Annual Report for the year ended 30 June 2007
Part 3: Departmental financial statements (continued)
Notes to the financial statements
For the year ended 30 June 2007
Note 1: Budget composition
| Note | 30/6/2007 Main estimates $000 | 30/6/2007 Supp. estimates changes $000 |
30/6/2007 Budget total $000 |
|
|---|---|---|---|---|
| Revenue | ||||
| Crown | 2 | 9,502 | - | 9,502 |
| Other | 3 | 144 | 311 | 455 |
| Total revenue | 9,646 | 311 | 9,957 | |
| Expenditure | ||||
| Personnel costs | 4 | 5,628 | 55 | 5,683 |
| Operating costs | 5 | 3,428 | 368 | 3,796 |
| Depreciation | 6 | 370 | (43) | 327 |
| Capital charge | 7 | 220 | (69) | 151 |
| Total expenses | 9,646 | 311 | 9,957 | |
| Net operating surplus | - | - | - |
Note 2: Revenue - Crown
This is revenue earned for the supply of outputs to the Crown.
Note 3: Other revenue
| 30/6/2006 Actual $000 | 30/6/2007 Actual $000 |
30/6/2007 Main estimates $000 |
30/6/2007 Supp. estimates $000 |
|
|---|---|---|---|---|
| Employer superannuation subsidy recovered |
127 | 154 | 144 | 175 |
| New Zealand Defence Force for initial project costs |
241 | 265 | - | 280 |
| Total other revenue | 368 | 419 | 144 | 455 |
Note 4: Personnel costs
| 30/6/2006 Actual $000 | 30/6/2007 Actual $000 |
30/6/2007 Main estimates $000 |
30/6/2007 Supp. estimates $000 |
|
|---|---|---|---|---|
| Salaries and wages |
4,777 | 5,416 | 5,415 | 5,450 |
| Retirement and resigning leave |
46 | (34) | 58 | 58 |
| Superannuation contributions | 182 | 217 | 155 | 175 |
| Total personnel costs | 5,005 | 5,599 | 5,628 | 5,683 |
Note 5: Operating costs
| 30/6/2006 Actual $000 | 30/6/2007 Actual $000 |
30/6/2007 Main estimates $000 |
30/6/2007 Supp. estimates $000 |
|
|---|---|---|---|---|
| Consultancy | 101 | 261 | 185 | 230 |
| Professional services | 99 | 212 | 222 | 222 |
| Audit fees for financial statements | 78 | 82 | 74 | 82 |
| Fees to auditors for other services |
13 | 27 | 5 | 28 |
| Share of New Zealand Defence Force costs for maintaining services | 524 | 511 | 524 | 524 |
| Grants and contributions |
46 | 81 | 44 | 60 |
| Inventory items |
27 | 26 | 16 | 16 |
| General maintenance and servicing |
30 | 64 | 43 | 60 |
| Travel and related costs |
297 | 424 | 293 | 293 |
| Courses, conferences and exhibitions |
106 | 61 | 80 | 70 |
| Rental of premises |
722 | 635 | 819 | 622 |
| Printing and stationery |
66 | 62 | 57 | 60 |
| Computer expenses |
127 | 215 | 260 | 230 |
| Electronic information, Acts and Regulations |
100 | 72 | 101 | 101 |
| Other operating costs |
397 | 173 | 705 | 918 |
| Initial project costs |
- | |||
| Helicopter replacement study |
203 | - | - | |
| Army engineering | 39 | 14 | - | 80 |
| Light/Training Utility Helicopter | - | 166 | - | 100 |
| Joint Control Command System | - | 68 | - | 100 |
| Close-in weapon system | - | 10 | - | - |
| Total operating costs | 2,975 | 3,164 | 3,428 | 3,796 |
Note 6: Depreciation
| 30/6/2006 Actual $000 | 30/6/2007 Actual $000 |
30/6/2007 Main estimates $000 |
30/6/2007 Supp. estimates $000 |
|
|---|---|---|---|---|
| Leasehold improvements |
45 | 40 | 80 | 62 |
| Office and computer equipment | 205 | 136 | 200 | 165 |
| Office furniture |
- | 6 | - | - |
| Other assets | 96 | 85 | 90 | 100 |
| Total depreciation charge | 346 | 267 | 370 | 327 |
Note 7: Capital charge
The Ministry pays a capital charge to the Crown on its average taxpayers' funds as at 30 June and 31 December each year. The capital charge rate for the year ended 30 June 2007 was 7.5 percent (30 June 2006 = 8 percent).
Notes to the financial statements
As at 30 June 2007
Note 8: Debtors and receivables
| 30/6/2006 Actual $000 | 30/6/2007 Actual $000 |
|
|---|---|---|
| Sundry debtors
- department |
159 | 145 |
| Sundry debtors - non department | 5 | 61 |
| Total debtors and receivables | 164 | 206 |
Note 9: Property, plant and equipment
| 30/6/2006 Actual $000 | 30/6/2007 Actual $000 |
|
|---|---|---|
| Leasehold improvements |
||
| At cost | 511 | 2,378 |
| Accumulated depreciation | (511) | (35) |
| Leasehold improvements - net book value | - | 2,343 |
| Office and computer equipment |
||
| At cost |
1,456 | 1,057 |
| Accumulated depreciation |
(1,255) | (952) |
| Office and computer equipment - net book value | 201 | 105 |
| Office furniture |
||
| At cost |
262 | 228 |
| Accumulated depreciation |
(262) | (38) |
| Office furniture - net book value | - | 190 |
| Other assets |
||
| At cost |
1,126 | 527 |
| Accumulated depreciation |
(912) | (389) |
| Other assets - net book value | 214 | 138 |
| Work in progress |
||
| (a) Ministry share of costs of new Defence building |
824 | - |
| (b) New financial management information system in process of installation | - | - |
| Total property, plant and equipment |
||
| At cost |
4,179 | 4,190 |
| Accumulated depreciation |
(2,940) | (1,414) |
| Total carrying amount of property, plant and equipment | 1,239 | 2,776 |
Note 10: Creditors and payables
| 30/6/2006 Actual $000 | 30/6/2007 Actual $000 |
|
|---|---|---|
| Trade creditors |
286 | 176 |
| Accrued expenses |
134 | 222 |
| GST payable |
106 | 122 |
| Creditors and payables | 526 | 520 |
| Accrued expenses for property, plant and equipment |
- | 205 |
| Total creditors and payables | 526 | 725 |
Note 11: Provision for employee entitlements
| 30/6/2006 Actual $000 | 30/6/2007 Actual $000 |
|
|---|---|---|
| Current liabilities |
||
| Annual leave |
340 | 332 |
| Sick leave |
10 | 15 |
| Long service, retirement and resigning leave |
83 | 23 |
| Total current portion |
433 | 370 |
| Non current liabilities |
||
| Long service, retirement and resigning leave |
171 | 188 |
| Total non-current portion |
171 | 188 |
| Total provision for employee entitlements | 604 | 558 |
Note 12: Financial instruments
The Ministry is party to financial instrument arrangements as part of its everyday operations. These include instruments such as bank balances, accounts receivable, and accounts payable.
Credit risk
In the normal course of its business, the Ministry incurs credit risk from trade debtors, and transactions with financial institutions and the New Zealand Debt Management Office (NZDMO).
The Ministry does not require any collateral or security to support financial instruments with financial institutions that the Ministry deals with, or with the NZDMO, as these entities have high credit ratings. For its other financial instruments, the Ministry does not have significant concentrations of credit risk.
Fair value
The fair value of all financial instruments is equivalent to the carrying amount disclosed in the Statement of Financial Position.
Currency risk and interest rate risk
Currency risk is the risk that debtors and creditors, due in foreign currency, will fluctuate because of changes in foreign exchange rates. The Ministry uses forward contracts to manage foreign exchange exposures.
The Ministry has no significant exposure to interest rate risk on its financial instruments.
Foreign exchange contracts (departmental)
The Ministry had no departmental foreign exchange contracts as at 30 June 2007. (30 June 2006 = Nil.)
Note 13: Related party information
The Ministry is a wholly owned entity of the Crown. The Government significantly influences the roles of the Ministry as well as being its major source of revenue.
The Ministry enters into transactions with other Government departments, Crown agencies and state-owned enterprises on an arms length basis. Where these parties are acting in the course of normal dealings with the Ministry, related party disclosures have not been made for transactions of this nature.
NZDF
During the year the Ministry paid the NZDF $2.304 million being $0.559 million for services received, including a contribution to the cost of defence attachés, and $1.745 million for capital costs on the new defence building in Aitken Street, Wellington invoiced to 30 June 2007.
The Ministry received $0.265 million from the NZDF for recovery of pre-acquisition costs incurred in the purchase of military equipment that do not meet the criteria for capitalisation.
The Ministry received $509.267 million (2006 $395.882 million) for non-departmental expenses incurred in the purchase of military equipment. At 30 June 2007 the amount due for recovery in August 2007 from the NZDF was $139.008 million (2006 $185.484 million).
Recoveries and amounts outstanding total $6.681 million as at 30 June 2007. The Ministry owes $0.006 million to NZDF as at 30 June 2007.
Note 14: Major budget variations
The major variations from the prospective financial information previously published in the 2006 Statement of Intent are:
Total vote
Vote Defence (Revenue Other and Operating Costs) was increased by $311,000 for:
| 30/6/2007 Main estimates $000 |
30/6/2007 Supp. estimates $000 |
Total voted $000 |
|
|---|---|---|---|
| Pre-acquisition costs recovered from New Zealand Defence Force. | |||
| The projects in 2006/2007 were: | |||
| Army engineering | - | 80 | 80 |
| Light/Training Utility Helicopter | - | 100 | 100 |
| Joint control command system | - | 100 | 100 |
| Recovery of State Sector Retirement Scheme employer subsidy | 144 | 31 | 175 |
| Total | 144 | 311 | 455 |
Pre-acquisition costs incurred on new projects up to the time of final Government approval to purchase, are funded by the NZDF from existing baselines. Where costs are incurred by the Ministry of Defence, these are reimbursed by the NZDF and receipted in Vote Defence as Departmental transactions through Revenue Other.
An increase in the number of Ministry staff joining the State Sector Retirement Savings Scheme combined with increased staff contributions required a $31,000 increase in Revenue Other for a higher recovery from the State Services Commission.
The effect on Vote Defence of these variations was fiscally neutral.
