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Statement of Intent 2005 - Forecast Financial Statements

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Forecast Statement of Financial Performance

For the year ending 30 June 2006

 2004/20052005/2006
Budgeted
$000		Estimated
Actual
$000		Budgeted
$000
Revenue
Crown 651,907 651,907 697,714
Departments 21,057 21,057 23,881
Other 4,349 4,349 4,349
Total revenue677,313677,313725,944
Expenses
Personnel 324,116 324,116 342,518
Operating 315,382 315,382 334,039
Depreciation 34,888 34,888 45,888
Capital charge 2,927 2,927 3,499
Total expenses677,313677,313725,944
Surplus/(deficit) from operations - - -
Profit on sale of fixed assets - - -
Net surplus/(deficit) - - -
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Forecast Statement of Financial Position

For the year ending 30 June 2006

 2004/20052005/2006
Budgeted
$000		Estimated
Actual
$000		Budgeted
$000
Taxpayers' funds107,327107,327107,327
Represented by:
Assets
Current assets:
Cash and bank 70,584 70,584 79,845
Prepayments 1,859 1,859 1,859
Accounts receivable 1,889 1,889 1,889
Total current assets74,33274,33283,593
Fixed assets 104,326 104,326 95,065
Total assets178,658178,658178,658
Less Liabilities
Current liabilities:
Accounts payable and accruals 36,134 36,134 36,132
Other short-term liabilities 18,561 18,561 18,561
Other provisions 6,109 6,109 6,111
Total current liabilities60,80460,80460,804
Non-current liabilities:
Provision for employee entitlements 10,527 10,527 10,527
Total liabilities71,33171,33171,331
Net assets107,327107,327107,327
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Forecast Statement of Cash Flows

For the year ending 30 June 2006

 2004/20052005/2006
Budgeted
$000		Estimated
Actual
$000		Budgeted
$000
Cash flows from operating activities
Cash provided from:
Supply of outputs 677,313 677,313 725,949
Cash disbursed to:
Production of outputs 651,320 651,320 678,257
Capital charge 2,927 2,927 3,499
Net operating cash flows23,06623,06644,188
Cash flows from investing activities
Cash provided from:
Sale of fixed assets 1,700 1,700 1,700
Cash disbursed to:
Purchase of fixed assets 34,397 34,397 36,627
Net investing cash flows(32,697)(32,697)(34,927)
Cash flows from financing activities
Cash provided from:
Capital contribution from the Crown - - -
Cash disbursed to:
Payment of net surplus to Crown 20,973 20,973 -
Net financing cash flows(20,973)(20,973)-
Net increase/(decrease) in cash (30,604) (30,604) 9,261
Cash at beginning of period 101,188 101,188 70,584
Cash at end of period70,58470,58479,845
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Reconciliation of Net Cash Flows from Operating Activities to Net Surplus / (Deficit) in the Operating Statement

For the year ending 30 June 2006

 2004/20052005/2006
Budgeted
$000		Estimated
Actual
$000		Budgeted
$000
Net operating surplus/(deficit)---
Add non-cash items:
Depreciation 34,888 34,888 45,888
Other non-cash items (1,948) (1,948) (1,700)
Add working capital movements:
Increase/(decrease) in:
Creditors and payables (10,121) (10,121) -
Add non-operating activity items:
Net loss/(gain) on sale of fixed assets - - -
Net cash flows from operating activities22,81922,81944,188
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Forecast Statement of Movements in Taxpayers' Funds

As at 30 June 2006

 2004/20052005/2006
Budgeted
$000		Estimated
Actual
$000		Budgeted
$000
Taxpayers' funds as at 1 July 107,574 107,574 107,327
Net surplus - - -
Total recognised revenues and expenses for the period107,574107,574107,327
Repayment of capital to the Crown (247) (247) -
Taxpayers' funds as at 30 June107,327107,327107,327
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Details of Forecast Fixed Assets by Category

As at 30 June 2006

 2004/200530 June 2006 Projected Position
Estimated Actual
Net Book Value $000		Cost
$000		Accumulated
Depreciation
$000		Net Book
Value
$000
Land 3,115 3,115-3,115
Buildings 9,624 11,480(2,365)9,115
Leasehold improvements 18,327 56,434(36,164)20,270
Computer equipment and software 46,777 160,473(125,404)35,069
Furniture and fittings 192 5,031(4,873)158
Office equipment 3,835 8,621(4,849)3,772
Motor vehicles 10,276 22,669(11,283)11,386
Work in progress 12,180 12,180-12,180
Total fixed assets104,326280,004(184,938)95,065
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Forecast Departmental Capital Expenditure

For the year ending 30 June 2006

Departmental capital expenditure to be incurred in accordance with section 15(3)(a) of the Public Finance Act 1989.

Departmental Capital Expenditure ($000)2005/062004/052003/042002/032001/022000/01
Forecast
$000		Estimated Actual
$000		Budget
$000		Actual
$000		Actual
$000		Actual
$000		Actual
$000
Leasehold improvements 6,9919,8919,891 4,788 2,363 2,583 3,277
Computer equipment and software 23,95518,67518,675 33,344 9,899 16,672 41,803
Furniture and fittings -150150 50 3 9 2
Office equipment 1,0811,0811,081 3,125 695 929 717
Motor vehicles 4,6004,6004,600 3,048 7,197 2,839 2,290
Total fixed assets36,62734,39734,39744,35520,15723,03248,089
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Statement of Financial Performance Forecast for the Department

For the year ending 30 June 2006

 2004/20052005/2006
Budgeted
$000		Estimated
Actual
$000		Budgeted
$000
Operating results
Revenue department 21,057 21,057 23,881
Revenue other 4,349 4,349 4,349
Output expenses 677,313 677,313 725,944
Net surplus - - -
Working capital
Net current assets 104,936 74,332 83,593
Net current liabilities 91,899 60,804 60,804
Current ratio 114% 122% 137%
Resource utilisation
Physical assets:
Total physical assets at year end 104,326 104,326 95,065
Additions as % of physical assets 33% 33% 36%
Taxpayers' funds level at year-end 107,327 107,327 107,327
Taxpayers' funds as % of total assets 51% 51% 60%
Forecast net cash flows
Net operating activities 23,066 23,066 44,188
Net investing activities (32,697) (32,697) (34,927)
Net financing activities (20,973) (20,973) -
Net increase/(decrease) in cash held (30,604) (30,604) 9,261
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Statement of Forecast Financial Performance for each Output Expense

For the year ending 30 June 2006

 Revenue
Crown
$000		Department
$000		Other
$000		Expenses
$000
VOTE: SOCIAL DEVELOPMENT
Services to Provide Benefit Entitlements and Obligations to Working Age Beneficiaries and to Promote Self-Sufficiency 232,345 7,835 4,349 244,529
Services to Minimise the Duration of Unemployment and Move People into Work 265,914 1,376 - 267,290
Services to Seniors 34,789 336 - 35,125
Services to Protect the Integrity of the Benefit System 30,911 240 - 31,151
Debt Management - Former Beneficiaries 18,854 155 - 19,009
Community Services Card 7,028 36 - 7,064
Services to Students 40,569 110 - 40,679
Family and Community Services 15,243 75 - 15,318
Social Development Leadership 5,056 52 - 5,108
Policy and Purchase Advice 36,678 1,088 - 37,766
Information Technology Services to the Department of Child, Youth and Family Services 33 12,500 - 12,533
Sub Total687,42023,8034,349715,572
VOTE: SENIOR CITIZENS
Senior Citizens Services 1,168 18 - 1,186
Sub Total1,16818- 1,186
VOTE: VETERANS' AFFAIRS - SOCIAL DEVELOPMENT
Processing and Payment of Pensions 4,132 23 - 4,155
Sub Total4,13223- 4,155
VOTE: YOUTH DEVELOPMENT
Youth Development Policy Advice 3,195 14 - 3,209
Facilitating Young People's Voices 677 11 - 688
Enabling Youth Development 1,122 12 - 1,134
Sub Total4,99437- 5,031
TOTAL697,71423,8814,349725,944
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Statement of Underlying Assumptions

These forecast financial statements comply with generally accepted accounting practice. The measurement base applied is historical cost, adjusted for the revaluation of land and buildings.

The accrual basis of accounting has been used in the preparation of these forecast financial statements.

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Statement of Accounting Policies

For the year ending 30 June 2006

Reporting Entity

The Ministry of Social Development is a government department as defined by section 2 of the Public Finance Act 1989.

These are the forecast financial statements for the Ministry of Social Development prepared pursuant to Section 38 of the Public Finance Act 1989.

Measurement System

The forecast financial statements have been prepared on the historical cost basis, modified by the revaluation of land and buildings.

Revenue

The Ministry gets revenue from providing outputs to the Crown and for services to third parties. Revenue is recognised when it is earned and is reported in the financial period it relates to.

Cost Allocation

The Ministry accumulates and allocates costs to Departmental Output Expenses using a three-staged costing system which is outlined below.

Cost Allocation Policy

The first stage allocates all direct costs to output expenses as and when they are incurred. The second stage accumulates and allocates indirect costs to output expenses based on cost drivers, such as full-time equivalent staff (FTE) and workload information obtained from surveys, which reflect an appropriate measure of resource consumption/use. The third stage accumulates and allocates overhead costs to output expenses based on resource consumption/use where possible, such as FTE staff ratio, or if an appropriate driver cannot be found then in proportion to the costs charged in the previous two stages.

Criteria for direct and indirect costs

Direct costs are all costs that vary directly with the level of activity and are causally related to, and readily assignable to, an output expense. Overhead costs are those costs that do not vary with the level of activity undertaken. Indirect costs are all costs other than direct costs and overhead costs.

Capital Charge

The Crown charges the Ministry a levy on taxpayers’ funds at the rate of 8.0% on the capital employed. This charge is based on the taxpayers’ funds held by the Ministry as at 31 December and 30 June each financial year, and paid in arrears. Under the differential capital charge scheme, notional interest is ‘earned’ based on the daily cash balances held by the Ministry. The interest ‘earned’ will be used to offset against the capital charge.

Receivables and Advances

Receivables and advances are stated at estimated net realisable value, after providing for doubtful and uncollectible debts.

Operating Leases

Leases where the lessor effectively retains substantially all the risk and benefits of ownership of the leased items are classified as operating leases. Payments under these leases are charged as expenses in the periods they are incurred, over the term of the lease.

Fixed Assets

Fixed assets are stated at historical cost or valuation, less accumulated depreciation.

Land and buildings are stated at fair value as determined by an independent registered valuer. Fair value is determined using market-based evidence. Land and buildings are revalued at least every three years. Additions between revaluations are recorded at cost.

The results of revaluing land and buildings are credited or debited to an asset revaluation reserve for that class of asset. Where a revaluation results in a debit balance in the revaluation reserve, the debit balance will be expensed in the Forecast Statement of Financial Performance.

All other fixed assets with a cost price in excess of $2,000 are capitalised and recorded at historical cost. Any write-down of an item to its recoverable amount is recognised in the Forecast Statement of Financial Performance.

The initial cost of a fixed asset is the value of consideration given to acquire or create the asset and directly attributable costs of bringing the asset up to the working condition for its intended use.

Depreciation

Depreciation is provided on a straight line basis on all fixed assets, other than freehold land and work in progress, at rates which will write-off the cost or valuation of the assets to their estimated residual values, over their estimated useful lives.

Estimated useful lives for the main clauses of assets fall within the following range:

Type of assetsEstimated life (years)
Buildings(including components) 10 to 50
Leasehold improvements 3 to 10
Computer equipment 3 to 5
Software 3 to 8
Furniture, fittings and office equipment 3 to 5
Motor vehicles 4

Leasehold improvements are capitalised and the cost is amortised over the unexpired period of the lease, or the estimated useful life of the improvements, whichever is shorter.

Assets under construction, classified as work in progress, are not depreciated. The total cost of a capital project is transferred to the appropriate asset category on its completion and then depreciated.

Income Tax

The Ministry is exempt from paying income tax in terms of the Income Tax Act 1994. Accordingly, no charge for income tax has been provided.

Goods and Services Tax (GST)

The Forecast Statement of Financial Position is exclusive of GST, except for Payables and Receivables, which are GST inclusive. All other statements are GST exclusive.

The amount of GST owing to or from the Inland Revenue Department at balance date, being the difference between output GST and input GST, is included in Payables or Receivables (as appropriate).

Financial Instruments

The Ministry is party to financial instruments as part of its normal operations. These forecast financial statements include bank accounts, short-term deposits, accounts receivable, Crown receivable and accounts payable.

All financial instruments are recognised in the Forecast Statement of Financial Position and revenues and expenses in relation to all financial instruments are recognised in the Forecast Statement of Financial Performance. All financial instruments are shown at their estimated fair value.

Employee Entitlements

A provision for employee entitlements is recognised as a liability when benefits have been earned but not yet received by employees at balance date. Employee benefits include annual leave, long service leave and retirement leave. Annual leave has been calculated on a nominal basis at current rates of pay while the other provisions are stated at the present value of the future cash outflows expected to be incurred.

Provisions

Provisions are recognised when management has approved a business decision that results in a present obligation to transfer economic benefits. The amount and/or timing of the expenditure that will be undertaken is uncertain but still probable and measurable.

Forecast Statement of Cash Flows

Cash includes cash balances on hand, in bank accounts.

Operating activities include the net cash received from all income sources of the Ministry and 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.

Taxpayers’ Funds

This is the Crown’s net investment in the Ministry.

Changes in Accounting Policy

The Ministry is not anticipating making any changes to any of the current accounting policies.

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