Annual Report for the year ended 30 June 2007
Part 4: Non-departmental schedules
Statement of non-departmental accounting policies
Measurement and recognition rules applied in the preparation of these non-departmental financial statements and schedules are consistent with generally accepted accounting practice and Crown accounting policies.
These non-departmental balances are consolidated into the Financial Statements of Government therefore readers of these statements and schedules should also refer to the Financial Statements of Government for 2006/07.
The following accounting policies have been applied:
Budget figures
The budget figures are those presented in the budget estimates (main estimates) and those amended by the supplementary estimates (supplementary estimates) and any transfer made by Order in Council under section 26 of the Public Finance Act 1989.
Revenue recognition
Military equipment is sold at cost to the NZDF in July and January each year. Revenue is recognised and reported in those months.
Interest income
Interest income is recognised in the period in which it is earned.
Goods and services tax (GST)
Input GST on the procurement or refurbishment of military equipment is expensed.
Work in progress
Work in progress comprises project expenditure to be recovered from the NZDF for the six months preceding balance date, plus accruals at balance date.
Foreign currency
Foreign currency transactions are converted into New Zealand dollars at the exchange rate at the date of the transaction. Where a forward exchange contract has been used to establish the price of a transaction, the forward rate specified in that foreign exchange contract is used to convert that transaction to New Zealand dollars. Consequently, no exchange gain or loss resulting from the difference between the forward exchange contract rate and the spot exchange rate on date of settlement is recognised.
Monetary assets and liabilities are translated to New Zealand dollars at the closing exchange rate. The resulting unrealised exchange gain or loss is recognised in the schedule of non-departmental expenses. Other exchange gains or losses, whether realised or unrealised, are recognised in the schedule of non-departmental expenses in the period to which they relate.
Schedule of non-departmental revenues and receipts
For the year ended 30 June 2007
Non-departmental revenues and receipts are administered by the Ministry on behalf of the Crown.
As these revenues and receipts are not established by the Ministry nor earned in the production of the Ministry's outputs, they are not reported in the Ministry's departmental financial statements.
| Note | 30/6/2006 Actual $000 | 30/6/2007 Actual $000 |
30/6/2007 Main estimates $000 |
30/6/2007 Supp. estimates $000 |
|
|---|---|---|---|---|---|
| Administered on behalf of the Minister of Defence | |||||
| Sales of military equipment, at cost, to New Zealand Defence Force The individual projects are: |
|||||
| Maritime helicopters |
- | 180,004 | - | 180,004 | |
| ANZAC ships |
478 | 174 | - | 174 | |
| Tactical communications equipment |
847 | (325) | 625 | (325) | |
| Light armoured vehicles |
16,333 | 3,965 | 4,187 | 3,965 | |
| P-3K Orion systems upgrade |
112,469 | 59,048 | 72,189 | 59,048 | |
| Project Protector vessels |
148,550 | 114,245 | 151,817 | 114,245 | |
| Light operational vehicles |
32,128 | 17,028 | 19,585 | 17,028 | |
| Very low level air defence system |
3,928 | 7,198 | 7,746 | 7,198 | |
| B-757 aircraft and modifications |
16,430 | 41,559 | 71,518 | 41,559 | |
| Medium range anti-armour weapon |
9,533 | 1,390 | 4,721 | 1,390 | |
| C-130H Life extension | 55,186 | 84,981 | 104,744 | 84,981 | |
| Total sales to New Zealand Defence Force | 395,882 | 509,267 | 437,132 | 509,267 | |
| Interest on foreign currency investments |
C1 | 570 | 754 | 200 | 870 |
| Total revenues and receipts administered on behalf of the Minister of Defence | 396,452 | 510,021 | 437,332 | 510,137 |
(Figures are GST exclusive)
Schedule of non-departmental expenses
For the year ended 30 June 2007
Non -departmental expenses are administered by the Ministry on behalf of the Crown.
As these expenses are not spent in the production of the Ministry's outputs, they are not reported in the Ministry's departmental financial statements.
This schedule includes both capital and operating expenses.
| 30/6/2006 Actual $000 | 30/6/2007 Actual $000 |
30/6/2007 Main estimates $000 |
30/6/2007 Supp. estimates $000 |
|
|---|---|---|---|---|
| Administered on behalf of the Minister of Defence | ||||
| Purchase of military equipment The individual projects are: |
||||
| Maritime helicopters |
- | 228,762 | - | 256,509 |
| ANZAC ships |
180 | - | - | - |
| Light armoured vehicles |
7,818 | 36 | - | 174 |
| Light operational vehicles |
32,726 | 2,451 | 964 | 2,735 |
| Medium range anti-armour weapon |
5,248 | 1,024 | 670 | 3,586 |
| Very low level air defence system |
3,402 | 6,838 | 6,510 | 6,871 |
| P-3K Orion systems upgrade |
110,719 | 37,716 | 46,472 | 62,957 |
| C-130H Life extension | 65,889 | 52,193 | 35,154 | 67,482 |
| Project Protector vessels |
152,024 | 106,904 | 143,629 | 174,271 |
| B-757 aircraft and modification |
35,128 | 35,650 | 51,172 | 39,019 |
| Tactical communications equipment |
1,505 | (1,787) | - | 919 |
| Total purchases of military equipment |
414,639 | 469,787 | 284,571 | 614,523 |
| GST input tax expensed |
12,945 | 26,639 | 50,952 | 78,669 |
| Unrealised exchange losses/(gains) |
(22,335) | 24,744 | - | - |
| Total expenses administered on behalf of the Minister of Defence | 405,249 | 521,170 | 335,523 | 693,192 |
(Figures are GST exclusive)
Schedule of non-departmental assets
As at 30 June 2007
Non -departmental assets are administered by the Ministry on behalf of the Crown.
As these assets are neither controlled by the Ministry nor used in the production of the Ministry's outputs, they are not reported in the Ministry's departmental statement of financial position.
| 30/6/2006 Actual $000 | 30/6/2007 Actual $000 |
30/6/2007 Main estimates $000 |
30/6/2007 Supp. estimates $000 |
|
|---|---|---|---|---|
| Administered on behalf of the Minister of Defence | ||||
| Crown bank accounts |
201,278 | 210,407 | 161,697 | 210,786 |
| Debtors and receivables |
1,232 | 6,723 | - | - |
| Work in progress |
185,484 | 146,004 | 110,774 | 290,740 |
| Total assets administered on behalf of the Minister of Defence | 387,994 | 363,134 | 272,471 | 501,526 |
(Figures are GST exclusive)
Schedule of non-departmental liabilities
As at 30 June 2007
Non -departmental liabilities are administered by the Ministry on behalf of the Crown.
As these liabilities are neither controlled by the Ministry nor used in the production of the Ministry's outputs, they are not reported in the Ministry's departmental statement of financial position.
| 30/6/2006 Actual $000 | 30/6/2007 Actual $000 |
30/6/2007 Main estimates $000 |
30/6/2007 Supp. estimates $000 |
|
|---|---|---|---|---|
| Administered on behalf of the Minister of Defence | ||||
| Creditors and payables |
1,787 | 21,815 | 9,586 | 9,255 |
| Total liabilities administered on behalf of the Minister of Defence |
1,787 | 21,815 | 9,586 | 9,255 |
(Figures are GST inclusive)
Schedule of non-departmental commitments
As at 30 June 2007
Non-departmental commitments are administered by the Ministry on behalf of the Crown.
As these commitments are not incurred in the production of the Ministry's outputs, they are not reported in the Ministry's departmental statement of commitments.
| 30/6/2006 Actual $000 | 30/6/2007 Actual $000 |
|
|---|---|---|
| Capital commitments | ||
| Less than one year |
316,208 | 307,080 |
| One to two years |
112,314 | 129,091 |
| Two to five years |
70,509 | 348,667 |
| More than five years |
- | - |
| Total non-departmental capital commitments |
499,031 | 784,838 |
(Figures are GST exclusive)
These figures exclude the non-recoverable GST payable to the New Zealand Customs Service on the import of military equipment.
Schedule of non-departmental expenditure and appropriation
For the year ended 30 June 2007
The statement of expenditure and appropriation details expenditure incurred against appropriation. The Ministry administers this appropriation on behalf of the Crown.
| 30/6/2006 Actual $000 | 30/6/2007 Actual $000 |
30/6/2007 Main estimates $000 |
30/6/2007 Supp. estimates $000 |
|
|---|---|---|---|---|
| Vote Defence Capital expenditure |
||||
| Defence equipment |
414,639 | 469,787 | 284,571 | 614,523 |
|
Capital expenditure |
414,639 | 469,787 | 284,571 | 614,523 |
(Figures are GST exclusive)
The accompanying accounting policies and notes form part of these financial statements.
Schedule of non-departmental contingencies
As at 30 June 2007
There are no non-departmental contingent assets or contingent liabilities at 30 June 2007. (30 June 2006 = Nil.)
Notes to the non-departmental schedules
For the year ended 30 June 2007
Note C1: Interest revenue
The Ministry invests foreign currency cash held prior to making payments with financial institutions that the Ministry deals with. All interest earned on short-term deposits is returned to the Crown.
Note C2: Budget composition
| 30/6/2007 Initial budget $000 |
30/6/2007 Budget changes at Supp. estimates time $000 |
30/6/2007 Final Budget total $000 |
|
|---|---|---|---|
| Non tax revenue |
|||
| Interest on foreign currency investments | 200 | 670 | 870 |
| Capital receipts |
|||
| Sales of military equipment, at cost, to New Zealand Defence Force | 437,132 | 72,135 | 509,267 |
| Capital expenditure |
|||
| Purchase of military equipment | 284,571 | 329,952 | 614,523 |
| GST on defence equipment | 50,952 | 27,717 | 78,669 |
Note C3: Major budget variations
Capital expenditure - defence equipment
The appropriation was increased by $329.952 million to recognise forecast changes in existing contract payments for C-130H Life extension, P-3K Orion systems upgrade and Project Protector vessels projects and an additional funding approval for the Medium Utility Helicopter project approved by Government during the financial year that was not provided for in Main Estimates. The reduction in the B-757 aircraft and modifications project reflects the approval to proceed with the upgrade contract being obtained early in the following financial year. The projects involved were:
| $000 | |
|---|---|
| Light armoured vehicles |
174 |
| Tactical communications | 919 |
| B-757 aircraft and modifications |
(12,153) |
| Light operational vehicles |
1,771 |
| Medium range anti-armour weapon |
2,916 |
| Very low level air defence system |
361 |
| C-130H Life extension | 32,328 |
| P-3K Orion systems upgrade |
16,485 |
| Medium utility helicopter | 256,509 |
| Project Protector vessels |
30,642 |
| 329,952 |
GST on defence equipment
The budget for GST was increased by $27.717 million to meet timing changes in import GST charges. The projects involved were:
| $000 | |
|---|---|
| Tactical communications | 189 |
| B-757 aircraft and modifications |
381 |
| Medium range anti-armour weapon | 1,933 |
| Very low level air defence system |
295 |
| C-130H Life extension | 625 |
| P-3K Orion systems upgrade |
22,880 |
| Project Protector vessels |
1,414 |
| 27,717 |
Note C4: Financial instruments
Currency risk
The Ministry has a foreign exchange covering policy that minimises the currency risk. The policy has key parts:
- the Ministry is not required to arrange cover for foreign exchange transactions more than two years in the future, unless Cabinet decides to the contrary
- a maximum of net aggregate NZ$2 million equivalent exposure at one time is allowed
- cover will occur within five working days of any exposure being identified. These exposures are identified contracts both formal and informal.
Foreign exchange contracts (Crown)
The Ministry had Crown foreign exchange contracts with a face value of $414.820 million at 30 June 2007. (30 June 2006 = $237.033 million.)
