Annual Report for the year ended 30 June 2004
Part 4: Non-departmental schedules
Statement of non-departmental accounting policies
Measurement and recognition rules applied in the preparation of these non-departmental financial statements and schedules are consistent with generally accepted accounting practice and Crown accounting policies.
These non-departmental balances are consolidated into the Crown Financial Statements and therefore readers of these statements and schedules should also refer to the Crown Financial Statements for 2003/04.
The following accounting policies have been applied:
Budget figures
The budget figures are those presented in the budget estimates (main estimates) and those amended by the supplementary estimates (supplementary estimates) and any transfer made by Order in Council under section 5 of the Public Finance Act 1989.
Revenue recognition
Military equipment is sold at cost to New Zealand Defence Force in July and January each year. Revenue is recognised and reported in those months.
Interest income
Interest income is recognised in the period in which it is earned.
Goods and services tax (GST)
Input GST on the procurement or refurbishment of military equipment is expensed.
Work in progress
Work in progress comprises project expenditure to be recovered from the New Zealand Defence Force for the six months preceding balance date, plus accruals at balance date.
Foreign currency
Foreign currency transactions are converted into New Zealand dollars at the exchange rate at the date of the transaction. Where a forward exchange contract has been used to establish the price of a transaction, the forward rate specified in that foreign exchange contract is used to convert that transaction to New Zealand dollars. Consequently, no exchange gain or loss resulting from the difference between the forward exchange contract rate and the spot exchange rate on date of settlement is recognised.
Monetary assets and liabilities are translated to New Zealand dollars at the closing exchange rate. The resulting unrealised exchange gain or loss is recognised in the schedule of non-departmental forecast expenses. Other exchange gains or losses, whether realised or unrealised, are recognised in the schedule of non-departmental expenses in the period to which they relate.
Schedule of non-departmental revenues and receipts
For the year ended 30 June 2004
Non-departmental revenues and receipts are administered by the Ministry on behalf of the Crown.
As these revenues and receipts are not established by the Ministry nor earned in the production of the Ministry's outputs, they are not reported in the Ministry's departmental financial statements.
| Note | 30/6/2003 Actual $000 | 30/6/2004 Actual $000 |
30/6/2004 Main estimates $000 |
30/6/2004 Supp. estimates $000 |
|
|---|---|---|---|---|---|
| Administered on behalf of the Minister of Defence | |||||
| Sales of military equipment, at cost, to New Zealand Defence Force The individual projects are: |
|||||
| Maritime helicopters |
35,001 | 3,067 | 20,310 | 3,067 | |
| Orion autopilot |
2,333 | 28 | 221 | 28 | |
| ANZAC ships |
37,235 | 20,910 | 13,224 | 20,910 | |
| Tactical communications equipment |
19,077 | 7,706 | 17,894 | 7,706 | |
| Light armoured vehicles |
31,142 | 331,782 | 326,582 | 331,782 | |
| Boeing 757 modification |
- | 98,071 | 145,499 | 98,071 | |
| Medium range anti-armour weapon |
- | 679 | - | 679 | |
| Other projects | 87 | 55 | - | 55 | |
| Total sales to New Zealand Defence Force | 124,875 | 462,298 | 523,730 | 462,298 | |
| Interest on foreign currency investments |
C1 | 392 | 290 | 250 | 250 |
| Other revenue |
C2 | - | 137 | - | - |
| Total revenues and receipts administered on behalf of the Minister of Defence | 125,267 | 462,725 | 523,980 | 462,548 |
(Figures are GST exclusive)
Schedule of non-departmental expenses
For the year ended 30 June 2004
Non -departmental expenses are administered by the Ministry on behalf of the Crown.
As these expenses are not spent in the production of the Ministry's outputs, they are not reported in the Ministry's departmental financial statements.
This schedule includes both capital and operating expenses.
| 30/6/2003 Actual $000 | 30/6/2004 Actual $000 |
30/6/2004 Main estimates $000 |
30/6/2004 Supp. estimates $000 |
|
|---|---|---|---|---|
| Administered on behalf of the Minister of Defence | ||||
| Purchase of military equipment The individual projects are: |
||||
| Maritime helicopters |
15,745 | 1,273 | - | 422 |
| Orion autopilot | 1,177 | - | - | - |
| ANZAC ships |
35,453 | 6,611 | 11,231 | 9,883 |
| Light armoured vehicles |
210,522 | 262,766 | 291,112 | 277,542 |
| Light operational vehicles |
- | 3,628 | - | 5,660 |
| Medium range anti-armour weapon |
- | 2,136 | - | 1,731 |
| Air defence system |
- | 1,631 | - | 2,947 |
| Boeing 757 modification |
93,694 | 14,540 | 44,055 | 28,974 |
| Tactical communications equipment |
7,306 | 8,878 | - | 8,711 |
| Other | 81 | 3 | - | - |
| Total purchases of military equipment |
363,978 | 301,466 | 346,398 | 335,870 |
| GST input tax expensed |
19,881 | 47,272 | 63,656 | 48,224 |
| Other operating expenses | 3 | - | - | - |
| Unrealised exchange losses/(gains) |
1,652 | (4,281) | - | - |
| Total expenses administered on behalf of the Minister of Defence | 385,514 | 344,457 | 410,054 | 384,094 |
(Figures are GST exclusive)
Schedule of non-departmental assets
For the year ended 30 June 2004
Non -departmental assets are administered by the Ministry on behalf of the Crown.
As these assets are neither controlled by the Ministry nor used in the production of the Ministry's outputs, they are not reported in the Ministry's departmental statement of financial position.
| 30/6/2003 Actual $000 | 30/6/2004 Actual $000 |
30/6/2004 Main estimates $000 |
30/6/2004 Supp. estimates $000 |
|
|---|---|---|---|---|
| Administered on behalf of the Minister of Defence | ||||
| Crown bank accounts |
49,321 | 26,116 | 70,704 | 23,361 |
| Debtors and receivables |
116 | 26 | - | - |
| Work in progress |
296,841 | 136,009 | 161,343 | 170,413 |
| Total assets administered on behalf of the Minister of Defence | 346,278 | 162,151 | 232,047 | 193,774 |
(Figures are GST exclusive)
Schedule of non-departmental liabilities
For the year ended 30 June 2004
Non -departmental liabilities are administered by the Ministry on behalf of the Crown.
As these liabilities are neither controlled by the Ministry nor used in the production of the Ministry's outputs, they are not reported in the Ministry's departmental statement of financial position.
| 30/6/2003 Actual $000 | 30/6/2004 Actual $000 |
30/6/2004 Main estimates $000 |
30/6/2004 Supp. estimates $000 |
|
|---|---|---|---|---|
| Administered on behalf of the Minister of Defence | ||||
| Creditors and payables |
11,568 | 12,731 | 9,586 | 9,586 |
| Total liabilities administered on behalf of the Minister of Defence |
11,568 | 12,731 | 9,586 | 9,586 |
(Figures are GST inclusive)
Schedule of non-departmental commitments
For the year ended 30 June 2004
Non-departmental commitments are administered by the Ministry on behalf of the Crown.
As these commitments are not incurred in the production of the Ministry's outputs, they are not reported in the Ministry's departmental statement of commitments.
| 30/6/2003 Actual $000 | 30/6/2004 Actual $000 |
|
|---|---|---|
| Capital commitments | ||
| Less than one year |
281,370 | 57,621 |
| One to two years |
6,033 | 11,804 |
| Two to five years |
- | 6,665 |
| More than five years |
- | - |
| Total non-departmental capital commitments |
287,403 | 76,090 |
(Figures are GST exclusive)
These figures exclude the non-recoverable GST payable to the New Zealand Customs Service on the import of military equipment.
Schedule of non-departmental expenditure and appropriations
For the year ended 30 June 2004
The statement of expenditure and appropriations details expenditure incurred against appropriations. The Ministry administers these appropriations on behalf of the Crown.
| 30/6/2003 Actual $000 | 30/6/2004 Actual $000 |
30/6/2004 Main estimates $000 |
30/6/2004 Supp. estimates $000 |
|
|---|---|---|---|---|
| Vote Defence Purchase or development of capital assets by the Crown |
||||
| Defence equipment | 363,978 | 301,466 | 346,398 | 335,870 |
| GST on defence equipment |
19,881 | 47,272 | 63,656 | 48,224 |
|
Total purchase or development of capital assets by the Crown |
383,859 | 348,738 | 410,054 | 384,094 |
(Figures are GST exclusive)
Schedule of non-departmental contingencies
For the year ended 30 June 2004
There are no non-departmental contingent assets or contingent liabilities at 30 June 2004. (30 June 2003 = Nil.)
Non-Adjusting Event After Balance Date
The Ministry of Defence was advised on 2 August 2004 that the Crown Law Office had been served with legal proceedings against the Ministry by Schelde Marinebouw BV.
Schelde, an unsuccessful respondent to the Project Protector Request For Proposal, is suing for damages arising out of its failure to secure the contract for the supply of Project Protector ships for the Royal New Zealand Navy. An estimate of its financial effect is unable to be made.
Notes to the non-departmental schedules
For the year ended 30 June 2004
Note C1: Interest revenue
The Ministry invests foreign currency cash held prior to making payments with financial institutions that the Ministry deals with. All interest earned on short-term deposits is returned to the Crown.
Note C2: Other revenue
| 30/6/2003 Actual $000 | 30/6/2004 Actual $000 |
|
|---|---|---|
| Refunds from foreign military sales cases following the decision to exit the arrangement to lease F-16 aircraft. |
- | 135 |
| Other |
- | 2 |
| Total other revenue | - | 137 |
Note C3: Budget composition
| 30/6/2004 Main estimates $000 | 30/6/2004 Supp. estimates $000 |
30/6/2004 Budget total $000 |
|
|---|---|---|---|
| Current non tax revenue |
|||
| Crown interest | 250 | - | 250 |
| Capital receipts |
|||
| Defence equipment | 523,730 | (61,432) | 462,298 |
| Expenditure |
|||
| Defence equipment | 346,398 | (10,528) | 335,870 |
| GST on defence equipment | 63,656 | (15,432) | 48,224 |
Note C4: Major budget variations
Purchase or development of capital assets by the Crown - defence equipment
The appropriation was decreased by $10.528 million to recognise timing changes in existing contract payments, and new projects approved by Government during the financial year, not provided for in approved baselines. The projects involved were:
| $000 | |
|---|---|
| Timing changes | |
| ANZAC ships |
(1,348) |
| Light armoured vehicles |
(13,570) |
| Tactical communications |
8,711 |
| Naval helicopters | 422 |
| Boeing 757 aircraft |
(15,081) |
| New projects | |
| Light operational vehicles |
5,660 |
| Medium range anti-armour weapon |
1,731 |
| Air defence system |
2,947 |
| (10,528) |
GST on defence equipment
The appropriation was decreased by $15.432 million to meet timing changes in import GST charges not provided for in approved baselines. The projects involved were:
| $000 | |
|---|---|
| Timing changes | |
| ANZAC ships |
41 |
| Light armoured vehicles |
(16,322) |
| Tactical communications |
2,099 |
| Naval helicopters | 573 |
| Boeing 757 aircraft |
(1,904) |
| New projects | |
| Light operational vehicles |
24 |
| Medium range anti-armour weapon |
34 |
| Air defence system |
23 |
| (15,432) |
Note C5: Financial instruments
Currency risk
The Ministry has a foreign exchange covering policy that minimises the currency risk. The policy has key parts:
- the Ministry is not required to arrange cover for foreign exchange transactions more than two years in the future, unless Cabinet decides to the contrary
- a maximum of net aggregate NZ$2 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.
Foreign exchange contracts (Crown)
The Ministry had Crown foreign exchange contracts with a face value of $70.990 million at 30 June 2004. (30 June 2003 = $224.295 million.)
