Annual Report 2006/07: Part 3 - Residential Tenancies Trust Account
Audit report
To the readers of Residential Tenancies Trust Account's Financial Statements for the year ended 30 June 2007
The Auditor-General is the auditor of Residential Tenancies Trust Account (RTTA). The Auditor-General has appointed me, John O'Connell, using the staff and resources of Audit New Zealand, to carry out the audit of the financial statements of the RTTA, on his behalf, for the year ended 30 June 2007.
Unqualified opinion
In our opinion:
The financial statements of the Residential Tenancy Trust Account comprising the Statement of Accounting Policies, Statement of Financial Performance, Statement of Movements in Bondholders’ Funds, Statement of Financial Position, Statement of Cash Flows, Statement of Commitments, Statement of Contingent Liabilities and Notes to the Financial Statements:
- comply with generally accepted accounting practice in New Zealand; and fairly reflect:
- the RTTA's financial position as at 30 June 2007;
- the results of its operations and cash flows for the year ended on that date.
The audit was completed on 28 September 2007, and is the date at which our opinion is expressed.
The basis of our opinion is explained below. In addition, we outline the responsibilities of the Chief Executive and the Auditor, and explain our independence.
Basis of opinion
We carried out the audit in accordance with the Auditor-General's Auditing Standards, which incorporate the New Zealand Auditing Standards.
We planned and performed the audit to obtain all the information and explanations we considered necessary in order to obtain reasonable assurance that the financial statements did not have material misstatements, whether caused by fraud or error.
Material misstatements are differences or omissions of amounts and disclosures that would affect a reader's overall understanding of the financial statements. If we had found material misstatements that were not corrected, we would have referred to them in our opinion.
The audit involved performing procedures to test the information presented in the financial statements. We assessed the results of those procedures in forming our opinion.
Audit procedures generally include:
- determining whether significant financial and management controls are working and can be relied on to produce complete and accurate data;
- verifying samples of transactions and account balances;
- performing analyses to identify anomalies in the reported data;
- reviewing significant estimates and judgements made by the Chief Executive;
- confirming year-end balances;
- determining whether accounting policies are appropriate and consistently applied; and
- determining whether all financial statement disclosures are adequate.
We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements or statement of service performance.
We evaluated the overall adequacy of the presentation of information in the financial statements. We obtained all the information and explanations we required to support our opinion above.
Responsibilities of the Chief Executive and the Auditor
The Chief Executive of the Department of Building and Housing is responsible for preparing financial statements in accordance with generally accepted accounting practice in New Zealand. The financial statements must fairly reflect the financial position of the RTTA as at 30 June 2007 and the results of its operations and cash flows for the year ended on that date. The Chief Executive's responsibilities arise from section 126 of the Residential Tenancies Act 1986.
We are responsible for expressing an independent opinion on the financial statements and reporting that opinion to you. This responsibility arises from section 15 of the Public Audit Act 2001.
Independence
When carrying out the audit we followed the independence requirements of the Auditor-General, which incorporate the independence requirements of the Institute of Chartered Accountants of New Zealand.
Other than the audit, we have no relationship with or interests in the RTTA.
John O'Connell
Audit New Zealand
On behalf of the Auditor-General
Wellington, New Zealand
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Matters relating to the electronic presentation of the audited financial statements
This audit report relates to the financial statements of the Residential Tenancies Trust Account for the year ended 30 June 2007 included on the Department of Building and Housing's website. The Department of Building and Housing's Chief Executive is responsible for the maintenance and integrity of the Department of Building and Housing's website. We have not been engaged to report on the integrity of the Department of Building and Housing's website. We accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
The audit report refers only to the financial statements named above. It does not provide an opinion on any other information which may have been hyperlinked to or from the financial statements. If readers of this report are concerned with the inherent risks arising from electronic data communication they should refer to the published hard copy of the audited financial statements and related audit report dated 28 September 2007 to confirm the information included in the audited financial statements presented on this website.
Legislation in New Zealand governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.
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Financial Statements
Statement of Accounting Policies
for the year ended 30 June 2007
Reporting entity
The Department of Building and Housing manages the Residential Tenancies Trust Account pursuant to the Public Finance Act 1989 and the Residential Tenancies Act 1986. The Department took over direct management of the Residential Tenancies Trust Account on 18 August 1992.
All interest arising from any investment in the Residential Tenancies Trust Account belongs to the Crown and is treated as other revenue to the Department of Building and Housing.
Investments are held in approved securities under the Public Finance Act 1989. The Department of Building and Housing pays costs associated with the management of the Residential Tenancies Trust Account as departmental expenses.
Measurement system
These financial statements have been prepared on the basis of modified historical cost except for certain items with specific accounting policies outlined below.
Accounting policies
The following particular accounting policies which materially affect the measurement of financial results and financial position have been applied.
Revenue
The Trust derives revenue from interest on investments. Interest on investments is accrued on a monthly basis.
Cash
Cash is defined as coins, notes and demand deposits in the Trust Account bank account and other deposits held on call.
Accounts receivable
Accounts receivable are stated at estimated realisable value.
Investments
Investments are not generally traded but held to maturity. Investments in government stock and bonds are valued at cost with premiums and discounts on investments accounted for on a yield-to-maturity basis. Investments in bank deposits are valued at cost.
Financial instruments
The Residential Tenancies Trust Account is party to financial instruments as part of its normal operations. These financial instruments include accounts payable and receivable, cash, deposits and investments. Revenue and expenditure in relation to all financial instruments are recognised in the Statement of Financial Performance. Except for those items covered by a separate accounting policy, all financial instruments are shown at estimated fair value.
Taxation
The Residential Tenancies Trust Account is exempt from income tax in terms of the Income Tax Act 2004. Accordingly, no charge for income tax has been provided for.
Changes in accounting policies
There have been no changes in accounting policies. All policies have been applied on a basis consistent with the previous year.
Statement of Financial Performance
for the year ended 30 June 2007
2006
Actual
$000 |
|
2007
Actual
$000 |
| |
Revenue |
|
| 263 |
Interest earned from government stock |
97 |
| 13,691 |
Interest earned from bank deposits |
16,880 |
| 13,954 |
Total revenue |
16,977 |
| |
Expenditure |
|
| 13,954 |
Interest to Department of Building and Housing |
16,977 |
| - |
Operating surplus |
- |
Note: Audit fees are paid by the Department of Building and Housing.
Reconciliation of Movements in Bondholders' Funds
for the year ended 30 June 2007
2006
Actual
$000 |
|
2007
Actual
$000
|
| 187,065 |
Bondholders' funds at 1 July |
207,519 |
| - |
Total recognised revenues and expenses for the year |
- |
| 117,837 |
Bonds lodged |
130,895 |
| (97,383) |
Bonds refunded |
(107,438) |
| 207,519 |
Bondholders' funds at 30 June |
230,976 |
These financial statements are to be read in conjunction with the accompanying accounting policies and notes to the financial statements.
Statement of Financial Position
as at 30 June 2007
2006
Actual
$000 |
|
Note |
2007
Actual
$000 |
| |
Current assets |
|
|
| 5,624 |
Bank |
1 |
7,773 |
| 148,786 |
Investments |
1 |
163,451 |
| 6,098 |
Accounts receivable |
|
11,425 |
| 160,508 |
Total current assets |
|
182,649 |
| |
Non-current assets |
|
|
| 60,305 |
Investments |
1 |
66,700 |
| 60,305 |
Total non-current assets |
|
66,700 |
| 220,813 |
Total assets |
|
249,349 |
| |
Current liabilities |
|
|
| 13,261 |
Payable to Department of Building and Housing |
|
18,338 |
| 33 |
Other |
|
35 |
| 13,294 |
Total current liabilities |
|
18,373 |
| 207,519 |
Net assets |
|
230,976 |
| |
Bondholders' funds |
|
|
| 187,065 |
Opening balance |
|
207,519 |
| 20,454 |
Net increase |
|
23,457 |
| 207,519 |
Closing balance of bondholders' funds |
|
230,976 |
Statement of Cash Flows
for the year ended 30 June 2007
2006
Actual
$000 |
|
2007
Actual
$000 |
| |
Cash flows from operating activities |
|
| |
Cash was provided from: |
|
| 11,865 |
Interest received |
11,650 |
| |
Cash was disbursed to: |
|
| (8,480) |
Interest payments to Department of Building and Housing |
(11,900) |
| 3,385 |
Net cash flows from operating activities |
(250) |
| |
Cash flows from investing activities |
|
| |
Cash was provided from: |
|
| 153,321 |
Proceeds from maturity of investments |
166,986 |
| |
Cash was disbursed to: |
|
| (179,653) |
Purchase of investments |
(188,046) |
| (1) |
Disposal of goods |
2 |
| (26,333) |
Net cash flows from investing activities |
(21,058) |
| |
Cash flows from financing activities |
|
| |
Cash was provided from: |
|
| 117,837 |
Lodgement of bonds |
130,895 |
| |
Cash was disbursed to: |
|
| (97,383) |
Refund of bonds |
(107,438) |
| 20,454 |
Net cash flows from financing activities |
23,457 |
| (2,494) |
Net increase/(decrease) in cash held |
2,149 |
| 8,118 |
Opening cash |
5,624 |
| 5,624 |
Closing cash |
7,773 |
These financial statements are to be read in conjunction with the accompanying accounting policies and notes to the financial statements.
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Notes to the Financial Statements
for the year ended 30 June 2007
Note 1: Investments by Counterparty
Investments are undertaken in line with the Department's investment strategy. Investments were held with the following counterparties as at 30 June (investment values at book value).
2006
Actual
$000 |
|
2007
Actual
$000 |
| |
Current |
|
| 34,200 |
Westpac |
31,200 |
| 8,000 |
National Bank |
6,500 |
| 39,925 |
ANZ |
39,950 |
| 30,006 |
BNZ |
33,001 |
| 32,633 |
ASB |
52,800 |
| 4,022 |
Government stock |
- |
| 148,786 |
Total current |
163,451 |
| |
Non-current |
|
| 10,000 |
Westpac |
24,000 |
| - |
National Bank |
3,000 |
| 7,500 |
ANZ |
11,200 |
| 18,005 |
BNZ |
23,500 |
| 24,800 |
ASB |
5,000 |
| 60,305 |
Total non-current |
66,700 |
| 209,091 |
Total investments by counterparty |
230,151 |
| |
Weighted average interest rates |
|
| 7.02% |
Short-term deposits |
7.68% |
| 7.42% |
Term deposits |
8.58% |
| 6.48% |
Government stock |
7.98% |
Note 2: Book value of Investments
2006
Actual
$000 |
|
2007
Actual
$000 |
| 197,425 |
Bank deposits |
228,150 |
| 7,644 |
Bank bonds |
2,001 |
| 4,022 |
Government stock |
- |
| 209,091 |
Total book value of investments |
230,151 |
Note 3: Financial Instruments
Financial instruments that are potentially subject to credit risk principally consist of cash on hand, bank balances, accounts receivable, short-term deposits and investments.
Credit risk
The maximum exposures to credit risk at balance date are:
2006
Actual
$000 |
|
2007
Actual
$000 |
| 5,624 |
Cash held |
7,773 |
| 6,098 |
Accounts receivable |
11,425 |
| 209,091 |
Investments |
230,151 |
| 220,813 |
Total |
249,349 |
There are no major concentrations of credit risk for accounts receivable.
Currency risk
The Residential Tenancies Trust Account has no currency risk, as any financial instruments it deals with are in New Zealand dollars.
Interest rate risk
The Residential Tenancies Trust Account has no interest rate risk, as all investments are held to maturity. Deposits are held with authorised New Zealand banks.
Fair value
The fair value of all financial instruments is equivalent to the carrying amount disclosed in the Statement of Financial Position, apart from the bank bonds, the fair value of which is $2,039,000 (2006: $4,025,600), and the investment in government stock, the fair value of which is nil at 30 June 2007 (2006: $4,045,200).
Note 4: Reconciliation of Operating Surplus to Net Cash Flows from Operating Activities
2006
Actual
$000 |
|
2007
Actual
$000 |
| - |
Operating surplus |
- |
| |
Add/(less) movements in working capital |
|
| (2,089) |
(Increase)/decrease in interest receivable |
(5,327) |
| 5,474 |
Increase/(decrease) in interest payable |
5,077 |
| 3,385 |
Net cash flows from operating activities |
(250) |
Note 5: Commitments and Contingencies
The Residential Tenancies Trust Account has no commitments or contingent liabilities at balance date (2006: Nil).
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