Notes to the Non-Departmental Schedules and Statements

for the year ended 30 June 2006

Note 1: Non-Departmental Revenue and Receipts

The schedule of revenue and receipts summarises non-departmental revenue that the Department collects on behalf of the Crown.

Note 2: Non-Departmental Expenditure and Appropriations

This statement details expenditure incurred against each appropriation administered by the Department on behalf of the Crown.

Note 3: Receivables and Prepayments

	2006 Actual $000	2005 Actual $000
Income-related rent debt	5,917	3,252
Less: provision for doubtful debts	(3,081)	(2,591)
Net realisable value	2,836	661
Prepayment of income-related rental subsidy	7,862	-
Receivable - Housing New Zealand Corporation	216	-
Total receivables and prepayments	10,914	661

Note 4: Investments

	2006 Actual $000	2005 Actual $000
Purchase of land by Housing New Zealand Corporation, as agent for the Crown under the Housing Act 1955, for state housing purposes	76,191	22,191
Capital injections to Housing New Zealand Corporation for housing activities 8	793,510	631,074
Total investments	869,701	653,265

Note 5: Non-Departmental Assets and Liabilities

Non-departmental assets and liabilities are administered by the Department of Building and Housing on behalf of the Crown. As these assets and liabilities are neither controlled by the Department nor used in the production of the Department's outputs, they are not reported in the Department's Statement of Financial Position.

Note 6: Payables

	2006 Actual $000	2005 Actual $000
Payable to Housing New Zealand Corporation
Current
- Output expenses	6,630	1,551
- Income-related rental subsidy	-	6,421
- Housing assistance	1,151	1,752
- Loan for Hobsonville land purchase	-	22,191
- Capital injection	38,131	37,612
- Other payables	14	13
Total current	45,926	69,540
Term
- Loan for Hobsonville land purchase	22,191	-
Total payables	68,117	69,540

Note 7: Explanation of major budget variances in 2006 and variances to 2005

All figures in the following explanations exclude GST.

Non-tax revenue
The increase in interest on Crown loans to Housing New Zealand Corporation reflects movements in interest rates and the level of loans advanced.

The decrease in dividend from Housing New Zealand Corporation from 2005 to 2006 is primarily due to increased depreciation expense, resulting from significant increases in property valuations at 30 June 2004.

Non-departmental output expenses
The increase in expenditure under the Contracted Housing Support Services output expense from 2005 is mainly due to the additional $7.278 million in Budget 2005 to continue the Rural Housing Programme to address sub-standard housing in rural areas.

The increase in expenditure under the HNZC Housing Support Services output expense from 2005 is due to:

• provision of $7.104 million in Budget 2005 to continue the Mortgage Insurance Scheme to help people into home ownership (classified as Housing Assistance expense and funded $4.199 million in 2005)
• additional $2.604 million funding (over that provided for in 2005) in Budget 2005 to continue the Community Renewal and Healthy Housing programmes
• funding of $0.300 million in Budget 2006 to commence a 2-year pilot loan assistance scheme for owners of non-weathertight homes
• an expense transfer of $0.805 million from 2005 to 2006 for the Housing Innovation Fund programme.

Despite a $2.930 million reduction in the Mortgage Insurance Scheme budget in the Supplementary Estimates, actual expenditure was an additional $1.324 million lower due to changing market condition (ie, house prices increased beyond the scope of the scheme).

The increase in expenditure under the Housing Policy Advice output expense is due to a $2.248 million increase in funding in Budget 2005 to increase the policy capability of Housing New Zealand Corporation, of which $0.434 million was to fund the Centre for Housing Research Aotearoa New Zealand for 2005/06 only.

One-off funding of $0.225 million was provided in 2006 to fund the introduction of a new registration, reporting and monitoring regime for architects.

Capital expenditure
Housing New Zealand Corporation was provided with funding of $54 million in 2006 to purchase surplus land at Hobsonville from the New Zealand Defence Force.

The Treasury identified the need to establish appropriations for the refinance of Crown debt by Housing New Zealand Corporation and Housing New Limited from 2005 and the need to validate the loans advanced to them, totalling $300 million over the preceding financial years (refer to Statement of Unappropriated Expenditure on page 46).

The decrease in budget for Capital Injections to Housing New Zealand Corporation for Housing Activities is due to:

• $0.900 million capital transfer for the Auckland City pensioner housing modernisation programme
• $4 million capital transfer and $4 million saving for the Community-Owned Rural Rental Housing Lending Programme
• $12 million saving in the Low Deposit Rural Lending Programme.

Output expense and capital expenditure transfers to 2007
The Minister of Housing and Minister of Finance approved in principle the following expense transfers from 2005/06 to 2006/07.

• $0.274 million funding under the Housing Policy Advice output expense to complete research projects commissioned by Housing New Zealand Corporation from the Centre for Housing Research Aotearoa New Zealand
• $0.044 million funding under the Housing Policy Advice output expense to complete the evaluation of the Housing Innovation Fund
• $0.190 million funding under the Housing Policy Advice output expense to complete the review of the Accommodation Supplement
• $0.291 million funding under the HNZC Housing Support Services output expense to complete the Housing New Zealand Corporation-led project in conjunction with Wellington City Council for an investigation of a potential joint arrangement between Housing New Zealand Corporation and Wellington City Council to manage the Council's housing stock and develop proposals for Cabinet to consider
• $0.050 million funding under the HNZC Housing Support Services output expense to complete the Low Cost Housing Design Initiative
• $0.110 million capital expenditure for ongoing work on the Auckland Pensioner Housing modernisation programme
• $0.014 million capital expenditure under the Local Government and Third Sector Housing lending programme. The transfer covers those loans that Housing New Zealand Corporation approved before the 30 June 2006, but are not accepted by the borrower until the beginning of the next financial year.

These expense and capital transfers will be confirmed by the joint Ministers in the October Baseline Update and included in the 2006/07 Supplementary Estimates.

	2006 Actual $000	2006 Supplementary Estimates $000	Variance Under/(over)Spent $ 000
Income-Related Rental Subsidy	395,491	395,233	(258)

An explanation for the $258,000 unappropriated expenditure is provided under the Statement of Unappropriated Expenditure (page 46).

Housing Assistance
The underspends in the Housing Assistance subsidy payable to Housing New Zealand Corporation are because:

• a greater than expected proportion of capital loans were made to local authorities than community-based organisations than anticipated, and local authorities are not eligible for operational support
• the take-up of the loans was slower than anticipated.

Increase in debt provision
This appropriation was established in 2006 to recognise any increase in the provision for doubtful debts on income-related rent debt. This is a new requirement under the Public Finance Act 1989. Before 2006, increases in debt provisions did not require an appropriation. The increase forecast in the Supplementary Estimates was calculated on the collection rate without regard to debt status, age and repayment arrangements that can extend over a long period. The actual expense recognised takes into account these elements as at 30 June 2006.

These financial statements are to be read in conjunction with the accompanying accounting policies and notes to the financial statements.

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 ⁸ The $208.251 million expenditure in the Statement of Non-Departmental Expenditure and Appropriations comprises $45.815 million debt and $162.436 million equity. The debt is accounted for by The Treasury. The equity (investment in Housing New Zealand Corporation) is accounted for by the Department.

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