Accounting policies
Reporting entity
The Ministry for the Environment is a government department as defined in section 2 of the Public Finance Act 1989.
These are the financial statements of the Ministry for the Environment prepared pursuant to section 41 of the Public Finance Act 1989.
(i) Budget and appropriation figures
The budget and appropriation figures are those presented in the 2005 Budget Night Estimates (Main Estimates) and those amended by the Supplementary Estimates and any transfer made by Order in Council under section 35 of the Public Finance Act 1989 (Supplementary Estimates).
(ii) Revenue
The Ministry derives revenue through the provision of outputs to the Crown and for services to third parties. Such revenue is recognised when earned and is reported in the financial period to which it relates.
(iii) Cost allocation
The Ministry for the Environment derives the costs of outputs using a cost allocation system. This is outlined below.
Cost allocation policy
Direct costs are charged directly to the Ministry's outputs. Indirect costs are charged to outputs based on a primary cost driver of salaried full-time equivalents.
Criteria for direct and indirect costs
'Direct costs' are those costs directly attributed to an output. 'Indirect costs' are those costs that cannot be directly associated with a specific output.
Direct cost assigned to outputs
Direct costs are charged directly to outputs.
Indirect costs assigned to outputs
Indirect costs are assigned to outputs based on a proportion of the number of full-time equivalents assigned to each output.
(iv) Debtors and receivables
Debtors and receivables are recorded at estimated realisable value, after providing for doubtful debts.
(v) Operating leases
Leases where the lessor effectively retains all the risks and benefits of ownership of the leased items are classified as operating leases. Payments under these leases are charged as expenses in the periods in which they are incurred.
(vi) Plant and equipment
All fixed assets are recorded at cost less accumulated depreciation. Fixed assets are recognised as individual items costing $1500 (GST exclusive) or more, which have a useful life greater than one year.
(vii) Depreciation
Depreciation of fixed assets is calculated on a straight-line basis so as to allocate the cost of the assets, after recognising residual values, over their useful lives.
The estimated useful lives of the assets are:
Depreciation rate |
Useful life |
|
|---|---|---|
Furniture and fittings |
20 |
5 |
Office equipment |
20 |
5 |
Computer software |
33 |
3 |
Computer hardware |
33 |
3 |
The cost of leasehold improvements (included in furniture and fittings) is capitalised and depreciated over the unexpired period of the lease or the estimated remaining useful lives of the improvements, whichever is shorter. Items classified as furniture and fittings but not deemed to be part of leasehold improvements are depreciated over their useful lives.
Losses and gains on disposal of fixed assets are taken into account in determining the operating result for the year.
(viii) Employee entitlements
Provision is made in respect of the Ministry's liability for annual leave, retention/refresher leave, long service leave and retirement leave. Annual leave is calculated on an actual entitlement basis at current values of pay. All annual leave is expected to be settled within 12 months of the reporting date.
Long service leave, retention/refresher leave and retirement leave are calculated on an actuarial basis, based on the present value of expected future entitlements. These have been provided for as long term liabilities on the statement of financial position.
(ix) Statement of cash flows
'Cash' means cash balances on hand and cash held in bank accounts.
Operating activities include cash received from all income sources of the Ministry and record the cash payments made for the supply of goods and services.
Investing activities are those activities relating to the acquisition and disposal of non-current assets.
Financing activities comprise capital injections by, or repayment of capital to, the Crown.
(x) Financial instruments
The Ministry for the Environment is party to financial instrument arrangements as part of its normal operations. All financial instruments are recognised in the Statement of Financial Position and all revenues and expenses relating to financial instruments are recognised in the Statement of Financial Performance. The Ministry for the Environment has not entered into any off-balance sheet transactions.
The following methods and assumptions were used to value each class of financial instrument:
- accounts receivable are recorded at expected realisable value
- all other financial instruments including cash and bank, short-term deposits and accounts payable are recognised at their fair value.
(xi) Goods and Services Tax (GST)
All statements are GST exclusive, except where otherwise stated. Creditors and payables and debtors and receivables in the Statement of Financial Position are stated inclusive of GST. GST payable at balance date is included in creditors and payables.
(xii) Taxation
The Ministry for the Environment is exempt from income tax in terms of the Income Tax Act 1994. Accordingly, no charge for income tax has been provided for.
(xiii) Commitments
Future expenses and liabilities to be incurred on contracts that have been entered into at balance date are disclosed as commitments at the point a contractual obligation arises, to the extent that they are equally unperformed obligations.
(xiv) Contingencies
Contingent liabilities and contingent assets are disclosed at the point at which the contingency is evident.
(xv) Taxpayers' funds
Taxpayers' funds are the Crown's net investment in the Ministry.
(xvi) Changes in accounting policies
There have been no changes in accounting policies since the date of the last audited financial statements. All policies will be applied consistently throughout the period.
Forecast performance indicators for the year ending 30 June 2006
Unit |
2004/05
Main estimates |
2004/05 Supplementary estimates |
2004/05
Estimated actual |
2005/06
Budget |
|
|---|---|---|---|---|---|
Operating results |
|||||
Revenue: Crown |
$000 |
36,916 |
39,830 |
39,830 |
51,593 |
Revenue: Departments and other |
$000 |
5 |
223 |
223 |
433 |
Output expenses |
$000 |
36,921 |
40,053 |
40,053 |
52,026 |
Net surplus/(deficit) |
$000 |
5 |
5 |
5 |
5 |
Working capital |
|||||
Net current assets |
$000 |
381 |
492 |
492 |
763 |
Liquid ratio |
% |
127 |
118 |
118 |
129 |
Resource utilisation |
|||||
Physical assets |
$000 |
562 |
2,001 |
2,001 |
2,580 |
Physical assets as % of total assets |
% |
13.2 |
39 |
39 |
43 |
Additions as % of physical assets |
% |
71.2 |
89.1 |
89.1 |
48.4 |
Physical assets per employee |
$000 |
2.4 |
8.4 |
8.4 |
8.9 |
Taxpayers' funds |
|||||
Level at year-end |
$000 |
343 |
1,843 |
1,843 |
2,693 |
Level per employee |
$000 |
1.5 |
7.7 |
7.7 |
9.3 |
Forecast net cash flows |
|||||
Surplus/(deficit) from operating activities |
$000 |
565 |
(3,152) |
(3,152) |
671 |
Surplus/(deficit) from investing activities |
$000 |
(385) |
(1,778) |
(1,778) |
(1,245) |
Surplus/(deficit) from financing activities |
$000 |
(5) |
779 |
779 |
845 |
Net increase/(decrease) in cash held |
$000 |
175 |
(4,151) |
(4,151) |
271 |
Human resources |
|||||
Staff turnover |
% |
14 |
12 |
12 |
12 |
Average length of service |
Years |
4.6 |
4.6 |
3.7 |
3.3 |
Total staff |
No. |
230 |
239 |
239 |
290 |
Quality standards for policy advice
The Ministry has a number of policies, standards, best practice documents and standard operating procedures to ensure that its service performance remains at an optimum level. These standards are applied to all aspects of our organisation, and are maintained through internal processes to ensure the quality of our policy advice. Such processes include peer review, and consultation within the organisation and relevant external agencies.
Additionally the General Managers work with the Chief and the Deputy Chief Executive on a regular basis, with all issues discussed at weekly meetings to ensure that work programmes remain consistent with the Ministry's core objectives.
