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The forecast financial statements for the Department of Prime Minister and Cabinet have been prepared in accordance with Section 39 of the Public Finance Act 1989.
The reporting entity is the Department of the Prime Minister and Cabinet. The reporting entity consists of those activities (represented by outputs) supplied by the department and related assets, liabilities and taxpayers’ funds.
The forecast financial statements show the financial performance and financial position after the elimination of all significant intra-entity transactions between output classes. Actual results for 2006/07 are likely to vary from the information presented and these variations could be material. These variations would be attributed mainly to changes in the level of demand for services produced by the department.
The budget figures are those presented in the 2006 Budget estimates (main estimates) and those amended by the supplementary estimates and any transfer made by Order in Council under Section 5 of the Public Finance Act 1989.
All statements are GST-exclusive, with the exception of the Statement of Forecast Financial Position where the entries for creditors, payables and debtors are GST-inclusive.
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, payables and provisions or in receivables and prepayments as appropriate.
All fixed assets have been valued on historical-cost basis. All individual assets or groups of assets are capitalised if their purchase cost is $2,000 or greater.
Gains and losses arising from the sale or disposal of assets have been included in the Statement of Forecast Financial Performance.
All fixed assets have been depreciated on a straight-line basis that reflects the decline in service potential of the asset during the reporting period. Specific rates of depreciation used for the various classes of fixed assets are as follows:
Fixtures and fittings 10%
IT equipment 33%
Office equipment 20%
Furniture 20%
Motor vehicles 25%
Kitchen equipment e.g. domestic appliances 20%
Major plant and equipment 10%
Minor plant and equipment 20%
Ground improvements 14%
The department is exempt from the payment of income tax in terms of the Income Tax Act 1994. Accordingly, no charge for income tax has been provided for.
The department is party to financial arrangements in the form of bank accounts, accounts receivable, accounts payable, and accruals as part of its everyday operations. These are reflected in the Statement of Forecast Financial Position at their fair value. Revenue and expenses in relation to the financial instruments are recognised in the Statement of Forecast Financial Performance in arriving at the operating surplus.
Direct costs are expenses incurred from activities in producing outputs. These costs are charged directly to the related output classes. Direct costs will represent 87 per cent of total departmental appropriations for output costs in 2006/07. (This compares with 87 per cent in 2005/06.)
Indirect costs are expenses incurred by Corporate Services and by the Office of the Chief Executive. Indirect costs are allocated to each output class in proportion to the level of appropriations in relation to the total vote. Indirect costs will represent 13 per cent of total departmental appropriations for output costs in 2006/07. (This compares with 13 per cent in 2005/06.)
The department leases office premises and photocopiers. As all risks and ownership are retained by the lessor, these leases are classified as operating leases. Operating lease costs are expensed in the period in which they are incurred.
Provision is made in respect of the department’s liability for annual, retirement and long-service leave. Annual leave entitlements have been calculated on an actual entitlement basis at current rates of pay. Long-service leave and retirement leave have been calculated on an actuarial basis, based on the present value of expected future entitlements.
Future payments are disclosed as commitments at the point where a contractual obligation arises, to the extent that they are equally unperformed obligations. Commitments relating to employment agreements are not disclosed.
Contingent liabilities are disclosed at the point at which the contingency is evident.
There have been no changes in accounting policies, including cost-allocation accounting policies. All policies have been applied on bases consistent with those used in the previous period.