Annual Report for the year ended 30 June 2001
Crown Operations
Crown statement of financial performance
for the year ended 30 June 2001
| Note | 30/6/2000 Actual $000 | 30/6/2001 Actual $000 |
30/6/2001 Budget Total $000 |
30/6/2001 Supp. estimates $000 |
|
|---|---|---|---|---|---|
| Crown Revenue | |||||
| Interest | C1 | 1,051 | 1,220 | 400 | 750 |
| Other operational revenue | C2 | 22,333 | 4,089 | 1,738 | - |
| Total Crown revenue | 23,384 | 5,309 | 2,138 | 750 | |
| Crown Expenditure | |||||
| GST input tax expensed | 83,487 | 25,234 | 40,449 | 41,202 | |
| Other operating expenses | C3 | 19,347 | 14 | - | - |
| Unrealised exchange losses/(gains) | (418) | 4,204 | 1,738 | - | |
| Total Crown expenses | 102,416 | 29,452 | 42,187 | 41,202 | |
| Net operating surplus/(deficit) | |||||
| Crown operations | (79,032) | (24,143) | (40,049) | (40,452) |
Crown statement of financial position
as at 30 June 2001
| 30/6/2000 Actual $000 | 30/6/2001 Actual $000 |
30/6/2001 Main estimates $000 |
30/6/2001 Supp. estimates $000 |
|
|---|---|---|---|---|
| Crown Funds | ||||
| Opening balance at 1 July | 261,583 | 170,651 | 163,141 | 170,651 |
| Net operating surplus/(deficit) - Crown operations | (79,032) | (24,143) | (40,049) | (40,452) |
| Funds received from New Zealand Debt Management Office |
243,000 | 274,000 | 186,000 | 305,000 |
| Funds paid to New Zealand Debt Management Office | (252,529) | (152,225) | (158,010) | (153,800) |
| Crown/Department asset transfer | (2,371) | - | - | - |
| Total Crown funds | 170,651 | 268,283 | 151,082 | 281,399 |
| Represented by: Current assets | ||||
| Cash | 80,712 | 62,257 | 89,038 | 57,393 |
| Short-term deposits | 28,103 | 25,910 | - | - |
| Debtors and receivables | 22,728 | 271 | - | - |
| Work in process | 80,179 | 209,614 | 71,630 | 233,592 |
| Total current assets | 211,722 | 298,052 | 160,668 | 290,985 |
| Total assets | 211,722 | 298,052 | 160,668 | 290,985 |
| Current liabilities | ||||
| Creditors and payables | 41,071 | 29,769 | 9,586 | 9,586 |
| Total current liabilities | 41,071 | 29,769 | 9,586 | 9,586 |
| Net assets - Crown | 170,651 | 268,283 | 151,082 | 281,399 |
Crown statement of cash flows
for the year ended 30 June 2001
| Note | 30/6/2000 Actual $000 | 30/6/2001 Actual $000 |
30/6/2001 Budget $000 |
30/6/2001 Supp. estimates $000 |
|
|---|---|---|---|---|---|
| Cash flows - operating activities Cash provided from: |
|||||
| Interest | 1,051 | 1,220 | 400 | 750 | |
| Other operating receipts | C2 | 20,595 | 4,089 | 1,738 | - |
| Cash disbursed to: |
|||||
| Other expenses | (3) | (14) | - | - | |
| GST Input tax expensed | (83,487) | (8,482) | (40,449) | (41,202) | |
| Operating activities net cash flows | (61,844) | (3,187) | (38,311) | (40,452) | |
| Cash flows - investing activities Cash provided from: |
|||||
| Sale of military equipment | 194,886 | 153,047 | 155,872 | 153,050 | |
| Deferred revenue | 36,025 | - | - | - | |
| GST on sales | 28,843 | 23,635 | 19,484 | 19,484 | |
| Cash disbursed for: |
|||||
| Purchase of military equipment | (227,042) | (288,079) | (146,356) | (315,220) | |
| GST paid to IRD | (28,843) | (23,635) | (19,484) | (19,484) | |
| Investing activities net cash flows | 3,869 | (135,032) | 9,516 | (162,170) | |
| Cash flows - financing activities Cash provided from: |
|||||
| New Zealand Debt Management Office for funding purchase or development of military equipment |
243,000 | 274,000 | 186,000 | 305,000 | |
| Cash disbursed for: |
|||||
| Payments to New Zealand Debt Management Office | (252,529) | (152,225) | (158,010) | (153,800) | |
| Financing activities net cash flows | (9,529) | 121,775 | 27,990 | 151,200 | |
| Net increase/(decrease) in cash held |
(67,504) | (16,444) | (805) | (51,422) | |
| Add opening cash and deposits | 175,901 | 108,815 | 89,843 | 108,815 | |
| Unrealised foreign exchange gain/(loss) |
418 | (4,204) | - | - | |
| Closing cash and deposits | 108,815 | 88,167 | 89,038 | 57,393 |
Crown reconciliation of net operating surplus to net cash flow from operating activities
for the year ended 30 June 2001
| 30/6/2000 Actual $000 | 30/6/2001 Actual $000 |
|
|---|---|---|
| Net operating surplus/(deficit) |
(79,032) | (24,143) |
| Plus unrealised exchange losses/(gains) |
(418) | 4,204 |
| Plus work in progress expensed | 19,347 | - |
| Increase/(decrease) in GST payable |
- | 16,752 |
| Other items |
(1,741) | - |
| Net cash flow from operating activites |
(61,844) | (3,187) |
Crown statement of commitments
as at 30 June 2001
| 30/6/2000 Actual $000 | 30/6/2001 Actual $000 |
|
|---|---|---|
| Capital commitments | ||
| Less than one year |
180,177 | 219,309 |
| One to two years |
50,906 | 368,221 |
| Two to five years |
47,152 | 204,149 |
| More than five years |
31,001 | - |
| Total capital commitments |
309,236 | 791,679 |
Crown statement of expenditure and appropriations
for the year ended 30 June 2001
(Figures are GST inclusive where applicable)
| 30/6/2001 Expenditure Actual $000 |
30/6/2001 Appropriation voted $000 |
|
|---|---|---|
| Vote: Defence Appropriations for purchase or development of capital assets by the Crown |
||
| Defence equipment |
316,435 | 342,488 |
| GST on defence equipment |
25,234 | 41,202 |
| Total |
341,669 | 383,690 |
The accompanying accounting policies and 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 audited Crown Financial Statements for the year ended 30 June 2001.
Notes to the crown financial statements
for the year ended 30 June 2001
Note C1: Interest revenue
The Ministry invests surplus foreign currency cash with financial institutions that the Ministry deals with. All interest earned on short-term deposits are returned to the Crown.
Note C2: Other operational revenue
| 30/6/2000 Actual $000 | 30/6/2001 Actual $000 |
|
|---|---|---|
| Realised foreign exchange gains following the decision to exit the arrangement to lease F-16 aircraft. |
22,333 | - |
| Refunds from foreign military sales cases following the decision to exit the arrangement to lease F-16 aircraft. |
- | 4,089 |
| Total operational revenue | 22,333 | 4,089 |
Note C3: Other operating expenses
| 30/6/2000 Actual $000 | 30/6/2001 Actual $000 |
|
|---|---|---|
| F-16 project costs expensed |
19,347 | 14 |
| Total other operating expenses | 19,347 | 14 |
Note C4: Budget composition
| 30/6/2001 Budget forecasts $000 | 30/6/2001 Supp. estimates changes $000 |
30/6/2001 Budget total $000 |
|
|---|---|---|---|
| Current non tax revenue |
|||
| Crown interest | 400 | 350 | 750 |
| Capital receipts |
|||
| Defence equipment | 191,897 | (2,822) | 189,075 |
| Expenditure |
|||
| Defence equipment | 145,084 | 197,404 | 342,488 |
| GST on defence equipment | 40,449 | 753 | 41,202 |
Note C5: Major budget variations
Purchase or development of capital assets by the Crown - defence equipment
The appropriation was increased by $197.404 million for the following items:
| $million | |
|---|---|
| (a) New work |
|
| Tactical mobile communications equipment |
62.250 |
| Light armoured vehicles for Army | 87.891 |
| Timing differences | (6.060) |
| (b) Timing changes in existing contract payments | 53.323 |
| $197.404 |
GST on defence equipment
The appropriation was increased by $0.753 million for the following items:
| $million | |
|---|---|
| Additional GST on the Tactical Mobile Communications Equipment | 0.753 |
| $0.753 |
Note C6: Financial instruments
Credit Risk
Financial instruments which potentially subject the Ministry of Defence to credit risk principally consist of bank balances, debtors and receivables and forward exchange contracts.
The Ministry also incurs credit risk from down payments made to overseas suppliers of military equipment.
Maximum Credit Risk Exposure
Maximum exposures to credit risk at balance date are:
| 30 June 2001 $000 | 30 June 2000 $000 |
|
|---|---|---|
| Cash |
62,257 | 80,712 |
| Short-term deposits | 25,910 | 28,103 |
| Debtors and receivables | 271 | 22,728 |
| Forward exchange contracts |
497,406 | 61,511 |
| 585,844 | 193,054 |
The above maximum exposures are net of any recognised provision for losses on these financial instruments.
Collateral or security in respect of Credit Risk
The Ministry does not require any collateral or security to support financial instruments with financial institutions that the Ministry deals with, or with the NZDMO, as these entities have high credit ratings.
The Ministry requires security (such as Letters of Credit) in the form of collateral for down payments with certain suppliers. The Letters of Credit entitle the Ministry to the return of payments made.
Significant Concentrations of Credit Risk
Forward exchange contracts with the New Zealand Debt Management Office are considered risk free to the Ministry. The Ministry further reduces counterparty risk by spreading the balance of its cash, investments and forward exchange contracts over registered New Zealand banks thereby limiting the credit exposure to any one financial institution.
The major concentration of credit risk with respect to accounts receivable is the New Zealand Defence Force for the on-sale of military equipment.
Fair Values
The fair value of Crown financial instruments are:
| 30 Jun
2001 Carrying amount $000 |
30 Jun 2001 Fair value $000 |
30 Jun 2000 Carrying amount $000 |
30 Jun 2000 Fair value $000 |
|
|---|---|---|---|---|
| Cash | 62,257 | 62,257 | 80,712 | 80,172 |
| Short-term deposits | 25,910 | 25,910 | 28,103 | 28,103 |
| Debtors and receivables |
271 | 271 | 22,728 | 22,728 |
| Forward exchange contracts |
||||
| NZDMO | 496,972 | 496,972 | 57,314 | 57,314 |
| Other Banks | 434 | 434 | 4,197 | 4,197 |
| Payables and provisions | 29,769 | 29,769 | 41,071 | 41,071 |
Currency Risk
The Ministry has a foreign exchange covering policy that minimises the currency risk. The policy has key parts:
- individual transactions above $NZ100,000 equivalent are to be covered with foreign exchange contracts.
- a maximum of net aggregate $NZ2 million equivalent exposure at one time is allowed.
- cover will occur within 5 working days of any exposure being identified. These exposures are identified contracts both formal and informal.
- the Anzac Ship project has a specific strategy of hedging 100 percent of forecasts in foreign currency exposure, as well as commitments.
Interest Risk
The Ministry has no exposure to interest rate risk.
