Reports and Publications

• Annual Report 2004
  • Contents
  • Part 1 Overview
  • Part 2: Statement of responsibility and audit report
  • Part 3: Departmental financial statements
  • Part 4: Non-departmental schedules
  • Part 5: Other information

Within this section

Output Class - Management of equipment procurement (continued)

12. Complete acquisition of naval helicopter

13. Complete replacement or upgrade of tactical communications for the Army

14. Continue management of the Anzac ship project

Annual Report for the year ended 30 June 2004

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Part 3: Departmental financial statements (continued)

Output Class D3 - Management of equipment procurement

12. Complete acquisition of naval helicopter
Target	Delivered
The intention is to complete the project within the Cabinet approval of $380.8 million (inclusive of GST), after allowing for foreign exchange variances, by 30 September 2003.	This project has been completed under budget and will be closed once final commitments are settled. A revised delivery schedule caused an approximate twelve month delay in completion of the project.

Financial summary of project costs charged to non-departmental appropriations as at 30 June 2004 (GST inclusive)
	$
Project approval	338,020,000
Foreign exchange variances to date and forecast to complete	58,152,654
GST	42,290,000
Total approved cost	438,462,654
GST exclusive
Expenditure to 30 June 2003	376,741,333
Expenditure 2003/04	1,273,177
Future commitments and forecasts	1,177,659
	379,192,169
GST
GST to 30 June 2003	47,494,465
Expenditure 2003/04	2,202,319
Future commitments and forecasts	-
	49,696,784
Total forecast cost to complete	428,888,953

• Foreign exchange variances on actual expenditure to 30 June 2004 are unfavourable by $58.530 million due to the purchase rates of the USD currency being less than the USD exchange rate used in the Cabinet paper to obtain financial approval.
  • USD approval rate = 0.66631
  • USD average rate achieved = 0.55774

13. Complete replacement or upgrade of tactical communications for the Army This project proposes to replace and/or upgrade existing Army short-range communications systems to provide a high bandwidth (higher capacity) digital theatre communication system to support command and control requirements of the New Zealand Defence Force Battalion Group operations.
Target	Delivered
The intention is to ensure that all radios approved by Government are delivered by September 2004; and to complete the project within the Cabinet approval of $134.2 million (inclusive of GST), after allowing for foreign exchange variances.	Most of the radios have now been delivered. Orders for ancillary equipment such as batteries, chargers, specialist headsets and test equipment were completed in June 2004. Final shipments are expected in December 2004. A revised completion date is 30 June 2005.

Financial summary of project costs charged to non-departmental appropriations as at 30 June 2004 (GST inclusive)
	$
Project approval	119,223,000
Foreign exchange variances to date and forecast to complete	5,232,288
GST	14,903,000
Total approved cost	139,358,288
GST exclusive
Expenditure to 30 June 2003	109,922,899
Expenditure 2003/04	8,878,282
Future commitments and forecasts	5,658,459
	124,459,640
GST
GST to 30 June 2003	10,626,990
Expenditure 2003/04	578,197
Future commitments and forecasts	3,690,656
	14,895,843
Total forecast cost to complete	139,355,483

• Foreign exchange variances on actual expenditure to 30 June 2004 are unfavourable by $5.507 million due to the purchase rates of the USD currency being less than the USD exchange rate used in the Cabinet paper for financial approval.
  • USD approval rate = 0.4300
  • USD average rate achieved =0.40970

• Due to better foreign exchange forward rates for future commitments and forecasts than the exchange rates used in the Cabinet approval, the project is expected to achieve a lesser unfavourable foreign exchange variance of approximately $5.232 million.

• Commitments are valued using an average exchange rate of forward contracts still to be settled, plus the actual exchange rates for currency in the bank.

• Forecasts are valued at a current market exchange rate.

  • USD approval rate = 0.4300
  • USD forecast average rate = 0.61479

14. Continue management of the Anzac ship project
Target	Delivered
Due to Anzac ship treaty arrangements the Ministry continues to maintain an interest in this project and is contributing financially in accordance with the contract and treaty arrangements.	Payments in accordance with treaty obligations were made during the year. It is planned to discontinue New Zealand's involvement in this project and settle any outstanding obligations.

Financial summary of project costs charged to non-departmental appropriations as at 30 June 2004 (GST inclusive)
	$
Approved baseline	938,949,321
Cost escalation to date and forecast to complete	252,391,118
Foreign exchange variances to date and forecast to complete	125,161,974
GST	153,808,491
Total approved cost	1,470,310,904
GST exclusive
Expenditure to 30 June 2003	1,235,184,501
Expenditure 2003/04	6,611,089
Future commitments and forecasts	16,089,677
	1,257,885,267
GST
GST to 30 June 2003	157,471,229
Expenditure 2003/04	5,763
Future commitments and forecasts	-
	157,476,992
Total forecast cost to complete	1,415,362,259

• The Anzac Ship approval was stated in 1989 base exchange rates against a basket of currencies. A Treaty with Australia recognised contract escalation and currency variances, and agreed the methodologies for calculation.
• The currencies with the greatest movement from the base rates are AUD (26%), DEM (28%) and USD (37%).

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