to fair value.
Functional and presentation currency
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 Treasury is New Zealand dollars.
Changes in accounting policies
The Treasury has adopted the PBE IPSAS 1 which has an effective date of 1 January 2016. This has resulted in a change to the recognition of Crown revenue as below.
These Financial Statements are the first Financial Statements presented in accordance with the new PBE accounting standards. The material adjustments arising on transition to the new PBE accounting standards are explained in the Statements.
2 Revenue Crown - Non-exchange#
Revenue from the Crown is measured based on the Treasury's funding entitlement for the reporting period.
The funding entitlement is established by Parliament when it passes the Appropriation Acts for the financial year. The amount of revenue recognised takes into account any amendments to appropriations approved in the Appropriation (Supplementary Estimates) Act for the year and certain other unconditional funding adjustments formally approved prior to balance date. There are no conditions attached to the funding from the Crown. However, the Treasury can incur expenses only within the scope and limits of its appropriations.
The fair value of Revenue Crown has been determined to be equivalent to the funding entitlement.
Budget figures#
The budget figures are those included in the Department's Budget Estimates for the year ended 30 June 2015, 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.
Foreign exchange#
Foreign exchange transactions are translated into New Zealand dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Schedule of Non-departmental Income or Expenses.
Forecast figures#
Basis of preparation
Forecast Financial Statements have been prepared in accordance with the accounting policies expected to be used in the future for reporting historical general purpose financial statements.
These Forecast Financial Statements have been prepared in accordance with NZ PBE IPSAS.
These financial forecasts are based on the BEFU and have been prepared on the basis of assumptions as to future events that the Treasury reasonably expects to occur, associated with the actions it reasonably expects to take. They have been compiled on the basis of existing government policies and ministerial expectations at the date that the information was prepared.
The actual results will remain substantially the same as the previous year. The main assumptions were as follows:
- The Treasury’s activities and output expectations will remain substantially the same as the previous year focusing on the Government’s priorities.
- Personnel costs were based on current wages and salary costs, adjusted for anticipated remuneration changes.
- Operating costs were based on historical experience and other factor that are believed to be reasonable in the circumstances and are the Treasury’s best estimate of future costs that will be incurred.
Additional factors that could lead to material differences between the Forecast Financial Statements and the 2015/16 Actual Financial Statements include changes to the baseline budget through new initiatives, transfer of funding across financial years or technical adjustments.
Authorisation statement
These Forecast Financial Statements were authorised for issue by the Secretary and Chief Executive of the Treasury on 30 April 2015. The Secretary and Chief Executive is responsible for the Forecast Financial Statements presented, including the appropriateness of the assumptions underlying the Forecast Financial Statements and all other required disclosure. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual financial results achieved for the period covered are likely to vary from the information presented, and the variations may be material.
Statement of cost allocation policies#
The Treasury has determined the cost of outputs using the following cost allocation system:
- Direct costs are expenses incurred from activities in producing outputs. These costs are charged directly to the related output classes.
- Indirect costs are expenses incurred by Corporate Services and by the Office of the Chief Executive that cannot be identified with a specific output. Indirect costs are allocated to each output class based on cost drivers, related activity and usage information.
There have been no changes in the Treasury's general cost accounting policies since the date of the last audited Financial Statements.
Critical accounting estimates and assumptions#
There are no critical accounting estimates and assumptions made in preparing these Financial Statements.
3 Adjustments on Transition to the new PBE Accounting Standards#
The Treasury has adjusted its comparative year Financial Statements for the year ended 30 June 2014 owing to reclassification adjustment arising from transition to the new PBE accounting standards.
The Treasury has reviewed its revenue stream to determine whether the revenue is exchange or non-exchange, and, if non-exchange, whether there are any conditions attached to the revenue received.
This has given rise to the following adjustment:
- Revenue Crown increased by $9.158 million, resulting in surplus for the same amount.
- Debtor Crown increased by $9.158 million, resulting in repayment of surplus to Crown by the same amount.
4 Other Revenue#
2014 Actual $000 |
2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
|
---|---|---|---|---|
7,430 | Cost recoveries from SSC and DPMC for CASS | 10,676 | 11,200 | 11,200 |
450 | Cost recoveries from State Sector Productivity | - | 350 | - |
1,177 | Cost recoveries from Secondments | 1,686 | 932 | 1,506 |
916 | Cost recoveries from Gateway project | 2,336 | 299 | 2,925 |
939 | Other | 489 | - | 3,874 |
10,912 | Total revenue - departmental | 15,187 | 12,781 | 19,505 |
5 Personnel Costs#
2014 Actual $000 |
2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
|
---|---|---|---|---|
50,694 | Salaries and wages | 54,413 | 54,084 | 53,833 |
1,751 | Superannuation contributions to defined contribution plans | 1,785 | 2,135 | 1,905 |
67 | Increase/(decrease) in employee entitlements | (65) | - | 100 |
1,442 | Training and development | 1,570 | 1,368 | 1,770 |
1,306 | Other | 977 | - | 1,232 |
55,260 | Total personnel costs | 58,680 | 57,587 | 58,840 |
6 Other Operating Expenses#
2014 Actual $000 |
2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
|
---|---|---|---|---|
4,258 | Rental of premises | 4,124 | 4,359 | 4,112 |
924 | Bank fees, commissions and service charges | 1,058 | 920 | 945 |
Fees to auditor: | ||||
306 |
|
332 | 497 | 100 |
219 |
|
1,432 | 133 | 400 |
279 | Audit of Financial Statements of the Government | 206 | 206 | 360 |
15,111 | Consultants | 6,327 | 7,573 | 10,025 |
3,828 | Legal fees | 1,930 | 466 | 1,310 |
735 | Process management services | 553 | 1,006 | 1,091 |
1,963 | Transport and travel | 2,036 | 2,005 | 2,532 |
3,965 | Information and communication costs | 5,651 | 4,876 | 4,945 |
2,242 | Other operating costs | 2,393 | 7,150 | 6,592 |
33,830 | Total operating expenses | 26,042 | 29,191 | 32,412 |
1 The Social Housing Reform Programme is being coordinated by the Treasury and therefore the consultancy work is funded via the Treasury, although the Programme has application outside of the Treasury's internal functions.
7 Property, Plant and Equipment and Intangible Assets#
Leasehold Improvements $000 |
Furniture, Fitting and Office Equipment $000 |
Computer Hardware $000 |
Intangibles $000 |
Total $000 |
|
---|---|---|---|---|---|
Cost |
|||||
Balance at 1 July 2014 | 4,823 | 2,065 | 5,830 | 6,168 | 18,886 |
Additions | 411 | 365 | 1,101 | 2,557 | 4,434 |
Disposals | - | - | (825) | (36) | (861) |
Balance at 30 June 2015 | 5,234 | 2,430 | 6,106 | 8,689 | 22,459 |
Accumulated depreciation and impairment losses |
|||||
Balance at 1 July 2014 | 3,967 | 1,787 | 3,035 | 2,427 | 11,216 |
Depreciation expense | 454 | 140 | 1,411 | 1,338 | 3,343 |
Disposals | - | - | (825) | (36) | (861) |
Impairment losses | - | - | - | - | - |
Balance at 30 June 2015 | 4,421 | 1,927 | 3,621 | 3,729 | 13,698 |
Carrying amounts |
|||||
At 1 July 2013 | 1,429 | 302 | 2,235 | 1,315 | 5,281 |
At 30 June/1 July 2014 | 856 | 278 | 2,795 | 3,741 | 7,670 |
At 30 June 2015 | 813 | 503 | 2,485 | 4,960 | 8,761 |
Asset | Useful Life | Depreciation/Amortisation Rate |
---|---|---|
Furniture and fittings and office equipment | 3-10 years | 10%-20% |
Leasehold improvements | 12 years | 8% |
Computer equipment | 3-5 years | 20%-33.3% |
Computer software | 3 years | 33.3% |
There are no restrictions over the title of the Treasury's intangible assets. No intangible assets are pledged as security for liabilities.
8 Reconciliation of Net Surplus to Net Cash Flows from Operating Activities#
2014 Actual $000 |
2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
|
---|---|---|---|---|
(402) | Net surplus/(deficit) | 5,481 | - | - |
Non-cash items: | ||||
2,840 | Depreciation, amortisation and impairment expenses | 3,343 | 2,588 | 4,079 |
2,840 | Total non-cash items | 3,343 | 2,588 | 4,079 |
Add/(less) items classified as investing or financing activities | ||||
54 | Net (Gains)/Losses on disposal of property, plant and equipment | - | - | - |
Add less movements in deferrals and accruals: | ||||
7,599 | (Increase)/Decrease in debtor - Crown | (14,365) | (304) | (3,161) |
(309) | (Increase)/Decrease in debtors and other receivables | 853 | (535) | (909) |
601 | (Increase)/Decrease in prepayments | (516) | - | - |
(796) | Increase/(Decrease) in creditors and other payables | 1,145 | 1,743 | (961) |
74 | Increase/(Decrease) in GST | 905 | 397 | (12) |
(2) | Increase/(Decrease) in provisions | 9 | (753) | 147 |
191 | Increase/(Decrease) in employee entitlements | (1,576) | 753 | (147) |
7,358 | Net movement in working capital items | (13,545) | 1,301 | (5,043) |
9,850 | Net cash flow from operating activities | (4,721) | 3,889 | (964) |
9 Related Party Transactions#
All related party transactions have been entered into on an arm's length basis and therefore such transactions and balances with related parties are exempt from the need for disclosure.
The Treasury is a wholly-owned entity of the Crown and received funding from the Crown of $79.427 million to provide services to the public for the year ended 30 June 2015 (2014: $81.333 million). The Government significantly influences the roles of the Treasury as well as being its major source of revenue.
In conducting its activities, the Treasury is required to pay various taxes and levies to the Crown and entities related to the Crown. The payment of these taxes and levies (other than income tax) is based on the standard terms and conditions that apply to all tax and levy payers. The Treasury is exempt from paying income tax.
The Treasury also purchased and sold goods and services from entities controlled, significantly influenced or jointly controlled by the Crown. Purchases from these government-related entities for the year ended 30 June 2015 totalled $5.018 million (2014: $4.421 million). These purchases exclude capital charge and include air travel from Air New Zealand, Accident Compensation Corporation levies, legal advice from the Crown Law Office and services provided by other government departments primarily being Audit NZ, DPMC, MFAT, SSC, Department of Internal Affairs, Ministry of Economic Development and Statistics New Zealand.
2014 Actual $000 |
2015 Actual $000 |
|
---|---|---|
3,032 | Salaries and other short-term employee benefits | 3,709 |
102 | Post-employment benefits | 102 |
221 | Termination payment | 4 |
4 | Other long-term employee benefits | - |
152 | Board member fees | 152 |
3,511 | Total key management personnel compensation | 3,967 |
Key management personnel of the Treasury at 30 June 2015 included the ELT (Chief Executive, one Deputy Chief Executive for part of the year and five Deputy Secretaries), plus the Director CASS and the Treasury Board fees.
The above key management personnel compensation excludes the remuneration and other benefits the Ministers of Finance, State Owned Enterprises, Infrastructure and Science and Innovation receive. The Ministers' remuneration and other benefits are not received only for their role as a member of key management personnel of the Treasury. The Ministers' remuneration and other benefits are set by the Remuneration Authority under the Civil List Act 1979 and are paid under Permanent Legislative Authority (PLA), and are not paid by the Treasury.
Related party transactions involving key management personnel (or their close family members)#
There were no related party transactions involving key management personnel or their close family members. No provision has been required, nor any expense recognised, for impairment of receivables from related parties (2014: Nil).
10 Events After Balance Date#
There were no events subsequent to balance date that required adjustment to the Financial Statements or disclosure (2014: Nil).
11 Explanation of Major Variances Against Budget#
Statement of Comprehensive Revenue and Expenses#
The following major variations occurred between the 2014/15 and the 2013/14 adjusted Actuals:
- In 2013/14 the Revenue Crown was recognised as total expenditure net of other revenue, whereas in 2014/15 it has been recognised on the basis of funding entitlement. The Revenue Crown was higher in 2013/14 owing to the costs for delivery of the Government Share Offer Programme.
- In 2014/15 the revenue received for the shared support services from DPMC and SSC has increased. This reflects higher depreciation being recovered as IT infrastructure has been upgraded and also reflects a full year of support for Emergency Management Services that transferred to DPMC from the Department of Internal Affairs from 1 April 2014.
- Personnel costs have increased reflecting higher levels of support provided by CASS for DPMC and additional personnel resource for the departmental appropriation “Implementation of Social Housing Reform”.
- Other operating expenses have decreased mainly reflecting a reduction in consultancy and legal costs that were associated with the delivery of the Government Share Offer Programme, offset in part by additional costs associated with the Social Housing Reform Programme.
The 2014/15 Actuals were lower than 2014/15 Supplementary Estimates budgets primarily owing to lower expenditure for the “Implementation of Social Housing Reform” as this project experienced delays in recruiting staff, lower expenditure on depreciation and operating expenses for the CASS development programme and personnel savings owing to vacancies across a range of activities.
Statement of Financial Position#
The following major variations occurred between the 2013/14 and the 2014/15 Actuals:
- The Debtor Crown account asset balance increased with a corresponding decrease in the bank balance as less cash was drawn down in 2014/15.
- Liabilities increased owing to the $5.4 million surplus which is due to be repaid to the Crown and the difference is owing to the change in Revenue Crown recognition.
The following major budget variations occurred between the 2014/15 Actuals and the 2014/15 Supplementary Estimates budgets:
- The Debtor Crown account asset balance was higher as less cash was drawn down than anticipated in the forecast.
- The balance of liabilities was higher owing to the $5.4 million surplus which is due to be repaid to the Crown.
Supplementary Financial Schedules - Non-departmental#
for the year ended 30 June 2015
- Schedule of Expenses
- Statement of Unappropriated Expenditure
- Schedule of Commitments and Contingent Liabilities
- Schedule of Revenue and Capital Receipts
- Schedule of Assets and Liabilities
- Statement of Trust Monies
- Statement of Accounting Policies
- Explanatory Notes to Supplementary Statements and Schedules - Non-departmental
Schedule of Expenses#
for the year ended 30 June 2015
The Schedule of Expenses summarises expenses that the Department administers on behalf of the Crown. Details of non-departmental expenditure and appropriations are provided in the Explanatory Notes to Supplementary Statements and Schedules - Non-departmental on pages 44 and 45.
2014 Actual $000 |
Note | 2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
|
---|---|---|---|---|---|
Vote Finance |
|||||
5,688 | Non-departmental output classes | 603 | 1,679 | 2,568 | |
3,549,500 | Debt servicing | 3(c) | 3,619,582 | 3,622,323 | 3,604,001 |
807,028 | Other expenses incurred by the Crown | 1,220,709 | 819,097 | 1,418,715 | |
- | Non-departmental multi-category output classes | 5,030 | 5,030 | 6,030 | |
Re-measurements: | |||||
- | Government Superannuation Fund revaluation: actuarial loss* | 2,049,000 | - | 2,049,000 | |
- | Change in NPF DBP (A) Scheme provision under Crown Guarantee* | 25,134 | - | - | |
- | Change in SRESL Provision | 5 | 5,450 | - | (10,450) |
- | Change in Solid Energy New Zealand Limited Rehabilitation Indemnity Provision | 6 | 15,694 | - | 6,626 |
21,997 | Foreign exchange losses incurred by the Treasury | - | - | - | |
4,377 | Other remeasurements incurred by the Treasury | 8,758 | - | - | |
253,843 | Fair value losses and remeasurements incurred by NZDMO | 3(a) | 3,000 | 118,000 | - |
4,642,433 | Total non-departmental expenses | 6,952,960 | 4,566,129 | 7,076,490 |
The Statement of Accounting Policies is an integral part of these supplementary financial schedules.
For a full understanding of the Crown's financial position and the result of its operations for the year, refer to the consolidated Financial Statements of the Government for the year ended 30 June 2015.
*Details on GSF and NPF-related balances are presented in the note: Retirement Plan Liabilities and Provisions to Financial Statements of the Government of New Zealand for the year ended 30 June 2015 respectively.
Statement of Unappropriated Expenditure#
for the year ended 30 June 2015
For the year ended 30 June 2015 there has been no unappropriated expenditure.
The Statement of Accounting Policies is an integral part of these supplementary financial schedules.
For a full understanding of the Crown's financial position and the result of its operations for the year, refer to the consolidated Financial Statements of the Government for the year ended 30 June 2015.
Schedule of Commitments and Contingent Liabilities#
as at 30 June 2015
The Department, on behalf of the Crown, has entered into non-cancellable contracts in relation to New Zealand House in London at a value of $1.8 million for the year ended 30 June 2015.
Disclosure of contingent liabilities incurred by the Crown is detailed in the Financial Statements of the Government of New Zealand for the year ended 30 June 2015.
For a full understanding of the Crown's financial position and the result of its operations for the year, refer to the consolidated Financial Statements of the Government for the year ended 30 June 2015.
Schedule of Revenue and Capital Receipts#
for the year ended 30 June 2015
2014 Actual $000 |
Note | 2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
|
---|---|---|---|---|---|
Vote Finance |
|||||
Non-departmental revenue | |||||
1,860,704 | Capital charge | 1,933,640 | 1,858,815 | 1,926,227 | |
- | Change in Government Superannuation Fund (GSF) unfunded liability: actuarial gain* | 1,727,000 | - | - | |
- | Change in International Financial Institutions Investment | 44,578 | - | 14,427 | |
- | Change in Southern Response Earthquake Services Ltd (SRESL) Crown Support Deed and uncalled capital |
5 |
26,526 | - | 1,007 |
- | Change in Solid Energy New Zealand Limited Environmental Rehabilitation Indemnity Provision | 6 | 2,104 | - | - |
613,970 | Change in other Crown assets and liabilities | 4,659 | - | - | |
719,627 | Dividends from SOEs | 733,157 | 618,371 | 718,067 | |
67,761 | Dividends from Crown entities | 38,150 | 15,001 | 36,042 | |
7,593 | Dividends from CRIs and other dividends | 3,549 | 3,505 | 6,505 | |
2,003,158 | Gain on sale from Government Share Offers | - | - | - | |
203,050 | Interest revenue | 289,982 | 330,627 | 285,813 | |
402,366 | Other income - NZDMO | 3(b) | 527,368 | 366,373 | 457,859 |
333,697 | Other current revenue | 4 | 100,553 | 245,940 | 92,360 |
6,211,926 | Total non-departmental revenue and receipts | 5,431,266 | 3,438,632 | 3,538,307 | |
Non-departmental capital receipts | |||||
20,264 | Return of capital by IMF | 1 | 52,288 | - | 6,543 |
30,472 | Capital withdrawal from Crown entities | - | 21,169 | - | |
28,037 | Loan and other repayments | 15,509 | - | 11,851 | |
78,773 | Total non-departmental capital receipts | 67,797 | 21,169 | 18,394 | |
6,290,699 | Total non-departmental revenue and capital receipts | 5,499,063 | 3,459,801 | 3,556,701 |
* Details on GSF-related balances are presented in the note: Retirement Plan Liabilities to Financial Statements of the Government of New Zealand for the year ended 30 June 2015.
Comparatives have been restated to reflect current year's gain or loss in the correct statement.
The Statement of Accounting Policies is an integral part of these supplementary financial schedules.
For a full understanding of the Crown's financial position and the result of its operations for the year, refer to the consolidated Financial Statements of the Government for the year ended 30 June 2015.
Schedule of Assets and Liabilities#
as at 30 June 2015
The Schedule of Assets and Liabilities summarises the assets and liabilities that the Department administers on behalf of the Crown.
2014 Actual $000 |
Note | 2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
|
---|---|---|---|---|---|
Current assets |
|||||
4,652,731 | Cash and cash equivalents | 6,644,336 | 2,222,000 | 5,236,332 | |
622,756 | Accounts receivable and prepayments | 9,028 | 34,568 | 4,632 | |
1,493,376 | Advances | 570,554 | 301,769 | 258,376 | |
5,228,000 | Marketable securities, deposits and derivatives in gain | 3,895,000 | 3,062,000 | 3,591,000 | |
11,996,863 | Total current assets | 11,118,918 | 5,620,337 | 9,090,340 | |
Non-current assets |
|||||
5,037,000 | Advances | 6,553,000 | 6,787,000 | 6,934,000 | |
257,950 | Air New Zealand Goodwill[10] | 257,950 | 257,950 | 257,950 | |
2,119,000 | Marketable securities, deposits and derivatives in gain | 1,961,000 | 748,000 | 1,720,000 | |
207,546 | Other share investments | 277,079 | 234,042 | 221,973 | |
200,444 | Other equity-accounted investments | 218,818 | 185,457 | 200,444 | |
62,671 | Property, plant and equipment | 66,601 | 56,653 | 56,085 | |
7,884,611 | Total non-current assets | 9,334,448 | 8,269,102 | 9,390,452 | |
19,881,474 | Total non-departmental assets | 20,453,366 | 13,889,439 | 18,480,792 | |
Current liabilities |
|||||
5,174,000 | Crown balances with Westpac | 4,411,000 | 3,981,000 | 3,602,000 | |
150,000 | Payables and accrued expenses | 108,141 | 17,228 | 8,560 | |
15,021,00011 | Borrowings | 3(d) | 10,478,000 | 7,139,000 | 9,626,000 |
724,000 | GSF unfunded liability12 | 742,000 | 748,012 | 703,000 | |
74,898 | Provisions | 5,6 | 153,615 | 182,770 | 182,483 |
21,143,898 | Total current liabilities | 15,894,216 | 12,068,010 | 14,122,043 | |
Non-current liabilities |
|||||
65,955,000[11] | Borrowings | 3(d) | 72,462,000 | 71,282,000 | 72,033,000 |
10,162,730 | GSF unfunded liability[12] | 10,102,300 | 9,637,044 | 11,859,000 | |
909,759 | NPF DBP(A) Scheme unfunded provision12 | 892,559 | 941,707 | 872,259 | |
373,576 | Provisions | 666,680 | 181,784 | 614,655 | |
77,401,065 | Total non-current liabilities | 84,123,701 | 82,042,535 | 85,378,914 | |
98,544,963 | Total non-departmental liabilities | 100,017,917 | 94,110,545 | 99,500,957 |
In addition, the Treasury monitors 12 SOEs, four mixed ownership model entities and 20 Crown entities. The investment in these entities is consolidated in the Crown Financial Statements on a line-by-line basis.The investment in these entities is not included in this Schedule.
The Statement of Accounting Policies is an integral part of these supplementary financial schedules.
For a full understanding of the Crown's financial position and the result of its operations for the year, refer to the consolidated Financial Statements of the Government for the year ended 30 June 2015.
Notes
- [10]Details of Air New Zealand Goodwill are presented in the Financial Statements of the Government of New Zealand for the year ended 30 June 2015.
- [11]Restated figures to show Borrowings liability at carrying value.
- [12]Additional detailed note disclosures are included in the Financial Statements of the Government of New Zealand for this liability.
Statement of Trust Monies#
as at 30 June 2015
(a) Unclaimed money#
2014 $000 |
2015 $000 |
|
---|---|---|
4,780 | Unclaimed money | 5,822 |
66 | Meridian Initial Public Offer Trust Account | 25 |
167 | Genesis Initial Public Offer Trust Account | 30 |
4 | Might River Power Initial Public Offer Trust Account | 3 |
420 | Treasury Trust Account | - |
5,437 | Total Trust Account monies closing balance | 5,880 |
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.
During the year, there has been $1.2 million of contributions (2014: $1.8 million) and $0.245 million (2014: $0.106 million) of distributions made from the Trust Account. Interest earned on the Trust Account for the year was $0.088 million (2014: $0.080 million).
(b) Government Share Offer Trust Accounts#
Over the past two years the Crown opened Initial Public Offer Trust Accounts to facilitate the partial sale of Meridian, Genesis and Mighty River Power. The source of funds relates to proceeds from the sale of shares and distributions relate to refunds paid to investors.
Meridian Initial Public Offer Trust Account
During the year there has been nil contributions (2014: $0.850 million) and $0.044 million of distributions (2014: $0.850 million) from the Trust Account.
Genesis Initial Public Offer Trust Account
During the year there has been $0.167 million of contributions (2014: $1.039 million) and $0.232 million (2014: $1,039 million) of distributions from the Trust Account.
Might River Power Initial Public Offer Trust Account
During the year there has been insignificant movement in the Trust Account (2014: $0.044 million of contributions and $1.065 million of distributions).
(c) Treasury Trust Account#
During the year the Crown opened a Trust Account to facilitate transactions where there are monies due to persons and collected under any agreement with the Crown. As at 30 June 2015, the Trust Account had nil value as the funds have been distributed.
The Statement of Accounting Policies is an integral part of these supplementary financial schedules.
For a full understanding of the Crown's financial position and the result of its operations for the year, refer to the consolidated Financial Statements of the Government for the year ended 30 June 2015.
Statement of Accounting Policies#
for the year ended 30 June 2015
Reporting Entity#
These Non-departmental Schedules present financial information on public funds managed by the Treasury on behalf of the Crown.
The financial information reported in these Schedules is consolidated[13] 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 2015.
Basis of Preparation#
The Non-departmental Schedules have been prepared in accordance with the accounting policies of the Financial Statements of the Government, Treasury Instructions and Treasury Circulars.
Measurement and recognition rules applied in the preparation of the Non-departmental Schedules are consistent with Crown accounting policies and Tier 1 NZ PBE accounting standards.
Significant Accounting Policies#
The accounting policies adopted have been applied consistently to all years presented in these Schedules. Crown accounting policies are detailed in the Financial Statements of the Government of New Zealand.
Notes
- [13]With the exception of impairment in investments (refer to note 5).
Explanatory Notes to Supplementary Statements and Schedules - Non-departmental#
Explanatory notes provide details of significant Treasury non-departmental expenditure and revenue variances between actual results in 2013/14 and 2014/15 and between 2014/15 actual results and 2014/15 Supplementary Estimates. All non-departmental balances are included in the Financial Statements of the Government of New Zealand, with the exception of impairment in investments.
1 International Financial Institutions (IFIs)#
Contributions of $34.1 million were made to the IMF lending programme in 2014/15 compared to forecast of $247.819 million owing to a timing variation in the draw-down of funding by IFIs. During the year the Crown paid $25 million of capital subscriptions to the International Bank for Reconstruction and Development. The increase in capital was twofold: to ensure that the bank's resources can meet projected demand for lending and to realign members' shareholdings to better reflect their economic weight in the world and to enhance the voting power of low-income countries. Capital withdrawals of $52.288 million (2014: $20.264 million) were made by IMF, representing a repayment of advances to IMF to support countries in financial difficulties. During the year a gain of $44.6 million on revaluation of IFIs' investment was recorded as a result of New Zealand dollar foreign exchange rate movement (2014: $21.997 million loss).
2 Government Share Offer#
Eligible New Zealand retail investors in the Mighty River Power and Genesis Energy share offers have received loyalty bonus shares. During the year the loyalty bonus shares were allocated and as a result the Crown's remaining ownership in the Mighty River Power and Genesis Energy has been adjusted. Proceeds from the Meridian Energy final instalment were recognised progressively at a discounted rate from maturity using effective interest rate method, resulting in interest income to the Crown of $21.374 million (2014: $12.507 million). During the year, the final instalment of proceeds received from investors was $627.7 million.
3 New Zealand Debt Management Office#
Detailed disclosures of borrowings and financial instruments are included in the Financial Statements of the Government.
(a) Fair value losses and remeasurements incurred by NZDMO
Unrealised 2014 fair value losses have largely reversed. The corresponding unrealised fair value gains in 2015 are reported under Other income - NZDMO in the Schedule of Revenue. In addition, fair value writedowns on undrawn concessionary lending have partially reversed, resulting in remeasurement gains in 2015 reported in the Schedule of Revenue, Other income - NZDMO.
(b) Other income - NZDMO
Other income - NZDMO is greater in 2015 owing to the inclusion of unrealised fair value gains which largely reversed the unrealised losses recognised in 2014. The 2014 losses are recognised in the Schedule of Expenses as fair value losses while the 2015 gains are reported in the Schedule of Revenue as Other income - NZDMO.
(c) Debt servicing
Greater debt servicing expenses in 2015 (versus 2014) are owing to increased average outstandings of debt issuance by NZDMO. Both short-term (Treasury bills) and long-term (Government bonds) average debt volumes are greater in 2015 as liquidity and funding requirements have been addressed.
(d) Borrowings
Borrowings have increased marginally at 2015 with higher short-term (Treasury bills) borrowings reflecting short-term liquidity decisions.
4 Other Current Revenue#
Significant balances included in Other current revenue are: Employers' superannuation contributions, Reserve Bank surplus, Earthquake Commission guarantee fee, rental income from New Zealand House and surpluses from investments in associates. Prior year Other current revenue was higher by $233.1 million, owing to an unanticipated recovery of an asset that was part of the government guarantee scheme but had been fully written down and a higher Reserve Bank surplus compared to current year.
5 Southern Response Earthquake Services Limited (SRESL)#
The Crown's financial support to SRESL for the ongoing settlement of its Canterbury earthquake claims is embodied in a Crown Support Deed (CSD). The financial obligations to SRESL under the CSD have been revalued to their net present value at 30 June 2015. This valuation is purely driven by SRESL's expected cash drawdown profile and its discounting over the life of the CSD. The valuation was completed by Finity Consulting Pty Limited.
Included in the Schedule of Liabilities - Provision has additional equity of $333 million to be provided to SRESL during the year as part of the uncalled capital under the CSD. These capital injections are immediately written-off as they are not recoverable. The impairment of the additional capital injection is not consolidated in the Financial Statements of Government as it is only recognised as an appropriated expenditure for Vote Finance.
In Supplementary Estimates 2015, a provision of $500 million was included to reflect the full uncalled capital amount the Crown is to provide to SRESL. The uncalled capital provision has been remeasured as at 30 June 2015 based on the expected disbursements and discount rates over the drawdown period. During the 2015/16 year, the Crown is to pay $142 million to SRESL to assist in settling its outstanding claims. This amount was included in Current Provisions in the Schedule of Assets and Liabilities (2014: $Nil).
6 Solid Energy New Zealand Limited#
In September 2014, the Crown signed a Deed of Indemnity and Bond Facility whereby the Crown undertakes to indemnify Solid Energy in respect of the environmental rehabilitation or reinstatement liabilities that arise on or after 1 April 1987 in respect of existing operations. Under this Deed, the Crown is to reimburse the costs of the rehabilitation expenses of Solid Energy, Pike River (2012) Ltd and Spring Creek Mining Company to the extent of $103 million in present value terms. The Deed of Indemnity creates a liability provision for the Crown and an asset for Solid Energy. As at 30 June 2015, $117.336 million is included in the Schedule of Liabilities – Provision, which includes interest unwind and indemnity revaluation gains and losses. Included in current liabilities, Provisions is $9.5 million, representing the current portion payable by the Crown for the 2015/16 environmental rehabilitation claims. The company paid $2.5 million to the Crown as part of the indemnity establishment fee, included in Other current revenue in the Schedule of Revenue.
Subsequent to balance date, Solid Energy's creditors agreed to a proposal whereby the company's assets would be sold over a two-and-a-half year period with the proceeds to be used to repay creditors to the best extent possible. The Crown amended the terms of its rehabilitation indemnities to make them available to any purchasers of the company's mining assets.
As of 1 July 2015 the pre-1987 indemnity will be transferred from MBIE to the Treasury.
Independent Auditor's Report#
To the Readers of the Treasury's Annual Report for the Year Ended 30 June 2015
The Auditor-General is the auditor of The Treasury (the Department). The Auditor-General has appointed me, Graeme Edwards, using the staff and resources of KPMG to carry out the audit on her behalf of:
- the financial statements of the Department on pages 48 to 57 that comprise the statement of financial position, statement of commitments, statement of contingent liabilities and contingent assets as at 30 June 2015, the statement of comprehensive revenue and expenses, statement of changes in equity, and statement of cash flows for the year ended on that date and the notes to the financial statements that include accounting policies and other explanatory information;
- the performance information prepared by the Department for the year ended 30 June 2015 on pages 9 to 25, 29 to 40 and 42 to 43;
- the statement of budgeted and actual expenses and capital expenditure incurred against appropriations and statement of expenses and capital expenditure incurred without, or in excess of, appropriation of other authority and the statement of capital injections for the year ended 30 June 2015 on pages 44 to 46;
- the schedules of non-departmental activities which are managed by the Department on behalf of the Crown on pages 59 to 65 that comprise:
- the schedules of: assets and liabilities; commitments and contingent liabilities; expenses; unappropriated expenditure; and revenue and capital receipts for the year ended 30 June 2015;
- the statement of trust monies for the year ended 30 June 2015; and
- the notes to the schedules that include accounting policies and other explanatory information.
Opinion
In our opinion:
- the financial statements of the Department:
- present fairly, in all material respects:
- its financial position as at 30 June 2015; and
- its financial performance and cash flows for the year ended on that date;
- comply with generally accepted accounting practice in New Zealand and have been prepared in accordance with Public Benefit Entity Reporting Standards.
- the performance information of the Department:
- presents fairly, in all material respects, for the year ended 30 June 2015:
- what has been achieved with the appropriation; and
- the actual expenses or capital expenditure incurred compared with the appropriated or forecast expenses or capital expenditure;
- complies with generally accepted accounting practice in New Zealand.
- the statements of expenses and capital expenditure of the Department on pages 44 to 46 are presented fairly, in all material respects, in accordance with the requirements of section 45A of the Public Finance Act 1989; and
- the schedules of non-departmental activities which are managed by the Department on behalf of the Crown on pages 59 to 65 present fairly, in all material respects, in accordance with the Treasury Instructions:
- the assets; liabilities; commitments; contingent liabilities and assets; expenses; and revenue for the year ended 30 June 2015; and
- the statement of trust monies for the year ended 30 June 2015.
Our audit was completed on 30 September 2015. This 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 to the Treasuryand our responsibilities, and we explain our independence.
Basis of opinion
We carried out our audit in accordance with the Auditor-General's Auditing Standards, which incorporate the International Standards on Auditing (New Zealand). Those standards require that we comply with ethical requirements and plan and carry out our audit to obtain reasonable assurance about whether the information we audited is free from material misstatement.
Material misstatements are differences or omissions of amounts and disclosures that, in our judgement, are likely to influence readers' overall understanding of the information we audited. If we had found material misstatements that were not corrected, we would have referred to them in our opinion.
An audit involves carrying out procedures to obtain audit evidence about the amounts and disclosures in the information we audited. The procedures selected depend on our judgement, including our assessment of risks of material misstatement of the information we audited, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Department's preparation of the information we audited in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Department's internal control.
An audit also involves evaluating:
- the appropriateness of accounting policies used and whether they have been consistently applied;
- the reasonableness of the significant accounting estimates and judgements made by the Secretary to the Treasury;
- the appropriateness of the reported performance information within the Department’s framework for reporting performance;
- the adequacy of the disclosures in the information we audited; and
- the overall presentation of the information we audited.
We did not examine every transaction, nor do we guarantee complete accuracy of the information we audited. Also, we did not evaluate the security and controls over the electronic publication of the information we audited.
We believe we have obtained sufficient and appropriate audit evidence to provide a basis for our audit opinion.
Responsibilities of the Secretary to the Treasury
The Secretary to the Treasury is responsible for preparing:
- financial statements that present fairly the Department’s financial position, financial performance, and its cash flows, and that comply with generally accepted accounting practice in New Zealand.
- performance information that presents fairly what has been achieved with each appropriation, the expenditure incurred as compared with expenditure expected to be incurred, and that complies with generally accepted accounting practice in New Zealand.
- statements of expenses and capital expenditure of the Department, that are presented fairly, in accordance with the requirements of the Public Finance Act 1989.
- schedules of non-departmental activities, in accordance with the Treasury Instructions, that present fairly those activities managed by the Department on behalf of the Crown.
The Secretary to the Treasury's responsibilities arise from the Public Finance Act 1989.
The Secretary to the Treasury is responsible for such internal control as is determined is necessary to ensure that the Annual Report is free from material misstatement, whether due to fraud or error. The Secretary to the Treasury is also responsible for the publication of the Annual Report, whether in printed or electronic form.
Responsibilities of the Auditor
We are responsible for expressing an independent opinion on the information we are required to audit, and reporting that opinion to you based on our audit. Our responsibility arises from the Public Audit Act 2001.
Independence
When carrying out the audit, we followed the independence requirements of the Auditor-General, which incorporate the independence requirements of the External Reporting Board.
In addition to the audit, we have carried out assignments in other areas of advisory services, which are compatible with those independence requirements. Other than the audit and these assignments, we have no relationship with or interests in the Department.
Graeme Edwards
KPMG
On behalf of the Auditor-General
Wellington, New Zealand
List of Acronyms#
BASS | Benchmarking Administrative and Support Services |
---|---|
BEFU | Budget Economic and Fiscal Update |
BPS | Budget Policy Statement |
CASS | Central Agencies Shared Services |
CERA | Canterbury Earthquake Recovery Authority |
CFI | Crown Financial Institution |
CSD | Crown Support Deed |
DHB | District Health Board |
DPMC | Department of the Prime Minister and Cabinet |
ELT | Executive Leadership Team |
FSR | Fiscal Strategy Report |
GDP | Gross Domestic Product |
GSF | Government Superannuation Fund |
GST | Goods and Services Tax |
HNZC | Housing New Zealand Corporation |
ICT | Information and Communication Technologies |
IFIs | International Financial Institutions |
IMAP | Investment Management and Asset Performance |
IMF | International Monetary Fund |
IR | Inland Revenue |
LGFA | Local Government Funding Agency |
MBIE | Ministry of Business, Innovation and Employment |
MC | Ministerial Correspondence |
MCA | Multi-category Appropriation |
MFAT | Ministry of Foreign Affairs and Trade |
MOIAs | Official Information Act requests made to the Minister |
MSD | Ministry of Social Development |
MYA | Multi-year Appropriation |
NCEA | National Certificate of Educational Achievement |
NZ GAAP | New Zealand Generally Accepted Accounting Practice |
NZDMO | New Zealand Debt Management Office |
NZECO | New Zealand Export Credit Office |
NZSF | New Zealand Superannuation Fund |
NZ PBE IPSAS | New Zealand Public Benefit Entity International Public Sector Accounting Standards |
OBEGAL | Government's Operating Balance Before Gains and Losses |
OCR | Official Cash Rate |
OECD | Organisation for Economic Co-operation and Development |
OGA | Office of the Government Accountant |
PIF | Performance Improvement Framework |
PLA | Permanent Legislative Authority |
PQs | Parliamentary Questions |
RBNZ | Reserve Bank of New Zealand |
RFI | Request for Information |
RIA | Regulatory Impact Analysis |
RIS | Regulatory Impact Statement |
RMA | Resource Management Act 1991 |
SLAs | Service Level Agreements |
SOE | State-Owned Enterprise |
SRESL | Southern Response Earthquake Services Ltd |
SSC | State Services Commission |
TOIAs | Official Information Act requests made to the Treasury |
Minister of Finance's Reports on Non-departmental Appropriations [B.14 (Finance)]#
The following pages of this document meet the requirement, set out in the supporting information to the 2014/15 Estimates or 2014/15 Supplementary Estimates, for information on certain non-departmental appropriations to be reported by the Minister of Finance.
Although the reports are presented in the same document as the Treasury's Annual Report, they do not form part of the Treasury's Annual Report for the year ended 30 June 2015 (including reporting by the Treasury on appropriations for that year).
New Zealand House - Renegotiation of Lease Arrangements#
What is intended to be achieved with this appropriation#
This appropriation is intended to provide for activities to re-gear the lease on New Zealand House in London.
What was achieved in this appropriation#
Performance Measure | Target for 2014/15 | Performance for 2014/15 |
---|---|---|
Activities undertaken in accordance with ministerial expectations. | Achieved | The work is continuing on activities to renegotiate the lease on New Zealand House, London. |
2014 Actual $000 |
2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
|
---|---|---|---|---|
187 | Expenses | 190 | 1,000 | 1,000 |
Note:
Underspend for the 2014/15 year of $0.810 million will be transferred to 2015/16 year for the continuation of activities relating to New Zealand House lease renegotiation.
Review and Reform of Local Government Infrastructure Arrangements#
What is intended to be achieved with this appropriation#
This appropriation is intended to achieve a review, and develop reform options for, the Crown's natural disaster funding arrangements for local government infrastructure. This appropriation will also contributeto assessing the financial viability of the proposed Local Government Risk Agency.
What was achieved in this appropriation#
Performance Measure | Target for 2014/15 | Performance for 2014/15 |
---|---|---|
Establish a board to assess the strategic, economic, commercial, and financial and management cases for the proposed Local Government Risk Agency. | 100% | A board was established in 2014/15, and work is continuing on development of the business case for the proposed Local Government Risk Agency. |
2014 Actual $000 |
2015 Actual $000 |
2015 Main Estimates $000 |
2015 Supp. Estimates $000 |
|
---|---|---|---|---|
- | Expenses | - | - | 230 |
Note:
During the 2014/15 year, no third party costs were incurred for work on creating the Establishment Board to develop the business case for the Local Government Risk Agency and therefore the $0.230 million underspend will be carried over to 2015/16 for the continuation of activities for the Establishment Board. Preliminary work undertaken by the Treasury to 30 June 2015 was funded through the Provision of Financial Operations Services and Operational Advice appropriation.
Chief Executive's Introduction#
Welcome to the Treasury's Annual Report for 2014/15.
As this Annual Report goes to print, the world is a more uncertain place than it was a year ago. Some of the main economic news has been anticipated: the transition of China towards a more consumption-led economy and lower trend growth; expectations as to when the Federal Reserve will return to a more normal monetary policy environment; and the slowing of Australia's economy. However, the extent of other developments has been unexpected: the substantial fall in commodity prices; the rapid reduction in the New Zealand Dollar-United States Dollar exchange rate; and the reductions in the Official Cash Rate (OCR).
Against this background, New Zealand's economy is in a good position, albeit with lower growth than forecast in Budget 2015 as a result of the further fall in dairy prices and the earlier peaking of the Christchurch rebuild. Our longer-term prospects remain positive as the core drivers of growth are still in place (including accommodative monetary conditions, high net migration and tourist arrivals, robust construction activity and a steady expansion in business activity). But if there is one issue we need to continue to focus on, it is the management of our own finances and the maintenance of a strong balance sheet that is resilient to shocks. Staying on course with a fiscal strategy that aims to reduce debt while sustaining value from operating and capital spending remains an important priority.
In such fluid circumstances it is vital that the Treasury maintains a strong understanding of the things that matter most for New Zealand's economic performance. A particular highlight of the past year was the release of Holding On and Letting Go as part of our Briefing to the Incoming Minister of Finance. Holding On and Letting Go is the Treasury's narrative on the opportunities and challenges for our economic performance and was developed using the Living Standards Framework. The three overlapping and interconnected dimensions of economic performance explored in Holding On and Letting Go - prosperity, sustainability and inclusiveness - are set out in this Annual Report.
You will also find many other highlights that demonstrate the breadth and depth of the Treasury's work in 2014/15. Fulfilling our responsibilities - whether in so-called business-as-usual functions such as managing Budget processes or providing advice on significant issues like Solid Energy or housing - is frequently complex and constantly challenging.
Much of our most effective work has been done in conjunction with many others across the public, private and social services sectors. Examples include the foundation work for The Thirty Year New Zealand Infrastructure Plan; cross-agency cooperation to advise Ministers on priorities for growing New Zealand's international connections; wide collaboration on progressing the Social Housing Reform Programme; and working alongside agencies to support an improvement in the quality of their Four-year Plans and strategic financial management capability. I would also like to acknowledge the development of a new model for the approval and monitoring of investment across the public sector (following on from the 2014 Investment Statement), and recognise our significant policy advice to help inform the Budget 2015 package to address child hardship.
We could not have accomplished these achievements without excellent people inside the Treasury and effective engagement outside the Treasury. During the year we aimed to embed great performance early on through an improved staff induction process and more intensive graduate development programme. We have also continued to lift our finance ministry capability and to ensure we are an organisation where diversity and inclusion flourish.
People have welcomed the Treasury becoming a broadly connected organisation with a greater focus on “real-world” solutions. Feedback from a survey conducted in 2015 confirms that stakeholders see us engaging more, value the opportunity to share their views with us and want to see and hear more from us. In addition, we have begun adopting a more citizen-centric approach to the development of our policy advice.
Finally, in 2015 we celebrate 175 years since the establishment of the New Zealand Treasury. The Treasury has been constantly changing throughout its history. Each era has built on, rather than replaced, the past. What we do has never been static, and what we think of as “core” business has changed over time; it has become more inclusive and richer.
As the Treasury reflects on its past, we continue to ask ourselves “What do we want to be remembered for? How will we make our mark?” This Annual Report shows that we continue to add to our proud history, and are well prepared for an exciting future.
Statement of Responsibility#
I am responsible, as the Secretary to the Treasury, for:
- the preparation of the Treasury’s Financial Statements, and Statements of Expenses and Capital Expenditure, and for the judgements expressed in them
- having in place a system of internal control designed to provide reasonable assurance as to the integrity and reliability of financial reporting
- ensuring that end-of-year performance information on each appropriation administered by the Treasury is provided in accordance with sections 19A to 19C of the Public Finance Act 1989, whether or not that information is included in this Annual Report, and
- the accuracy of any end-of-year performance information prepared by the Treasury, whether or not that information is included in the Annual Report.
In my opinion:
- the Financial Statements fairly reflect the financial position of the Treasury as at 30 June 2015 and its operations for the year ended on that date, and
- the Forecast Financial Statements fairly reflect the forecast financial position of the Treasury as at 30 June 2016 and its operations for the year ending on that date.
Gabriel Makhlouf
Secretary to the Treasury
30 September 2015
About the Treasury#
What We Do#
As a finance and economics ministry, the Treasury's work can be thought about as five core functions:
- Economic policy advice. We are the lead advisor for Ministers on economic performance, concentrating on policy areas that have a significant impact on economic performance. This includes advice on measures to improve the quality of regulation, removing barriers to growth and enhancing productivity.
- Financial management and advice. We manage the financial affairs of the Crown and provide advice on fiscal strategy, policy and performance. As the Government’s chief accountant we also work to support awareness, professionalism and skills development in financial management across the State sector.
- State sector leadership. With the Department of the Prime Minister and Cabinet (DPMC) and the State Services Commission (SSC), we collectively lead the State sector with the aim of delivering results for New Zealanders. We assist the Government to develop its overall strategy for the State services, provide advice on how to improve the system and manage significant issues.
- Performance management and advice. We manage the performance of departments and other entities the Crown owns. This includes working with them to improve performance as required. Our focus is getting value for money for taxpayers.
- Commercial policy advice and operations. We provide commercial policy advice, execute commercial transactions and provide financial operational services through the Treasury’s Debt Management Office (NZDMO) and the New Zealand Export Credit Office (NZECO).
How We Work - Our Values#
Every person working at the Treasury has a role in helping to achieve higher living standards for New Zealanders. The Treasury's staff bring specialist skills and expertise to the varied and complex challenges of government. We bring policy expertise and operational smarts to the table. We have the ability to pick up complex projects. We understand the power of strong stakeholder relationships so we work hard to develop and maintain them. The way we think and work is driven by behavioural norms and expectations reflected in the organisational values we collectively hold dear. To be successful, the values that all Treasury employees strive to uphold are:
- Bold and innovative. We will never achieve what we want unless we generate, and act on, new ideas and challenge the status quo.
- Passionate and ambitious. We need to attract, retain and motivate the best people, challenge them, treat them exceptionally well and keep them focused on significant work.
- Collaborative and challenging. We must work with others to achieve our outcomes – maintaining the rigour and analytical excellence that is our traditional strength, coupled with a collaborative approach that gets things done in the real world.
- Adaptable and focused. We do a lot of complex and important work, so we need to focus on what really matters, look beyond our own boundaries and common ways of working and shift gears when we need to.
An Overview of the Treasury's Strategic Framework#
Lifting Living Standards for New Zealanders#
During the 2014/15 year, the Treasury reviewed and refreshed its strategic framework with a view to take account of the work in recent years to develop an integrated economic narrative that spoke to our vision of working towards higher living standards for New Zealanders.
The Living Standards Framework helps to ensure, and to understand how, the Treasury's advice impacts across all the dimensions that matter for New Zealanders' living standards.
As a result of the review, we committed to a revised strategic framework comprising the three broad themes from the Living Standards Framework and seven strategic intentions that represent the priority areas for the Treasury. These will help us to focus on what really matters and what we believe will have the greatest impact toward our goals.
This framework replaces our previous focus on Outcomes, which we initially used to structure our work in the year under review. Readers can find more information about our new strategic framework and what we intend to achieve over the next three years in our Statement of Intent for 2015-2019.[1]
The Treasury recognises that lifting the living standards of New Zealanders involves more than economic growth. We see three dimensions of economic performance as contributing to living standards:
- Prosperity. Economic performance is about higher incomes and jobs for New Zealanders.
- Sustainability.Economic performance is not just about prosperity today; it is also about prosperity tomorrow - and the future prosperity of our children.
- Inclusiveness. Economic performance is about all New Zealanders having a role to play in the economy and society.
In November 2014, the Treasury released its economic narrative Holding On and Letting Go,[2] which was developed using the Treasury’s higher Living Standards Framework. We want economic growth to bring prosperity but we also want that growth and the higher incomes and jobs that it brings. We also want an economy that is sustainable today and for future generations, brings social benefits, is resilient and enables equitable outcomes. These three dimensions are mutually supporting and will help to support improved living standards for all New Zealanders.
- Figure 1: Key dimensions of economic performance that contribute to living standards
Prosperity#
We want economic growth to bring New Zealand greater prosperity and we want prosperity to influence economic growth.
Prosperity means a flourishing, successful economy generating higher incomes and jobs for New Zealanders and increased opportunities for economic growth.
While New Zealand has significantly improved its economic performance since the early 1990s, income per person still lags behind the better-performing advanced economies. Since the early 1990s, our gross domestic product (GDP) per capita growth has broadly kept pace with other advanced economies and has improved in the past few years. GDP per capita depends on labour productivity (output per hour worked) and labour input (hours worked per person). In the past few years, New Zealand's GDP per capita has moved closer to the Organisation for Economic Co-operation and Development (OECD) average. This reflects increased hours worked per capita relative to the OECD average as the global recession has adversely affected labour force participation and unemployment in a number of OECD countries. Nonetheless, New Zealand's labour productivity remains around 20% below the OECD average.
There is a range of explanations for New Zealand's poor productivity performance; however, one key factor is New Zealand's small size and distance from international markets.
The strategic challenge is to lift our productivity outcomes by strengthening our international connections. International connections boost productivity by bringing scale, competition, investment and ideas, and a productive economy attracts international flows of goods and services, people, capital and ideas. Through its work, the Treasury strives to support and enable New Zealand to thrive in a globalising and changing world, so that this will in turn increase incomes and economic growth.
Key indicators | Recent performance and latest data available |
---|---|
Higher incomes per person (measured by GDP per capita relative to other OECD countries) |
In 2006, GDP per capita was 15% below the OECD average and New Zealand was ranked 22nd out of 34 OECD countries. In 2010, our standings improved to 21st and our GDP per capita was 12% below the average. In 2013, GDP per capita was around 8% below the OECD average and New Zealand was ranked 19th. Source: OECD http://stats.oecd.org/index.aspx |
Increased labour productivity (measured by GDP per hour worked relative to other OECD countries) |
In 2006, New Zealand's labour productivity was around 23% below the OECD average. As at 2013, this gap was around 19%. Source: OECD http://stats.oecd.org/index.aspx |
Greater levels of international connectedness measured through flow of people, capital, skills and knowledge | This is discussed in the strategic intention “New Zealand as an internationally connected and competitive business environment” (pages 9 and 10). |
Sustainability#
It is important that prosperity is sustainable - tomorrow and in the future.
Sustainable growth and prosperity means we have a flexible economy with good stocks of natural, human, financial and social capital.
In recent years, we have seen strong private consumption, a strong New Zealand dollar, low inflation, high employment, a buoyant labour market, business confidence remaining high and strong activity in the manufacturing and services sectors. The economy has recorded five years of growth. In the year to March 2015, the economy grew by 3.2% in real terms; the fastest growth in a March year since 2006, and higher than most other developed countries.
The Budget 2015 outlook was for economic growth to average 2.8% over the next four years, driven by robust consumption growth as a result of net migration inflows and strong income growth, and supported by low interest rates. However, the outlook has weakened since the Budget with GDP growth in the March 2015 quarter (0.2%) lower than expected (following a 0.8% growth in the previous quarter), June quarter inflation a bit below forecast and dairy prices falling further.
Such movement in commodity prices, and the global financial crisis, are reminders of the importance of resilience to emerging trends and unexpected events. For example, net core Crown debt increased from 10% of GDP in 2008 to 25.6% of GDP in 2014 as temporary fiscal deficits were used to smooth the impact of the crisis and Canterbury earthquakes. We see the strategic challenge for a sustainable economy being supporting a shift towards more investment and export-led growth. Sustainable growth depends upon good management of our resources and capital stocks and a stable macro economy with flexible markets that support businesses and people to respond to a changing world.
Indicators | Recent performance and latest data available |
---|---|
Reducing our net external debt and vulnerabilities to external shocks (measured by net international investment position as % of GDP) |
For the year ending March 2014, New Zealand's net external liabilities were 65.5% of GDP. Source: The Treasury http://www.treasury.govt.nz/budget/forecasts/befu2015 |
Strengthening fiscal buffers and reduction in core Crown debt (measured by net core Crown debt as a % of GDP) |
For the year ending June 2014, net core Crown debt was 25.6% of GDP. Source: The Treasury http://www.treasury.govt.nz/budget/forecasts/befu2015 |
Continued improvements in management of New Zealand's natural resources | Refer to the strategic intention “New Zealand as an internationally connected and competitive business environment” (pages 9 and 10). |
Government balance sheet well managed in accordance with medium-term objectives | This is discussed in the strategic intention “Crown balance sheet is managed effectively and efficiently” (pages 19 and 20). |
Inclusiveness#
An economy cannot be prosperous and sustainable if it does not enable participation in society and the economy by all New Zealanders.
Economic and social participation means access to good-quality housing, an education system that works for all New Zealanders, the availability of diverse employment opportunities and an accessible health system.
New Zealand generally does well in supporting economic and social participation. We have high rates of employment and our education and health systems work well for most. However, some New Zealanders experience a range of barriers to participation and some groups are under-represented in employment and too many children fail to achieve their full educational potential. For example, the labour force participation rate for disabled adults in 2013 was 50%, compared with 76% for non-disabled adults. As another example, around 40% of young Māori do not achieve National Certificate of Educational Achievement (NCEA) Level 2.
The Treasury supports policy primarily focused on removing the barriers and increasing the opportunities for people, especially for people experiencing hardship. The strategic challenge is to remove barriers and to equip New Zealanders to reach their potential, particularly the most disadvantaged. A focus on social cohesion and community involvement will both form an important part of promoting inclusiveness, and any increase in equity that is achieved needs to be sustainable for future generations. The Treasury has a focus on supporting improved performance of the social sector through a “social investment” approach, which involves more systematic use of evidence and data to better understand the “customers” of social services in order to get better long-run outcomes.
Indicator | Recent performance and latest data available |
---|---|
Improvement in the levels of educational achievement and employment outcomes | Refer to the strategic intention “People have the capability and opportunities to participate in society and the economy” (pages 21 and 22) |
For further information, readers can view a copy of Holding On and Letting Go from the Treasury's website: http://www.treasury.govt.nz/publications/briefings/holding-on-letting-go
Progress Against our Strategic Intentions #
The reporting against each of the Treasury's seven strategic intentions, on pages 9 to 22, meets the requirement for this Annual Report to include an assessment of the Treasury's operations, an assessment of the Treasury's progress in relation to its strategic intentions and, on pages 23 to 25, information about the Treasury's management of its organisational health and capability.
In addition, the reporting on those pages meets much of the requirement for end-of-year performance information on what has been achieved with each departmental appropriation administered by the Treasury.
New Zealand has an Internationally Connected and Competitive Business Environment#
Our focus#
To systematically apply an international lens to our significant policy and regulatory work programmes, and to our interactions with business, household and international stakeholders, while ensuring they support a strong domestic business environment with greater levels of productivity and the sustainable use of natural resources. Specific areas of focus include:
- ensuring government activity provides the foundations for a strong business environment that raises productivity and ensures productivity and sustainability of our natural resources
- reducing barriers to the flows of trade, capital, people and ideas
- supporting internationalisation, innovation and partnership with business, and
- maintaining revenue to fund government services that bias economic decisions as little as possible.
What we did in 2014/15 to progress our strategic intention#
International work
The Treasury supported cross-agency work to advise Ministers on policy priorities for growing New Zealand's international connections. This led to an agreement to include the new priorities in the Government's business growth agenda: a refreshed trade strategy; taking an international perspective to regulation; and sharpening the international focus of the innovation system.
We provided advice to Ministers on firm-level barriers to overseas direct investment and options to support higher levels of overseas direct investment by New Zealand firms.
The Treasury managed New Zealand's engagement in the G20 process, jointly with the Ministry of Foreign Affairs and Trade (MFAT). This included support for the Minister of Finance at G20 meetings.
NZECO continued to actively diversify its portfolio and undertake initiatives to improve its risk mitigation, and has continued to explore opportunities to support New Zealand exporters increase their sales by supporting the offering of financing solutions to buyers of exports from New Zealand.
Raising productivity and ensuring the sustainability of our natural resources
The Treasury led an engagement process with government agencies, local government and the private sector to produce The Thirty Year New Zealand Infrastructure Plan.[3] The Plan sets out the step-change needed in our approach to infrastructure planning and management: a better understanding of the levels of service we want to deliver; more mature asset management practices and use of data; and more effective decision-making that considers non-asset solutions. The Plan includes an action plan to help make this shift, including a number of key anchor actions relating to developing meta-data standards, long-term integrated regional planning, the alignment of planning legislation and strengthening procurement practices and the visibility of future investment.
The latest OECD New Zealand country study was completed, focusing on policies to support a sustainable economic expansion, ensuring that economic growth is inclusive, and climate change and freshwater management. The majority of the OECD's recommendations were supportive of New Zealand's policy approach.
As part of the cross-agency Productivity Hub, we continued to grow our understanding of New Zealand's productivity trends, with a focus on understanding firm-level productivity. The Productivity Hub and the Productivity Commission have started to build a more robust evidence base with an ongoing series of published research papers.
The Treasury worked collaboratively with the natural resource sector agencies to refresh the overall objectives for the sector and achieve a sector-based approach to Budget 2015. We also contributed to cross-agency advice on reforms to the Resource Management Act 1991 (RMA), including initiatives to promote more responsive land supply, and on New Zealand's post-2020 climate change international commitment.
We worked with other agencies, iwi and the Land and Water Forum on strategy and evidence building to support progress on water reform.
Supporting a strong business environment
The Treasury has continued to work with Inland Revenue (IR) to deliver the Government's tax policy work programme. This included work with IR and the OECD on international tax reform to make sure OECD recommendations on Base Erosion and Profit Shifting protect the tax base without discouraging foreign investment. The Treasury has also worked with IR on an issues paper to correct operation of loss grouping and imputation credits so that tax does not artificially favour foreign corporate takeovers over other restructuring.
We worked with agencies on transport issues and the alignment of central government and Auckland Council objectives to lift Auckland's economic growth.
We prepared the Government's response to a Productivity Commission inquiry into regulatory institutions and practices, committing to a series of system-focused initiatives and partnerships.
We also worked with agencies in the Building Skilled and Safe Workplaces work stream of the Business Growth Agenda to advise on how the education, skills and immigration systems could better support inclusive growth, including addressing regulation of labour market settings and reducing variations in regional underemployment.
Cross-government leadership
As mentioned earlier in this report, the Treasury published its economic narrative, Holding On and Letting Go, which sets out New Zealand's medium-term economic challenges and opportunities and presented a framework for developing policy advice on lifting economic performance. We have also advanced our programme of medium-term investment work so that we are better positioned to advise on future policy issues.
The Treasury continued to convene the Economic Chief Executives' group, in collaboration with the Ministry of Business, Innovation and Employment (MBIE), with a view to drive a shared economic vision through the public sector. Over the year, the Economic Chief Executives met to consider compulsory education, tertiary education, the role of Information and Communication Technologies (ICT) in lifting New Zealand's productivity, the refresh of the Business Growth Agenda, the potential of the primary sector and investment options for increasing firm internationalisation.
Alongside MBIE, we also provided advice to Ministers on the implementation, coordination and next steps in the Business Growth Agenda.
The progress we are seeing in our medium-term indicators of success#
Indicators | At June 2015 |
---|---|
Trade intensity increases as a proportion of GDP. | Businesses that export tend to have higher productivity, and this can help overcome the constraints of a small domestic market while imports provide firms with access to global technology and ideas. Statistics New Zealand reports that our trade intensity as a proportion of GDP was 58% in 2014, up from 57% in 2013. |
Flows of inwards and outwards direct investment increase to levels more proximate to other small, open economies, while becoming demonstrably more diverse and productivity enhancing. | Inward and outward flows of direct investment are important for accessing growth capital and supporting New Zealand business growth offshore. In 2014, inward direct investment was $97.3 billion which is 43.1% of GDP, up from 39.8% of GDP in 2013. Outward direct investment was $23.1 billion which is 10.9% of GDP, up from 10.7% in 2013. |
GDP per hour worked grows substantially faster than the OECD average. | GDP per hour worked is a measure of labour productivity and so a good indicator of how well the economy is using its human capital on aggregate and New Zealand’s labour productivity is a key driver of our lower incomes. According to the OECD, New Zealand’s GDP per hour worked was $39.90 in 2014, up from $39.00 in 2013. This rate is slightly above the growth rate of the OECD average between 2013 and 2014. |
Business investment as a percentage of GDP increases substantially relative to the OECD mean. | Business investment is an important component of GDP, since it increases productive capacity in the economy and boosts employment. Latest OECD data show that business investment in New Zealand was 12.8% of GDP in 2014 compared to 12.9% across the OECD. The position relative to the OECD figure has remained steady since 2013 when business investment was 12.6% and 12.7% respectively. The OECD has recently revised its method for calculating New Zealand's business investment. |
The perceived quality of New Zealand's infrastructure increases in measures such as those produced by the World Economic Forum. | The quality of our infrastructure is important to support higher levels of productivity, and to help underpin a strong economy. On the 2014 World Economic Forum's ranking of perceived quality of infrastructure, New Zealand was ranked 29th and scored 5.3/7 in 2014, compared with a ranking of 27th and a score of 5.2/7 in 2013. |
The State Sector Efficiently and Effectively Delivers Results for New Zealanders#
Our focus#
Our efforts have been on improving the performance of the State sector system at an agency and sector level through cross-agency leadership and collaboration, improved strategic management and better information to support the drive for performance improvements. Specific areas of focus include:
- ensuring there are clear results-focused goals and cross-agency leadership and collaboration leading to a more inclusive society
- ensuring there is improved value for money of expenditure and agency interventions and steadily rising productivity
- supporting improved strategic financial management, and
- ensuring agencies keep to their agreed spending paths and future liabilities are reduced in major expenditure areas.
What we did in 2014/15 to progress our strategic intention#
Results-focused goals and improved value for money
The Treasury has an important leadership role in assisting the State sector to meet the expectations of the New Zealand public, and ultimately to make a real difference in the results that matter most. This includes working with others to strengthen the delivery of public services and working to enhance the fiscal, financial and performance management and capability of the State sector.
In recent years, the State sector has focused on achieving a set of clearly defined Better Public Services results. The Treasury works alongside other agencies to support the achievement of these goals. Strong progress was recorded in a number of these goals; in particular, infant immunisation rates have increased (result 3) and crime rates are down (result 7).
Innovation in service delivery has been a focus in our efforts to lift performance in 2014/15 and support the achievement of the Better Public Services results. One example of this innovation is that we have worked closely with the Ministry of Health to develop a pilot programme for social bonds.
Social bonds are an innovative way to contract social outcomes and will see private and public sector organisations operating together to fund and deliver services. The return for investors will be partially determined by whether or not agreed social targets have been achieved.
We have also implemented innovative ways to source information via the Request for Information (RFI) that we released in 2014/15. This was to help identify what we can do to make the biggest difference for the hardest to reach children and their families. Responses were invited from people who work with vulnerable New Zealanders, and others whose input might help the Government invest to get better results. We received over 250 responses to the RFI and, while these indicated that our current areas of focus were broadly in the right direction, it is also clear that more can be done to improve the results from social services more generally. Insights from the RFI are being used to inform our advice to the Government, and will continue to influence the Treasury's work programme in 2015/16.
The Treasury has worked with a range of departments on options for improving services by reforming the way services are delivered. One example is the Social Housing Reform Programme where the Treasury works with MBIE, the Ministry of Social Development (MSD) and Housing New Zealand Corporation (HNZC). The programme is designed to change the way social housing is delivered, with the goals of improving tenants' outcomes from social housing and growing the number and quality of social housing places. A key component of the reform programme is the creation of a market for social housing in which registered community housing providers participate alongside HNZC. To facilitate the development of this market, the Treasury is leading a project to transfer HNZC houses to registered providers. It is anticipated that 1,000 to 2,000 HNZC houses will be transferred over 2015/16.
We also supported the transition to medium-term arrangements in Canterbury and the movement of the Canterbury Earthquake Recovery Authority (CERA) to become a departmental agency within DPMC. These changes help maintain momentum with the earthquake rebuild and place natural disaster recovery work at the core of central government planning.
Better information to drive State sector performance
Our Analytics and Insights function has been created to undertake research about people, their interaction with government services during their lives and the long-term outcomes they experience. The team uses newly integrated public sector administrative data to identify groups at risk of poor outcomes to inform policy processes and decision-making. In the past year this analysis has been used to support the Government's focus on vulnerable people by providing Ministers with better information about the characteristics of families and children most at risk of poor outcomes and the factors that are associated with higher risk. Addressing these underlying problems and lifting long-term outcomes will mean fewer vulnerable New Zealanders and therefore also less demand for services, such as welfare, in the future. This benefits individuals and helps to manage future cost pressures and enable shifts in social spending from alleviating current problems to investing in future living standards.
Data providing comparisons of Benchmarking Administrative and Support Services (BASS) across agencies were collected for the fifth year. This information helps agencies identify opportunities for improving the cost, efficiency and effectiveness of their services by enabling them to compare their performance over time and with other similar organisations.
Lifting the strategic financial and non-financial performance of agencies
The Treasury has continued its focus on lifting the medium to long-term performance of agencies through its engagement with them on Four-year Plans and capital intentions as well as greater emphasis on building strategic financial management capability with the establishment of the Office of the Government Accountant (OGA).
In 2014/15 we engaged intensively with the other central agencies, functional leads and departments on the development of Four-year Plans. The quality of Four-year Plans has continued to improve. Forty-eight percent of departments were assessed as meeting the criteria expected of a credible medium-term strategic Four-year Plan, with a further 45% of Plans sitting just below meeting the criteria for a credible medium-term strategic plan.
We are seeing a shift from the provision of a generic strategy to a strategy specific to the agency; more departments taking an integrated approach to the development and communication of their Plan; more discussion on operating models and how they need to change; and increased recognition of customers/ customer awareness and the importance of partnerships.
New operating spending in Budget 2015 was managed within the Government's allowance for new spending
Provisions for new operating spending in Budget 2015 were managed within the allowances for new spending that were set by the Government. To support the achievement of the fiscal intentions and objectives we introduced new systems to provide more rigorous analysis of spending proposals.
Our efforts around operating expenses have focused on advising about the affordability and the value for money of proposals for spending. In addition, for the first time, a package of system initiatives was funded in Budget 2015 using contributions from agency baselines. This package aims to reduce transaction costs, speed up action and provide more sustainable funding for initiatives that benefit the system as a whole. We have also supported agencies, such as the Ministry of Justice and Police, to carry out expenditure reviews.
Work is also underway to embed the social investment approach for Budgets 2016 and beyond to provide better information on returns on investment and to support Ministers in making spending choices.
We have lifted our capacity as a “Ministry of Finance” - a core part of the Treasury's role - by deepening our understanding of cost drivers and pressures to underpin advice about the sustainability of expenses and capital spending.
We continued to expand the scope and robustness of the Capital Investment Panel we created in 2013/14, drawing on experts from across the public sector, to provide an assessment of proposals for new capital investments to help guide the Government's decision-making during the preparation of the Budget. This year, the Panel was able to look at significant baseline capital spending for the first time as well as new capital investment. In-depth assessments of the risks to capital sustainability across capital intensive agencies supported this work. These assessments focused on agencies' capacity to fund the future capital investment plans without needing additional resources, as well as examining the areas that are likely to seek additional resources in the future.
The progress we are seeing in our medium-term indicators of success#
Indicators | At June 2015 |
---|---|
Seventy percent of departments are assessed by central agencies as investment ready under Four-year Plans. | The Treasury revised this measure during the year. The new measure assesses the percentage of Plans submitted by agencies that meet the criteria expected of a credible medium-term strategic plan. Forty-eight percent of plans met the criteria in 2014/15 by comparison to our target of 60%. |
Financial capability of agencies is assessed as higher as measured by the Finance and Resources - Financial Management rating in Performance Improvement Framework (PIF) whereby 90% of agencies are assessed as at least “well placed”. |
Eleven PIF reviews were published in the 12 months to May 2015. Of these 11 reviews, two agencies (18%) recorded “well-placed” or higher in the Finance and Resources - Financial Management rating. By contrast, 53% of the 32 agencies reviewed up to 30 June 2014 were judged as strong or well placed on the financial management capability element of PIF. Sources: https://www.ssc.govt.nz/pif-factsheet5; The Treasury Annual Report 2013/14 |
Government results are delivered and functional leadership in property, procurement and ICT delivers tangible benefits. |
The Crown Office Estate Report for the year to June 2014 (the latest available data) recorded a $2 million reduction in total estate rental. In the previous year, total rent-spend increased by $4 million. For procurement, MBIE has created all-of-government contracts to establish single supply agreements for selected common goods and services. All-of-government contracts account for around 2% of government spend with third party suppliers and are designed to improve engagement with suppliers. |
There is a broad picture of how the State sector system is performing and how it influences end results for citizens (where measures are available). |
Citizens' experiences of public services are a critical measure of how the State sector is performing. The Kiwis Count survey provides a broad measure of this. In the September 2014 quarter the survey recorded 73% satisfaction with public services, the same result as recorded in September 2013. |
There has been a demonstrable lift in State sector productivity, efficiency and effectiveness (where measures are available). |
Eleven PIF reviews were published in the 12 months to May 2015. Just under 50% were rated as “well placed” or higher for Core Business - Effectiveness and around 20% were rated as “well placed” or higher for Core Business - Efficiency. Source: https://www.ssc.govt.nz/pif-factsheet5 Of the 11 reviews, none recorded “well-placed” or higher for the Finance and Resources - Improving Efficiency and Effectiveness rating. By contrast, the most recent system-level findings were published by the Institute for Governance and Policy Studies in December 2012, which found 62% were rated as “green” (signifying good performance) for Core Business Effectiveness, 52% were rated as “good” for Core Business Efficiency and 24% were rated as “good” for Improving Efficiency and Effectiveness. Source: http://igps.victoria.ac.nz/publications/publications/show/339 To assess the efficiency and effectiveness of agencies' back office functions, with a goal of supporting and freeing up resources for front line public services, we released the 2013/14 report on the cost, efficiency and effectiveness of administrative and support services across 26 public sector agencies. This year's report shows that administrative and support costs were relatively similar to last year at $1.68 billion (up $43 million) across the five functions. This follows a $140 million increase in the prior year, from 2011/12 to 2012/13. Source: http://www.treasury.govt.nz/publications/media-speeches/media/07aug15 |
New purchasing models such as contracting for outcomes have been tested, and are being implemented if they are producing better outcomes for at-risk population groups. | The Treasury is assisting the Ministry of Health in the procurement of the first social bond pilots in 2015/16 as a way to contract social outcomes and will see private and public sector organisations operating together to fund and deliver services. The return for investors will be partially determined by whether or not agreed social targets have been achieved. |
Value drivers for government agencies and value from expenditure are better understood. | During 2014/15 we worked with agencies during the production of Four-year Plans, Budget documents and the annual reporting processes to understand departments' capacity to deliver outcomes sought by the Government. For example, in the health sector we have agreed a new system for obtaining information and we have used this to underpin advice to Ministers about district health board (DHB) performance and the performance of the health system as a whole. |
Agencies keep to agreed spending paths and measured future liabilities reduce in major expenditure areas. |
The Government delivered Budget 2015 within the allowances for new spending that it set in the 2014 Budget Policy Statement (BPS). MSD produces an estimate of the expected future costs of supporting current beneficiaries over their lifetime - this is a measure of the size of future liabilities in the sector. The most recent valuation was published in February 2015 and recorded a $7.5 billion reduction as at 30 June 2014 compared with 30 June 2013. Source: http://www.msd.govt.nz/about-msd-and-our-work/newsroom/media-releases/2015/reforms-succeed.html In the preceding 12 months the measure reduced by $10.3 billion. |
There is a Faster Improvement in Māori Living Standards#
Our focus #
In our first year in this strategic priority, the Treasury's overall approach has been to work towards partnering with Māori and iwi on ideas and actions that will support Māori economic development and social outcomes, particularly education. Specificareas of focus include:
- building an understanding of the Māori economy, its potential and how government could contribute to its growth
- successful partnering between Māori, iwi and the Crown on ideas and actions to improve living standards and strengthen the New Zealand economy
- collaborating with public sector agencies and with Māori on opportunities to improve delivery of education services and Māori education outcomes
- ensuring effective engagement with iwi on natural resource management and mechanisms for recognising Māori rights and interests in natural resources are integrated into regulatory frameworks, and
- ensuring historical Treasury settlements are fair, durable and affordable.
What we did in 2014/15 to progress our strategic intention#
Partnering with Māori on economic development
In our Māori economic development work we are seeking to partner with other government agencies, iwi and other Māori organisations to grow the Māori economy and its contribution to improving Māori living standards.
This year we have worked alongside MBIE, Te Puni Kōkiri, Ministry of Primary Industries, New Zealand Trade and Enterprise, Callaghan Innovation and the Māori Economic Development Advisory Board to grow our understanding of the opportunities and issues for the Māori economy and to agree a cross-government work programme for Māori economic development in support of He Kai Kei Aku Ringa (the Crown-Māori economic partnership). We have also sought to integrate this work with regional economic development growth study and action plan processes, given the strong overlaps between these areas.
Focus areas for our work are: internationalisation and innovation performance of Māori businesses; supporting increased productivity of Māori-owned assets (primarily collectively-owned land); ability of Māori businesses to attract capital for growth; and improving skills and vocational outcomes.
Clarifying Māori rights and interests in natural resources
We have been working collaboratively with the Ministry for the Environment, DPMC and iwi on ongoing policy work on Māori rights and interests in freshwater and other natural resources. The cross-agency engagement with iwi leaders and other groups has provided a good platform for Crown-Māori discussions on other natural resources.
We have also provided support to the Land and Water Forum on its advice to the Government on freshwater management, and contributed to advice on the natural resource components of historical Treaty of Waitangi settlements.
Improving educational services and outcomes
Over the medium term our education work aims to achieve accelerated and sustained improvement in Māori education achievement (measured by Better Public Services targets).
We worked alongside the Ministry of Education and others to develop a stronger understanding of the current performance of the education system for Māori learners, and what would support better outcomes. Retention and engagement of Māori in education beyond age 16 has been a particular focus, as a necessary first step to achieving for Māori the Better Public Services goal of 85% of 18-year-olds with at least NCEA Level 2.
We applied a design-thinking approach to better understand the experiences of Māori students with the education system, which highlighted, amongst other things, the roles of school leadership and teachers, and a lack of coordination across government agencies which is contributing to disengagement from schooling by Māori students. Insights from the work are beginning to inform the education reform work programme and social investment work.
Incorporating Māori perspectives in the policy process
As well as focusing on a few policy areas where we consider we can make significant gains in terms of improving Māori living standards, we also sought to build our organisational capability to understand Māori perspectives and bring this understanding to our work.
Our goal in this is to improve the relevance and impact of our advice by understanding different perspectives and engaging effectively with the community.
Particularly areas of focus have been:
- Developing the Treasury’s Māori living standards framework to incorporate Māori perspectives on what matters for living standards so that these can be applied to policy development within the Treasury and other agencies, as well as by iwi and Māori organisations in their work. We have tested our developing thinking with students, iwi and Māori economic organisations.
- Developing an organisational Māori engagement strategy that focuses on purpose and relationship building. Key initial engagements are underway with iwi.
Achieving fair and durable Treaty settlements
The Treasury supported the Office of Treaty Settlements to achieve Treaty negotiations milestones with iwi. We worked closely with the Office to ensure that settlement packages are fair, durable and affordable.
Our goal in this work is to support the completion of historic Treaty settlements with all willing and able iwi, in order that iwi secure an economic base for themselves to enable them to realise their economic and social aspirations.
The progress we are seeing in our medium-term indicators of success#
Indicators | As at 2015 |
---|---|
There is evidence of sustained growth in the Māori economy (as measured by the value, return on and productivity of Māori-owned assets; participation in export markets; and Māori employment). |
Over the course of the year, the Treasury worked with Te Puni Kōkiri, MBIE, Ministry of Primary Industries, New Zealand Trade and Enterprise and Callaghan Innovation to identify priority work areas to support growth in the Māori economy - particular areas of focus are export and internationalisation performance, productivity of Māori-owned land and skills and vocational outcomes. High-level data on the size of the Māori economy asset base have been produced by Business and Economic Research Limited and Te Puni Kōkiri. Latest estimate (at 2013) of the size of the asset base is $43 billion. Previously (in 2010) Business and Economic Research Limited estimated the asset base at $36.9 billion. Source: http://www.tpk.govt.nz/en/a-matou-mohiotanga/business-and-economics/māori-economy-report-2013 |
There is accelerated and sustained improvement in Māori education achievement (measured through Better Public Services targets). Data here represent the percentage of 18-year-olds with a minimum of NCEA Level 2 or equivalent. |
Latest available Better Public Services data show that the Māori achievement of NCEA Level 2 was 67.7% of 18-year-olds in 2014. This is up from a 57% achievement rate in 2011. Source: https://www.ssc.govt.nz/bps-boosting-skills-employment#result5 |
Historical Treaty of Waitangi claims are settled and government and iwi are focused on strengthening economic and social outcomes. |
In 2014/15 the Treasury contributed to claims settlement work which resulted in four initialled deeds of settlement (valued at $64.2 million) by the end of the year. Rangitane o Manawatu https://www.govt.nz/treaty-settlement-documents/rangitane-o-manawatu/ Hineuru https://www.govt.nz/treaty-settlement-documents/ngati-hineuru/hineuru-settlement-summary/redress/ Ngatikahu ki Whangaroa https://www.govt.nz/treaty-settlement-documents/ngatikahu-ki-whangaroa/ Ahuriri https://www.govt.nz/treaty-settlement-documents/ahuriri-hapu/ |
The Economic Cycle is Managed in a Way that Supports Sustainable Growth #
Our focus#
We focused on the use of tax, product, financial, labour market and fiscal policy levers to support sustainable growth and a more resilient economy that is less susceptible to shocks. Special areas of focus were:
- returning the operating balance to surplus and developing fiscal policy that does not exacerbate the economic cycle
- making changes to facilitate a more responsive housing supply
- using macro-prudential tools appropriately
- ensuring capital markets are efficient and effective and support trend-growth
- ensuring the settings provide for appropriate management of a banking crisis, and
- taking action to reduce long-term fiscal pressures.
What we did in 2014/15 to progress our strategic intention#
Returning to surplus
The Budget Economic and Fiscal Update (BEFU) forecast a $0.7 billion deficit in the operating balance before gains and losses (OBEGAL) for 2014/15. However, in the 11 months to May 2015, OBEGAL was $1 billion ahead of forecast and a surplus is still possible when the accounts are finalised in October. The Treasury supported the Government in identifying fiscal risks to the 2014/15 OBEGAL surplus and in providing a range of options to achieve it. Fiscal policy settings continue to place downward pressure on aggregate demand.
Markets and growth
The Treasury advised the Minister on the IR-led KiwiSaver Evaluation Synthesis report (published February 2015). A KiwiSaver fund management market study and asset allocation study were also completed. Advice was provided to government in Budget 2015 on improving value for money of KiwiSaver.
Key issues influencing the cost of capital for firms were presented to Ministers and deeper analysis of the influence of bank funding costs was prepared. We also embarked on a project to investigate business saving and its link to firm investment behaviour and the wider economy was commenced.
We also provided advice to the Minister on the increased use of “sum insured” policies in the residential insurance market.
Policy settings and frameworks
The Treasury assisted the Government with developing the BPS and the Fiscal Strategy Report (FSR). In addition to this support, the Treasury provided a wide range of advice on fiscal settings and macroeconomic stability issues. This included advice on fiscal policy settings in a low inflation and low interest rate environment, given the prevailing macroeconomic outlook, and advice on the impact of evolving household balance sheets.
New Zealand's operation of macroeconomic policy and associated frameworks was endorsed by the International Monetary Fund (IMF) and OECD in their respective reports on New Zealand. An external review of fiscal policy advice found that the Treasury's advice has been consistent with sound principles and practices of responsible fiscal management, and appropriately mindful of fiscal policy's equity, effectiveness and efficiency objectives. New Zealand's economic and fiscal stability have seen it maintain an AA credit rating since 2011. The Treasury provided input into the processes producing the reports and ratings outlined above.
During the year, we advised the Minister on the Reserve Bank of New Zealand's (RBNZ's) five-year funding agreement, the Policy Targets Agreement and the role of the Reserve Bank Board.
We also provided advice on RBNZ's proposed use of macro-prudential tools. The advice was enhanced through the application of new macroeconomic policy modelling tools to assess potential implications.
Forecasting
The Treasury published three Economic and Fiscal Updates through the course of 2014/15 - the Pre-election, Half Year and Budget Updates. Each Update outlined New Zealand's economic outlook for the next five years and the implications for the Government's fiscal position.
The BEFU forecast OBEGAL rising surpluses in the 2016 through 2019 fiscal years. As a result, net core Crown debt is projected to fall from 25.6% of GDP in 2013/14 to 22.9% in 2018/19. New Zealand remains on track to reduce net core Crown debt to 20% by 2020.
We continue to monitor the economy and tax revenues. Monthly Economic Indicator reports and Financial Statements of the Government were published throughout the year to inform Ministers and the public on the evolving macroeconomic and fiscal outlook. Key fiscal and economic data were published alongside these reports.
Planning for the fourth statement on the Long-term Fiscal Position is underway.
Settings ensure banking crisis can be appropriately managed
The Treasury engaged with the RBNZ on crisis governance advice and open bank resolution policy with a view to reporting to the Minister in early 2015/16.
We also chaired the Trans Tasman Banking Council for 2014/15, working closely with Australian and New Zealand counterparts to refresh the policy agenda and work through crisis resolution issues. Planning is underway to ensure a smooth handover to the new chair.
Housing supply
The Treasury worked with other agencies to provide advice on a range of measures related to the supply of housing including the provision of infrastructure, the impact of council rules and processes, and establishing the Productivity Commission inquiry into land use. We also provided advice on a range of potential tax measures that were considered as part of Budget 2015.
The progress we are seeing in our medium-term indicators of success#
Indicators | At June 2015 |
---|---|
Fiscal policy has supported monetary policy by placing downward pressure on aggregate demand growth as measured by a range of indicators |
The fiscal impulse indicator shows that fiscal policy is expected to have a contradictory impact on demand in almost every year of the forecast horizon. The fiscal impulse for 2014/15 is -0.4% of GDP. Fiscal consolidation is keeping interest and exchange rates lower than otherwise. Source: http://www.treasury.govt.nz/budget/forecasts/befu2015/111.htm |
The Government's financial buffers have been strengthened, with core Crown net debt on track to be below 20% of GDP by 2020. | Net core Crown debt as a share of nominal GDP is forecast to be 25.7% of GDP in 2014/15 and is projected to decline to 19.7% of GDP by 2020/21, consistent with the Government’s long-term fiscal objectives of net core Crown debt at a level no higher than 20% of GDP by 2020. Sources: http://www.treasury.govt.nz/budget/2015/fsr/05.htm http://www.treasury.govt.nz/budget/forecasts/befu2015/021.htm |
Any positive operating balance surprises are used mainly to further strengthen the Government's balance sheet. |
Net worth attributable to the Crown is forecast to grow steadily in nominal terms across the forecast period largely owing to forecast operating balance surpluses. Beyond 2015, net worth attributable to the Crown is expected to grow by $18.1 billion to stand at $93.6 billion by 2018/19, increasing as a share of nominal GDP to reach 32.8% by 2018/19. Source: http://www.treasury.govt.nz/budget/forecasts/befu2015/022.htm |
A lift in both government and private sector saving rates contributes to higher national saving over time. | Government and households have both been increasing their saving rate in recent years leading to a higher national saving rate. The Treasury forecasts ongoing saving from both sectors. Source: http://www.rbnz.govt.nz/statistics/tables/m6/ |
Housing supply is more responsive to housing demand and house price growth is substantially lower than in the previous cycle, such that there is a moderate fall in the house price/income ratio. |
Housing supply has been increasing with building consents issued increasing steadily since 2011. House price inflation has increased but remains below peaks seen during the last cycle. Source: http://www.rbnz.govt.nz/statistics/key_graphs/house_prices_values/ |
The increase in interest rates over the forthcoming economic cycle is smaller than it was during the 2000s. |
RBNZ has revised down its view of neutral levels for the OCR (or 90-day interest rates), and for retail interest rates that households and firms face, typically proxied by the neutral floating mortgage rate. A lower neutral real interest rate implies that the average level of interest rates over the cycle will be lower than in the past and this is reflected in lower forecasts for interest rates than in previous cycles. Source: http://reservebank.govt.nz/research_and_publications/ |
Assessments of exchange rate misalignment do not show material over- (or under-) valuation. |
The IMF concluded that the New Zealand dollar was 5% to 15% overvalued when it assessed the New Zealand economy in June 2014. The exchange rate has since depreciated along with a significant fall in export commodity prices, and expectations for interest rates in the future, than previously thought. Source: http://www.imf.org/external/pubs/ft/scr/2014/cr14158.pdf |
Strengthened preventative measures are in place, and settings ensure a bank failure can be appropriately managed. | The open bank resolution is available to stabilise a failed bank and RBNZ and the Treasury are working on a set of legislative amendments to ensure the statutory manager has the appropriate powers. The Treasury chaired the Trans Tasman Banking Council work agenda on crisis preparedness. |
Financial stability risks related to New Zealand are within the “normal range”. | RBNZ's financial stability report reports that bank capital, liquidity and funding buffers remain above required minima, while asset quality and underlying profitability are strong. The Treasury provided advice on a set macro-prudential tools that has enhanced their operation. |
The Crown Balance Sheet is Managed Effectively and Efficiently#
Our focus#
We managed the performance and risk profile of assets and liabilities to support the Government's medium-term objectives. Specific areas of focus included:
- the composition and shape of the Crown’s balance sheet and liabilities is aligned with government priorities
- appropriate financial, commercial and social returns, and long-term value is achieved from the assets that the Crown owns
- agencies have the appropriate level of management capability
- sufficient funds are raised to finance the Crown’s cash deficit while minimising the cost to the Crown of such borrowing
- the Crown balance sheet provides a buffer to improve resilience, and
- Crown financial risks are managed consistent with government risk tolerance.
What we did in 2014/15 to progress our strategic intention#
Managing the balance sheet
The 2014 Investment Statement[4] provided information on the shape and health of the Crown's portfolio of assets and liabilities. Following the Investment Statement's publication, the Treasury has developed and commenced a work programme to improve the management of the balance sheet. The Treasury has continued to monitor and provide policy advice on the performance of the Crown's balance sheet.
The Treasury identified metrics and data collection needs for Crown balance sheet asset performance and risk measurement. It also assessed processes required for collecting, aggregating and analysing asset performance across the Crown balance sheet.
The Treasury has increased its understanding of Crown financial risks and contingent items, developing a framework for their management. In addition, the Treasury developed and received support to implement a new model for approval and monitoring of investments across the public sector. The new model, set out in Cabinet circular CO (15) 5,[5] took effect from 1 July 2015. The circular sets out Cabinet's expectations for the management of investments and assets by departments and Crown entities. This will ensure the active stewardship of government resources and a stronger alignment between individual investments and government's long-term priorities.
Monitoring the performance of the Crown's assets
In monitoring the performance of the Crown's assets through its Commercial Operations programme, the Treasury developed and initiated a pipeline of policy and strategic reviews in relation to the Crown's commercial portfolio.
The Treasury has developed new analytical tools, processes and products. In addition, it has advised Ministers on board appointments, and executed mandated commercial transactions.
Managing the core Crown funding requirements
In managing the core Crown funding requirements, NZDMO has planned, communicated and executed the borrowing programme within agreed cost and risk parameters, managed the Crown's net cash flows and associated risks and improved NZDMO's business continuity readiness.
In addition, NZDMO has delivered technology solutions to support execution, risk management and reporting of the NZDMO's activities, executed an investor marketing programme that reinforced investor confidence in New Zealand government debt securities and broadened the investor base. NZDMO has also delivered services to the Local Government Funding Authority (LGFA).
Social Housing Reform Programme
The Treasury progressed the Social Housing Reform Programme, including working with MBIE, MSD and HNZC, to change the way social housing is delivered.
The Programme's goals are to improve tenants' outcomes from social housing and grow the number and quality of social housing places.
A key component of the reform programme is the creation of a market for social housing in which registered community housing providers participate alongside HNZC. To facilitate the development of this market, the Treasury is leading a project to transfer HNZC houses to registered providers. It is anticipated that 1,000 to 2,000 HNZC houses will be transferred over 2015/16.
The progress we are seeing in our medium-term indicators of success#
Indicators | At June 2015 |
---|---|
Balance sheet targets are met and the Crown balance sheet is resilient to shocks. |
Core Crown net debt is on track to return to 20% of GDP by 2020 and is expected to continue to fall thereafter. This will continue to strengthen the Government's financial buffers. Budget 2015 new capital allowances were funded from the Future Investment Fund and the Government has signalled its post Future Investment Fund capital spending intentions. The Future Investment Fund was established to invest the money released by selling minority shareholdings in electricity companies and reducing the Government's stake in Air New Zealand. |
The composition and shape of the Crown's assets and liabilities and Crown capital allocation aligns with medium-term government priorities. |
The Investment Panel, comprising senior public and private sector officials, provides an independent value assessment of investment initiatives to support government budget decisions. Advice to Investment Ministers on the Budget reflects an amended value-based package. |
Appropriate financial, commercial and social returns and long-term value are achieved from the assets the Crown owns. | CO (15) 5 requires investment-intensive agencies to report against meaningful metrics of asset performance in 2016 annual reports. |
New investments deliver expected value for money. |
A value lens is being applied to all new capital investment, with investment decisions considered within a comprehensive framework that systematically analyses alternative choices so that highest value options are chosen. CO (15) 5 requires assessment of investment-intensive agencies on their performance at realising benefits. |
Entity risks are well understood and appropriately managed. | In progress. The Treasury is developing a framework for the management of whole-of-Crown financial risk. |
Agencies have the appropriate level of asset management capability. | CO (15) 5 requires investment-intensive agencies to be assessed for asset management maturity, and the gap between current and target levels revealed. |
Debt portfolio composition is optimised with regard to the Crown balance sheet. | Inflation-indexed bonds rose from 14.6% to 19% as a proportion of the bond portfolio, helping to lift the average-weighted term to maturity from 6 to 6.8 years. These developments help offset the long-term profile of the Crown's assets. |
Borrowing targets are successfully completed within appropriate cost and risk parameters. | In managing the core Crown funding requirements, NZDMO has planned, communicated and executed the borrowing programme within agreed cost and risk parameters. |
Crown cash flows and financial risks are efficiently and effectively managed, operating within agreed limits and error rates. | In managing the core Crown funding requirements, NZDMO has managed the Crown's net cash flows and associated risks. |
People have the Capability and Opportunities to Participate in Society and the Economy#
Our focus #
We worked on improving public service systems and the results they deliver, and on developing data and information tools to support social investment performance. Our efforts have focused on:
- improving the effectiveness of education and welfare systems to enable people to contribute to society and the economy over the long term, and
- rebalancing the cost of welfare away from income support towards enabling interventions.
What we did in 2014/15 to progress our strategic intention#
Improving the value for money of welfare and education expenditure
The Treasury worked with the Ministry of Education to support ongoing work to encourage participation, improve achievement rates and foster collaboration across the education sector. In particular, we supported the Ministry through updates to the Education Act 1989 and the funding system for early childhood education and schooling; as well as the evolution and implementation of the Investing in Educational Success initiative to improve teaching quality through collaboration and career pathways for teachers.
We worked with the Ministry of Education, MSD and other social sector agencies to strengthen coordination across the social sector and to provide coordinated advice to Ministers on a social sector investment package for the 2015 Budget. The Budget 2015 process also included working with the Ministry of Education to put a capital programme in place to meet future pressures on school infrastructure.
We also provided significant policy advice to help inform the Budget 2015 package to address child material hardship and ongoing advice on the Child, Youth and Family modernisation project, MSD simplification project and strategy for community investment.
Working collaboratively to lift the integration of skills development with labour market needs
In 2014/15, we worked with the Ministry of Education, MBIE, MSD and the Tertiary Education Commission to provide coordinated advice to Ministers on an approach to increase the relevance of tertiary education to the labour market. We worked with agencies in the Building Skilled and Safe Workplaces work stream of the Business Growth Agenda to advise on actions to increase the impact of the education, skills and immigration systems to support inclusive growth, including addressing regulation of labour market settings and reducing variations in regional underemployment. In addition, we advised on progress towards, and the refresh of, the Better Public Services skills and employment results.
Supporting interventions that reduce the long-term cost of welfare by enabling more people into paid work
During the year we continued to support MSD's investment approach. In particular, we provided advice on the implementation of an updated Better Public Services target and on the development of a cross-agency work plan for meeting the target. The new target is more aligned to the welfare valuation.
The Treasury, as the external monitor of MSD's investment approach, prepared quarterly reporting on progress against the ongoing valuations of the benefit system, and suggested lines of inquiry and actions for MSD.
We also provided support to MSD in developing a cost model to enhance MSD's ability to optimise the resources of the “Improved Employment and Social Outcomes” multi-category appropriation (MCA). The development of the cost model is still under development as at the beginning of 2015/16. We also provided input into the consideration of whether to bring Childcare Assistance into the MCA.
The progress we are seeing in our medium-term indicators of success#
Indicators | Progress |
---|---|
Ninety-eight percent of children starting school in 2016 will have participated in high-quality early childhood education. | Intensive and high-quality early childhood education for the most disadvantaged children can significantly improve educational outcomes. The percentage of children who have attended early childhood education before starting school has steadily increased each year since 2000, and was 96.1% as at March 2015. This was an increase of 0.2 percentage points since March 2014. |
Eighty-five percent of 18-year-olds have an NCEA Level 2 or equivalent qualification by 2017. |
Success in education is key for New Zealanders to reach their full potential and contribute to the economy and society. A Level 2 qualification gives people opportunities in terms of further education, employment, health outcomes and a better quality of life. The 2014 NCEA Level 2 result for 18-year-olds was 81.2%, compared with 78.6% in 2013 and 77.2% in 2012. Māori and Pasifika achievement improved at a faster rate than overall. Source: Ministry of Education; Education Counts http://www.educationcounts.govt.nz/statistics/schooling/senior-student-attainment/18-year-olds-with-level-2-or-equivalent |
Sixty percent of 25-34-year-olds have a qualification at National Qualifications Framework Level 4 or above by 2018. (The Better Public Services target has been revised upward because good progress has been made towards the previous target of 55% by 2017.) |
People who gain higher-level qualifications, especially at degree level and above, are more likely to be employed, have higher earnings and less likely to be receiving a benefit. In the year to March 2015, 54.2% of 25-34-year-olds had a qualification at Level 4 or above, which was in line with 54.1% in year to March 2014, but up from 52.6% in year to March 2013. Source: Ministry of Education; Education Counts |
Reduce the number of people continuously receiving working-age benefits for more than 12 months by 30%.[6] | Being out of paid work and on a benefit for extended periods increases the risk of poverty, social dislocation and deteriorating overall health. It can also have negative effects on the children of people on a benefit long term. Good progress had been made on the previous Better Public Services target: a reduction of almost 5,000 people or 6.6% over the 12 months to December 2014. This built on an 8.1% decrease the previous year. Source: Ministry of Social Development http://www.msd.govt.nz/about-msd-and-our-work/work-programmes/better-public-services/long-term-welfare-dependence/snapshot.html |
Number of households with no-one working is less than it was in quarter four 2007; less than 12.7% of households. |
Employment matters because paid work is an important route out of poverty and low incomes. The number of households with no-one working was 12.2% of households in the March 2015 quarter (quarter one of 2015). This was less than the 12.7% of households with no-one working in the fourth quarter of 2007. Source: Household Labour Force Survey |
- Figure 2: Progress toward the Government's Better Public Services goal of increasing the percentage of 18-year-olds with NCEA Level 2
Notes
- [6]In December 2014, Cabinet agreed to expand the Better Public Services Result 1 target from a 30% reduction in the number of people receiving long-term working-age Jobseeker Support benefits by 2017; to a 25% reduction in the total number of people receiving main benefits, and a reduction in the long-term cost of benefit dependency by $13 billion, by June 2018.
The Treasury is a High-performing Organisation#
Our focus#
This strategic intention focuses on the Treasury's management of its organisational health and capability. We strive to strengthen the Treasury, and to attain the level of excellence necessary to achieve the Treasury's ambitions and raise living standards for New Zealanders. Our approach involves investing in our people, organisational culture and our engagement with stakeholders. We want to enrich the quality of our ideas and approaches to the work we do; generate efficiencies and savings in how we do it; strengthen our relationships and our ability to get things done; make the Treasury a more connected and engaged organisation, and simply a better place to work.
Our approach was developed in response to the 2014 organisational performance review. In particular, we focused on:
- delivering high-quality, fit-for-purpose corporate and organisational services and strategic advice and services that support and enable the Treasury to meet its legislative obligations and achieve better results
- working to build the capability and diversity of our workforce so that we have a more broad-based view of the issues facing New Zealanders now and in the future
- investigating new ways of working, and sustaining our focus on continuous improvement across all aspects of our work, including the effectiveness of our resource use on State sector issues, and
- planning for and measuring our performance.
Our approach is guided by our goal to be:
- more outward facing; seeking out and incorporating a wide range of perspectives in our thinking
- more collaborative; working with others to generate new ideas and solutions to improve outcomes
- better at our core business; being an effective Ministry of Finance that understands where to invest to deliver the best outcomes for New Zealanders, and
- more productive; proactively managing and developing our people so they work in smart, inclusive ways and invest effort on the things that matter most.
What we did in 2014/15 to progress our strategic intention#
Having the right capability
The Treasury's success, like many organisations, depends on the quality of its workforce and the systems and infrastructure that support it. Achieving our ambitions requires knowing what we need, having a plan for getting there and the right people with the right skills at the right time to deliver.
In recent years we have been striving to build a culture that fosters and values diversity and inclusion, such that our staff feel valued and included. This is intended to increase retention and help us attract a stronger range of people with the best skills and attributes. Our approach to diversity and inclusion goes beyond our statutory requirements to be a “good employer” (founded on and building upon the equal employment opportunities and fairness principles), principally through its focus on diversity of thought as a means to improve performance.
During the year, we redesigned our induction programme with a view to getting our new staff up to speed and contributing sooner. This will be implemented in 2015/16. The diversity and inclusiveness of our workforce is also an important factor that supports high performance so we have been actively promoting diversity of thought in our workplace. Ensuring different voices are heard and valued will contribute to better quality ideas, analysis and solutions, higher employee engagement and increased productivity; all of which contribute to improved performance.
Ethnicity | Percentage as at June 2015[7] |
Percentage as at June 2014 |
---|---|---|
Asian | 6.5 | 7 |
NZ European/Pākehā | 65.5 | 67 |
NZ Māori | 6 | 4 |
Other ethnic group | 2 | 1 |
Other European | 14 | 12 |
Pacific Islands | 1.5 | 1 |
Not declared | 4.5 | 8 |
We are working to develop practical tools, training and approaches to mitigate against barriers to inclusiveness, including inviting local and international experts to deliver unconscious bias training, and changing how we do some of our core human resource processes. We have also been leaning on the skills and experience of other agencies such as DiverseNZ Inc, MBIE and the Bank of New Zealand about their approach to diversity.
Māori capability
Our workforce strategy also identifies growing our capability to improve outcomes for Māori. To achieve this, we need to lift the capability of our staff; creating an inclusive environment where Māori perspectives are integrated into our thinking. This will help us to better understand the issues and the opportunities to support Māori with the important role they play in New Zealand’s economy and society. It also recognises the direction the Government has signalled towards a new era of Crown–Māori relationships.
To support this ambition we established a Māori cultural development programme Puna Kaupapa; a development programme that will help grow our awareness and ability to engage with Māori and to incorporate Māori perspectives into our work.
Alongside this we are building our Māori networks and improving our recruitment processes so that we can better attract staff who bring a Māori perspective.
Getting better at our core business
The Treasury needs to excel at its core business; areas in which it specialises.
We want to become a more effective Ministry of Finance by getting better at advising Ministers about departmental performance, including the efficiency and effectiveness of spending across the State sector. This advice underpins the choices we make about where to invest to get the outcomes for New Zealanders.
Over time, the Treasury has evolved and taken on a range of new functions and now a significant part of our work programme is devoted to “operational” activities associated with the Crown's commercial assets and debt management.
One of the ways we are improving our performance is by enhancing the tools, information and training we use. Examples of this include introducing a more intensive graduate development programme and standardising tools for monitoring financial performance across public spending.
We are also taking a more active approach to managing value in the Crown’s balance sheet, and a more integrated perspective on government investment management through the establishment of an Investment Management and Asset Performance (IMAP) unit. This unit combines the monitoring functions moved previously performed by SSC with the Treasury’s existing role in managing investment projects as part of an overall government investment portfolio.
The Living Standards Framework
The Living Standards Framework was developed to support the Treasury's policy advice function; in particular, to serve as a framework for developing quality advice that takes into account all of the key dimensions of living standards, rather than focusing more narrowly on economic growth.
The Living Standards Framework has been applied to different projects in different ways to help us develop our thinking and advice. These include Holding On and Letting Go and the 2014 Briefing for the Incoming Minister of Finance and the Long-term Fiscal Statement.
The Living Standards Framework has received interest outside of the Treasury by other government and non-government agencies and also international organisations such as the OECD.
We used the Increasing Equity dimension of the framework to initiate the development of the Inclusive NZ forum in July.
Our work into revealing and quantifying New Zealanders' preferences to guide policy has created opportunities to work with the OECD on wellbeing, and a draft paper on a stylised economics model for the framework (weaving together threads from literature on wellbeing, sustainable development and endogenous economic growth) has received international attention.
Listening to what matters to New Zealanders
Meaningful, two-way, engagement with stakeholders is helping us build the relationships we need to be more effective across every area of our work. The insights from such engagements shape both our thinking and approach; an essential foundation for good decision-making.
Our engagement approach is rewarding us with a deeper understanding of issues, richer perspectives on real-world solutions and greater buy in. We are proactively identifying stakeholders and prioritising who they engage with, when and how. These relationships have enhanced our understanding of the agencies we work with and the challenges they face and helped to bring the impact of our work to life.
During the year we worked intensively with the infrastructure sector on development of the National Infrastructure Plan, met with front line staff in the justice and social sectors; and worked with iwi to better understand the opportunities and obstacles that affect Māori economic development, and developed productive relationships with a wide range of stakeholders ranging from the business community to Black Power.
We have implemented relationship management at the Executive Leadership Team (ELT) level to foster strategic relationships, and invited key influencers from all walks of life to share their knowledge and experience with the Treasury. These engagements have helped us make new connections and are challenging how people see us.
Over 80% of our work teams have stakeholder engagement plans and, as networks become more established, the goal will shift to deepen relationships and looking at how we can collaborate with stakeholders for better results for New Zealand.
The Treasury's 2015 stakeholder survey sought feedback on how well stakeholders felt we were engaging with them. Their feedback confirmed that they see us engaging more, value the opportunities to share their views and collaborate with us and they want to see and hear more from us.
Improving the way we work to achieve results
Our success depends in part on how we deploy and support our workforce; ensuring that we spend time on the right things, taking advantage of new ways of working and delivering more, and better, results.
Continuous improvement focuses on improving the efficiency and effectiveness of existing work processes and we are finding that “lean” techniques can both save time and make work easier. During the 2014/15 year, we shone the light on how we can improve the Budget process and how we deliver our economic and tax forecasts. We also worked on improving soft skills like meeting management and facilitation, decision-making and prioritisation.
We looked for new and innovative ways of working; introducing new tools and approaches to help us do this. We adopted a more citizen-centric approach to developing our ideas and have continued to incorporate visual management to enhance our oversight and prioritisation of the Treasury's work programme. This year, representatives from a number of agencies visited the ELT's meeting room; inspiring some to set up similar visual management systems of their own.
Because measurement is critical to holding ourselves accountable for the objectives we set, this year we reviewed our strategy, planning and reporting processes to streamline them and ensure they are better integrated. The changes have been implemented during the development of our strategic intentions for 2015/16. More integrated processes have improved the line of sight between what individual teams do and how this contributes to the Treasury's objectives. It is also strengthening the quality of the management information we use to monitor our performance and enable better quality and timely decisions.
In late 2014, we changed our risk assurance, governance and reporting processes to better enable our Risk and Audit Committee to have a more informed conversation with executive management on the organisational risks and the strategies being taken to manage them. The changes resulted in the Treasury establishing two separate audit committees: one with the “standard” departmental risk and audit committee focus on the Treasury’s internal operations and financial reporting; and the other focusing specifically on the Financial Statements of the Government.
Capital expenditure
Over the year we incurred $4.434 million of capital expenditure. The main area of capital expenditure (approximately $3.658 million) related to upgrading technology (both hardware and software). Central Agencies Shared Services (CASS) continued to consolidate and transform legacy infrastructure in order to provide a stable and consistent user experience across the central agencies. In addition, the first phase of the Business Information Hub programme is coming to an end providing enhanced outcomes for NZDMO core activities.
We have also been reconfiguring our work environments so as to increase both capacity and the flexibility and effectiveness of work spaces, $780,000 being invested during 2014/15 to achieve this.
The progress we are seeing in our medium-term indicators of success#
Indicators | At June 2015 |
---|---|
Stakeholder survey |
Sixty-three percent of stakeholders are satisfied with the way the Treasury interacts with them. This is an increase from 2013 and 2011 (at the 90% confidence level) when 55% of stakeholders were satisfied. Source: http://www.treasury.govt.nz/publications/informationreleases/s/cb-s-jun15.pdf |
Benchmarking Administrative and Support Services |
The Treasury's administrative and support services spend for 2013/14 (the most recent information available) was 8.15% of our total departmental operating expenditure; the median for the small agency cohort, and below the overall median of 12.77%. This compares with 9.89% in 2012/13. Source: http://www.treasury.govt.nz/statesector/performance/bass/benchmarking/2013-14 |
Engagement survey index | The Treasury's overall engagement score for 2014 was 73%. This compares with a State sector benchmark of 69% for the same year, and score of 70% for the Treasury in 2013. |
Gender distribution | The gender distribution of the Treasury's staff was 52% male and 48% female. This compares with 53% male and 47% female last year. Women accounted for 34% of management roles, including team leaders, by comparison to 44% last year. |
Annualised turnover | This was 13.8%, compared to 16.5% in June 2014. |
Notes
- [7]Percentages for 2014/15 are rounded to the nearest 0.5%.