Financial statements

Statement of Financial Performance

for the year ended 30 June 2009

Actual 2008 $ 000			Note	Actual 2009 $ 000	Main Estimates 2009 $ 000	Supplementary Estimates 2009 $ 000
		Income
22,817		Revenue Crown		24,695	22,694	24,695
521		Revenue Department		548	407	545
47,872		Revenue other	2	44,527	51,250	48,008
7		Gains	3	4	-	-
71,217		Total income		69,774	74,351	73,248
		Expenditure
32,066		Personnel costs	4	32,235	30,044	28,744
1,683		Depreciation and amortisation expense	9,10	1,721	2,553	2,063
850		Capital charge	5	861	1,223	1,000
-		Finance costs	6	3	-	-
108		Restructuring costs		26	-	-
32,047		Other operating expenses	7	31,259	36,741	40,818
66,754		Total expenditure		66,105	70,561	72,625
4,463		Net surplus/(deficit)		3,669	3,790	623

STATEMENT OF CHANGES IN TAXPAYERS' FUNDS

for the year ended 30 June 2009

Actual 2008 $ 000			Note	Actual 2009 $ 000	Main Estimates 2009 $ 000	Supplementary Estimates 2009 $ 000
11,220		Balance as at 1 July		11,480	11,480	11,480
4,463		Surplus/(deficit) for the year		3,669	3,790	623
4,463		Total recognised income and expense		3,669	3,790	623
(9,289)		Repayment of surplus to the Crown	12	(8,558)	(6,526)	(1,436)
4,826		Capital injection to fund memorandum account deficit(s)		4,889	5,765	4,889
260		Capital injection for fixed assets		5,792	2,763	5,792
11,480		Taxpayers' funds as at 30 June	16	17,272	17,272	21,348

STATEMENT OF FINANCIAL POSITION

as at 30 June 2009

Actual 2008 $ 000			Note	Actual 2009 $ 000	Main Estimates 2009 $ 000	Supplementary Estimates 2009 $ 000
		Assets
		Current assets
1,770		Cash and cash equivalents		2,123	3,490	4,881
24,032		Debtors and other receivables	8	24,058	17,372	16,992
234		Prepayments		133	200	200
26,036		Total current assets		26,314	21,062	22,073
		Non-current assets
6,954		Property, plant and equipment	9	7,241	8,166	6,750
470		Intangible assets	10	4,195	6,110	6,501
7,424		Total non-current assets		11,436	14,276	13,251
33,460		Total assets		37,750	35,338	35,324
		Liabilities
		Current liabilities
10,372		Creditors and other payables	11	8,969	9,540	10,550
9,289		Repayment of surplus	12	8,558	6,526	1,436
488		Provisions	13	171	10	-
1,396		Employee entitlements	14	1,610	1,500	1,500
-		Finance leases	15	198	-	-
21,545		Total current liabilities		19,506	17,576	13,486
		Non-current liabilities
29		Provisions	13	29	40	40
406		Employee entitlements	14	200	450	450
-		Finance leases	15	743	-	-
435		Total non-current liabilities		972	490	490
21,980		Total liabilities		20,478	18,066	13,976
11,480		Net assets		17,272	17,272	21,348
		Taxpayers' funds
11,480		General funds	16	17,272	17,272	21,348
11,480		Total taxpayers' funds		17,272	17,272	21,348

STATEMENT OF CASH FLOWS

for the year ended 30 June 2009

Actual 2008 $ 000			Note	Actual 2009 $ 000	Main Estimates 2009 $ 000	Supplementary Estimates 2009 $ 000
		Cash flows from operating activities
22,817		Receipts from Crown		22,080	22,694	24,695
46,928		Receipts from revenue other		44,523	50,014	55,270
(30,335)		Payments to suppliers		(31,675)	(36,608)	(41,003)
(31,828)		Payments to employees		(32,094)	(29,790)	(28,492)
(850)		Payments for capital charge		(861)	(1,223)	(1,000)
(227)		Goods and Services Tax (net)		531	(227)	139
6,505		Net cash from operating activities	17	2,504	4,860	9,609
		Cash flows from investing activities
11		Receipts from sale of property, plant and equipment		142	-	-
(1,028)		Purchase of property, plant and equipment		(991)	(1,858)	(2,890)
(86)		Purchase of intangible assets		(2,694)	(6,594)	(5,000)
(1,103)		Net cash from investing activities		(3,543)	(8,452)	(7,890)
		Cash flows from financing activities
5,086		Capital contribution		10,681	8,528	10,681
(9,191)		Repayment of surplus		(9,289)	(3,183)	(9,289)
(4,105)		Net cash from financing activities		1,392	5,345	1,392
1,297		Net (decrease)/increase in cash		353	1,753	3,111
473		Cash at the beginning of the year		1,770	1,737	1,770
1,770		Cash at the end of the year		2,123	3,490	4,881

The GST (net) component of operating activities reflects the net GST paid and received with the Inland Revenue Department. The GST (net) component has been presented on a net basis, as the gross amounts do not provide meaningful information for financial statement purposes.

STATEMENT OF COMMITMENTS

as at 30 June 2009

Non-cancellable operating lease commitments

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

Actual 2008 $ 000						Actual 2009 $ 000
			Non-cancellable operating lease commitments
	2,501		Not later than one year
2,435	8,181		Later than one year and not later than five years
8,208	4,075		Later than five years
2,487	14,757		Total non-cancellable operating lease commitments
13,130	-		Other non-cancellable commitments
-	14,757		Total operating commitments
13,130
			Capital commitments
	-		Not later than one year
2,188	-		Later than one year and not later than five years
-	-		Later than five years
-	-		Total capital commitments
2,188
	14,757		Total commitments
15,318

STATEMENT OF CONTINGENT LIABILITIES and contingent assets

as at 30 June 2009

Contingent liabilities

The Department has no contingent liabilities (2008: nil).

Contingent assets

The Department has no contingent assets (2008: nil).

STATEMENT OF DEPARTMENTAL EXPENditure AND CAPITAL EXPENDITURE AGAINST APPROPRIATIONS

for the year ended 30 June 2009

Expenditure after remeasurements 2008 $ 000					Expenditure after remeasurements 2009 $ 000	Appropriation Voted 2009 * $ 000
			Appropriation for output expenses
	3,172		Building Act 2004 Implementation			-
-	12,706		Building Regulation and Control			16,992
18,470	9,657		Occupational Licensing			8,070
9,511	514		Purchase and Monitoring Advice - Housing New Zealand Corporation			623
673	19,731		Residential Tenancy Services			19,764
21,458	4,095		Sector and Regulatory Policy			4,812
5,469	16,879		Weathertight Homes Resolution Service			15,844
17,044	66,754		Total appropriation for output expenses			66,105
72,625
			Appropriation for capital expenditure
	1,354		Department of Building and Housing - Capital Expenditure			5,871
7,890	1,354		Total appropriation for capital expenditure			5,871
7,890

* This includes adjustments made in the Supplementary Estimates.

There were no remeasurements during the year.

Statement of Unappropriated expenditure

as at 30 June 2009

The Department of Building and Housing had no instances of unappropriated expenditure for the year ended 30 June 2009 (2008: nil).

Statement of Trust monies as at 30 June 2009

The Department of Building and Housing operates trust accounts under section 66 of the Public Finance Act 1989. The transactions through these accounts and their balances at 30 June 2009 are not included in the Department's own financial statements. Movements in these accounts during the year ended 30 June 2009 (as reported to the Treasury) were as follows:

			Opening	Distributions	Capital	Closing
			balance	made	increase	balance
			1 July 2008			30 June 2009
			$ 000	$ 000	$ 000	$ 000
Trust Accounts
Certifiers Bond Trust Account			187	-	5	192
Residential Tenancies Trust Account			260,445	(127,679)	159,069	291,835

Certifiers Bond Trust Account

This account holds in trust deposits received from certifiers of building consents.

Residential Tenancies Trust Account

This account holds all sums paid by way of a bond in respect of any tenancy pursuant to the Residential Tenancies Act 1986.

A full set of audited financial statements for the Residential Tenancies Trust Account, prepared on an accrual accounting basis in conformity with generally accepted accounting practice, is provided on pages 86 to 93.

The accompanying notes form part of the financial statements.

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2009

Note 1: Statement of Accounting Policies for the year ended 30 June 2009

Reporting entity

The Department of Building and Housing is a government department as defined by section 2 of the Public Finance Act 1989 and is domiciled in New Zealand.

In addition, the Department of Building and Housing has reported on the Crown activities and trust monies that it administers.

The primary objective of the Department is to provide services to the public rather than making a financial return. Accordingly, the Department has designated itself as a public entity for the purpose of New Zealand equivalents to International Financial Reporting Standards (NZ IFRS).

The financial statements of the Department are for the year ended 30 June 2009. The financial statements were authorised for issue by the Chief Executive of the Department on 30 September 2009.

Basis of preparation

The financial statements of the Department have been prepared in accordance with the requirements of the Public Finance Act 1989, which includes the requirement to comply with New Zealand generally accepted accounting practice (NZ GAAP).

These financial statements have been prepared in accordance with, and comply with, NZ IFRS as appropriate for public benefit entities.

The accounting policies set out below have been applied consistently to all periods presented in these financial statements.

The financial statements have been prepared on a historical cost basis.

The financial statements are presented in New Zealand dollars and all values are rounded to the nearest thousand dollars ($ 000). The functional currency of the Department is New Zealand dollars.

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

• NZ IAS 1 Presentation of Financial Statements (revised 2007) 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 subtotals, or in two separate statements (a separate income statement followed by a statement of comprehensive income). The Department expects 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.

Standards and interpretations and amendments to published Standards that are not yet effective that do not give rise to material changes are NZ IAS 23 Borrowing Costs, NZ IFRIC 12 Service Concessions, NZ IFRS 8 Operating Segments and NZ IFRIC 13 Customer Loyalty Programmes.

Accounting policies

The following particular accounting policies which materially affect the measurement of financial results and financial position have been applied.

Budget figures

The budget figures are those presented in the Main Estimates, and those amended by the 2008/09 Supplementary Estimates, and any transfer made by Order in Council under the Public Finance Act 1989.

Revenue

The Department derives revenue through the provision of outputs to the Crown, for services to third parties and interest from the Residential Tenancies Trust Account. Revenue is recognised when earned and is reported in the financial period to which it relates.

Residential Tenancies Trust Account: In accordance with the Residential Tenancies Act 1986, the Department administers a trust account for tenancy bond investments. Interest is payable to the Department and interest income is recognised on an accrual basis.

Revenue is measured at the fair value of consideration received.

Capital charge

The capital charge is recognised as an expense in the period to which the charge relates.

Cost allocation

The Department has determined the cost of outputs using a cost allocation system outlined below.

Cost allocation policy: Direct costs are charged directly to significant activities. Indirect costs are charged to significant activities based on cost drivers and related activity/usage information.

Criteria for direct and indirect costs: ‘Direct costs' are those costs directly attributable to an output. ‘Indirect costs' are those costs that cannot be identified, in an economically feasible manner, with a specific output.

Assignment of costs to outputs: Direct costs are charged directly to outputs. Indirect costs are assigned to outputs based on a number of cost drivers. Depreciation and capital charge are charged on the basis of asset utilisation. Personnel and indirect costs are charged on the basis of estimated time incurred on each output. Property and other premises costs, such as maintenance, are charged on the basis of floor area occupied for the production of each output.

Foreign currency

Foreign currency transactions are recorded at the date of settlement of the transaction.

Leases

Finance lease: The Department leases communications equipment under a finance lease. The Department recognises the finance lease as an asset and liability in the Statement of Financial Position at the lower of the fair value of the leased item or the present value of the minimum lease payments.

The amount recognised as an asset is amortised over the term of the lease.

Operating leases: The Department leases office premises and office equipment. These leases are operating leases and the costs are expensed in the period in which they are incurred.

Cash and cash equivalents

Cash includes cash on hand and funds on deposit with bank.

Debtors and receivables

Debtors and receivables are stated at their estimated realisable value, after providing for doubtful and uncollectable debts.

Property, plant and equipment

Fixed assets costing more than $2,000 are capitalised and recorded at historical cost. Any write-down of an item to its recoverable amount is recognised in the Statement of Financial Performance. No revaluations have been performed on any class of fixed assets.

Depreciation of property, plant and equipment

Depreciation is provided on a straight-line basis on all property, plant and equipment, which will write off the cost of the assets to their estimated residual value over their useful lives.

The useful lives and associated depreciation rates of major classes of assets have been estimated as follows:

• Office and communications equipment 20% per annum
• Leasehold improvements 10-35% per annum
• Furniture and fittings 10% per annum
• Computer hardware 25% per annum
• Motor vehicles 20% per annum

The cost of leasehold improvements is capitalised and amortised over the unexpired period of the lease or the estimated remaining useful lives of the improvements, whichever is shorter. The depreciation rate for motor vehicles is based on rates that will write down the cost of vehicles to their estimated residual value (40 percent of retail value at time of purchase) over three years.

Capital work in progress is not depreciated. The total cost of the work is transferred to the relevant asset category on its completion and then depreciated.

Intangible assets

Software acquisition and development: Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software.

Costs associated with maintaining computer software are recognised as an expense when incurred.

Amortisation

The carrying value of an intangible asset with a finite life is amortised on a straight-line basis over its useful life. Amortisation begins when the asset is available for use and ceases at the date that the asset is derecognised. The amortisation charge for each period is recognised in the Statement of Financial Performance.

The useful lives and associated amortisation rates of intangible assets have been estimated as follows:

Acquired computer software 12.5-33% per annum

Creditors and payables

Payments due to suppliers for goods and services received at balance date but not paid for are included in the financial statements. They are recorded at the estimated obligation to pay.

Employee entitlements

Liabilities for annual leave are recognised as they accrue to employees. Provision is also made for payments of long-service leave, retirement leave and sick leave obligations to employees. Annual leave provisions, retirement leave and sick leave have been calculated on an actual entitlement basis at current rates of pay. Long-service leave is calculated on a present value basis.

Taxpayers' funds

This is the Crown's net investment in the Department.

Financial instruments

The Department is party to financial instruments as part of its normal operations. These financial instruments include accounts payable and receivable, cash and short-term deposits. Revenues and expenses in relation to all financial instruments are recognised in the Statement of Financial Performance.

Commitments

Future expenses and liabilities to be incurred on contracts that have been entered into at balance date are disclosed as commitments to the extent that they are equally unperformed obligations.

Goods and Services Tax (GST)

The Statement of Financial Position is exclusive of GST, except for creditors and payables and debtors and receivables, which are stated inclusive of GST. All other statements are GST-exclusive.

Taxation

Government departments are exempt from the payment of income tax in terms of the Income Tax Act 2004. Accordingly, no charge for income tax has been provided for.

Statement of cash flows

Cash means cash balances on hand and held in bank accounts. Operating activities include cash received from all income sources of the Department and record the cash payments for the supply of goods and services. Investing activities are those activities relating to the acquisition and disposal of non-current assets. Financing activities comprise capital injections by, or repayment of capital to, the Crown.

Critical accounting estimates and assumptions

In preparing these financial statements the Department has made estimates and assumptions concerning the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical assumptions in applying the Department's accounting policies

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 and in any future periods affected.

In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies, that have the most significant effect on the amount recognised in the financial statements, are described in the notes 14 and 15.

Changes in accounting policies

There were no changes in accounting policies since the date of the last audited financial statements.

All policies have been applied on a basis consistent with the previous year.

Note 2: Revenue Other
Actual 2008 $ 000				Actual 2009 $ 000	Main Estimates 2009 $ 000	Supplementary Estimates 2009 $ 000
20,202		Building levies		16,921	23,111	18,582
21,003		Interest from tenancy bonds		21,232	20,000	22,887
857		Tenancy Tribunal fees		1,067	799	799
5,291		Electrical workers' levy and fees		4,959	5,117	4,226
181		Licensed building practitioners' levy and fees		274	2,099	699
338		Other		74	124	815
47,872		Total revenue other		44,527	51,250	48,008

Note 3: Gains
Actual 2008 $ 000				Actual 2009 $ 000	Main Estimates 2009 $ 000	Supplementary Estimates 2009 $ 000
7		Net gain on disposal of property, plant and equipment		4	-	-
7		Total gains		4	-	-

During the year the Department disposed of a motor vehicle in accordance with the Department's Vehicle Replacement Policy.

Note 4: Personnel costs
Actual 2008 $ 000			Note	Actual 2009 $ 000	Main Estimates 2009 $ 000	Supplementary Estimates 2009 $ 000
29,713		Salaries and wages		30,533	29,500	28,200
760		Recruitment costs		440	-	-
453		Superannuation		539	440	440
151		ACC Levy		134	104	104
26		Fringe Benefit Tax		37	-	-
963		Other		552	-	-
32,066		Total personnel costs		32,235	30,044	28,744

The salaries and wages figure includes payments to employment agencies for temporary staff, and staff contractors.

Note 5: Capital charge

The Department pays a capital charge to the Crown on taxpayers' funds as at 30 June and 31 December each year. The capital charge rate for the year ended 30 June 2009 was 7.5% (2008: 7.5%).

Note 6: Finance costs
Actual 2008 $ 000				Actual 2009 $ 000	Main Estimates 2009 $ 000	Supplementary Estimates 2009 $ 000
-		Interest on finance leases		3	-	-
-		Total finance costs		3	-

Note 7: Other Operating Costs
Actual 2008 $ 000				Actual 2009 $ 000	Main Estimates 2009 $ 000	Supplementary Estimates 2009 $ 000
5,297		Administration		4,013	5,027	5,193
1,086		Communications		1,317	1,413	1,372
1,348		Computer costs		1,331	1,360	1,361
485		Premises costs		447	490	490
3,433		Rental and leasing costs		3,810	3,625	3,625
1,625		Tenancy Tribunal		1,811	1,641	1,641
2,599		Consultancy		3,513	5,275	5,694
1,984		Travel - domestic and overseas		1,749	2,250	2,234
82		Audit fees for the audit of financial statements		83	92	92
9		Audit fees for the audit of RTTA statements		9	-	-
5		Audit fees for the audit of NZ IFRS transition		10	-	-
4		Audit fees other services		-	-	-
9		Net loss on disposal/write-off of property, plant and equipment		126	-	-
-		Bad debts written off		11	72	72
14,081		Other		13,029	15,496	19,044
32,047		Total operating costs		31,259	36,741	40,818

Premises costs include insurance, rates, electricity, cleaning services and security.

The Department pays costs associated with the management of the Residential Tenancies Trust Account and audit of the financial statements.

Note 8: Debtors and other receivables

Actual 2008 $ 000				Actual 2009 $ 000	Main Estimates 2009 $ 000	Supplementary Estimates 2009 $ 000
3,511		Trade debtors and other receivables		3,544	1,432	1,052
(60)		Less provision for doubtful debts		(60)	(60)	(60)
3,451		Net trade and other receivables		3,484	1,372	992
20,142		Tenancy bond current account		20,574	16,000	16,000
439		GST receivable		-	-	-
24,032		Total debtors and receivables		24,058	17,372	16,992

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

As at 30 June 2009 and 2008, all overdue receivables have been assessed for impairment and appropriate provisions applied, as detailed below:

	2008			2009
	Gross $ 000	Impairment $ 000	Net $ 000	Gross $ 000	Impairment $ 000	Net $ 000
	Not past due	24,000	-	24,000	24,023	-
24,023	Past due 31-60 days	-	-	-	20	-
20	Past due 61-90 days	-	-	-	2	-
2	Past due > 91 days	92	(60)	32	73	(60)
13	Total	24,092	(60)	24,032	24,118	(60)
24,058

The provision for doubtful debts has been calculated based on the expected losses for the Department's pool of electrical workers debtors.

Expected losses have been determined based on a review of specific debtors.

Movements in the provision for doubtful debts are as follows:

Actual 2008 $ 000				Actual 2009 $ 000	Main Estimates 2009 $ 000	Supplementary Estimates 2009 $ 000
60		Balance at 1 July		60	60	60
-		Additional provisions made during the year		11	-	-
-		Receivables written off during period		(11)	-	-
60		Balance at 30 June		60	60	60

Note 9: Property, Plant and Equipment
	Office equipment $ 000	Leasehold improvements $ 000	Furniture and fittings $ 000	Computer hardware $ 000	Motor vehicles $ 000	Total $ 000
Cost or valuation
Balance at 1 July 2007	291	6,838	452	3,416	543	11,540
Additions	24	423	13	526	42	1,028
Disposals	(37)	-	-	(128)	(45)	(210)
Balance at 30 June 2008	278	7,261	465	3,814	540	12,358
Balance at 1 July 2008	278	7,261	465	3,814	540	12,358
Additions	1,009	130	83	688	22	1,932
Disposals	(46)	(286)	(3)	(1,285)	(21)	(1,641)
Balance at 30 June 2009	1,241	7,105	545	3,217	541	12,649
Accumulated depreciation and impairment losses
Balance at 1 July 2007	227	1,453	164	2,173	124	4,141
Depreciation expense	29	717	36	576	101	1,459
Eliminate on disposal	(31)	-	-	(125)	(40)	(196)
Balance at 30 June 2008	225	2,170	200	2,624	185	5,404
Balance at 1 July 2008	225	2,170	200	2,624	185	5,404
Depreciation expense	75	737	43	550	102	1,507
Eliminate on disposal	(46)	(220)	(3)	(1,225)	(9)	(1,503)
Balance at 30 June 2009	254	2,687	240	1,949	278	5,408
Carrying amounts
At 1 July 2007	64	5,385	288	1,243	419	7,399
At 30 June and 1 July 2008	53	5,091	265	1,190	355	6,954
At 30 June 2009	987	4,418	305	1,268	263	7,241

Property, plant and equipment includes work in progress of $692,000 (2008: $337,000). Leased assets with a carrying amount of $941,450 (2008: nil) are included in the office equipment asset category.

Note 10: Intangible assets

						Acquired software $ 000
						Cost
				Balance at 1 July 2007
			1,785	Additions
			86	Disposals
			-	Balance at 30 June 2008
			1,871
				Balance at 1 July 2008
			1,871	Additions
			3,939	Disposals
			-	Balance at 30 June 2009
			5,810
				Accumulated amortisations and impairment losses
				Balance at 1 July 2007
			1,177	Amortisation expense
			224	Disposals
			-	Balance at 30 June 2008
			1,401
				Balance at 1 July 2008
			1,401	Amortisation expense
			214	Disposals
			-	Balance at 30 June 2009
			1,615
				Carrying amounts
				At 1 July 2007
			608	At 30 June and 1 July 2008
			470	At 30 June 2009
			4,195

Intangible assets include work in progress of $4,008,690 (2008: $69,000).

Note 11: Creditors and Payables

Actual 2008 $ 000				Actual 2009 $ 000	Main Estimates 2009 $ 000	Supplementary Estimates 2009 $ 000
4,738		Trade creditors		1,917	8,150	8,200
-		Creditor for fixed assets		1,245	-	-
1,834		Accrued expenses		4,618	390	1,350
-		GST payable		92	(300)	(300)
2,616		Creditor Crown		-	-	-
1,184		Deferred revenue		1,097	1,300	1,300
10,372		Total creditors and payables		8,969	9,540	10,550

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.

Note 12: Repayment of Surplus

Actual 2008 $ 000				Actual 2009 $ 000	Main Estimates 2009 $ 000	Supplementary Estimates 2009 $ 000
4,463		Net surplus/(deficit)		3,669	3,790	623
4,826		Adjustment for memorundum account deficit(s)		4,889	2,736	813
9,289		Net surplus payable to Crown		8,558	6,526	1,436

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

Note 13: Provisions

Actual 2008 $ 000				Actual 2009 $ 000	Main Estimates 2009 $ 000	Supplementary Estimates 2009 $ 000
		Current provisions are represented by:
10		Lease make-good		10	10	-
67		One-off payments		-	-	-
411		Staff training and development		161	-	-
488		Total current portion		171	10	0
		Non-current provisions are represented by:
29		Lease make-good		29	40	40
29		Total non-current portion		29	40	40
517		Total provisions		200	50	40

	Lease make-good	One-off payments	Restructuring	Staff training and development	Total
	$ 000	$ 000	$ 000	$ 000	$ 000
2008
Opening balance at 1 July	83	111	-	162	356
Additional provisions made	14	77	-	280	371
Amounts used	-	(90)	-	(31)	(121)
Unused amounts reversed	(58)	(31)	-	-	(89)
Closing balance at 30 June	39	67	-	411	517
2009
Opening balance at 1 July	39	67	-	411	517
Additional provisions made	-	-	-	-	-
Amounts used	-	(67)	-	(250)	(317)
Unused amounts reversed	-	-	-	-	-
Closing balance at 30 June	39	-	-	161	200

In respect of a number of its leased premises, the Department is required at the expiry of the lease terms to make good any damage caused to the premises and to remove any fixtures or fittings installed by the Department. In many cases the Department has the option to renew these leases, which impacts on the timing of the expected cash outflows to make good the premises.

One-off payments are awarded to some staff as part of the annual performance review by the Department.

Staff training and development awards are made to staff to undertake a variety of development activities including leadership accountabilities. These may include full-time or part-time tertiary or postgraduate study, leadership and management development programmes, specific skills development programmes, carrying out a research project, secondments etc, here in New Zealand and internationally.

Note 14: Employee Entitlements

Actual 2008 $ 000				Actual 2009 $ 000	Main Estimates 2009 $ 000	Supplementary Estimates 2009 $ 000
		Current
1,368		Annual leave		1,544	1,456	1,456
-		Retirement leave		2	-	-
-		Long-service leave		37	-	-
28		Sick leave		27	44	44
1,396		Total current		1,610	1,500	1,500
		Non-current
236		Retirement leave		29	275	275
170		Long-service leave		171	175	175
406		Total non-current		200	450	450
1,802		Total employee entitlements		1,810	1,950	1,950

The present value of the retirement and long-service leave obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. Two key assumptions used in calculating this liability include the discount rate and the salary inflation factor. Any changes in these assumptions will impact on the carrying amount of the liability.

Note 15: Finance Lease

Actual 2008 $ 000				Actual 2009 $ 000	Main Estimates 2009 $ 000	Supplementary Estimates 2009 $ 000
		Minimum lease payments payable:
-		Not later than one year		198	-	209
-		Later than one year and not later than five years		743	-	733
-		Total minimum lease payments		941	-	942

Determining whether a lease agreement is a finance lease or an operating lease requires judgement as to whether the agreement transfers substantially all the risks and rewards of ownership to the Department. Judgement is required on various aspects that include, but are not limited to, the fair value of the leased asset, the economic life of the leased asset, whether or not to include renewal options in the lease term and determining an appropriate discount rate to calculate the present value of the minimum lease payments. Classification as a finance lease means the asset is recognised in the Statement of Financial Position as property, plant and equipment, whereas with an operating lease no such asset is recognised. The Department has exercised its judgement on the appropriate classification of equipment leases, and has determined one lease arrangement to be a finance lease.

Note 16: Taxpayers' funds

Actual 2008 $ 000				Actual 2009 $ 000	Main Estimates 2009 $ 000	Supplementary Estimates 2009 $ 000
		General funds
11,220		Balance at 1 July		11,480	11,480	11,480
4,463		Net surplus/(deficit)		3,669	3,790	623
5,086		Capital contribution from the Crown		10,681	8,528	10,681
(9,289)		Provision for repayment of surplus to the Crown		(8,558)	(6,526)	(1,436)
11,480		General funds at 30 June		17,272	17,272	21,348

Note 17: Reconciliation of Net Surplus/(Deficit) to Net Cash Flows from Operating Activities

Actual 2008 $ 000				Actual 2009 $ 000	Main Estimates 2009 $ 000	Supplementary Estimates 2009 $ 000
4,463		Net surplus/(deficit) from operations		3,669	3,790	623
		Add/(less) non-cash items
1,683		Depreciation		1,721	2,553	2,063
30		Increase in non-current employee entitlements		(206)	-	-
		Add/(less) movements in working capital
(34)		(Increase)/decrease in prepayments		101	-	-
67		(Increase)/decrease in inventories		-	-	-
(1,304)		(Increase)/decrease in debtors and receivables		(26)	(1,743)	6,635
1,408		Increase/(decrease) in creditors and payables		(2,878)	260	288
52		Increase/(decrease) in deferred revenue		(87)	-	-
137		Increase in current employee entitlements		214	-	-
		Add/(less) investing activity items
(7)		Net gain on sale of property, plant and equipment		(4)	-	-
10		Fixed asset write-offs		-	-	-
6,505		Net cash flows from operating activities		2,504	4,860	9,609

Note 18: Related Party Transactions and Key Management Personnel

The Department of Building and Housing is a wholly owned entity of the Crown. The government significantly influences the roles of the Department as well as being a major source of revenue.

The Department enters into numerous transactions with other government departments, Crown agencies and state-owned enterprises on an arm's length basis. No contracts have been entered into by the Department where the supplier had any connection to senior management of the Department.

Salary with post-employment benefits

2008 Actual $ 000						2009 Actual $ 000
					1,539
Salaries and other short-term employee benefits				1,547	16
Post-employment benefits				-	1,555
Total key management personnel compensation				1,547

Other long-term benefits and termination benefits: nil (2008: nil).

Key management personnel include the Chief Executive and the five members of the Strategic Leadership Team (2008: Chief Executive and the six members of the Strategic Leadership Team).

Note 19: Events after the balance date

No events have occurred between the balance date and date of signing these financial statements that materially affect the financial statements.

Note 20: Financial instruments risks

The Department is party to financial instruments as part of its normal operations. These include bank balances, investments and accounts receivable and payable.

Credit risk is the risk that a third party will default on its obligations to the Department, causing the Department to incur a loss. In the normal course of its business, the Department incurs credit risk from trade debtors, and transactions with financial institutions.

The Department does not require any security to support financial instruments with financial institutions that the Department deals with as these entities have high credit ratings.

The Department is party to a letter of credit with ANZ National Bank of $0.650 million (2008: $0.650 million).

The Crown Retail Deposit Guarantee Scheme for deposits held with banks that have opted into the scheme provides a guarantee of $1 million per depositor per guaranteed institution. Deposits beyond this level are not covered by this scheme.

The fair value of all financial instruments is equivalent to the carrying amount disclosed in the Statement of Financial Position.Currency risk

Currency risk is the risk that the value of debtors and creditors due in foreign currency will fluctuate because of changes in foreign exchange rates.

The Department has no currency risk with regard to cash and accounts receivable, as the financial instruments it deals with are in New Zealand dollars. The Department has no significant exposure to currency risk on accounts payable.

Interest rate risk is the risk that the Department's return on the funds it has invested will fluctuate due to changes in market interest rates. The Department had no interest rate risk as no money was invested in this financial year apart from that which is recorded in the financial statements relating to the Residential Tenancies Trust Account.

Note 21: Memorandum accounts

Memorandum accounts are notional accounts to record the accumulated balance of surpluses and deficits incurred for outputs operating on a full cost recovery basis. They are intended to provide a long-run perspective on the pricing of outputs.

Building Controls
Actual 2008 $ 000				Actual 2009 $ 000	Main Estimates 2009 $ 000	Supplementary Estimates 2009 $ 000
2,874		Opening balance at 1 July		8,500	5,354	8,500
20,480		Revenue		16,921	23,188	18,582
(14,766)		Expenses		(15,934)	(16,621)	(16,665)
(88)		Transfer of expenses from Occupational Licensing - Building Practitioners -			-	-
8,500		Closing balance at 30 June		9,487	11,921	10,417

Occupational Licensing - Building Practitioners
Actual 2008 $ 000				Actual 2009 $ 000	Main Estimates 2009 $ 000	Supplementary Estimates 2009 $ 000
(3,625)		Opening balance at 1 July		(8,833)	(9,435)	(8,833)
181		Revenue		274	2,106	699
(5,477)		Expenses		(3,523)	(5,264)	(5,301)
88		Transfer of expenses to Building Controls		-	-	-
(8,833)		Closing balance at 30 June		(12,082)	(12,593)	(13,435)

Occupational Licensing - Electrical Workers
Actual 2008 $ 000				Actual 2009 $ 000	Main Estimates 2009 $ 000	Supplementary Estimates 2009 $ 000
(21)		Opening balance at 1 July		3,204	3,314	3,204
4,055		Revenue		4,329	4,439	4,226
(3,415)		Expenses		(3,917)	(3,546)	(4,172)
2,585		Transfer from Ministry of Economic Development		-	-	-
3,204		Closing balance at 30 June		3,616	4,207	3,258

Note 22: Explanation of Major Budget Variations

Revenue Crown funding requirements were increased by $2.001 million during the year. This is made up of an increase due to in-principle transfers from 2007/08 to 2008/09 of $3.491 million, and a reduction due to value for money savings of $1.490 million which were offered up in the March Baseline Update. Not all value for money savings were funded from Revenue Crown. The significant in-principle transfer related to Weathertight Homes Resolution Service activities being delayed until the 2008/09 year but initially budgeted in 2007/08.

Revenue Other was initially forecast at $51.250 million in the Main Estimates. This was updated to $48.008 million due to improved projections during the year.

Revenue Other is $3.481 million or approximately 7 percent below that forecast in the Supplementary Estimates as a consequence of the following.

• Building levies received were $1.661 million below forecast, which relates to the downturn in building due to economic pressures.
• Interest revenue from Residential Tenancy Services was $1.655 million lower than forecast due to lower interest rates on investments offset by higher levels of bond funds on investment.

Operating expenditure reflected in the Main Estimates was $70.561 million. This was updated in the Supplementary Estimates to $72.625 million. The main changes causing this were:

• carry forward of funding from 2007/08 of $5.100 million for Weathertight Homes Resolution Service, and Building Regulation and Control projects that were not completed in 2007/08; partially offset by
• value for money savings of $3.171 million.

Operating expenditure is $6.520 million or approximately 9 percent below that forecast in the Supplementary Estimates primarily due to the following.

• Actual expenditure for Building Regulation and Control was $1.478 million lower than the Supplementary Estimates. This is due to operational savings identified during the later part of the year. Identified savings are attributed to a review of the Department's contribution to the New Zealand Energy Efficiency and Conservation Strategy initiatives, which resulted in the cessation of one project and the reduction in scope of three others.
• Actual expenditure for Sector and Regulatory Policy was $0.657 million lower than the Supplementary Estimates. This is due to cancellation of the Weathertight Homes Resolution Service (WHRS) information programme, as a review of the WHRS was required.
• Actual expenditure for Occupational Licensing was $1.441 million lower than the Supplementary Estimates. This is primarily due to building practitioner licensing volumes continuing to be low due to outstanding policy decisions, and the flow-on effect has reduced expenditure for this output. Other savings are due to contract savings and business process streamlining.
• Actual expenditure for Residential Tenancy Services was $1.694 million lower than Supplementary Estimates. This was due to work associated with the Unit Titles Bill and Residential Tenancies Amendment Bill implementation being placed on hold pending the prioritisation of legislation by the incoming government. Savings can also be attributed to lifting overall productivity, specific performance improvement actions and expenditure control.
• Actual expenditure on the Weathertight Homes Resolution Service was $1.200 million lower than the Supplementary Estimates. This is due to demand-driven volumes of claims being lower than expected, and the flow-on effect this has had on assessments.

There is a variation between the net assets forecast in the Supplementary Estimates and the actual financial position as at 30 June 2009 of $4.076 million. This variance is due to an incorrect calculation of the provision for surplus at the time of setting the Supplementary Estimates. This calculation overlooked the capital contributions received for the memorandum accounts.

The actual current assets, non-current assets and current liabilities vary when compared to the Supplementary Estimates due to the following.

• Cash and cash equivalents were $2.758 million lower because of a higher value of debtors.
• Debtors and receivables were $7.066 million higher, being largely the result of interest earned on tenancy bondholders' funds which is available for use by the Department to meet the costs for Residential Tenancy Services.
• The net book value of property, plant and equipment and intangible assets was $1.815 million lower, mainly as the result of capital expenditure on some infrastructure projects occurring later than originally planned.
• The provision for the repayment of surplus to the Crown was $7.122 million higher than forecast in the Supplementary Estimates. As mentioned above, the calculation of the forecast surplus did not include the capital contribution on memorandum accounts.