Financial Statements

Statement of Acounting Policies

for the year ended 30 June 2007

Reporting entity

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

The financial statements of the Department of Building and Housing have been prepared pursuant to section 35 of the Public Finance Act 1989, and comply with generally accepted accounting practice.

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

Measurement system

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

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 Budget Night Main Estimates, and those amended by the 2006/07 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.

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 costs are charged on the basis of actual time incurred. Property and other premises costs, such as maintenance, are charged on the basis of floor area occupied for the production of each output. Remaining indirect costs are assigned on the proportion of direct costs for each output.

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

Leases
Finance leases: A liability equal to the present value of the future minimum lease payments is recognised for office equipment acquired by way of finance lease. Each lease payment is apportioned between the finance charge and the reduction of the outstanding liability. The interest expense component of the finance lease payments is recognised in the Statement of Financial Performance using the effective interest rate method.

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

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 equipment: 5 years, 20 percent per annum

Leasehold improvements: 5-10 years, 10-20 percent per annum

Furniture and fittings: 10 years, 10 percent per annum

Computer hardware: 4 years, 25 percent per annum

Computer software: 3-8 years, 12.5-33 percent per annum

Motor vehicles: 6 years, 16 percent 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 4 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.

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, retiring leave and resigning leave obligations to employees. Annual leave provisions, retiring leave and resigning 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.

Committments
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.

Contingent liabilities
Contingent liabilities are disclosed at the point at which the contingency is evident.

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.

Changes in accounting policies

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

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		Note	2007 Actual $000	2007 Supplementary Estimates $000	2007 Main Estimates $000
	Revenue
24,519	Crown		27,842	27,842	33,516
298	Departmental		387	386	348
33,825	Other	1	43,168	37,594	36,233
58,642	Total operating revenue		71,397	65,822	70,097
	Expenses
26,239	Personnel	2	30,208	28,667	28,133
26,469	Operating	3	35,094	41,998	40,638
1,257	Depreciation	4	1,615	1,654	2,192
332	Capital charge	5	829	830	880
142	Write-off of property, plant and equipment		-	-	-
54,439	Total operating expenses		67,746	73,149	71,843
4,203	Net surplus/(deficit)		3,651	(7,327)	(1,746)

For information on major budget variances refer to Note 16 in the Notes to the Financial Statements.

Statement of Movements in Taxpayers' Funds

for the year ended 30 June 2007

2006 Actual $000		Note	2007 Actual $000	2007 Supplementary Estimates $000	2007 Main Estimates $000
4,152	Taxpayers' funds at 1 July		10,390	10,390	10,555
4,203	Net surplus/(deficit)		3,651	(7,327)	(1,746)
			3,651	(7,327)	(1,746)
4,203	Total recognised revenues and expenses for the year
	Adjustment for flows to and from the Crown:
(7,012)	Provision for payment of surplus to the Crown	10	(9,192)	1,850	(1,520)
2,809	Capital contribution to fund memorandum account deficit(s)		5,541	5,680	3,254
5,638	Capital contributions for fixed assets		905	766	3,878
-	Other non-cash movements to cover forecast output deficit		-	7,327	-
600	Net asset transfer from the Ministry of Economic Development (in 2006/07) and from the Department of Internal Affairs (2005/06)		139	139	583
10,390	Taxpayers' funds as at 30 June		11,434	18,825	15,004

Statement of Financial position

as at 30 June 2007

2006 Actual $000		Note		2007 Actual $000	2007 Supplementary Estimates $000	2007 Main Estimates $000
	Taxpayers' funds
10,390	General funds			11,434	18,825	15,004
10,390	Total taxpayers' funds			11,434	18,825	15,004
	Current assets
1,138	Cash and bank balances			473	750	4,273
-	Inventory			67	-	-
-	Prepayments			200	-	-
16,223	Debtors and receivables		6	23,173	8,100	13,025
17,361	Total current assets			23,913	8,850	17,298
	Non-current assets
8,233	Property, plant and equipment		7	8,090	12,839	12,131
8,233	Total non-current assets			8,090	12,839	12,131
25,594	Total assets			32,003	21,689	29,429
	Current liabilities
6,442	Creditors and payables		8	8,296	9,375	10,827
175	Provision for restructuring		9	-	-	-
7,012	Provision for repayment of surplus to Crown		10	9,192	(9,177)	1,520
326	Other provisions			275	-	-
-	Deferred revenue			1,236	1,000	900
944	Employee entitlements		11	1,215	983	828
14,899	Total current liabilities			20,214	2,181	14,075
	Non-current liabilities
305	Employee entitlements		11	355	683	350
305	Total non-current liabilities			355	683	350
15,204	Total liabilities			20,569	2,864	14,425
10,390	Net assets			11,434	18,825	15,004

For information on major budget variances refer to Note 16 in the Notes to the Financial Statements.

Statement of Cashflows

for the year ended 30 June 2007

2006 Actual $000		Note		2007 Actual $000	2007 Supplementary Estimates $000	2007 Main Estimates $000
	Cash flows from operating activities
	Cash was provided from supply of outputs to:
24,596	Crown			27,842	29,151	33,516
27,357	Customers			36,948	45,794	38,381
	Cash was disbursed to producing outputs:
(25,739)	Personnel			(29,754)	(28,667)	(27,945)
(27,152)	Operating			(33,119)	(36,816)	(43,066)
(336)	Net GST paid			208	(719)	-
(332)	Capital charge			(829)	(830)	(880)
(1,606)	Net cash flows from operating activities		12	1,296	7,913	6
	Cash flows from investing activities
	Cash was provided from:
16	Sale of property, plant and equipment			36	-	-
	Cash was disbursed to:
(4,989)	Purchase of property, plant and equipment			(2,867)	(7,863)	(4,673)
(4,973)	Net cash flows from investing activities			(2,831)	(7,863)	(4,673)
	Cash flows from financing activities
	Cash was provided from:
7,738	Capital contributions from the Crown			7,755	6,446	7,132
	Cash was disbursed to:
(188)	Payment of surplus to the Crown			(7,012)	(7,012)	(2,967)
7,550	Net cash flows from financing activities			743	(566)	4,165
971	Net increase/(decrease) in cash held			(792)	(516)	(502)
167	Opening cash balances at 1 July			1,138	1,138	4,413
-	Effect of exchange rate changes			-	-	-
-	Transfer of cash balances from the Ministry of Economic Development			127	128	362
1,138	Closing cash			473	750	4,273

Statement of Commitments

as at 30 June 2007

2006 Actual $000		2007 Actual $000
	Operating lease commitments
2,891	Less than 1 year	2,557
1,952	1 to 2 years	2,324
4,802	2 to 5 years	5,869
5,454	Over 5 years	5,751
15,099	Total operating lease commitments	16,501
-	Capital commitments	-
15,099	Total commitments	16,501

Statement of Contingent Liabilities

as at 30 June 2007

2006 Actual $000		2007 Actual $000
	Contingent liabilities
108	Personal grievance(s)	-
-	Restructuring costs	40
-	Supplier disputes	519
108	Total contingent liabilities	559

Statement of Unapproriated Expenditure

as at 30 June 2007

The Department of Building and Housing had no instances of unappropriated expenditure for the year ended 30 June 2007 (30 June 2006: $258,000).

Statement of Departmental Expenditure and Appropriations

for the year ended 30 June 2007

This statement shows expenditure incurred by the Department against each departmental output expense appropriation. All appropriations are GST-exclusive.

2006 Actual $000		2007 Actual $000	2007 Supplementary Estimates $000	2007 Appropriation Changes $000	2007 Main Estimates $000
	Vote Housing - Departmental output expenses
3,262	Building Act 2004 Implementation	5,275	6,699	2,411	4,288
11,124	Building Regulation and Control	11,873	13,641	1,001	12,640
2,815	Occupational Licensing	8,828	8,885	1,350	7,535
	Purchase and Monitoring Advice -
389	Housing New Zealand Corporation	464	492	88	404
17,740	Residential Tenancy Services	18,256	18,259	383	17,876
3,356	Sector and Regulatory Policy	5,412	5,884	626	5,258
32	State Housing Appeal Services	-	-	-	-
15,721	Weathertight Homes Resolution Service	17,638	19,289	(4,553)	23,842
54,439	Total departmental output expenses and appropriations	67,746	73,149	1,306	71,843

The State Housing Appeal Services output expense was subsumed into the Residential Tenancy Services output expense in 2006/07. For information on major budget variances refer to Note 16 in the Notes to the Financial Statements.

Memorandum Accounts

for the year ended 30 June 2007

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.

2006 Actual $000		2007 Actual $000
	Building Controls
(2,996)	Opening balance at 1 July	1,685
19,067	Revenue (primarily from building levies)	23,471
(14,386)	Expenses	(17,148)
4,681		6,323
-	Transfer of expenses from Occupational Licensing - Building Practitioners	(5,134)
1,685	Closing balance at 30 June	2,874

The transfer of expenses from the Occupational Licensing - Building Practitioners memorandum account is to reallocate expenses incurred since 2004/05 to the correct memorandum account.

2006 Actual $000		2007 Actual $000
	Occupational Licensing - Building Practitioners
(1,537)	Opening balance at 1 July	(4,346)
6	Revenue	29
(2,815)	Expenses	(5,623)
(2,809)		(5,594)
-	Transfer of expenses to Building Controls	5,134
-	Removal of non-chargeable expenses	1,181
(4,346)	Closing balance at 30 June	(3,625)

The transfer of expenses to the Building Controls memorandum account is to reallocate expenses incurred since 2004/05 to the correct memorandum account. Expenses that are not chargeable against the Licensed Building Practitioner Scheme have been removed.

2006 Actual $000		2007 Actual $000
	Occupational Licensing - Electrical Workers
	Opening balance at 1 July	-
-	Revenue	3,185
-	Expenses	(3,206)
-	Closing balance at 30 June	(21)

Statement of Trust Monies

as at 30 June 2007

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 2007 are not included in the Department's own financial statements. Movements in these accounts during the year ended 30 June 2007 (as reported to the Treasury) were as follows.

	Opening Balance 1 July 2006$000	Contributions Received $000	Distributions Made $000	Cash Receipts $000	Cash Expenses $000	Closing Balance 30 June 2007 $000
Trust account
Certifiers Bond Trust Account	178	-	-	5	-	183
Residential Tenancies Trust Account	207,519	130,895	(107,438)	-	-	230,976

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 Trust Account, prepared on an accrual accounting basis in conformity with generally accepted accounting practice, is provided on pages 93 to 102.

These financial statements are to be read in conjunction with the accompanying accounting policies and notes to the financial statements.

Notes to the Financial Statements

for the year ended 30 June 2007

Note 1: Other Revenue

2006 Actual $000		2007 Actual $000	2007 Supplementary Estimates $000	2007 Main Estimates $000
18,683	Building levies	22,028	17,102	18,072
13,954	Interest from tenancy bonds	16,977	16,245	12,988
848	Tenancy Tribunal fees	825	800	800
-	Electrical workers levy and fees	3,178	3,363	2,861
-	Licensed building practitioners levy and fees	-	-	1,399
12	Gain on sale of property, plant and equipment	36	-	-
328	Other	124	84	113
33,825	Total other revenue	43,168	37,594	36,233

Note 2: Personnel Costs

2006 Actual $000		2007 Actual $000	2007 Supplementary Estimates $000	2007 Main Estimates $000
24,097	Salaries and wages	27,829	26,928	26,208
1,006	Recruitment costs	912	671	900
324	Superannuation	418	419	375
79	ACC levy	130	104	95
56	Fringe benefit tax	52	45	55
677	Other	867	500	500
26,239	Total personnel costs	30,208	28,667	28,133

The salaries and wages figures include payments to employment agencies for temporary staff, and staff contractors.

Note 3: Operating Costs

2006 Actual $000		2007 Actual $000	2007 Supplementary Estimates $000	2007 Main Estimates $000
3,703	Administration	4,378	5,148	5,000
1,200	Communications	1,159	711	700
1,423	Computer costs	2,606	1,513	1,400
509	Premises costs	474	453	500
2,990	Rental and leasing costs	3,633	3,630	2,638
1,432	Tenancy Tribunal	1,611	1,692	1,640
1,469	Travel - domestic and overseas	2,016	2,365	2,300
82	Audit fees for the audit of financial statements	77	90	82
	Audit fees for the audit of RTTA statements	10	-	-
	Auditor's fees for audit of NZIFRS opening balances	10	-	-
3	Change in provision for doubtful debts	-	-	-
	Bad debts written off	5	-	-
13,658	Other	19,115	26,396	26,378
26,469	Total operating costs	35,094	41,998	40,638

Premises costs include insurance, rates, electricity, cleaning services and security.The Department pays costs associated with the management of the Residential Tenancies Trust Account, including for the audit of the financial statements.

Note 4: Depreciation

2006 Actual $000		2007 Actual $000	2007 Supplementary Estimates $000	2007 Main Estimates $000
32	Office equipment	33	30	30
237	Leasehold improvements	658	684	744
16	Furniture and fittings	31	28	28
716	Computer hardware	376	374	801
224	Computer software	471	485	557
32	Motor vehicles	46	53	32
1,257	Total depreciation	1,615	1,654	2,192

Note 5: Capital Charge

The Department pays a capital charge to the Crown based on taxpayers' funds held by the Department as at 30 June and 31 December each year. The capital charge rate for 2007 was 7.5 percent (2006: 8 percent).

Note 6: Debtors and Receivables

2006 Actual $000		2007 Actual $000	2007 Supplementary Estimates $000	2007 Main Estimates $000
1,237	Trade debtors and other receivables	4,024	1,000	1,000
(3)	Less provision for doubtful debts	(60)	-	-
1,234	Net trade and other receivables	3,964	1,000	1,000
13,261	Tenancy bond current account	18,338	7,100	12,025
419	GST receivable	871	-	-
1,309	Debtor Crown	-	-	-
16,223	Total debtors and receivables	23,173	8,100	13,025

Note 7: Property, Plant and Equipment

2006 Cost $000	2006 Accumulated Depreciation $000	2006 Net Book Value $000		2007 Actual $000	2007 Accumulated Depreciation $000	2007 Net Book Value $000
299	214	85	Office equipment	291	227	64
6,446	1,014	5,432	Leasehold improvements	6,838	1,453	5,385
246	144	102	Furniture and fittings	452	164	288
3,121	1,793	1,328	Computer hardware	3,177	2,173	1,004
1,810	926	884	Computer software	2,088	1,397	691
397	267	130	Motor vehicles	543	124	419
			Work in progress
139	-	139	- leasehold improvements	-	-	-
8	-	8	- computer hardware	239	-	239
125	-	125	- computer software	-	-	-
12,591	4,358	8,233	Total property, plant and equipment	13,628	5,538	8,090

Note 8: Creditors and Payables

2006 Actual $000		2007 Actual $000	2007 Supplementary Estimates $000	2007 Main Estimates $000
2,843	Trade creditors	3,668	4,075	10,547
1,614	Creditor for fixed assets	-	-	-
1,970	Accrued expenses	3,968	5,000	200
-	GST payable	660	300	80
15	Other	-	-	-
6,442	Total creditors and payables	8,296	9,375	10,827

Note 9: Provision for Restructuring

2006 Actual $000		2007 Actual $000	2007 Supplementary Estimates $000	2007 Main Estimates $000
247	Opening balance of provision	175	175	175
(72)	Movement in provision	(175)	(175)	(175)
175	Closing balance of provision for restructuring	-	-	-

Note 10: Provision for Repayment of Surplus to Crown

2006 Actual $000		2007 Actual $000	2007 Supplementary Estimates $000	2007 Main Estimates $000
4,203	Net surplus/(deficit)	3,651	(7,327)	(1,746)
2,809	Adjustment for memorandum account deficit(s)/(surplus)	5,541	(1,850)	3,266
7,012	Net surplus payable to Crown	9,192	(9,177)	1,520

Note 11: Employee Entitlements

2006 Actual $000		2007 Actual $000	2007 Supplementary Estimates $000	2007 Main Estimates $000
	Current
944	Annual leave	1,215	983	828
944	Total current	1,215	983	828
	Non-current
204	Retirement and resigning leave	244	483	250
101	Long service leave	111	200	100
305	Total non-current	355	683	350
1,249	Total employee entitlements	1,570	1,666	1,178

Note 12: Reconciliation of Net Surplus to Net Cash Flows from Operating Activities

2006 Actual $000		2007 Actual $000	2007 Supplementary Estimates $000	2007 Main Estimates $000
4,203	Net surplus/(deficit) from operations	3,651	(7,327)	(1,746)
	Add/(less) non-cash items
1,257	Depreciation	1,615	1,654	2,192
36	Increase in non-current employee entitlements	50	-	-
	Add/(less) movements in working capital
-	(Increase) in prepayments	(200)	-	-
-	(Increase) in inventories	(67)	-	-
(6,736)	(Increase)/decrease in debtors and receivables	(8,259)	8,721	-
(850)	Increase/(decrease) in creditors and payables	3,035	4,865	(440)
-	Increase in deferred revenue	1,236	-	-
354	Increase in current employee entitlements	271	-	-
	Add/(less) investing activity items
(12)	Net gain on sale of plant, property and equipment	(36)	-	-
142	Fixed asset write-offs	-	-	-
(1,606)	Net cash flows from operating activities	1,296	7,913	6

Note 13: Related Party Transactions

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 its 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. Where those parties are acting in the course of their normal dealings with the Department, related party disclosures have not been made for transactions of this nature.

Apart from those transactions described above, the Department has not entered into any related party transactions.

Note 14: Financial Instruments

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
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 for $0.650 million (2006: $0.650 million).

Fair value
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
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.

Note 15: Contingent Assets

The Department does not have any contingent assets as at 30 June 2007 (2006: Nil).

Note 16: Explanation of Major Budget Variances

Statement of Financial Performance
Revenue Crown funding requirements were reduced by $5.674 million or approximately 17 percent in the Supplementary Estimates.

The largest changes were:

• an expense transfer of $1.600 million for the Weathertight Homes Resolution Service from 2006/07 into 2007/08
• the transfer of the Weathertight Homes Resolution Service adjudication function to the Ministry of Justice ($1.196 million)
• a reduction of $2.857 million in Crown funding for Residential Tenancy Services offset by an increase in interest income under revenue other.

Revenue other is $6.935 million or approximately 19 percent above that forecast in the Main Estimates as a consequence of the following.

• Building levies received were $3.956 million higher than Main Estimates forecast as the number and value of building consents lodged was higher than anticipated.
• Interest revenue from the Residential Tenancy Services output expense was $3.989 million higher than forecast as interest rates and bond lodgements were higher than anticipated.
• Revenue from electrical workers levies and fees was $0.317 million higher than forecast due to an increase in demand-driven activities.
• The Main Estimates included revenue from licensed building practitioners of $1.399 million with the assumption that the scheme would commence in the 2006/07 financial year. Subsequently the commencement date was confirmed as 1 November 2007 resulting in nil revenue for 2006/07.

Operating expenditure is $4.097 million or approximately 6 percent below that forecast in the Main Estimates primarily due to the following.

• Actual expenditure on the Weathertight Homes Resolution Service (WHRS) was $6.204 million lower than the Estimates. The Main Estimates appropriation was reduced by an expense transfer of $1.600 million from 2006/07 to 2007/08, and $1.196 million from the transfer of the adjudication function to the Ministry of Justice in the Supplementary Estimates. The remainder of the variance reflects lower- than-forecast new claims activity and the WHRS enhancements being implemented later than originally envisaged when the Estimates were finalised.
• There was a net increase of $1.306 million in appropriations approved in the Supplementary Estimates, the largest components being:
  • $2.300 million for the building consent authority accreditation assistance package
  • an expense transfer of $1.261 million for the post-regulatory phase of the Licensed Building Practitioner Scheme
  • $0.453 million for electrical workers licensing activities
  • $0.250 million for the review of the Unit Titles Act 1972 and Residential Tenancies Act 1986
  • $0.100 million to purchase additional performance monitoring advice
  • $0.100 million for building officials education
  • $0.038 million for the state sector retirement savings scheme.
• These increases were largely offset by reductions of:
  • an expense transfer of $1.600 million from 2006/07 to 2007/08 for the Weathertight Homes Resolution Service
  • $1.196 million for the transfer of the Weathertight Homes Resolution Service adjudication function from the Department to the Ministry of Justice
  • an expense transfer of $0.400 million from 2006/07 to 2007/08 for Occupational Licensing.
• Approval is being sought for the following expense transfers from 2006/07 into 2007/08.
  • $0.709 million for the building consent authority accreditation assistance package
  • $0.600 million for Building Act 2004 communications
  • $0.750 million for the Energy Efficiency Awareness programme
  • $1.000 million for the Weathertight Homes Resolution Service, to fund the anticipated increased costs for revising assessment reports for existing claimants who want to progress their claims under the enhanced provisions of the new legislation

Statement of Financial Position
The main factors for the $3.570 million variation between the net assets forecast in the Main Estimates and the actual financial position are as follows.

• Cash and bank balances were $3.800 million lower than the Estimates largely because revenue from the Crown was reduced in the Supplementary Estimates.
• Debtors and receivables were $10.148 million higher than the Estimates, being largely the result of interest earned on Tenancy Bondholders' funds.
• The net book value of property, plant and equipment was $4.041 million lower than the Main Estimates,
• mainly as the result of capital expenditure on some infrastructure projects being deferred until 2007/08.
• Creditors and payables were $2.533 million lower than the Main Estimates, reflecting the underspend for the year.
• The provision for the payment of the surplus to the Crown was $7.672 million higher than the Main Estimates, as the net surplus was higher than the forecast net operating result.

Note 17: Transition to New Zealand Equivalents to International Financial Reporting Standards (IFRS)

The financial statements for the year ended 30 June 2007 have been prepared under current New Zealand GAAP. The Department will be adopting New Zealand IFRS for the first time in its audited financial statements for the year ending 30 June 2008 (although comparative information will be collected throughout the 2007/08 financial year). This timetable is in line with the adoption of New Zealand equivalents to IFRS in the consolidated financial statements of the Government reporting entity. The Department will be adopting the accounting policies of the financial statements of the Government. The Department has set up a New Zealand IFRS work programme to ensure that the Department is New Zealand IFRS compliant. At this stage no material issues have been identified. However, the actual impact of adopting New Zealand IFRS may vary from this initial assessment, and the variation may be material.

Note 18: Events after Balance Date

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

Non-departmental schedules and statements

Statement of Accounting Policies: Non-Departmental

for the year ended 30 June 2007

Reporting entity

The following non-departmental statements and schedules record the revenue and receipts, expenses, assets, liabilities, contingencies and commitments that the Department administers on behalf of the Crown. These, together with associated notes, are presented below.

Measurement system

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.

Accounting policies

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

Revenue and expenditure
Revenue and expenditure are recognised when earned or incurred respectively and are reported in the financial period to which they relate.

Receivables
Receivables are recorded at estimated realisable value after providing, where necessary, for doubtful and uncollectable debts.

Commitments
Future expenses and liabilities to be incurred on contracts that have been entered into at balance date are disclosed as commitments (at the point a contractual obligation arises) to the extent that there are equally unperformed obligations. Commitments relating to employment contracts are not disclosed.

Contingencies
Contingent liabilities and assets are disclosed at the point at which the contingency is evident.

Goods and Services Tax (GST)
The Statement of Non-departmental Expenditure and Appropriations is exclusive of GST (where applicable). The Schedules of Assets and Liabilities are exclusive of GST, except for payables and receivables, which are GST-inclusive. All other figures are GST-exclusive (where applicable).

Any payments made for GST input tax are made under the authority of section 6 of the Public Finance Act 1989.

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 the year ended 30 June 2007.

Schedule of Non-Departmental Revenue and Receipts

for the year ended 30 June 2007

2006 Actual $000		Note	2007 Actual $000	2007 Supplementary Estimates $000	2007 Main Estimates $000
	Non-tax revenue
96,748	Interest Housing New Zealand Corporation Loans		115,163	115,564	109,323
14,140	Dividend from Housing New Zealand Corporation		20,211	20,211	4,279
110,888	Total non-tax revenue	1	135,374	135,775	113,602

Statement of Non-Departmental Expenditure and Appropriations

for the year ended 30 June 2007

2006 Actual $000		Note	2007 Actual $000	2007 Supplementary Estimates $000	2007 Main Estimates $000
	Non-departmental output expenses
9,162	Contracted Housing Support Services		9,604	10,635	11,183
8,877	HNZC Housing Support Services		9,198	10,119	11,491
3,128	Housing Policy Advice		3,315	3,320	2,912
225	Registration Regime for Architects		-	-	-
21,392	Total non-departmental output expenses		22,117	24,074	25,586
	Benefits and other unrequited expenses
4,511	Housing Assistance		6,439	6,724	8,666
395,491	Income Related Rental Subsidy		433,932	434,179	417,452
400,002	Total benefits and other unrequited expenses		440,371	440,903	426,118
	Other expenses to be incurred by the Crown
4,373	Community Housing Rent Relief Programme		4,145	4,500	4,500
460	Increase in Debt Provision		1,430	1,645	3,149
4,833	Total other expenses to be incurred by the Crown		5,575	6,145	7,649
	Capital expenditure
54,000	Activities for state housing purposes		-	-	-
	Housing New Zealand Corporation (HNZC) -
-	Loans to refinance third party debt		259,342	259,342	259,342
	Capital injections to Housing New Zealand
208,251	Corporation for housing activities		188,193	204,796	216,913
30,000	Housing New Zealand Limited (HNZL) - Loans to refinance Crown debt		-	-	-
-	Loan to Architects Board		-	45	45
292,251	Total capital expenditure		447,535	464,183	476,300
718,478	Total non-departmental expenditure and appropriations	2	915,598	935,305	935,653

Schedule of Non-Departmental Assets

as at 30 June 2007

2006 Actual $000		Note	2007 Actual $000	2007 Supplementary Estimates $000	2007 Main Estimates $000
	Current assets
501	Crown bank account		13,392	6,427	2,684
10,914	Receivables and prepayments	3	11,437	10,209	8,220
-	Assets held for sale		34	-	-
11,415	Total current assets		24,863	16,636	10,904
	Non-current assets
76,191	Investments	4	81,846	-	-
-	Physical assets		94,670	-	-
76,191	Total non-current assets		176,516	-	-
87,606	Total assets	5	201,379	16,636	10,904

In addition, the Department monitors the activities of Housing New Zealand Corporation. The investment in this Crown entity is recorded within the Crown Financial Statements on a line-by-line basis. No disclosure is made in this schedule.

Schedule of Non-Departmental Liabilities

as at 30 June 2007

2006 Actual $000		Note	2007 Actual $000	2007 Supplementary Estimates $000	2007 Main Estimates $000
	Current liabilities
45,926	Payables	6	82,026	42,842	67,205
45,926	Total current liabilities		82,026	42,842	67,205
	Term liabilities
22,191	Payables	6	27,846	22,191	-
22,191	Total term liabilities		27,846	22,191	-
68,117	Total liabilities	5	109,872	65,033	67,205

These financial statements and schedules are to be read in conjunction with the accompanying accounting policies and notes to the financial statements and schedules.

Statement of Commitments

as at 30 June 2007

The Department reports no non-departmental commitments as at 30 June 2007 (2006: Nil).

Statement of Contingent Liabilities

as at 30 June 2007

2006 Actual $000		2007 Actual $000
-	Properties underwritten for Home Equity Scheme	900
-	Total contingent liabilities	900

These financial statements and schedules are to be read in conjunction with the accompanying accounting policies and notes to the financial statements and schedules.

Notes to the Non-Departmental Schedules and Statements

for the year ended 30 June 2007

Note 1: Non-Departmental Revenue and Receipts

The schedule of revenue and receipts summarises non-departmental revenue the Department collects on behalf of the Crown.

Note 2: Non-Departmental Expenditure and Appropriations

The statement details expenditure incurred against each appropriation administered by the Department on behalf of the Crown.

Note 3: Receivables and Prepayments

2006 Actual $000		2007 Actual $000
5,917	Income related rent debt	7,917
(3,081)	Less: provision for doubtful debts	(4,511)
2,836	Net realisable value	3,406
7,862	Prepayment of income related rental subsidy	7,448
216	Receivable - Housing New Zealand Corporation	583
10,914	Total receivables and prepayments	11,437

Note 4: Investments

2006 Actual $000		2007 Actual $000
76,191	Purchase of land by Housing New Zealand Corporation, as agent for the Crown under theHousing Act 1955, for state housing purposes	81,846
76,191	Total investments	81,846

Note 5: Non-Departmental Assets and Liabilities

Non-departmental assets and liabilities are administered by the Department of Building and Housing on behalf of the Crown. As these assets and liabilities are neither controlled by the Department of Building and Housing nor used in the production of the Department's outputs, they are not reported in the Department's Statement of Financial Position.

Note 6: Payables

2006 Actual $000		2007 Actual $000
	Current
	Payable to Housing New Zealand Corporation
6,630	- Output expenses	-
-	- Income Related Rental Subsidy	-
1,151	- Housing Assistance	2,887
38,131	- Capital injection	35,346
14	- Other payables	10
45,926	Total payable to Housing New Zealand Corporation	38,243
-	Total payable to Housing Agency Account	43,783
45,926	Total current	82,026
	Term
22,191	- Loan for Hobsonville land purchase	27,846
68,117	Total payables	109,872

Note 7: Explanation of Major Budget Variances

Non-tax revenue
The increase in interest on Crown loans to Housing New Zealand Corporation primarily relates to increases in interest rates.

The increase in dividends received is mainly due to the net surplus achieved by Housing New Zealand Corporation for the financial year 2005/06 being significantly greater than forecast.

Non-departmental output expenses
The increase in expenditure of $0.403 million under the Housing Policy Advice output is due to an increase in funding allocated: to the review of the accommodation supplement; for Housing New Zealand Corporation commissioned research projects; and for evaluation of the Housing Innovation Fund.

The Contracted Housing Support Services output was reduced by $0.548 million during the year. $0.300 million of the decrease was for the return of savings to the Crown and $0.248 million was due to savings identified from the Low Deposit Rural Lending Education programme.

An in-principle transfer of $0.178 million has been requested to carry forward expenses related to the Group Self Build (Kapa Hanga Kainga). The product and the way it is delivered is currently being reviewed.

The remaining under expenditure is explained by the impact of the introduction of Home Ownership Education on the Low Deposit Rural Lending (LDRL) scheme and the lower number of applicants for LDRL, Special Housing Action Zone, the Northland, East Coast, Bay of Plenty Rural Housing programme, and the Community Owned Rural Rental Loans.

The HNZC Housing Support Services appropriation was reduced by $1.372 million during the year. This was due to a decrease of $1.909 million relating to savings identified from Welcome Home Loans, an increased cost of $0.291 million relating to Wellington City Council housing stock evaluation, an increase of $0.050 million for the low-cost housing initiative and an increase of $0.196 million for the Auckland City Pensioner Housing modernisation programme.

During 2006/07, a total of 1070 loans were settled against a budgeted target of 700 to 1000. This resulted in an under expenditure against the budget of $0.693 million. This is mainly due to lower-than-expected administration costs for managing the project during the year.

The Housing Assistance appropriation was reduced by $1.942 million during the year. Housing Assistance (Third Party and Local Government Housing Innovation Fund) was reduced by $1.542 million due to a change in the ratio of allocating this funding between local authorities and community-based organisations, decided by the Minister of Housing in July 2006. This resulted in a reduction in the value of conditional grants required. Interest subsidies on Community Owned Rural Rental Loans were reduced by $0.400 million due to the reforecasting of the interest on the revised loan profile.

The overall under expenditure compared to the Supplementary Estimates is $0.285 million. This is mainly due to reduced payments in relation to the interest foregone across the loan portfolios caused by delays in the drawdown on new loans.

The under expenditure in Community Housing Rent Relief Programme of $0.355 million is due to the impact of the introduction of new criteria since 1 January 2007 to access this fund.

The Increase in Debt Provision appropriation was reduced by $1.504 million during the year. The reason for the reduction is forecast changes to market conditions.

This appropriation was established in 2005/06 to recognise any increase in the provision for doubtful debts on Income Related Rent debt. This is a new requirement under the Public Finance Act 1989. Prior to 2005/06, increases in debt provisions did not require an appropriation.

Capital expenditure
Capital injections to Housing New Zealand Corporation for housing activities were reduced by $12.117 million from the Main Estimates. The decrease consisted of:

• a $10.270 million capital transfer for the Auckland City Pensioner Housing modernisation programme
• a decrease of $1.861 million for financial assistance to non-weathertight homes
• an increase of $0.014 million for a capital transfer for the lending programme - Community Owned Rural Rental Loans programme.

Output expense and capital expenditure transfers to 2008
The Minister of Housing and Minister of Finance approved in principle the following transfers from 2006/07 to 2007/08.

• Transfer of up to $11.250 million from 2006/07 to 2007/08 for housing acquisitions to enable HNZC to satisfy its contractual obligations under the acquisitions programme.
• Transfer of up to $0.500 million from 2006/07 to 2007/08 for housing acquisitions to enable HNZC to provide financial assistance to homeowners who require help for issues relating to non-weathertight houses.
• Transfer up to $1.000 million from 2006/07 to 2007/08 due to delays in programme delivery caused by prolonged council consent processes including several sites being escalated to the Environment Court, relating to the Auckland City Pensioner Housing project.
• Transfer of $4.500 million from 2006/07 to 2007/08 in relation to the Community Group Housing project.
• Transfer of $4.500 million from 2006/07 to 2007/08 in respect of the Local Government and Third Sector Housing Lending programme.
• Transfer of $0.500 million from 2006/07 to 2007/08 in respect of the Home Ownership Education Programme to cover for any increase in demand for the course in 2007/08.
• Transfer of $0.178 million in respect of expenses related to the Group Self Build programme in 2007/08.

These expenses and capital transfers will be confirmed by joint Ministers in the October Baseline Update and included in the 2007/08 Supplementary Estimates.