Forecast Financial Statements

Forecast Statement of Financial Performance

For the year ending 30 June 2008

	2006/2007		2007/2008
	Budget $000	Estimated Actual $000	Budget $000
Revenue
Crown	1,103,143	1,103,143	1,114,450
Departments	14,189	14,189	15,010
Other	6,711	6,711	6,281
Total revenue	1,124,043	1,124,043	1,135,741
Expenses
Personnel	582,869	582,869	588,309
Financial plan costs	103,870	103,870	103,870
Operating	365,851	365,851	366,835
Depreciation and amortisation	55,271	55,271	60,102
Impairment	-	-	-
Capital charge	16,182	16,182	16,625
Total expenses	1,124,043	1,124,043	1,135,741
Surplus/(deficit) from operations	-	-	-
Profit on sale of fixed assets	-	-	-
Net surplus/(deficit)	-	-	-

Forecast Statement of Movements in Taxpayers’ Funds

As at 30 June 2008

	2006/2007		2007/2008
	Budget $000	Estimated Actual $000	Budget $000
Balance at beginning of year	112,559	112,559	311,790
Transition adjustment on adoption of NZ IFRS	-	-	1,557
Restated balance at beginning of year	112,559	112,559	313,347
Net surplus	-	-	-
Other Recognised revenues and expenses:
Increase in revaluation reserve	-	-	-
Total recognised revenues and expenses for the period	-	-	-
Capital contribution from the Crown	199,231	199,231	1,500
Capital repayment to the Crown	-	-	-
Provision for paying surplus	-	-	-
Total movements for year	199,231	199,231	1,500
Balance at end of year	311,790	311,790	314,847

Forecast Statement of Financial Position

As at 30 June 2008

	30 June 2007		30 June 2008
	Budget $000	Estimated Actual $000	Budget $000
Taxpayers' funds
General funds	304,101	304,101	307,158
Revaluation Reserves	7,689	7,689	7,689
Total Taxpayers' funds	311,790	311,790	314,847
Represented by:
Assets
Current assets:
Cash and cash equivalents	156,421	151,042	165,219
Prepayments	6,226	6,226	4,210
Receivables	3,733	3,733	3,154
Total current assets	166,380	161,001	172,583
Non-current assets
Property, plant and equipment	298,984	304,363	258,912
Intangible assets	-	-	44,630
Total non-current assets	298,984	304,363	303,542
Total Assets	465,364	465,364	476,125
Liabilities
Current liabilities:
Payables and accruals	71,152	71,152	77,038
Employee entitlements	44,036	44,036	44,986
Other provisions	17,632	17,632	18,500
Total current liabilities	132,820	132,820	140,524
Non-current liabilities:
Employee entitlements	20,754	20,754	20,754
Total liabilities	153,574	153,574	161,278
Net assets	311,790	311,790	314,847

Forecast Statement of Cash Flows

For the year ending 30 June 2008

	2006/2007		2007/2008
	Budget $000	Estimated Actual $000	Budget $000
Cash flows from operating activities
Cash provided from:
Supply of outputs	1,124,043	1,124,043	1,135,741
Cash disbursed to:
Production of outputs	1,005,140	1,005,140	1,048,960
Capital charge	16,182	16,182	16,625
Net operating cash flows	102,721	102,721	70,156
Cash flows from investing activities
Cash provided from:
Sale of non-current assets	4,101	4,101	4,101
Cash disbursed to:
Purchase of non-current assets1	256,562	261,941	61,580
Net investing cash flows	(252,461)	(257,840)	(57,479)
Cash flows from financing activities
Cash provided from:
Capital contribution from the Crown	199,231	199,231	1,500
Cash disbursed to:
Payment of net surplus to Crown2	14,190	14,190	-
Net financing cash flows	185,041	185,041	1,500
Net increase/(decrease) in cash	35,301	29,922	14,177
Opening cash and cash equivalents	121,120	121,120	151,042
Closing cash and cash equivalents	156,421	151,042	165,219

Reconciliation of Net Cash Flows from Operating Activities to Net Surplus / (Deficit) in the Operating Statement

For the year ending 30 June 2008

	2006/2007		2007/2008
	Budget $000	Estimated Actual $000	Budget $000
Net surplus/(deficit)	-	-	-
Non-cash items:
Depreciation and amortisation	55,271	55,271	60,102
Other non-cash items	(630)	(630)	(245)
Working capital movements:
(Increase)/decrease in:
Receivables	(1,431)	(1,431)	579
Prepayments	(3,730)	(3,730)	2,016
Crown receivable	-	-	-
Increase/(decrease) in:
Payables	35,947	35,947	6,754
Employee entitlements	17,294	17,294	950
Investing activities:
Net loss/(gain) on sale of non-current assets	-	-	-
Net cash flows from operating activities	102,721	102,721	70,156

Details of Forecast Non-Current Assets by Category

As at 30 June 2008

	30 June 2007 Estimated	30 June 2008 Budget
	Actual NBV $000	Cost $000	Accumulated Depreciation $000	Net Book Value $000
Non-current assets
Property, plant and equipment
Land	54,765	55,765	-	55,765
Buildings - residential	112,047	115,079	(5,400)	109,679
Buildings - non-residential	20,559	21,389	(3,393)	17,996
Leasehold improvements	16,074	71,990	(52,470)	19,520
Computer equipment	15,503	75,434	(55,427)	20,007
Office equipment and furniture	7,122	25,836	(17,006)	8,830
Motor vehicles	21,115	40,570	(15,305)	25,265
Work in progress	7,966	1,850	-	1,850
Software	49,212
Total property, plant and equipment	304,363	407,913	(149,001)	258,912
Intangible assets
Software3	-	171,509	(126,879)	44,630
Total non-current assets	304,363	579,422	(275,880)	303,542

Forecast Departmental Capital Expenditure

For the year ending 30 June 2008

Departmental capital expenditure to be incurred in accordance with section 24 of the Public Finance Act 1989.

Departmental Capital Expenditure4	2007/2008	2006/2007		2005/2006	2004/2005	2003/2004	2002/2003
	Budget $000	Estimated Actual $000	Budget $000	Actual $000	Actual $000	Actual $000	Actual $000
Land	1,000	1,000	-	-	-	-	-
Buildings - residential	1,500	12,978	2,471	-	-	-	-
Buildings - non-residential	-	-	-	-	-	-	-
Leasehold improvements	11,345	4,722	10,854	4,493	4,920	4,788	2,363
Computer equipment	18,305	10,043	9,447	8,608	16,210	33,344	9,899
Office equipment and furniture	4,780	2,182	3,199	287	911	3,175	698
Motor vehicles	9,150	7,750	7,750	4,193	4,588	3,048	7,197
Software5	15,500	24,035	22,610	3,991	-	-	-
Total capital expenditure	61,580	62,710	56,331	21,572	26,629	44,355	20,157

Statement of Financial Performance Forecast for the Department

For the year ending 30 June 2008

	2006/2007		2007/2008
	Budget	Estimated Actual	Budget
Operating results
Revenue department	14,189	14,189	15,010
Revenue other	6,711	6,711	6,281
Output expenses	1,124,043	1,124,043	1,135,741
Net surplus	-	-	-
Working capital
Current assets	166,380	161,001	172,583
Current liabilities	132,820	132,820	140,524
Current ratio	125%	121%	123%
Resource utilisation
Non-current assets:
Total non-current assets at year end	298,984	304,363	303,542
Additions as % of non-current assets	86%	86%	20%
Taxpayers' funds level at year-end	311,790	311,790	314,847
Taxpayers' funds as % of total assets	67%	67%	66%
Forecast net cash flows
Net operating activities	102,721	102,721	70,156
Net investing activities	(252,461)	(257,840)	(57,479)
Net financing activities	185,041	185,041	1,500
Net increase/(decrease) in cash	35,301	29,922	14,177

Statement of Forecast Financial Performance for each Output Expenses

For the year ending 30 June 2008

	Revenue				Expenses	Net
	Crown $000	Departments $000	Other $000	Total $000	$000	Surplus $000
Vote Social Development
Community Services Card	5,728	36	-	5,764	5,764	-
Debt Management - Former Beneficiaries	19,272	180	-	19,452	19,452	-
Family and Community Services	28,509	129	-	28,638	28,638	-
Policy and Purchase Advice	38,311	1,434	-	39,745	39,745	-
Services to Minimise the Duration of Unemployment and Move People into Work	228,676	1,621	-	230,297	230,297	-
Services to Protect the Integrity of the Benefit System	36,118	346	-	36,464	36,464	-
Services to Provide Benefit Entitlements and Obligations to Working Age Beneficiaries and to Promote Self-Sufficiency	268,436	8,479	4,349	281,264	281,264	-
Services to Seniors	41,107	412	-	41,519	41,519	-
Services to Students	32,355	164	-	32,519	32,519	-
Social Development Leadership	2,879	52	-	2,931	2,931	-
Sub Total	701,391	12,853	4,349	718,593	718,593	-
Vote Child Youth and Family Services
Adoption Services	8,380	46	-	8,426	8,426	-
Care and Protection Services	282,165	797	1,799	284,761	284,761	-
Development and Funding of Community Services	8,286	59	-	8,345	8,345	-
Policy Advice and Ministerial Servicing	2,864	59	-	2,923	2,923	-
Prevention Services	4,360	601	13	4,974	4,974	-
Youth Justice Services	96,241	397	-	96,638	96,638	-
Sub Total	402,296	1,959	1,812	406,067	406,067	-
Vote Senior Citizens
Senior Citizens Services	1,017	18	-	1,035	1,035	-
Sub Total	1,017	18	-	1,035	1,035
Vote Veterans' Affairs
Processing and Payment of Pensions	4,132	23	-	4,155	4,155	-
Sub Total	4,132	23	-	4,155	4,155
Vote Youth Development
Youth Development	5,614	157	120	5,891	5,891	-
Sub Total	5,614	157	120	5,891	5,891	-
Total	1,114,450	15,010	6,281	1,135,741	1,135,741	-

---

Statement of Accounting Policies

Reporting Entity

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

Basis of Preparation

(a) Statement of Compliance
These forecast financial statements have been prepared in accordance with the Public Finance Act 1989 and New Zealand Generally Accepted Accounting Practice (NZ GAAP). In general the policies are intended to comply with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS), and other applicable Financial Reporting Standards as appropriate for public benefit entities.

(b) Basis of Measurement
The financial statements have been prepared on the historical cost basis, modified by the revaluation of land and buildings.

Revenue

The Ministry receives revenue from providing outputs to the Crown and for services to third parties. Revenue is measured at fair value and 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 Departmental Output Expenses as and when they are incurred. The second stage accumulates and allocates indirect costs to Departmental 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 Departmental 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 class. 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.

Trade and other receivables and advances

Trade and other receivables and advances fall within the financial asset category of loans and receivables and are recorded at amortised cost less any impairment losses.

Impairment
The carrying amounts of assets are reviewed at each balance date to determine whether there is any indication of impairment.
Indicators of impairment include internal and external factors such as a decline in market value, changes adversely affecting the asset or the way in which it is used, obsolescence or changes in the market, legal, or technological environment in which the entity operates, financial difficulty or payment defaults of the borrower.

Where indicators exist, a formal impairment test is undertaken and the asset’s recoverable amount estimated. Where the carrying amount exceeds the recoverable amount an impairment loss is recognised in the income statement.

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. Operating lease expenses are recognised on a straight line basis over the term of the lease. Lease incentives are recognised in the income statement as an integral part of the total lease expense.

Property, Plant and Equipment

Property, plant and equipment are stated at valuation or historical cost, less accumulated depreciation and impairment losses.

Cost includes:
(a) Purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates.
(b) Any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, and for leased premises the estimated reinstatement costs.

Land and buildings are stated at fair value as determined by an independent registered valuer. Fair value is determined using market-based evidence, to reflect the highest and best use of those assets. 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 Income Statement.
All other items of property, plant and equipment with a cost price in excess of $2,000 are capitalised and recorded at historical cost.

Depreciation

Depreciation is recognised in the Income Statement on a straight line basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives for the main classes are:

Buildings (including components)	10 to 50 years
Leasehold improvements	3 to 10 years
Computer equipment	3 to 5 years
Furniture, fittings and office equipment	3 to 5 years
Motor vehicles	4 years

Leasehold improvements are depreciated over the shorter of the leased term and useful life.

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

Non-current Assets Held for Sale

Non-current assets are classified as held for sale when their carrying amount is expected to be recovered principally through a sale transaction rather than through continuing use.

To be classified as held for sale assets must be:
(a) available for immediate sale in their present condition,
(b) sale must be highly probable as indicated by;
(i) management having committed to a plan to sell, and
(ii) having initiated an active sales programme,
(c) expected to be sold within one year from the date of classification, unless there are delays caused by events beyond the Ministry’s control.

Such assets are stated at the lower of their carrying amount, and fair value less costs to sell and not depreciated nor amortised while they are so classified.

An impairment loss is recognised for any initial or subsequent write-down of the asset to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell, but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of sale of the non-current asset is recognised at the date of sale.

Non-current assets held for sale are presented separately from the other assets in the Balance Sheet.

Intangible Assets

The cost of acquiring an intangible asset is amortised from the date the underlying asset is held ready for use on a straight line basis over the periods of its expected benefit as follows:

Software	3 to 8 years

Where the period of expected benefit has diminished due to technological change or market conditions, amortisation is accelerated or the carrying value is written-down.

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.

Payables
Trade payables and other accounts payable are recognised when an obligation to make future payments resulting from the purchase of goods and services is incurred.

Goods and Services Tax (GST)

All financial statements are prepared exclusive of GST, except for payables and receivables in the Balance Sheet which are GST inclusive. The amount of GST owing to, or from, the Inland Revenue Department at balance date is included in payables or receivables as appropriate.

Commitments

Future expenses and liabilities to be incurred on contracts that have been entered into at balance date are disclosed as commitments to the extent that they are quantifiable and there are equally unperformed obligations.

Contingent Assets and Liabilities

Contingent assets and liabilities are disclosed at the point at which the contingency is evident. Contingent liabilities are disclosed if the possibility that they will crystallise is not remote.

Foreign Currency

Foreign currency transactions are converted at the New Zealand exchange rate at the date of the transaction. Foreign currency receivables and payables at balance date are translated at exchange rates current at balance date. Exchange differences arising on the translation of accounts payable and receivable in foreign currency are recognised in the Income Statement.

Financial Instruments

The Ministry is party to financial instruments as part of its normal operations. These financial instruments include cash and cash equivalents, trade and other receivables, trade and other payables. All financial instruments are recognised in the Balance Sheet, and revenues and expenses in relation to all financial instruments are recognised in the Income Statement. All financial instruments are shown at their estimated fair value.

Employee Entitlements

Provision is made to cover the Ministry’s liability for both short and long-term employee entitlements:

(a) Short-term entitlements
Liabilities for annual leave and time off in lieu are accrued at the full amount owing at the pay period ending immediately prior to Balance Sheet date.
Liabilities for accumulating short-term compensated absences (e.g. sick leave) are measured as the amount of unused entitlement accumulated at Balance Sheet date that the Ministry anticipates employees will use in future periods, in excess of the days that they will be entitled to in each of those periods.
(b) Long-term entitlements
The long service leave and retiring gratuity liabilities are assessed on an actuarial basis using current rates of pay taking into account years of service, years to entitlement and the likelihood staff will reach the point of entitlement. These estimated amounts are discounted to their present value using an interpolated 10 year government bond rate.
(c) Superannuation
The Ministry participates in two superannuation schemes as follows:
(i) Government Superannuation Fund
The fund is a multi-employer defined benefit plan. The Crown holds the indemnity obligations for any deficits incurred by the fund. Consequently the Ministry’s participation in the scheme is accounted for as if the scheme were a defined contribution plan.
(ii) State Sector Retirement Savings Scheme
The scheme is a multi-employer master trust, where money invested in separate schemes is pooled for investment purposes. The scheme is a defined contribution plan, and contributions to the plan are expensed as incurred.

Forecast Statement of Cash Flows

Cash and cash equivalents comprise cash on hand and balances held in bank accounts with maturities of three months or less.
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.

Provisions

Provisions are recognised when there is a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits, the amount of which can be reliably estimated, will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Other Liabilities

All other liabilities are recorded at the estimated obligation to pay.

Taxpayers’ Funds

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

Judgements and Estimations

The preparation of financial statements in conformity with NZ IFRS requires judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates, and those differences may be material.

Changes in Accounting Policy

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