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Refer to “The Supplementary Estimates of Appropriations for the year ending 30 June 2007” for an explanation of significant budget changes between the 2006/07 Main Estimates and 2006/07 Supplementary Estimates for Vote Māori Affairs (B.7 – Pages 326 and 329).
The following notes explain significant variances between Main Estimates and Actuals.
Personnel Costs – the variance mainly relates to delays experienced in appointing staff to new positions.
Operating Costs – additional operating costs were incurred mainly as a result of increased activity in Treaty of Waitangi claims and Māori Tourism, resulting in additional appropriation in the Supplementary Estimates, as well as use of consultants to undertake a number of projects that were not budgeted.
Cash – the increase in cash is largely due to more than anticipated levels of Creditors and Payables and the Net Operating surplus.
Creditors and Payables – the variance is mainly due to larger year end accruals than originally forecast.
The variance mainly relates to the realignment of strategic priorities by shifting resources across other output classes. This particularly reflects increased activity around Treaty of Waitangi Claims and Settlements and the Māori Trust Office review within Policy - Crown Māori Relationships.
Te Puni Kōkiri is party to financial instrument arrangements as part of its everyday operations. These include instruments such as bank balances, accounts receivable and accounts payable.
Credit risk is the risk that a third party will default on its obligations to Te Puni Kōkiri, causing Te Puni Kōkiri to incur a loss. In the normal course of its business, Te Puni Kōkiri incurs credit risk from trade debtors, and transactions with financial institutions and the New Zealand Debt Management Office (NZDMO).
Te Puni Kōkiri does not require any collateral or security to support financial instruments with financial institutions that Te Puni Kōkiri deals with, or with the NZDMO, as these entities have high credit ratings. For its other financial instruments, Te Puni Kōkiri does not have significant concentrations of credit risk.
The fair value of financial instruments is equivalent to the carrying amount disclosed in the Statement of Financial Position.
Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. This could impact on the return on investments or the cost of borrowing. Te Puni Kōkiri has no significant exposure to interest rate risk on its financial instruments.
Under section 46 of the Public Finance Act Te Puni Kōkiri cannot raise a loan without Ministerial approval and no such loans have been raised. Accordingly, there is no interest rate exposure for funds borrowed.
Te Puni Kōkiri is a wholly owned entity of the Crown. The Government significantly influences the roles of Te Puni Kōkiri as well as being its major source of revenue.
Te Puni Kōkiri enters into numerous transactions with other government departments, Crown agencies and state-owned enterprises on an arm’s length basis. These transactions are not considered to be related party transactions.
Apart from those transactions described above, Te Puni Kōkiri has not entered into any related party transactions, except for where:
Te Puni Kōkiri staff who work in local communities may in a private capacity hold executive or advisory positions in local organisations. Some of these organisations may receive funding via Te Puni Kōkiri. These organisations are therefore considered related parties of Te Puni Kōkiri. Te Puni Kōkiri staff are required to declare any real or potential conflicts of interest. Steps are then taken to ensure that staff members with a conflict of interest are not involved in any Te Puni Kōkiri decisions involving a group/organisation they may be involved with in a private capacity.
Te Puni Kōkiri staff who work in local communities may in a private capacity hold executive or advisory positions in local organisations. Some of these organisations may receive funding via Te Puni Kōkiri. These organisations are therefore considered related parties of Te Puni Kōkiri.
Te Puni Kōkiri staff are required to declare any real or potential conflicts of interest. Steps are then taken to ensure that staff members with a conflict of interest are not involved in any Te Puni Kōkiri decisions involving a group/organisation they may be involved with in a private capacity.
In December 2002 the New Zealand Accounting Standards Review Board announced that New Zealand International Financial Reporting Standards (NZ IFRS) would apply to all New Zealand reporting entities for the periods commencing on or after 1 January 2007. Entities had the option to adopt NZ IFRS for the periods beginning on or after 1 January 2005.
Te Puni Kōkiri intends to implement NZ IFRS in its annual financial statements for the year ending 30 June 2008. In complying with NZ IFRS for the first time, Te Puni Kōkiri will restate amounts previously reported under current New Zealand accounting standards (NZ GAAP) using NZ IFRS. This requires a restatement of opening balances as at 1 July 2006, with initial transitional adjustments recognised retrospectively and mainly against retained earnings (operating surplus) at that date. The amounts/transactions incurred during the year ending 30 June 2007 will also be restated and will impact the income statement (statement of financial performance) and the balance sheet (statement of financial position) for that period. However, transitional adjustments relating to those standards where comparatives are not required will only be made at 30 June 2007.
A conversion project involving finance staff was established to evaluate the differences, if any, between current policies and the policies of the financial statements of the Government. The project team assessed the impact of changes in financial reporting standards on Te Puni Kōkiri financial reporting and other related activities as well as designed and implemented processes to deliver financial reporting under NZ IFRS.
This project is largely complete and Te Puni Kōkiri expects to be in a position to comply with the requirements of NZ IFRS for the year ending 30 June 2008.
The purpose of this disclosure is to highlight the expected impact on Te Puni Kōkiri as a result of transition from current policies to NZ IFRS based on the standards that exist at the date of issue of these financial statements. As we progress towards 30 June 2008, Te Puni Kōkiri intends to continue to provide users of the financial statements with updated information about the likely impacts of NZ IFRS on its income statement and balance sheet. This note, therefore, only provides a summary of the significant potential impacts resulting from transition to NZ IFRS and should not be taken as an exhaustive list of all the differences between existing NZ GAAP and NZ IFRS. NZ IFRS 1 also allows a number of exemptions to assist in the transition to reporting under NZ IFRS. The explanatory comments below include details of the NZ IFRS 1 treatments adopted.
The significant differences identified by Te Puni Kōkiri on transition to NZ IFRS are outlined below. It should not be regarded as a complete list of changes in accounting policies that will result from the transition to NZ IFRS, as some decisions have not been finalised where choices of accounting policies are available. It is possible that the actual impact of adopting NZ IFRS may vary from the information presented below, and the variation may be material.
Te Puni Kōkiri intends to provide further information, including quantifying the impacts of transitioning to NZ IFRS in our next Annual financial statements for the year ending 30 June 2008.
The estimated impact of transition to NZ IFRS from existing NZ GAAP is set out below. It is possible that the actual impact of adopting NZ IFRS may vary from the information presented below, and the variation may be material.
Estimated Impact on Te Puni Kōkiri Departmental Equity, Total Liabilities and Total Assets on transition to NZ IFRS on 1 July 2006
Te Puni Kōkiri recognises a liability for sick leave to the extent that absences in the coming year are expected to be greater than the sick leave entitlements in the coming year. The amount is calculated based on the unused sick leave entitlement that can be carried forward at balance date, to the extent that Te Puni Kōkiri anticipates it will be used by staff to cover those future absences.
Long service and retiring leave is calculated as the present value of the estimated future cash outflows.
Rural Lending loans are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. These are recognised initially at fair value plus transaction costs and subsequently measured at amortised cost using the effective interest rate method. Loans issued with duration less than 12 months are recognised at their nominal value. Allowances for estimated irrecoverable amounts are recognised when there is objective evidence that the asset is impaired. Interest and impairment losses are recognised in the Statement of Financial Performance.
A provision for impairment of receivables is established when there is objective evidence that Te Puni Kōkiri will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted using the effective interest method.
Te Puni Kōkiri has estimated the impact on Departmental and Non Departmental Equity, Total Liabilities, Total Assets and Income of transition to NZ IFRS as at 30 June 2007.
