General Publications
Department of Labour Annual Report 2006
Financial statements
Notes to the financial statements for the year ended 30 June 2006
* The Department has also capitalised $22,800 worth of fees from Audit New Zealand, the Department’s external auditor, for assurance work done in relation to various capital projects (2004/05: $23,740).
5 Capital charge
The capital charge represents a charge by the Crown on its taxpayers’ funds as at 30 June and 31 December each year. The capital charge rate for 2005/06 was 8.0% (2004/05: 8.0%).
6 Transfers between Departments
During the year no transfers of assets with other Departments occurred. In 2004/05 the responsibility for administrative support for the Employment Court transferred from the Department of Labour to the Ministry of Justice. Fixed Assets with a net book value totalling $69,000 relating to the Employment Court were transferred to the Ministry of Justice.
Land and buildings in Suva were revalued at fair value as at 20 February 2004, by an independent registered valuer, Serupepeli Navuta, of Rolle Hillier Parker. Land and buildings at the Mangere Resettlement Centre in Auckland were revalued at fair value as at 16 February 2004, by an independent registered valuer, Rene McLean, of Quotable Value NZ. There were no significant assumptions or limiting conditions set out in the valuation reports.
An independent actuarial valuation was undertaken by Melville Jessup Weaver as at 30 June 2006 to estimate the present value of retirement leave. The key assumptions used in discounting to present values were:
- Discount rate for the 2006 financial year 6% p.a. (30 June 2005 5.0% p.a.).
- Salary growth rate for the 2006 financial year 3.5% p.a. (30 June 2005 3.0% p.a.).
A provision for refunding of lapsed General Skills applications was established in June 2003. Refunding has largely been completed during the three years since, with 11,276 applications refunded. Approximately 432 applications remain unclaimed as at balance date. The additional provision was made to restate the predominantly foreign currency-denominated provision into equivalent New Zealand dollars over a period of projected decreases in the value of the New Zealand dollar.
In January 2003, the Department entered into the ACC’s Partnership Programme with the ACC. Under the Partnership Programme, the Department took responsibility for workplace injury management. This includes rehabilitation and claims management for staff injured at work. In return, the Department is able to substantially reduce the ACC employers’ levy. This provision relates to the estimated costs under the Partnership Programme of outstanding claims and claims incurred but not reported.
During the year, a provision was established for one-off costs associated with the restructuring of work groups within the Department and estimated settlement costs associated with Collective Employment Agreement negotiations. The restructuring and settlement will be completed in the 2006/07 year.
Under the Public Finance Act 1989, entering into finance lease arrangements is deemed to be raising a loan, which requires the approval of the Minister of Finance. The Department has received the Minister’s approval for these leases.
The interest rates implicit in these lease contracts vary from 7-13% per annum.
13 Taxpayers’ funds
Taxpayers’ funds comprise general funds and a revaluation reserve.
| Actual 30 June 2005 $000 | Actual 30 June 2006 $000 | Main Estimates 30 June 2006 $000 | Supp. Estimates 30 June 2006 $000 | |
|---|---|---|---|---|
| 27,768 | General funds as at 1 July | 43,733 | 43,737 | 43,733 |
| 4,178 | Net surplus/(deficit) | (5,466) | (7,438) | (4,504) |
| 17,968 | Capital contribution | 13,810 | 11,015 | 13,810 |
| (1,934) | Capital withdrawal | (2,042) | - | - |
| (4,178) | Repayment of surplus to the Crown | - | - | - |
| (69) | Transfers between Departments | - | - | - |
| 43,733 | General funds as at 30 June | 50,035 | 47,314 | 53,039 |
Subject to joint Ministers’ approval, the Department is entitled to a refund from the Crown for the Department’s net deficit for the year ended 30 June 2006. The refund entitlement arises from the visa and permits memorandum account which allows the Department to replenish any deficit in taxpayers’ funds arising from visa and permit activities. As joint approval was not granted by 30 June 2006, the refund has not been recognised in the year ended 30 June 2006.
| Actual Land 30 June 2005 $000 | Actual Building 30 June 2005 $000 | Actual Total 30 June 2005 $000 | Actual Land 30 June 2006 $000 | Actual Building 30 June 2006 $000 | Actual Total 30 June 2006 $000 | |
|---|---|---|---|---|---|---|
| 3,467 | 891 | 4,358 | Opening Balance as at 1 July | 3,467 | 891 | 4,358 |
| 3,467 | 891 | 4,358 | Closing Balance as at 30 June | 3,467 | 891 | 4,358 |
15 Financial instruments
Credit Risk
Financial instruments, which potentially subject the Department of Labour to credit risk, principally consist of cash on hand, bank balances, forward exchange contracts and accounts receivable.
There were no major concentrations of credit risk with respect to accounts receivable.
Interest Rate Risk
The Department has no interest rate risk as it neither borrows nor invests monies.
Fair Value
Estimated fair values of the Department’s financial assets and liabilities as at 30 June 2006 equate with the carrying amounts reflected in these financial statements.
Currency Risk
The Department reduces its exposure to currency risk through the use of forward exchange contracts. Forward contracts are not captured in the statement of Financial Position. Forward contracts in place at balance date and the respective fair values at that date are as per the following schedule. The NZ Treasury Debt Management Office provided the market valuations of these instruments. No Provision is recognised for off balance sheet exposures.
Maturity Date |
Currency | Nominal FC contracted to buy (sell) $000 | Nominal NZD contacted to buy (sell) $000 | Market value at 30/6/06 $000 |
|---|---|---|---|---|
| 19/07/2006 | AUD | 2,162 | (2,393) | 250 |
| 19/07/2007 | AUD | 2,258 | (2,522) | 250 |
| 31/07/2006 | EUR | (30) | 62 | (2) |
| 31/08/2006 | EUR | (30) | 62 | (2) |
| 31/07/2006 | USD | (50) | 82 | (0) |
| 31/08/2006 | USD | (50) | 83 | (0) |
| 31/07/2006 | USD | (400) | 663 | 3 |
| 31/08/2006 | USD | (200) | 332 | 1 |
| Net Market Value - forward contracts | 500 |
All significant overseas operating lease commitments have been listed, along with all foreign bank account balances as at 30 June 2006.
As at 30 June 2006 the Department had the following foreign currency exposures:
Currency |
Foreign Currency |
NZ Dollar |
||
|---|---|---|---|---|
| Cash at Bank $000s | Operating commitments $000s | Cash at Bank $000s | Operating commit ments $000s | |
| US Dollar | 560 | 664 | 918 | 1,088 |
| Great British Pounds | 202 | 954 | 612 | 2,911 |
| Euro | 145 | - | 302 | - |
| Australian Dollar | 238 | 5,097 | 291 | 6,215 |
| Indian Rupee | 3,085 | 938 | 110 | 34 |
| Fijian Dollar | 92 | 89 | 84 | 81 |
| Chinese Yuan | 330 | 45 | 69 | 9 |
| Hong Kong Dollar | 321 | 2,512 | 68 | 534 |
| Thai Baht | 1,635 | 803 | 68 | 33 |
| Taiwanese Dollar | 1,245 | 7,642 | 62 | 382 |
| Tongan Pa'anga | 69 | - | 53 | - |
| Phillipine Peso | 1,149 | - | 35 | - |
| Western Samoan Tala | 45 | - | 25 | - |
| Singapore Dollar | 21 | 141 | 21 | 141 |
| Other Currencies (15) | 315 | 16 | ||
| Total NZD Equivalent | 3,033 | 11,444 | ||
16 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.
The Department enters into numerous transactions with other Government Departments, Crown Agencies and State-Owned Enterprises on an arm’s length basis. Where those parties are acting in the course of their normal dealings with the Department, related party disclosures have not been made for transactions of this nature.
Apart from those transactions described above, the Department has not entered into any related party transactions.
17 Discontinued activities
No activities were discontinued in the year ended 30 June 2006. For the year ended 30 June 2005, the provision of services to create sustainable community health and wellbeing through employment, delivered by the Community Employment Group (CEG), was transferred to the Ministry of Social Development and CEG was disestablished. In 2004/05, the total revenue earned from delivering this service was $9.834 million, and it generated a surplus of $0.377 million.
18 Explanation of major budget changes
The Supplementary Estimates of Appropriations for the year ending 30 June 2006 explain all budget changes between the 2005/06 Main Estimates and the 2005/06 Supplementary Estimates as follows:
- Vote ACC – Supplementary Estimates of Appropriations, B7 Vol 1 – Pages 1 to 5
- Vote Employment – Supplementary Estimates of Appropriations, B7 Vol 1 – Pages 171 to 175
- Vote Immigration – Supplementary Estimates of Appropriations, B7 Vol 1 – Pages 255 to 259
- Vote Labour – Supplementary Estimates of Appropriations, B7 Vol 1 – Pages 277 to 284.
19 Explanation of significant actual variations
The following notes explain the significant variances between Supplementary Estimates and Actuals.
Statement of Financial Performance
The variance in Revenue – Other of $2.687 million resulted primarily from lower immigration fees received.
Total Expenditure was below budget by $2.291 million. This arose primarily from the short fall by output class noted below which was offset by the unappropriated expenditure in Vote Immigration as outlined in the Statement of Unappropriated
Expenditure. The major factors that contributed to this shortfall by output class were:
| $000 | |
|---|---|
| Vote Labour: Policy Advice – Labour Variances resulted from staff vacancies and consequent project delays |
494 |
| Vote Labour: International Services Delays in the commencement of projects and the postponement of planned International Labour Organisation meetings |
278 |
| Vote Labour: Services to Promote and Support Safe and Healthy People and Workplaces Delays in filling Professional and Specialist Services Group vacancies during their restructuring period |
447 |
| Vote Immigration: Services to Position New Zealand as an International Citizen with Immigration-Related Interest and Obligations Refugee Status Appeal Authority backlogs were cleared earlier than expected |
619 |
| Vote Employment: Labour Market Information An in-principle expense transfer to 06/07 has been approved for project delays |
434 |
| Vote ACC: Regulatory Services Workload lower than expected given its residual function |
116 |
| Vote ACC: Policy and Monitoring Staff vacancies and lower expenditure on demand-driven legal advice |
822 |
Statement of Financial Position
| Net assets higher (lower) $000 | |
|---|---|
| Cash and Bank Balances Required to cover higher year end creditors Draw downs of capital not yet spent |
9,479 |
| Prepayments Additional prepayments made as a consequence of new projects commencing |
368 |
| Debtors and Receivables Funding due for the employers' contribution to the State Services Retirement Savings Scheme |
506 |
| Creditors and Payables Timing of supplier billings resulting in higher amounts outstanding Immigration application monies received in advance |
(9,081) |
| Finance Lease Finance leases replaced by the purchase of equipment later than anticipated |
(303) |
Statement of Movements in Taxpayers' Funds
| Taxpayers' Funds higher (lower) $000 | |
|---|---|
| Net deficit Less revenue and less planned activities and expenditure |
(962) |
20 Post balance-date events
There were no post balance date events occurring between year end and the signing of the financial statements that would have a significant effect on these financial statements.
The following non-departmental statements and schedules record the expenses, revenue and receipts, assets and liabilities that the Department manages on behalf of the Crown. The Department administered $705.9 million (2005: $754.6 million) of non-departmental payments, $60.4 million (2005: $151.2 million) of non-departmental revenue and receipts, $18.5 million of assets (2005: $22.3 million) and $1.5 million (2005: $19.2 million) of liabilities on behalf of the Crown for the year ended 30 June 2006. Further details of the Department’s management of these Crown assets and liabilities are provided in the Statement of Objectives and Service Performance section of the Annual Report.
These non-departmental balances are consolidated into the Crown Financial Statements. Therefore, readers of these statements and schedules should also refer to the Crown Financial Statements for 2005/06.