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Annual Report of the Treasury for the Year Ended 30 June 2007

Presented to the House of Representatives Pursuant to Section 39 of the Public Finance Act.

Previous annual reports are available from Archive of Annual Reports.

Government's vision

Government’s vision

An inclusive New Zealand where all people enjoy the opportunity to fulfil their potential, prosper and participate in the social, economic, political and cultural life of their communities and nation.

Government’s priorities (themes)

Economic transformationFamilies - young and oldNational identity
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The Treasury’s vision

A world-class Treasury working for higher living standards for New Zealanders.

The Treasury’s goal

The Treasury is a highly engaged, relevant and respected economic and financial policy advisor, making an impact on the issues that are important to New Zealand’s economic performance and State sector performance.
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The Treasury’s outcomes

Improving New Zealand’s economic performanceA stable and sustainable macroeconomic environmentImproving State sector performance
The Treasury brings an overall perspective that includes analysis on institutions, macroeconomics and microeconomics and how it all fits together, to advise on what really matters for New Zealand’s economic performance – with a principal focus on sustainable growth. The Treasury provides advice on macroeconomic conditions and fiscal policy and on the performance of monetary and financial policy. We also provide timely and accurate economic and fiscal data through economic and fiscal forecasts and reporting through the Crown accounts.The Treasury provides advice to ensure the work of the State sector represents value for money in achieving the Government’s aims and objectives. This includes advice on policy and regulatory settings, the public management system, and the management, and return on, the Crown’s assets and liabilities.

Central agency leadership

Together with the Department of the Prime Minister and Cabinet and the State Services Commission, the Treasury has an interest in a high-performing, trusted and accessible State sector. Central agencies have a key leadership role to play in aligning the activities of the State services with Government’s priorities and making sure that Ministers receive the best possible advice before making decisions.
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Results focus

Through the results focus we are being more explicit about the areas we think will make the greatest contribution to achieving our outcomes, the impact we are seeking in these areas, and what we are going to do to achieve this.
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Treasury output classes

  • Budget management
  • Debt and related financial asset management
  • Economic and fiscal forecasting and reporting
  • Management of claims against the Crown, contractual liabilities and Crown properties
  • Policy advice: financial and public sector management systems
  • Policy advice: general economic and fiscal strategies
  • Policy advice: ownership and performance of Crown companies and financial institutions
  • Policy advice: regulation and Vote purchase, ownership and performance issues
  • Policy advice: tax

CCMAU – Crown company monitoring advice to:

  • the Minister for Crown Research Institutes
  • The Minister for State-Owned Enterprises and other Responsible Ministers

What we do

The Treasury’s overall vision is to be a world-class Treasury working for higher living standards for New Zealanders. This vision is behind our efforts to increase savings, improve export performance and invest in the wellbeing of New Zealanders.

Our overarching goal is to be a highly engaged, relevant and respected economic and financial policy advisor, making an impact on the issues that are important to New Zealand’s economic performance and State sector management.

Our roles and outcomes

The Treasury is uniquely placed to provide advice that integrates economic and financial perspectives including interests in institutions, macroeconomic performance and structural policy issues and financial advice to the Government. We bring it together in a way that helps the Government focus on what really matters to improve living standards for New Zealanders.

We need to do this in collaboration with other agencies, both those with more specific responsibilities, and with other central agencies to ensure that the public service overall is aligned with, and giving effect to, the Government’s priorities.

Over the past year, we clarified our roles. These are:

Economic role – focuses on issues with regulatory or policy implications that may have a significant and therefore pervasive impact on the performance of the economy as a whole, rather than providing second-opinion advice on all issues with economic implications.

Financial role – focuses on issues with a significant fiscal focus – expensive policies and long-term trends, and financial management and standards (including financial probity issues), rather than all issues with fiscal implications.

Central agency role – places more emphasis on helping the Government develop its overall strategy and manage significant issues that emerge.

We think about our roles in terms of the three main outcomes we are seeking:

  • Improved economic performance.
  • Improved State sector performance.
  • A more stable and sustainable macroeconomic environment.

These are all necessary to achieving higher standards of living for New Zealanders, and are mutually supporting.

Crown Company Monitoring Advisory Unit

The Crown Company Monitoring Advisory Unit (CCMAU) is a stand-alone unit within the Treasury. The Executive Director of the Unit is directly accountable to the Secretary to the Treasury for the Crown’s investment in CCMAU, and for CCMAU’s performance.

Chief Executive’s Summary

The 2006/07 year has been an important one for the Treasury.

It has been characterised by a period of significant internal change, as we first designed and then began implementation of a strategic programme aimed at improving the way we operate as an organisation.

At the same time, we have continued to concentrate on our primary role of providing high-quality economic and financial policy advice for the Government. I am pleased to report that not only has the quality of this work remained high during a period of considerable pressure for staff, but it is also evident that our new strategic focus on results and customer need is making a positive impact.

In particular, it has been encouraging to see a number of projects carried out in conjunction or close collaboration with other government agencies, demonstrating our important leadership role as a central agency.

Highlights

The Treasury’s advice and services over the past year covered our wide-ranging contribution to the Government’s longer-term economic and fiscal goals, as well as more immediate responses to topical issues as they arose.

While this contribution was of high quality overall, a number of achievements stand out.

Budget 2007 was one such achievement. The Budget - the mechanism by which the government determines its spending, and which incorporates fiscal strategy and forecasts - is always a major Treasury output involving significant resource. In 2007, however, a number of different streams of Treasury work in the savings and tax areas were also drawn into the Budget process as the Government moved to implement the Business Tax Reform and make significant enhancements to KiwiSaver. In addition, Budget 2007 was the first to be produced using New Zealand equivalents to International Financial Reporting Standards. Despite these extra demands and complexities, the end result was of an extremely high standard.

Similarly well received was the development and publication ofThe Treasury’s Position on New Zealand’s Savings Performance, which drew together the many different elements of our savings-related work. This work provided a clear articulation of the Treasury’s view on this issue of critical significance to the New Zealand economy.

Our work with other government agencies continued to grow, one notable example over 2006/07 being climate change - an issue with significant implications for the economy as well as the environment. The Treasury has a leading role, together with the Ministry for the Environment, in the Government’s Emissions Trading Group, developing policy for an economy-wide emissions trading scheme. We are also proud to be one of six government agencies leading the way in meeting public sector carbon neutrality goals.

The Treasury role as a central agency, together with the State Services Commission (SSC) and the Department of Prime Minister and Cabinet (DPMC), gathered momentum over 2006/07. This was reflected in the decision to create a distinct Central Agencies Group as part of our organisational restructuring early in the year. Much traction has been (and continues to be) gained in supporting the Government to achieve high levels of public sector performance, particularly in the areas of sustainability, youth development, housing affordability and State sector reprioritisation.

A welcome recognition of the New Zealand Debt Management Office’s (NZDMO’s) work came with the news in February that it was named Sovereign Risk Manager of the Year in Risk magazine’s 2007 Risk Awards. NZDMO is a separate unit within the Treasury responsible for managing the Government’s debt portfolio, net cash flows and certain other financial assets within an appropriate risk management framework.

Organisational developments

In September last year the Treasury launched a strategic programme, Stepping Up, designed to improve the way we worked as an organisation and to better contribute to the Government’s goals.

The main elements of the change involved clearly identifying the results we were aiming to achieve as an organisation over the short to medium term, requiring a stronger focus on the needs of Ministers and ensuring more consistent quality in our advice and operations.

That programme moved from launch to action and implementation in the second half of the year. Implementation began with a physical organisational restructuring in February followed by an intensive and ongoing internal programme around creating a stronger ‘results’ and ‘customer’ focus.

This strategic organisational work remains underway as we enter the 2007/08 year.

I have been very pleased by the positive and enthusiastic response of Treasury staff to the objectives of Stepping Up and am encouraged by the tangible progress made so far. We are now actively focused on putting effort and resources into areas where most impact can be made and to deliver the best results possible.

The year ahead

It is still our vision to be a world-class Treasury working for higher living standards for New Zealanders – and I believe we have made considerable progress towards that goal over the past year.

I’d like to thank Treasury staff for their professionalism and commitment throughout the past 12 months and I look forward to meeting the challenges of the year ahead.

John Whitehead signature.
John Whitehead
Secretary to the Treasury

 Our Outcome Performance 2006/07

In this section we report progress during 2006/07 on the priority result areas in each of the Treasury’s three outcome areas. These are Improved Overall Economic Performance,Stable and Sustainable Macroeconomic Environment and Improved State Sector Performance.

Over the past year we moved from four outcomes to three, resulting in a split of the former Efficient Management of the Crown’s Assets and Liabilities outcome. We refocused our strategic agenda on the three outcomes where we could have the most influence (with others) to achieve the Government’s goals. These outcomes reflect, and are aligned with, the Government’s broad objectives (themes) of economic transformation, families – young and old, and national identity. In deciding where we would focus our efforts in achieving each outcome, we considered how we could best contribute to achieving those Government objectives while contributing to higher living standards for all New Zealanders.

The Treasury’s main output, or service, is policy advice. This policy advice, as well as the other services we provide, is captured in our nine output classes (see pages 24-44 for more detail). These output classes contribute directly to the results we want to achieve, which reflect the areas where we can have the greatest impact. The reason we also focus on results is that our effectiveness as a Department is not based solely on delivering our outputs. Success is also about engaging effectively internally and with our key customers, providing good quality policy advice and operations, and the ability to be more flexible to respond to changes in our operating environment.

The Treasury’s outcomes
Improved overall
economic performance
Stable and sustainable     
macroeconomic environment
Improved State
sector performance
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Results focus
Through the results focus we are being more explicit about the areas we think will make the greatest contribution to achieving our outcomes, the impact we are seeking in these areas, and what we are going to do to achieve this.
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The Treasury’s output classes
  • Budget Management
  • Debt and Related Financial Asset Management
  • Economic and Fiscal Forecasting and Reporting
  • Management of Claims Against the Crown, Contractual Liabilities and Crown Properties
  • Policy Advice: Financial and Public Sector
    Management Systems
  • Policy Advice: General Economic and Fiscal Strategies
  • Policy Advice: Ownership and Performance of Crown Companies and Financial Institutions
  • Policy Advice: Regulation and Vote Purchase, Ownership and Performance Issues
  • Policy Advice: Tax

Outcome 1: Improved Overall Economic Performance

The Treasury brings an overall perspective, including interests in institutions, macroeconomics and microeconomics, to advise Ministers on what really matters for New Zealand’s economic performance - with a principal focus on sustainable growth.

Our focus is on pervasive and significant economy-wide issues – the issues that span and influence many markets and decision-makers and are more likely to have a significant impact on economic performance. Coming to a view about the best role for government in these areas needs to be based in sound comparative institutional analysis – how well we would expect different institutional arrangements (eg, rules, or markets, or government agencies) to work in practice, in terms of addressing the presenting problems, and increasing overall economic performance.

Key priorities for the 2006/07 year

The priority areas for 2006/07 were: international connections; skills/education attainment; competition/ regulatory frameworks; financial markets; firm productivity; and business tax review/international tax.

In addition to these, the areas of Auckland and Transport are also reported on. This is due to the Treasury moving significant resources into areas of additional priority for the Government.

Output delivery

The results contributing to the Improved Overall Economic Performance outcome are delivered directly through the following outputs:

  • Policy Advice: Tax
  • Policy Advice: General Economic and Fiscal Strategies
  • Management of Claims Against the Crown, Contractual Liabilities and Crown Properties
  • Ownership and Performance of Crown Companies and Financial Institutions
  • Policy Advice: Regulation and Vote Purchase, Ownership and Performance Issues.
  • Detailed information relating to individual output classes can be found on pages 24-44.

International connections

This result area has two main aims. The first is that domestic policy settings give effect to government decisions and support international connections that are important for economic growth. The second is that Ministers have advice on policy priorities and efficient practical options to deepen the international connections most important for growth.

The output class that contributes to this result area is Policy Advice: Regulation and Vote Purchase, Ownership and Performance Issues.

Key Results Wanted Over 2006/07 Key Indicators of Success for 2006/07 Achieved?

We lift our understanding of the international resource flows that affect New Zealand’s economic performance.

We identify areas for more in-depth investigation in 2007/08, with a view to prioritising the assessment of current policy settings in specific sectors, and developing options for changes to policy where our research indicates potential gains in economic performance.

 

Key sectors are identified for further research, analysis, and policy development.

Yes. We have determined three priority areas for further work, with the possibility of adding further sectors for investigation before the end of calendar 2007. These are:

“Hollowing out” – whether the relocation, and change in ownership, of economic activity presents any detrimental impacts on economic performance, and whether policy adjustments might ameliorate these impacts.

Immigrants’ labour market outcomes – whether changes to the profile of the preferred migrant could improve immigrants’ labour market outcomes.

Export of education services whether there are important connections between the export of education services, and the international transmission of knowledge and innovation to New Zealand, and whether current policy settings optimise these transfers.

 

Skills/Education attainment

The overall result we were looking to achieve in this area is that government decisions are implemented to improve outcomes from schooling.

The output class that contributes to this result area is Policy Advice: Regulation and Vote Purchase, Ownership and Performance Issues.

Key Results Wanted Over 2006/07 Key Indicators of Success for 2006/07 Achieved?
We build the Treasury’s knowledge of patterns and trends in education outcomes, and of “state of the art” in schooling improvement and school reform literature.

Outcome data (including gender, ethnicity and socioeconomic dimensions) is reviewed and analysed.

Ministers find Treasury analysis helpful and pick up on key points.

Yes. Analysis of outcomes data was undertaken and fed into policy advice.  

Treasury analysis was reflected in senior Ministers’ comments highlighting early school leaving and low 15-19 year old enrolment rates as policy priorities.

We engage with Finance and Education Ministers, and DPMC, on schooling policy priorities with a distinctive Treasury contribution. There is positive feedback from Ministers and DPMC on quality, timeliness and relevance of advice. Yes. In particular the 2006 families - young and old budget theme was developed and in ongoing work to improve education outcomes for 15-19 year olds was initiated.
We establish strong working relationships and influence with Ministry of Education leadership and key sector stakeholders.

Treasury priorities are reflected in the Ministry of Education’s policy work programme and collaborative work on priority issues is underway.

There is regular, effective engagement with key government and sector leaders.

Yes. The Treasury worked closely with the Ministry of Education on key policy issues including options to increase educational engagement for 15-19 year olds, school governance review, NCEA changes and budget strategy.

The Treasury has ongoing high-level engagement with senior education officials and is increasing links with sector leaders.

Competition/Regulatory frameworks

The overall result we are seeking to achieve is effect given to government decisions and to work with Ministers and other agencies to ensure that competition and regulatory frameworks support a vibrant and dynamic business environment.

The output class that contributes to this result area is Policy Advice: Regulation and Vote Purchase, Ownership and Performance Issues.

Key Results Wanted Over 2006/07 Key Indicators of Success for 2006/07 Achieved?

We examine the impact of the Dairy Industry Responsibility Act and identify changes that may be desirable.

We scope an in-depth analysis of Fonterra.

The Treasury’s Quality Standards for Analysis and Advice (see page 103) are met. Yes. This work was refocused towards current dairy industry issues. The Treasury, jointly with other Ministries, reported to Ministers on the issues involved. This reporting is continuing into 2007/08. 
We contribute to the Ministry of Economic Development (MED)- led Commerce Act Review to enable a stronger focus on dynamic efficiency; investment and innovations; greater regulatory certainty; and greater confidence by Ministers, the public and industry. Our advice is the result of a process which has addressed/considered the perspectives of relevant stakeholders. We have formed a clear position on issues, which we are comfortable to explain/defend to Ministers and external stakeholders.

Review is still progressing. 

We have constructively influenced the MED discussion documents, with quality submissions received to inform the policy process.

We have had significant engagement with stakeholders and have completed analysis, which has enabled an effective contribution to official processes.

 

Financial markets

The overall result we are seeking is for New Zealand to have efficient and effective regulatory settings for savings, investment and financial markets that give effect to government decisions, fit New Zealand circumstances and best support economic growth.

The output class that contributes to this result area is Policy Advice: Regulation and Vote Purchase, Ownership and Performance Issues.

Key Results Wanted Over 2006/07 Key Indicators of Success for 2006/07 Achieved?
Ministers are well informed on issues affecting the financial system and firm performance, and presented with possible policy options. Savings initiatives and Treasury conclusions on saving policy are revisited and Ministers advised accordingly. Yes. The Treasury report on “Theory and Evidence of Savings” was submitted in May and made publicly available on the Treasury website.

The Treasury and other agencies have delivered strategic discussions and jointly agreed substantive advice to Ministers.

We have engagement with commentators and media who focus on financial system issues.

This gives effect to Ministerial decisions on saving and financial system development.

 

Yes. We supported policy development and implementation of KiwiSaver enhancements to enable announcement in Budget 2007 (with Inland Revenue Department (IRD), MED and SSC) and contributed to ongoing MED-led work on review of financial products and providers.  The Treasury- led review of domestic institutional arrangements for prudential regulation was completed.
 

With partner agencies, we develop an integrated framework for approaching analysis and locating advice.

We recap empirics on financial system development and performance covering regulatory, tax and other issues.

Evidence on local vs overseas ownership, capital-raising and firm-location decisions is reviewed.

We prepare and hold strategic discussions with the Minister of Finance and Minister of Economic Development to paint the emerging picture on financial system development and gather their questions and views.

Largely. A joint Treasury/MED project has developed an agreed framework and completed preliminary analysis of financial system performance, firm-location decisions and capital-raising issues. A joint report on emerging findings was presented to Ministers in May, and initial discussion on a range of possible policy measures was held with the Ministers of Finance and Economic Development in August.
A Treasury policy perspectives paper is prepared. Partially. A paper on financial system assessment and policy questions was drafted and is now being made ready for release.
  A workshop is organised involving staff of the Treasury, MED and the Reserve Bank of New Zealand to consider financial system performance, issues and options. Deferred. An MED-led forum is planned for later this year.

Firm productivity

Our overall focus here is to develop a sound understanding of New Zealand firm productivity growth and the factors that influence firm productivity, including the role of taxation, product market regulation, firm finance and innovation.

The output class that contributes to this result area is Policy Advice: Regulation and Vote Purchase, Ownership and Performance Issues.

Key Results Wanted Over 2006/07 Key Indicators of Success for 2006/07 Achieved?

We build our understanding of the firm-level factors that influence productivity.

Research extends our understanding of the relationships between firm dynamics and growth.

 

The working paper “Toward a Model of Firm Productivity Dynamics” is published (Treasury Working Paper 06/11).

The link between exporting and firm- level productivity, entry and exit is explored.

The link between firm and worker productivity effects is explored.

Yes, although work on productivity more generally will continue over 2007/08.

 

 

Business tax review/International tax

Our high-level objectives are to provide useful input into the Business Tax and International Tax Reviews in order that our tax policy settings support individuals and firms to take decisions that will contribute to improved economic performance.

The output class that contributes to this result area is Policy Advice: Tax.

Key Results Wanted Over 2006/07 Key Indicators of Success for 2006/07 Achieved?

Well-designed tax reforms make a significant contribution to improved economic performance.

 

 

Coherent advice on the review of international tax and the business tax review is developed.

Tax policy advice is informed by sound understanding of international empirical evidence.

Yes. We received positive feedback from the Minister of Finance on the quality of our advice.

 

  Tax policy advice reflects effective consultation with stakeholders. Yes. Effective stakeholder consultation was achieved given time constraints.

Business tax reforms are well integrated with the Budget process.

 

Tax policy advice is consistent with revenue strategy and fiscal strategy.

Tax policy advice supports the government’s fiscal, macroeconomic, distributional and economic transformation objectives.

Yes. Effective coordination of tax reforms in the Budget process was achieved.

Advice tendered reflected tradeoffs across government objectives.

Advice was consistent with revenue strategy and fiscal strategy.

Auckland

The overall result we are looking to achieve is increased confidence in the quality of infrastructure investment (including social infrastructure) in Auckland, to support the ongoing growth and development of Auckland as a world-class city and to help implement Government decisions.

The output class that contributes to this result area is Policy Advice: Regulation and Vote Purchase, Ownership and Performance Issues.

Key Results Wanted Over 2006/07 Key Indicators of Success for 2006/07 Achieved?
The Government and Auckland local authorities reach a common understanding about the long-term strategy for Auckland transport. A joint report is presented to political leaders in Auckland and Wellington which recommends a common view. Yes. The “common view’” report was delivered in April 2007.
Auckland and Wellington political leaders confirm agreement to a common strategic direction for Auckland transport. Partially. Agreement is yet to be confirmed – now expected in 2007/08.
  Agreement is reached regarding the electrification of the Auckland rail network. Yes. Agreement was reached subject to resolution of operational and funding details.
Auckland local authorities agree on a joint proposal for strengthening regional governance which is endorsed by central government. A proposal is developed and presented to Auckland councils. Yes. An interim proposal was delivered in May, and the final proposal in July 2007.
Auckland councils formally support the proposal. Partially. Councils support the proposal subject to resolution of operational details.
  Central government endorses the proposal. Yes. Cabinet endorsed the proposal in July 2007.
The Government’s programme to assist Auckland’s economic transformation represents value for money and complements regional priorities. There is a commonly agreed “one plan” for Auckland’s long-term development. Partially. The “one plan” concept is agreed but yet to be implemented.
Investment proposals are prioritised and assessed against economically rational criteria. No. Proposals to date have been “one-off” – a result is expected in 2007/08.

Transport

The overall result we are looking to achieve in this area is more effective planning, financing and allocation of land transport investment. The output class that contributes to this result area is Policy Advice: Regulation and Vote Purchase, Ownership and Performance Issues.

Key Results Wanted Over 2006/07 Key Indicators of Success for 2006/07 Achieved?
Advice on planning, funding and structure of the transport sector is provided. Advice is accepted by Ministers. Yes. The Next Steps project was commissioned and completed. Recommendations were agreed by Cabinet. Implementation is underway.
We promote value for money in the sector. The Cabinet Committee on Government Expenditure and Administration (EXG) review is completed. Yes.
We advise on regional fuel tax and Auckland rail electrification. Advice and options for Ministerial decisions are provided. Yes. Decisions were taken as part of Budget 2007.

Outcome 2: Stable and Sustainable Macroeconomic Environment

The Treasury provides advice on macroeconomic conditions and fiscal policy and on the performance of monetary and financial policy. We also provide timely and accurate economic and fiscal data through economic and fiscal forecasts and reporting through the Crown accounts. A stable and sustainable macroeconomic environment contributes to higher economic growth by allowing individuals, businesses and the Government to plan more effectively for the longer term. This improves the quality and quantity of investment in physical and human capital, and helps to raise productivity.

Our focus is on the institutional frameworks that promote macro stability, and on the sound operation of fiscal policy. In particular, we are concerned to ensure that these policies perform well with the least collateral damage to the economy in terms of long-run growth.

Over the past year we moved from four outcomes to three, resulting in a split of the former Efficient Management of the Crown’s Assets and Liabilities outcome (pages 31-35 of the Statement of Intent 2006-2009). The management of Crown debt and financial assets contributes to this outcome area, with the rest now falling under Improved State Sector Performance.

Key priorities for the 2006/07 year

In order to have more impact, we identified a clear set of priority areas for action in 2006/07. These were long-term fiscal policy, tax forecasting, and fiscal reporting.

In addition, advising the Minister of Finance on macroeconomic policy frameworks became a high priority through the year.

Output delivery

The results contributing to the Stable and Sustainable Macroeconomic Environment outcome are delivered through the following outputs:

  • Policy Advice: General Economic and Fiscal Strategies
  • Budget Management
  • Debt and Related Financial Asset Management
  • Economic and Fiscal Forecasting and Reporting.
  • Detailed information relating to individual output classes can be found on pages 24-44.

Long-term fiscal policy

Long-term (LT) fiscal policy is about delivering a sound fiscal position over the long term. The overall goal of this result area is that decisions are made to help meet long-term fiscal challenges, to ensure the government’s debt position does not become unsustainable.

The output classes that contribute to this result area are Policy Advice: General Economic and Fiscal Strategies; Budget Management; and Economic and Fiscal Forecasting and Reporting.

Key Results Wanted Over 2006/07 Key Indicators of Success for 2006/07 Achieved?
Decision-makers accept that the LT fiscal position is a constraint and that policy change is necessary. Major speeches are delivered by decision-makers and key stakeholders acknowledging the importance of the LT fiscal position. Yes. Speeches have been given by the Minister and senior Treasury officials on the importance of lowering the growth rate of health spending to help meet LT fiscal challenges.
  The Fiscal Strategy Report(FSR) extends our current analysis of the fiscal position into the longer term (at least a 40-year horizon). Yes. The FSR in Budget 2007 discussed ageing and LT fiscal challenges, especially around superannuation and health.
Advice with LT implications from the Treasury and key departments acknowledges the LT fiscal outlook and the key drivers. Monthly updates from Treasury vote teams for Health, Education, Social Development and IRD indicate that some analysis of LT fiscal impacts has been included in Cabinet papers, etc. Partially. The advice from the Treasury about the need to constrain growth of the health track and increase effectiveness has been accepted by some parts of the health sector. We have yet to see this in other spending areas.
  There are requests for presentations on the LT fiscal position from key departments. Partially. We were asked to make presentations to several departments, but have yet to see much acceptance of the need for constraint in LT spending.

There is more commentary about LT fiscal issues in the general media.

 

 

Periodic reviews of published material indicate there is more commentary about LT fiscal issues. The first few months or so after release of the Long-term Fiscal Statement produced a flurry of articles and commentary, but fewer since then. Some articles have more recently appeared in specialised journals.
Key target audiences have an understanding of the LT fiscal position and its drivers. There are requests from interest groups for presentations on LT fiscal position in key areas. Some success. A few presentations have been made to special interest groups.

Tax forecasting

Treasury has under-forecast tax revenues in recent years. More accurate, well-explained forecasts, recognised as credible by Ministerial and other stakeholders are wanted as a better basis for making fiscal decisions.

The output class that contributes to this result area is Economic and Fiscal Forecasting and Reporting.

Key Results Wanted Over 2006/07 Key Indicators of Success for 2006/07 Achieved?
The Minister and other key stakeholders accept Treasury forecasts as being the best possible for the decisions they need to make. Ministerial and Ministerial advisor comment indicates acceptance of Treasury forecasts. Yes – in part. Forecasts were presented and explained as part of the Budget process to Finance Ministers and advisors and were used as the basis for the 2007/08 Budget.
Forecasts are accurate and well explained. Internal Treasury quality assurance groups agree there is a coherent, integrated explanation of tax and macroeconomic trends.

Yes. Internal Treasury quality assurance groups agreed that an integrated, coherent explanation was provided of underlying macroeconomic and tax trends.

Base analysis of forecast accuracy was completed as a basis for future comparisons and published in a working paper.

Stakeholders understand tax forecast performance, its limitations and context. Ministers and Ministerial advisors understand the reasons for past errors and accept measures have been put in place to correct them. Partially achieved. Ministers and stakeholders have been advised of risks and uncertainties underlying forecasts within the Budget process. Fuller explanation will be provided in 2007/08.

Fiscal reporting

The Treasury’s goal for fiscal reporting over the next three to five years is for key stakeholders to consider that the reporting fully illuminates fiscal performance and impacts of the government finances on the economy. Our primary focus for 2006/07 was to prepare for the transition to the new NZ IFRS accounting standards, including the preparation of Budget 2007 in compliance with these standards.

The output class that contributes to this result area is Economic and Fiscal Forecasting and Reporting.

Key Results Wanted Over 2006/07 Key Indicators of Success for 2006/07 Achieved?
Accounts and forecasts meet appropriate standards and specifications over the transition period to NZ IFRS. Unqualified audit opinion is obtained on the 2005/06 financial statements of the Government.

Yes.

 

  Audit assurance is obtained on NZ IFRS opening balance sheet. Partial. Verbal assurance was provided prior to the Budget. A formal opinion will be sought in 2007/08.
  Technical requirements of the transition to NZ IFRS do not overshadow or confuse the fiscal decisions made in Budget 2007. Yes.
Fiscal information is presented in a way that aids decision-making and monitoring against the fiscal strategy. Major reporting products explicitly link the fiscal strategy and financial results and forecasts.

Yes.

 

  Choices in implementing IFRS are made in light of the aggregates required to assess fiscal policy. Yes. Revised fiscal indicators were provided as part of Budget 2007.
There is improved media understanding of the fiscal strategy. There is more accurate reporting of the actual and forecast fiscal position. Yes.

Outcome 3: Improved State Sector Performance

The Treasury provides advice to ensure the work of the State sector represents value for money in achieving the Government’s aims and objectives. This includes advice on policy and regulatory settings, the public management system, and the management of, and return on, the Crown’s assets and liabilities.

Our focus over the longer term is on ensuring we have a sustainable public sector that represents value for money in responding to the challenges set out in the Government’s themes.

We have chosen to focus initially on performance in the fiscally significant areas – health, education, justice, and welfare - as a matter of priority. In these areas we are developing measures of performance, and options to improve performance and manage longer-run fiscal pressures over time.

As stated in the previous outcome area, our move from four outcomes to three has resulted in a splitting of the former Efficient Management of the Crown’s Assets and Liabilities outcome (pages 31-35 of the Statement of Intent 2006-2009). The management of the Crown’s physical assets, ensuring that material risks and liabilities are managed, and ensuring that the government is getting an optimal return on investment held by SOEs, Crown research institutes, Crown companies and Crown financial institutions now contribute to this outcome area. The macroeconomic focus on managing the Crown’s balance sheet to maximise returns and minimise risk on financial assets and liabilities falls under the Stable and Sustainable Macroeconomic Environment outcome.

Key priorities for the 2006/07 year

In order to have more impact, we identified a clear set of priority areas for action for 2006/07. These were: in-depth performance analysis- health; EXG reviews; review of accountability documents; Crown entities; improving systems and processes; Budget design; and review of the public sector management model. In addition, we discuss the central agency outcome.

Output delivery

The results contributing to the Improved State Sector Performance outcome are delivered through the following outputs:

  • Policy Advice: Financial and Public Sector Management Systems
  • Policy Advice: Regulation and Vote Purchase, Ownership and Performance Issues.

And the results are partially delivered through:

  • Management of Claims Against the Crown, Contractual Liabilities and Crown Properties
  • Ownership and Performance of Crown Companies and Financial Institutions.

Detailed information relating to individual output classes can be found on pages 24-44.

Priority sectoral in-depth analysis of performance and value for money – health

Our overall focus in health is to help support decisions that take into account the long-term impact on the sector (in terms of policy and fiscal outcomes) and are informed by robust cost-effectiveness analysis. As such, we are seek to support the management of long-term health expenditure, whilst also focusing on improving the efficiency and effectiveness of the health sector as a way of ensuring value for money.

The output class that contributes to this result area is Policy Advice: Regulation and Vote Purchase, Ownership and Performance Issues.

Key Results Wanted Over 2006/07 Key Indicators of Success for 2006/07 Achieved?
Decision-makers on health take actions that reflect the future impact (in terms of policy and fiscal outcomes), informed by robust cost-effectiveness analysis.

The 2007 health budget is delivered within agreed parameters.

Budget documents note challenges in managing health expenditure growth.

Yes. Budget decisions reflect concern for long-term fiscal outlook.

The Budget Policy Statement noted challenges in managing the non-demographic drivers of health expenditure.

The Fiscal Strategy Report focused on challenges in managing health expenditure growth, and the need to get the most from existing spending.

We raise public and health sector awareness of the long-term challenges in managing health expenditure growth. The Treasury is invited to present at health sector conferences. Yes. Officials participated in a number of speaking engagements in the health sector, including the Health Leaders’ Conference and Paying for Tomorrow’s Health.
  Ministers acknowledge and promote debate on the challenges in managing health expenditure growth. Ministers noted long-term fiscal challenges in health in speeches to sector conferences, and to wider audiences.
Ministers are confident of returns on health investments and of improving health sector performance. The Treasury is invited to bring long-term fiscal and value-for-money perspectives to Ministry of Health advice. Yes. The Ministry of Health invited Treasury perspectives on future work to progress the Primary Health Care Strategy.
  The Cabinet Committee on Government Expenditure and Administration (EXG) is supported in its expenditure review of the health sector. There was support for the EXG health review, including advice on health service reviews, establishment of health targets, and productivity.

EXG reviews – implementation of capital expenditure and central agency reviews, new reviews on SOI process

The result we were looking to achieve in this area is improvement in State sector performance through greater central agency leadership and activity, individually and severally, on key government priorities and ownership issues.

The output class that contributes to this result area is Policy Advice: Regulation and Vote Purchase, Ownership and Performance Issues.

Key Results Wanted Over 2006/07 Key Indicators of Success for 2006/07 Achieved?
Departmental Statements of Intent (SOIs) are reviewed.

The EXG report is completed with specific recommendations to improve the engagement between Ministers and departments.

Updated guidance is issued and workshops with departments are conducted.

Yes.

 

 

 

There is a central agency review of performance. There is an agreed central agency definition of performance and focus on areas where central agencies can make the biggest impact on and contribution to the achievement of government priorities by working together differently.

Yes. The report has been completed.

Processes have been established to implement key findings.

New processes are now in operation.

There is a review of capital asset management. An EXG report is completed on the review of capital asset management in the State sector with specific recommendations for the development of the capital asset management regime. Yes.

Review of accountability documents

The result we are looking to achieve in this area is to reduce duplication and sharpen the focus of performance information in the current suite of accountability documents. The aim is to make these more relevant and accessible to Ministers and Members of Parliament and to drive improvements in performance in the State sector.

The output class that contributes to this result area is Policy Advice: Financial and Public Sector Management Systems.

Key Results Wanted Over 2006/07 Key Indicators of Success for 2006/07 Achieved?
We report to EXG by 30 June identifying options for making the accountability documents more useful to Ministers and Members of Parliament. Options are identified and canvassed with the Minister of Finance and initial consultations held with the Finance and Expenditure Committee prior to developing a report for consideration by Cabinet.

Yes. In July, the report was completed identifying a preferred option.

There has been a Cabinet Business Committee (CBC) agreement- in- principle to an option for change, subject to formal parliamentary consultation. 

Once the option is confirmed, it will be implemented for Budget 2008 (from 2008/09).

Crown entities

The result we are looking to achieve in this area is a well-performing Crown entity sector, reflected in measurable improvements. These include: effective Ministerial engagement with Crown entities; responsive boards giving effect to and reflecting government policy; monitoring departments providing timely and effective advice to responsible Ministers on Crown entity performance; and central agencies supporting Ministers, monitoring departments and boards of Crown entities to attain higher levels of performance.

The output class that contributes to this result area is Policy Advice: Financial and Public Sector Management Systems.

Key Results Wanted Over 2006/07 Key Indicators of Success for 2006/07 Achieved?
There is an integrated central agency approach to improving Crown entity performance. A joint Crown entity work programme for central agencies is developed. A joint work programme was presented to Ministers in December and is being actively implemented.
There is better support for Ministerial engagement with Crown entities.

Guidance is provided to Ministers.

A template letter of expectations is provided to responsible Ministers.

Yes, as part of ongoing activity.
There is enhanced monitoring of Crown entities.

An independent review of Crown entity monitoring practices is completed.

Action plans are produced to increase the capability and focus of monitoring departments.

The review has been completed and action plans agreed for departments to improve their monitoring practices.
  Regular reporting on Crown entity performance is established. There was an EXG agreement to a six-monthly performance report on selected Crown entities from September 2007.
We scan opportunities to review operations of Crown entities to improve responsiveness and performance. We produce a comprehensive report on key issues with Crown agents, autonomous Crown entities and independent Crown entities. The report was completed in September, identifying key issues and risks, and the preferred approach.

Improving systems and processes

The result we are looking to achieve in this area is a widening of the focus of Treasury performance analysis to cover all aspects of the performance cycle, including baseline as well as incremental spending.

The output class that contributes to this result area is Policy Advice: Financial and Public Sector Management Systems.

Key Results Wanted Over 2006/07 Key Indicators of Success for 2006/07 Achieved?
To build an infrastructure of support to assist a new approach to performance analysis by Treasury analysts based on a performance cycle.

A performance cycle is established.

We focus on a small number of priority areas.

Yes.

The performance cycle is now in use.

Budget design - implementation of a new Budget process

The overall result we are looking to achieve in this area is that Budget decisions deliver better State sector performance, are consistent with meeting the Government’s fiscal strategy and take account of short-term macroeconomic stability.

The output class that contributes to this result area is Budget Management.

Key Results Wanted Over 2006/07 Key Indicators of Success for 2006/07 Achieved?
We implement the theme objectives and baseline analysis process to feed into Budget 2007.

There is a successful running of process in accordance with Budget strategy timelines.

The theme objectives are agreed for Budget 2007 and beyond.

Our baseline analysis reveals opportunities for further work to identify reprioritisation opportunities.

Yes. The next stage is to do more detailed and focused work on the areas of possible reprioritisation or performance improvement identified in the baseline analysis, to feed into Budget 2008.
We develop a new mechanism that enhances the focus on performance for proposed new initiatives.

The mechanism is successfully rolled out by December 2007.

There is a demonstrable improvement in the level of performance information available to help Ministers make budget decisions.

Yes. Reviews are commissioned for possible further improvements in this process and, in particular, identifying what further improvements in performance information are possible.
We implement further automation of the financial recommendations process. The new process is successfully implemented in time for the Cabinet deadline for the Budget Cabinet Paper. Yes. A review was commissioned of further improvements that are possible in this process.

Review of the public sector management model

The result we are looking to achieve in this area is improvement in the design and operation of the public sector management model in order to generate improvements in performance in the State sector.

Key Results Wanted Over 2006/07 Key Indicators of Success for 2006/07 Achieved?
A report to the Minister of Finance will be completed by 30 June identifying options for further analysis to enhance the design and operation of the public sector management model. Options are identified for improving the performance of the model. Yes. The report is completed and follow on work will be confirmed as part of a wider programme to improve the performance of the model.

Central agency outcome

In responding to the recommendations of the Central Agency Review, and the need for government to have confidence in the quality of policy advice and co-ordination across the State sector, the Treasury, the Department of Prime Minister and Cabinet, and the State Services Commission have established co-ordination mechanisms to drive performance in this area. The work is being led from within the State Services Commission, and the Treasury has established a small team to support this work.

The outcome sought is to ensure that the State sector manages resources better, responds more promptly and efficiently to government priorities, and delivers services to New Zealanders that meet and exceed their expectations.

Organisational development and Capability

The Treasury has a continuous focus on maintaining and developing capability, ensuring we deliver optimal performance and can respond to both present and future challenges.

Through the Stepping Up change programme, work was undertaken over the period to ensure that our capability delivered maximum impact in the areas where we could add the most value. A key part of that was establishing the Organisational Performance Group (OPG) to support the Chief Executive, the Strategic Leadership team and the three policy groups to achieve their three-to five-year direction and associated results.

In our Statement of Intent 2006-2009 we grouped our capabilities around the “TIME management objectives” (see below). The framework we now base our capabilities on has changed and the elements are more detailed. The table below demonstrates the shift from TIME objectives to the current results focus. For more detailed information on these results-focused capabilities, please refer to our Statement of Intent 2007-2010, available on our website at [www.treasury.govt.nz/publications/abouttreasury/soi/2007-10/02.htm]

TIME Objective (SOI 2006-2009)   Results Focus (As of February 2007)
Take the lead Arrow right.

-     Maximising our impact – focusing on results

-     Developing leadership and management

Invest in our organisation and its people
Arrow right.

-     Changing the way we operate – our behaviours

-     Improving the way we organise ourselves – our structure

Manage for outcomes Arrow right.

-     Improving our organisational performance in planning, prioritisation, capability and resourcing

-     Improving our cross-Treasury decision-making

-     Focusing on quality

Engage effectively
Arrow right.

-     Focusing on customer need

-     Developing effective external engagement

Capability to deliver on our results

The Treasury’s human resource policies, organisational arrangements and staff development initiatives are designed to help us recruit and retain the best staff possible and to ensure we can deliver on our current and future results. Over the 2006/07 period, an Organisational Development and Capability team (formerly Human Resources) was established to help achieve this.

Our people

Overall staff numbers at the Treasury remain stable. The Treasury employed 308 staff as at the end of June 2007 with a further 13 staff on secondment to various agencies and Ministers’ offices and four seconded to international institutions.

Figure 1 - Numbers and Distribution of Staff
As at 30 June 2007 2006 2005
  Staff Numbers
Full-time staff 262 253  275
Part-time staff 46 50   45
Total staff 308 303  320
Gender distribution All Staff
Women 50% 47% 48%
Men 50% 53% 52%
Ethnicity distribution      
NZ European 71.8% 72% 70%
NZ Māori 4.6% 5.3% 6.2%
Pacific Islander 2% 1.6% 2.2%
Asian 4.6% 3.6% 3.5%
Other European 13% 13.5% 15%
Other ethnic groups 1% 1% 0.6%
Undeclared 3% 3% 2.5%
Management staff  (male/female) M F M F M F
Tier 1 1 - 1 - 1 -
Tier 2 4 1 4 1 4 1
Tier 3 [*] 8 4 20 10 20 11
  • [*] Tier 3 is defined s reporting to the Deputy Secretaries. The figures for 2006/07 show the shift resulting from our Stepping Up change in management structure.

Staff training and experience

As a knowledge-based organisation, our success in contributing to our outcomes depends on maintaining and developing a talented workforce and making full use of its experience and expertise.

 

Figure 2 - Staff Experience
As at 30 June 2007 2006 2005
Average length of service (years) 6.17 6.6 6.2
Proportion of staff staying more than 1 year 81.5% 86% 84%

Organisational health

Overall the Treasury’s organisational health is at an acceptable level. Staff turnover was 18.9%, compared with 15.4% last year and 13.2% the year before. This increase of 3.5% on last year is reflective of the current tight labour market.

In 2006 we commissioned our biennial staff climate survey for the fourth time. The Treasury’s overall score was 63% positive, which was the same as the overall score in 2004 (63%) and compares with 61% in 2002 and 59% in 2001. Compared with the New Zealand benchmark score of 53%, Treasury staff are significantly more positive than their peers in other New Zealand organisations.

The table below shows various indicators of our organisational health, as measured by our biennial climate survey, compared with our rankings in 2004. The areas that have shown a decline are being addressed through Stepping Up initiatives.

Figure 3 - Organisational Health and Staff Satisfaction
Figure 3 - Organisational Health and Staff Satisfaction.

Management and leadership

A clear Stepping Up priority is the need for a more consistent and focused approach to leadership and management, including the development of future Treasury leaders. As a central agency, we also want to actively shape the agenda and provide more leadership across the wider public sector.

Over the 2006/07 year we:

  • created a new position of Deputy Secretary Central Agencies to provide extra focus on working across the three central agencies (State Services Commission, Department of Prime Minister and Cabinet, and the Treasury) and on implementing the outcomes of the central agencies review
  • created new Assistant Secretary (AS) positions to work with the Deputy Secretaries in providing internal leadership and management within the Treasury groups and in engaging with external stakeholders.

Relationships

A critical part of our results specification process was making sure we understood the needs of our customers. In particular, this relates to the Minister of Finance, but also includes key stakeholders and influencers in media and business audiences, as well as colleagues in key government departments and agencies.

Over the 2006/07 year we:

  • established an Office of the Chief Executive to undertake specific work around identifying and meeting customer need
  • identified potential issues of interest to governments in the future and began to position ourselves to be able to respond to these issues if the need arose
  • actively identified and promoted opportunities for external engagement by senior management with key stakeholder audiences, both formal and informal, centred around the Treasury’s work priorities
  • proactively and regularly communicated with key media, particularly those with an interest in the economy and in the Treasury’s work, and monitored the organisation’s media coverage and profile
  • used the Treasury’s website/s to more effectively meet the needs of all key external audiences and customers, by creating more accessible navigation systems and content.

Being an environmentally sustainable Treasury

The Treasury is one of six public service agencies pioneering the Government’s goal of a carbon neutral public service.
We are required to produce an audited carbon emissions inventory annually from 2006/07, and to have an emissions reduction plan in place by February 2008. Carbon emissions arise from our energy use, business travel and the waste we send to landfill. Our emissions reduction plan will outline the actions we are taking to reduce emissions. These are to be reasonable and cost effective and must not result in reduced departmental performance. The inventory lets us measure our emissions over time, and will track the effect of our reduction efforts. Emissions that can’t be avoided will be offset using New Zealand forestry projects, so that we become carbon neutral by 2012.
As well as becoming carbon neutral, the Treasury has maintained its commitment to the ongoing Govt3 sustainability programme. We implemented an organisation-wide recycling scheme in 2005. Prior to this, our landfill waste “footprint” was around 90 kg per staff member over the whole year. In 2006/07 this has been reduced to 18 kg per staff member. This significant reduction was recognised in October 2006 when the Minister for the Environment presented the Treasury with a Govt3 award for minimising the waste it sends to landfill.
Other steps we’ve taken towards environmental sustainability over the past year include:

  • using office paper that has a 50% recycled content
  • printing on both sides of each page to reduce the amount of paper used
  • setting computer screens to power saver mode after 10 minutes of inactivity, and automatically reminding staff to turn their computers off each night if they forget to
  • putting sustainability clauses in supplier contracts as they come up for renewal
  • including environmental impact statements in new business proposals, to ensure decision-makers are aware of the consequences of new initiatives, and to identify the likely impact on the Treasury’s carbon emissions inventory
  • using an energy-efficient office lighting system.

We have a number of other initiatives underway to further reduce our carbon emissions, and we expect some of these will also create operational efficiencies.

 

Vote Finance Output Class performance

Statement of Objectives and Service Performance Section 45A of the Public Finance Act 1989

Budget management

This class of outputs covers the development of Budget strategy, and the management and delivery of the Budget process. These outputs contribute to an efficient, effective and innovative State sector by providing credible public sector management and decision-making systems that encourage value for money.

In addition to managing the annual Budget, outputs include the provision of advice to identify and implement further improvements in the design of the Budget process. The focus is on improving linkages between the allocation of resources and achieving desired results.

Significant work completed during the year

  • Designed, communicated and implemented a new Budget process for Budget 2007, including a new Theme Objectives and Baseline Analysis (TOBA) phase.
  • Prepared the Budget Policy Statement.
  • Prepared Budget-related legislation including the Appropriations Bills, Imprest Supply Bills and Financial Review Bill. Provided advice on the strategy for managing Budget 2007, including spending allocations and other ways to manage pressures.
  • Provided detailed advice on managing individual initiatives as part of Budget 2007.
  • Prepared the Budget Executive Summary and Estimates (Supplementary and Mains) documentation.
  • Began developing processes for Budget 2008 with other central agencies.
Service Performance
Measure Achieved?

Quality

 

All reports will comply with the Quality Standards for Analysis and Advice.

The Minister will be requested to indicate his level of satisfaction with the overall quality of outputs at the end of each trimester.

Yes

Outputs produced under this output expense will:

  • meet the agreed standard for publication of parliamentary papers
Yes
  • be prepared within the Budget timetable set by the Government and the statutory time limits of the Public Finance Act 1989.
Yes

Quantity

 

The quantity and nature of advice and operational services will be supplied on the basis agreed between the Minister of Finance and the Secretary to the Treasury (as amended from time to time) for 2006/07. Yes

Timeliness

 
All outputs will be delivered to timeframes as agreed between the Minister and the Secretary to the Treasury for 2006/07.

Yes

Cost
  2006/07
Actual
$000
Supp. Estimates
- Voted
$000
Main Estimates
$000
2005/06
Actual
$000
Expenses 2,189 2,202 2,106 2,225
Funded by:        
Revenue Crown 2,141 2,153 2,058 2,174
Other Revenue 48 49 48 51

Actual 2006/07 output class expenditure was $13,000 or 1% under Supplementary Estimates budgets.

The appropriation for this output class was increased by $96,000 in the Supplementary Estimates.

Debt and related financial asset management

This class of outputs contributes to achieving an optimal Crown balance sheet and concerns the operational management of the Crown’s portfolio of sovereign-issued debt and associated financial assets.

Specific activities include:

  • developing and maintaining an appropriate framework for efficiently managing the portfolio and the risks associated with it
  • issuing domestic-currency debt to meet the Government’s funding requirements
  • disbursing cash to departments and facilitating departmental cash management
  • advancing funds to government entities in accordance with Government policy
  • providing capital market services and derivative transactions for departments and government entities
  • funding the Reserve Bank’s foreign-exchange reserves
  • managing foreign-currency assets required to meet net foreign-currency interest and principal payments
  • maintaining hedges of foreign-currency debt that cannot be bought back from investors.

Significant work completed during the year

  • Achieved a record value-added result of $54.3 million from tactical portfolio management.
  • Launched the first issue ($50 million) of infrastructure bonds in February 2007.
  • Hedged the foreign-currency exposure associated with the purchase of NH-90 helicopters by the Ministry of Defence.
  • Received international recognition as Sovereign Risk Manager of the year in Risk magazine’s 2007 awards.
  • Contributed significantly to a favourable performance audit report on the “Effectiveness of the New Zealand Debt Management Office” by the Controller and Auditor-General.
Service Performance
Measure Achieved?

Quality



All reports will comply with the Quality Standards for Analysis and Advice.

The Minister will be requested to indicate his level of satisfaction with the overall quality of outputs at the end of each trimester.

Yes
The Secretary to the Treasury will monitor the operation of NZDMO with the assistance of an Advisory Board. Performance in portfolio management, debt issuance, capital market transactions and advice, transactional processing, and compliance with risk management policies will be reported regularly to the Secretary to the Treasury and the Advisory Board, and in the context of the Treasury’s three times a year reporting to the Minister. Yes
Policies regarding the strategic objectives for domestic- and foreign-currency debt, instruments and currencies for transactions, limits in respect of market and credit risk utilisation, composition requirements for the liquidity asset portfolio, and maturity profile requirements will be adhered to. Yes
Policies, delegations, limits, reporting and performance management requirements, procedural manuals, and established processes, and other controls for managing internal operations will be adhered to. Yes
Issuance of domestic-currency debt will be transparent and predictable. Yes

Quantity

 

The quantity and nature of advice and operational services will be supplied on the basis agreed between the Minister of Finance and the Secretary to the Treasury (as amended from time to time) for 2006/07. Yes

Timeliness

 

All outputs will be delivered to timeframes as agreed between the Minister and the Secretary to the Treasury for 2006/07. Yes
Cost
  2006/07
Actual
$000
Supp. Estimates
- Voted
$000
Main Estimates
$000
2005/06
Actual
$000
Expenses 6,966 7,290 4,255 3,721
Funded by:        
Revenue Crown 6,817 7,139 4,146 3,624
Other Revenue 149 151 109 97

Actual 2006/07 output class expenditure was $324,000 or 4% under Supplementary Estimates budgets. 

The appropriation for this output class was increased by $3,035,000 in the Supplementary Estimates due to a technical change of recording all debt and related financial management costs within the departmental output expense rather than a non-departmental appropriation. 

Economic and fiscal forecasting and reporting

This class of outputs involves the preparation of macroeconomic and fiscal forecasts, and the monitoring of economic and fiscal conditions.

Economic and fiscal updates are published in the middle of the financial year (typically in December) and at the time of the Budget (typically in May). Monitoring outputs include reports on major economic data releases and preparation of the annual and monthly financial statements of the Crown. In addition, the Minister is provided with regular assessments of how current events are affecting the economic and fiscal outlooks since the last update as an aid to Budget decision-making.

The outputs also include advice on the application and development of generally accepted accounting practice (GAAP) as it applies to the Crown. It also includes assessments of the adequacy of departmental management controls to detect or prevent errors in the financial information submitted to the Treasury.

These outputs contribute to the understanding by Ministers, Parliament and the public of the expected and actual fiscal consequences of government decisions, by entity and in the aggregate.

Significant work completed during the year

  • Regularly reported on domestic and international economic developments through Monthly Economic Indicators and Weekly Economic Update briefs.
  • Completed briefings on major new data such as GDP, the balance of payments, labour markets and the consumer price index.
  • Prepared the 2006 Half-Year Economic and Fiscal Update and 2007 Budget Economic and Fiscal Update, including economic, tax and expenditure forecasts and risk assessments, and reported on discussions with businesses and tax practitioners undertaken in conjunction with the Updates.
  • Prepared the 2007 Budget Economic and Fiscal Update in compliance with the new NZ IFRS accounting standards, including the development of revised fiscal indicators and communication of changes in reporting to media, analysts, and rating agencies.
  • Prepared the Annual Financial Statements of Government for the 12 months ended 30 June 2006 and monthly financial statements and cash outturns during the year.
  • Provided submissions to, and/or representation on, the Financial Reporting Standards Board, Accounting Standards Review Board, and International Accounting Standards Board on financial reporting standards and their applicability to public benefit entities.
  • Project managed 2006/07 departmental internal control evaluations.
  • Prepared and monitored imprest supply requirements and maintained the requirements of the controller function.
  • Maintained daily operational activity for bank and trust account delegations and for cash payment schedules.
  • Provided budgetary advice to NZ Aid for the Government of Niue.
Service Performance
Measure Achieved?

Quality

 

All reports will comply with the Quality Standards for Analysis and Advice.

The Minister will be requested to indicate his level of satisfaction with the overall quality of outputs at the end of each trimester.

Yes
Forecasting publications produced under this output expense will meet the requirements of the Public Finance Act 1989. Yes
The Crown financial statements will conform with GAAP and fairly reflect the operations, cash flows and financial position of the Crown for the year ending 30 June 2006, the quarter ending 30 September 2006, and at monthly intervals after that until the end of the financial year. Yes
The monitoring report on appropriations for the Auditor-General (the Controller function report) will be prepared and forwarded to the Auditor-General on a monthly basis as required by the Public Finance Act 1989. Yes
Delegations for the management of foreign-exchange risks, Crown bank accounts and trust money will be managed to ensure that the conditions of the delegations are not breached and that they permit financial activity to be authorised at an appropriate level. Yes
Management statements required under section 29 of the Public Finance Act 1989 will be signed within the time limits set out in that Act and will be supported by analysis and reviews of departmental financial management. Yes

Quantity

 
The quantity and nature of advice and operational services will be supplied on the basis agreed between the Minister of Finance and the Secretary to the Treasury (as amended from time to time) for 2006/07.

Yes

Timeliness

 
All outputs will be delivered to timeframes as agreed between the Minister and the Secretary to the Treasury for 2006/07.

Yes

 

Cost
  2006/07
Actual
$000
Supp. Estimates
- Voted
$000
Main Estimates
$000
2005/06
Actual
$000
Expenses 5,979 6,181 6,170 5,939
Funded by:        
Revenue Crown 5,861 6,055 6,054 5,820
Other Revenue 118 126 116 119

Actual 2006/07 output class expenditure was $202,000 or 3% under Supplementary Estimates budgets.

The appropriation for this output class was increased by $11,000 in the Supplementary Estimates.

Management of claims against the Crown, contractual liabilities and Crown properties

This class of outputs involves managing a range of commercial, contractual, legal and Treaty of Waitangi-related claims against the Crown. Outputs contribute to minimising Crown financial risk within the bounds of Government objectives. Specific outputs include:

  • management of commercial and contractual risks associated with the 1973 Maui Gas Contract, including the operation of the gas notification system with downstream gas users
  • management of contractual and commercial issues arising from completed asset sales and wind-up of the Crown’s previous ownership interests in SOEs, Crown companies and other entities
  • advice on the management of historical claims under the Treaty of Waitangi and assistance with the Crown’s negotiation of specific settlements
  • provision of legal title to land sold to SOEs and other Crown companies as part of their sale and purchase agreements with the Crown
  • management of litigation against the former Building Industry Authority relating to weather-tight homes
  • management of New Zealand House, London
  • management of the export credit guarantee policy and scheme.

Specific outputs often depend on the actions of third parties.

Significant work completed during the year

  • Continued to manage the Crown’s contractual obligations under the Maui Gas Contract.
  • Concluded the settlement of the Ralph Estate claim against the Crown in respect of coal royalties.
  • Provided advice on various aspects of the Government’s involvement in the Rugby World Cup, including on Eden Park and other stadium issues.
  • Provided advice on the possible lease or sale of various geothermal wells.
  • Continued the programme of identifying and transferring legal land title to various SOEs and other companies.
  • Progressed settlement of various claims against the Crown and one regarding Solid Energy.
  • Advised on issues related to litigation against the former Building Industry Authority.
  • Provided advice on various Treaty of Waitangi negotiation and settlement proposals.
Service Performance
Measure Achieved?

Quality

 

All reports will comply with the Quality Standards for Analysis and Advice.

The Minister will be requested to indicate his level of satisfaction with the overall quality of outputs at the end of each trimester.

Yes

Outputs produced under this output expense will:

  • explore all opportunities to reach a satisfactory settlement of liabilities within parameters set by Ministers
Yes
  • meet the Treasury’s policies and procedures for the employment of advisors and consultants
Yes
  • meet the Crown’s contractual responsibilities and enforce the Crown’s contractual rights.
Yes
The Secretary to the Treasury will monitor the operation of the Export Credit Office with the assistance of an Advisory Board. It is expected that performance will conform to international best practices for the provision of export credit insurance. Yes

Quantity

 

The quantity and nature of advice and operational services will be supplied on the basis agreed between the Minister of Finance and the Secretary to the Treasury (as amended from time to time) for 2006/07.

Yes

Timeliness

 

All outputs will be delivered to timeframes as agreed between the Minister and the Secretary to the Treasury for 2006/07.

Yes

Cost
  2006/07
Actual
$000
Supp. Estimates
- Voted
$000
Main Estimates
$000
2005/06
Actual
$000
Expenses 2,433 3,013 6,300 2,381
Funded by:        
Revenue Crown 2,385 2,951 6,183 2,333
Other Revenue 48 62 117 48

Actual 2006/07 output class expenditure was $580,000 or 19% under Supplementary Estimates budgets due to reduced consultancy costs in relation to the Building Industry Authority. 

The appropriation for this output class was reduced by $3,287,000 in the Supplementary Estimates as funding for the management
of potential claims against the former Building Industry Authority was not required and has been transferred to 2007/08.

 Policy advice: financial and public sector management systems

This class of outputs involves policy advice on financial and public sector management systems in use across the Crown and contributes to:

  • improved decision-making and performance management systems that facilitate the effective and efficient use of State resources and regulatory powers
  • efficient management of the Crown’s assets and liabilities.

It covers the development and design of specific public sector management regimes applicable to departments and Crown entities. It also includes the development of financial policy that takes into account the Crown’s overall pattern of expenditure, revenue, assets, liabilities and risks, in order to minimise the economic costs through time arising from financing a given profile of government expenditure.

Outputs will specifically include advice on:

  • the governance, incentives, operating framework and reporting systems for departments and Crown entities to ensure effective performance and accountability relationships between entities and their stakeholders
  • the range and nature of financial risks to which the Crown is exposed and the degree to which these can be managed more efficiently when considered as part of an integrated set of risks, assets and liabilities across the Crown.

Significant work completed during the year

  • Undertook negotiations with Australia on the reporting and governance arrangements for a joint therapeutics authority.
  • Undertook a review of accountability documents with a report to Cabinet.
  • Undertook a scoping review of the public sector management model with a report to the Minister of Finance.
  • Undertook a review of departmental monitoring of Crown entities.
  • Developed a six-monthly report to EXG on the performance of a selection of Crown entities.
  • Undertook a review of the engagement process for developing and the quality of statements of intent.
  • Contributed to the EXG expenditure review process – in particular the five central agency reviews and the review of capital asset management.
  • Undertook a review of the efficiency and effectiveness of the management of Crown receivables.
  • Began developing processes for Budget 2008 with other central agencies.
  • Commenced work on a performance cycle to enable improved reporting to Ministers.
  • Produced guidance on annual reports for Crown entities.
  • Produced guidance on statements of intent for departments and Crown entities.
  • Produced guidance on multi-year appropriations, multi-class output appropriations, revenue-dependent appropriations, and department-to-department appropriations.
  • Produced draft Cabinet Circular on the financial veto.
  • Developed a communications strategy, an organisational development strategy and an evaluation strategy to inform, support and embed Treasury’s central agency role.
  • Designed and implemented processes to support better central agency Chief Executive collaboration on public management system design, performance and capability issues.
Service Performance
Measure Achieved?

Quality

 

All reports will comply with the Quality Standards for Analysis and Advice.

The Minister will be requested to indicate his level of satisfaction with the overall quality of outputs at the end of each trimester.

 

 

Yes

Quantity

 

The quantity and nature of advice and operational services will be supplied on the basis agreed between the Minister of Finance and the Secretary to the Treasury (as amended from time to time) for 2006/07.

 

Yes

Timeliness

 

All outputs will be delivered to timeframes as agreed between the Minister and the Secretary to the Treasury for 2006/07.

 

Yes

Cost
  2006/07
Actual
$000
Supp. Estimates
- Voted
$000
Main Estimates
$000
2005/06
Actual
$000
Expenses 2,195 2,201 3,031 2,328
Funded by:        
Revenue Crown 2,152 2,151 2,954 2,281
Other Revenue 43 51 77 47

Actual 2006/07 output class expenditure was $6,000 under Supplementary Estimates budgets. 

The appropriation for this output class was reduced by $830,000 in the Supplementary Estimates mainly due to staff vacancies and shifts in resources to output priorities in other output classes.

Policy advice: general economic and fiscal strategies

This class of outputs involves policy advice on the Government­’s broad economic strategy and macroeconomic policy settings, and their effect on living standards for New Zealanders.

This includes advice for the Government on the macroeconomic policy framework and its operation, with particular emphasis on the fiscal policy framework.

General economic and fiscal strategy requires empirical and analytical research to support and inform policy advice. Outputs include research and policy advice with a medium-term perspective, taking account of the characteristics of the New Zealand economy and developments in global capital and product markets. This research and policy advice will focus on how to improve New Zealand’s economic performance, looking at growth, productivity and macro stability issues.

Significant work completed during the year

  • Provided economic and fiscal policy advice related to the 2007 Budget.
  • Published the 2007 Fiscal Strategy Report.
  • Undertook further work on communicating the key messages contained in the 2006 Statement on the Long-Term Fiscal Position, including engagement with departments.
  • Jointly published the proceedings of the June 2006 Macroeconomic Policy Forum with the Reserve Bank.
  • Organised and provided material for annual credit rating reviews by Moody’s and Standard & Poor’s. Both agencies confirmed their ratings for New Zealand.
  • Planned, hosted and participated in the OECD Economic Survey mission to New Zealand in December 2006. Reviewed the draft report on New Zealand and participated in the OECD Economic Review and Development Committee examination of New Zealand. The final OECD Survey was published in April.
  • Planned, hosted and participated in the International Monetary Fund Article IV mission to New Zealand in February 2007. Reviewed and provided briefing on the final International Monetary Fund Article IV report on the New Zealand economy. The final staff report was published in May.
  • Provided advice and briefings on options for strengthening macro stabilisation for meetings between Ministers, Treasury and the Reserve Bank.
  • Undertook further work on the mechanics of a Mortgage Interest Levy. The results of this work were reported in February 2007.
  • Produced reports and briefings on the Reserve Bank’s Monetary Policy Statements.
  • Contributed to, and provided advice on, the Reserve Bank’s review of managing foreign reserves and the exchange rate. Changes to the policy were announced in late June.
Service Performance
Measure Achieved?

Quality


All reports will comply with the Quality Standards for Analysis and Advice.

The Minister will be requested to indicate his level of satisfaction with the overall quality of outputs at the end of each trimester.

Yes
Fiscal publications under this output expense will meet the requirements of the Public Finance Act 1989. Yes

Quantity

 

The quantity and nature of advice and operational services will be supplied on the basis agreed between the Minister of Finance and the Secretary to the Treasury (as amended from time to time) for 2006/07.

 

Yes

Timeliness

 

All outputs will be delivered to timeframes as agreed between the Minister and the Secretary to the Treasury for 2006/07.

 

Yes

Cost
  2006/07
Actual
$000
Supp. Estimates
- Voted
$000
Main Estimates
$000
2005/06
Actual
$000
Expenses 4,340 4,366 4,603 4,397
Funded by:        
Revenue Crown 4,255 4,275 4,508 4,310
Other Revenue 85 91 95 87

Actual 2006/07 output class expenditure was $26,000 or 1% under Supplementary Estimates budgets. 

The appropriation for this output class was decreased by $237,000 in the Supplementary Estimates.

 

Policy advice: ownership and performance of Crown companies and financial institutions

This class of outputs involves the provision of policy advice on the Crown’s financial position and the Crown’s ownership interest in Air New Zealand, Crown companies (including SOEs) and Crown financial institutions (CFIs). This contributes towards enhancing and protecting the value of the Crown’s interest in these institutions.

The outputs include:

  • advice to the Minister of Finance as shareholder in SOEs, CRIs and other Crown companies, on issues impacting on the Crown’s ownership strategies, business plans and statements of intent, capital structure, dividends, diversification and expansion proposals, and divestments. This also includes advice on Air New Zealand, rail infrastructure and certain other entities where the Crown has an ownership interest
  • advice on significant company restructurings, on establishing commercially related activities in an appropriate institutional form and on Crown negotiations in relation to changes in asset structure and form
  • advice on the Crown’s ownership interests and guarantee and indemnity obligations in relation to the GSF, the National Provident Fund, Public Trust, the Earthquake Commission (EQC) and the New Zealand Superannuation Fund (NZSF), especially in relation to Crown financing, financial performance, management of risk (as owner or guarantor), unfunded Crown liabilities, and any residual implementation issues in relation to the NZSF.

Significant work completed during the year

  • Provided advice and engaged with CFIs to support the development of responsible investment policies.
  • Reported quarterly to the Minister of Finance on CFI performance and risk.
  • Provided advice to the independent review of the GSF.
  • Participated in reviews to improve working arrangements between Crown companies.
  • Provided advice on:
    • long-term hold reviews of New Zealand Post, Genesis and Kordia
    • various business planning issues
    • AgriQuality and Asure
    • commercial valuations of SOEs
    • Timberlands West Coast
    • Landcorp land sales
    • corporate social responsibility.
Service Performance
Measure Achieved?

Quality


All reports will comply with the Quality Standards for Analysis and Advice.

The Minister will be requested to indicate his level of satisfaction with the overall quality of outputs at the end of each trimester.

Yes
Outputs produced under this output expense will be undertaken in conjunction with CCMAU where reports are prepared on the financial performance of SOEs, CRIs and other Crown companies and in conjunction with the Ministry of Housing in relation to Housing New Zealand Corporation. Yes

Quantity

 

The quantity and nature of advice and operational services will be supplied on the basis agreed between the Minister of Finance and the Secretary to the Treasury (as amended from time to time) for 2006/07.

Yes

Timeliness

 

All outputs will be delivered to timeframes as agreed between the Minister and the Secretary to the Treasury for 2006/07.

Yes

 

Cost
  2006/07
Actual
$000
Supp. Estimates
- Voted
$000
Main Estimates
$000
2005/06
Actual
$000
Expenses 2,107 2,286 2,783 2,566
Funded by:        
Revenue Crown 2,065 2,237 2,729 2,515
Other Revenue 42 49 54 51

Actual 2006/07 output class expenditure was $179,000 or 8% under Supplementary Estimates budgets due reduced demand for SOE outputs and a shift of resources to other output classes. 

The appropriation for this output class was decreased by $497,000 in the Supplementary Estimates mainly due to staff vacancies and shifts in resources to output priorities in other output classes.

Policy advice: regulation and vote purchase, ownership and performance issues

This class of outputs contributes primarily to ensuring that the State’s resources and regulatory powers are used effectively and efficiently to achieve the Government’s desired outcomes, including a stable and sustainable macroeconomic environment.

The outputs include:

  • advice on cost, quality and quantity of output sought by the Government, the financial performance of departments and Crown entities, and the capability of departments and Crown entities
  • monitoring of appropriations to ensure expenditure is within parliamentary authority and advice on the non-departmental revenue and expenditure administered by departments and Crown entities
  • identification and assessment of opportunities for the Government to achieve its goals relating to improving economic performance, inclusive society, environment management and an efficient and effective State sector
  • empirical and analytical research into issues with a medium-term perspective.

Areas covered are:

  • empirical and analytical research
  • health
  • education
  • welfare (including housing and social services)
  • justice
  • labour market (including employment, immigration and ACC)
  • population agencies
  • external linkages, defence and national security
  • research, science and technology
  • economic development (regional and industry development and firm performance)
  • the regulatory environment (for example business law and competition policy)
  • infrastructure (including energy, telecommunications, water and transport)
  • environment
  • primary sector
  • government services (for example Internal Affairs, SSC, local government)
  • parliamentary agencies.

Significant work completed during the year

  • Contributed to further proposals relating to the quality and supply of early childhood education.
  • Provided advice on the educational attainment and retention of senior secondary students.
  • Provided advice on a range of housing issues, including home ownership and social housing.
  • Advised on a range of options for addressing the high imprisonment rate and their implementation.
  • Provided advice on the development of capital asset plans and a number of major capital proposals in the justice sector.
  • Provided advice on a number of capital proposals in the defence sector.
  • Provided a scope review of Otago and Spring Hill Regional Corrections Facilities.
  • Advised on a range of social development issues, notably the Working New Zealand proposals.
  • Worked with the Department of Labour on changes to immigration, notably the business case for the immigration new service model.
  • Provided advice on proposals to upskill the low-skilled end of the workforce.
  • Provided advice on the tertiary reforms, including advice on funding, planning, quality assurance, monitoring and legislative proposals.
  • Led negotiations on compensation for Vietnam veterans.
  • Developed advice for Ministers on the value and priorities for the health package in Budget 2007 including all aspects of vote management and capital expenditure.
  • Worked with the Ministry of Health on District Health Board (DHB) monitoring and accountability including a review of the DHB accountability framework. Provided advice to the Minister of Finance on DHB annual plans.
  • Provided advice to the Ministry of Health on ways to improve sector performance, including national health targets in priority areas, expenditure reviews of specific services, and ways of measuring productivity – as part of the Ministry’s Performance Assessment and Management programme.
  • Provided advice to Ministers on the contribution of primary health care to health system performance and long-term fiscal sustainability.
  • Provided public presentations and published articles on long-term funding and performance challenges in the health sector.
  • Completed the Treasury-led review of domestic institutional arrangements for prudential regulation.
  • Contributed to the MED-led review of the regulation of the non-bank financial sector with the first phase of decision- making completed.
  • Contributed to the MED-led Review of Parts 4, 4A and 5 of the Commerce Act.
  • Provided advice on the approach to economic transformation, policy priorities and budget priorities.
  • Participated in the review of the electricity market and the development of the New Zealand Energy Strategy and the New Zealand Energy Efficiency and Conservation Strategy.
  • Published the Treasury working paper “Toward a Model of Firm Productivity Dynamics”.
  • Jointly with SSC, DPMC and the Ministry of Transport (MoT) completed the Next Steps review of planning, funding and structures in the land transport sector.
  • Jointly with MoT, advised on regional fuel tax.
  • Advised on rail investments, including electrification of the Auckland network.
  • Led the Auckland Transport Strategic Alignment Project.
  • Researched sectors that matter most in ensuring consistency between policy settings facilitation of international resource and knowledge flows that benefit New Zealand.
  • Chaired the APEC Economic Committee meetings, changing the focus of the committee to behind border structural reform.
  • Advanced Single Economic Market issues with Australia, particularly work on private retirement income scheme portability and a CER investment protocol.
  • Participated in Free Trade Agreement negotiations with China and ASEAN.
  • Provided briefings and logistical support for Ministerial participation and represented New Zealand at various international forums and bilateral meetings.
  • Provided advice on climate change issues including mitigation potential, use of Kyoto flexibility mechanisms, purchasing mechanisms, land use initiatives, new initiatives, tax incentives for renewable energy/energy efficiency, and the climate change contingency.
  • Participated in the Nairobi climate change talks.
  • Established the cross-departmental Emissions Trading Group at Treasury and provided advice on emissions trading.
Service Performance
Measure Achieved?

Quality

 

All reports will comply with the Quality Standards for Analysis and Advice.

The Minister will be requested to indicate his level of satisfaction with the overall quality of outputs at the end of each trimester.

 

 

Yes

Quantity

 

The quantity and nature of advice and operational services will be supplied on the basis agreed between the Minister of Finance and the Secretary to the Treasury (as amended from time to time) for 2006/07.

 

Yes

Timeliness

 

All outputs will be delivered to timeframes as agreed between the Minister and the Secretary to the Treasury for 2006/07.

 

Yes

Cost
  2006/07
Actual
$000
Supp. Estimates
- Voted
$000
Main Estimates
$000
2005/06
Actual
$000
Expenses 21,446 22,071 21,245 20,383
Funded by:        
Revenue Crown 21,022 21,615 20,816 19,975
Other Revenue 424 456 429 408

Actual 2006/07 output class expenditure was $625,000 or 3% under Supplementary Estimates budgets. 

The appropriation for this output class was increased by $826,000 in the Supplementary Estimates due to increased demand for outputs in this class.

Policy advice: tax

This class of outputs involves the provision of advice on tax policy and contributes to raising required tax revenue at least cost to the economy, in line with fiscal strategy.

The Treasury, jointly with the Policy Advice Division of Inland Revenue, will provide advice on:

  • tax strategy (overall objectives of the tax system, including choice of tax bases and the mix of taxation)
  • international taxation (including taxation agreements with other countries; tax on New Zealanders’ foreign-source income; and the taxation of income earned by New Zealanders overseas)
  • personal taxation (that is, direct taxes imposed on individuals)
  • indirect taxes (including GST and taxes on specific goods and services, like excises)
  • corporate taxation (that is, direct taxes imposed on companies, trusts and other forms of legal entity; and taxes imposed on individuals through such business organisations)
  • tax systems and compliance (including withholding taxes, tax penalties, taxation administration rules, taxpayer rights and obligations and taxpayer compliance costs).

The Government purchases tax policy advice from both the Treasury and Inland Revenue to ensure that its tax policies are based on all relevant economic, legal and administrative factors.

The Treasury will also provide advice, in cooperation with the collection agencies, on excises that are not collected by Inland Revenue.

In respect of Votes Revenue and Customs, the Treasury will provide:

  • advice on cost, quality and quantity of output sought by the Government, the financial performance of the departments, and the capability of the departments
  • monitoring of payments for outputs against appropriations and advice on the non-departmental revenue and expenditure administered by the departments.

Significant work completed during the year

  • Developed the key policy directions for the international tax review, as announced in Budget 2007.
  • Provided substantial and wide-ranging policy advice on the Business Tax Review and policy design for the Business Tax Reform elements of the 2007 Budget.
  • Coordinated and delivered the Government’s proposed KiwiSaver workplace-based savings scheme, including policy design of KiwiSaver Budget 2007 enhancements and some stages of legislative implementation.
  • Reported to Ministers on the Taxation of Partnerships discussion document and draft legislation.
  • Provided ongoing advice and analysis on Vote Revenue issues, including internal Strategic Vote Analysis, analysis of Budget 2007 vote revenue bids and coordination with IRD.
  • Provided support to FEC on legislation implementing the 2006 Taxation (Annual Rates, Savings Investment and Miscellaneous Provisions) Bill.
Service Performance
Measure Achieved?

Quality


All reports will comply with the Quality Standards for Analysis and Advice.

The Minister will be requested to indicate his level of satisfaction with the overall quality of outputs at the end of each trimester.

Yes
Outputs produced under this output expense are to be undertaken in conjunction with Inland Revenue and other relevant collection agencies where reports are produced on revenue policy issues. Yes

Quantity

 

The quantity and nature of advice and operational services will be supplied on the basis agreed between the Minister of Finance and the Secretary to the Treasury (as amended from time to time) for 2006/07.

 

Yes

Timeliness

 

All outputs will be delivered to timeframes as agreed between the Minister and the Secretary to the Treasury for 2006/07.

 

Yes

Cost
  2006/07
Actual
$000
Supp. Estimates
- Voted
$000
Main Estimates
$000
2005/06
Actual
$000
Expenses 2,803 2,858 2,314 2,739
Funded by:        
Revenue Crown 2,748 2,800 2,266 2,685
Other Revenue 55 58 48 54

Actual 2006/07 output class expenditure was $55,000 or 2% under Supplementary Estimates budgets. 

The appropriation for this output class was increased by $544,000 in the Supplementary Estimates due to increased demand for outputs in this class, in particular KiwiSaver.

Service Performance Objectives: All Vote Finance Output Classes

Performance Dimensions Achieved?

Quality

 


All reports will comply with the Quality Standards for Analysis and Advice outlined on page 103. Output quality will be assessed as follows:

  • The Minister will expect the Treasury to implement suitable quality control procedures to support the expectations for analysis and advice delivered under this Vote.
Yes
  • Managerial and peer (internal and external) review will be maintained to ensure that the quality standards are met.
Yes
  • The Minister will be formally requested, at least three times a year, to indicate his level of satisfaction with the overall quality of the outputs produced.
Rating: Met and frequently exceeded expectations for each output class

Coverage

 

A comprehensive range of services will be provided as agreed with the Minister. These will include
the capacity to react quickly and provide support for the Minister in Cabinet committees, including
relevant briefings on significant issues and regular evaluation of the impacts of policy on the Government’s desired outcomes.

 

Yes

Cost-effectiveness

 

Analysis and advice will be delivered within the cost parameters agreed with the Minister (or as subsequently modified by agreement).

 

Yes

Timeliness

 

Timeframes will be agreed between the Minister and the Secretary to the Treasury for the financial year.

  • Advice will be delivered within the agreed and/or statutory timeframe so that Ministers have sufficient time to consider the issues and take appropriate action. Where agreed deadlines will not be met, extensions are to be requested formally.

 

 

Yes

  • Ministerial correspondence (MCs), parliamentary questions (PQs), Cabinet agendas and Official Information Act requests (OIAs) will be responded to within agreed and/or statutory timeframes.
Yes
  • The Department will respond appropriately to requests for attendance at Parliament during debates and at Cabinet and select committee meetings.
Yes
  • Drafting instructions in the form of draft legislation will be provided to the Parliamentary Counsel Office within the timeframe agreed with that Office.
Yes
  • Reporting three times a year will enable the Minister to assess actual performance in the timeliness of output delivery against those expectations.
Yes
2006/07 PQs MCs OIAs

Budget Management

     
Estimated 0-5 0-5 0-5
Actual draft replies 6 0 15
% answered by due date 100% - 100%

Debt and Related Financial Asset Management

     
Estimated 0-5 0-5 0-5
Actual draft replies 2 2 0
% answered by due date 100% 100% -

Economic and Fiscal Forecasting and Reporting

     
Estimated 100-120 0-5 5-10
Actual draft replies 13 1 8
% answered by due date 100% 0% 100%

Management of Claims Against the Crown, Contractual Liabilities and Crown Properties

     
Estimated 0-5 5-10 5-10
Actual draft replies 30 37 22
% answered by due date 100% 97% 82%

Policy Advice: Financial and Public Sector Management Systems

     
Estimated 0-5 10-20 0-5
Actual draft replies 20 1 7
% answered by due date 100% 0% 71%

Policy Advice: General Economic and Fiscal Strategies

     
Estimated 5-10 80-100 10-20
Actual draft replies 29 194 13
% answered by due date 100% 85% 85%

Policy Advice: Ownership and Performance of Crown Companies and Financial Institutions

     
Estimated 15-30 100-120 20-30
Actual draft replies 21 55 14
% answered by due date 100% 98% 86%

Policy Advice: Regulation and Vote Purchase, Ownership and Performance Issues

     
Estimated 150-200 400-450 50-100
Actual draft replies 116 465 136
% answered by due date 99% 76% 91%

Policy Advice: Tax

     
Estimated 10-20 150-200 10-20
Actual draft replies 16 361 22
% answered by due date 100% 47% 73%

Ownership

     
Estimated 30-40 5-10 5-10
Actual draft replies 40 4 40
% answered by due date 100% 100% 80%

Crown Company Monitoring Advisory Unit (CCMAU)

Executive summary

During 2006/07, CCMAU continued to take a leadership role in the ownership monitoring of the wide range of State-Owned Enterprises (SOEs), Crown companies and entities in its portfolio. The performance of these companies and entities is critical to the Government’s economic transformation priority theme.

During the year, these companies and entities faced a number of challenges and issues, and CCMAU was at the forefront of managing and advising shareholding Ministers on many of them. In some instances, company performance was adversely affected by these events. At the same time, we continued the process of long-term owners’ reviews of SOEs with the completion of a further two reviews, bringing the total completed to ten. A further review was substantially progressed at year end. Equally, we developed a set of non-financial performance indicators to enable the Government to measure the contribution Crown Research Institutes (CRIs) make to the wider economy. We also assisted Ministers to reinforce their ownership expectations for CRIs. Our Appointments and Governance team continued to identify skilled directors for Ministers to appoint to the boards of the companies and entities we monitor. Furthermore, CCMAU forged a new relationship with Massey University’s Graduate School of Business to provide our governance training programme.

CCMAU’s capability was tested at times this year with the loss of some experienced staff to the private sector and SOEs. However, we were able to recruit new staff with relevant skills and experience to ensure Ministers’ expectations continued to be met. The opportunity now exists for CCMAU to enhance its ownership monitoring role, building on current expertise to more effectively address the Government’s wider ownership objectives.

What we do

CCMAU aims to be the New Zealand Government’s ownership advisor of choice in the provision of commercial and wider ownership advice.

CCMAU provides services in the following areas:

  • Monitoring – reporting on business plans, company reports, performance against targets and sectoral trends.
  • Ownership advice – advising on strategic issues, investment and diversification opportunities, restructuring issues and the impact of policy decisions.
  • Ministerial servicing – managing issues and drafting replies to correspondence, parliamentary questions and Official Information Act requests.
  • Governance – identifying and screening potential directors, managing appointment processes and promoting best-practice corporate governance of Crown companies and entities.

Relationship with the Treasury

The Executive Director of CCMAU is directly accountable to the Secretary to the Treasury for the Crown’s investment in CCMAU, and for CCMAU’s performance in providing the output classes Ministers seek.

The year in review

CCMAU contributed to a wide range of activities and initiatives this year. The key achievements in each sector were:

Science and innovation sector
Proposed Activity Progress
Develop a set of indicators to measure CRIs’ engagement with industry; the ways in which they apply their research findings and the impact those activities is having on New Zealand’s economy, environment and society. Completed development of the “research application indicators”, which were introduced for use for the first time for the 2006/07 financial year.
Administer the CRI Capability Fund. Ongoing.
Support the establishment of REANNZ and move into a more stable monitoring phase. Completed.
Expect NZVIF to complete the allocation of its $100 million under the VIF programme and to continue implementation of the new Seed Co-investment Fund.

First investments made through the Seed Co-investment Fund programme. 

Target of $100 million commitment not reached as private sector fundraising proved challenging.

Improve our ability to measure performance across all objectives of the companies we monitor. Continued development of non-financial performance measures and improved techniques to determine and measure financial viability.
Energy, land and environment sector
Proposed Activity Progress
Ensure SOE strategies are developed, and significant investments made, with SOEs fully informed of shareholder expectations. CCMAU evaluated a number of business cases for new investments and provided advice to Ministers on them.
Complete long-term ownership policy review of Genesis. Substantially completed.
Resolve review of organisational options for AgriQuality and Asure. Completed.
Create an environment where each SOE will perform at a level that fulfils their requirement under the SOE Act to operate as a successful business, including to be as profitable and as efficient as comparable businesses not owned by the Crown; a good employer; and an organisation that exhibits a sense of social responsibility.

Undertook a pilot exercise on the potential use of private sector equity analysts to assess the value and projected performance of large SOEs.

Established a process that should result in a more robust framework for SOE social responsibility.

Communications, services and infrastructure sector
Proposed Activity Progress
Complete long-term ownership policy reviews of New Zealand Post and Kordia. Review of New Zealand Post completed and review of Kordia well advanced.
Provide advice on the possible introduction of digital television in New Zealand. Assessed TVNZ’s digital television content proposal, TVNZ’s involvement in Freeview and Kordia’s proposed digital terrestrial television (DTT) network investment. Digital satellite transmission commenced in May 2007, with DTT to follow in 2008.
Complete airport terminal redevelopments at Christchurch and Dunedin airports. Dunedin was completed and construction at Christchurch should commence in 2008.
Appointments and governance
Proposed Activity Progress
Focus on core appointments activity. Individual appointment rounds for SOEs, CRIs and other entities completed.
Expand initiatives to support directors after appointment. Conducted a full review of CCMAU’s governance training programmes, and ran an RFP process to select a new provider of these programmes – ultimately selecting Massey University’s Graduate School of Business as our provider. Two core programmes for aspiring and recently appointed directors held in Wellington and Christchurch, and a series of professional director updates for serving Crown directors held.
Review current director fee levels against market benchmarks. Completed.
Articulate shareholders’ best-practice governance expectations and circulate them to boards. Revised Owners’ Expectations Manuals for SOEs and CRIs substantially completed and expected to be released in early 2007/08.
Maintain strong relationships with other (national and international) agencies that have appointment and governance functions. CCMAU has continued its lead agency role in the International Network of Government Ownership Agencies (INGOA), including the completion of a website fully funded by member contributions. 
Use our expertise to help with board appointment processes and governance expectations for non-commercial government entities. CCMAU has continued to play an active role in the cross-government officials’ governance group. It has also assisted other agencies with board nominations from time to time.

Maintaining and developing capability

CCMAU’s reputation and ability to exceed the expectations of Ministers and key stakeholders are very dependent on the skill and experience of its staff and their ability to manage relationships with a wide range of contacts. During the year we continued to pay attention to making CCMAU a great place to work and to provide staff with the resources necessary to do their jobs well.

While CCMAU is able to attract high-quality candidates to fill the vacancies that occur, the cost of recruiting and inducting new staff is significant. This is an ongoing challenge for a small agency with limited promotional opportunities.

CCMAU continued to measure the satisfaction of its staff by completing another staff climate survey. While the staff satisfaction index resulting from this survey dropped slightly this year, the variance was not material.

Over the past three years key measures of staff capability and satisfaction were:

  2006/07 2005/06 2004/05
Women (FTEs) 8 6 6
Men (FTEs) 12 14 14
Total staff (FTEs) 20 20 20
Staff satisfaction index 69.5% 72.7% 69.7%
Staff turnover 29% 15% 30%
Average length of service (years) 3.8 3.5 2.7

Murray Wright signature

Murray Wright
Executive Director

CCMAU Output Class Performance

Statement of Objectives and Service Performance Section 45A of the Public Finance Act 1989

Vote State-Owned Enterprises

Crown company monitoring advice to the Minister for State-Owned Enterprises and other responsible Ministers

This class of outputs involves the provision of policy and ownership monitoring advice on the SOEs, Crown companies and Crown entities covered by Vote SOEs (collectively referred to below as “SOEs”). This includes:

  • advising the Minister for SOEs and other responsible Ministers on the strategic direction of SOEs; the commercial and fiscal risks associated with Crown ownership; proposals to establish and restructure SOEs; and the processes and outcomes of significant SOE divestments and acquisitions
  • providing advice which assists Ministers to set ownership objectives and targets for SOEs
  • monitoring and advising Ministers of SOEs’ performance against these objectives and targets
  • providing policy advice on, and managing issues arising out of, the ownership of SOEs, including residual implementation issues
  • managing, on behalf of responsible Ministers, the appointment of SOE directors and monitoring the performance of those directors and boards
  • assisting responsible Ministers in the formulation of shareholders’ expectations in relation to the governance practices and structures companies adopt.
  • Maintaining and enhancing the Crown’s ownership interest in these entities contributes to the efficient management of the Crown’s assets and liabilities. The CRIs, NZVIF, and REANNZ have an important role to play in the New Zealand innovation system, thereby contributing to improving New Zealand’s overall economic performance.

Significant work completed during the year

  • Completed the 2006/07 SOE business planning round, which includes analysing and reporting on each company’s draft SCI and business plan so that shareholding Ministers are able to provide informed feedback to boards. The 2007/08 SOE business planning round was also substantially completed by 30 June 2007.
  • Completed Crown Company Quarterly Performance reports for the June, September, December and March quarters, which were presented to Cabinet.
  • Completed long-term hold owners’ reviews for New Zealand Post and Genesis; and substantially progressed the review of Kordia.
  • Managed a number of company issues, and the provision of advice to Ministers on them, including:
    • progress on the facilitator’s review of the organisational and purchase arrangements supporting New Zealand’s weather, climate and environmental forecasting functions provided by MetService and NIWA
    • the evaluation, legislative support and other advice relating to the proposed merger between AgriQuality and Asure
    • a range of issues relating to Solid Energy, including snail preservation on the West Coast and land acquisition for potential lignite developments in Southland
    • Solid Energy’s joint venture arrangements in relation to the Spring Creek coal mine on the West Coast
    • Timberlands’ ongoing financial viability and the provision of a Letter of Comfort
    • assessment of a business case to revise Public Trust’s strategic direction to improve its financial viability
    • the acquisition by Kiwibank of a portfolio of existing mortgages, and the issuance of some Tier II capital
    • clarification of owners’ expectations over capital structure for Quotable Value
    • progress towards the completion of Genesis’ e3p project
    • Mighty River Power’s review of its participation in the Electricity and Gas Complaints Commission scheme
    • matters relating to Mercury Energy/Mighty River Power and the Muliaga case
    • issues around Transpower’s planned major upgrades
    • land issues affecting Landcorp and the subsequent wider land review and interim process for the disposal of land
    • Kordia’s proposed digital terrestrial television network investment and proposed acquisition of Orcon
    • the revision of RNZ’s charter and consideration of changes to its institutional form
    • assessment of TVNZ’s digital television content proposal
    • the second phase of TVNZ’s capital structure review and its five-year Strategic Plan
    • SOE executive remuneration and profitability in the context of the publication of SOE annual results.
  • Conducted a pilot exercise on the potential use of private sector equity analysts to assess the value and projected performance of large SOEs.
  • Carried out a review of corporate social responsibility and SOEs, including setting in train a process that will result in a more robust framework for SOE social responsibility in the future.
  • Drafted a Cabinet paper for the Minister for SOEs on the wider issues relating to SOEs and the Commerce Act in the context of proposals to merge AgriQuality and Asure.
  • Continued to take a “lead agency” role in the establishment of an international best-practice sharing network of organisations with a similar role to that of CCMAU including the completion of a website.
  • Continued to participate actively in the wider governance officials’ forum.
  • Hosted two core training programmes for recently appointed or aspiring directors.
  • Hosted three networking functions and three professional director updates for existing Crown directors.
  • Hosted a one-day induction seminar for new SOE directors.
  • Managed expressions of interest from candidates wishing to be considered for Crown governance roles.
  • Continued to provide assistance to other agencies regarding nominations.
  • Provided advice to Ministers on a number of appointments and governance issues, including:
    • completion of two SOE appointment rounds and appointments and reappointments to a number of other companies and entities
    • the 2006/07 directors’ fees for SOEs and a number of other companies and entities
    • generic advice to boards on the mechanisms for paying directors’ fees and associated tax implications.
Service Performance
Performance Dimensions Achieved?

Quality

 

The Minister for SOEs and other responsible Ministers will expect advice to demonstrate a sound knowledge of the Crown company’s business, the environment within which the company operates and the consequences of shareholder or company actions.

All reports will comply with the generic Quality Standards for Analysis and Advice outlined on page 103. Output quality will be assessed as follows

 

 

  • The Ministers will expect CCMAU to implement suitable quality control procedures to support the expectations for analysis and advice delivered under the relevant Votes.
Yes
  • Managerial and peer (internal and external, where appropriate) review will be maintained to ensure that the quality standards are met.
Yes
  • The Minister for SOEs will be formally requested, on a six-monthly basis, to indicate his level of satisfaction with the overall quality of the outputs produced.
Yes

Quantity

 
The quantity and nature of advice and operational services will be supplied on the basis agreed between the Minister for SOEs and the Executive Director of CCMAU (as amended from time to time) for 2006/07. Yes
Six-monthly and end-of-year reporting will enable the Minister to assess actual performance in output delivery against those expectations. Yes

Coverage

 
A comprehensive range of services will be provided as agreed with the Minister for SOEs. These will include the capacity to react quickly and provide support for the Minister in Cabinet committees, including relevant briefings on significant issues and regular evaluation of the impacts of shareholder decisions and company actions on the Government’s desired outcomes. Yes

Cost-effectiveness

 
Analysis and advice will be delivered within the cost parameters agreed with the Minister for SOEs (or as subsequently modified by agreement). Yes

Timeliness

 

Timeframes will be agreed between the Minister and the Executive Director of CCMAU for the financial year.

 

 

  • Advice will be delivered within the agreed and/or statutory timeframe so that Ministers have sufficient time to consider the issues and take appropriate action. Where agreed deadlines will not be met, extensions are to be formally requested.

Yes

 

  • Ministerial correspondence (MCs), parliamentary questions (PQs), Cabinet agendas and Official Information Act requests (OIAs) will be responded to within agreed and/or statutory timeframes.
Yes
  • CCMAU will respond appropriately to requests for attendance at Parliament during debates and at Cabinet and select committee meetings.
Yes
  • Six-monthly and end-of-year reporting will enable the Minister to assess actual performance in the timeliness of output delivery against those expectations.
Yes
Ministerial servicing
2006/07 PQs MCs OIAs
Estimated 120-160 160-180 12-20
Actual draft replies 104 174 16
% answered by due date 100% 100% 94%
Cost
  2006/07
Actual
$000
Supp. Estimates
- Voted
$000
Main Estimates
$000
2005/06
Actual
$000
Expenses 2,582 2,613 2,603 2,480
Funded by:        
Revenue Crown 2,526 2,548 2,538 2,417
Other Revenue 56 65 65 63

 

Vote Crown Research Institutes

Crown company monitoring advice to the Minister for Crown Research Institutes and Minister of Research, Science and Technology

This class of outputs involves the provision of policy and ownership monitoring advice on nine CRIs, New Zealand Venture Investment Fund Limited (NZVIF), Research and Education Advanced Network New Zealand Limited (REANNZ), formerly known as Advanced Network Co Ltd. (ANCO), and the provision of advice on the performance of the CRI Capability Fund, and includes:

  • advising the Minister for CRIs and the Minister of Research, Science and Technology (RS&T) on the strategic direction of CRIs, NZVIF and REANNZ respectively, and the commercial and fiscal risks associated with Crown ownership
  • providing advice which assists the Minister for CRIs and the Minister of RS&T to set ownership objectives and targets for CRIs, NZVIF and REANNZ
  • monitoring and advising the Minister for CRIs and the Minister of RS&T of CRIs’, NZVIF’s and REANNZ’s performance against these objectives and targets
  • providing policy advice on, and managing issues arising out of, the ownership of CRIs, NZVIF and REANNZ, including residual implementation issues
  • managing, on behalf of the responsible Ministers, the appointment of CRI, NZVIF and REANNZ directors and monitoring the performance of those directors and boards
  • assisting the responsible Ministers in the formulation of shareholder expectations in relation to the governance practices and structures companies adopt.

Maintaining and enhancing the Crown’s ownership interest in these entities contribute to the efficient management of the Crown’s assets and liabilities. CRIs, NZVIF and REANNZ have an important role to play in the New Zealand innovation system, thereby contributing to improving New Zealand’s overall economic performance.

Significant work completed during the year

  • Completed the 2006/07 strategic planning round, which includes analysing and reporting on each company’s draft SCI and strategic plan so that shareholding Ministers are able to provide informed feedback to boards. The 2007/08 strategic planning round was also substantially completed by 30 June 2007.
  • Completed Crown Company Quarterly Performance reports for the June, September, December and March quarters, which were presented to Cabinet.
  • Contributed to the 2007 Operating Framework for CRIs.
  • Managed a number of company issues, and the provision of advice to Ministers on them, including:
    • the acquisition and disposal of various assets by a number of CRIs
    • shareholder consent for AgResearch’s purchase of Canesis Network Ltd
    • progress on the facilitator’s review of the organisational and purchase arrangements supporting New Zealand’s weather, climate and environmental forecasting functions provided by MetService and NIWA
    • CRI intellectual property reward share policies
    • CRI submissions to the Waitangi Tribunal on the Wai 262 claim
    • input into guidelines for CRI reporting on their good employer practices
    • the rationale for a return on equity requirement for CRIs
    • review of CRI reporting on entitlement to and use of CRI Capability Fund monies
    • the Crown’s offer to AgResearch for reimbursement of costs to remediate contamination at Wallaceville
    • extension of the Venture Investment Fund programme mandate.
  • Continued to take a “lead agency” role in the establishment of an international best-practice sharing network of organisations with a similar role to that of CCMAU, including the completion of the website.
  • Continued to participate actively in the wider governance officials’ forum.
  • Hosted two core training programmes for recently appointed or aspiring directors.
  • Hosted three networking functions and three professional director updates for existing Crown directors.
  • Hosted a one-day induction seminar for new CRI directors.
  • Managed expressions of interest from candidates wishing to be considered for Crown governance roles.
  • Continued to provide assistance to other agencies regarding nominations.
  • Provided advice to Ministers on a number of appointments and governance issues, including:
    • the 2007/08 CRI appointment round
    • the appointment of a new Chair and Deputy Chair for NZVIF
    • the 2006/07 directors’ fees for the CRIs, NZVIF and REANNZ
    • generic advice to boards on the mechanisms for paying directors’ fees and associated tax implications.
Service Performance
Performance Dimensions Achieved?

Quality

 

The Minister for CRIs or the Minister of RS&T will expect advice to demonstrate a sound knowledge of the business, the environment within which the organisation operates and the consequences of shareholder or CRI or fund actions.

All reports will comply with the generic Quality Standards for Analysis and Advice outlined on page 103. Output quality will be assessed as follows:

 

 

 

 

  • The Ministers will expect CCMAU to implement suitable quality control procedures to support the expectations for analysis and advice delivered under the relevant Votes.
Yes
  • Managerial and peer (internal and external, where appropriate) review will be maintained to ensure that the quality standards are met.                
Yes
  • The Minister for CRIs will be formally requested, on a six-monthly basis, to indicate their level of satisfaction with the overall quality of the outputs produced.
Yes

Quantity

 
The quantity and nature of advice and operational services will be supplied on the basis agreed between the Minister for CRIs and the Executive Director of CCMAU (as amended from time to time) for 2006/07. Yes
Six-monthly and end-of-year reporting will enable the Minister to assess actual performance in output delivery against those expectations. Yes

Coverage

 
A comprehensive range of services will be provided as agreed with the Minister for CRIs. These will include the capacity to react quickly and provide support for the Minister in Cabinet committees, including relevant briefings on significant issues and regular evaluation of the impacts of shareholder decisions and company actions on the Government’s desired outcomes. Yes

Cost-effectiveness

 
Analysis and advice will be delivered within the cost parameters agreed with the Minister for CRIs (or as subsequently modified by agreement). Yes

Timeliness

 

Timeframes will be agreed between the Minister and the Executive Director of CCMAU for the financial year.

 

 

  • Advice will be delivered within the agreed and/or statutory timeframe so that Ministers have sufficient time to consider the issues and take appropriate action. Where agreed deadlines will not be met, extensions are to be formally requested.

Yes

  • Ministerial correspondence (MCs), parliamentary questions (PQs), Cabinet agendas and Official Information Act requests (OIAs) will be responded to within agreed and/or statutory timeframes.
Yes
  • CCMAU will respond appropriately to requests for attendance at Parliament during debates and at Cabinet and select committee meetings.
Yes
  • Six -monthly and end-of-year reporting will enable the Minister to assess actual performance in the timeliness of output delivery against those expectations.
Yes
Ministerial servicing
2006/07 PQs MCs OIAs
Estimated 20-40 30-50 4-8
Actual draft replies 84 20 11
% answered by due date 100% 100% 100%
Cost
  2006/07
Actual
$000
Supp. Estimates
- Voted
$000
Main Estimates
$000
2005/06
Actual
$000
Expenses 1,028 1,062 1,072 970
Funded by:        
Revenue Crown 1,006 1,042 1,052 945
Other Revenue          22 20 20 25

Statement of Responsibility

Pursuant to sections 45 and 45C of the Public Finance Act 1989, the Secretary to the Treasury is responsible for the preparation of the Department’s financial statements and non-departmental supplementary schedules, and the judgements made in the process of producing these financial statements and supplementary schedules.

The Department’s internal control procedures provide reasonable assurance as to the integrity and reliability of its financial reporting.

In the opinion of the Secretary to the Treasury:

  • The Department’s financial statements and statements of service performance fairly reflect its financial position and operations for the financial year ended 30 June 2007.
  • The supplementary schedules fairly reflect the assets, liabilities, contingencies and commitments managed by the Treasury on behalf of the Crown as at 30 June 2007 and revenues and expenses managed by the Treasury on behalf of the Crown for the year ended on that date.
John Whitehead signature.
John Whitehead
Secretary to the Treasury
18 September 2007
John Matheson signature
John Matheson
Chief Financial Officer
(countersigned)
18 September 2007
Philip Combes signature
Philip Combes
Treasurer- NZDMO
(countersigned)
18 September 2007

Overview of Departmental Financial Results for the year ended 30 June 2007

The following significant movements in actual results between 2006/07 and 2005/06 are explained below:

  2007
Actual
$000
2006
Actual
$000

Revenue

   
Crown 52,979 49,079

Expenses

   
Personnel 35,539 34,890
Operating 14,258 11,622
Consultants 2,276 1,446
Capital charge 617 698

Non-Current Assets

   
Property, plant and equipment 5,563 6,414

Taxpayers Funds

   
General funds 7,927 8,527

Revenue

Revenue Crown for departmental outputs increased by $3.9 million, mainly due to a technical change during 2006/07 to record all debt and related financial management costs within the departmental output expense rather than non-departmental appropriations.

Expenses

Personnel increased by $0.6 million due mainly to market increases in salaries.

Operating increased by $2.6 million due mainly to the technical change of recording all debt and related financial management costs within the departmental output expense, rather than non-departmental appropriations.

Consultants increased by $0.8 million due largely to some vacancies being filled with short-term consultants during 2006/07, an increase in debt and financial management consultancies as a result of the technical change in appropriation outlined above under “operating” and one-off reviews associated with the Stepping Up change programme.

Capital charge decreased by $0.08 million due to decreased taxpayers’ equity following a capital repayment of $0.6 million during 2006/07 and a reduction in the capital charge rate from 8% to 7.5%.

Non-Current Assets

Property, plant and equipment decreased by $0.9 million mainly due to delays in replacing computer hardware during 2006/07 and depreciation of leasehold improvements.

Taxpayers Funds

General funds decreased by $0.6 million due to a capital repayment to the Crown during 2006/07. The Treasury is repaying capital provided for the 2005 upgrade of office accommodation.

Statement of Financial Performance for the year ended 30 June 2007

The Statement of Financial Performance details the revenue and expenses relating to all outputs (goods and services) produced by the Department, including CCMAU, during the financial year ended 30 June 2007. Total Expenses equals Total Departmental Output Classes Expenditure and Appropriations in the Statement of Expenditure and Appropriations on page 65.

Statement of Financial Performance for the year ended 30 June 2007
2006
Actual
$000
  Notes 2007
Actual
$000
2007
Main Estimates $000
2007
Supp. Estimates
$000
 

Revenue

       
49,079 Crown 1 52,979 55,304 54,965
1,050 Other revenue 2 1,090 1,178 1,178
50,129     54,069 56,482 56,143
 

Expenses

       
34,890 Personnel   35,539 36,368 35,850
11,622 Operating 3 14,258 10,877 14,368
1,446 Consultants   2,276 6,947 3,897
1,473 Depreciation 4 1,379 1,650 1,411
698 Capital charge 5 617 640 617
50,129     54,069 56,482 56,143
- Net Surplus   - - -

The accompanying accounting policies and notes form part of these financial statements.

Statement of Movements in Taxpayers Funds for the year ended 30 June 2007

The Statement of Movements in Taxpayers Funds combines information about the net surplus with other aspects of the financial performance of the Department, including CCMAU, to give a degree of measure of comprehensive income.

Statement of Movements in Taxpayers Fundsfor the year ended 30 June 2007
2006
Actual
$000
  2007
Actual
$000
2007
Main Estimates $000
2007
Supp. Estimates
$000
8,927 Taxpayers funds at the beginning of the year 8,527 8,527 8,527
  Movements during the year      
- Net surplus - - -
- Total Recognised Revenue and Expenses for the Year - - -
- Capital contributions from the Crown - - -
(400) Capital withdrawal repaid to the Crown (600) (600) (600)
8,527 Taxpayers Funds at the End of the Year  7,927 7,927 7,927

The accompanying accounting policies and notes form part of these financial statements.

Statement of Financial Position as at 30 June 2007

The Statement of Financial Position reports the total assets and liabilities of the Department, including CCMAU, as at 30 June 2007. Taxpayers funds are represented by the difference between the assets and liabilities.

Statement of Financial Position as at 30 June 2007
2006
Actual
$000
  Notes 2007
Actual
$000
2007
Main Estimates $000
2007
Supp. Estimates
$000
 

Taxpayers Funds

       
8,527 General funds   7,927 7,927 7,927
8,527 Total Taxpayers Funds   7,927 7,927 7,927
  Represented by:        
  Assets        
 

Current Assets

       
3,182 Cash and bank balances   3,896 1,908 2,666
444 Prepayments   406 580 444
408 Accounts receivable   460 364 408
5,753 Debtor - Crown   5,671 5,185 6,358
9,787     10,433 8,037 9,876
 

Non-Current Assets

       
6,414 Property, plant and equipment 6 5,563 6,041 5,970
6,414     5,563 6,041 5,970
16,201 Total Assets   15,996 14,078 15,846
  Less:        
  Liabilities        
 

Current Liabilities

       
3,312 Payables and accrued expenses   3,501 2,684 3,704
4,005 Provision for employee entitlements 7 4,250 3,158 3,876
25 Provision for onerous contracts 8 15 17 17
18 Finance lease liability 9 21 - 19
7,360     7,787 5,859 7,616
 

Non-Current Liabilities

       
276 Provision for employee entitlements 7 280 292 301
17 Provision for onerous contracts 8 - - -
21 Finance lease liability 9 2 - 2
314     282 292 303
7,674 Total Liabilities   8,069 6,151 7,919
8,527 Net Assets   7,927 7,927 7,927

The accompanying accounting policies and notes form part of these financial statements.

Statement of Cash Flows for the year ended 30 June 2007

The Statement of Cash Flows summarises the cash movements in and out of the Department during the financial year. It takes no account of money owed to the Department or owing by the Department and therefore differs from the Statement of Financial Performance on page 59.

Statement of Cash Flows for the year ended 30 June 2007
2006
Actual
$000
  Notes 2007
Actual
$000
2007
Main Estimates $000
2007
Supp. Estimates
$000
 

Cash Flows from Operating Activities

       
  Cash was provided from:        
48,979 Supply of outputs to the Crown   53,061 54,715 54,360
1,028 Supply of outputs to third parties   1,102 1,178 1,178
50,007     54,163 55,893 55,538
  Cash was disbursed to:        
34,476 Personnel   35,148 36,504 35,955
12,481 Operating   16,549 18,080 17,889
698 Capital charge   617 640 617
47,655     52,314 55,224 54,461
2,352 Net Cash Flows from Operating Activities 10 1,849 669 1,077
 

Cash Flows from Investing Activities

       
  Cash was provided from:        
10 Sale of property, plant and equipment   - 2 -
  Cash was disbursed to:        
(2,041) Purchase of property, plant and equipment   (535) (1,171) (993)
(2,031) Net Cash Flows from Investing Activities   (535) (1,169) (993)
 

Cash Flows from Financing Activities

       
  Cash was provided from:        
- Capital contribution   - - -
  Cash was disbursed to:        
(400) Capital withdrawal   (600) (600) (600)
(400) Net Cash Flows from Financing Activities   (600) (600) (600)
(79) Net movement in cash and bank balances   714 (1,100) (516)
3,261 Cash and bank balances at the beginning of the year   3,182 3,008 3,182
3,182 Cash and Bank Balances at the End of
the Year
  3,896 1,908 2,666

The accompanying accounting policies and notes form part of these financial statements.

Statement of Commitments as at 30 June 2007

The Department has a non-cancellable lease on its principal premises at No 1 The Terrace, Wellington. The Department also has a non-cancellable lease over office space in Boulcott Street, Wellington. The Department has other operating commitments consisting of computer maintenance contracts, building services contracts and contracts for services. These operating lease commitments have been recorded at their gross values in the Statement of Commitments. However, onerous contract provisions have been recorded for the office space the Department does not occupy, which is detailed in Note 8.

Statement of Commitments as at 30 June 2007
2006
Actual
$000
  2007
Actual
$000
 

Operating Lease Commitments

 
3,737 Less than one year 4,056
3,201 One to two years 3,524
9,114 Two to five years 10,131
18,340 Greater than five years 16,940
34,392   34,651
- Capital commitments -
34,392 Total Commitments 34,651

The accompanying accounting policies and notes form part of these financial statements.

Statement of Contingent Assets and Liabilities as at 30 June 2007

As at 30 June 2007, the Department had no departmental contingent assets or liabilities (30 June 2006: nil).

The accompanying accounting policies and notes form part of these financial statements.

Statement of Expenditure and Appropriations for the year ended 30 June 2007

The Statement of Expenditure and Appropriations details expenditure against appropriations. Total Departmental Output Classes Expenditure and Appropriations equals total expenses in the Statement of Financial Performance on page 59.

Statement of Expenditure and Appropriations for the year ended 30 June 2007
2006
Actual
$000
  Notes 2007
Actual
$000
2007
Main Estimates $000
2007
Supp. Estimates
$000
 

Vote Finance: Departmental Output Classes

       
2,225 Budget Management   2,189 2,106 2,202
3,721 Debt and Related Financial Asset Management   6,966 4,255 7,290
5,939 Economic and Fiscal Forecasting and Reporting   5,979 6,170 6,181
2,381 Management of Claims Against the Crown, Contractual Liabilities and Crown Properties   2,433 6,300 3,013
2,328 Policy Advice: Financial and Public Sector Management Systems   2,195 3,031 2,201
4,397 Policy Advice: General Economic and Fiscal Strategies   4,340 4,603 4,366
2,566 Policy Advice: Ownership and Performance of Crown Companies and Financial Institutions   2,107 2,783 2,286
20,383 Policy Advice: Regulation and Vote Purchase, Ownership and Performance Issues   21,446 21,245 22,071
2,739 Policy Advice: Tax   2,803 2,314 2,858
46,679     50,458 52,807 52,468
 

Vote Crown Research Institutes: Departmental Output Classes

       
970 Crown Company Monitoring Advice to the Minister for Crown Research Institutes and the Minister of Research, Science and Technology   1,029 1,072 1,062
 

Vote State-Owned Enterprises: Departmental Output Classes

       
2,480 Crown Company Monitoring Advice to the Minister for State-Owned Enterprises and Other Responsible Ministers   2,582 2,603 2,613
50,129 Total Departmental Output Classes Expenditure and Appropriation   54,069 56,482 56,143

The accompanying accounting policies and notes form part of these financial statements.

Statement of Accounting Policies for the year ended 30 June 2007

Reporting entity and statutory base

These are the financial statements of the Treasury, a government department (the “Department”) as defined by section 2 of the Public Finance Act 1989 for the financial year ended 30 June 2007. The statements have been prepared pursuant to section 45 of that Act.

The activities of CCMAU have been incorporated into these financial statements.

Measurement system

These financial statements have been prepared on the basis of historical cost.

Accounting policies

Revenue

The Department derives revenue through the provision of outputs to the Crown and for services to third parties. Such revenue is recognised in the Statement of Financial Performance when earned.

Cost allocation

The Department has derived the cost of outputs using a cost allocation system, which is outlined below.

Definition of terms

“Branch” is a cost centre that directly and indirectly contributes to outputs.

“Corporate overhead costs” are those costs attributed to support service cost centres.

“Direct costs” are costs that can be identified with a single output.

“Indirect costs” are costs that cannot be identified with an output in an economically feasible manner. They are incurred for the common benefit of more than one output.

Corporate overhead costs

Corporate overhead costs are assigned to branches on an approximate resource usage basis.

Direct costs

Where possible, costs are assigned directly to outputs.

Direct labour costs

A time recording system is used to collect and assign direct labour costs to outputs.

Indirect costs

Indirect costs, including corporate overhead costs, are allocated to outputs on a direct labour cost basis.

Accounts receivable

Accounts receivable are recorded in the Statement of Financial Position at the amounts expected to be ultimately collected.

Leases

Operating lease

The Department leases office premises. Substantially all the risks and benefits of ownership are retained by the lessor and therefore these leases are classified as operating leases. Operating lease costs are recognised as an expense in the Statement of Financial Performance in the year in which they are incurred, except for onerous lease provisions.

Finance lease

The Crown Company Monitoring Advisory Unit leases computer equipment. Substantially all the risks and benefits of ownership belong to the lessee and therefore this lease is classified as a finance lease. The obligation under this lease is capitalised at the present value of the minimum lease payments. The capitalised values are amortised over the period in which CCMAU expects to receive benefits from their use.

Property, plant and equipment

Property, plant and equipment are stated at the lower of cost less accumulated depreciation or fair value. All computer equipment assets and all other assets costing more than $5,000 are capitalised.

Depreciation

Depreciation is calculated on a straight line basis to allocate cost of property, plant and equipment, less estimated residual value, over their useful lives. The estimated economic useful lives are:

Furniture and Fittings:

Safes 15 years
  Shelving 10 years
  Other 5 years

Leasehold Improvements:

  12 years

Office Machinery and Electrical Equipment:

Photocopiers 5 years
  Other 5 years
  Electronic white boards 5 years
  Facsimile machines 3 years

Computer Hardware:

UPS/Air conditioning 5 years
  Cabling 5 years
  PCs, terminals and printers 3 years
  Other hardware 3 years

Computer Software:

Internally generated and system software 3 years

Plant:

  5 years

Provisions

Employee entitlements

Provision is made in respect of the Department’s liability for resigning, retirement and long service leave. These provisions have been calculated on an actuarial basis based on the present value of expected future entitlements.

Onerous contract

Where the benefits expected to be derived from a contract are lower than the unavoidable costs of meeting the Department’s obligation under the contract, a provision is recognised. The provision is stated at the present value of the future net cash outflows expected to be incurred in respect of the contract.

Foreign currency

Foreign-currency transactions, relating primarily to information, travel and training costs, are reported at the New Zealand-dollar exchange rate at the date of the transaction.

Financial instruments

Financial instruments primarily comprise cash and bank balances, receivables and payables. All financial instruments are recognised in the Statement of Financial Position. Revenues and expenses in relation to all financial instruments are recognised in the Statement of Financial Performance.

Goods and services tax

Amounts in the financial statements are reported exclusive of GST except for advances and prepayments, accounts receivable, debtor – Crown and payables.

The amount of GST owing to or from the Inland Revenue Department as at balance date, being the difference between output GST and input GST, is included in the Statement of Financial Position as either a payable or a receivable (as appropriate).

Income tax

Government departments are exempt from the payment of income tax in terms of the Income Tax Act 1994. Accordingly, no charge for income tax has been provided for.

Commitments

Commitments disclosed include those operating and capital commitments arising from non-cancellable contractual obligations.

Contingent assets and liabilities

Departmental contingent assets and liabilities are disclosed in the Statement of Contingent Assets and Liabilities at the point at which the contingency is evident.

Changes in accounting policies

There have been no changes in accounting policies, including cost allocation accounting policies, since the date of the last audited financial statements.

Notes to the Financial Statements for the year ended 30 June 2007

1   Revenue – Crown

This is revenue earned for the supply of outputs to the Crown

2   Other revenue

2 Other revenue
2006
Actual
$000
  2007
Actual
$000
2007
Main Estimates $000
2007
Supp. Estimates
$000
12 Rental income 48 12 48
956 State sector retirement superannuation scheme 981 886 978
82 Miscellaneous 61 280 152
1,050   1,090 1,178 1,178

3   Operating expenses

3 Operating expenses
2006
Actual
$000
  2007
Actual
$000
2007
Main Estimates $000
2007
Supp. Estimates
$000
2,937 Lease of premises 2,918 3,361 2,909
  Fees to KPMG for audit of the Department and NZDMO:      
243 - old GAAP 235 235 235
- - NZ IFRS 85 73 85
182 Fees to Auditor-General for audit of the Crown Financial Statements 232 224 195
58 Other fees to Department and NZDMO auditors 42 35 40
247 Other fees to Crown auditors 319 275 280
17 Provisions for onerous lease - - -
3 Finance charges on finance lease 2 - -
2 Foreign exchange losses - realised - - -
1,598 Process management services 2,706 1,676 2,938
1,140 Transport and travel 1,360 1,348 1,605
735 Training and development 956 980 934
748 Information costs 875 816 922
547 Data processing costs 555 716 577
18 Furniture/office equipment purchases 28 - 35
3,147 Other operating costs 3,945 1,138 3,613
11,622   14,258 10,877 14,368

4   Depreciation

4 Depreciation
2006
Actual
$000
  2007
Actual
$000
2007
Main Estimates $000
2007
Supp. Estimates
$000
189 Furniture and fittings 209 202 209
385 Leasehold improvements 414 408 414
17 Office machinery and electrical equipment 18 14 17
847 Computer hardware 682 879 706
35 Computer software 56 147 65
1,473   1,379 1,650 1,411

5   Capital charge

The Treasury pays a capital charge to the Crown on its average taxpayers funds for the six months ended 30 June and 31 December. The capital charge rate for the financial year ended 30 June 2007 was 7.5% (30 June 2006: 8%).

6  Property, plant and equipment

The following categories of property, plant and equipment were used by the Department:

6 Property, plant and equipment
2006
Actual
$000
  2007
Actual
$000
2007
Main Estimates $000
2007
Supp. Estimates
$000
 

Computer Hardware

     
4,407 Cost 4,047 4,220 4,604
(3,253) Accumulated Depreciation (3,404) (3,015) (3,649)
1,154   643 1,205 955
 

Computer Software

     
1,369 Cost 1,681 1,714 1,787
(1,115) Accumulated Depreciation (1,171) (1,262) (1,180)
254   510 452 607
 

Furniture and Fittings

     
1,089 Cost 1,078 1,102 1,100
(364) Accumulated Depreciation (558) (602) (572)
725   520 500 528
 

Leasehold Improvements

     
5,025 Cost 5,058 5,071 5,058
(814) Accumulated Depreciation (1,228) (1,218) (1,228)
4,211   3,830 3,853 3,830
 

Leased Equipment

     
56 Cost 56 56 56
(17) Accumulated Depreciation (36) (36) (36)
39   20 20 20
 

Office Machinery and Electrical Equipment

     
647 Cost 674 750 664
(616) Accumulated Depreciation (634) (739) (634)
31   40 11 30
6,414 Total Property, Plant and Equipment 5,563 6,041 5,970

The 30 June 2007 actual cost balance includes $359,494 of work in progress (30 June 2006: $163,000) which has not been depreciated.

7   Provision for employee entitlements

7 Provision for employee entitlements
2006
Actual
$000
  2007
Actual
$000
2007
Main Estimates $000
2007
Supp. Estimates
$000
1,267 Retirement, resigning and long service leave 1,307 1,187 1,307
2,355 Annual leave 2,505 2,000 2,200
244 Accrued salaries 374 163 250
131 Accrued performance payments 139 100 100
284 Accrued other entitlements 205 - 320
4,281   4,530 3,450 4,177
  Represented by:      
4,005 Current 4,250 3,158 3,876
276 Non-current 280 292 301
4,281   4,530 3,450 4,177

Notes to the Financial Statements (continued)

8   Provision for onerous contracts

8 Provision for onerous contracts
2006
Actual
$000
  2007
Actual
$000
2007
Main Estimates $000
2007
Supp. Estimates
$000
59 Balance at the beginning of the year 42 47 42
17 Additional provisions made - - -
(3) Unused provision reversed - - -
(29) Amount utilised (27) (30) (25)
(2) Effect of discounting - - -
42   15 17 17
  Represented by:      
25 Current 15 17 17
17 Non-current - - -
42   15 17 17

The Department has a non-cancellable lease which is at Level 14, 47 Boulcott Street in Wellington. Owing to the change in its activities, the Department no longer occupies Level 14 at the Boulcott Street premises. These premises are currently sub-leased. Owing to market conditions, the rental income is lower than the rental expense being incurred. The net obligation under the lease agreement has been provided for as an onerous lease and this liability will be incurred over the next year.

9   Term liabilities

9 Term liabilities
2006
Actual
$000
  2007
Actual
$000
2007
Main Estimates $000
2007
Supp. Estimates
$000
  Analysis of Finance Lease Liabilities      
20 Payable no later than one year 22 - 20
20 One to two years 2 - 2
2 Two to five years - - -
(3) less future finance charges (1) - (1)
39   23 - 21
  Represented by:      
18 Current 21 - 19
21 Non-current 2 - 2
39   23 - 21

The effective interest rate for the life of the finance lease is 6.5%. The finance lease is secured over the assets to which it relates. The ownership of these assets passes to the Department at the conclusion of the lease term. The Minister of Finance, pursuant to section 47 of the Public Finance Act 1989, has approved this finance lease.

10  Reconciliation of the net surplus to the net cash flows from operating activities

This reconciliation discloses the non-cash adjustments applied to the net surplus reported in the Statement of Financial Performance on page 59 to arrive at the net cash flows from operating activities disclosed in the Statement of Cash Flows on page 62.

10 Reconciliation of the net surplus to the net cash flows from operating activities
2006
Actual
$000
  2007
Actual
$000
2007
Main Estimates $000
2007
Supp. Estimates
$000
- Net surplus from Statement of Financial Performance - - -
  Non-cash items:      
1,473 Depreciation 1,379 1,650 1,411
  Add/(less) working capital movements -      
137 Decrease/(increase) in advances and prepayments 38 - -
(84) (Increase)/decrease in accounts receivable (52) - -
(100) Decrease/(increase) in debtor - Crown 82 (589) (605)
495 Increase/(decrease) in payables, accrued expenses and provisions 179 (61) 402
514 Increase/(decrease) in other current liabilities 245 (312) (128)
(73) (Decrease)/increase in non-current liabilities (29) (17) (11)
  Investing activity items      
(10) Net loss/(gain) on sale of property, plant and equipment 7 (2) 8
2,352 Net Cash Flows From Operating Activities 1,849 669 1,077

11   Financial instruments

The Department is party to financial instrument arrangements as part of its everyday operations. These financial instruments include cash and bank balances, advances, accounts receivable, debtor Crown, and payables and accrued expenses.

Credit risk

In the normal course of its business the Department is subject to credit risk from debtors other than the Crown.

The Department does not require any collateral or security to support financial instruments with financial institutions with which the Department deals, as these entities have high credit ratings. For its other financial instruments the Department does not have significant concentrations of credit risk.

Fair value

The fair value of financial instruments is equivalent to the carrying amount disclosed in the Statement of Financial Position.

Currency and interest rate risk

The Department has no significant exposure to currency exchange loss risk and its financial instruments are not interest rate sensitive.

12   Related party information

The Department is a wholly owned entity of the Crown. The Government significantly influences the roles of the Department as well as being its major source of revenue.

13  Events subsequent to balance date

There were no events subsequent to balance date that required adjustment to the financial statements or disclosure (2006: none).

14   Transition to New Zealand equivalents to International Financial Reporting Standards (NZIFRS)

The Department will be adopting NZIFRS for the first time in its audited financial statements for the year ending 30 June 2008. This timetable is in line with the adoption of NZIFRS in the consolidated financial statements of the Government reporting entity. The Department will be adopting the accounting policies of the financial statements of the Government. The Department has evaluated the differences between these and current policies. The Treasury has established a team to manage the NZIFRS implementation. At this stage no material issues have been identified except for the recognition of a new provision for accumulating compensated absences - sick leave, arising from the adoption of NZ IAS 19: Employee Benefits. However, the actual impact of adopting NZIFRS may vary from this current assessment as further changes to NZIFRS are approved under the Financial Reporting Act 1993 and this variation may be material.

Supplementary Financial Schedules – Non-Departmental for the year ended 30 June 2007

 

The following supplementary financial schedules record the expenses, revenue and capital receipts, assets and liabilities that the Department manages on behalf of the Crown. These supplementary financial schedules include NZDMO balances reported on pages 88 to 99.

The Department administered $3,732 million of expenses, $4,998 million of revenue, $159 million of capital receipts, $23,926 million of assets and $47,565 million of liabilities on behalf of the Crown for the year ended 30 June 2007.

The financial information reported in these schedules is consolidated into the Crown financial statements, and therefore readers of these schedules should also refer to the Crown financial statements for the year ended 30 June 2007.

Overview

Borrowing expenses:

NZDMO’s debt servicing expenses decreased by $245 million from 2005/06, primarily as a result of reduced Treasury bill issuance, relating to the Reserve Bank of New Zealand’s new liquidity management regime, and also lower levels of New Zealand Government Bonds (page 79).

Capital charge:

Capital charge receipts in 2006/07 increased by 7% compared with 2005/06. This was due to an increase in the capital base of departments, primarily as a result of revaluations of property, plant and equipment, which was partially offset by a reduction in the capital charge rate from 8% to 7.5% (page 81).

Dividends:

SOE dividends decreased by $469 million from 2005/06 (page 81), primarily as a result of a special dividend from Meridian Energy in 2005/06 due to the sale of an Australian subsidiary. This reduction was partially offset by an increase in dividends received from Air New Zealand in 2006/07.

Crown entity dividends decreased by $66 million, as a special dividend had been received from Television New Zealand during 2005/06.

CRI dividends decreased by $17 million, due to a reduction in the level of dividends received from NIWA and AgResearch.

Foreign-exchange losses/(gains):

Foreign-exchange losses were $37 million in 2006/07, compared with gains of $26 million in 2005/06, as a result of movements in exchange rates affecting the value of New Zealand’s shareholding in the Asian Development Bank and the World Bank (page 78). The reduction in value of these investments is also reflected in “Other Investments” (page 83).

GSFA – Subsidies to GSF Schemes:

GSF benefit payments were 11% lower than 2005/06, as a greater number of Police members transferred their funds to a dedicated Police scheme during the prior year (page 79).

GSF unfunded liabilities:

The GSF unfunded liability as at 30 June 2007 was $10,311 million (page 84), a decrease of $1,129 million compared with 30 June 2006 (page 81). The primary reason for the decrease was movements in the economic assumptions used in calculating the liability.

International financial institutions:

No capital contributions to the International Monetary Fund (IMF) were required in 2006/07 (page 80), whilst returns of capital totalled $100 million (page 82). This reflects the cyclical nature of the IMF lending programme.

Maui Gas Contract:

The Crown’s revenues from Maui Gas Contracts have decreased by $50 million as the gas drawn reduces as the contract nears expiry. In addition the revaluation of the Crown’s margin and reduction in sales of prepaid gas has decreased both “Other Current Revenue” and “Sales of Goods and Services” by $11 million (page 81).The decrease in revenues is offset by a reduction in “Other Expenses Incurred by the Crown” for Maui Gas Contracts of $56 million (page 79).

 NPF Defined Benefit Plan (Annuitants) Scheme liability movement:

The NPF DBP (A) Scheme liability as at 30 June 2007 was $949 million (page 84), a decrease of $49 million compared with 30 June 2006. The primary reason for the decrease was movements in the economic assumptions used in calculating the liability.

NZDMO other income:

NZDMO’s other income decreased by $56 million primarily due to a reduction in market valuation gains on advances to RBNZ which were partly offset by increased interest income from greater lending to Housing New Zealand Corporation and the Crown Financing Agency. In addition, a market valuation methodology change applied to advances to RBNZ resulting in a one-off increase in other income in 2005/06 (page 81).

Reserve Bank surplus:

The Reserve Bank’s “notional surplus income” payable to the Crown increased from $139 million to $410 million. The notional surplus income is calculated under section 158 of the Reserve Bank Act 1989. This calculation excludes unrealised gains and losses. As foreign-currency loans do not mature on a regular basis, the amount of notional surplus income will vary from year to year, often quite substantially (page 81).

Rugby World Cup:

In 2005/06, the Crown agreed to underwrite the 2011 Rugby World Cup. The estimated net present value of this cost has increased by $3 million due to the reforecast of costs, changes in discount rate and the time value of money (page 84).

Under a joint venture agreement between the Crown and New Zealand Rugby Union Incorporated (NZRU), a capital contribution by way of investment in Rugby New Zealand 2011 Limited of $20 million was made during the 2006/07 year (page 80). The Crown’s share of losses for the period decreases the value of the investment, which is included within “Other Investments” (page 83).

Rail issues:

During the year, the Crown:

  • continued the structural upgrade of Wellington Railway Station, at a cost of $4 million in 2006/07 (page 80)
  • spent a further $32 million (GST inclusive) on upgrading the national rail network (page 79)
  • provided $80 million long-term loans to ONTRACK (page 80)
  • spent $98 million of the $600 million committed in the 2006 Budget to the development of rail services in Auckland (page 79). This was approved via a multi-year appropriation and the unspent balance is carried forward as per the Schedule of Commitments (page 85).

Wellington Regional Council Loan:

In 2006/07, the Crown provided $4 million of loans to the Wellington Regional Council to assist with the purchase and upgrade of passenger rail carriages (page 80.

Statement of Accounting Policies for the year ended 30 June 2007

Measurement and recognition rules applied in the preparation of these non-departmental supplementary financial schedules are consistent with GAAP and Crown accounting policies.

The financial information reported in these schedules is consolidated into the Crown financial statements, and therefore readers of these schedules should also refer to the Crown financial statements for the year ended 30 June 2007.

Schedule of expenses for the year ended 30 June 2007

The Schedule of Expenses summarises expenses that the Department administers on behalf of the Crown. Details of non-departmental expenditure and appropriations are provided on pages 79 to 80.

Schedule of expenses for the year ended 30 June 2007
2006
Actual
$000
  2007
Actual
$000
2007
Supp. Estimates $000
 

Vote Finance

   
7,875 Non-departmental output classes 5,874 7,147
1,091,367 Benefits and other unrequited expenses 975,542 929,397
2,674,921 Borrowing expenses 2,429,985 2,414,000
  289,405 Other expenses incurred by the Crown 262,728 349,014
 14,473 Other expenses - NZDMO  15,072   (5,000)
  Remeasurements:    
 -  - Rail asset writedowns  -  -
 -  - Change in GSF unfunded liability  -  -
 -  - Change in NPF DBP (A) Scheme liability  -  -
 -  - Change in Rugby World Cup provision  2,747  -
854  - Other changes - revision of assets  3,567  -
(25,939)  - Foreign-exchange losses/(gains)  36,849  -
4,052,956   3,732,364 3,694,558
 

Vote Crown Research Institutes

   
 - Other expenses incurred by the Crown 134 1,005
 -   134 1,005
4,052,956 Total Non-Departmental Expenses 3,732,498 3,695,563

The Crown’s accounting policies are an integral part of these supplementary financial schedules.

Statement of Expenditure and Appropriations for the year ended 30 June 2007

The Statement of Expenditure and Appropriations details expenditure and Capital payments incurred against appropriations. The Department administers these appropriations on behalf of the Crown.

Statement of Expenditure and Appropriations for the year ended 30 June 2007
2006
Actual
$000
  2007
Actual
$000
2007
Supp. Estimates
Voted $000
2006
Actual
$000
  2007
Actual
$000
2007
Supp. Estimates
Voted $000
 

Vote Finance

   
 

Non-Departmental Output Classes

   
3,641 GSF Authority 3,866 4,459
3,728 Guardians of New Zealand Superannuation 1,511 1,537
441 Management of Crown Overseas Properties 402 1,000
 65 Management of Residual Geothermal Liabilities   95 151
7,875   5,874 7,147
 

Benefits and Other Unrequited Expenses

   
1,091,367 GSFA – Subsidies to GSF Schemes 975,542 929,397
1,091,367   975,542 929,397
 

Borrowing Expenses

   
2,674,921 Debt Servicing 2,429,985 2,414,000
2,674,921   2,429,985 2,414,000
 

Other Expenses Incurred by the Crown

   
 46,900 Amortisation of Goodwill in Air New Zealand   46,900  46,900
3,686 Auckland Rail Development  97,897 175,000
 13,955 Crown Overseas Properties  12,263  15,898
426 Crown Residual Liabilities 211 656
 45 Geothermal Liabilities  - 500
3,000 Grant to Atihau-Whanganui Incorporation  -  -
3 Government Superannuation Appeals Board 5   50
6,880 GSF: Crown Share of Custodial and Investment Management Expenses 6,893 6,361
  112,673 Maui Gas Contracts  56,625  66,000
 59,098 Upgrade of Rail Network  31,926  22,031
 - NZ Cricket Compensation 406 406
 10,070 ONTRACK Operating  and Maintenance Costs 8,400  12,900
 - Overlander support 639 650
4 Overseas Investment Commission Honoraria  -  -
 32,093 Rugby World Cup  -  -
548 Wellington Railway Station Expenses 549 1,162
 24 Unclaimed Money   14 500
  289,405   262,728 349,014
 

Capital Expenditure

   
200 Guardians of New Zealand Superannuation  -  -
 - International Financial Institutions  - 200,000
 - Suspensory Loan to Invercargill Airport    - 1,500
 56,000 Loans to ONTRACK  80,000 102,005
3,000 Equity Injection to ONTRACK  -  10,600
 98,892 NZ Railways Corporation - Transfer of Assets  -  -
2,337,000 NZ  Superannuation Fund - Contributions 2,049,000 2,049,000
 - Rugby World Cup   20,000  20,000
700 Taitokerau Forests 600 871
5,642 Wellington Railway Station Upgrade 3,669 4,672
 - Wellington Regional Council Loan 3,858  10,600
2,501,434   2,157,127 2,399,248
6,565,002 Total Vote Finance 5,831,256 6,098,806
 

Vote Crown Research Institutes

   
 

Other Expenses Incurred by the Crown

   
 - Crown Residual Liabilities 134 1,005
 - Total Vote Crown Research Institutes 134 1,005
6,565,002 Total Non-Departmental Expenditure and Appropriations 5,831,390 6,099,811

The Crown’s accounting policies are an integral part of these supplementary financial schedules.

Schedule of Revenue for the year ended 30 June 2007

Schedule of Revenue for the year ended 30 June 2007
2006
Actual
$000
  2007
Actual
$000
2007
Supp. Estimates $000
 

Vote Finance

   
1,308,228 Capital Charge 1,404,573 1,413,481
  (9,960) Change in GSF unfunded liability 1,129,242  -
(54,101) Change in NPF DBP (A) Scheme liability  49,189  -
3,869 Contact Energy Ltd Crown margin interest 3,606 2,295
 80,452 Dividends from Crown entities  14,525  14,525
1,073,109 Dividends from SOEs 603,685 674,303
2,848 Dividends - other 2,681 2,681
 10,000 Earthquake Commission guarantee fee  10,000  10,000
 61,562 Employers superannuation contributions  52,043  58,484
150 Export Credit Office 147 117
1,048,269 Interest from investments 1,044,300 1,136,000
7,459 Interest income - other  13,880  13,000
  231,793 Other income - NZDMO 175,512 204,000
  100,632 Maui Gas contracts  50,939  60,000
 15,535 Rentals from Crown overseas properties  14,991  16,200
  139,284 Reserve Bank of New Zealand notional surplus 410,000 410,000
 21,502 Sale of goods and services  10,504  10,786
 12,222 Gain on sale of physical assets  -  -
 18,506 Other current revenue 5,944 600
373 Unclaimed money 1,431 1,000
4,071,732   4,997,192 4,027,472
  Vote Crown Research Institutes    
 18,000 Dividends from CRIs 803  -
 18,000   803  -
4,089,732 Total Non-Departmental Revenue 4,997,995 4,027,472

The Crown’s accounting policies are an integral part of these supplementary financial schedules.

Schedule of Capital Receipts for the year ended 30 June 2007

The Schedule of Capital Receipts details non-departmental capital receipts that the Department administers on behalf of the Crown.

Schedule of Capital Receipts for the year ended 30 June 2007
2006
Actual
$000
  2007
Actual
$000
2007
Supp. Estimates $000
 55,800 Contact Energy Ltd Crown margin  58,242  58,242
 - Loan repayments from other parties 500 500
  313,000 Return of capital from the International Monetary Fund 100,000 200,000
 36,700 Sale of rail assets to NZ Railways Corporation  -  -
  405,500   158,742 258,742

The Crown’s accounting policies are an integral part of these supplementary financial schedules.

Schedule of Assets as at 30 June 2007

The Schedule of Assets summarises the assets that the Department administers on behalf of the Crown.

Schedule of Assets as at 30 June 2007
2006
Actual
$000
  2007
Actual
$000
2007
Supp. Estimates
$000
2,386,956 Cash and bank accounts 3,182,132 1,378,947
2,780,683 Accounts receivable and advances 3,216,748 3,243,348
 18,985,056 Marketable securities, deposits and equity investments  16,987,719  16,294,816
 10,975 Inventory 5,238 4,974
  257,950 Intangibles and goodwill 211,050 211,050
  211,427 Other investments 193,785 231,427
  132,480 Property, plant and equipment 129,653 130,090
24,765,527 Total Non-Departmental Assets  23,926,325  21,494,652

The Crown’s accounting policies are an integral part of these supplementary financial schedules.

Schedule of Liabilities as at 30 June 2007

The Schedule of Liabilities summarises the liabilities that the Department administers on behalf of the Crown.

Schedule of Liabilities as at 30 June 2007
2006
Actual
$000
  2007
Actual
$000
2007
Supp. Estimates
Voted
$000
3,040,000 Overdrafts 4,052,000 3,041,000
 11,439,960 Government Superannuation Fund unfunded liability  10,310,718  11,547,645
  998,272 NPF DBP (A) Scheme unfunded liability 949,083 998,272
 31,793 Rugby World Cup provision  34,645  32,093
  678,293 Other payables and provisions 657,962 433,599
 36,102,000 Borrowings  31,561,000  32,077,000
 52,290,318 Total Non-Departmental Liabilities  47,565,408  48,129,609

The Crown’s accounting policies are an integral part of these supplementary financial schedules.

Schedule of commitments as at 30 June 2007

Schedule of commitments as at 30 June 2007
2006
$000
  2007
$000
 

Operating Commitments

 
2,021 Non-cancellable property lease 1,700
  575,000 Auckland rail development 498,417
 80,761 National rail network upgrades  52,160
 - Urban rail development 550,000
213 Other non-cancellable operating commitments 625
  657,995   1,102,902
 

By Term

 
  195,261 Less than one year 277,358
  335,809 One to two years 275,198
  125,145 Two to five years 548,855
1,780 More than five years 1,491
  657,995   1,102,902
 

Capital Commitments

 
4,867 Wellington Railway Station 1,003
4,867   1,003
  662,862 Total Commitments 1,103,905

The Crown’s accounting policies are an integral part of these supplementary financial schedules.

Schedule of Contingent Liabilities as at 30 June 2007

Schedule of Contingent Liabilities as at 30 June 2007
2006
$000
  2007
$000
 

Quantifiable Contingent Liabilities:

 
 50,536 Guarantees and indemnities  21,623
2,577,091 Uncalled capital 2,063,868
750 Legal proceedings and disputes 132
1,817,312 Other contingent liabilities 1,439,314
4,445,689   3,524,937

Contingent liabilities are costs which the Crown will have to face if a particular event occurs. Typically, contingent liabilities consist of guarantees and indemnities, uncalled capital, legal disputes and claims. The contingent liabilities managed by the Department on behalf of the Crown are a mixture of operating and balance sheet risks and they vary greatly in magnitude and likelihood of realisation. In general, if a contingent liability were realised it would have a negative impact on the operating balance, net Crown debt and net worth. However, in the case of contingencies for uncalled capital, the negative impact would be restricted to net Crown debt.

Where contingent liabilities have arisen as a consequence of legal action being taken against the Crown, the amount included is the amount claimed and thus the maximum potential cost. It does not represent either an admission that the claim is valid or an estimation of the possible amount of any award against the Crown.

The majority of the quantified contingent liabilities shown above arise from the uncalled capital element of the Crown’s investments in the Asian Development Bank and the World Bank, and promissory notes issued in favour of the International Monetary Fund.

Unquantifiable Contingent Liabilities

The Treasury also administers a number of contingent liabilities which cannot be quantified. These arise primarily from institutional guarantees and indemnities. Readers are referred to the Crown financial statements for further details.

The Crown’s accounting policies are an integral part of these supplementary financial schedules.

Statement of Trust Monies as at 30 June 2007

Statement of Trust Monies as at 30 June 2007
2006
$000
  2007
$000
824 Balance at the beginning of the year 849
76 Contribution 293
(3) Distribution (32)
31 Revenue 35
(79) Unclaimed money returned to the Crown (204)
849 Balance at End of the Year 941

The Trust Account is established pursuant to section 67 of the Public Finance Act 1989, for the purposes of depositing money paid to the Crown under section 77 of the Trustee Act 1956.

The source of funds is principally estates of deceased persons where the beneficiaries cannot be traced. Funds are retained in the Trust Account for six years, and are then transferred to the Crown as unclaimed money. During the financial year ended 30 June 2007, $31,724 was paid to claimants and interest of $35,463 was earned from trust money on term deposit.

Details of funds held in the Trust Account are gazetted annually.

The Crown’s accounting policies are an integral part of these supplementary financial schedules.

New Zealand Debt Management Office (NZDMO) for the year ended 30 June 2007

NZDMO is an operating unit of the Treasury. NZDMO is responsible for managing the Crown’s debt, overall cash flows and interest-bearing deposits. To facilitate a greater level of transparency regarding NZDMO operations as distinct from other entities, a separate section on NZDMO is provided in the Treasury Annual Report.

The following supplementary financial schedules reflect the activity of NZDMO as though it were a stand-alone entity. Cross-holdings or other financial positions between NZDMO and other government entities are not eliminated.

NZDMO managed $17,136 million of assets, $36,244 million of liabilities, $1,234 million of revenue and $2,445 million of expenses on behalf of the Crown for the year ended 30 June 2007.

Further information on NZDMO’s performance in managing the Crown’s sovereign-issued debt and related financial assets is provided in the Debt and Related Financial Asset Management output performance section of this report on pages 26 and 27.

The financial information reported in these schedules is consolidated into the Crown financial statements. Readers should refer to the Crown financial statements for the year ended 30 June 2007.

Nature and Extent of Activities

NZDMO, established in 1988, is part of the New Zealand Treasury and is responsible for the efficient management of the Crown’s debt and associated assets within an appropriate risk management framework. NZDMO’s strategic objective is to maximise the long-term economic return on the Crown’s financial assets and debt in the context of the Government’s fiscal strategy, particularly its aversion to risk. NZDMO’s major responsibilities involve:

  • financing the Crown’s gross borrowing requirement, managing foreign-currency assets required to meet net foreign-currency interest and principal payments, and settling and accounting for all related debt transactions
  • maintaining and developing an appropriate framework for efficiently managing the portfolio and the risks associated with it
  • disbursing cash to departments and facilitating departmental cash management
  • advancing funds to government entities in accordance with Government policy
  • providing capital markets services and derivative transactions for departments and government entities
  • providing reporting for fiscal forecasting and financial statements
  • maintaining a diversified funding base and, where appropriate, enhancing relationships with investors who hold, or are potential holders of, New Zealand government securities and with financial intermediaries and the international credit rating agencies.

Schedule of Assets and Liabilities as at 30 June 2007

The Schedule of Assets and Liabilities summarises the assets and liabilities managed by NZDMO.

Schedule of Assets and Liabilities as at 30 June 2007
Book value
2006
$M
Fair value
2006
$M
  Book value
2007
$M
Fair value
2007
$M
   

Foreign Currency Assets

   
6,003   5,988 Marketable securities 4,467   4,448
715   714 External deposits 1,062   1,062
5,281   5,281 Advances to Reserve Bank 3,926   3,926
4,792   4,806 Derivatives [1] (15,834)   (15,496)
341   341 IMF reserve position 182   182
  57 57 Debtors and receivables  54 54
5   5 Foreign bank accounts 9   9
 17,194 17,192     (6,134)  (5,815)
   

New Zealand-dollar Assets

   
2,248   2,248 Crown settlement account 3,150   3,150
912   908 Advances to Crown Financing Agency 1,123   1,096
1,342   1,342 Advances to Housing New Zealand 1,643   1,641
129   162 Other advances 184   181
  (4,281)  (4,219) Derivatives [1]  17,054 16,637
  82 82 Debtors and receivables [2] 116   116
432   523    23,270 22,821
 17,626 17,715 Total DMO assets  17,136 17,006
   

Foreign-currency Liabilities

   
2,209   2,310 Debt 1,913   1,977
 14,745 14,444 Derivatives [1]   (8,212)  (8,162)
233   233 Creditors and Payables [2] 211   210
 17,187 16,987     (6,088)  (5,975)
   

New Zealand-dollar Liabilities

   
4,993   4,992 Treasury bills 2,283   2,282
 25,496 25,819 Government bonds [3]  24,594 23,858
1,796   2,073 Inflation-indexed bonds 1,860   2,043
389   387 Kiwi bonds 361   358
3,040   3,040 Crown balances with Westpac [4]   4,052   4,052
(13,539)   (13,204) Derivatives [1] 8,722   8,969
419   419 Creditors and payables 420   420
  13 15 Other  40 42
 22,607 23,541    42,332 42,024
 39,794 40,528 Total Liabilities  36,244 36,049
  • [1] Each derivative transaction is recorded as an asset or a liability based on its year-end value. Where derivatives (currency swaps and foreign exchange contracts) involve New Zealand-dollar and foreign-currency flows, the flows are separately classified with the result that both positive and negative values are reported within assets and liabilities.
  • [2] Accrued interest, including on derivatives, is recognised under payables or receivables.
  • [3] Government bonds include non-market issues to the Reserve Bank of New Zealand.
  • [4] Crown balances with Westpac at 30 June 2007 include the NZDMO disbursement account ($4,332 million O/D). NZDMO disburses funds from this account to bank accounts maintained by departments and the account operates as an effective contra to the balances held by departments.

The Crown’s accounting policies are an integral part of these supplementary financial schedules.

 

Schedule of Revenue and Expenses for the year ended 30 June 2007

The Schedule of Revenues and Expenses summarises the revenues and expenses associated with the assets and liabilities managed by NZDMO.

Schedule of Revenue and Expenses for the year ended 30 June 2007
2006
$M
  2007
$M
 

Foreign-currency Revenue

 
186  Marketable securities 233
  23  External deposits  42
158  Advances to RBNZ 193
371  Derivatives 212
8  IMF reserve position 5
  80  Unrealised gains/(losses) on advances to RBNZ   (6)
826   679
  New Zealand-dollar Revenue  
  73  Crown settlement account  75
  55  Advances to Crown Financing Agency  64
  97  Advances to Housing New Zealand 115
229  Derivatives 284
8  Other  17
462   555
1,288  Total Revenue 1,234
  Foreign-currency Expenditure  
141  Debt 117
  54  Derivatives  44
  14  Foreign exchange (gains)/losses   (9)
209   152
  New Zealand-dollar Expenses  
360  Treasury bills 209
1,655  Government bonds 1,570
149  Inflation-indexed bonds 151
  23  Kiwi bonds  23
270  Derivatives 293
  23  Other  47
2,480   2,293
2,689  Total Expenses 2,445

The Crown’s accounting policies are an integral part of these supplementary financial schedules.

Risk management

With Ministerial approval, NZDMO maintains a portfolio and risk management framework within which it operates. That includes NZDMO’s strategic objective, objectives for New Zealand-dollar and foreign-currency debt, the instruments in which NZDMO may transact, limits in respect of market and credit risk utilisation, composition requirements for the liquidity asset portfolio and maturity profile requirements.

The risk management framework has been in place since NZDMO was established. The specifics of implementation have been subject to continuous improvement as resources allow and as information technology capability and analytical techniques have improved. Careful prioritisation ensures that resources are allocated to managing the most significant risks first and that fundamental risks are covered. In addition, NZDMO periodically commissions reviews by external experts of its risk management framework and practices, including the strategic parameters of the portfolio.

The basis of operation is well defined, including the legal authority to borrow and service debt and NZDMO’s internal organisation. Internal operations are managed through an established risk culture, body of policies, ethical guidelines and codes of conduct, defined responsibilities and accountabilities, formal delegations, segregated duties, limits, reporting and performance management requirements, procedural manuals and established processes.

Credit risk

Credit risk refers to the risk of a counterparty failing to discharge an obligation.

Credit losses arise when NZDMO is required to find a transaction counterparty to replace one that is no longer of acceptable credit quality. In finding a suitable replacement, NZDMO would incur transaction costs and potentially suffer a loss in the market value of the original transaction. Credit losses also arise when the issuer of a financial obligation that NZDMO holds as an asset is downgraded or defaults.

Financial instruments that subject NZDMO to credit risk include bank balances, advances, investments, interest-rate swaps, currency swaps, and foreign-exchange forward contracts.

NZDMO manages credit risk through the use of credit exposure limits. Credit exposures are maintained only with highly rated institutions for which the probability of default is low. To diversify credit exposure, NZDMO limits its exposure to any one institution. The creditworthiness of counterparties is continuously monitored. Credit risk is further controlled by incorporating credit support annexes into master swap agreements with swap and foreign-exchange counterparties.

As at 30 June 2007, total credit exposure was calculated as follows:

2006
$M
  2007
$M
 17,626  Total NZDMO assets  17,136
   Less:  
9,887  Crown-related balances  10,005
179  Crown-related derivatives 124
139  Receivables 170
7,421  Total Credit Exposure 6,837
   Comprising:  
5  Foreign bank accounts 9
  58  Advances  34
715  External deposits 1,062
5,971  Marketable securities 4,454
331  Derivatives 1,096
341  IMF 182
7,421  Total Credit Exposure 6,837

As at 30 June 2007, concentrations of credit exposure by industry type were as follows:

2006
$M
  2007
$M
3,291  Sovereign issuers 2,153
1,306  Supranationals 380
2,081  Banks 3,029
743  Other 1,275
7,421  Total Credit Exposure 6,837

As at 30 June 2007, concentrations of credit exposure by geographical area were as follows:

2006
$M
  2007
$M
560  United States 990
4,216  Europe 3,417
2  Japan 4
931  Australia 1,706
286  New Zealand 294
1,306  Supranationals 380
120  Other  46
7,421  Total Credit Exposure 6,837

As at 30 June 2007, concentrations of credit exposure by credit rating were as follows:

2006
$M
  2007
$M
5,322  AAA 3,744
1,688  AA 2,876
  12  A 5
58  Non-rated and other 30
341  IMF reserve position 182
7,421  Total Credit Exposure 6,837

Collateral

For swaps and foreign-exchange contracts transacted under NZDMO’s customised International Swaps and Derivatives Association (ISDA) swap documentation, collateral is required when the mark-to-market exposure exceeds the credit exposure limit for a counterparty.

As at June 2007, NZDMO held the following as collateral against counterparties under credit support annexes to master swap agreements:

2006
$M
  2007
$M
  59  Cash deposits 493
59  Total Collateral Held 493

Settlement exposure

The settlements process involves the receipt and payment of funds and securities, and default by a settlement agent would result in NZDMO being unable to make or receive payments with that agent.

The nature of NZDMO’s business is such that large amounts may be settled on one day. For that reason, monetary limits are not placed on NZDMO’s exposure to transaction banks, custodians, fiscal agents and clearing brokers. Risk in respect of those institutions is managed through procedures for selecting and monitoring transaction settlement agents.

Interest-rate and foreign-exchange risk

Interest-rate risk refers to the risk of loss due to adverse movements in interest rates. Foreign-exchange risk refers to the risk of loss due to adverse movements in foreign-exchange rates.

New Zealand-dollar assets and liabilities

The New Zealand-dollar portfolio is driven by a set of principles that support NZDMO’s debt management objective, rather than one strategic benchmark. These principles are used to manage the risks and costs of the New Zealand- dollar portfolio and help NZDMO issue debt cost-effectively. The market value of New Zealand-dollar debt is not actively managed.

In general, interest-rate risk is managed strategically. To diversify interest-rate risk and lower the cost of the New Zealand portfolio, NZDMO maintains a mix of fixed-rate and floating-rate debt and uses interest-rate swaps. Inflation-indexed debt makes up a component of the portfolio and has been issued when it was cost-effective to do so. Bonds are issued into benchmark lines to improve liquidity in the market and, consequently, reduce the Crown’s cost of borrowing. When issuing domestic securities, NZDMO samples interest rates throughout the year by conducting monthly auctions of Government bonds and weekly auctions of Treasury bills. NZDMO is committed to transparency, predictability and even-handedness in its domestic securities’ issuance.

Foreign-currency assets and liabilities

NZDMO manages interest-rate and foreign-exchange risk in the foreign-currency portfolio in an integrated manner.

Unless otherwise directed by the Minister of Finance, NZDMO’s net foreign-currency debt position is kept close to zero when measured on a market value basis. With Ministerial approval, there are specified conservative position and loss limits that allow some discretionary trading to take place. Market risk is incurred from that discretionary activity due to movements in the interest rates and foreign-exchange rates. The range of instruments used to minimise exposure to market risk includes foreign-exchange contracts, currency swaps, interest-rate swaps and futures contracts.

Market risk associated with discretionary trading is managed through the use of value at risk (VAR) limits and stop-loss limits. The VAR limit is maintained for the overall foreign-currency portfolio. It is expressed over daily, monthly and annual time horizons at 95% confidence level and reflects the risk tolerance of the Government in respect of discretionary activity undertaken by NZDMO.

A stop-loss limit is in place to protect NZDMO from further losses once actual losses reach a certain point. It reflects the tolerance of the Government in respect of maximum acceptable losses over monthly, quarterly and annual time horizons.

NZDMO uses back-testing to evaluate the performance of the VAR model. Actual profit and loss are compared with the market risk estimates calculated using the VAR model to determine its integrity and performance. Consistent with industry best practice, VAR is supplemented with stress-testing to understand how extreme or unusual events would impact on the portfolio.

Refinancing and repricing risk

Refinancing and repricing risk refers to the risk that maturing debt is refinanced, maturing assets are reinvested or instruments are repriced at an unacceptable yield.

To manage the refinancing risk associated with New Zealand-dollar borrowing, NZDMO establishes a relatively even maturity profile for debt across the yield curve to manage the funding requirement, and the uncertainty around it arising from fiscal shocks, flexibly and without putting undue pressure on interest rates. In respect of foreign-currency borrowing, NZDMO establishes a maturity profile for debt that reduces the likelihood of being unable to access markets in a timely manner or raise funds at an acceptable cost.

Repricing risk is further diversified through the use of interest-rate swaps.

As at June 2007, assets and liabilities will mature or reprice within the following periods:

  2007
$M
0-12 Months
$M
1-2 years
 $M
2-5 years
 $M
5-10 years
$M
>10 years
 $M
Foreign Currency Assets            
 Marketable securities   4,467   3,891  87   403  86 -
 External deposits   1,062   1,062  - - - -
 Advances to RBNZ   3,926   3,926  - - - -
 Derivatives (15,834)   (15,530)  (128)  (445)   269 -
 IMF reserve position 182 182        
 Debtors and receivables  54 54  - - - -
 Foreign bank accounts 9   9  - - - -
    (6,134)  (6,406) (41) (42)   355 -
New Zealand-dollar Assets            
 Crown settlement account  3,150   3,150  - - - -
 Advances to Crown Financing Agency  1,123   273  95   345   410 -
 Advances to Housing New Zealand  1,643   1,593  50 - - -
 Derivatives   17,054 14,908   212   680   338   916
 Debtors and receivables  116   116  - - - -
 Other  184   110  - -  18  56
    23,270 20,150   357   1,025   766   972
 Total Assets   17,136 13,744   316   983   1,121   972
Foreign-currency Liabilities            
 Debt  1,913   1,366  -   288   259 -
 Derivatives   (8,212)  (8,135)  70  (237)  90 -
 Creditors and  payables  211   211  - - - -
    (6,088)  (6,558)  70  51   349 -
New Zealand-dollar Liabilities            
 Treasury bills  2,283   2,283  - - - -
 Government bonds   24,594 - 3,771   9,142   8,020   3,661
 Inflation-indexed bonds  1,860 -  - -   1,860 -
 Kiwi bonds  361   320  33 8 - -
 Crown balances with Westpac  4,052   4,052  - - - -
 Derivatives  8,722 15,836   (1,967)  (1,945)  (1,787)  (1,415)
 Creditors and payables  420   420  - - - -
 Other  40   1  -  37 2 -
    42,332 22,912 1,837   7,242   8,095   2,246
 Total Liabilities   36,244 16,354 1,907   7,293   8,444   2,246
  • * The figures reported above, including derivatives, are exclusive of accrued interest. Derivative values will differ from the book values reported in the “Derivatives” table where accrued interest is included.
    Derivatives may contribute to two different repricing buckets. Floating legs would reprice within 12 months while the fixed leg would be classified according to swap maturity.

Liquidity risk

Liquidity risk refers to the risk of loss due to the lack of market liquidity preventing timely or cost-effective liquidation of products, positions or portfolios. To manage liquidity risk, NZDMO holds readily liquefiable assets in sufficient quantity to cover off all obligations falling due over rolling six-week and 12-week horizons.

Derivatives

NZDMO’s involvement in derivatives comprises foreign-exchange contracts, currency swaps, interest-rate swaps and futures contracts. As at 30 June 2007, the value of derivatives* was as follows:

Book value
2006
$M
Fair value
2006
$M
  Book value
2007
$M
Fair value
2007
$M
   

Foreign-exchange Contracts

   
202   206  In gain position 554   539
  (537)  (521)  In loss position   (295)  (296)
  (335)  (315)  Net Position 259   243
   

Currency Swaps

   
216   242  In gain position 591   545
  (646)  (631)  In loss position   (175)  (230)
  (430)  (389)  Net Position 416   315
   

Interest-rate Swaps

   
136   207  In gain position  85   127
 (25)  (114)  In loss position  18  (281)
111 93  Net Position 103  (154)
   

Futures

   
 - -  In gain position  - -
 - -  In loss position  - -
 - -  Net Position  - -
  • * Derivatives’ position includes accrued interest. Net accrued interest at 30 June 2007 was $68 million (30 June 2006: $41 million)

As at 30 June 2007, the notional value of derivatives was as follows:

Notional value
2006
$M
  Notional value
2007
$M
 18,844 Foreign-exchange contracts  23,050
5,558 Currency swaps 5,312
8,925 Interest rate swaps 9,213
560 Futures 241
 33,887    37,816

Operational risk

Operational risk refers to the risk of loss due to an event that could impact on NZDMO’s ability to produce its outputs to the quality, quantity and cost specified. Risk events include resource failures or constraints, control and security breaches or failures, transaction errors, compliance breaches, poor strategic decisions, the breakdown of key relationships and disasters.

Operational risks are managed in a number of ways. Operational risk policies span, for instance, transaction processing, legal and regulatory issues, ethical standards, physical and systems security, and business continuity. Independent experts provide additional support in managing operational risk. NZDMO managers assess the organisation’s operational risk profile annually.

Audit Report

KPMG Logo.

To the Readers of the Treasury’s Financial Statements and Performance Information for the year ended 30 June 2007.

The Auditor-General is the auditor of the Treasury (the Department). The Auditor-General has appointed me, Andrew Dinsdale, using the staff and resources of KPMG, to carry out the audit on his behalf. The audit covers the financial statements, statement of service performance and schedules of non-departmental activities included in the annual report of the Department for the year ended 30 June 2007.

Unqualified Opinion

In our opinion:

  • The financial statements of the Department on pages 59 to 73:
    • comply with generally accepted accounting practice in New Zealand; and
    • fairly reflect:
      • the Department’s financial position as at 30 June 2007;
      • the results of its operations and cash flows for the year ended on that date.
  • The statement of service performance of the Department on pages 24 to 44 and 48 to 55:
    • complies with generally accepted accounting practice in New Zealand; and
    • fairly reflects for each class of outputs:
      • its standards of delivery performance achieved, as compared with the forecast standards outlined in the statement of forecast service performance adopted at the start of the financial year; and
      • its actual revenue earned and output expenses incurred, as compared with the forecast revenues and output expenses outlined in the statement of forecast service performance adopted at the start of the financial year.
  • The schedules of non-departmental activities on pages 78 to 87 and 90 to 98 fairly reflect the assets, liabilities, revenues, expenses, contingencies, commitments and trust monies managed by the Department on behalf of the Crown for the year ended 30 June 2007.

The audit was completed on 18 September 2007, and is the date at which our opinion is expressed.

The basis of our opinion is explained below. In addition, we outline the responsibilities of the Chief Executive and the Auditor, and explain our independence.

Basis of Opinion

We carried out the audit in accordance with the Auditor-General’s Auditing Standards, which incorporate the New Zealand Auditing Standards.

We planned and performed the audit to obtain all the information and explanations we considered necessary in order to obtain reasonable assurance that the financial statements and statement of service performance did not have material misstatements, whether caused by fraud or error.

Material misstatements are differences or omissions of amounts and disclosures that would affect a reader’s overall understanding of the financial statements and the statement of service performance. If we had found material misstatements that were not corrected, we would have referred to them in our opinion.

The audit involved performing procedures to test the information presented in the financial statements and statement of service performance. We assessed the results of those procedures in forming our opinion.

Audit procedures generally include:

  • determining whether significant financial and management controls are working and can be relied on to produce complete and accurate data;
  • verifying samples of transactions and account balances;
  • performing analyses to identify anomalies in the reported data;
  • reviewing significant estimates and judgements made by the Secretary to the Treasury;
  • confirming year-end balances;
  • determining whether accounting policies are appropriate and consistently applied; and
  • determining whether all financial statement and statement of service performance disclosures are adequate.

We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements or statement of service performance.

We evaluated the overall adequacy of the presentation of information in the financial statements and statement of service performance. We obtained all the information and explanations we required to support our opinion above.

Responsibilities of the Secretary to the Treasury and the Auditor

The Secretary to the Treasury is responsible for preparing financial statements and a statement of service performance in accordance with generally accepted accounting practice in New Zealand. The financial statements must fairly reflect the financial position of the Department as at 30 June 2007 and the results of its operations and cash flows for the year ended on that date. The statement of service performance must fairly reflect, for each class of outputs, the Department’s standards of delivery performance achieved and revenue earned and expenses incurred, as compared with the forecast standards, revenue and expenses adopted at the start of the financial year. In addition, the schedules of non-departmental activities must fairly reflect the assets, liabilities, revenues, expenses, contingencies, commitments and trust monies managed by the Department on behalf of the Crown for the year ended 30 June 2007. The Secretary to the Treasury’s responsibilities arise from sections 45A, 45B and 45(1)(f) of the Public Finance Act 1989.

We are responsible for expressing an independent opinion on the financial statements and statement of service performance and reporting that opinion to you. This responsibility arises from section 15 of the Public Audit Act 2001 and section 45D(2) of the Public Finance Act 1989.

Independence

When carrying out the audit we followed the independence requirements of the Auditor-General, which incorporate the independence requirements of the Institute of Chartered Accountants of New Zealand.

In addition to the audit we have carried out assignments in the areas of assistance with the implementation of New Zealand International Financial Reporting Standards for the Crown and taxation advice, which are compatible with those independence requirements. Other than the audit and these assignments, we have no relationship with or interests in the Department.

Andrew Dinsdale
KPMG
On behalf of the Auditor-General
Wellington, New Zealand

Quality Standards for Analysis and Advice

Purpose
The objective for the advice is clearly stated; it answers any financial and economic issues raised by the Minister and it demonstrates a clear understanding of the desired outcome(s) of the Government and/or
the Minister.

Problem definition
Any public policy problem, including the underlying causes, size and materiality of issues, is identified and supported by data or other evidence.

Context
It is clear where the advice stands in the context of the wider policy process, including what has already been undertaken and what is expected to occur in the future. CCMAU’s advice is undertaken in the context of the Government’s ownership expectations for SOEs and/or CRIs.

Logic
An appropriate analytical framework is used. Assumptions behind the advice are explicit and the argument is logical and supported by facts.

Accuracy
All material facts are present and accurate. Known gaps that could significantly affect the conclusions are identified and the range of uncertainty stated. Forecasts are credible at the time they are produced and take into account all relevant information.

Options
A range of options is presented that provides clearly differentiated choices and these are rigorously
evaluated against the analytical framework. Costs, benefits, consequences and risks/opportunities of the options are assessed as part of the analysis. Where it is not appropriate to use a range of options the
reasons are clearly stated.

Recommendations
Recommendations are clear, logical and action oriented and can stand alone from the rest of the advice. They are sufficient to enable a decision to be made on the proposal or to move to the next decision/action point.

Consultation
Evidence of thorough and timely consultation with other government departments and interested parties is presented, and their views, including objections, incorporated as appropriate.

Practicality
Issues of implementation, technical feasibility, practicality and timing are considered and advice accurately identifies compliance, transitional, political, legislative, revenue, expense and administrative implications
and costs (quantified where possible).

Communication
Guidance is provided on how communications arising from decisions on the advice should be handled, including an assessment of key stakeholders who should be informed and how.

Presentation
Material is presented to suit the target audience and:
  • is concise and structured in a way that assists others to understand the aim of the advice, key features of the information, analysis and recommendations, and their key implications
  • uses appropriate language and style
  • uses empirical evidence
  • avoids clichés and technical jargon (or where the latter is not possible, it is used appropriately for a general audience)
  • is consistent with departmental and Cabinet Office presentation requirements.

Note:

All aspects of the standards may not apply to specific pieces of policy advice, given considerations of urgency or the particular nature of the advice to be provided. For instance, much of our work is second opinion advice on other departments’ proposals often undertaken under tight time pressures.

Working and policy perspectives papers for the year ended 30 June 2007

Treasury Working and Policy Perspectives Papers contain work in progress on a variety of economic, financial, trade and social issues. Our aim in publishing is to make papers available to a wider audience, and to inform and encourage public debate. All papers can be viewed on our website: [www.treasury.govt.nz/publications/research-policy/wp]

Papers added during 2006/07 include:

Working Papers 2007
07/04 Housing in the Household Portfolio and Implications for Retirement Saving: Some Initial Findings from SOFIE
by Grant M Scobie, Trinh Le and John Gibson
07/03 Adaptive Governance and Evolving Solutions to Natural Resource Conflicts by Kevin Guerin
07/02 An Analysis of Tax Revenue Forecast Errors by Martin Keene and Peter Thomson
07/01 Productivity, Capital-Intensity and Labour Quality at Sector Level in New Zealand and the UK by Geoff Mason and Matthew Osborne
Working Papers 2006
06/11 Toward a Model of Firm Productivity Dynamics by David Law, Bob Buckle and Dean Hyslop
06/10 Treasury’s Forecasting Performance: A Head-to-Head Comparison by Khoon Lek Goh and Daniel Lawrence
06/09 Past, Present and Future Developments in New Zealand’s Terms of Trade by Philip Borkin
06/08 An Empirical Investigation of Fiscal Policy in New Zealand by Iris Claus, Aaron Gill, Boram Lee and
Nathan McLellan
06/07 Housing: An Analysis of Ownership and Investment Based on the Household Savings Survey by Mark van Zijll de Jong and Grant M Scobie
06/06 Use of Targets to Improve Health System Performance: Should New Zealand Follow the Successful Lead of the English NHS? by Nick Mays
06/05 Investigating Health Technology Diffusion in New Zealand - How Does it Spread and Who Stands to Gain?
by Louise Allsopp
06/04 Estimating the costs of crime in New Zealand in 2003/04 by Tim Roper and Andrew Thompson
Policy Perspectives Papers 2007
None published in 2007 to date.
Policy Perspectives Papers 2006
06/09 Measurement of Public Sector Output and Productivity by James Douglas
06/08 Principles for Royalties on Non-Mineral Natural Resources in New Zealand by Kevin Guerin
06/07 Funding Recreational Opportunity Provision on the New Zealand Conservation Estate by Tobias Haque
06/06 Environmental Risk Management in New Zealand – Is there Scope to Apply a More Generic Framework?
by Linda Cameron
06/05 International Comparative Surveys of Regulatory Impact by Julia Hall and Anthony Casey
06/04 Electricity Generation: Competition, Market Power and Investment by Max Dupuy

Legislation as at 30 June 2007

Budget legislation administered by the Treasury during
the year:

  • Appropriation Act(s)
  • Imprest Supply Act(s)

Other legislation administered by the Treasury:

  • Bank of New Zealand Act 1988
  • Crown Entities Act 2004 (Part 4)
  • Crown Forest Assets Act 1989
  • Crown Research Institutes Act 1992
  • Export Guarantee Act 1964
  • Farm and Fishing Vessel Ownership Savings Schemes (Closure) Act 1998
  • Finance Acts (Various)
  • Government Superannuation Fund Act 1956
  • Hawkes Bay Earthquake Act 1931
  • Institute of Chartered Accountants of New Zealand Act 1996
  • International Finance Agreements Act 1961
  • National Expenditure Adjustment Act 1932
  • National Provident Fund Restructuring Act 1990
  • National Savings Act 1940
  • New Zealand Council Planning Dissolution Act 1991
  • New Zealand Government Property Corporation Act 1953
  • New Zealand Railways Corporation Restructuring Act 1990
  • New Zealand Railways Staff Welfare Society Dissolution
    Act 1999
  • New Zealand Superannuation Act 2001 (various provisions)
  • Overseas Investment Act 2005
  • Post Office Bank Act 1987
  • Public Audit Act 2001
  • Public Finance Act 1989
  • Rural Banking and Finance Corporation of New Zealand
    Act 1989
  • Southland Electricity Act 1993
  • State Insurance Act 1990
  • State-Owned Enterprises Act 1986
  • State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Act 2007
  • Superannuation Schemes Act 1989
  • Tourist Hotel Corporation of New Zealand Act 1989
  • Treasurer (Statutory References) Act 1997

Delegated legislation administered by the Treasury:

  • Bank of New Zealand Order 1989
  • Cityline (NZ) Vesting Order 1992
  • Crown Entities (Financial Powers) Regulations 2005
  • Electricity Industry Reform Act Commencement Orders (various)
  • Export Guarantee Amendment Act Commencement Order 1990
  • Finance Acts Orders (various)
  • International Finance Agreements Amendment Act Commencement Order 1978
  • National Provident Fund (Approval of Amendments to Restructuring Proposal) Order 1993
  • National Savings Investment Account Regulations (various)
  • New Zealand Railways Corporation Restructuring Act Orders (various)
  • New Zealand Railways Staff Welfare Society Dissolution Act Commencement Order 1999
  • Overseas Investment Regulations 2005
  • Post Office Bank Amendment Act Orders (various)
  • Public Audit (West Coast Development Trust) Order 2002
  • Public Finance Act Orders (various)
  • State-Owned Enterprises Act Orders (various)
  • Tourist Hotel Corporation of New Zealand Act Commencement Order 1990
  • Tower Corporation Act Commencement Order 1990

Monitoring of crown Agencies

The Treasury has sole monitoring responsibility for the following:

  • Earthquake Commission (EQC)
  • National Provident Fund (NPF)
  • New Zealand Superannuation Fund (NZSF)
  • Government Superannuation Fund (GSF)
  • Air New Zealand Ltd

CCMAU has sole monitoring responsibility for the following:

  • New Zealand Lotteries Commission (Lotteries)
  • Pacific Forum Line Ltd (PFL)

CCMAU has a lead monitoring role with support
from the Treasury for the following:

  • State-Owned Enterprises:
  • AgriQuality Ltd (AgriQuality)
  • Airways Corporation of New Zealand Ltd (Airways)
  • Animal Control Products Ltd (ACP)
  • Asure New Zealand Ltd (Asure)
  • Electricity Corporation of New Zealand (Residual) Ltd (ECNZ)
  • Genesis Power Ltd (Genesis)
  • Kordia Group Ltd (Kordia)
  • Landcorp Farming Ltd (Landcorp)
  • Learning Media Ltd (LML)
  • Meridian Energy Ltd (Meridian)
  • Meteorological Service of New Zealand Ltd (MetService)
  • Mighty River Power Ltd (Mighty River Power)
  • New Zealand Post Ltd (NZ Post)
  • New Zealand Railways Corporation (ONTRACK)
  • Public Trust (Public Trust)
  • Quotable Value Ltd (Quotable Value)
  • Solid Energy New Zealand Ltd (Solid Energy)
  • Timberlands West Coast Ltd (Timberlands)
  • Transpower New Zealand Ltd (Transpower)
  • Other Crown companies:
  • New Zealand Venture Investment Fund Ltd (NZVIF)
  • Radio New Zealand Ltd (RNZ)
  • Television New Zealand Ltd (TVNZ)
  • Research & Education Advanced Network
    New Zealand Ltd (REANNZ)
  • Crown Research Institutes:
  • AgResearch Ltd (AgResearch)
  • Institute of Environmental Science and Research Ltd (ESR)
  • Institute of Geological and Nuclear Sciences Ltd
    (GNS Science)
  • Landcare Research New Zealand Ltd (Landcare Research)
  • National Institute of Water and Atmospheric
    Research Ltd (NIWA)
  • New Zealand Forest Research Institute Ltd (Scion)
  • New Zealand Institute for Crop and Food Research Ltd (Crop and Food Research)
  • The Horticulture and Food Research Institute
    New Zealand Ltd (HortResearch)
  • Other:
  • Christchurch International Airport Ltd (CIAL)
  • Dunedin International Airport Ltd (DIAL)
  • Invercargill Airport Ltd (IAL)