Vote Education - Supplementary Estimates and supporting information 2010/11

Details of Projected Movements in Departmental Net Assets#

Ministry of Education

Information Supporting the Supplementary Estimates Vote Education#

MINISTER(S) RESPONSIBLE FOR APPROPRIATIONS: Minister of Education (M26), Minister for Tertiary Education (M68)

ADMINISTERING DEPARTMENT: Ministry of Education

MINISTER RESPONSIBLE FOR MINISTRY OF EDUCATION : Minister of Education

Part 1 - Summary of the Vote#

Part 1.3 - Trends in the Vote

Summary of Financial Activity

Part 2 - Details and Expected Performance for Output Expenses#

Part 2.1 - Departmental Output Expenses#

Interventions for Target Student Groups (M26)

Scope of Appropriation

Expenses and Revenue

Reasons for Change in Appropriation

This appropriation increased by $4.998 million to $242.394 million for 2010/11 mainly owing to a combination of:

• provision for supporting 1,000 additional students aged five to eight ($4 million increase)
• funding settlement of staff collective agreements ($1.018 million increase)
• training additional advisors on deaf children ($600,000 increase), and
• changes to cost allocations between departmental output expense appropriations ($1.073 million decrease).

School Property Portfolio Management (M26)#

Scope of Appropriation#

Expenses and Revenue#

Reasons for Change in Appropriation#

This appropriation decreased by $105.786 million to $1,258.407 million for 2010/11 mainly owing to:

• changes in capital charge, largely reflecting the impact of revaluation and impairment of defective buildings at 30 June 2010 ($77.627 million decrease)
• delays in the school property rationalisation project with expenditure now expected to occur over the next several years ($22.959 million decrease)
• a slower start than expected on a national survey of defective buildings, which is now due to finish at the end of next financial year ($11.501 million decrease)
• provision for costs arising from the February 2011 earthquake ($4.396 million increase), and
• changes to cost allocations between departmental output expense appropriations ($1.575 million increase).

Strategic Leadership in the Sector (M26)#

Scope of Appropriation#

Expenses and Revenue#

Reasons for Change in Appropriation#

This appropriation increased by $2.605 million to $34.081 million for 2010/11 mainly owing to changes to cost allocations between departmental output expense appropriations ($2.755 million increase).

Strategic Leadership in the Tertiary System (M68)#

Scope of Appropriation#

Expenses and Revenue#

Reasons for Change in Appropriation#

This appropriation increased by $2.402 million to $16.292 million for 2010/11 mainly owing to:

• changes to cost allocations between departmental output expense appropriations ($1.494 million increase), and
• transfer of policy advice activities from the Tertiary Education Commission to the Ministry of Education ($788,000 increase).

Support and Resources for Education Providers (M26)#

Scope of Appropriation#

Expenses and Revenue#

Reasons for Change in Appropriation#

This appropriation decreased by $10.917 million to $74.752 million for 2010/11 mainly owing to a combination of:

• a transfer to 2011/12 as a result of delays in the schools' payroll project ($10.127 million decrease)
• changes to cost allocations between departmental output expense appropriations ($2.912 million decrease)
• a transfer to departmental output expense Support and Resources for Teachers to develop the Student Achievement Function ($1.063 million decrease)
• a transfer to 2011/12 as a result of delays in the long-term work programme ($1.022 million decrease), and
• programme management costs related to ultra-fast broadband in schools ($3.881 million increase).

Support and Resources for Teachers (M26)#

Scope of Appropriation#

Expenses and Revenue#

Reasons for Change in Appropriation#

This appropriation increased by $3.522 million to $63.050 million for 2010/11 owing to a combination of:

• transfers from other appropriations to develop the Student Achievement Function in order to continue to raise student achievement by directly working with schools and kura ($6.140 million increase), and
• changes to cost allocations between departmental output expense appropriations ($2.757 million decrease).

Support and Resources for the Community (M26)#

Scope of Appropriation#

Expenses and Revenue#

Reasons for Change in Appropriation#

This appropriation decreased by $813,000 to $13.565 million for 2010/11 owing to a combination of:

• a transfer to departmental output expense Support and Resources for Teachers for the Student Achievement Function ($2 million decrease)
• changes to cost allocations between departmental output expense appropriations ($918,000 increase), and
• a transfer of funding from the previous financial year after a delay in developing support material on the National Standards for parents, family and whanau ($250,000 increase).

Part 2.2 - Non-Departmental Output Expenses#

Curriculum Support (M26)#

Scope of Appropriation

Reasons for Change in Appropriation

This appropriation decreased by $1.372 million to $63.835 million for 2010/11. This decrease is mainly owing to:

• a transfer to departmental output expense Support and Resources for Teachers to develop the Student Achievement Function ($1.090 million decrease), and
• a transfer to non-departmental other expense Special Needs Support for Alternative Education programmes ($765,000 decrease).

Education Research Initiatives (M26)#

Scope of Appropriation#

Reasons for Change in Appropriation#

This appropriation increased by $28,000 to $3.008 million for 2010/11 as a result of a revision to the level of funding allocated to departmental output expense Strategic Leadership in the Sector to support the longitudinal study Growing Up in New Zealand.

Managing the Government's Investment in the Tertiary Education Sector (M68)#

Scope of Appropriation#

Reasons for Change in Appropriation#

This appropriation increased by $1.550 million to $36.080 million for 2010/11. This increase is owing to:

• a transfer from 2009/10 for performance benchmarking of Tertiary Education Institutions as a consequence of delays in the programme ($1.250 million increase), and
• provision for the detailed planning and initiation of event-driven information collection systems ($300,000 increase).

Provision of Information and Advisory Services (M26)#

Scope of Appropriation#

Reasons for Change in Appropriation#

This appropriation increased by $205,000 to $22.547 million for 2010/11 as a result of expanding provision for cochlear implant habilitation.

Qualifications Support Structures (M26)#

Scope of Appropriation#

Reasons for Change in Appropriation#

This appropriation increased by $13,000 to $6.062 million for 2010/11 owing to a transfer from Vote Foreign Affairs and Trade for support for negotiation of international trade agreements.

School Transport (M26)#

Scope of Appropriation#

Reasons for Change in Appropriation#

This appropriation increased by $1.906 million to $162.178 million for 2010/11. This increase relates to:

• provisions for increased road user charges ($993,000 increase)
• provision for additional transport costs arising from the Canterbury earthquakes ($890,000 increase)
• higher costs for index-based adjustments ($426,000 increase), and
• other adjustments, including the impact of lower than expected primary school rolls and lower levels of other claims ($403,000 decrease).

Supporting Parenting (M26)#

Scope of Appropriation#

Reasons for Change in Appropriation#

This appropriation decreased by $1.490 million to $3.768 million for 2010/11 mainly as a result of delays in the Engaging Priority Families programme and a consequential transfer of funds to outyears ($1.400 million decrease).

Tertiary Education and Training Policy Advice (M68)#

Scope of Appropriation#

Reasons for Change in Appropriation#

This appropriation decreased by $1.091 million to $4.546 million for 2010/11 mainly owing to a transfer to departmental output expense Strategic Leadership in the Tertiary System after the Tertiary Education Commission's policy function was transferred to the Ministry of Education.

Tertiary Education: Student Achievement Component (M68)#

Scope of Appropriation#

Reasons for Change in Appropriation#

This appropriation increased by $7.381 million to $1,834.868 million for 2010/11 to address demand pressures for additional undergraduate university places.

Training for Designated Groups (M68)#

Scope of Appropriation#

Reasons for Change in Appropriation#

This appropriation decreased by $35.900 million to $268.507 million for 2010/11 owing to a reprioritisation of the Industry Training Fund to fund additional undergraduate university places.

Part 3 - Details for Benefits and Other Unrequited Expenses#

Part 3.2 - Non-Departmental Benefits and Other Unrequited Expenses#

National Study Awards (M26)

Scope of Appropriation

Reasons for Change in Appropriation

This appropriation increased by $35,000 to $24.681 million for 2010/11 owing to a provision for settlement of teachers and principals' collective agreements.

Teacher Trainee Scholarships (M26)#

Scope of Appropriation#

Reasons for Change in Appropriation#

This appropriation decreased by $3 million to $4.027 million for 2010/11 owing to a transfer to Vote Social Development to enable StudyLink to continue to make scholarship payments to recipients and providers.

Tertiary Scholarships (M68)#

Scope of Appropriation#

Reasons for Change in Appropriation#

This appropriation decreased by $656,000 to $16.259 million for 2010/11 owing to a transfer to non-departmental other expense Tertiary Education Grants and Other Funding for Adult Literacy Educator Grants.

Part 5 - Details and Expected Results for Other Expenses#

Part 5.1 - Departmental Other Expenses#

Intended Impacts, Outcomes and Objectives

Recovery from February 2011 Christchurch Earthquake (M26)

Scope of Appropriation

Expenses

Reasons for Change in Appropriation

This new appropriaton of $14.720 million provides for making good earthquake damage to schools and writing off assets badly damaged or destroyed in the earthquake.

Expected Results

Part 5.2 - Non-Departmental Other Expenses#

Intended Impacts, Outcomes and Objectives#

Adult and Community Education (M68)#

Scope of Appropriation

Reasons for Change in Appropriation

This appropriation decreased by $582,000 to $69.071 million for 2010/11. The decrease in funding is mainly owing to a transfer to 2011/12 of funding for the Workplace Literacy Fund ($481,000).

Early Childhood Education (M26)#

Scope of Appropriation#

Reasons for Change in Appropriation#

This appropriation increased by $121.486 million to $1,385.394 million for 2010/11. The increase in funding is mainly owing to a combination of:

• increased average weekly hours attended and a higher proportion of hours being claimed by children receiving 20 Hours Early Childhood Education ($91.696 million increase)
• higher than expected participation and an increase in average weekly hours attended by under-two-year-olds ($24.970 million increase)
• increased average weekly hours attended by over-two-year-olds ($6.976 million increase)
• provision for settlement of the kindergarten teachers collective agreement ($2.841 million increase), and
• a transfer of funding to create the new non-departmental other expense Support for Early Childhood Education Providers ($6.067 million decrease).

Early Childhood Grants (M26)#

Scope of Appropriation#

Reasons for Change in Appropriation#

This appropriation of $13.783 million was transferred entirely to the new non-departmental other expense Support for Early Childhood Education Providers.

Integrated Schools Property (M26)#

Scope of Appropriation#

Reasons for Change in Appropriation#

This appropriation increased by $5.796 million to $55.051 million for 2010/11. The increase is mainly owing to additional funding for the School Network Upgrade Project ($5.350 million).

Macro Economic Policy Advice & Management MCOA (M31)#

Scope of Appropriation#

Explanation for Use of Multi-Class Output Expense Appropriation#

These output classes all contribute to the outcome of a stable and sustainable macroeconomic environment in New Zealand.

Expenses and Revenue#

Reasons for Change in Appropriation#

This multi-class output expense appropriation has decreased due to:

• efficiency savings of $274,000 in 2010/11 to transfer into 2011/12 to address emerging cost pressures for crown balance sheet work, and
• a reclassification of current activity. The reduction in Fiscal Management recognises a reclassification of Vote Analyst work during the Budget process from Fiscal Management into the other Policy Advice output classes. Efficiencies have also been made in the Budget production process. The increase in Policy Advice: Fiscal and Macroeconomic relates to Crown Balance Sheet advice which, given its advisory nature and focus on ownership mix was reclassified from the Management of Liabilities, Claims Against the Crown and Crown Properties output class.

State Sector and Economic Performance Policy Advice and Management MCOA (M31)#

Scope of Appropriation#

Explanation for Use of Multi-Class Output Expense Appropriation#

These output classes all contribute to the outcomes of improving New Zealand's overall economic performance and improving state sector performance.

Expenses and Revenue#

Reasons for Change in Appropriation#

This multi-class expense appropriation has decreased overall due to range of decreases greater than the increases during the year.

Increases are due to:

• new funding of $440,000 was provided in Policy Advice: State Sector Performance for Phase two of the Better Administration and Support Services project. This was funded through recoveries from other agencies, and
• a reallocation of resources to reflect Ministerial priorities in 2010/11 output plan. Policy Advice: Economic Performance was given a higher level of resource to deliver on additional work eg, Savings Working Group, and other priority areas including Regulation, Tax Strategy and Highly Skilled Workforce. State Sector Performance was increased to fund priority projects and fiscal risks around State sector reform work.

Decreases are due to:

• identified efficiency savings of $940,000 in 2010/11 to transfer into 2011/12 to address emerging cost pressures in crown balance sheet work
• funds being returned to the Crown from New Zealand Export Credit Office. This resulted from slower than expected deal flow giving rise to less third-party costs, such as legal and surety bond fees associated with these deals, and
• reclassification of activities. The Crown Balance Sheet work on Vote Finance entities was previously funded from Management of Liabilities, Claims Against the Crown and Crown Properties. This work was reclassified into Policy Advice: Fiscal and Macroeconomic.

Part 2.2 - Non-Departmental Output Expenses#

Intended Impacts, Outcomes and Objectives#

2025 Productivity Taskforce (M31)#

Scope of Appropriation

Expenses

Reasons for Change in Appropriation

The outstanding balance of the appropriation in 2009/10 was carried forward to 2010/11 to address the ongoing work programme of the Taskforce.

Output Performance Measures and Standards

Enquiries, Reviews and Research Into Productivity Matters (M31)#

Scope of Appropriation#

Expenses#

Reasons for Change in Appropriation#

A new Multi-class Output Appropriation (MCOA) has been established in Vote Finance for the activities of the New Zealand Productivity Commission. This will allow for a higher level of oversight and best reflects the segregation of outputs being purchased. The funding from this original appropriation has been transferred to the new MCOA and the output performance measures and standards have been reported there.

Inquiries and Research into Productivity Related Matters MCOA (M31)#

Scope of Appropriation#

Explanation for Use of Multi-Class Output Expense Appropriation#

The two output classes are limited to inquiries, research and promotion of productivity related matters.

Expenses#

Reasons for Change in Appropriation#

This new Multi-class Output Appropriation (MCOA) has been established in Vote Finance for the activities of the New Zealand Productivity Commission. This will allow for a higher level of oversight and best reflects the segregation of outputs that the Minister is purchasing. Funding has been transferred in 2010/11 to these output classes from the original Non-Departmental Output class (Enquiries, Reviews and Research Into Productivity Matters) and from the unspent portion of the Departmental Output Class (Establishment of the New Zealand Productivity Commission).

Output Performance Measures and Standards#

Conditions on Use of Appropriation#

New Zealand Productivity Commission will complete a Statement of Intent for the period 1 April 2011 to 30 June 2012 by 30 June 2011. This document will set out the measures and standards against which the New Zealand Productivity Commission will be assessed during the period to 30 June 2012.

Management of New Zealand House, London (M31)#

Scope of Appropriation#

Expenses#

Reasons for Change in Appropriation#

The appropriation has been reduced by $400,000, partially due to the change in exchange rates during the year and has been returned to the Crown. Rental revenue has been revised down by the same amount, making this change fiscally neutral.

Output Performance Measures and Standards#

Management of the Crown's Obligations for Geothermal Wells (M31)#

Scope of Appropriation#

Expenses#

Reasons for Change in Appropriation#

An expense transfer from 2009/10 was made to provide funding for remedial work on redundant geothermal assets at Wairakei as this work was not completed during that year.

Output Performance Measures and Standards#

Management of the New Zealand Superannuation Fund (M31)#

Scope of Appropriation#

Expenses#

Reasons for Change in Appropriation#

The payments expected to be made to Guardians of the New Zealand Superannuation Fund are now forecast to be $166,000 lower than appropriation and are being returned to the Crown.

Output Performance Measures and Standards#

Summary of Service Providers for Non-Departmental Outputs#

Funding has been transferred in 2010/11 to Inquiries and Research into Productivity Related Matters MCOA from the original Non-Departmental Output class (Enquiries, Reviews and Research Into Productivity Matters) and from the unspent portion of the Departmental Output Class (Establishment of the New Zealand Productivity Commission).

The above table summarises funding to be allocated through Vote Finance to non-departmental providers, along with an indication of the mechanism to be used for reporting actual performance and (where determined) the length of the funding commitment.

Part 4 - Details for Borrowing Expenses#

Part 4.2 - Non-Departmental Borrowing Expenses#

Debt Servicing PLA (M31)

Scope of Appropriation

Expenses

Reasons for Change in Appropriation

The change reflects interest rate movements and the amount of debt outstanding.

Part 5 - Details and Expected Results for Other Expenses#

Part 5.2 - Non-Departmental Other Expenses#

Intended Impacts, Outcomes and Objectives

Additional Payments to Facilitate Full Payout under the Crown Retail Deposit Guarantee Scheme. (M31)

Scope of Appropriation

Expenses

Reasons for Change in Appropriation

This appropriation was utilised to provide contingency funding to the Trustee of South Canterbury Finance. This has subsequently been fully repaid back to the Crown by the Trustee.

Expected Results

Costs in respect of Guarantees and Indemnities PLA (M31)#

Scope of Appropriation#

Expenses#

Reasons for Change in Appropriation#

This appropriation is required for the gross payment of guaranteed depositors of defaulting entities, guaranteed under the Crown Retail Deposit Guarantee Scheme. On payment, the Crown assumes the rights of the depositors and recognises the recoveries from these entities as non-tax revenue. In addition this appropriation also reflects adjustments to the expected recoveries from the nine entities which have defaulted under the scheme.

Expected Results#

Earthquake Commission (M31)#

Scope of Appropriation#

Expenses#

Reasons for Change in Appropriation#

This is a new appropriation in 2010/11 of $141.100 million approved as a result of the Canterbury Earthquake on 4 September 2010 to provide funding to Canterbury local councils for remedial work.

Expected Results#

Earthquake Commission - Land Insurance Payments (M31)#

Scope of Appropriation#

Expenses#

Reasons for Change in Appropriation#

This is a new appropriation in 2010/11 of $5 million approved as the result of the Canterbury earthquake on 4 September 2010.

Expected Results#

Government Superannuation Fund Authority - Crown's Share of Expenses PLA (M31)#

Scope of Appropriation#

Expenses#

Reasons for Change in Appropriation#

This increase is a result of changes in custodial, investment and administration costs due to an increase in assets under fund management.

Expected Results#

Government Superannuation Fund Unfunded Liability PLA (M31)#

Scope of Appropriation#

Expenses#

Reasons for Change in Appropriation#

This decrease reflects marginal changes to forecast assumptions, other than actuarial losses and gains.

Expected Results#

Impairment of Crown's interest in AMI (M31)#

Scope of Appropriation#

Expenses#

Reasons for Change in Appropriation#

This is a new appropriation of $500 million for potential impairment of the Crown's investment in AMI. The fair value of AMI is still uncertain, subject to the final level of claims received for the Christchurch earthquake. The appropriation is set at the maximum exposure to the Crown being the total amount of equity invested.

Expected Results#

Impairment of Loans to Taitokerau Forest Limited (M31)#

Scope of Appropriation#

Expenses#

Reasons for Change in Appropriation#

The timing of drawdowns of Taitokerau Forests Limited loan facility is uncertain. In 2009/10, the actual drawdown of the loan was $700,000 less than appropriated for that year resulting in a carry forward of this amount into 2010/11. The impairment takes place when the loan is drawn down.

Expected Results#

National Provident Fund - Crown liability for Scheme Deficiency PLA (M31)#

Scope of Appropriation#

Expenses#

Reasons for Change in Appropriation#

The Crown is liable for deficiencies in specified superannuation schemes of the National Provident Fund. The current forecast for the year is $16,000.

Expected Results#

National Provident Fund Schemes - Liability Under Crown Guarantee PLA (M31)#

Scope of Appropriation#

Expenses#

Reasons for Change in Appropriation#

The decrease in the appropriation relates to the GST rate increase during the year which was separately appropriated in the 2010/11 Estimates but not deducted from the liability.

New Zealand House, London (M31)#

Scope of Appropriation#

Expenses#

Reasons for Change in Appropriation#

The operational costs of New Zealand House have been revised down by $1.500 million primarily due to the fall in the exchange rate and occupancy rates during the year. Rental revenue has been revised down by the same amount, making this change fiscally neutral.

Expected Results#

Payment in respect of Export Credit Office Guarantees and Indemnities PLA (M31)#

Scope of Appropriation#

Expenses#

Reasons for Change in Appropriation#

This relates to two claims under the export credit guarantee paid out during the year.

Expected Results#

Taitokerau Forests Limited Grant (M31)#

Scope of Appropriation#

Expenses#

Reasons for Change in Appropriation#

Grants payable to Taitokerau Forest Limited for on-payment to forest owners, are payable upon harvest of the forests. Timing of the harvest is uncertain and hence an expense transfer from 2009/10 of $269,000 was approved into 2010/11 for services not completed.

Expected Results#

Reporting Mechanisms#

The above table indicates the mechanisms to be used for reporting actual performance for each non-departmental other expenses appropriation.

Part 6 - Details and Expected Results for Capital Expenditure#

Part 6.1 - Departmental Capital Expenditure#

The Treasury - Capital Expenditure PLA (M31)

Scope of Appropriation

Capital Expenditure

Reasons for Change in Appropriation

The increase in the departmental capital expenditure of $82,000 mainly relates to:

• a delay in the redevelopment of the Treasury's human resource and financial systems with the financial system replacement now expected in 2011/12 and timing is still unconfirmed for the human resource system replacement, and
• delay in the development of the NZDMO systems.

This is offset by expected improvements to the security systems and fitout alterations in Treasury to accommodate the scoping work on the mixed ownership model.

Expected Results

Part 6.2 - Non-Departmental Capital Expenditure#

Intended Impacts, Outcomes and Objectives#

AMI Equity Injection (M31)#

Scope of Appropriation

Capital Expenditure

Reasons for Change in Appropriation

This is a new appropriation of $500 million for the purchase of equity in AMI.

Expected Results

Asian Development Bank PLA (M31)#

Scope of Appropriation#

Capital Expenditure#

Reasons for Change in Appropriation#

The 5th General Capital Increase has been made to the Asian Development Bank. The final payment was $65.125 million compared to the forecast of $71 million due to changes in exchange rates and a discount offered.

International Financial Institutions PLA (M31)#

Scope of Appropriation#

Capital Expenditure#

Reasons for Change in Appropriation#

This increase is to incorporate possible contributions to the International Monetary Fund (IMF) in 2010/11. Forecasts of contributions were unknown when the Estimates were prepared.

Expected Results#

Landcorp Protected Land Agreement (M31)#

Scope of Appropriation#

Capital Expenditure#

Reasons for Change in Appropriation#

This increase is to provide for the additional capital incurred in maintaining the properties held under the Protected Land Agreement by Landcorp Farming Limited, for the net losses/(profits) of those properties and for interest charged while dividends were diverted to pay off the initial investment.

Loan in Respect to Guarantees and Indemnities for the Crown Retail Deposit Guarantee Scheme (M31)#

Scope of Appropriation#

Capital Expenditure#

Reasons for Change in Appropriation#

This is a new appropriation for 2010/11 for a $175 million loan to the receivers of South Canterbury Finance to remove prior charge holders. The loan was subsequently repaid in full.

Taitokerau Forests (M31)#

Scope of Appropriation#

Capital Expenditure#

Reasons for Change in Appropriation#

The timing of drawdowns of Taitokerau Forests Limited loan facility is uncertain. In 2009/10, the actual drawdown of the loan was $700,000 less than that appropriated for that year resulting in a carry forward of this amount into 2010/11.

Reporting Mechanisms#

The above table indicates the mechanisms to be used for reporting actual results for each non-departmental capital expenditure appropriation.