Financial Statements
Statement of Responsibility
The Director-General of the Ministry of Agriculture and Forestry, in terms of the Public Finance Act 1989, is responsible for the preparation of the Ministry’s financial statements, statement of service performance and non-departmental statements and schedules, and the judgements made in the process of producing these financial statements and schedules.
I have the responsibility for establishing and maintaining, and I have established and maintained, a system of internal control procedures that provide reasonable assurance as to the integrity and reliability of financial reporting.
In the opinion of the Director-General of the Ministry of Agriculture and Forestry:
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The Ministry’s financial statements and statement of service performance fairly reflect the financial position and operations of the Ministry for the year ended 30 June 2007.
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The non-departmental statements and schedules fairly reflect the assets, liabilities, contingencies and commitments managed by the Ministry on behalf of the Crown as at 30 June 2007 and revenues and expenses managed by the Ministry on behalf of the Crown for the year ended on that date.
Signed
Paul Stocks
Acting Director-General
Countersigned
Gael Hargreaves
Acting Chief Financial Officer
Audit Report
TO THE READERS OF THE MINISTRY OF AGRICULTURE AND FORESTRY’S FINANCIAL STATEMENTS AND PERFORMANCE INFORMATION
for the year ended 30 June 2007
The Auditor-General is the auditor of the Ministry of Agriculture and Forestry (the Ministry). The Auditor General has appointed me, John O’Connell, using the staff and resources of Audit New Zealand, to carry out the audit on his behalf. The audit covers the financial statements and statement of service performance and schedules of non-departmental activities included in the annual report of the Ministry for the year ended 30 June 2007.
Unqualified opinion
- The financial statements of the Ministry comprising the Statement of
Accounting Policies, Statement of Financial Performance, Statement of Movements
of Taxpayers’
Funds, Statement of Financial Position, Statement of Cash Flows, Statement of
Commitments, Statement of Contingent Liabilities, Statement of Unappropriated
Expenses and Capital Expenditure, Statement of Trust Monies, Statement of
Departmental Expenditure and Capital Expenditure, Notes 1 to 23 to the Financial
Statements:
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comply with generally accepted accounting practice in New Zealand; and
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fairly reflect:
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the Ministry’s financial position as at 30 June 2007; and
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the results of its operations and cash flows for the year ended on that date.
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- The statement of service performance of the Ministry:
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complies with generally accepted accounting practice in New Zealand; and
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fairly reflects for each class of outputs:
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its standards of delivery performance achieved, as compared with the forecast standards outlined in the statement of forecast service performance adopted at the start of the financial year; and
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its actual revenue earned and output expenses incurred, as compared with the forecast revenues and output expenses outlined in the statement of forecast service performance adopted at the start of the financial year.
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- The schedules of non-departmental activities comprising the Non-Departmental Statements and Schedules, Schedule of Non-Departmental Expenses, Statement of Non-Departmental Expenditure and Capital Expenditure, Schedule of Non-Departmental Revenue, Schedule of Non-Departmental Capital Receipts, Schedule of Non-Departmental Assets, Schedule of Non-Departmental Liabilities, Statement of Non-Departmental Cash Flows, Schedule of Non-Departmental Contingent Liabilities, Schedule of Non-Departmental Commitments and Notes 1 to 13 to the Non-Departmental Financial Statements fairly reflect the assets, liabilities, revenues, expenses, contingencies, commitments and trust monies managed by the Ministry on behalf of the Crown for the year ended 30 June 2007.
The audit was completed on 24 September 2007, and is the date at which our opinion is expressed.
The basis of our opinion is explained below. In addition, we outline the responsibilities of the Director-General and the Auditor, and explain our independence.
Basis of opinion
We carried out the audit in accordance with the Auditor-General’s Auditing Standards, which incorporate the New Zealand Auditing Standards.
We planned and performed the audit to obtain all the information and explanations we considered necessary in order to obtain reasonable assurance that the financial statements and statement of service performance did not have material misstatements, whether caused by fraud or error.
Material misstatements are differences or omissions of amounts and disclosures that would affect a reader’s overall understanding of the financial statements and the statement of service performance. If we had found material misstatements that were not corrected, we would have referred to them in our opinion.
The audit involved performing procedures to test the information presented in the financial statements and statement of service performance. We assessed the results of those procedures in forming our opinion.
Audit procedures generally include:
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determining whether significant financial and management controls are working and can be relied on to produce complete and accurate data;
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verifying samples of transactions and account balances;
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performing analyses to identify anomalies in the reported data;
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reviewing significant estimates and judgements made by the Director-General;
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confirming year-end balances;
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determining whether accounting policies are appropriate and consistently applied; and
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determining whether all financial statement and statement of service performance disclosures are adequate.
We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements or statement of service performance.
We evaluated the overall adequacy of the presentation of information in the financial statements and statement of service performance. We obtained all the information and explanations we required to support our opinion above.
Responsibilities of the Director-General and the Auditor
he Director-General is responsible for preparing financial statements and a statement of service performance in accordance with generally accepted accounting practice in New Zealand. The financial statements must fairly reflect the financial position of the Ministry as at 30 June 2007 and the results of its operations and cash flows for the year ended on that date. The statement of service performance must fairly reflect, for each class of outputs, the Ministry’s standards of delivery performance achieved and revenue earned and expenses incurred, as compared with the forecast standards, revenue and expenses adopted at the start of the financial year. In addition, the schedules of non-departmental activities must fairly reflect the assets, liabilities, revenues, expenses, contingencies, commitments and trust monies managed by the Ministry on behalf of the Crown for the year ended 30 June 2007. The Director-General’s responsibilities arise from sections 45A, 45B and 45(1)(f) of the Public Finance Act 1989.
We are responsible for expressing an independent opinion on the financial statements and statement of service performance and reporting that opinion to you. This responsibility arises from section 15 of the Public Audit Act 2001 and section 45D(2) of the Public Finance Act 1989.
Independence
When carrying out the audit we followed the independence requirements of the Auditor General, which incorporate the independence requirements of the Institute of Chartered Accountants of New Zealand.
In addition to the audit we have carried out assignments during the reporting period and since 30 June 2007 to provide probity assurance over tender processes in Biosecurity. These assignments are compatible with those independence requirements. Other than the audit and these assignments, we have no relationship with or interests in the Ministry.
John O’Connell
Audit New Zealand
On behalf of the Auditor-General
Wellington, New Zealand
Matters relating to the electronic presentation of the audited financial statementsThis audit report relates to the financial statements of Ministry of Agriculture and Forestry for the year ended 30 June 2007 included on Ministry of Agriculture and Forestry's web site. The Ministry of Agriculture and Forestry’s Director General is responsible for the maintenance and integrity of the Ministry of Agriculture and Forestry's web site. We have not been engaged to report on the integrity of the Ministry of Agriculture and Forestry's web site. We accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the web site. The audit report refers only to the financial statements named above. It does not provide an opinion on any other information which may have been hyperlinked to/from these financial statements. If readers of this report are concerned with the inherent risks arising from electronic data communication they should refer to the published hard copy of the audited financial statements and related audit report dated 24 September 2007 to confirm the information included in the audited financial statements presented on this web site. Legislation in New Zealand governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. |
Statement of Accounting Policies
The Reporting Entity
The Ministry of Agriculture and Forestry (MAF) is a government department as defined by the Public Finance Act 1989.
These are the financial statements of MAF prepared pursuant to the Public Finance Act 1989. In addition, the Ministry has reported the Crown activities and trust monies which it administers.
Measurement System
The financial statements have been prepared on an historical cost basis modified by the revaluation of certain fixed assets as identified in the specific accounting policies below.
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 Day Estimates (Main estimates) and those amended by the Supplementary Estimates (Supp. Estimates) and any transfer made by Order in Council under section 26A of the Public Finance Act 1989.
Revenue
The Ministry derives revenue through the provision of outputs to the Crown and for services to third parties. Such revenue is recognised when earned and is reported in the financial period to which it relates.
Unearned Revenue
Unearned revenue is revenue received in the current accounting period that relates to services the Ministry will provide in future accounting periods.
Cost Allocation
The Ministry has determined the cost of outputs using the cost allocation system outlined below:
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Direct costs are charged directly to significant activities. Indirect costs are charged to significant activities based on cost drivers and related activity/usage information.
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Direct costs are those costs directly attributed to an output. Indirect costs are those costs that cannot be identified in an economically feasible manner, with a specific output.
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Direct costs are charged directly to outputs. Depreciation and capital charge are charged on the basis of asset use. Indirect costs are assigned to business groups based on various cost drivers including assessed charges and usage, personnel numbers and estimated allocation of time.
Debtors and Receivables
Receivables are recorded at estimated realisable value after providing for doubtful and uncollectable debts.
Leases
Leases which effectively transfer to the Ministry substantially all the risks and benefits incidental to ownership of the leased items are classified as finance leases. These are capitalised at the lower of the fair value of the asset or the present value of the minimum lease payments. The leased assets and the corresponding lease liabilities are recognised in the Statement of Financial position. The leased assets are depreciated over the period the Ministry is expected to benefit from their use. The interest expense component of finance lease payments is recognised in the Statement of Financial Performance.
Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item are classified as operating leases. Operating lease expenses are recognised on a systematic basis over the period of the lease.
Property, Plant and Equipment
Land and buildings are stated at fair value as determined by an independent registered valuer. Fair value is determined using market-based evidence. Land and buildings are revalued at least every five years. Additions between revaluations are recorded at cost.
The results of revaluing land and buildings are credited or debited to an asset revaluation reserve for that class of asset. Where a revaluation results in a debit balance in the revaluation reserve, the debit balance will be expensed in the Statement of Financial Performance.
All other property, plant and equipment, or groups of assets forming part of a network which are material in aggregate, costing more than $5,000 are capitalised and recorded at cost. Any write-down of an item to its recoverable amount is recognised in the Statement of Financial Performance.
Depreciation
Depreciation is provided on a straight line basis on all fixed assets, other than freehold land and items under construction, at a rate which will write off the cost (or valuation) 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:
The cost of lease improvements is capitalised and depreciated over the unexpired period of the lease or the estimated remaining useful lives of the improvements, whichever is shorter.
Items under construction are not depreciated. The total cost of a capital project is transferred to the appropriate asset class on its completion and then depreciated.
Depreciation
| Buildings | 50 years | (2%) |
| Leasehold improvements | 2-10 years | (10-50%) |
| Plant and equipment | 3-10 years | (10-33%) |
| Leased plant and equipment | 3 years | (33%) |
| Motor vehicles | 4-8 years | (12-25%) |
Property Intended for Sale
Properties held for sale are separately recognised as a current asset where the sale of a property is highly probable and management are committed to a plan to sell the asset, which is expected to occur within one year. Properties intended for sale are valued at the lower of their carrying value and net realisable value.
Inventory
Inventory held for distribution is valued at the lower of cost and current replacement value. Inventory held for use in the provision of goods and services is valued at the lower of cost (assigned to inventory quantities on hand at balance date using the first in first out (FIFO) basis) or net realisable value. Full provision is made for obsolescence where applicable.
Employee Entitlements
Provision is made in respect of the Ministry’s liability for annual, long service and retirement leave. Annual leave and other entitlements expected to be settled within 12 months of reporting date, are measured at nominated values on an actual entitlement basis at current rates of pay.
Entitlements payable beyond 12 months, such as long service and retiring leave, have been calculated on an actuarial basis based on the present value of expected future entitlements.
Statement of Cash Flows
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Cash means cash balances on hand, held in bank accounts, and deposits with the New Zealand Debt Management Office.
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Operating activities include cash received from all income sources of the Ministry and record cash payments made for the supply of goods and services.
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Investing activities are those activities relating to the acquisition and disposal of non-current assets.
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Financing activities comprise capital injections by, and repayment of capital to, the Crown.
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 Statement of Financial Performance. Other exchange gains or losses, whether realised or unrealised, are recognised in the Statement of Financial Performance in the period to which they relate.
Financial Instruments
The Ministry is party to financial instruments as part of its normal operations. These financial instruments include bank accounts, debtors, creditors and foreign currency forward contracts. The Ministry enters into the foreign currency forward contracts to hedge currency transactions. Any exposure to gains or losses on those contracts is generally offset by a related loss or gain on the item being hedged. Apart from foreign currency forward contracts, all financial instruments are recognised in the Statement of Financial Position and all revenues and expenses in relation to financial instruments are recognised in the Statement of Financial Performance.
Except for those items covered by a separate accounting policy all financial instruments are shown at their estimated fair value.
Goods and Services Tax (GST)
The Statement of Trust Monies is inclusive of GST. The Statement of Financial Position is exclusive of GST, except for Creditors and Payables and Debtors and Receivables which are GST inclusive. All other statements are GST exclusive.
The amount of GST owing to or from the Inland Revenue Department at balance date, being the difference between Output GST and Input GST, is included in Creditors and Payables or Debtors and Receivable (as appropriate).
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.
Commitments
Future expenses and liabilities to be incurred on contracts entered into at balance date are disclosed as commitments to the extent there are equally unperformed obligations.
Contingent Liabilities
Contingent liabilities are disclosed at the point at which the contingency is evident.
Taxpayers’ Funds
This is the Crown’s net investment in the Ministry.
Changes in Accounting Policies
There have been 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 prior year.
Contact for Enquiries
Strategy and Performance Group
Ministry of Agriculture and Forestry
Pastoral House
25 The Terrace
PO Box 2526, Wellington
Tel: +64 4 894 0100
Fax: +64 4 894 0738
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