Annual Report for the year ended 30 June 2002
Crown Operations
Crown statement of financial performance
For the year ended 30 June 2002
| Note | 30/6/2001 Actual $000 | 30/6/2002 Actual $000 |
30/6/2002 Main estimates $000 |
30/6/2002 Supp. estimates $000 |
|
|---|---|---|---|---|---|
| Crown Revenue | |||||
| Interest | C1 | 1,220 | 665 | 650 | 900 |
| Other operational revenue | C2 | 4,089 | 115 | - | - |
| Total Crown revenue | 5,309 | 780 | 650 | 900 | |
| Crown Expenditure | |||||
| GST input tax expensed | 25,234 | 34,350 | 14,158 | 35,424 | |
| Other operating expenses | 14 | 5 | - | - | |
| Unrealised exchange losses/(gains) | 4,204 | 4,980 | - | - | |
| Total Crown expenses | 29,452 | 39,335 | 14,158 | 35,424 | |
| Net operating surplus/(deficit) | |||||
| Crown operations | (24,143) | (38,555) | (13,508) | (34,524) |
Crown statement of financial position
As at 30 June 2002
| 30/6/2001 Actual $000 | 30/6/2002 Actual $000 |
30/6/2002 Main estimates $000 |
30/6/2002 Supp. estimates $000 |
|
|---|---|---|---|---|
| Crown Funds | ||||
| Opening balance at 1 July | 170,651 | 268,283 | 281,529 | 268,283 |
| Net operating surplus/(deficit) - Crown operations | (24,143) | (38,555) | (13,508) | (34,524) |
| Funds received from New Zealand Debt Management Office |
274,000 | 170,000 | 157,000 | 200,000 |
| Funds paid to New Zealand Debt Management Office | (152,225) | (280,872) | (319,618) | (280,971) |
| Total Crown funds | 268,283 | 118,856 | 105,403 | 152,788 |
| Represented by: Current assets | ||||
| Cash | 62,257 | 46,638 | 21,022 | 55,470 |
| Short-term deposits | 25,910 | 17,419 | 9,010 | - |
| Debtors and receivables | 271 | 140 | - | - |
| Work in process | 209,614 | 57,738 | 84,957 | 106,904 |
| Total current assets | 298,052 | 121,935 | 114,989 | 162,374 |
| Total assets | 298,052 | 121,935 | 114,989 | 162,374 |
| Current liabilities | ||||
| Creditors and payables | 29,769 | 3,079 | 9,586 | 9,586 |
| Total current liabilities | 29,769 | 3,079 | 9,586 | 9,586 |
| Net assets - Crown | 268,283 | 118,856 | 105,403 | 152,788 |
Crown statement of cash flows
As at 30 June 2002
| Note | 30/6/2001 Actual $000 | 30/6/2002 Actual $000 |
30/6/2002 Main estimates $000 |
30/6/2002 Supp. estimates $000 |
|
|---|---|---|---|---|---|
| Cash flows - operating activities Cash provided from: |
|||||
| Interest | 1,200 | 665 | 650 | 900 | |
| Other operating receipts | C2 | 4,089 | 115 | - | - |
| Cash disbursed to: |
|||||
| Other expenses | (14) | (2) | - | - | |
| GST Input tax expensed | (8,482) | (50,378) | (14,158) | (35,424) | |
| Operating activities net cash flows | (3,187) | (49,600) | (13,508) | (34,524) | |
| Cash flows - investing activities Cash provided from: |
|||||
| Sale of military equipment | 153,047 | 280,072 | 318,968 | 280,075 | |
| GST on sales | 23,635 | 35,009 | 39,871 | 35,009 | |
| Cash disbursed for: |
|||||
| Purchase of military equipment | (288,079) | (138,729) | (170,333) | (197,277) | |
| GST paid to IRD | (23,635) | (35,009) | (39,871) | (35,009) | |
| Investing activities net cash flows | (135,032) | 141,343 | 148,635 | 82,798 | |
| Cash flows - financing activities Cash provided from: |
|||||
| New Zealand Debt Management Office for funding purchase or development of military equipment |
274,000 | 170,000 | 157,000 | 200,000 | |
| Cash disbursed for: |
|||||
| Payments to New Zealand Debt Management Office | (152,225) | (280,873) | (319,618) | (280,971) | |
| Financing activities net cash flows | 121,775 | (110,873) | (162,618) | (80,971) | |
| Net increase/(decrease) in cash held |
(16,444) | (19,130) | (27,491) | (32,697) | |
| Add opening cash and deposits | 108,815 | 88,167 | 57,523 | 88,167 | |
| Unrealised foreign exchange gain/(loss) |
(4,204) | (4,980) | - | - | |
| Closing cash and deposits | 88,167 | 64,057 | 30,032 | 55,470 |
Crown reconciliation of net operating surplus to net cash flow from operating activities
As at 30 June 2002
| 30/6/2001 Actual $000 | 30/6/2002 Actual $000 |
|
|---|---|---|
| Net operating surplus/(deficit) |
(24,143) | (38,555) |
| Unrealised exchange losses/(gains) |
4,204 | 4,980 |
| Increase/(decrease) in GST payable |
16,752 | (16,028) |
| Other items |
- | 3 |
| Net cash flow from operating activites |
(3,187) | (49,600) |
Crown statement of commitments
As at 30 June 2002
| 30/6/2001 Actual $000 | 30/6/2002 Actual $000 |
|
|---|---|---|
| Capital commitments | ||
| Less than one year |
219,309 | 164,332 |
| One to two years |
368,221 | 310,574 |
| Two to five years |
204,149 | 9,976 |
| More than five years |
- | - |
| Total capital commitments |
791,679 | 484,882 |
Crown statement of expenditure and appropriations
As at 30 June 2002
(Figures are GST inclusive where applicable)
| 30/6/2002 Expenditure Actual $000 |
30/6/2002 Appropriation voted $000 |
|
|---|---|---|
| Vote: Defence Appropriations for purchase or development of capital assets by the Crown |
||
| Defence equipment |
128,119 | 177,361 |
| GST on defence equipment |
34,350 | 35,424 |
| Total |
162,469 | 212,785 |
The accompanying accounting policies and notes form part of these financial statements. For a full understanding of the Crown's financial position and the results of its operations for the period, reference should be made to the consolidated audited Crown Financial Statements for the year ended 30 June 2002.
Notes to the crown financial statements
For the year ended 30 June 2002
Note C1: Interest revenue
The Ministry invests surplus foreign currency cash with financial institutions that the Ministry deals with. All interest earned on short-term deposits are returned to the Crown.
Note C2: Other operational revenue
| 30/6/2001 Actual $000 | 30/6/2002 Actual $000 |
|
|---|---|---|
| Refunds from foreign military sales cases following the decision to exit the arrangement to lease F-16 aircraft. |
4,089 | 115 |
| Total operational revenue | 4,089 | 115 |
Note C3: Budget composition
| 30/6/2002 Budget forecasts $000 | 30/6/2002 Supp. estimates changes $000 |
30/6/2002 Budget total $000 |
|
|---|---|---|---|
| Current non tax revenue |
|||
| Crown interest | 650 | 250 | 900 |
| Capital receipts |
|||
| Defence equipment | 318,968 | (38,897) | 280,071 |
| Expenditure |
|||
| Defence equipment | 170,333 | 7,028 | 177,361 |
| GST on defence equipment | 14,158 | 21,266 | 35,424 |
Note C4: Major budget variations
Purchase or development of capital assets by the Crown - defence equipment
The appropriation was increased by $7.028 million to recognise timing changes in existing contract payments not provided for in approved baselines. The projects involved were:
| $000 | |
|---|---|
| ANZAC ships |
8,755 |
| Light armoured vehicles |
(22,196) |
| P-3 Orion Aircraft Rewing | (5,904) |
| Naval helicopters | 34,999 |
| Very Low Level Air Defence | (5,389) |
| Orion autopilot | 3,411 |
| Tactical communications |
(6,306) |
| Other |
(342) |
| 7,028 |
GST on defence equipment
The appropriation was increased by $21.266 million to meet timing changes in import GST charges not provided for in approved baselines. The projects involved were:
| $000 | |
|---|---|
| ANZAC ships |
274 |
| Light armoured vehicles |
716 |
| P-3 Orion Aircraft Rewing | 2,535 |
| Naval helicopters | 14,065 |
| Orion autopilot | 842 |
| Tactical communications |
2,829 |
| Other |
5 |
| 21,266 |
Note C5: Financial instruments
Credit Risk
Financial instruments which potentially subject the Ministry of Defence to credit risk principally consist of bank balances, debtors and receivables and forward exchange contracts.
The Ministry also incurs credit risk from downpayments made to overseas suppliers of military equipment.
Maximum Credit Risk Exposure
Maximum exposures to credit risk at balance date are:
| 30 June 2002 $000 | 30 June 2001 $000 |
|
|---|---|---|
| Cash |
46,638 | 62,257 |
| Short-term deposits | 17,419 | 25,910 |
| Debtors and receivables | 140 | 271 |
| Forward exchange contracts |
428,866 | 497,406 |
| 493,063 | 585,844 |
The above maximum exposures are net of any recognised provision for losses on these financial instruments.
Collateral or security in respect of Credit Risk
The Ministry does not require any collateral or security to support financial instruments with financial institutions that the Ministry deals with, or with the New Zealand Debt Management Office (NZDMO), as these entities have high credit ratings.
The Ministry requires security (such as Letters of Credit) in the form of collateral for down payments with certain suppliers. The Letters of Credit entitle the Ministry to the return of payments made.
Significant Concentrations of Credit Risk
Forward exchange contracts with the NZDMO are considered risk free to the Ministry. The Ministry further reduces counterparty risk by spreading the balance of its cash, investments and forward exchange contracts over registered New Zealand banks thereby limiting the credit exposure to any one financial institution.
The major concentration of credit risk with respect to accounts receivable is the New Zealand Defence Force for the on-sale of military equipment.
Fair Values
The fair value of all financial instruments is equivalent to the carrying amount disclosed in the Statement of Financial Position.
| 30 Jun 2002 Carrying amount $000 | 30 Jun 2002 Fair value $000 |
30 Jun 2001 Carrying amount $000 |
30 Jun 2001 Fair value $000 |
|
|---|---|---|---|---|
| Cash | 46,638 | 46,638 | 62,257 | 62,257 |
| Short-term deposits | 17,419 | 17,419 | 25,910 | 25,910 |
| Debtors and receivables |
140 | 140 | 271 | 271 |
| Payables and provisions | 3,079 | 3,079 | 29,769 | 29,769 |
Currency Risk
The Ministry has a foreign exchange covering policy that minimises the currency risk. The policy has key parts:
- individual transactions above $NZ100,000 equivalent are to be covered with foreign exchange contracts.
- a maximum of net aggregate $NZ2 million equivalent exposure at one time is allowed.
- cover will occur within 5 working days of any exposure being identified. These exposures are identified contracts both formal and informal.
- the Anzac Ship project has a specific strategy of hedging 100 percent of forecasts in foreign currency exposure, as well as commitments.
Interest Risk
The Ministry has no exposure to interest rate risk.
Foreign Exchange Contracts (Crown)
The Ministry had Crown foreign exchange contracts with a face value of $428.866 million at 30 June 2002. (30 June 2001 = $497.406 million.
