FINANCIAL STATEMENTS

STATEMENT OF FINANCIAL PERFORMANCE

FOR THE YEAR ENDED 30 JUNE 2008

Statement of financial performance for the year ended 30 June 2008

Actual		Note	Actual	Main estimates	Supp estimates
2007			2008	2008	2008
$000			$000	$000	$000
(966)	Net surplus/ (deficit)		19,040	(8,932)	8,519
	Income
158,192	Revenue Crown		168,486	153,376	168,486
2,761	Revenue Department	4	3,482	3,136	3,482
84,491	Revenue other	5	109,004	82,447	110,126
285	Finance income	6	1,198	11	150
245,729	Total income		282,170	238,970	282,244
	Expenditure
123,410	Employee benefits	7	133,077	133,178	141,800
11,505	Depreciation and amortisation	14,15	11,082	12,480	11,707
3,992	Capital charge	8	4,343	4,959	4,197
107,072	Other operating costs	9	114,615	97,285	116,021
716	Finance expenses	10	13	-	-
246,695	Total expenditure		263,130	247,902	273,725

Explanations of significant variances against budget are detailed in note 30.

The accompanying notes form part of these financial statements.

Statement of financial position

AS AT 30 JUNE 2008

Statement of financial position as at 30 June 2008

Actual		Note	Actual	Main estimates	Supp estimates
2007			2008	2008	2008
$000			$000	$000	$000
	Assets
	Current assets
52,370	Cash and cash equivalents		58,795	37,046	50,699
1,376	Prepayments		1,269	1,000	1,000
2,086	Debtors and other receivables	11	21,751	960	2,829
115	Inventories	13	602	400	400
491	Property, plant and equipment	14	572	-	-
56,438	Total current assets		82,989	39,406	54,928
	Non-current assets
24,336	Property, plant and equipment	14	29,455	31,579	37,181
15,312	Intangible assets	15	13,963	19,267	15,886
39,648	Total non-current assets		43,418	50,846	53,067
96,086	Total assets		126,407	90,252	107,995
	Liabilities
	Current liabilities
27,793	Creditors and other payables	16	52,084	26,936	34,115
20	Finance leases	17	4	-	20
31	Derivative financial instruments	12	-	-	31
43	Insurance liabilities	18	65	22	-
7,355	Provision for employee benefits	19	8,746	5,108	8,677
504	Other provisions	20	29	374	547
35,746	Total current liabilities		60,928	32,440	43,390
	Non-current liabilities
20	Finance leases	17	-	-	20
60	Insurance liabilities	18	61	45	60
2,455	Provision for employee benefits	19	3,347	3,400	2,455
2,535	Total non-current liabilities		3,408	3,445	2,535
38,281	Total liabilities		64,336	35,885	45,925
57,805	Net assets		62,071	54,367	62,070
	Taxpayers' funds
53,823	General funds	21	58,089	50,009	58,089
3,982	Property, plant and equipment revaluation reserves	21	3,982	4,358	3,981
57,805	Total taxpayers' funds		62,071	54,367	62,070

The accompanying notes form part of these financial statements.

STATEMENT OF CHANGES IN TAXPAYERS' FUNDS

FOR THE YEAR ENDED 30 JUNE 2008

Statement of changes in taxpayers' funds for the year ended 30 June 2008

Actual		Note	Actual	Main estimates	Supp estimates
2007			2008	2008	2008
$000			$000	$000	$000
57,805	Balance at 30 June	21	62,071	54,367	62,070
54,934	Balance at 1 July		57,805	57,018	57,804
(966)	Net surplus/(deficit) for the year		19,040	(8,932)	8,519
(376)	Property, plant and equipment revaluation gains/(losses) taken to equity	14	-	-	-
(1,342)	Total recognised income and expense		19,040	(8,932)	8,519
4,213	Capital contribution		4,266	6,281	4,266
-	Repayment of surplus to the Crown		(19,040)	-	(8,519)

The accompanying notes form part of these financial statements.

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2008

Statement of cash flows for the year ended 30 June 2008    

Actual		Note	Actual	Main estimates	Supp estimates
2007			2008	2008	2008
$000			$000	$000	$000
52,370	Cash at 30 June		58,795	37,046	50,699
	Cash flows from operating activities
158,192	Receipts from Crown		149,938	153,376	168,486
2,761	Receipts from Department		3,483	3,136	3,482
82,838	Other receipts		108,784	82,447	109,383
(125,726)	Payments to employees		(129,331)	(229,964)	(141,289)
(112,946)	Payments to suppliers		(111,900)	-	(118,999)
(3,992)	Payments for capital charge		(4,343)	(4,959)	(4,197)
(61)	Goods and services tax (net)		(177)	-	2,206
1,066	Net cash from operating activities	23	16,454	4,036	19,072
	Cash flows from investing activities
112	Interest non-NZDMO		259	11	150
220	Receipts from sale of property, plant and equipment		130	-	-
(10,353)	Purchase of property, plant and equipment		(11,252)	(6,453)	(18,921)
(1,933)	Purchase of intangible assets		(4,145)	(6,027)	(6,014)
(11,954)	Net cash from investing activities		(15,008)	(12,469)	(24,785)
	Cash flows from financing activities
4,213	Capital contribution		4,266	6,281	4,266
-	Repayment of surplus		(224)	-	(224)
4,213	Net cash from financing activities		4,042	6,281	4,042
(6,675)	Net increase/(decrease) in cash		5,488	(2,152)	(1,671)
59,212	Cash at 1 July		52,370	39,198	52,370
(167)	Effect of exchange rate fluctuations on cash held		937	-	-

The accompanying notes form part of these financial statements.

STATEMENT OF COMMITMENTS

AS AT 30 JUNE 2008

Capital commitments

Capital commitments are the aggregate amount of capital expenditure contracted for the acquisition of property, plant and equipment and intangible assets that have not been paid for or not recognised as a liability at the balance sheet date.

Non-cancellable operating lease commitments

The Department leases property, plant and equipment in the normal course of its business. The majority of these leases are for premises, which have a non-cancellable leasing period ranging from three to ten years.

Other non-cancellable commitments

The Department has entered into non-cancellable contracts for computer maintenance, cleaning services and other contracts for service.

Commitments

Actual		Actual
2007		2008
$000		$000
71,591	Total commitments	89,337
	Capital commitments
2,401	Property, plant and equipment	91
1,700	Intangible assets	26
4,101	Total capital commitments	117
	Non-cancellable operating lease commitments
15,008	Not later than one year	15,233
27,287	Later than one year and not later than five years	32,462
3,184	Later than five years	2,498
45,479	Total non-cancellable operating lease commitments	50,193
	Other non-cancellable commitments
20,910	Not later than one year	24,563
1,101	Later than one year and not later than five years	12,459
-	Later than five years	2,005
22,011	Total other non-cancellable commitments	39,027

The total minimum future sub-lease payments expected to be received under non-cancellable sub-leases at the balance sheet date is $10,313 (2007: Nil).

The Department's non-cancellable operating leases have varying terms, escalation clauses and renewal rights. There are no restrictions placed on the Department by any of its leasing arrangements.

The accompanying notes form part of these financial statements.

STATEMENT OF CONTINGENT LIABILITIES AND CONTINGENT ASSETS

AS AT 30 JUNE 2008 

Statement of contingent liabilities and contingent assets as at 30 June 2008        

Actual		Actual
2007		2008
$000		$000
1,223	Total quantifiable contingent liabilities	12,117
1,017	Legal proceedings and disputes	11,655
206	Personal grievances	462

Legal proceedings and disputes

Legal proceedings and disputes represent amounts claimed by plaintiffs in relation to the performance of the Department's statutory role. The Department is currently disputing these claims.

Personal grievances

Personal grievances represent amounts claimed by employees for an alleged breach of contract.

Guarantees

The Department has not given any guarantees under section 65ZE of the Public Finance Act 1989 at 30 June 2008 (2007: Nil).

Contingent assets

The Department has no contingent assets at 30 June 2008 (2007: Nil).

The accompanying notes form part of these financial statements.

STATEMENT OF DEPARTMENTAL EXPENDITURE AND CAPITAL EXPENDITURE AGAINST APPROPRIATIONS

FOR THE YEAR ENDED 30 JUNE 2008

Statement of departmental expenditure and capital expenditure against appropriations for the year ended 30 June 2008

Exp. after remeasure.			Exp. before remeasure.	Remeasure.	Exp. after remeasure.	Appropriation voted*
2007			2008	2008	2008	2008
$000			$000	$000	$000	$000
249,992	Total		278,140	387	278,527	298,660
	Vote Labour
13,326	Policy advice - labour		12,637	-	12,637	12,839
949	International services		804	-	804	830
24,947	Services to promote and support safe and healthy people and workplaces		31,734	-	31,734	32,488
27,516	Services to promote and support fair and productive employment relationships		25,180	-	25,180	25,709
4,595	Services to promote and support the safe management of hazardous substances in the workplace and amusement devices		4,538	-	4,538	4,533
71,333	Total Vote Labour		74,893	-	74,893	76,399
	Vote Immigration
142,255	Services to increase the capacity of New Zealand through immigration		151,949	-	151,949	158,277
15,971	Services to position New Zealand as an international citizen with immigration-related interests and obligations		16,599	-	16,599	16,553
-	Immigration Advisers Authority		1,819	-	1,819	2,305
158,226	Total Vote Immigration		170,367	-	170,367	177,135
	Vote Employment
8,896	Labour market analysis and knowledge		10,131	-	10,131	10,613
4,923	Policy, research and evaluation		4,959	-	4,959	7,085
13,819	Total Vote Employment		15,090	-	15,090	17,698
	Vote ACC
2,312	Policy and monitoring		2,328	-	2,328	2,394
89	Regulatory services		65	-	65	99
2,401	Total Vote ACC		2,393	-	2,393	2,493
245,779	Total appropriations for output expenses		262,743	-	262,743	273,725
-	Remeasurements		-	387	387	-
-	Total departmental expenditure		262,743	387	263,130	273,725
4,213	Appropriation for capital expenditure		15,397	-	15,397	24,935

* These amounts include adjustments made in the Supplementary Estimates and transfers under section 26A of the Public Finance Act 1989.

The accompanying notes form part of these financial statements.

STATEMENT OF DEPARTMENTAL UNAPPROPRIATED EXPENDITURE AND CAPITAL EXPENDITURE

FOR THE YEAR ENDED 30 JUNE 2008

Statement of departmental unappropriated expenditure and capital expenditure for the year ended 30 June 2008

Unappropriated expenditure		Expenditure after remeasurements	Appropriation voted	Unappropriated expenditure
2007		2008	2008	2008
$000		$000	$000	$000
1,087	Total unappropriated expenditure	21,137	21,086	51
	Vote Labour
-	Services to promote and support the safe management of hazardous substances in the workplace and amusement devices	4,538	4,533	5
	Vote Immigration
1,087	Services to increase the capacity of New Zealand through immigration	-	-	-
-	Services to position New Zealand as an international citizen with immigration-related interests and obligations	16,599	16,553	46

The Department has incurred unappropriated expenditure of $0.051 million during the year (2007: $1.087 million).

The 2007/08 appropriation in two output expenses was exceeded as a result of a technical change to the recognition of long service leave provisions.  Subsequent to Supplementary Estimates, Cabinet approved changes to the collective bargaining parameters to be introduced before 1 July 2009.  This created a constructive obligation that needed to be recognised as at 30 June 2008.

The accompanying notes form part of these financial statements.

NOTES TO THE DEPARTMENTAL FINANCIAL STATEMENTS

1 Reporting entity

The Department of Labour is a government department as defined by section 2 of the Public Finance Act 1989 and is domiciled in New Zealand. The Department's principal activities are outlined in the statement of objectives and service performance.

The Department also administers trust monies and memorandum accounts for the sale of visas and permits and the provision of HSE levy-funded services. This report also covers those activities as well as various non-departmental activities as outlined in the schedules.

For the purposes of financial reporting, the Department is a public benefit entity as defined in NZ IAS 1: Presentation of Financial Statements.

2 Basis of preparation

(a) Statement of compliance

These financial statements and schedules have been prepared pursuant to the Public Finance Act 1989 and in accordance with New Zealand generally accepted accounting practice. They comply with the New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and other applicable Financial Reporting Standards, as appropriate for public benefit entities. These are the Department's first set of financial statements complying with NZ IFRS, and NZ IFRS 1: First-time Adoption of New Zealand Equivalents to International Financial Reporting Standards has been applied.

An explanation of how the transition to NZ IFRS has affected the reported financial position, financial performance and cash flows of the Department is provided in note 32.

Standards, amendments and interpretations issued but not yet effective and have not been adopted, which are relevant to the Department include:

• NZ IAS 1: Presentation of Financial Statements (revised 2007), which replaces NZ IAS 1: Presentation of Financial Statements (issued 2004) and is effective for reporting periods beginning on or after 1 January 2009. The revised standard requires information in financial statements to be aggregated on the basis of shared characteristics and to introduce a statement of comprehensive income. This will enable readers to analyse changes in equity resulting from transactions with the Crown in its capacity as 'owner' separately from 'non-owner' changes. The revised standard gives the Department the option of presenting items of income and expense and components of other comprehensive income either in a single statement of comprehensive income with sub-totals, or in two separate statements (a separate income statement followed by a statement of comprehensive income). The Department expects that it will apply the revised standard for the first time for the year ended 30 June 2010 and is yet to decide whether it will prepare a single statement of comprehensive income or a separate income statement followed by a statement of comprehensive income.

Other standards, amendments and interpretations issued but not yet effective that are not relevant to Department and/or will have no impact on the Department's financial statements are:

• NZ IFRS 4: Insurance Contracts - Amendments (approved 2007)
• NZ IFRS 8: Operating Segments (approved 2006)
• NZ IAS 23: Borrowing Costs (approved 2007)
• NZ IFRIC 11: NZ IFRS 2: Group and Treasury Share Transactions (approved 2006)
• NZ IFRIC 12: Service Concession Arrangements (approved 2007)
• NZ IFRIC 13: Customer Loyalty Programmes (approved 2007)
• NZ IFRIC 14: The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (approved 2007).

The financial statements were authorised for issue by the Chief Executive on 29 September 2008.

(b) Basis of measurement

The measurement base applied to the financial statements is historical cost modified by the revaluation of certain items of property, plant and equipment and the revaluation of forward exchange contracts.

(c) Reporting period and currency

The reporting period for these financial statements is the year ended 30 June 2008. The budget figures are those presented in the Main Estimates on 17 May 2007 and those amended by the Supplementary Estimates on 22 May 2008 and any transfer made by Order in Council under the Public Finance Act 1989.

The reporting currency used in the preparation of these financial statements is New Zealand dollars rounded to the nearest thousand.

(d) Use of judgements and estimates

The preparation of financial statements in conformity with NZ IFRS requires judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses.

The estimates and associated assumptions are based on historical experience and various other factors that are considered to be reasonable under the circumstances. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements that have a significant effect on the financial statements and estimates with a significant risk of material adjustments in the next year are discussed in the notes to the financial statements.

3 Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these financial statements and in preparing an opening NZ IFRS balance sheet as at 1 July 2006 for the purposes of the transition to NZ IFRS.

The following particular accounting policies have been applied:

(a) Revenue

Crown funding

Funding from the Crown for the supply of departmental services is recognised on a straight line basis over the financial period for which the appropriation is approved.

Rendering of services

Revenue from applications for processing visas and permits is recognised by reference to the stage of completion of the contract at the balance sheet date. Application fees received in advance of any service provided are recognised as deferred revenue in the Statement of Financial Position.

Sale of publications

Revenue from the sale of publications is recognised when the Department has transferred the publication to the buyer.

Interest revenue

Interest earned from Westpac New Zealand and overseas bank accounts is recognised on a time-proportionate basis that takes into account the effective yield on the financial asset.

(b) Expenses

Grants and subsidies

Where grants and subsidies are discretionary until payment, the expense is recognised when the payment is made. Otherwise, the expense is recognised when the specified criteria have been fulfilled and notice has been given to the Department.

Capital charge

The capital charge represents a charge by the Crown on the Department's taxpayers' funds as at 30 June and 31 December each year. The capital charge is recognised as an expense in the period to which the charge relates.

Income tax

The Department is exempt from the payment of income tax in terms of the Income Tax Act 2004. Accordingly, no charge for income tax is recognised.

(c) Cost accounting policies

The Department's accounting systems record costs by outputs. The costs may be direct or indirect. Costs that can be causally linked and assigned to an output economically are direct costs. Costs incurred to produce more than one output and that are shared across several work groups, such as corporate costs, are indirect costs. Indirect costs are allocated to outputs according to staff numbers, the amount of resource consumption or use. There have been no changes in cost accounting policies since the date of the last audited financial statements.

(d) Goods and Services Tax (GST)

All items in the financial statements are exclusive of GST, with the exception of receivables and payables, which are stated as GST inclusive. Where GST is not recoverable as an input tax, then it is recognised as part of the related asset or expense.

(e) Foreign currency

Transactions in foreign currencies are translated to New Zealand dollars at the average rates for the month of the transaction, approximating the exchange rate at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies at balance date are translated to New Zealand dollars at the foreign exchange rate at balance date. Foreign exchange gains or losses arising from translation of monetary assets and liabilities are recognised in the Statement of Financial Performance.

(f) Financial instruments

Cash and cash equivalents

Cash and cash equivalents include cash on hand, cash in transit, bank accounts and deposits with a maturity of no more than three months from the date of acquisition.

Debtors and other receivables

Receivables are recognised initially at fair value and subsequently measured at amortised cost. Allowances for estimated irrecoverable amounts are recognised when there is objective evidence that the receivable is impaired. Impairment losses are recognised in the Statement of Financial Performance.

Creditors and other payables

Creditors and other payables represent liabilities for goods and services, provided to the Department prior to the end of the financial year, that are unpaid. These are initially measured at fair value and subsequently measured at amortised cost using the effective interest rate method.

Derivatives

Forward exchange contracts are recognised at fair value as either assets or liabilities with fair value gains or losses recognised in the Statement of Financial Performance. Further details on these contracts and the objectives for entering into forward exchange contracts are provided in note 12.

(g) Inventories

Inventories held for distribution for public benefit purposes such as freely available publications and brochures are recorded at the estimate of lower of cost or current replacement cost.

(h) Property, plant and equipment

Items of property, plant and equipment are initially recorded at cost. Cost includes expenditure that is directly attributable to the acquisition of the item. Any borrowing costs incurred during the period required to complete and prepare the asset for its intended use are expensed. Subsequent to acquisition, items of property, plant and equipment (excluding land and buildings) are stated at cost less accumulated depreciation and impairment.

Subsequent to acquisition land and buildings are measured at fair value less depreciation accumulated since the assets were last revalued. The fair value of land and buildings is based on an independent valuation prepared by external valuation experts. Land and buildings are valued at least every three years or whenever the carrying amount differs materially to fair value. Unrealised gains and losses arising from changes in the fair value of land and buildings are recognised at the balance date. To the extent that a gain reverses a loss previously charged to the Statement of Financial Performance for the asset class, the gain is credited to the Statement of Financial Performance. Otherwise, gains are credited to an asset revaluation reserve for that class of asset. To the extent that there is a balance in the asset revaluation reserve for the asset class, any loss is debited to the reserve. Otherwise, losses are reported in the Statement of Financial Performance.

The carrying amounts of property, plant and equipment are reviewed at least annually to determine if there is any indication of impairment. Where an item's recoverable amount is less than its carrying amount, it will be reported at its recoverable amount, and an impairment loss will be recognised. Losses resulting from impairment are reported in the Statement of Financial Performance, unless the item is land and buildings, in which case, any impairment loss is treated as a revaluation decrease.

Depreciation is charged on a straight-line basis at rates calculated to allocate the cost or valuation of an item of property, plant and equipment, less any estimated residual value, over its estimated useful life. Typically, the estimated useful lives of different classes of property, plant and equipment are as follows:

Depreciation Rates

Asset	Depreciation
Buildings	40 years
Leasehold improvements	1 to 10 years
Motor vehicles	4 years
Furniture and fittings
Fixtures and fittings	1 to 10 years
Carpets and drapes	4 to 7 years
Office equipment	4 years
Specialised equipment	8 years

Leasehold improvements are depreciated over the unexpired period of the lease or the estimated remaining useful lives of the improvements, whichever is the shorter.

Realised gains and losses arising from the disposal of property, plant and equipment are recognised in the Statement of Financial Performance in the period in which the transaction occurs. Any balance attributable to the disposed asset in the asset revaluation reserve is transferred to taxpayer's funds.

(i) Intangible assets - computer software

Computer software is initially recorded at cost. The cost of internally generated computer software represents expenditure incurred in the development phase of the software only. The development phase occurs after the following can be demonstrated: technical feasibility; ability to complete the asset; intention and ability to sell or use the asset; and development expenditure can be reliably measured. Expenditure incurred on research of an internally generated intangible asset is expensed when it is incurred. Where the research phase cannot be distinguished from the development phase, the expenditure is expensed when it is incurred.

Subsequent to acquisition, all computer software is recorded at cost less any amortisation and impairment losses. Amortisation is charged to the Statement of Financial Performance over the useful life of the asset (not more than five years).

Computer software is reviewed annually to determine if there is any indication of impairment. Where the software's recoverable amount is less than its carrying amount, it will be reported at its recoverable amount, and an impairment loss will be recognised. Losses resulting from impairment are reported in the Statement of Financial Performance.

(j) Employment entitlements

Pension liabilities

Obligations for contributions to the State Services Retirement Savings Scheme and the Government Superannuation Fund are recognised in the Statement of Financial Performance as they fall due. Any reimbursement of these costs from the State Services Commission is recognised as revenue in the Statement of Financial Performance.

Other employment entitlements

Employee entitlements to salaries and wages, annual leave, long service leave, retiring leave, sick leave and other similar benefits are recognised in the Statement of Financial Performance when they accrue to employees. Employee entitlements to be settled within 12 months are reported at the amount expected to be paid. The liability for long-term employee entitlements is reported as the present value of the estimated future cash outflows.

Termination benefits

Termination benefits are recognised in the Statement of Financial Performance only when there is a demonstrable commitment to either terminate employment prior to normal retirement date or to provide such benefits as a result of an offer to encourage voluntary redundancy. Termination benefits settled within 12 months are reported at the amount expected to be paid, otherwise they are reported as the present value of the estimated future cash outflows.

(k) Insurance contracts - ACC Partnership Programme

Obligations for managing workplace injury claims under the ACC Partnership Programme are recognised as a liability in the Statement of Financial Position. The liability is revalued annually based on an actuarial valuation. Movements in the liability are recognised in the Statement of Financial Performance.

(l) Leases

Finance leases transfer to the Department as lessee substantially all the risks and rewards incident on the ownership of the leased items. Initial recognition of a finance lease results in an asset and liability being recognised at amounts equal to the lower of the fair value of the leased property or the present value of the minimum lease payments. The capitalised values are amortised over the period in which the Department expects to receive benefits from their use.

Operating leases, where the Department is a lessee and the lessor substantially retains the risk and rewards of ownership, are recognised in a systematic manner over the term of the lease. Leasehold improvements are capitalised, and the cost is amortised over the unexpired period of the lease or the estimated useful life of the improvements, whichever is shorter. Lease incentives received are recognised evenly over the term of the lease as a reduction in rental expense.

(m) Provisions

Restructuring provisions

A provision for restructuring is recognised when the Department has developed a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it.

Other provisions

Other provisions are recorded at the best estimate of the expenditure required to settle the obligation. Liabilities and provisions to be settled beyond 12 months are recorded at their present value.

(n) Taxpayers' funds

Taxpayers' funds represent the Crown's net investment in the Department and is measured as the difference between total assets and total liabilities. Taxpayers' funds are disaggregated and classified as general funds and property, plant and equipment revaluation reserves.

(o) Contingent liabilities and contingent assets

Contingent liabilities and contingent assets are recorded in the Statement of Contingent Liabilities and Contingent Assets at the point at which the contingency is evident. Contingent liabilities are disclosed if the possibility that they will crystalise is not remote. Contingent assets are disclosed if it is probable that the benefits will be realised.

(p) Commitments

Future expenses and liabilities to be incurred on contracts that have been entered into at balance date are disclosed as commitments (at the point a contractual obligation arises) to the extent that there are equally unperformed obligations. Commitments relating to employment contracts are not disclosed.

Cancellable commitments that have penalty or exit costs explicit in the agreement on exercising that option to cancel are included in the Statement of Commitments at the value of that penalty or exit cost.

(q) Related party transactions

The Department's key management personnel are defined as the Secretary of Labour, the Deputy Secretaries and the Department's third tier managers as defined in the Department's Delegations Framework. All these personnel have authority and the primary responsibility for planning, directing and controlling the activities of the Department.

(r) Comparatives

When presentation or classification of items in the financial statements is amended or accounting policies are changed voluntarily, comparative figures are restated to ensure consistency with the current period unless it is impracticable to do so.

4 Revenue Department    

Revenue Department    

Actual		Actual
2007		2008
$000		$000
2,761	Total revenue Department	3,482
1,912	State Services Commission - State Sector Retirement Savings Scheme	2,377
-	MFAT - Pacific Security Fund Project	236
87	MFAT- Niue Strengthened Cooperation Programme Fund run by NZAID	-
762	Ministry of Social Development - Refugee Services	869

5 Revenue other    

Revenue other    

Actual		Actual
2007		2008
$000		$000
84,491	Total revenue other	109,004
83,129	Immigration fees	107,818
1,362	Other	1,186

6 Finance income    

Finance income

Actual		Actual
2007		2008
$000		$000
285	Total finance income	1,198
112	Interest income on cash at bank	259
9	Change in provision for doubtful debts	-
164	Realised/unrealised foreign exchange gains	939

7 Employee benefits 

Employee benefits    

Actual		Actual
2007		2008
$000		$000
123,410	Total employee benefits	133,077
120,482	Salaries and wages	127,576
3,106	Employer contributions to defined contribution schemes	3,218
(178)	Increase/decrease in employee entitlements	2,283

8 Capital charge

The Department pays a capital charge to the Crown on its taxpayers' funds as at 30 June and 31 December each year. The capital charge rate for the year ended 30 June 2008 was 7.5% (2007: 7.5%).

9 Other operating costs    

Other operating costs    

Actual		Actual
2007		2008
$000		$000
107,072	Total other operating costs	114,615
	Fees to auditors
-	Audit fees for the financial statement audit 07/08	297
260	Audit fees for the financial statement audit 06/07	15
25	Audit fees for the financial statement audit 05/06	-
15	Audit fees for NZ IFRS transition	20
15	Fees for assurance and other related services	-
21,118	Operating lease payments	21,905
806	Write-off of property, plant and equipment	-
292	Net loss on disposal of property, plant and equipment	34
3,602	Other property-related costs	3,936
71	ACC Partnership Programme (note 18)	23
15,500	Information systems and communication costs	16,653
25,530	Professional services	28,016
10,847	Immigration services direct operating costs	10,306
1,230	Inventories distributed and consumed	1,505
27,761	Other operating costs	31,905

10 Finance expenses  

Finance expenses  

Actual		Actual
2007		2008
$000		$000
716	Total finance expenses	13
167	Net unrealised foreign exchange losses	-
18	Bad debts written off	13
531	Loss on derivatives	-

11 Debtors and other receivables

Debtors and other receivables

Actual		Actual
2007		2008
$000		$000
2,086	Total debtors and other receivables	21,751
-	Debtor Crown	18,548
1,780	Other debtors	3,216
1,780	Total debtors	21,764
(13)	Less: provision for doubtful debts	(13)
1,767	Net debtors	21,751
319	Lease and other deposits	-

The carrying value of debtors and other receivables approximates their fair value.

12 Derivative financial instruments

The notional principal amount of outstanding forward exchange contracts at 30 June 2008 was Nil (2007: AUD$2,512,000).

The fair value of forward exchange contracts has been determined using quoted market rates provided by the New Zealand Debt Management Office (NZDMO).

13 Inventories

Inventories

Actual		Actual
2007		2008
$000		$000
115	Total inventories	602
115	Publications held for distribution	602

No inventories are pledged as security for liabilities.

14 Property, plant and equipment

Property, plant and equipment

	Land	Buildings	*Furniture and fittings	Specialised equipment	Motor vehicles	Total
	$000	$000	$000	$000	$000	$000
At 30 June 2008	2,714	1,360	21,518	355	4,080	30,027
Cost or valuation
Balance at 1 July 2006	3,753	799	36,597	1,009	6,853	49,011
Additions	-	-	9,550	6	798	10,354
Revaluation increase/(decrease)	(1,039)	606	-	-	-	(433)
Disposals	-	-	(5,873)	(170)	(702)	(6,745)
Balance at 30 June 2007	2,714	1,405	40,274	845	6,949	52,187
Balance at 1 July 2007	2,714	1,405	40,274	845	6,949	52,187
Additions	-	-	16,866	-	748	17,614
Other asset movement	-	-	(6,664)	-	-	(6,664)
Disposals	-	-	(33)	-	(382)	(415)
Balance at 30 June 2008	2,714	1,405	50,443	845	7,315	62,722
Accumulated depreciation and impairment losses
Balance at 1 July 2006	-	44	24,859	423	2,187	27,513
Depreciation expense	-	23	5,078	126	916	6,143
Eliminate on disposal	-	-	(5,657)	(161)	(421)	(6,239)
Eliminate on revaluation	-	(57)	-	-	-	(57)
Balance at 30 June 2007	-	10	24,280	388	2,682	27,360
Balance at 1 July 2007	-	10	24,280	388	2,682	27,360
Depreciation expense	-	35	4,654	102	797	5,588
Eliminate on disposal	-	-	(9)	-	(244)	(253)
Balance at 30 June 2008	-	45	28,925	490	3,235	32,696
Carrying amounts
At 1 July 2006	3,753	755	11,738	586	4,666	21,498
At 30 June and 1 July 2007	2,714	1,395	15,994	457	4,267	24,827

* Furniture and fittings includes leasehold improvements, office equipment and furniture including computer hardware.

In accordance with the Department's asset management plan at 30 June 2008, the Department intends to sell and replace various motor vehicles worth $572,000 (2007: $491,000). These vehicles do not meet the criteria of held for sale as they are still in use and not yet marketed for sale. In accordance with NZ IAS 1: Presentation of Financial Statements, the value of these motor vehicles has been recorded as a current asset as it is intended they will be realised within the next 12 months of the balance sheet date.

Land and buildings in Suva were revalued at fair value as at 7 August 2006, by an independent registered valuer, Ramesh Behari, of Fairview Valuations. Land and buildings at the Mangere Resettlement Centre in Auckland were revalued at fair value as at 30 April 2007, by an independent registered valuer, Richard S Arlidge, of Tse Wall Arlidge.

The total amount of property, plant and equipment in the course of construction is $3,123,000 (2007: $1,635,000).

The net carrying amount of plant and equipment held under finance leases is Nil (2007: $332,000).

15 Intangible assets

Intangible assets

	Acquired software	Internally generated software	Total
	$000	$000	$000
Cost
Balance at 1 July 2006	6,952	33,358	40,310
Additions	401	1,470	1,871
Disposals	-	(1,412)	(1,412)
Balance at 30 June 2007	7,353	33,416	40,769
Balance at 1 July 2007	7,353	33,416	40,769
Additions	-	4,145	4,145
Balance at 30 June 2008	7,353	37,561	44,914
Accumulated amortisation and impairment losses
Balance at 1 July 2006	971	19,712	20,683
Amortisation expense	2,168	3,194	5,362
Disposals	-	(588)	(588)
Balance at 30 June 2007	3,139	22,318	25,457
Balance at 1 July 2007	3,139	22,318	25,457
Amortisation expense	-	5,494	5,494
Balance at 30 June 2008	3,139	27,812	30,951
Carrying amounts
At 1 July 2006	5,981	13,646	19,627
At 30 June and 1 July 2007	4,214	11,098	15,312
At 30 June 2008	4,214	9,749	13,963

There are no restrictions over the title of the Department's intangible assets, nor are any intangible assets pledged as security for liabilities.

16 Creditors and other payables  

Creditors and other payables

Actual		Actual
2007		2008
$000		$000
27,793	Total creditors and other payables	52,084
15,978	Creditors and accrued expenses	20,722
10,859	Income in advance	11,768
732	GST payable	554
224	Provision for repayment of surplus to the Crown	19,040

Creditors and payables are non-interest bearing and are normally settled on 30-day terms; therefore, the carrying value of creditors and other payables approximates their fair value.

The repayment of surplus is required to be paid by 31 October each year.

17 Finance leases  

Finance leases  

Actual		Actual
2007		2008
$000		$000
	Minimum lease payments payable:
20	Not later than one year	4
20	One to two years	-
40	Total minimum lease payments	4
	Total minimum lease payments are represented by:
20	Current	4
20	Non-current	-
40	Total finance leases	4

The Department has entered into finance leases for the use of photocopiers. The net carrying amount of the leased items is shown in note 14.

The total value of the minimum lease payments does not materially differ to the present value of the minimum lease payments.

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 leases can be renewed at the Department's option, subject to ministerial approval, with rents set by reference to current market rates for items of equivalent age and condition. The Department does not have the option to purchase the photocopiers at the end of the lease term. The interest rates implicit in these lease contracts vary from 7-13% per annum.

Finance lease liabilities are effectively secured, as the rights to the leased asset revert to the lessor in the event of default.

18 Insurance liability  

Total insurance liability

Actual		Actual
2007		2008
$000		$000
103	Total insurance liability	126
	Total insurance liability is represented by:
43	Current	65
60	Non-current	61

Movement in the liability

Actual		Actual
2007		2008
$000		$000
103	Closing balance at 30 June	126
	Movement in the liability is represented by:
96	Opening balance at 1 July	103
71	Additional provisions made	23
(64)	Amounts used	-

The Department's insurance liability arises from the Department's membership in the ACC Partnership Programme under the Full Self Cover Plan. Under the ACC Partnership Programme, the Department takes responsibility for workplace injury management, and in return, the Department is able to reduce the ACC employer's levy. The Department assumes full financial and injury management responsibility for:

• work-related injuries and illnesses for a selected management period
• continuing financial liability for the life of the claim to a pre-selected limit.

The Department is responsible for managing claims for a period of up to 24 months from the lodgement date. At the end of 24 months, if an injured employee is still receiving entitlements, the financial and management responsibility of the claim will be transferred to ACC for a price calculated on an actuarial valuation basis. The Department has chosen a stop loss limit of 215% of the industry premium. The stop loss limit means the Department will only carry the total cost of claims of up to $315,000.

The liability is measured at the present value of expected future payments to be made in respect of the employee injuries and claims up to the reporting date using actuarial techniques. Consideration is given to expected future wage and salary levels and experience of employee claims and injuries. Expected future payments are discounted using market yields at the report date on national Government Bonds with terms to maturity that match, as closely as possible, to the estimated future cash outflows.

The Department manages its exposure arising from the programme by promoting a safe and healthy working environment by:

• implementing and monitoring health and safety policies
• enhancing awareness of health and safety through meetings and induction processes
• actively managing workplace injuries to ensure employees return to work as soon as practical
• recording and monitoring workplace injuries and near misses to identify risk areas and implementing mitigating actions
• identification of workplace hazards and implementation of appropriate safety procedures.

The Department is not exposed to any significant concentrations of insurance risk, as work- related injuries are generally the result of an isolated event to an individual employee.

An independent actuarial valuation was undertaken by Melville Jessup Weaver to calculate the Department's liability, and the valuation is effective 30 June 2008. The valuer has attested to being satisfied as to the nature, sufficiency and accuracy of the data used to determine the outstanding liabilities claim. The key assumptions used in determining the value of outstanding claims are detailed in the assumptions paragraph below. There are no qualifications contained in the actuarial valuer's report.

Average inflation has been assumed as between 2.27% and 5.08% for the year ending 30 June 2008 and as between 2.27% and 5.08% for the year ending 30 June 2009. A discount rate has been assumed as 6.7% for the year ending 30 June 2008 and 6.1% for the year ending 30 June 2009.

The value of the liability is not material for the Department's financial statements; therefore, any changes in assumptions will not have a material impact on the financial statements.

19 Provision for employee benefits    

Provision for employee benefits

Actual		Actual
2007		2008
$000		$000
9,810	Total provision for employee benefits	12,093
	Current employee benefits are represented by:
6,931	Annual leave	8,088
90	Sick leave	111
163	Long service leave	214
171	Retirement leave	333
7,355	Total current portion	8,746
	Non-current employee benefits are represented by:
211	Long service leave	976
2,244	Retirement leave	2,371
2,455	Total non-current portion	3,347

An independent actuarial valuation was undertaken by Melville Jessup Weaver as at 30 June 2008 to estimate the present value of retirement leave and long service leave. The key assumptions used in determining the present values were:

• discount rate for the 2008 financial year 6.7% p.a. (2007: 7.0% p.a.)
• salary growth rate for the 2008 financial year 3.5% p.a. (2007: 3.5% p.a.).

Any changes in these assumptions will impact on the carrying amount of the liability. In determining the appropriate discount rate, the Department considers the interest rates on New Zealand Government Bonds that have terms to maturity that match, as closely as possible, to the estimated future cash outflows. The salary inflation factor has been determined after considering historical salary inflation patterns and after obtaining advice from an independent actuary.

If the discount rate was to differ by 1% from the Department's estimates, with all other factors held constant, the carrying amount of the liability would be an estimated $0.177 million higher/lower.

If the salary inflation factor was to differ by 1% from the Department's estimates, with all other factors held constant, the carrying amount of the liability would be an estimated $0.183 million higher/lower.

20 Other provisions

Other provisions

Actual		Actual
2007		2008
$000		$000
504	Total other provisions	29
	Other provisions are represented by:
346	Refund of INZ lapsed General Skills applications	29
158	Restructuring and settlement costs	-

Refund of INZ lapsed general skills applications

	Refund of INZ lapsed general skills applications	Restructuring	Total
2007	$000	$000	$000
Closing balance at 30 June	346	158	504
Opening balance at 1 July	357	2,149	2,506
Amounts used	(11)	(1,960)	(1,971)
Unused amounts reversed	-	(31)	(31)

Refund of INZ lapsed general skills applications

	Refund of INZ lapsed general skills applications	Restructuring	Total
2008	$000	$000	$000
Closing balance at 30 June	29	-	29
Opening balance at 1 July	346	158	504
Amounts used	(2)	(158)	(160)
Unused amounts reversed	(315)	-	(315)

Refund of Immigration New Zealand (INZ) lapsed general skills applications

A provision for refunding of lapsed General Skills immigration applications was established in June 2003. Refunding has largely been completed during the last five years. The balance represents applications that remain unclaimed as at 30 June 2008.

Restructuring

The restructuring provision arose from various structural changes to positions within various work groups as well as settlement costs associated with the collective employment agreement negotiations. The restructuring and settlement was completed in 2008.

21 Taxpayers' funds  

Taxpayers' funds  

Actual		Actual
2007		2008
$000		$000
	General funds
50,576	Balance at 1 July	53,823
4,213	Capital contribution	4,266
-	Repayment of surplus to the Crown	(19,040)
(966)	Surplus/(deficit) for the year	19,040
53,823	General funds at 30 June	58,089
	Revaluation reserves
4,358	Balance at 1 July	3,982
(376)	Revaluation gains/(losses)	-
3,982	Revaluation reserves at 30 June	3,982
57,805	Total taxpayers' funds	62,071
	Revaluation reserves consist of:
2,428	Land	2,428
1,554	Buildings	1,554
3,982	Total revaluation reserves	3,982

22 Capital management

The Department's capital is its taxpayers' funds which comprises general funds and revaluation reserves. Taxpayers' funds are represented by net assets.

The Department manages its revenues, expenses, assets, liabilities and general financial dealings prudently. The Department's equity is largely managed as a by-product of managing income, expenses, assets, liabilities and compliance with the Government Budget processes and with Treasury Instructions.

The objective of managing the Department's equity is to ensure the Department effectively achieves its goals and objectives for which it has been established, whilst remaining a going concern.

23 Reconciliation of net surplus to net cash flows from operating activities

Reconciliation of net surplus to net cash flows from operating activities

Actual		Actual	Main estimates	Supp estimates
2007		2008	2008	2008
$000		$000	$000	$000
(966)	Net Surplus / (Deficit)	19,040	(8,932)	8,519
	Add/(less) non-cash items:
11,505	Depreciation and amortisation	11,082	12,480	11,707
167	Unrealised FX (gain)/loss	(937)	-	-
11,672	Total non-cash items	10,145	12,480	11,707
	Add/(less) movements in working capital items:
(620)	(Increase)/ decrease in debtors and receivables	(18,219)	28	(367)
(8)	(Increase)/ decrease in prepayments	(1,338)	-	(150)
285	(Increase)/ decrease in inventory	(487)	-	(285)
(9,970)	Increase/ (decrease) in creditors and payables	4,401	(30)	(3,879)
(142)	Increase/ (decrease) in employee entitlements	3,350	501	1,321
(10,455)	Net movements in working capital items	(12,293)	499	(3,360)
	Add/(less) items classified as investing activity:
292	Net loss/ (profit) on sale of fixed assets	34	-	-
-	Goods and services tax (net)	(177)	-	2,206
-	Interest non-NZDMO	(259)	(11)	-
806	Fixed asset write-offs	-	-	-
	Add/(less) items classified as investing activity:
(283)	Increase/ (decrease) in finance lease liability	(36)	-	-
1,066	Net cash from operating activities	16,454	4,036	19,072

24 Financial instrument risks

The Department's activities expose it to a variety of financial instrument risks, including market risk, credit risk and liquidity risk. The Department has several policies to manage the risk associated with financial instruments and seeks to minimise exposure from financial instruments. These policies do not allow any transactions that are speculative in nature to be entered into.

Market risk

Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Department's greatest direct foreign exchange exposure arises from the offshore branch and agency network providing immigration services. Application fees are collected in more than 30 foreign currencies through this network. The offshore branch network incurs significant local expenses, providing a natural hedge for the branch revenue. The Department's convention is for branches to retain buffers in foreign currency accounts up to the value of an average month's expenditure.

Further transaction exposures arise from the ILO contribution and periodic purchase of capital assets and IT development from firms based overseas. The Department also incurs indirect foreign currency exposure through its purchase of services from the Ministry of Foreign Affairs and Trade at offshore locations.

The Department's foreign exchange management policy requires the Department to manage direct foreign currency exposure by entering into forward exchange contracts when it is considered certain that currency risk will arise.  As there is a natural hedge between revenue and expenditure at the Department's offshore branches, only the net exposure is covered.

Application fees are set by regulation in New Zealand dollars, updated annually. Foreign currency equivalent fees are set by the Department to reflect the New Zealand amount. Foreign currency transaction exposure is also mitigated to some extent by the ability of the Department to initiate updates of foreign currency fees to bring them into line with prevailing market conditions.

Sensitivity analysis

At 30 June 2008, if the New Zealand dollar had weakened/strengthened by 5% against the US dollar with all other variables held constant, the surplus/deficit for the year would have been $8,000 (2007: $3,000) higher/lower. This movement is attributable to the foreign exchange gains and losses on translation of the US dollar currency held by the Department in its foreign currency account.

At 30 June 2008, if the New Zealand dollar had weakened/strengthened by 10% against the Australian dollar with all other variables held constant, the surplus/deficit for the year would have been $6,000 (2007: $4,000) higher/lower. This movement is attributable to the foreign exchange gains and losses on translation of the Australian dollar currencies held in its foreign currency account.

Interest rate risk

Interest rate risk is the risk that the fair value of a financial instrument will fluctuate or the cash flows from a financial instrument will fluctuate due to changes in market interest rates. The Department has no interest rate risk.

Credit risk

Credit risk is the risk that a third party will default on its obligations to the Department, causing the Department to incur a loss. Financial instruments that potentially subject the Department to credit risk principally consist of cash on hand, bank balances, forward exchange contracts and accounts receivable. The Department's maximum credit exposure for each class of financial instrument is represented by the total carrying amount of cash and cash equivalents, net debtors (note 11) and derivative forward exchange contracts. There is no collateral held as security against these financial instruments, including those instruments that are overdue or impaired.

There are no major concentrations of credit risk with respect to accounts receivable other than the amount due to the Crown.

The risk that a bank with which funds are deposited will fail or that a party with which future or current transactions are outstanding will not meet its obligations is minimised by only opening accounts with banks following Treasury approval. The Department deals only, where there is a choice, with banks that have a high credit standing. Exposure to any one counterparty is limited to NZ$5 million including unsettled forward exchange contracts, bank account balances and contracts due for settlement on the day the exposure is calculated. This limit does not apply when the counterparty is Westpac New Zealand, the New Zealand Debt Management Office or the Reserve Bank of New Zealand.

Liquidity risk

Liquidity risk is the risk that the Department will encounter difficulty raising liquid funds to meet commitments as they fall due.

In meeting its liquidity requirements, the Department closely monitors its forecast cash requirements with expected cash drawdowns from the New Zealand Debt Management Office.

The table below analyses the Department's financial liabilities that will be settled based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed are on the contractual undiscounted cash flows.

Financial liabilities

		Between 6 months and 1 year
	Less than 6 months		Between 1 and 5 years	Over 5 years
Year	$000	$000	$000	$000
2007
Creditors and other payables (note 16)	27,793	-	-	-
Derivative financial instrument liabilities	31	-	-	-
Finance leases (note 10)	10	10	20	-
2008
Creditors and other payables (note 16)	52,084	-	-	-
Derivative financial instrument liabilities	-	-	-	-
Finance leases (note 10)	4	-	-	-

25 Categories of financial instruments

The carrying amounts of financial assets and financial liabilities in each of the NZ IAS 39 Categories of financial instruments categories are as follows:

Categories of Financial Instruments

Actual		Actual
2007		2008
$000		$000
	Loans and receivables
52,370	Cash and cash equivalents	58,795
2,086	Debtors and other receivables (note 11)	21,751
54,456	Total loans and receivables	80,546
	Instruments recognised at fair value through profit and loss
31	Derivative financial instrument liabilities	-
31	Total instruments recognised at fair value through profit and loss	-
	Financial liabilities measured at amortised cost
27,793	Creditors and other payables (note 16)	52,084
27,793	Total financial liabilities measured at amortised cost	52,084

26 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 transactions with other government departments, Crown entities and State-owned enterprises on an arm's length basis. Those transactions that occur within a normal supplier or client relationship on usual terms and conditions are not disclosed.

Apart from those transactions described above, the Department has not entered into any related party transactions.

Key management personnel compensation

Actual		Actual
2007		2008
$000		$000
5,874	Total key management personnel compensation	6,146
5,845	Salaries and other short-term employee benefits	6,072
-	Other long-term benefits	2
29	Termination benefits	72

27 Trust monies

The Department operates trust accounts as the agent under section 66 of the Public Finance Act 1989. The transactions through these accounts and their balances at 30 June 2008 are not included in the Department's own financial statements. Movements in these accounts during the year ended 30 June 2008 were as follows:

Statement of trust monies or the year ended 2008

Account	As at 2007	Contribution	Distribution	Revenue	Expense	As at 2008
	$000	$000	$000	$000	$000	$000
	7,387	5,516	(5,899)	397	(27)	7,374
Employment Relations Service Trust	24	268	(274)	1	-	19
Employment Relations Act Security of Costs Trust	6	-	-	-	-	6
NZ Immigration Trust	7,357	5,248	(5,625)	396	(27)	7,349

The Employment Relations Service Trust (previously called the Industrial Relations Trust) was established in September 1988 and handles trust monies received by labour inspectors on behalf of workers.

The Employment Relations Act Security of Costs Trust (previously called the Employment Court Trust) was established in February 1990 and handles monies held at the direction of the Employment Relations Authority.

The NZ Immigration Trust was established in 1999 to hold bonds required to be paid by visitors with a higher risk profile. The distribution figure includes $808,000 net forfeited to the Crown during the year due to clients either not meeting the conditions of their bond or not having applied for a refund within the 12 months allowed.

28 Memorandum account - visas and permits  

Memorandum account - visas and permits  

Actual		Actual
2007		2008
$000		$000
(1,684)	Balance at 30 June	10,237
	Provision for statutory information
3,733	Balance at 1 July	(1,684)
82,860	Revenue	108,946
(87,954)	Expenses	(96,702)
(323)	Capital injection	(323)

This memorandum account summarises financial information relating to the accumulated financial surplus and deficits incurred in the sale of visas and permits by the Department.

Memorandum accounts are notional accounts that are not formal assets or liabilities of the Crown. The accounts record the accumulated balance of surpluses and deficits incurred in the provision of certain outputs on a full cost recovery basis. The surplus/deficit levels are dependent upon the business conditions and Government's policy settings prevailing during that period. The expectation is that, with fluctuations in the immigration market, possible changes to immigration policy and the potential need for future capital contributions for expansion and improvement of visa and permit services, the balance of this account will reduce over time.

This memorandum account has been operating since 1 July 1999 and reflects forecasts based on the current strong demand for visa and permit services. Changes to these demand levels during or between years may mean actual out-turns differ from forecast. In 2007, expenditure was higher than revenue due to the continuation of the subsidy on visitor visas.

29 Memorandum account - provision of HSE levy-funded services

Memorandum account - provision of HSE levy-funded services

Actual		Actual
2007		2008
$000		$000
-	Balance at 30 June	2,184
-	Balance at 1 July	-
-	Revenue	37,978
-	Expenses	(35,794)

This notional account was established on 1 July 2007 in accordance with the Cabinet Economic Development Committee Decision EDC Min (07) 29/14.

The account does not hold accessible funds. It records health and safety in employment (HSE) levy revenue accumulated by the Crown, offset by the amount of levy revenue spent by the Department of Labour and designated agencies (the Civil Aviation Authority and Maritime New Zealand) on appropriated HSE activity. The account balance is determined at the end of each financial year. If the balance is greater than zero, it means the revenue collected to that point is higher than expenses, and conversely, a negative balance denotes higher accumulated expenses compared to revenue.

The accumulated balance in the account, the forecast revenue and known future expenses to be appropriated will be considered annually in determining changes to the HSE levy rates within set parameters. The rate of the HSE levy is currently set in the Health and Safety in Employment Regulations 1994 at five cents per 100 dollars of leviable earnings.

30 Explanation of major variances against budget

Explanations for major variances from the Department's estimated figures in the Statement of Intent are as follows:

Statement of financial performance

The variance in employee benefits expenditure of $8.723 million, or 6%, was due to a misclassification that occurred in the reporting of the Supplementary Estimates. The variance against internal employee benefit budgets is $3.049 million, or 2%.

Total expenditure was below budget by $10.595 million, or 4%. This variance is predominantly due to the under-expenditure in each of the Votes. Much of the under-expenditure has approval in-principle to transfer funding to 2008/09 as shown in the following table.

Major variances against budget

Vote	Variance to Budget $000	Variance to Budget %	In-Principle Transfers to 2008/09 $000
Total*	10.982	4.0%	6.654
Labour	1.506	2.0%	1.364
Immigration	6.768	3.8%	4.940
Employment	2.608	14.7%	0.310
ACC	0.100	4.0%	0.040

*$0.387 million of remeasurement of employee entitlements is not attributed to Votes and appropriation expenses.

Vote Employment shows a significant level of under-expenditure, which predominately relates to the Upskilling Partnership Programme. The detailed design of the Upskilling Partnership Programme clarified that budgeted training costs would not be met by the Department, but by the TEC. The majority of Vote Immigration under expenditure will be transferred to 2008/2009. 

Statement of financial position

	Net Assets Higher/ (Lower) $000
Cash and cash equivalents	8,096
Draw-downs of capital not yet spent as capital expenditure programmes have been delayed.
Debtors and other receivables	18,922
The Department expected a certain level of under-expenditure at year end and therefore did not draw the full amount of cash owed from the Crown.
Fixed Assets	(9,077)
The projected spend on capital did not eventuate.
Creditors and other payables	17,969
The under-expenditure is also recognised in the higher provision for the repayment of surplus to the Crown.

Statement of cash flows

	Net Assets Higher/ (Lower) $000
Net cash from investing activities	9,777
Purchases of property, plant and equipment were lower due to delays in the Department's capital expenditure programme.

31 Events after the balance sheet date

There were no events occurring between year end and the signing of the financial statements that would have a significant effect on these financial statements.

32 Explanation of transition to NZ IFRS

The Department's financial statements for the year ended 30 June 2008 are the first financial statements that comply with NZ IFRS. The Department has applied NZ IFRS 1 in preparing these financial statements.

The Department's transition date is 1 July 2006. The Department prepared its opening NZ IFRS balance sheet at that date. The reporting date of these financial statements is 30 June 2008. The Department's NZ IFRS adoption date is 1 July 2007.

The following tables show the changes in equity, resulting from the transition from previous NZ GAAP to NZ IFRS as at 1 July 2006 and 30 June 2007.

RECONCILIATION OF DEPARTMENTAL EQUITY

AS AT 1 JULY 2006

Reconciliation of departmental equity as at 1 July 2006

	Note	NZ GAAP as at 1 Jul 2006 $000	Recognition/ measurement adjustments $000	Presentation adjustments $000	NZ IFRS as at 1 Jul 2006 $000
Assets
Current assets
Cash and cash equivalents		59,212	-	-	59,212
Prepayments		1,368	-	-	1,368
Trade and other receivables		1,466	-	-	1,466
Other financial assets	a	-	503	-	503
Inventory	b	-	400	-	400
Property, plant & equipment	c	-	-	671	671
Total current assets		62,046	903	671	63,620
Non-current assets
Property, plant & equipment	c	41,309	(184)	(20,298)	20,827
Intangible assets	d	-	-	19,627	19,627
Total non-current assets		41,309	(184)	(671)	40,454
Total assets		103,355	719	-	104,074
Liabilities
Current liabilities
Trade and other payables	e	36,016	-	224	36,240
Finance leases		290	-	-	290
Other financial liabilities	a	-	3	-	3
Insurance liabilities	f	-	22	29	51
Employee entitlements	g	7,176	108	-	7,284
Provision for repayment of surplus to the Crown	e	224	-	(224)	-
Other provisions	f	2,535	-	(29)	2,506
Total current liabilities		46,241	133	-	46,374
Non-current liabilities
Finance leases		33	-	-	33
Insurance liabilities	f	-	45	-	45
Employee entitlements		2,688	-	-	2,688
Total non-current liabilities		2,721	45	-	2,766
Total liabilities		48,962	178	-	49,140
Net assets		54,393	541	-	54,934
Taxpayers' funds
General funds	h	50,035	541	-	50,576
Asset revaluation reserve		4,358	-	-	4,358
Total taxpayers' funds		54,393	541	-	54,934

RECONCILIATION OF DEPARTMENTAL EQUITY

AS AT 30 JUNE 2007

Reconciliation of departmental equity as at 30 June 2007

	Note	NZ GAAP as at 30 Jun 2007 $000	Recognition/ measurement adjustments $000	Presentation adjustments $000	NZ IFRS as at 30 Jun 2007 $000
Assets
Current assets
Cash and cash equivalents		52,370	-	-	52,370
Prepayments		1,376	-	-	1,376
Trade and other receivables		2,086	-	-	2,086
Other financial assets	a	-	-	-	-
Inventory	b	-	115	-	115
Property, plant & equipment	c	-	-	491	491
Total current assets		55,832	115	491	56,438
Non-current assets
Property, plant & equipment	c	40,261	(123)	(15,803)	24,335
Intangible assets	d	-	-	15,312	15,312
Total non-current assets		40,261	(123)	(491)	39,647
Total assets		96,093	(8)	-	96,085
Liabilities
Current liabilities
Trade and other payables	e	27,569	-	224	27,793
Finance leases		20	-	-	20
Other financial liabilities	a	-	31	-	31
Insurance liabilities	f	-	14	29	43
Employee entitlements	g	7,265	90	-	7,355
Provision for repayment of surplus to the Crown	e	224	-	(224)	-
Other provisions	f	533	-	(29)	504
Total current liabilities		35,611	135	-	35,746
Non-current liabilities
Finance leases		20	-	-	20
Insurance liabilities	f	-	60	-	60
Employee entitlements		2,455	-	-	2,455
Total non-current liabilities		2,475	60	-	2,535
Total liabilities		38,086	195	-	38,281
Net assets		58,007	(203)	-	57,804
Taxpayers' funds
General funds		54,025	(203)	-	53,822
Asset revaluation reserve		3,982	-	-	3,982
Total taxpayers' funds		58,007	(203)	-	57,804

Notes to the restated Statement of Financial Position

(a) Recognition of forward exchange contracts

In accordance with NZ IAS 39: Financial Instruments: Recognition and Measurement, the Department has recognised its forward exchange contracts in the Statement of Financial Position at fair value. Under NZ GAAP, these were not recognised but disclosed in the notes to the financial statements.

(b) Inventory

In accordance with NZ IAS 2: Inventories, the Department has recognised the publications and brochures that it gives away to the public as inventories held for distribution. Inventories held for distribution are assets:

• held for distribution at no or nominal consideration in the ordinary course of operations
• in the process of production for distribution at no or nominal consideration in the ordinary course of operations
• in the form of material or supplies to be consumed in the production process or in the rendering of services at no or nominal consideration.

Under NZ GAAP, these were not recognised as an asset.

(c) Property, plant and equipment

In accordance with NZ IAS 1: Presentation of Financial Statements, the Department has classified vehicles that are expected to be sold in the next 12 months as a current asset. Under NZ GAAP these were classified as non-current assets.

The vehicles expected to be disposed of in the next 12 months do not meet the definition of assets held for sale, as a sale is not highly probable. The vehicles were not actively marketed for sale at 1 July 2006 and 1 July 2007.

In accordance with NZ SIC 32: Web Site Costs, the Department has derecognised some website development costs. These costs relate to the development of the New Zealand Now website which does not generate any revenue for the Department and is not transactional in nature other than giving users the ability to download general information on New Zealand and the Department's general services.

(d) Intangible assets

In accordance with NZ IAS 38: Intangible Assets, the Department has classified its computer software as an intangible asset. Previously, computer software was treated as a separate class of asset within property, plant and equipment.

(e) Trade and other payables

The Department has chosen to reclassify the provision for repayment of surplus to the Crown and include it within trade and other payables.

(f) Insurance liabilities

The Department has remeasured its liability for work-related injury claims under the ACC Partnership Programme in accordance with the specific measurement guidance under NZ IFRS 4: Insurance Activities. Under NZ GAAP, an estimate of the liability was made in accordance with FRS 15: Provisions, Contingent Liabilities and Contingent Assets.

In addition, the Department has presented the liability in accordance with the current and non-current definitions outlined in NZ IAS 1: Presentation of Financial Statements. Under NZ GAAP, the liability was included under other provisions.

(g) Employee entitlements

In accordance with NZ IAS 19: Employee Benefits, the Department has recognised accumulating sick leave as a liability. Accumulating sick leave means any sick leave that can be carried forward and can be used in future periods if the current period's entitlement is not used in full. Under NZ GAAP, no provision for sick leave was recognised.

RECONCILIATION OF THE DEFICIT

FOR THE YEAR ENDED 30 JUNE 2007

Reconciliation of the deficit for the year ended 30 June 2007

	Note	PreviousNZ GAAP $000	Recognition/ measurement adjustments$000	Presentation adjustments$000	NZ IFRS$000
Net deficit		(223)	743	-	(966)
Income
Revenue Crown		158,192	-	-	158,192
Revenue Department		2,761	-	-	2,761
Revenue other		84,491	-	-	84,491
Finance income	a	112	-	173	285
Total income		245,556	-	173	245,729
Expenses
Employee benefits	b	125,313	(18)	(1,857)	123,438
Depreciation and amortisation	c	11,468	(78)	-	11,390
Capital charge		3,992	-	-	3,992
Other operating costs	d	105,006	308	1,845	107,157
Finance expenses	e	-	531	185	716
Total expenses		245,779	743	(173)	246,693

Notes to the restated deficit

(a) Finance income

In accordance with NZ IAS 21: The Effects of Changes in Foreign Exchange Rates, the Department has reclassified some net realised foreign exchange gains under finance income. Previously, these were recognised in other operating costs. The Department has also chosen to recognise a decrease in the doubtful debt provision as income. Previously, this was recognised in other operating costs.

(b) Employee benefits

In accordance with NZ IAS 19: Employee Benefits, the Department has recognised a change in the accumulating sick leave balance of $18,000. The Department has also taken the opportunity to reclassify some recruitment costs as operating costs to more accurately reflect their nature.

(c) Depreciation and amortisation

In accordance with NZ IAS 38: Intangible Assets, the Department has recorded a lower depreciation and amortisation charge of $78,000 to reflect the lower asset base and the non-recognition of website development costs that were capitalised under previous NZ GAAP.

(d) Other operating costs

In accordance with NZ IAS 4: Inventory, the Department has recognised a change in its inventory available for distribution of $285,000.

In accordance with NZ IFRS 4: Insurance Contracts, the Department has recognised a change in its liability for the ACC Partnership Programme of $7,000.

In accordance with NZ IAS 38: Intangible Assets, the Department has recognised a loss on disposal of $14,000 relating to website costs that were previously capitalised and do not meet the capitalisation criteria under NZ IAS 38.

(e) Finance expenses

In accordance with NZ IAS 39: Financial Instruments: Recognition and Measurement, the loss on derivatives of $531,000 reflects the unrealised loss on the change in the value of several forward exchange contracts.

The Department has also chosen to reclassify net unrealised foreign exchange losses and bad debt write-offs as finance expenses. Previously, these were classified as operating costs.

RECONCILIATION OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2007

There have been no material adjustments to the Statement of Cash Flows on transition to NZ IFRS.

NON-DEPARTMENTAL STATEMENTS AND SCHEDULES

FOR THE YEAR ENDED 30 JUNE 2008

Non-Departmental statements and schedules or the year ended 30 June 2008

Actual		Actual	Main estimates	Supp estimates
2007		2008	2008	2008
$000		$000	$000	$000
52,781	Revenues and receipts	49,654	41,318	50,859
787,036	Expenses	879,716	825,316	880,339
13,908	Assets	13,413	17,107	13,746
1,891	Liabilities	2,117	648	1,729

The following non-departmental statements and schedules record the income, expenses, assets, liabilities, commitments, contingent liabilities, contingent assets and trust account that the Department manages on behalf of the Crown.

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-department balances are consolidated into the Crown Financial Statements. Therefore, readers of these statements and schedules should also refer to the Crown Financial Statements for 2007/08.

The accompanying notes form part of these financial statements.

For a full understanding of the Crown’s financial position and the results of its operations for the period, reference should be made to the consolidated Financial Statements of the Government for the year ended 30 June 2008.

STATEMENT OF NON-DEPARTMENTAL EXPENDITURE AND CAPITAL EXPENDITURE AGAINST APPROPRIATIONS

FOR THE YEAR ENDED 30 JUNE 2008

Statement of non-departmental expenditure and capital expenditure against appropriations for the year ended 30 June 2008

Exp. after remeas.		Exp. before remeas.	Remeas.	Exp. after remeas.	Appropriation voted
2007		2008	2008	2008	2008
$000		$000	$000	$000	$000
787,036	Total Annual Appropriations	879,716	-	879,716	880,339
	Vote Labour
	Appropriation for output expenses
788	Pay and Employment Contestable Fund	1,270	-	1,270	1,326
1,894	Employment Relations Contestable Fund	2,411	-	2,411	2,169
869	Health & Safety in Employment Levy - collection services	869	-	869	869
3,551	Total appropriations for output expenses	4,550	-	4,550	4,364
	Appropriation for other expenses to be incurred by the Crown
952	International Labour Organisation	1,027	-	1,027	1,400
943	Joint Equal Employment Opportunities Trust	943	-	943	943
15	New Zealand Industrial Relations Foundation	15	-	15	15
2,776	Employment Relations Authority members' Salaries and Allowances (Employment Relations Act 2000, Section 171)	2,926	-	2,926	3,080
1	Bad debt expense	1	-	1	15
4,687	Total appropriations for other expenses to be incurred by the Crown	4,912	-	4,912	5,453
8,238	Total	9,462	-	9,462	9,817
	Vote ACC
	Appropriation for output expenses
55,739	Case management and supporting services	53,570	-	53,570	53,570
432,238	Claim entitlements and services	460,170	-	460,170	460,170
183,226	Public health acute services	208,934	-	208,934	208,934
671,203	Total appropriations for output expenses	722,674	-	722,674	722,674
	Benefits & other unrequited expenses
106,988	Other compensation	145,271	-	145,271	145,271
106,988	Total appropriations benefits & unrequited expenses	145,271	-	145,271	145,271
778,191	Total	867,945	-	867,945	867,945
	Vote Immigration
	Appropriation for other expenses to be incurred by the Crown
607	RRB, RRA & RSAA members' salaries and allowances	2,309	-	2,309	2,577
607	Total appropriations for other expenses to be incurred by the Crown	2,309	-	2,309	2,577
607	Total	2,309	-	2,309	2,577

GST of $90.9 million (2007: $84.5 million) has been excluded from non-departmental expenditure and capital appropriations in accordance with the accounting policy on GST. The GST is not recoverable from the IRD and is an expense that requires no appropriation. The expense is therefore not included in the Statement of Non-Departmental Expenditure and Capital Appropriations.

The accompanying notes form part of these financial statements.

For a full understanding of the Crown’s financial position and the results of its operations for the period, reference should be made to the consolidated Financial Statements of the Government for the year ended 30 June 2008.

STATEMENT OF NON-DEPARTMENTAL UNAPPROPRIATED EXPENDITURE AND CAPITAL EXPENDITURE AGAINST APPROPRIATIONS

FOR THE YEAR ENDED 30 JUNE 2008

Statement of non-departmental unappropriated expenditure and capital expenditure against appropriations For the year ended 30 June 2008

Unappropriated expenditure		Expenditure after remeasurements	Appropriation Voted	Unappropriated expenditure
2007		2008	2008	2008
$000		$000	$000	$000
1,894	Total unappropriated expenditure	2,411	2,169	242
	Vote Labour
1,894	Employment Relations Contestable Fund	2,411	2,169	242

The non-departmental output classes have incurred $0.242 million unappropriated expenditure during the year (2007: Nil). This unappropriated expenditure has been approved by the Minister of Finance in terms of section 26c of the Public Finance Act 1989.

VOTE LABOUR

Employment Relations Education Contestable Fund

A review of contract management practices for the fund has identified issues in contract management, the way variations to contracts have been recorded and accounted for, and the basis for the allocation of the fund. Issues have also arisen in relation to the management of transferred funding between financial years.

In May 2008, a potential overspend of $0.330 million was identified, and a Cabinet paper seeking interim authority under Imprest Supply to incur expenditure in excess of appropriation was approved in June 2008.

In the preparation of the financial reports for the year ended 30 June 2008, the fund incurred unappropriated expenditure of $0.242 million.

In addition, the review highlighted that, as at 30 June 2007, the fund may have awarded contracts to providers greater than the appropriation for the 2006/07 financial year.

The accompanying notes form part of these financial statements.

For a full understanding of the Crown’s financial position and the results of its operations for the period, reference should be made to the consolidated Financial Statements of the Government for the year ended 30 June 2008

SCHEDULE OF NON-DEPARTMENTAL EXPENSES

FOR THE YEAR ENDED 30 JUNE 2008

Schedule of non-departmental expenses for the year ended 30 June 2008

Actual		Actual	Main estimates	Supp estimates
2007		2008	2008	2008
$000		$000	$000	$000
	Expenditure
	Vote Labour
3,551	Non-departmental output classes	4,550	2,786	4,364
4,687	Other expenses to be incurred by the Crown	4,912	5,453	5,453
8,238	Total non-departmental expenses: Vote Labour	9,462	8,239	9,817
	Vote ACC
671,203	Non-departmental output classes	722,674	707,807	722,674
106,988	Benefits and other unrequited expenses	145,271	106,693	145,271
778,191	Total non-departmental expenses: Vote ACC	867,945	814,500	867,945
	Vote Immigration
607	Other expenses to be incurred by the Crown	2,309	2,577	2,577
607	Total non-departmental expenses: Vote Immigration	2,309	2,577	2,577
787,036	Total non-departmental expenses	879,716	825,316	880,339

Note: Annual and other appropriations have been classified together in the above schedule, but are separately disclosed in the Statement of Non-Departmental Expenditure and Capital Appropriations.

The accompanying notes form part of these financial statements.

For a full understanding of the Crown’s financial position and the results of its operations for the period, reference should be made to the consolidated Financial Statements of the Government for the year ended 30 June 2008.

SCHEDULE OF NON-DEPARTMENTAL INCOME

FOR THE YEAR ENDED 30 JUNE 2008

Schedule of non-departmental income for the year ended 30 June 2008

Actual		Actual	Main estimates	Supp estimates
2007		2008	2008	2008
$000		$000	$000	$000
52,781	Total non-departmental income administered by the Department	49,654	41,318	50,859
	Administered on behalf of the Minister of Labour
184	Employment Relations Authority fees	172	193	193
35,950	Health and safety in employment levy	37,977	29,067	38,608
33	OSH fees and licences	32	33	33
-	Contestable fund recoveries	1	-	-
216	Recovery of Remuneration Authority costs of setting local authority members' remuneration	227	250	250
10	Infringement notice fines	28	247	247
36,393	Total non-departmental income administered on behalf of the Minister of Labour	38,437	29,790	39,331
	Administered on behalf of the Minister of Immigration
11,364	Migrant levy	10,418	11,528	11,528
286	Visitor bonds	-	-	-
4,661	English language bonds	756	-	-
55	Forfeited application fees	39	-	-
16,366	Total non-departmental income administered on behalf of the Minister of Immigration	11,213	11,528	11,528
	Administered on behalf of the Minister for Social Development and Employment
22	Programme recoveries	4	-	-
22	Total non-departmental income administered on behalf of the Minister for Social Development and Employment	4	-	-

The accompanying notes form part of these financial statements.

For a full understanding of the Crown’s financial position and the results of its operations for the period, reference should be made to the consolidated Financial Statements of the Government for the year ended 30 June 2008.

SCHEDULE OF NON-DEPARTMENTAL ASSETS

AS AT 30 JUNE 2008

Schedule of non-departmental assets as at 30 June 2008

Actual		Note	Actual	Main estimates	Supp estimates
2007			2008	2008	2008
$000			$000	$000	$000
13,908	Total non-departmental assets		13,413	17,107	13,746
	Current assets
8,631	Cash and cash equivalents		11,567	15,320	11,196
5,277	Receivables and prepayments	4	1,846	470	544
13,908	Total current assets		13,413	15,790	11,740
	Non-current assets
-	Debtors and other receivables		-	1,317	2,006
-	Total non-current assets		-	1,317	2,006

The accompanying notes form part of these financial statements.

For a full understanding of the Crown’s financial position and the results of its operations for the period, reference should be made to the consolidated Financial Statements of the Government for the year ended 30 June 2008.

SCHEDULE OF NON-DEPARTMENTAL LIABILITIES

AS AT 30 JUNE 2008

Schedule of non-departmental liabilities as at 30 June 2008

Actual		Note	Actual	Main estimates	Supp estimates
2007			2008	2008	2008
$000			$000	$000	$000
1,891	Total liabilities		2,117	648	1,729
	Current liabilities
1,453	Creditors and other payables	5	1,527	648	1,290
284	Provisions	6	373	-	284
1,737	Total current liabilities		1,900	648	1,574
	Non-current liabilities
154	Provisions	6	217	-	155
154	Total term liabilities		217	-	155

The accompanying notes form part of these financial statements.

For a full understanding of the Crown’s financial position and the results of its operations for the period, reference should be made to the consolidated Financial Statements of the Government for the year ended 30 June 2008.

SCHEDULE OF NON-DEPARTMENTAL COMMITMENTS

FOR THE YEAR ENDED 2008

Schedule of non-departmental commitments for the year ended 2008

Actual		Actual
2007		2008
$000		$000
	Other non-cancellable commitments
810,043	Not later than one year	938,141
-	Later than one year and not later than five years	4,248
-	Later than five years	-
810,043	Total other non-cancellable commitments	942,389

The operating commitments comprise of:

• Employment Relations Contestable Fund contracts of $5.0 million that are still to be completed as at 30 June 2008 (2007: $1.7 million)
• Pay and Equity Contestable Fund contracts of $749,000 that are still to be completed as at 30 June 2008 (2007: $483,000)
• the 2008/09 purchase agreement with ACC. The Minister for ACC entered into a purchase agreement with ACC on 22 June 2008. The purchase agreement outlines the outputs the Minister has agreed to purchase from ACC on behalf of non-earners for 2008/09. The total cost of the outputs that the Minister committed to on 22 June 2008 was $936.6 million (2007: $807.9 million).

The accompanying notes form part of these financial statements.

For a full understanding of the Crown’s financial position and the results of its operations for the period, reference should be made to the consolidated Financial Statements of the Government for the year ended 30 June 2008.

SCHEDULE OF NON-DEPARTMENTAL CONTINGENT LIABILITIES AND CONTINGENT ASSETS

FOR THE YEAR ENDED 2008

There were no non-departmental contingent liabilities or contingent assets as at 30 June 2008 (2007: Nil).

The accompanying notes form part of these financial statements.

For a full understanding of the Crown’s financial position and the results of its operations for the period, reference should be made to the consolidated Financial Statements of the Government for the year ended 30 June 2008.

NOTES TO THE NON-DEPARTMENTAL FINANCIAL STATEMENTS

1 Reporting entity

These non-departmental schedules and statements present financial information on public funds managed by the Department on behalf of the Crown.

These non-department balances are consolidated into the Financial Statements of the Government. For a full understanding of the Crown's financial position, results of operations and cash flows for the year, reference should also be made to the Financial Statements of the Government.

2 Basis of preparation

(a) Statement of compliance

The non-departmental schedules and statements have been prepared in accordance with the Government's accounting policies as set out in the Financial Statements of the Government and in accordance with relevant Treasury instructions and Treasury circulars.

Measurement and recognition rules applied in the preparation of these non-departmental schedules and statements are consistent with New Zealand generally accepted accounting practice as appropriate for public benefit entities.

This is the first set of schedules and statements prepared using NZ IFRS. There is no estimated material financial impact on the opening non-departmental asset and liability schedules as at 1 July 2006 as a result of the transition to NZ IFRS.

Standards, amendments and interpretations issued but not yet effective and have not been adopted, which are relevant to the Department include:

• NZ IAS 1: Presentation of Financial Statements (revised 2007), which replaces NZ IAS 1: Presentation of Financial Statements (issued 2004) and is effective for reporting periods beginning on or after 1 January 2009. The revised standard requires information in financial statements to be aggregated on the basis of shared characteristics and to introduce a statement of comprehensive income. This will enable readers to analyse changes in equity resulting from transactions with the Crown in its capacity as 'owner' separately from 'non-owner' changes. The revised standard gives the Department the option of presenting items of income and expense and components of other comprehensive income either in a single statement of comprehensive income with sub-totals, or in two separate statements (a separate income statement followed by a statement of comprehensive income). The Department expects that it will apply the revised standard for the first time for the year ended 30 June 2010 and is yet to decide whether it will prepare a single statement of comprehensive income or a separate income statement followed by a statement of comprehensive income.

Other standards, amendments and interpretations issued but not yet effective that are not relevant to Department and/or will have no impact on the Department's financial statements are:

• NZ IFRS 4: Insurance Contracts - Amendments (approved 2007)
• NZ IFRS 8: Operating Segments (approved 2006)
• NZ IAS 23: Borrowing Costs (approved 2007)
• NZ IFRIC 11: NZ IFRS 2: Group and Treasury Share Transactions (approved 2006)
• NZ IFRIC 12: Service Concession Arrangements (approved 2007)
• NZ IFRIC 13: Customer Loyalty Programmes (approved 2007)
• NZ IFRIC 14: The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (approved 2007).

The financial statements were authorised for issue by the Chief Executive on 29 September 2008.

(b) Basis of measurement

The measurement base applied to the financial statements is historical cost.

(c) Reporting period and currency

The reporting period for these financial statements is the year ended 30 June 2008. The budget figures are those presented in the Main Estimates on 17 May 2007 and those amended by the Supplementary Estimates on 22 May 2008 and any transfer made by Order in Council under the Public Finance Act 1989.

The reporting currency used in the preparation of these financial statements is New Zealand dollars rounded to the nearest thousand.

(d) Use of judgements and estimates

The preparation of financial statements in conformity with NZ IFRS requires judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses.

The estimates and associated assumptions are based on historical experience and various other factors that are considered to be reasonable under the circumstances. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements that have a significant effect on the financial statements and estimates with a significant risk of material adjustments in the next year are discussed in the notes to the financial statements.

3 Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these financial statements and in preparing an opening NZ IFRS balance sheet as at 1 July 2006 for the purposes of the transition to NZ IFRS.

The following particular accounting policies have been applied:

(a) Revenue - levies

Levy revenue includes the health and safety in employment levy and the migrant levy, which are legislated under the Health and Safety in Employment Act 1992 (section 59) and the Immigration Act 1987 (section 149B) respectively. Revenue from levies is recognised as revenue when the obligation to pay the levy is incurred.

(b) Grant expenditure

Non-discretionary grants are those grants awarded if the application meets the specified criteria and are recognised as expenditure when an application that meets the specified criteria for the grant has been received.

Discretionary grants are those grants where the Department has no obligation to award on receipt of the grant application and are recognised as expenditure when approved by the grants approvals committee and the approval has been communicated to the applicant.

(c) Goods and Services Tax (GST)

All items in the financial statements, including appropriation statements, are stated exclusive of GST, except for receivables and payables, which are stated on a GST inclusive basis. In accordance with Treasury instructions, GST is returned on revenue received on behalf of the Crown, where applicable. However, an input tax deduction is not claimed on non-departmental expenditure. Instead, the amount of GST applicable to non-departmental expenditure is recognised as a separate expense and eliminated against GST revenue on the consolidation of the government financial statements.

(d) Debtors and other receivables

Debtors and other receivables are recognised initially at fair value and subsequently measured at amortised cost. Allowances for estimated irrecoverable amounts are recognised when there is objective evidence that the receivable is impaired. Impairment losses are recognised in the schedule of non-departmental expenses.

(e) Commitments

Future expenses and liabilities to be incurred on non-cancellable contracts that have been entered into at balance date are disclosed as commitments to the extent that there are equally unperformed obligations. Cancellable commitments that have penalty or exit costs explicit in the agreement on exercising that option to cancel are included in the Statement of Commitments at the value of that penalty or exit cost.

(f) Changes in accounting policies

There have been no changes in accounting policies since the date of the last audited financial statements. All policies have been applied on a basis consistent with other years.

Notes to schedules

4 Creditors and other receivables

Creditors and other receivables

Actual		Actual
2007		2008
$000		$000
5,277	Total debtors and other receivables	1,846
4,795	Debtors and receivables	-
482	Prepayments	1,846

The carrying value of debtors and other receivables approximates their fair value.

5 Creditors and other payables    

Creditors and other payables

Actual		Actual
2007		2008
$000		$000
1,453	Total creditors and other payables	1,527
763	Creditors	894
39	Income in advance	-
651	GST payable	633

Creditors and other payables are non-interest bearing and are normally settled on 30-day terms; therefore, the carrying value of creditors and other payables approximates their fair value.

6 Provisions for employee entitlements    

Provisions for employee entitlements

Actual		Actual
2007		2008
$000		$000
438	Total provisions for employee entitlements	590
	Current liabilities
284	Annual leave	373
284	Total current	373
	Non-current liabilities
14	Long service leave	11
140	Retirement leave	206
154	Total non-current liabilities	217

An independent actuarial valuation was undertaken by Melville Jessup Weaver as at 30 June 2008 to estimate the present value of retirement leave and long service leave. The key assumptions used in determining the present values were:

• discount rate for the 2008 financial year 6.7% p.a. (2007: 7.0% p.a.)
• salary growth rate for the 2008 financial year 3.5% p.a. (2007: 3.5% p.a.).

Any changes in these assumptions will impact on the carrying amount of the liability. In determining the appropriate discount rate, the Department considers the interest rates on New Zealand Government Bonds that have terms to maturity that match, as closely as possible, to the estimated future cash outflows. The salary inflation factor has been determined after considering historical salary inflation patterns and after obtaining advice from an independent actuary.

If the discount rate was to differ by 1% from the Department's estimates, with all other factors held constant, the carrying amount of the liability would be an estimated $0.010 million higher/lower.

If the salary inflation factor was to differ by 1% from the Department's estimates, with all other factors held constant, the carrying amount of the liability would be an estimated $0.010 million higher/lower.

7 Vote ACC

Funding is provided by the government through the Department of Labour to ACC for costs relating to the Non-Earners Account. The Non-Earners Account covers all personal injuries to people not in the paid workforce - students, beneficiaries, older people and children.

For claims that originated after 1 July 2001, ACC funding is provided based on an actuarial assessment of the whole-of-life cost. This is reassessed annually and funding appropriated from the Crown and provided to ACC. This is referred to as 'fully funded' and cost $755.388 million in 2008 (2007: $672.299 million).

For claims that originated prior to 1 July 2001, ACC funding is provided to cover the costs relating to claims in the year the costs are incurred. The cost of this is assessed during the year and appropriation sought from the Crown and funding provided to ACC. This is referred to as 'pay as you go' and, in 2008, cost $112.594 million (2007: $105.892 million).

8 Events after the balance sheet date

There were no events occurring between year end and the signing of the financial statements that would have a significant effect on these financial statements.

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