Pūrongo-ā-tau mō Te Kawa Mataaho 2021 | Te Kawa Mataaho Annual Report 2021

Reporting Entity

The Public Service Commission (the Commission) is a New Zealand government department as defined by section 5 of the Public Service Act 2020 and is domiciled and operates in New Zealand. The relevant legislation governing the Commission’s operations includes the Public Finance Act 1989 (PFA), and the Public Service Act 2020.

The Social Wellbeing Agency (SWA) is a departmental agency as defined by section 2 of the Public Finance Act 1989, which is hosted within the Commission, unless explicitly stated, references to the Commission cover both the Commission and SWA.

In addition, the Commission has reported separately, in the Non-departmental Schedules, financial information on public funds managed by the Commission on behalf of the Crown.

The primary objective of the Commission is to provide services to the public rather than making a financial return. Accordingly, the Commission is designated as a Public Benefit Entity (PBE) for financial reporting purposes.

The Financial Statements of the Commission are for the year ended 30 June 2021. The Forecast Financial Statements are for the year ending 30 June 2022. These Financial Statements were authorised for issue by the Chief Executive on 30 September 2021.

The financial statements of the Commission for the year ended 30 June 2021 are consolidated financial statements including both the Commission and SWA. They are shown as Group in this annual report.

The Departmental Financial Statements and the financial information reported in the Non-departmental Schedules are consolidated into the Financial Statements of the Government and, therefore, readers of these schedules should also refer to the Financial Statements of the Government for the year ended 30 June 2021.

Statement of compliance

The Departmental Financial Statements, non-departmental schedules and unaudited Departmental Forecast Financial Statements of the Commission have been prepared in accordance with the requirements of the Public Finance Act 1989, which includes the requirement to comply with New Zealand Generally Accepted Accounting Practices (NZ GAAP), Treasury Instructions and Treasury Circulars. These Financial Statements comply with PBE accounting standards as appropriate for Tier 1 entities. These Financial Statements have been prepared in accordance with Tier 1 NZ PBE accounting standards. Measurement and recognition rules applied in the preparation of the Non-departmental Supplementary Financial Schedules are consistent with NZ GAAP and Crown accounting policies and are detailed in the Financial Statements of the Government.

Basis of preparation

The Departmental Financial Statements and Non-departmental Schedules have been prepared on a going concern basis, and the accounting policies have been applied consistently throughout the period.

Measurement base

The Departmental Financial Statements and Non-departmental Schedules have been prepared on an historical cost basis with the exception of Artwork, which is revalued every five years.

Functional and presentation currency

The Departmental Financial Statements and Non-departmental Schedules are presented in New Zealand dollars and all values are rounded to the nearest thousand dollars ($000), other than the related party transaction disclosures in Note 15. The related party transaction disclosures are rounded to the nearest dollar. The functional currency of the Commission is New Zealand dollars.

Cash and cash equivalents

Cash and cash equivalents includes cash on hand and deposits held at call with banks.

Income tax

The Commission is a public authority and consequently is exempt from income tax. Accordingly, no provision has been made for income tax.

Goods and services tax

Items in the financial statements are stated exclusive of goods and services tax (GST), except for receivables and payables, which are stated on a GST-inclusive basis. Where GST is not recoverable as input tax, it is recognised as part of the related asset or expense.

The net amount of GST recoverable from, or payable to, the Inland Revenue (IR) is included as part of receivables or payables in the statement of financial position.

The net GST paid to or received from the IR, including the GST relating to investing and financing activities, is classified as an operating cash flow in the statement of cash flows.

Commitments and contingencies are disclosed exclusive of GST.

Changes in accounting policies

There have been no changes in accounting policies during the financial year.

Standards issued and not yet effective and not early adopted

Standards and amendments, issued but not yet effective that have not been early adopted, and which are relevant to the Commission are:

Amendment to PBE IPSAS 2 Cash Flow Statement

An amendment to PBE IPSAS 2 requires entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. This amendment is effective for the year ending 30 June 2022, with early application permitted. This amendment will result in additional disclosures. The Commission does not intend to early adopt the amendment.

PBE IPSAS 41 Financial instruments

PBE IPSAS 41 replaces PBE IFRS 9 Financial Instruments and is effective for the year ending 30 June 2023, with earlier adoption permitted. The Commission has assessed that there will be little change as a result of adopting the new standard as the requirements are similar to those contained in PBE IFRS 9. The Commission does not intend to early adopt the standard.

PBE FRS 48 Service Performance Reporting

PBE FRS 48 replaces the service performance reporting requirements of PBE IPSAS 1 Presentation of Financial Statements and is effective for the year ending 30 June 2023, with early adopted permitted. The Commission has not yet determined how application of PBE FRS 48 will affect its statement of service performance. It does not plan to adopt the standard early.

Budget and forecast figures

Basis of the budget and forecast figures

The 2021 budget figures are for the year ended 30 June 2021 and were published in the 2019/20 annual report. They are consistent with the Commission’s best estimate financial forecast information submitted to the Treasury for the Budget Economic and Fiscal Update (BEFU) for the year ending 2020/21.

The 2022 forecast figures are for the year ending 30 June 2022, which are consistent with the best estimate financial forecast information submitted to the Treasury for the BEFU for the year ending 2021/22.

The forecast financial statements have been prepared as required by the PFA to communicate forecast financial information for accountability purposes.

The budget and forecast figures are unaudited and have been prepared using the accounting policies adopted in preparing these financial statements.

The 30 June 2022 forecast figures have been prepared in accordance with and comply with PBE FRS 42. Prospective Financial Statements.

The forecast financial statements were approved for issue by the Chief Executive on 01 April 2021. The Chief Executive is responsible for the forecast financial statements, including the appropriateness of the assumptions underlying them and all other required disclosures.

Although the Commission regularly updates its forecasts, updated forecast financial statements for the year ending 30 June 2022 will not be published.

Significant assumptions used in preparing the forecast financial information

The forecast figures contained in these financial statements reflect the Commission’s purpose and activities and are based on a number of assumptions on what might occur during the 2021/22 year. The forecast figures have been compiled on the basis of existing government policies and ministerial expectations at the time the Main Estimates were finalised.

The main assumptions, which were adopted as at 01 April 2021, were as follows:

• The Commission’s activities and output expectations will remain substantially the same as the previous year focusing on the Government’s priorities.
• Personnel costs were based on current wages and salary costs, adjusted for anticipated remuneration changes.
• Operating costs were based on historical experience and other factors that are believed to be reasonable in the circumstances and are the Commission’s best estimate of future costs that will be incurred.
• Inclusion of the Social Wellbeing Agency.

The actual financial results achieved for 30 June 2022 are likely to vary from the forecast information presented, and the variations might be material. Since the approval of the forecasts, there is no significant change or event that would have a material effect on the forecasts.

Statement of cost allocation policies for Departmental Financial Statements

The Commission has determined the cost of outputs and categories using the following cost allocation system:

• Direct costs are expenses incurred from activities in producing outputs. These costs are charged directly to the related appropriations.
• Indirect costs are expenses incurred by corporate services functions that cannot be identified with a specific output. Indirect costs are allocated to each appropriation based on full-time equivalent personnel.

There have been no changes in the Commission’s general cost accounting policies since the date of the last audited Financial Statements.

Critical accounting estimates and assumptions

There are no critical accounting estimates and assumptions made in preparing these Financial Statements.

Capital management

The Commission manages its revenues, expenses, assets, liabilities and general financial dealings prudently.

It’s equity is largely managed as a by-product of managing revenue, expenses, assets, liabilities and compliance with the government budget processes, Treasury Instructions, and the PFA.

Revenue Crown

Revenue from the Crown is measured based on the Commission's funding entitlement for the reporting period as reported in the Departmental Financial Statements.

The funding entitlement is established by Parliament when it passes the Appropriation Acts for the financial year.

The amount of revenue recognised takes into account any amendments to appropriations approved in the Appropriation (Supplementary Estimates) Act for the year and certain other unconditional funding adjustments formally approved prior to balance date. There are no conditions attached to the funding from the Crown. However, the Commission can incur expenses only within the scope and limits of its appropriations.

The fair value of Revenue Crown has been determined to be equivalent to the funding entitlement.

Other revenue

PIF reviews

Revenue from reviews is recognised based on percentage completed.

LDC Levies and LDC courses

Revenue from levies for the Leadership Development Centre are recognised on a straight line basis. Revenue from the courses are recognised as revenue on a straight line basis over the life of each course.

Recovery of rental costs and secondments

Recovery of rental costs and secondments from participating agencies is recognised as revenue on a straight line basis.

Public Service Fale contribution revenue

Revenue from the Public Service Fale contribution is recognised as revenue when the obligation to pay the expenses is incurred.

Clerical and administration pay equity claim team delivery revenue

Revenue from the Clerical and Administration Pay Equity Claim team is recognised as revenue when the obligation to pay the expenses is incurred.

Employee Led Networks membership levies

Revenue from levies for the Employee Led Networks programme is recognised as revenue on a straight line basis.

Breakdown of other revenue and further information

Accounting policy

Salaries and wages

Salaries and wages are recognised as an expense as employees provide services.

Superannuation schemes

Defined contribution schemes

Employee contributions to defined contribution plans such as the State Sector Retirement Savings Scheme, KiwiSaver, and the Government Superannuation Fund are accounted for as defined contribution superannuation schemes and are expensed in the surplus or deficit as incurred. Note that the Commission may make contributions to other defined contribution plans which employees may be members of, including defined benefit plans that are accounted for as a defined contribution plan.

Defined benefit scheme

The Commission makes contributions to the Defined Benefit Plan (DBP) Contributors Scheme (the scheme), which is managed by the Board of Trustees of the National Provident Fund. The scheme is a multiemployer defined benefit scheme.

Insufficient information is available to use defined benefit accounting, as it is not possible to determine from the terms of the scheme the extent to which the surplus or deficit in the plan will affect future contributions by individual employers, as there is no prescribed basis for allocation. The scheme is therefore accounted for as a defined contribution scheme.

Accounting policy

The capital charge is recognised as an expense in the financial year to which the charge relates.

The Commission pays a capital charge to the Crown on its equity (adjusted for memorandum accounts) as at 30 June and 31 December each year. The capital charge rate for the year ended 30 June 2021 was 5% (2020: 6%).

Accounting policy

Property, plant and equipment is measured at cost, less accumulated depreciation and impairment losses, except for Artwork, which is revalued to fair values every five years, subject to regular assessment of market movements to ensure they do not differ materially from fair value. The latest revaluation was performed as at 30 June 2018.

Intangible assets are capitalised on the basis of the costs incurred to acquire and bring to use the specific asset. Direct costs include software acquisition and customisation costs by consultants or staff. Staff training costs are recognised as an expense when incurred. Intangible assets with finite lives are subsequently recorded at cost, less any amortisation and impairment losses. The carrying value of an intangible asset with a finite life is amortised on a straight-line basis over its useful life.

Depreciation and amortisation begins when an asset is available for use and ceases at the date that an asset is de-recognised. The depreciation and amortisation charge for each period is recognised in the Statement of Comprehensive Revenue and Expenses.

The useful lives of all classes of assets have been estimated as follows:

Property, Plant and Equipment

Intangible Assets

Accounting Policy

Short-term receivables are recorded at the amount due, less an allowance for credit losses. The Ministry applies the simplified expected credit loss model of recognising lifetime expected credit losses for receivables.

In measuring expected credit losses, short-term receivables have been assessed on a collective basis as they possess shared credit risk characteristics. They have been grouped based on the days past due.

Short-term receivables are written off when there is no reasonable expectations of recovery. Indicators that there is no reasonable expectations of recovery include the debtor being in liquidation or the receivable being more than one year overdue.

Ageing of debtors and other receivables

Accounting Policy

Creditors and other payables are recorded at their face value.

Accounting Policy

Revenue in advance is recognised where amounts billed are in excess of the amounts recognised as revenue.

Presentation of employee entitlements

Sick leave, annual leave, vested long service leave and non-vested long service leave and retirement leave expected to be settled within 12 months of balance date are classified as a current liability. All other employee entitlements are classified as a non-current liability.

Retirement and Long Service Leave

The present value of the retirement and long service leave obligations depends on a number of factors that are determined on an actuarial basis using some assumptions. Two key assumptions used in calculating this liability include the discount rate (year 1: 0.380%; year 2: 0.810%; year 3+ : 3.080%) and the salary-inflation factor (year 1: 0.00%; year 2+: 3.080%). Any changes in these assumptions will impact on the carrying amount of the liability. In determining the appropriate discount rate, the Commission adopts the central table of risk-free discount rates and Consumer Price Index (CPI) assumptions provided by the Treasury.

The Commission is required at the expiry of the lease term in the Reserve Bank on 28 February 2024 to make good the premises. $0.119 million has been provided for this.

Accounting policy

Equity is the Crown’s investment in the Commission and is measured as the difference between total assets and total liabilities. Equity is disaggregated and classified as taxpayers’ funds, memorandum accounts, and artwork revaluation reserves.

Memorandum accounts

Memorandum accounts reflect the cumulative surplus or deficit on those departmental services provided that are intended to be fully cost recovered from third parties through fees, levies, or charges. The balance of each memorandum account is expected to trend toward zero over time.

Artwork revaluation reserves

These reserves relate to the revaluation of artwork to fair value.

Breakdown of equity and further information

This memorandum account summarises financial information relating to the accumulated surpluses and deficits incurred in the delivery of development programmes, resources and experiences by the Leadership Development Centre (a function of the Commission) to third parties on a full cost recovery basis.

The balance of the memorandum account is expected to trend toward zero over a reasonable period of time, with interim deficits being met either from cash from the Commission’s statement of financial position or by seeking approval for a capital injection from the Crown. Capital injections will be repaid to the Crown by way of cash payments throughout the memorandum account cycle.

The Commission’s obligation to return a portion of its operating surplus in accordance with the Public Finance Act 1989 is recognised at face value as it is required to be paid by 31 October of each year, per Treasury instructions.

All related party transactions have been entered into on an arm’s-length basis. Further, transactions with other government agencies (for example, government departments and Crown entities) are not disclosed as related party transactions when they are consistent with the normal operating arrangements between government agencies and undertaken on the normal terms and conditions for such transactions.

The Commission is a wholly-owned entity of the Crown. The Government significantly influences the roles of the Commission as well as being its major source of revenue.

In conducting its activities the Commission is required to pay various taxes and levies (such as GST, FBT, PAYE and ACC levies) to the Crown and entities related to the Crown. The payment of these taxes and levies, other than income tax, is based on the standard terms and conditions that apply to all tax and levy payers.

Key management personnel

The above key management personnel compensation excludes the remuneration and other benefits the Minister of the Public Service receives. The Minister’s remuneration and other benefits are not received only for his role as a member of key management personnel of the Commission. The Minister’s remuneration and other benefits are set by the Remuneration Authority under the Members of Parliament (Remuneration and Services) Act 2013 and are paid under Permanent Legislative Authority, and not paid by the Commission.

Related party transactions involving key management personnel (or their close family members)

There were no related party transactions involving key management personnel or their close family members. No provision has been required, nor any expense recognised, for impairment of receivables from related parties (2020: Nil).

There have been no significant events subsequent to balance date that require adjustment to the Financial Statements or disclosure.

The following major budget variations occurred between the 2020/21 Actuals and the 2020/21 Budget:

Statement of Comprehensive Revenue and Expense

Revenue

Revenue Crown was higher than originally budgeted mainly due to expense transfers that were approved after the budget for delayed work from the 2019/20 year. The largest of these was the delay in the delivery of the Data Exchange project. Revenue other was higher than originally budgeted due to the adjustments for the Public Service Fale and the inclusion of two new programmes during the year: the Clerical and Administration Pay Equity Claim and the Employee-Led Networks programme.

Expenditure

Personnel costs were higher than budgeted due to the adjustments for the Public Service Fale, Clerical and Administration Pay Equity Claim and the Employee-Led Networks programme. Depreciation and amortisation costs were higher than budgeted due to increased capital expenditure on fitting out an additional floor, which was acquired during the year. The higher spend in other operating expenditure corresponds to the inclusion of the additional work programmes mentioned above.

Statement of Financial Position, Cashflow and Changes in Equity

Variances in the Statement of Position and Statement of Cashflow are largely due to timing differences between when the goods or services were delivered and when the cash changed hands. The bank balance is higher than budgeted due to the unbudgeted surplus made during the year. This can also be seen in the Statement of Cash Flow where actual net cash flow exceeds budgeted net cash flow (the budget being the Supplementary Estimates budget). This surplus will be repaid to the Crown.

There are variances in the Statement of Changes in Equity due to the capital injection received for the Social Wellbeing Agency’s refresh of their premises (this was funded through a fiscally neutral adjustment). The remaining variance relates to the creation of a memorandum account for the Leadership Development Centre.

The Public Service Fale had budgeted to undertake a significant amount of international travel throughout the Pacific as part of their work programme. However, COVID-19 restrictions meant that most of this travel was not able to take place. This impacts both expenditure and revenue as the travel would have been recovered from the Ministry of Foreign Affairs and Trade.

The Commission continues to play a significant role in supporting the response to COVID-19 and this is explored in the section Responding to and recovering from COVID-19 However, this work is managed by re-prioritising resources and reallocating staff, resulting in a minimal impact on the financial statements.

The carrying amounts of financial assets and liabilities in each of the PBE IFRS 9 financial instrument categories are: