NZ Transport Agency Annual report

Transcription

1 F.16 NZ Transport Agency Annual report for the year ended 30 June Presented to the House of Representatives pursuant to section 151 of the Crown Entities Act 2004.

2 Annual report NZ Transport Agency Published November ISSN (print) ISSN (online) Copyright: November NZ Transport Agency If you have further queries, call our contact centre on or write to us: NZ Transport Agency Private Bag 6995 Wellington This publication is also available on the NZ Transport Agency s website at

3 Contents Page Chair s report 2 Introducing the NZ Transport Agency Board 4 Section one: The year s key achievements 5 Chief Executive s introduction 6 Our achievements 8 Strategic priorities 14 Managing in a changeable environment 21 Organisational development 23 Management structure and staff resources 26 Financial highlights for year ended 30 June 30 Section two: Statement of service performance 33 Section three: Financial statements 57 Appendices: NZTA legislative functions 101 Government transport sector diagram 102 NZ Transport Agency Annual report 1

4 Chair s report I am pleased to present the first annual report for the NZ Transport Agency (NZTA), a new Crown entity established on 1 August 2008 from the merger of Land Transport NZ and Transit NZ. The new entity has a broad mandate and many functions, new energy and new ideas for a better land transport system for New Zealanders. This Board has overseen the transition from two separate entities into a single entity. We have merged and maintained the momentum of the activities from the NZTA Establishment Unit and the Land Transport NZ and Transit NZ Boards. The NZTA Board mostly comprises members from a mix of the previous three Boards. This Board membership has allowed for continuity in the core operations of the NZTA but, in welcoming new members, has enabled new ideas to be incorporated in our approach. As a Board, we are keen to ensure a customer focus and responsiveness to the users of the transport system in all that we do. We have a widespread influence over the transport sector and we have sought to shape the NZTA into a streamlined and customer service orientated organisation. We have a strong focus on building long-term value for money thinking into all our decisions and activities. Our enabling legislation includes as a specific operating principle for the NZTA using its revenue in a manner that seeks value for money. This new direction is evident in how we have shaped the 12 National Land Transport Programme. Much of the preparation work for this programme occurred over the 2008/09 year, with the establishment of an investment and revenue framework. We have improved the Economic evaluation manual to clarify project benefits, and examined project standards to ensure that these are fit for purpose. We have reviewed the procurement procedures for the purchase of physical works, professional services and public transport, with the publication 2 NZ Transport Agency Annual report

5 of the updated Procurement manual. We have also initiated a review of our property holdings to ensure that further funds can be reinvested in high-priority transport projects. The Board has worked with the management team to develop a single unified set of NZTA corporate policies and applied a best practice approach where appropriate. We have implemented systems and processes to enable the Board to give the same level of scrutiny to its own proposed activities as it would to those proposed by approved organisations. We have clearly set out the delegations and the parameters for operational activities and actively monitor the activities of the organisation. We consider that, over the first year, we have made good progress and are well on the way to achieving the objectives set for the NZTA at its establishment. The Board looks forward to the upcoming year, the implementation of New Zealand s first three-year National Land Transport Programme, and further streamlining and customer focus from the NZTA. We appreciate the dedication and hard work of the NZTA staff during this first year to ensure that we met our outcomes and targets, while laying the foundations for the organisation. Brian Roche Chair NZ Transport Agency NZ Transport Agency Annual report 3

6 Introducing the NZ Transport Agency Board The NZ Transport Agency is a Crown entity governed by a Board appointed by the Minister of Transport. Brian Roche Chair Wellington Garry Moore Deputy Chair Christchurch Christine Caughey Auckland Paul Fitzharris Picton Brian is an accountant and PricewaterhouseCoopers partner. He has experience in the governance/ management and operation of the public sector. He has held a number of key government appointments, including being the Establishment Chair of the Auckland Regional Transport Authority. Garry is an accountant and served on the boards of Land Transport NZ and Transit NZ. He served for five terms on the Christchurch City Council, including three as Mayor between 1998 and He now works as a director on a number of private sector boards. Christine is a qualified planner with a professional background in local and regional government in Auckland. She was an Auckland city councillor from 2004 to She is an experienced and certified planning commissioner under the Resource Management Act Paul was the Acting Chair of Land Transport NZ from March During the latter part of his career with the NZ Police, he represented the NZ Police Department on the National Road Safety Committee. Grahame Hall Rotorua Bryan Jackson JP Waikanae Alick Shaw Wellington Grahame is a retired Mayor of Rotorua, having served 27 years on local government, and is a former Local Government NZ representative. He served as a board member of Transit NZ, Chair of Rotorua Energy Charitable Trust, and is a former President of Rotorua Federated Farmers. Grahame is a New Zealand Nuffield Scholar. Bryan was the Acting Chair of Transit NZ from March He is the Chair of Vehicle Testing New Zealand and is a past President of the Motor Trade Association. Previously, Bryan owned and operated a major motor vehicle dealership and is a director of KiwiRail Group and several other companies. Alick has governance experience gained from nine years as a Wellington city councillor and from his directorships on a range of government, community and trust boards. 4 NZ Transport Agency Annual report

7 Section one The year s key achievements This section outlines the role and functions of the NZTA, and highlights the areas we gave particular focus to in the 2008/09 financial year. NZ Transport Agency Annual report 5

8 Chief Executive s introduction The purpose of the NZ Transport Agency (NZTA) is to build a better transport system for New Zealanders. Our aim is to invest in moving people and freight to grow New Zealand s economy, to help New Zealanders travel safely, and to be focused on meeting our customers needs. In this first year of our new organisation, we have worked to ensure continued delivery of core work programmes while shaping the focus on areas that are critical to achieving long-term outcomes. We have continued to manage the allocation of funding to land transport activities through the National Land Transport Programme (NLTP). We have a major role as co-funder, in collaboration with local and regional government investment, in local roads and public transport infrastructure and services. Our funding role is accompanied by an assist and advise function that includes NZTA membership on regional transport committees to help develop and implement regional land transport programmes. We play a large role in managing access to, and use of, the land transport network. We work closely with our transport service delivery agents to provide transport users with safe access to the land transport system by providing driver testing services, issuing driver and transport service licences, undertaking vehicle certification, registration and licensing activities, and collecting road user charges and other road revenue. We are the custodian of the largest road network in New Zealand. We are committed to providing a safe and reliable state highway system and ensuring that the state highway corridors make an optimum contribution to an integrated multi-modal land transport system. We invest funding for state highway capital improvements and manage the delivery of a state highway improvement programme. We also operate and maintain the state highway network through the maintenance of road surfaces at a safe condition, maintaining bridges and tunnels, roadside lighting, signs and barriers. We also provide funding for emergency reinstatement services. 6 NZ Transport Agency Annual report

9 We provide a vital connection between transport policy making and the operation of the land transport sector. Close working relationships are maintained with the Ministry of Transport, which is responsible for leading the development of strategic transport policy, with the NZ Police, which provides a range of road policing services, and with local authorities that are responsible for implementing transport projects and other activities funded through the NLTP. In the first year of operation, we have given focus to five key priorities. These priorities provided the key points of leverage for the NZTA in giving effect to the Government policy statement on land transport funding (GPS), and the objectives of the New Zealand Transport Strategy These priorities are: Safer travel working to make journeys safer. Streamlined funding process making applications for funding easier and success more predictable. Value for money developing our approach for achieving value for money. Partnerships building our capacity to deliver with partners. Modal shift assisting freight and people to access a wider range of transport modes to remove congestion and stimulate economic productivity. This overview outlines our key work on the NZTA s core functions and the strategic priorities for the 2008/09 financial year. To deliver its functions and achieve its outcomes, the NZTA needs to have strong internal capability. We have therefore initiated a programme to build an organisation that is capable of delivering on our ambitious work programmes. This report describes the key initiatives we have undertaken over the last year to build this capability. The achievements outlined in this report are due to the skills and commitment of our people. Thanks to all at the NZTA for their hard work in making these happen. Geoff Dangerfield Chief Executive NZ Transport Agency Annual report 7

10 Our achievements The 2008/09 year has been a challenging one. We have been focused on delivering the first three-year National Land Transport Programme (NLTP), working with regional stakeholders to implement new planning and funding systems, developing a strategy framework that will help us deliver our strategic outcomes and priorities over the medium term, and we ve been bedding in our new organisational structure, appointing our management team, aligning the systems and processes of our two legacy organisations and building our capability. The following section outlines some of our key achievements across the entire business and then, more specifically, in relation to our 2008/09 strategic priorities. More efficient and reliable networks 2008/09 has been another record year of expenditure, with $1.5 billion spent on operating, maintaining and improving the state highway network. The main contributor to this increase in expenditure was state highway improvements. Large new construction projects were fast-tracked for approval and commencement to help stimulate the economy, as was the completion of some of our major regional arterials. State highway improvement funding was increased during the year to fund projects such as the Newmarket Viaduct, property purchase for both the Tauranga Eastern Motorway and Ngāruawāhia projects, and a $35 million fiscal stimulus package. State highway maintenance and operations expenditure for 2008/09 was $461 million 5.9 percent higher than target. This was due to safety retrofit and travel demand management programmes, costs of attending to incidents on the network, meeting the expectations of travellers and freight operators for road availability and road information and reducing the impact on the environment through maintenance techniques. The Northern Gateway toll road was officially opened by the Minister of Transport on 24 January the culmination of over five years of planning and construction. From this date to 30 June over 1.9 million toll transactions were processed, 203,000 customer enquiries answered and 33,000 pre-paid accounts established. All of this was achieved while introducing a brand new concept to the motoring public of New Zealand electronic free-flow tolling. The Northern Gateway toll road provides a more direct and safer route between Auckland and Northland, and delivers a range of benefits for the Rodney district and for the wider region. Stage two of the Northern Busway, New Zealand s first purpose-built road dedicated to bus passenger transport, was completed before schedule and below budget. The Northern Busway provides a world-class public transport solution for Auckland s North Shore, allowing passengers to enjoy higher levels of service. For every full bus, there are 40 less cars on the road. 8 NZ Transport Agency Annual report

11 The first two ramp signals on the Northwestern Motorway were installed, marking the first step in the western roll-out of the NZTA s comprehensive traffic management system for Auckland. Ramp signals are traffic lights at onramps that manage the rate at which vehicles move down the ramp onto the motorway, helping improve traffic flows and safety, while enabling consistent speeds, safer merging and more predictable travel times. Good progress was made on investigation for the Auckland Manukau Eastern Transport Initiative (AMETI) strategy with packages of projects optimised and the preferred option for the first package identified. This is a substantial integrated strategy that will provide road, public transport and land use benefits for Auckland s eastern suburbs. Funding was approved for Waitakere City Council s New Lynn transit-oriented development integrated package of roading and public transport improvements. This package links with the trenching of the rail line through New Lynn and will be the catalyst for revitalising the town centre. A substantive start was made on the construction of Taupo District Council s $100 million East Taupo arterial, which will provide a bypass around the Taupo township and become part of State Highway 1 on completion. We also approved investment in the following public transport projects: Environment Canterbury s integrated ticketing upgrade, which modernises and extends the existing system to accommodate new features and allows for the expansion of bus services within Canterbury. The contract has been let and the system is currently in development and will be rolled out early in Greater Wellington Regional Council s real-time public transport information system will provide real-time service information through existing information channels (text and internet) and through new displays at major bus stops and railway stations. The system will be rolled out during the /2010 financial year. The Auckland Regional Transport Authority s route planning and service scheduling systems will establish digital mapping of public transport services and a central services database that will enable improved service planning and delivery. NZ Transport Agency Annual report 9

12 Improved access Vehicles and licences A large part of our role in managing access to the land transport network revolves around providing driver testing services, issuing driver and transport service licences, undertaking vehicle certification, registration and licensing activities, and collecting road user charges and other road revenue. In 2008/09 we issued over 571,000 driver licences and conducted 328,000 driver tests. There are currently 4.1 million registered motor vehicles, a net increase of only 10,500 over the year. A decrease in the number of vehicles registered was witnessed each month from February onwards the first time in 20 years that we have seen a decreasing trend. Rules We are funded by the Ministry of Transport to provide rules development services for the government. In 2008/09 five rules relating to road use and driver and operator licensing were signed and three were released for public consultation. In the vehicles area, 10 rules were signed and four released for public consultation. Taxis We inspect taxis and taxi operators for compliance over a range of activities, such as whether their cars are roadworthy, logbooks are accurate and up-to-date, and the person behind the wheel is the person who should be operating the taxi. During 2008/09 we engaged with members of the taxi industry on 6271 occasions, through our combined agency operations, amnesty inspections, enforcement operations, taxi vehicle checks, industry meetings and complaint investigations. We commissioned a public survey to gauge the perceptions of personal safety and security among taxi users, as our taxi enforcement unit had been operating for 12 months. The results indicate a reasonably high level of public confidence in the taxi industry, with 94 percent of respondents rating the physical condition of taxis as very clean or acceptably clean and of reasonable or very good condition, and 82 percent feeling very safe and secure or reasonably safe and secure using taxis. 10 NZ Transport Agency Annual report

13 Community focused activities We provided funding for a broad programme of community focused activities that encouraged walking and cycling. These included implementation of specific initiatives such as work and school travel plans as well as broad-based programmes such as Feet First and Bike Wise. These programmes support low-energy and low-impact travel choices and improve access to transport networks for those who walk, cycle or use public transport. Contact centre Our contact centre, based in Palmerston North, is an extremely busy place, handling over 1.6 million phone calls and s over the 2008/09 year. Despite the busy environment, our customer service representatives have maintained customer satisfaction levels of 98 percent on average throughout the year. This service was recognised when our contact centre won the Gold Award at the national CRM Contact Centre Awards, and was Manager and Centre finalists in the over 50 seats categories in the Manawatu Contact Centre Awards. Improved environmental and social wellbeing The NZTA supports the interests of people, communities and ecosystems impacted by both the road network and the vehicles that use it. Some of the most significant effects include traffic and construction noise, vehicle emissions, storm water run-off, social severance, and culture and heritage. We mitigate these adverse effects by employing good urban design practices, engaging with the public, using landscaping to improve the aesthetics and noise barriers to control the level of noise pollution, decreasing our carbon footprint and ensuring compliance with resource consent conditions. We have identified 12 areas of significance in the environmental area, including noise, air quality, water resources, erosion and sediment control, social responsibility, culture and heritage, spill response and contamination, resource efficiency, climate change, visual quality and vibration. Key performance indicators have been developed for five of the most important areas, with air quality now having a fully developed data collection system. We implemented the next stage of the Emissions Rule (effective from January ) which requires all vehicles entering the fleet to meet a higher standard, ie reduced limit for certain exhaust gas emissions. These are type approval standards that applied to new vehicles by our vehicle source markets. These standards have several levels of stringency depending on the year of vehicle manufacture. NZ Transport Agency Annual report 11

14 Integrated transport and land use Over the year we have been working with local government and key stakeholders to identify the best choice of transport systems for their communities, regionally and nationally. With our transport partners we have completed or progressed over 70 studies throughout the country ranging from small tightly focused studies addressing safety issues on a route or area, through to Auckland s Waitemata Harbour Crossing study that is looking at some of Auckland s long-term transport issues. We have been working to embed an integrated approach to transport and land use planning into our business. Integrated planning in action includes the Gisborne Integrated Planning Pilot trial, an accessibility planning framework and geographic information systems mapping. A number of other initiatives to support local authorities and other approved agencies are at different stages of development, including: helping provide network plans for the roads of national significance providing a framework for transport management plans for the Rugby World Cup in 2011 providing guidance on transport solutions for communities with limited or no public transport providing integrated planning guidelines and toolkits providing guidelines for strategic studies providing guidelines for travel plans to improve travel efficiency. We were actively involved in the review of the Resource Management Act 1991 (RMA) from December Phase 1 focused on a series of amendments to streamline and simplify the RMA and culminated in the Resource Management (Amendment) Bill which has recently been passed into law. The NZTA s key interest in this phase related to the workability of proposed changes to the designation process. We worked closely with Ministry of Transport and Ministry for the Environment officials. The select committee deferred any amendments to the designation process to Phase 2 of the RMA review. Improved transport safety Safety on the state highway Road safety is built into and delivered through many of our network management activities such as signs and markings, minor safety improvements, skid resistance and resealing. The safe operation of the state highway continues to be a key public, political and customer concern. 12 NZ Transport Agency Annual report

15 Traffic volumes and ageing infrastructure required a high level of investment and impacted on our ability to undertake maintenance work safely and with the least amount of disruption. During the year, we maintained processes for improving network safety, including safety inspections, crash monitoring, maintenance and replacement of safety features, improved delineations and minor safety improvements. More highways were retrofitted with rumble strips to alert drivers should they stray to the edge of their lane. Road Policing Programme In line with our statutory responsibility, we developed the 12 Road Policing Programme and ensured alignment with other activities funded through the NLTP. The Road Policing Programme targets enforcement to local risk on the state highway and local road networks in relation to speed, alcohol and drug affected driving, restraint use and dangerous/ careless driving. Advertising In January we launched two television advertising campaigns targeting experienced male drivers who habitually speed. The first campaign reinforced the risk associated with cornering at speed. The second campaign encouraged the target audience to reconsider their speed-related behaviour and to consider the trauma that speed-related crashes have on other road users. We launched a new drink-driving television advertising campaign in June targeting young males. Despite increased police enforcement, drink-driving continues to be a major cause of road crashes and one of the two main causes of deaths and serious injuries on our roads. The new advertisement Trapped focuses on the instant and chilling consequences of drink-driving. It is an unashamedly strong and confronting campaign designed to challenge these drivers. Improving skills and awareness Highlights from our education programme for 2008/09 include: re-launching the Practice programme, a practical driving aid that assists learner drivers to pass the restricted test (a new website and more user-friendly resources with greater appeal to young people were launched in April ) developing a framework for the continuous improvement of the Safe2go programme, aimed at increasing correct restraint use developing and distributing facilitator guidelines to local authorities for development of neighbourhood accessibility plans that improve road safety planning at a community level. NZ Transport Agency Annual report 13

16 Strategic priorities 2008/09 Safer travel Working to make journeys safer Why this is important Meeting community expectations of achieving the 2010 road safety goals remains a considerable challenge. Significant safety improvements have been achieved on the state highway network over the last two decades, but local road safety remains an opportunity for further development. Projected increases in the number of pedestrians, cyclists and motorcyclists on the roads need to be matched by improvements that support their safety. What we did We continued targeting safety on the state highway network by initiating a further safety retrofit programme to complement centre-line barriers and vibraline. A number of nationally led strategic safety initiatives were carried out over the past year. For example, a $7 million safety retrofit was undertaken to make the roadside more forgiving by removing or protecting hazardous objects, $8 million went to improve signs, markings, surfacing and shoulder width on high-risk curves and $5 million went to install rumble strips along the highest collective risk road corridors. Through the government s fiscal stimulus package, a further $19 million was allocated to fund roadside barrier installations and improvements, rumble strips, seal widening, and blackspot area improvements. We worked with NZ Police to renew the focus on safety on our roads that will contribute to decreasing the road toll, and improve the experience for people using active transport modes. We have been working with NZ Police and other partners to renew the focus on safety on our roads in order to contribute to decreasing the road toll and improving the experience for all road users. At the regional and local levels, developments have been based around refining interagency road safety action planning which synchronises the delivery of engineering, education and enforcement activities to deliver joint road safety results for the land transport sector and to achieve value for money. Effective road safety action planning requires a collaborative approach from participating partners to address and mitigate road safety risks, especially in terms of the Fatal 5 road safety issues for local areas, namely speed, alcohol and drug affected driving, restraint wearing, dangerous/careless driving and high-risk drivers. We made progress on the new Operator Rating System and implemented promotion campaigns to influence purchaser behaviour. The Operator Rating System (ORS) will rate commercial road transport operators on their performance against transport standards and regulations by producing an operator safety rating. The system will enable the NZTA to use available information to produce a safety rating for each commercial road transport operator in New Zealand. During 2008/09 we completed the ORS computer application that calculates the score and the star rating for transport operators. The integrity of the ORS input data was improved by adding further data validation, adding transport service licence numbers to the Traffic Offence Register and building a register to capture roadside inspection transactions. Throughout the year we have continued to work closely with the Accident Compensation Corporation, Ministry of Transport and NZ Police on a vehicle safety advertising campaign to encourage people to consider safety features as a priority when purchasing a new vehicle. This campaign aims to increase public awareness of and demand for safety features in vehicles by specifically promoting the benefit of electronic stability control and side curtain airbags. Raising awareness of the importance of these safety features also seeks to influence future used car buying decisions. 14 NZ Transport Agency Annual report

17 Streamlined funding process Making applications for funding easier and success more predictable Why this is important The government has created a funding and planning environment that supports and provides incentives for delivery of government transport goals and aligns planning at local and central government levels. A new transport planning and funding system with a longer-term focus has been created, with the first three-year NLTP being adopted in August to give effect to the Government policy statement on land transport funding (GPS). Stakeholders want less administrative burden and earlier advice about the likely success of funding applications for specific packages and projects. In order to meet expectations, we need to shift the emphasis of engagement with stakeholders from assessment of individual projects to up-front strategic engagement and assessment of transport packages. What we did The first three-year NLTP was adopted by the NZTA Board on 27 August. The allocation of funding for national and regional priorities was guided by the GPS and the Board s investment direction as set out in our Investment and Revenue Strategy (). The GPS and the investment strategy ensure that NLTP funding is allocated in the first instance where national and regional priorities are aligned and make a significant contribution to the outcomes sought by government, such as increasing productivity and stimulating economic growth for the benefit of all New Zealanders. The new three-year timeframe enables investment with a longer-term view and the wider land transport sector to plan ahead with increased confidence and flexibility. We rolled out a revised Planning, programming and funding manual and guidelines. The Planning, programming and funding manual guides regional land transport programmes and the NLTP and sets out the policy and procedures for developing and managing these programmes. In August 2008, we released a revised Planning, programming and funding manual and regional land transport guidelines. These guidelines are designed to be used alongside the manual to assist regional transport committees and the Auckland Regional Transport Authority to meet their legislative responsibilities in preparing their region s regional land transport programme. A new activity class, Transport planning, was introduced in the GPS and included in the manual, supporting the contribution that good transport planning can make in achieving value for money from transport investments made by councils and the NZTA through the NLTP. The manual now includes guidance on the development of regional land transport programmes as required under the amended Land Transport Management Act 2003 (LTMA). NZ Transport Agency Annual report 15

18 We ensured that appropriate assessments are undertaken at each stage of the funding allocation process. When approving funding for particular transport activities, projects or groups of projects, we ensure that the proposed project takes account of the GPS and regional land transport strategies, contributes to LTMA objectives, has been assessed against other options and alternatives and complies with any consultation requirements under the LTMA. These requirements have been encapsulated into the NZTA assessment framework and criteria (strategic fit, effectiveness and economic efficiency) to determine how to prioritise a transport activity and whether or not it will be approved within the NLTP. Some of these criteria are new and have been developed as part of our Investment and Revenue Strategy in response to the updated GPS. The first stage of streamlining the transport planning and funding process took place this year. A number of transport strategies were assessed and supported by our Board, which enabled the strategic fit to be carried forward into the subsequent project development phases that focused on optimising the preferred solution and its cost effectiveness. We streamlined the funding approval process by ensuring funding evaluations are undertaken once at the time transport proposals are developed. The need to review our business in light of the move to three-year programming provided an opportunity to review our processes and integrate a number of improvements to the funding allocation system. These improvements were identified by our customers during stakeholder surveying and largely related to LTP online the system the NZTA uses to engage with our customers when developing and managing their land transport programmes. Among the major improvements were: a stronger focus on the concepts of strategies, packages and groups of activities. These allow users to aggregate information on related but different individual projects. This has simplified the system by reducing the need to enter data multiple times for activities arising from strategies or packages and activities amalgamating the functionality formerly contained in two systems LTP online and Transfund allocation programme system (TAPS) into one. This means that users can now monitor their activities throughout their lifecycles in one system introducing better support for LTP online users including remodelling our training documentation and making available a freephone number users can call for assistance revising some of our delegations to enable decisions on activities within certain parameters to be made by our regional staff who are best placed to understand the regional risks and opportunities. Removing the national office decision-making step for these activities is expected to achieve a 50 percent reduction in the time required to make a decision. 16 NZ Transport Agency Annual report

19 Value for money Making applications for funding easier and success more predictable Why this is important Achieving value for money is a key requirement for the NZTA as it is important to optimise outcomes from National Land Transport Fund investments. There are different views on what value for money means. We need to work towards a shared understanding across the sector (value for money includes doing the right thing, at the right time, in the right way and at the right price). We need to ensure the full range of whole of life costs and benefits are considered when evaluating programmes and packages so that the most suitable activities are funded. What we did We developed and agreed a value for money framework for the NZTA and considered how to encapsulate value for money in our transactions with partners and stakeholders. A clear definition of value for money has been embedded into our new funding manuals the Planning, programming and funding manual and the Procurement manual. These contain guidance on doing the right thing, at the right price and at the right time to achieve the best whole of life value for money outcomes. We have been working towards rolling out streamlined funding processes for the three-year NLTP through LTP online. We updated the economic evaluation procedures to include agglomeration benefits and to provide revisions to the procedures for induced traffic effects, vehicle operating costs and health benefits of active modes. Our economic evaluation procedures provide the industry s standard for the economic evaluation of transport activities and are used by approved organisations for economic evaluation and the preparation of funding applications to the NZTA. In September 2008 we issued amendment 2 to the Economic evaluation manual volume 1, with updates for discount rate, vehicle operating costs, agglomeration benefits and the handling of induced traffic to improve the estimation of economic efficiency within the value for money framework. Volume 2 of the Economic evaluation manual was updated with an amendment in January with improved procedures for the evaluation of public transport, freight services, travel behaviour change, and walking and cycling. We made funding decisions transparent and accessible to all stakeholders in order to ensure we give the same level of scrutiny to our own activities as we do to those proposed by approved organisations. There is a requirement under the LTMA that for certain matters we must apply the same level of scrutiny to our own activities as those of approved organisations (primarily local road controlling NZ Transport Agency Annual report 17

20 authorities and regional councils). Processes were put in place to ensure requests from the NZTA or approved organisations were required to supply a similar level of information in support of funding applications. The assessment of activities and the funding decisions were captured in LTP online, and all decisions and the reasons for decisions were made publicly available through the NZTA s website. We implemented improvements to the procurement procedures and strategies for physical works and professional services, and public transport. Activities funded through the NLTP must be purchased through the use of procurement procedures approved by the NZTA. The Procurement manual is the tool that will help to create a new procurement environment by promoting and supporting long-term strategic thinking and obtaining value for money. It contains guidance to help obtain value for money and a step-by-step guide to developing a procurement strategy. The interim Procurement manual was issued in October 2008 for a pilot application with 10 local and regional councils and our own Highways and Network Operations group. The pilot was a trial of the content and practical application of the interim manual before release of the final manual in July. The new procurement environment is principle based, and the pilot users have signalled that the manual is a practical, easy to use tool. It gives approved organisations more flexibility to respond to the current economic situation and provides transparency for their thinking. The procurement procedures in the Procurement manual will help approved organisations to get better value from the money spent on transport. Partnerships Building our capacity to deliver with partners Why this is important The new transport sector environment relies more heavily on regional decision-making in a national context, with regional transport committees at the centre. Good transport solutions need good land use planning decisions and regions are at the forefront of those decisions. The NZTA has a strong regional focus and delivers through partners such as the NZ Police, territorial local authorities and regional government. What we did We participated in regional and local planning processes to ensure multi-modal transport and supporting land use is promoted and provided for within regional policy statements, regional growth strategies, district plans and long-term council community plans. Delivering good transport systems that all users find effective and affordable relies on working with councils and communities to develop regional and local growth strategies. We have continued to 18 NZ Transport Agency Annual report

21 place great emphasis on contributing to regional growth strategies, regional policy statements and district plans, regional land transport strategies and long-term council community plans. Examples of our successful involvement include Smart Growth in the Western Bay of Plenty, the Ngauranga to Airport study in Wellington and the Greater Christchurch Urban Development Strategy. Our contribution in these studies has enabled us to respond positively to the government s emphasis on economic growth and productivity through the development of roads of national significance. We shared existing centres of excellence with national and regional partners. Through working with local authorities, offering both expertise and funding, we have: seen real-time information provided for Wellington bus services with rail to follow and proposals for Auckland s bus and rail services approved seen Auckland city progress on its work to improve access in and around the CBD and Newmarket through more efficient bus services and more convenient and safer routes for pedestrians continued the roll-out of ramp signalling in Auckland to improve the flow of traffic on the motorway system and arterial network seen around 150 school travel plans delivered along with over 240 walking school bus programmes delivered 40 workplace plans covering around 100,000 people mostly in Auckland installed an Advanced Traffic Management System in Wellington to provide travellers with more information to improve general traffic flow and reduce congestion initiated a trial with the Gisborne district for an innovative integrated planning methodology. We supported regional transport committees to prepare regional land transport strategies and programmes that formed the basis of the first three-year NLTP. We provided regional transport committees and their technical support groups with assistance and advice on the 2008 amendment to the LTMA, and put in place revised policies and procedures to comply with the revised planning and funding arrangements and responsibilities. We supported regional transport committees in their preparation of regional land transport strategies and regional land transport programmes by providing training on the new policies and procedures, conducting workshops to develop a shared understanding, and cooperating with technical support groups to develop and apply regionally agreed processes to funding requests. Our Board initiated a programme of regional visits, visiting Auckland and Christchurch, with future regional visits planned. The Chief Executive has been active in meeting with regional and national stakeholders and staff, including visits with other members of the Senior Leadership Team. The Senior Leadership Team has visited regions, with an ongoing programme as time and commitments permit. NZ Transport Agency Annual report 19

22 Modal shift Assisting freight and people to access a wider range of transport modes to remove congestion and stimulate the economy Why is this important? Transport choice can lead to a more integrated, sustainable, resilient and efficient transport system. Freight transfer to rail and coastal shipping improves transport efficiency and reduces road congestion, as well as lowering overall transport energy consumption and reducing climate change impacts. Public transport and vehicle sharing are ways in which congestion can be reduced, allowing optimum use of existing networks. Urban design is an important influence on transport modes and choices. What we did We worked with local government to address public transport capacity in key urban areas. This involved assessing the potential for redesigning services to optimise travel times and overall efficiency of the Wellington network and working with the Ministry of Transport to identify barriers to higher productivity within the public transport sector. We implemented multi-modal strategic transport studies in conjunction with regional partners. We have been working with local government and key stakeholders to identify the best choice of transport systems regionally and nationally. Seventy studies have been completed or progressed throughout the country ranging from small tightly focused studies looking to address safety issues on a route or area, through to Auckland s Waitemata Harbour Crossing study that is looking to address some of Auckland s long-term transport issues. We completed the New Zealand walking and cycling strategy stocktake report. We distributed walking and cycling strategy preparation guidelines and developed a walking and cycling strategy review tool that has enabled road controlling authorities to evaluate their strategies against the NZTA guidelines. 20 NZ Transport Agency Annual report

23 Managing in a changeable environment Maintaining funding neutrality and transparency Under the Land Transport Management Act 2003 (LTMA), there is a requirement that the NZTA apply the same level of scrutiny to its own activities as those of its key stakeholders (principally local road controlling authorities and regional councils) when making certain decisions. There are also other mechanisms that ensure that revenue and expenditure are accounted for in a transparent fashion and that funds are used to achieve overall best value for money. Specific provisions in the LTMA include: an audited annual report on the National Land Transport Fund (s 11) the form and content of regional land transport programmes, and procedures for the NZTA to propose activities for inclusion in such a programme (s 16 and s 16a) notification of decisions with reasons not to include activities in the NLTP or to change the priorities set out in a regional land transport programme (s 19d) reasons for making decisions to approve or decline funding for all activities to be made available (s 20d) the agency to give effect to the Government policy statement on land transport funding (GPS) when exercising its functions (s 89) the operating principles of the NZTA (s 96) the Secretary for Transport s responsibilities to monitor and review specified land transport activities, including those of the NZTA (s 101). Under section 20 of the Land Transport Management Act 2003 (2008 amendment), the Agency may approve an activity or combination of activities as qualifying for payments from the National Land Transport Fund. The NZTA has ensured it did not favour its own activities over those of its key stakeholders by using the same assessment methodology for both, as set out by activity class in the Planning, programming and funding manual. After the Board approves proposed activities or combinations of activities to be delivered by the NZTA and by key stakeholders, the decisions are made publicly available through our website. Directions issued by Ministers On 21 July 2008, the Minister of State Services and the Minister of Finance issued a direction regarding all-of-government shared authentication services pursuant to section 107 of the Crown Entities Act The NZTA supports this direction by offering the public access via the e-government identity verification service to Change of Vehicle Ownership information. Risk management Throughout the year we have continued to advance the implementation of risk management, building on the work of our predecessor organisations. The implementation enhances critical business decision-making and provides greater confidence of achieving objectives. An NZTA risk management approach has been adopted and a strategic risk profile and plan initiated with the Senior Leadership Team, with oversight from the Board Audit, Risk and Assurance Committee. From a capability perspective, we have recently employed further specialist capability to help lead and support the evolution of the NZTA s risk management practice and to achieve robust integration into critical aspects of the business. Risk management will be actively encouraged at all management tiers and for all critical activities performed by or for the NZTA. NZ Transport Agency Annual report 21

24 Development of the 12 National Land Transport Programme (NLTP) During 2008/09, we worked with our sector partners to develop regional land transport programmes and the NLTP for 12. Early in the year we revised our planning and funding policies and procedures in response to the amended legislative framework for land transport, culminating in the release of the Planning, programming and funding manual and guidelines for the development of regional land transport programmes. Each of the 16 newly formed regional transport committees and ARTA developed a regional transport programme for their region setting out transport activities proposed for inclusion in the 12 NLTP for funding from the National Land Transport Fund (NLTF). These programmes were based on activities identified by regional and territorial councils and other approved organisations, and by the NZTA for state highways. We assisted and advised the regional transport committees in developing and consulting on their regional land transport programmes under the new legislative framework and in a manner that reflected the priorities in the GPS. We received and considered the regional land transport programmes when developing the NLTP. In addition, we considered nationally delivered activities, such as national advertising campaigns, for inclusion in the NLTP. We developed priorities for investment so that it could give effect to the amended GPS when the NLTP was finalised and adopted in August. Procurement procedures We have developed a new procurement environment in response to a change in legislative requirement, the need to update procurement guidance in line with best practice and through a desire to reduce the bureaucratic demands of the process. The LTMA requires us to approve procurement procedures that are designed to obtain value for money, have regard to the desirability of encouraging fair competition, and enable competitive and efficient markets. There is now less focus on the upfront price and more on the overall value associated with the asset or service over its life. There is an assessment on how uncertainties, eg increases in fuel prices and wages, may adversely impact on the supplier s ability to deliver the outputs. 22 NZ Transport Agency Annual report

25 Organisational development Introduction Much of this report focuses on our financial targets and our output delivery, but achieving these targets and delivering on outputs is only possible if our organisation is in strong health. This section draws on non-financial indicators to measure the health of the organisation and our ability to meet the demands placed on us. We will continue to develop indicators to assist this measurement, so that we can track progress over time and continually work to improve our performance. Crucial to this improvement are the initiatives delivered through our Organisational Development Strategy. Organisational Development Strategy Our values We developed our NZTA values and released these to staff in July after a comprehensive and inclusive consultation process. These values are explicit principles that guide our attitudes, influence our behaviour and shape how others perceive us. These values are: Achievement Service Integrity Respect Professionalism We achieve excellent results We provide outstanding service We are honest, ethical and trustworthy We show consideration for others We produce high quality work To support progress within the new organisation, the Introduction to the NZTA Programme was developed and released in late November Introducing staff to the purpose, function and values of the organisation is an important foundation for building shared responsibility and understanding across all business groups. Our senior leaders have demonstrated their commitment to the programme by attending each workshop and introducing their area of the business. In addition, participants were involved in interactive sessions that improved awareness and knowledge of the business, and of our key internal and external stakeholders. Leadership development Leadership development in 2008/09 focused on making appointments to key leadership roles and the creation of development plans. Most appointments were completed by February, with the new organisational structure and management teams being fully in place by April. A continued focus on leadership development will remain a key indicator of performance for the organisation. A new leadership competency framework has been adopted for all leadership roles. The expectations of our leaders are clearly articulated in the position descriptions for each role and are measured specifically through the performance management system that the organisation has adopted for all positions. Further work in the coming year will focus on succession planning and talent management to ensure that our leaders are identified, developed and supported now and in the future. The establishment of key regional leadership roles with the recruitment of the regional directors has provided a platform to work more closely with and through regional stakeholders. These roles have accountability for ensuring that the regional teams are operating at a consistently high level of performance across all aspects of our business. NZ Transport Agency Annual report 23

26 A leadership programme to provide training and support for our leaders has been agreed with the Senior Leadership Team and incorporates a range of activities to support sound management decision-making as well as ensuring a strong focus on leadership competencies that will drive consistently high performance in our staff. A leadership forum was held in April to give real effect to the dynamic interaction between leadership, strategy, action and organisational performance. The theme for our first forum was giving effect to our business priorities, where we looked at aligning our work programmes with our strategic priorities and began exploring our ideal values and behaviours. Regional capability The new transport sector environment relies more heavily on regional strategies and priorities in a national context, with regional transport committees at the centre. Working in partnership with others requires us to be good listeners, responsive to the needs of our customers, local communities and local government. Strong stakeholder relationships are key to ensuring success in achieving our outcomes and strategic priorities. In our first year of operation, we have placed emphasis on strengthening these relationships so that we are able to understand our customers needs and work to meet them as effectively as we can. We continue to place high priority on the development of our regional capability. Over the 2008/09 year, regional leadership teams focused strongly on embedding the organisation s values and strategic priorities across all offices. Priority was given to ensuring regional staff and stakeholders were well informed about the wide range of government and NZTA initiatives that have been rolled out over the last 12 months. This focus on regional communication and relationship management has enabled significant progress towards resilient, high-performing and unified regional teams and has set a strong platform for developing a customer service focus across the organisation. Professional development Throughout the year, we have continued to maintain the high level of qualifications that are available to staff to access internally through the New Zealand Qualifications Authority. Internal assessment and on-the-job training opportunities continue to play a key role in assisting staff to gain contact centre, business administration and other qualifications. We are one of only three organisations approved to trial the assessment of the Public Sector Diploma level 6. We continue to offer our Graduate Development Programme; an important element of the NZTA/ Institution of Professional Engineers New Zealand (IPENZ) Professional Development Partner Programme. Currently we have 36 graduates involved in the programme which includes mentoring, the opportunity for internal rotation between our regional offices and national office based in Wellington, secondment to consultants and contractors, and ongoing training. The NZTA retains an effective relationship with IPENZ and successfully became one of the first organisations in New Zealand to be awarded Professional Development Partner status. 24 NZ Transport Agency Annual report

27 Integration of systems The introduction of NZTA human resources policies was completed by 30 June. Staff and their union representatives were involved in the development of this set of new policies for the organisation. A significant policy is our Code of conduct which was released to all staff on 1 July. Workshops are being delivered to all staff to ensure that they are aware of their obligations and responsibilities as a staff member of the NZTA. Both legacy payroll systems were fully integrated by August 2008 and have been effectively running since this time. The transition was managed effectively with minimal disruption to delivery as evidenced by the recent D-tech audit of the system by external auditors from Deloitte s. Work has been completed on enhancing our management decision-making tools including on-demand organisation charts and an automated process of reporting information for our Senior Leadership Team and the NZTA Board. Other activities currently underway include: a comprehensive suite of online management reports e-solutions for recruitment and performance management. Engagement with staff The Collective Employment Agreement between the New Zealand Public Service Association and the NZTA was finalised recently. This agreement consolidated provisions from the legacy organisations and is intended to cover the next three years. It reinforces the relationship that the NZTA wishes to have with staff through demonstrating open dialogue and a constructive approach to industrial relations activities. Staff engagement surveys were undertaken throughout the transition and merger process. As anticipated, staff satisfaction levels improved progressively over this period as the merger activities were completed and key appointments to positions were confirmed. The People and Capability group are currently identifying the most appropriate approach to assessing staff engagement levels as there is a direct correlation between engagement and performance levels. Engagement with Māori We have established a Māori perspectives unit within the Strategy and Performance group to provide advice, mentoring and support to the business to ensure our strategies, policies and practices are developed and implemented in a culturally relevant and meaningful way. During /10 we will continue to develop and deliver training programmes for staff relating to the Treaty of Waitangi, Māori language and culture, and protocols when engaging with Māori. NZ Transport Agency Annual report 25

28 Management structure and staff resources Our Senior Leadership Team Our Senior Leadership Team comprises the Chief Executive, six group managers and six regional directors. It is the Senior Leadership Team s role to work in the collective interest of the organisation by: shaping the vision for the NZTA and the desired culture for a successful organisation framing and deciding on the organisation s strategy, priorities and resourcing determining the strategy to build the NZTA s capability and organisational development integrating and connecting the work of the different groups within the NZTA to strengthen overall performance. Front row, left to right: Bruce Richards, Regional Director Dunedin, Ian Gordon, Group Manager Access and Use, Liz Huckerby, Group Manager People and Capability, Harry Wilson, Regional Director Hamilton, Dave Brash, Group Manager Regional Partnerships and Planning Back row, left to right: Mark Yaxley, Regional Director Canterbury/West Coast, Jenny Chetwynd, Regional Director Central, Colin Crampton, Group Manager Highways and Network Operations, Deb Hume, Regional Director Wellington, Nelson, Marlborough and Tasman, Wayne McDonald, Regional Director Auckland, Geoff Dangerfield, Chief Executive, Allan Frost, Group Manager Organisational Support, Ernst Zollner, Group Manager Strategy and Performance 26 NZ Transport Agency Annual report

29 Our group structure The NZTA is built around four functional business groups and two support groups: The Strategy and Performance group is the primary interface with the Ministry of Transport and government themes, objectives and strategies, and is responsible for servicing the Board in relation to approval of the NLTP. The Regional Partnerships and Planning group interfaces with local government to work in partnership on regional planning and programming processes. The Highways and Network Operations group is responsible for building, maintaining and operating the state highway network. The Access and Use group provides users with access to the transport system (such as driver licences and motor vehicle registration) and regulates transport operators. The Organisational Support group ensures that the NZTA has corporate strategies and policies to support strategy and organisational performance. The People and Capability group ensures that the NZTA can deliver on its outcomes through its people capability. Figure 1 High-level business model Regional Partnerships and Planning highways and Network Operations Access and Use Planning and funding (government Policy Statement) Strategy and Performance Organisational Support People and capability Assisting and advising Promoting Collecting revenue monitoring and enforcing Providing access and regulating Building, operating and maintaining NZ Transport Agency Annual report 27

30 Our regional structure We have six regional areas that support a regionally focused planning environment. Figure 2 NZ Transport Agency regional areas Auckland & Northland Waikato & Bay of Plenty Taranaki, Manawatu-Wanganui, Hawke s Bay & Gisborne Wellington, Nelson, Marlborough & Tasman Canterbury & West Coast Otago & Southland 28 NZ Transport Agency Annual report

31 Statement of resources as at 30 June full-time equivalent staff 600 Number of full-time equivalent staff Staff remuneration Number of staff Percent of staff ,000 29,999 30,000 39,999 40,000 49,999 50,000 59,999 60,000 69,999 70,000 79,999 80,000 89,999 90,000 99, ,000 and over Access & Use Ce s Office Highways & Network Operations Organisational Support People & Capability Regional Partnership & Planning Senior Leadership Team Strategy & Performance Agreed establishment Salary range Number Percent NZ Transport Agency Annual report 29

32 Financial highlights for the year ended 30 June This section provides an overview of the NZTA s financial results for the period 1 July 2008 to 30 June. The NZTA has ended the financial year to 30 June with a net surplus of $85 million, compared to a budgeted surplus of $184 million. The NZTA is showing a surplus Income $000 Budget $000 Income we received from the Crown (total) 79,068 96,000 Income we received from the National Land Transport Fund 1,792,000 2,003,601 Income we received from third parties 112, ,927 1,984,034 2,204,528 Total income received was $220 million less than budgeted. This is mainly due to the deferral of $250 million of National Land Transport Fund revenue to /10 as it was deemed surplus to requirements for the current year and therefore not drawn down. Expenditure $000 Budget $000 Spending on the NZTA s operations 289, ,166 National Land Transport Programme 1,199,599 1,355,712 Depreciation and amortisation expense 389, ,223 Specific Crown projects 20,431 33,000 1,898,874 2,020,101 National Land Transport Programme expenditure was $156 million below budget because more of the costs incurred were treated as capital. Depreciation and amortisation was greater than budgeted because of a revision to the state highway valuation model and underlying unit costs. 30 NZ Transport Agency Annual report

33 How this surplus affects our financial position Non-current assets $000 Budget $000 The value of the state highway network 24,066,819 20,737,957 Other fixed assets owned by the NZTA 35,764 43,374 24,102,583 20,781,331 Total fixed assets were $3.3 billion higher than budgeted in the Statement of intent. This is mainly due to the revaluation of state highways assets as at 30 June. A substantial amount of work was undertaken to improve the state highway asset valuation process in 2008/09, reflected in the robustness of the results. Equity $000 Budget $000 Crown s investment in the NZTA 25,785 25,795 Crown s investment in the state highway network 23,642,614 20,797,248 Funds retained for future use 658, ,004 Deficit accumulated from third party activities (14,929) (17,032) 24,312,400 21,132,015 Total equity is $3.2 billion higher than budgeted due to the revaluation of state highway assets. There are a number of third party funded activities operating at a deficit. We have put in place a governance structure for all these activities to ensure the efficient and effective delivery of such services, the recovery of all appropriate costs, and the timely review of such fees to better match revenue to costs. How we have invested in our assets Capital expenditure $000 Budget $000 Investing in information technology 6,300 8,840 Investing in the driver licence and motor vehicle registers 2,427 6,258 Investing in offices and equipment 2,092 4,911 Investing in state highways 1,240,544 1,031,070 1,251,363 1,051,079 Total capital expenditure was $200 million higher than budgeted. This is primarily due to the budgeted state highway spending on capital expenditure being higher than forecast due to a different split between operating expenditure and capital. NZ Transport Agency Annual report 31

34 The NZTA s business in the context of the land transport funding system Land transport revenue (crown appropriations) Land transport user fees and charges GOVERNMENT DIRECTION SETTING LAND TRANSPORT REVENUE fuel excise duty Road user charges motor vehicle revenue (including collection of ACC levies) National Land Transport Fund (Nationally distributed funds) (Regionally distributed funds) (Crown contributions) government policy statement Expenditure target $8.65 billion over the next 3 years (funding ranges specified for each activity class in the National land Transport Programme) crown contract appropriations Service delivery contracts driver and operator licensing warrant of fitness and certificate of fitness Toll collection government control over fee levels NZTA managed NZTA managed NZTA S BUSINESS National Land Transport Programme management Rules development Motor vehicle registration Vehicle register Revenue management Fuel excise revenue Road user charges Tolling Sector training and research Driver licensing Licensing register Agent management Transport services licensing NZTA delivery National education and advertising campaigns Vehicle licensing Warrant of fitness Certificate of fitness Audit Certification and standards Inspection and enforcement management of funding allocation NZTA funded and managed NZTA financial assistance State highway network planning maintenance operations improvement Local road network planning maintenance operations improvement Demand management and community programmes driver education school education community safety Active and shared modes Public transport infrastructure Public transport services (bus, ferry, rail) SuperGold card funding walking facilities cycling facilities 32 NZ Transport Agency Annual report

35 Section two Statement of service performance NZ Transport Agency Annual report 33

36 Statement of responsibility The NZTA is a new Crown entity formed on 1 August 2008, combining the expertise and functions of Land Transport NZ and Transit NZ. In terms of the Crown Entities Act 2004, the Board is responsible for the preparation of the NZTA s financial statements and statement of service performance, and the judgements made in them. This annual report incorporates the results of the two merged entities for the period 1 July to 31 July Clause 34(1) and (2) of schedule 2 of the Land Transport Management Amendment Act 2008 allows the NZTA to include in its annual report the combined results for the whole of the financial year ended 30 June. Being a new entity, no prior year comparatives are included. The Board has adopted 1 July 2008 as the date for reporting purposes. The Board of the NZTA has the responsibility for establishing, and has established, a system of internal controls designed to provide reasonable assurance as to the integrity and reliability of financial reporting. In the Board s opinion, these financial statements and statement of service performance fairly reflect the financial position and operations of the NZTA for the year ended 30 June. Signed on behalf of the Board: Brian Roche Chair 30 October Garry Moore Deputy Chair 30 October Countersigned by: Geoff Dangerfield Chief Executive Officer 30 October Paul Helm Chief Financial Officer 30 October 34 NZ Transport Agency Annual report

37 Statement of service performance for the year ended 30 June The NZTA s output classes have various revenue streams. We undertake different functions, depending on the particular output class. In broad terms our output classes fall into three categories: Regulatory and revenue management. We provided or contracted out all services for these output classes. They were mostly funded by fees and charges (eg driver licensing) and payment for contracted services (eg developing land transport rules). Specific activities funded by the Crown. For these output classes we either delivered services (eg Canterbury transport project) or allocated funding for activities (eg regional development funding). Activities funded through the NLTF, either as NZTA-delivered activities or those delivered by approved organisations. These activities were approved as part of the NLTP for 2008/09. For these output classes we had three distinct accountabilities. These differences were not clearly differentiated in the NZTA s Statement of intent for Accountabilities for NLTF activities were: The NZTA provided funding and was responsible for the delivery of all services (eg maintenance of state highways). The NZTA provided funding and was responsible for the delivery of some services along with other approved organisations (eg walking and cycling). The NZTA provided funding and other support to the organisations receiving funding to encourage better-quality transport decision-making (as described in the table below). The output classes for which we had a responsibility to deliver services are contained in the statement of service performance in this report. The NLTF annual report 2008/09 contains a detailed description of the output classes that the NZTA provided funding and other support for, but did not deliver. The reason for the differentiation is that the NZTA annual report contains the activities the NZTA delivered and the NLTF annual report contains the activities that other approved organisations delivered. The following three tables set out the NZTA s three categories of output classes. Regulatory and revenue management Output classes for regulatory and revenue management part funded by Crown, and part NLTF (below) and largely third party fees Regulatory implementation and enforcement Licensing activities Motor vehicle registry Road user charges collection, investigation and enforcement Refund of fuel excise duty NZTA accountability The NZTA is accountable for and either delivered in-house or contracted out services NZ Transport Agency Annual report 35

38 Specific activities funded by the Crown Output classes for specific activities funded by the Crown Realignment of Buckle Street Canterbury Transport Project Regional development funding Enhanced public transport concessions NZTA accountability Sole service provider One of many service providers, and allocated funding Provided funding and other support Provided funding and other support Activities funded through the NLTF The NZTA provided support for all activities funded through the NLTF by way of the following (in addition to the functions provided under any individual output class): Programming and investing. Facilitating transport planning. Influencing, aligning and integrating transport studies and strategies, regional land transport strategies and programmes, and service, network and activity management plans. Promoting, educating and informing about policies and practices. Undertaking performance monitoring. Providing training. Output classes for activities funded through the NLTF (and delivered or supported by the NZTA) Regulatory implementation and enforcement Promotion, information and education services Management of the funding allocation system New and improved infrastructure for state highways Maintenance of state highways Research and performance monitoring Transport demand management Walking and cycling Regional land transport Road Policing Programme Rail and sea freight Passenger transport services New and improved infrastructure for local roads Maintenance of local roads NZTA accountability The NZTA was the sole service provider for all the output classes in this category with the exception of the research and performance monitoring output class* The NLTF also funded some activities within regulatory implementation and enforcement. For example, the NLTF part funded the road network audit and taxi enforcement. One of many service providers and providing funding Provided programme development support Provided funding and support * That output class has two components the NZTA is the sole service provider for performance monitoring. However, for research, the NZTA is the manager, funding provider and one of several service providers. 36 NZ Transport Agency Annual report

39 Regulatory and revenue management Output class Regulatory implementation and enforcement Description Under this output class, we: developed standards and procedures, monitored and audited: vehicle certification and testing transport service operators driver licences rail operators road networks taxi compliance and enforcement developed land transport rules under contract to the Ministry of Transport maintained and managed an agent network. Performance measures 2007/08 Target 2008/ /09 Quantity/Quality Delivery of an agreed rules development programme that meets the quality and timeliness requirements in the agreement for rules development services Delivery of an agreed audit programme meeting agreed standards and covering: regulatory compliance of rail licence holders and licensed transport operators, eg passenger services (including taxis) and goods services agent service delivery (including driver testing, licence administration, and vehicle certification services) Audits of regulatory compliance and agent service delivery carried out according to agreed standards New Yes Yes New Yes Yes 100% Yes Yes NZ Transport Agency Annual report 37

40 Regulatory implementation and enforcement Budget $000 $000 Income Revenue from the Crown Revenue from the Crown for contracted services (Rules development) 1,013 1,013 Revenue from the National Land Transport Fund 4,452 1,335 Revenue from the National Land Transport Fund (Taxi enforcement) 1,369 1,369 Revenue from third parties 27,116 26,803 Total income 34,498 31,068 Expenditure Rules development 924 1,282 Roading network audit and monitoring 4,605 4,438 Taxi enforcement 1,818 1,383 Driver licence audit and monitoring 737 1,843 Rail audit and monitoring Transport service operator audit and monitoring 6,983 10,316 Vehicle audit and monitoring 13,325 13,532 Tolling* 2,230 0 Total expenditure 31,612 33,669 Net surplus/(deficit) 2,886 (2,601) * Tolling expenditure was not included in the 2008/09 Statement of intent budget due to the figures not being available at the time the Statement of intent was published. A Summary Tolling report is included under supplementary information. Commentary on the financial performance The increase in revenue of $3.4 million is due to a transfer from another output class (Promotion, information and education) during the March baseline update. This was done to cover for the expected increase in spending identified during the mid-year budget review. There was a $3.3 million under-spend in the Transport service operator audit and monitoring area. Budgeted expenditure of $1.4 million on the development of the Operator Rating System was treated as capital expenditure as it was felt that costs were an intangible asset under the New Zealand International Accounting Standard 38. Another $1.2 million under-spend was due to this activity attracting less overhead costs than budgeted. In order to meet its commitment to the industry, it was important that the Commercial Road Transport (CRT) unit recorded their operational activities very specifically against a revised time recording structure. Although the first version of the new time recording system was in place by July 2008, we had a number of teething problems during the year. The time recording system will be amended and refined and be able to be maintained appropriately by staff in /10. Total under-spend in this output class was offset to an extent by the unbudgeted expenditure on the tolling system. 38 NZ Transport Agency Annual report

41 Output class Licensing activities Description Under this output class, we: funded drug and alcohol assessments provided licensing services for: drivers transport service operators rail operators maintained regulatory data accuracy mitigated the risk of fraudulent activities provided accurate, timely and relevant licensing information and advice to the public service and the public. Performance measures 2007/08 Target 2008/ /09 Quantity/Quality Operation of the Transport Registry Centre carried out according to agreed standards* New 90% 94% * The standard of service is agreed with the Ministry of Transport and includes Driver Licence Register accuracy, contact centre metrics and customer satisfaction measurements. It did not include Driver Licence Register accuracy prior to 2008/09. Licensing activities Budget $000 $000 Income Revenue from the Crown (drug and alcohol assessments) 650 1,830 Revenue from the Crown (driver test subsidy) 1,445 1,445 Revenue from third parties 40,579 41,842 Total income 42,674 45,117 Expenditure Drug and alcohol assessments 651 1,633 Driver licences and testing 48,678 49,107 Over dimension permits Rail operator licences Transport service licences 2,777 2,486 Total expenditure 52,728 53,926 Net surplus/(deficit) (10,054) (8,809) Commentary on the financial performance $1 million of the revenue variance is due to the general reduction in licensing volumes compared to the budget. In addition, $1 million of drug and alcohol assessments funding was transferred to financial year /10. Total expenditure variance mainly reflects the revised expenditure on drug and alcohol assessments during 2008/09. NZ Transport Agency Annual report 39

42 Output class Motor vehicle registry Description Under this output class, we: operated the motor vehicle register delivered motor vehicle registration (MVR) and licensing services undertook the collection and refund of MVR and licensing revenue developed tolling policy and processes paid fees to storage providers for unclaimed vehicles impounded by the NZ Police. Performance measures 2007/08 Target 2008/ /09 Quantity/Quality MVR licensing compliance (proportion of licensed vehicles with current licence) MVR revenue compliance (proportion of vehicles relicensed within 12 months of licence expiry) Operation of the Transport Registry Centre carried out according to agreed standards** 88.2% 88% 87.6% 98.4% 98% 98.5%* New 90% 94.5% * This is the percentage of vehicles with a current licence at the end of the month. February had the highest rate since 1999, contributed to by the first-ever drop in total vehicles. The following months have also been high and with even greater drops in vehicle numbers. The result has been a year of two halves: the current compliance averaged 86.1% in the first half and 89.2% in the second. It was assumed that the tightening economic conditions would continue to affect this measure, but perhaps the changes in licensing split (with the purchase of more short-term licences) are reflecting the changes in customers behaviours. ** The standard of service is agreed with the Ministry of Transport and includes Motor Vehicle Register accuracy, contact centre metrics and customer satisfaction measurements. The measurements were slightly different prior to 2008/09. Motor Vehicle Registry Budget $000 $000 Income Revenue from the Crown 35,332 43,147 Revenue from third parties 12,777 12,092 Total income 48,109 55,239 Expenditure 50,459 52,996 Net surplus/(deficit) (2,350) 2,243 Commentary on the financial performance The revenue variance of $7 million is primarily due to transfer of funds to two other output classes (road user charges collection, investigation and enforcement and refund of fuel excise duty) to realign the revenue to match the budgeted expenditure during the October baseline update process. Overall the expenditure was $2.5 million below budget. This is primarily due to lower than budgeted IT systems maintenance costs and a number of enhancement projects being carried forward into /10. The net deficit of $2.35 million will be offset by the Crown funds held in our balance sheet derived from surpluses made in prior years by one of the legacy organisations (Land Transport NZ). 40 NZ Transport Agency Annual report

43 Output class Road user charges collection, investigation and enforcement Description (Ministry of Transport output class delivered under contract by the NZTA) Under this output class, we: collected and refunded road user charges, including managing the sale of road user licences and collection of road user charges investigated evasion of road user charges and enforced payment. Performance measures 2007/08 Target 2008/ /09 Quantity/Quality Identified evasion revenue recovered 69.5% >30% 65.1% Road user charges collection, investigation and enforcement Budget $000 $000 Income Revenue from the Crown for contracted services 17,688 9,852 Total income 17,688 9,852 Expenditure 17,947 19,784 Net surplus/(deficit) (259) (9,932) Commentary on the financial performance The revenue variance of $7.8 million is due to a fiscally neutral transfer of $6.0 million from output class Motor vehicle registry and an additional $1.8 million from a Cabinet decision during 2008/09. This was done to realign revenue to match additional expenditure. The expenditure variance of $1.8 million is mainly due to lower than budget spend on IT enhancement projects. NZ Transport Agency Annual report 41

44 Output class Refund of fuel excise duty Description (Ministry of Transport output class delivered under contract by the NZTA) Under this output class we managed fuel tax refunds. Performance measures 2007/08 Target 2008/ /09 Quantity/Quality Proportion of revenue which is refunded New 3% 2.4% Refund of fuel excise duty Budget $000 $000 Income Revenue from the Crown for contracted services Total income Expenditure Net surplus/(deficit) (120) (97) Commentary on the financial performance The revenue variance is due to $0.06 million being transferred from output class Motor vehicle registration, during the realignment of funding between the three output classes included under the old Motor vehicle registry and revenue management output class. The expenditure variance of $0.083 million is mainly due to this activity attracting more overhead expenses than originally budgeted. 42 NZ Transport Agency Annual report

45 Activities funded through the National Land Transport Fund Output class Research and performance monitoring Description Under this output class, we: commissioned and published research into transport issues monitored and reported on transport inputs, outputs, impacts and consequences. Performance measures 2007/08 Target 2008/ /09 Quantity/Quality Delivery of a land transport annual achievement report* Yes Yes Yes Delivery of a published research programme** Yes Yes Yes * This measure refers to the delivery of a land transport statistics report as required under the Land Transport Management Amendment Act ** Research proposals assessed in accordance with the NZTA s Planning, programming and funding manual. Research and performance monitoring Budget $000 $000 Income Revenue from the National Land Transport Fund 11,776 4,502 Revenue from third parties 6 0 Total income 11,782 4,502 Expenditure Research 5,777 6,100 Performance monitoring 2,180 5,676 Total expenditure 7,957 11,776 Net surplus/(deficit) 3,825 (7,274) Commentary on the financial performance The revenue increase mainly reflects a funding correction between this output class and Promotion, information and education during the March baseline update process. The expenditure variance is primarily due to the time recorded against this activity being significantly less than originally budgeted and hence lower overhead cost being allocated to this activity. In /10 we have put in a more robust monitoring process to ensure that staff are correctly coding time to budgeted activities on a more consistent basis. NZ Transport Agency Annual report 43

46 Output class Promotion, information and education services Description Under this output class, we: commissioned national and local advertising on transport-related issues commissioned national and local promotion of walking and cycling commissioned national managed school road safety education provided administration services to the Road Safety Trust provided information and education for drivers, operators, vehicles, road controlling authorities, and others managed the crash analysis system. Performance measures 2007/08 Target 2008/ /09 Quantity/Quality Development and implementation of a well targeted advertising strategy* Development and implementation of a well targeted education strategy** All funded activities assessed in accordance with performance guidelines*** New Yes Yes Yes Yes Yes Yes Yes Yes * The quality of targeting of advertising campaigns is determined by surveys which measure unprompted recall of advertisements and general relevance of the campaign to the target audience. ** The quality of targeting of education campaigns is determined through satisfaction levels in stakeholder surveys. *** Activities (including those undertaken by the NZTA) are assessed in compliance with the NZTA s Planning, programming and funding manual. Promotion, information and education Budget $000 $000 Income Revenue from the National Land Transport Fund 30,544 34,948 Revenue from third parties 1,792 1,250 Total income 32,336 36,198 Expenditure Advertising 22,037 21,978 Bike Wise 1,596 1,519 Community road safety programme Crash analysis reports 2, Education 1,906 2,902 RoadSense 4,498 4,445 Road Safety Trust Total expenditure 33,307 31,795 Net surplus/(deficit) (971) 4,403 Commentary on the financial performance The revenue variance mainly reflects the transfer of funding to the Research and performance monitoring output class. The expenditure variance of $1.5 million primarily reflects the increase in work allocation to the crash analysis reports. This expenditure was budgeted under performance monitoring in output class Research and performance monitoring. 44 NZ Transport Agency Annual report

47 Output class Management of the funding allocation system Description Under this output class we: managed the allocation and expenditure of funding for the National Land Transport Programme. This includes the development and administration of: the National Land Transport Programme associated procurement procedures, policies, and guidelines performance agreements with approved organisations funded through the National Land Transport Programme provided assistance and advice to approved organisations audited approved organisations performance developed transport activities with a national focus undertook state highway administration. Performance measures 2007/08 Target 2008/ /09 Quantity/Quality Development and delivery of a National Land Transport Programme that meets all its statutory requirements* Yes Yes Yes** Delivery of a performance monitoring audit programme*** Yes Yes Yes Preparation of the NZ Police s Road Policing Programme for recommendation to the Minister of Transport**** Yes Yes Yes** All allocations consistent with the funding allocation process***** Yes Yes Yes * The statutory requirements are set out in section 20 of the Land Transport Management Act ** Timeframe for development of the National Land Transport Programme was extended to 30 August. *** The performance monitoring audit programme is designed to check that allocated funds realise expected outcomes. **** Recommendations are based on an assessment of NZ Police proposals and their compliance with the NZTA s Planning, programming and funding manual. ***** Timeframe for development of the National Land Transport Programme was extended to 30 August. Management of funding allocation system Budget $000 $000 Income Revenue from the National Land Transport Fund 74,156 73,633 Total income 74,156 73,633 Expenditure Operations 17,149 16,356 State highways 56,271 57,800 Total expenditure 73,420 74,156 Net surplus/(deficit) 736 (523) Commentary on the financial performance This output class is the combination of the two entities being merged. The expenditure split did not necessarily follow the split in the original Statement of intent. Overall, the expenditure results are close to budget. NZ Transport Agency Annual report 45

48 Output class Rail and sea freight Description Under this output class, we invested funding, together with funding from approved organisations, in initiatives that encourage the movement of freight by rail and coastal shipping (including barging) instead of by road. Performance measures 2007/08 Target 2008/ /09 Quantity/Quality Percentage of programme delivered consistent with performance guidelines* New 100% 100% All funds allocated to best eligible activities New Yes Yes * All activities are assessed in accordance with the methodology set out in the Planning, programming and funding manual and as set out in section 20 of the Land Transport Management Act Rail and sea freight Budget $000 $000 Income Revenue from the National Land Transport Fund 2,500 2,000 Total income 2,500 2,000 Expenditure 874 8,000 Net surplus/(deficit) 1,626 (6,000) Commentary on the financial performance The expenditure variance of $7 million reflects the slow and low take-up of the domestic sea freight project. Revised policies are being put in place for / NZ Transport Agency Annual report

49 Output class Transport demand management and walking and cycling Description Under this output class, we purchased activities which promote safe and sustainable use of transport networks and services including: initiatives to improve the performance of the transport system by changing transport demand travel behaviour change initiatives. We invested funding, together with funding from approved organisations, in new and improved walking and cycling infrastructure. Performance measures 2007/08 Target 2008/ /09 Quantity/Quality Percentage of programme delivered consistent with performance guidelines* New 100% 100% All funds allocated to best eligible activities New Yes Yes * All activities are assessed in accordance with the methodology set out in the Planning, programming and funding manual and as set out in section 20 of the Land Transport Management Act Transport demand management, and walking and cycling Budget $000 $000 Income Revenue from the National Land Transport Fund 33,748 33,748 Total income 33,748 33,748 Expenditure 35,470 42,663 Net surplus/(deficit) (1,722) (8,915) Commentary on the financial performance The $7 million expenditure variance represents lower approvals and claims put through by approved organisations than originally forecast in the areas of community programme and regional studies. NZ Transport Agency Annual report 47

50 Output class Passenger transport services Description Under this output class we invested funding together with funding from approved organisations in non-commercial road, rail and ferry services and infrastructure. Performance measures 2007/08 Target 2008/ /09 Quantity/Quality Percentage of programme delivered consistent with performance guidelines* New 100% See note All funds allocated to best eligible activities New Yes Yes * All activities are assessed in accordance with the methodology set out in the Planning, programming and funding manual and as set out in section 20 of the Land Transport Management Act Note: For 2008/09 a specific system was not in place to measure the percentage of programme delivered consistent with performance guidelines. The programme however has been developed in accordance with historical practice and is based on regional requests. The requests are evaluated on an individual, and across the board judgement basis and a recommendation for overall programme levels and specific funding approvals made to the NZTA Board for approval. Passenger transport services Budget $000 $000 Income Revenue from the National Land Transport Fund 313, ,800 Total income 313, ,800 Expenditure 263, ,800 Net surplus/(deficit) 50,275 0 Commentary on the financial performance The expenditure variance of $50 million below budget reflects slower than expected delivery of the passenger transport infrastructure programme in 2008/ NZ Transport Agency Annual report

51 Output class New and improved infrastructure for state highways Description Under this capital appropriation, we managed the development and delivery of a state highway improvement programme. Performance measures 2007/08 Target 2008/ /09 Quantity/Quality Development and delivery of a state highway improvement programme that is consistent with performance guidelines New Yes See note All funds allocated to best eligible activities New Yes Yes Forecast benefits of completed projects accrue over time Yes Yes Yes Capital projects (block) completed within expected time and cost parameters Large capital projects completed within expected: budget to cost ratio timeliness parameters 86% 95% 103% 1.0 New % 93%* % * Mainly attributed to some slower than expected progress through statutory processes and the construction of some projects not proceeding as fast as planned. Note: We are confident that the programme has been developed and approved in accordance with the required procedures, ie the 3 factor assessment profile specified in the Planning, programming and funding manual. New and improved infrastructure for state highways Budget $000 $000 Income Revenue from the National Land Transport Fund 148, ,425 Revenue from third parties (business units) 3,281 0 Revenue from third parties 27,415 22,940 Total income 179, ,365 Expenditure Business units 3,260 0 National Land Transport Programme 983, ,478 Total expenditure 986, ,478 Net surplus/(deficit) (807,740) (461,113) Commentary on the financial performance The reduction in revenue of $164 million reflects a transfer of funding to the /10 financial year, as funds were deemed surplus to needs in 2008/09. The expenditure variance of $182 million is mainly due to a number of activities brought forward to enable more rapid delivery of roads of national significance (RoNs). For example, advanced property purchases in Waikato and Bay of Plenty. We implemented part of the economic stimulus package works not in the original budget. The budgeted and actual deficits are funded by capital contributions for the state highways. NZ Transport Agency Annual report 49

52 Output class Maintenance of state highways Description Under this output class, we managed the development and delivery of a periodic and routine maintenance programme for existing state highway infrastructure. Performance measures 2007/08 Target 2008/ /09 Quantity/Quality Development and delivery of a state highway renewal and maintenance programme that is consistent with performance guidelines New Yes See note All funds allocated to best eligible activities New Yes Yes Note: For 2008/09 a specific system was not in place to measure the percentage of programme delivered consistent with performance guidelines. The programme however has been developed in accordance with historical practice and is based on regional requests. The requests are evaluated on an individual, and across the board judgement basis and a recommendation for overall programme levels and specific funding approvals made to the NZTA Board for approval. Maintenance of state highways Budget $000 $000 Income Revenue from the National Land Transport Fund 298, ,524 Total income 298, ,524 Expenditure 319, ,524 Net surplus/(deficit) (21,375) 0 Commentary on the financial performance The expenditure variance of $21 million is largely due to $30 million more being spent on emergency road works than budgeted. 50 NZ Transport Agency Annual report

53 Output class New and improved infrastructure for local roads Description Under this output class we invested funding together with funding from approved organisations in local roads capital improvements. Performance measures 2007/08 Target 2008/ /09 Quantity/Quality Delivery of a local road improvement programme that is consistent with performance guidelines Yes Yes See note All funds allocated to best eligible activities New 100% 100%* * Not all funds were allocated. Those that were were allocated to best eligible activities. Note: We are confident that the programme has been developed and approved in accordance with the required procedures, ie the 3 factor assessment profile specified in the Planning, programming and funding manual. New and improved infrastructure for local roads Budget $000 $000 Income Revenue from the National Land Transport Fund 313, ,064 Total income 313, ,064 Expenditure 323, ,064 Net surplus/(deficit) (10,459) 0 Commentary on the financial performance The revenue variance of $40 million reflects lower expenditure identified in local roads. This was reassigned to other activities within state highways during the year. The expenditure variance of $30 million is mainly due to the slower delivery of local road improvement projects than originally planned. NZ Transport Agency Annual report 51

54 Output class Maintenance of local roads Description Under this output class, we invested funding together with funding from approved organisations in the routine maintenance of local roading infrastructure. Performance measures 2007/08 Target 2008/ /09 Quantity/Quality Delivery of a local road maintenance programme that is consistent with performance guidelines Yes Yes See note All funds allocated to best eligible activities New 100% 100% Note: For 2008/09 a specific system was not in place to measure the percentage of programme delivered consistent with performance guidelines. The programme however has been developed in accordance with historical practice and is based on regional requests. The requests are evaluated on an individual, and across the board judgement basis and a recommendation for overall programme levels and specific funding approvals made to the NZTA Board for approval. Maintenance of local roads Budget $000 $000 Income Revenue from the National Land Transport Fund 240, ,133 Total income 240, ,133 Expenditure 243, ,133 Net surplus/(deficit) (2,862) 0 Commentary on the financial performance The revenue to fund maintenance of local roads was reduced to reflect the lower than forecast spend by approved organisations. The actual spend by approved organisations reflects what was forecast during the year. 52 NZ Transport Agency Annual report

55 Output class Regional land transport Description Under this output class we invested funding in regional priority land transport activities from a dedicated increase in fuel excise duties and light vehicle road user charges. Performance measures 2007/08 Target 2008/ /09 Quantity/Quality Funding allocated consistent with agreed regional priorities New Yes See note Note: The process of regional funding differs from what was intended at the time the Statement of intent was prepared. There is no requirement on the NZTA to agree regional priorities. We however considered regional priorities when approving funding for activities and sought to ensure that the approvals reflected the same where this was reasonable. Regional land transport Budget $000 $000 Income Revenue from the National Land Transport Fund 319, ,120 Total income 319, ,120 Expenditure 236, ,120 Net surplus/(deficit) 82,795 0 Commentary on the financial performance Regional land transport funds roading expenditure in all regions that meet the definition of regional development. The level of proposed projects and claims from approved organisations was lower than budget by $83 million. However, the total claims received in 2008/09 represents a 123% increase from 2007/08 (refer to Land Transport New Zealand s Annual report 2007/08). NZ Transport Agency Annual report 53

56 Crown contributions to specific activities Output class Realignment of Buckle Street Description This output class is a government contribution towards the cost of realigning Buckle Street, which currently separates the National War Memorial from the area of the planned memorial park, northward. Realignment of Buckle Street Budget $000 $000 Income Revenue from the Crown for specific projects 0 5,333 Total income 0 5,333 Expenditure Net surplus/(deficit) 0 4,833 Commentary on the financial performance No work was carried out in 2008/09 in respect of the initiative to realign Buckle Street. Output class Canterbury transport project Description Under this output class we invested funding to assist the Canterbury region to implement a land transport package. Performance measures 2007/08 Target 2008/ /09 Quantity/Quality Funding assistance provided for a Canterbury transport programme in line with their timetable and budget New Yes No* * Nothing was approved from this funding source for 2008/09. An allocation has been made for the /10 financial year. Canterbury transport project Budget $000 $000 Income Revenue from the Crown for specific projects 0 4,500 Total income 0 4,500 Expenditure 0 4,500 Net surplus/(deficit) 0 0 Commentary on the financial performance The implementation plan has been deferred to / NZ Transport Agency Annual report

57 Output class Regional development transport funding Description Under this output class we invested funding in regional development initiatives to develop the forestry roading infrastructure in Northland and Tairawhiti. Performance measures 2007/08 Target 2008/ /09 Quantity/Quality Funding allocated consistent with agreed regional priorities New Yes Yes Regional development transport funding Budget $000 $000 Income Revenue from the Crown for specific projects 8,000 10,000 Total income 8,000 10,000 Expenditure 6,591 10,000 Net surplus/(deficit) 1,409 0 Commentary on the financial performance The project was set up during 2008/09. Any unspent portion of the revenue will be carried over to /10. NZ Transport Agency Annual report 55

58 Output class Enhanced public transport concessions Description Under this output class we invested funding to provide enhanced public transport concessions for SuperGold cardholders. Performance measures 2007/08 Target 2008/ /09 Quantity/Quality Funding allocated consistent with agreement with regional councils for implementation of the enhanced concession for SuperGold cardholders New Yes Yes Enhanced public transport concessions for SuperGold cardholders Budget $000 $000 Income Revenue from the Crown for specific projects 14,000 18,000 Total income 14,000 18,000 Expenditure Concessions 13,144 16,900 Administration 696 1,100 Total expenditure 13,840 18,000 Net surplus/(deficit) Commentary on the financial performance The revenue variance is mainly due to a carry forward of $2 million for concessions and $0.4 million for administration into /10. The expenditure variance was due to the demand being lower than was budgeted. 56 NZ Transport Agency Annual report

59 Section three Financial statements NZ Transport Agency Annual report 57

60 Financial statements Statement of financial performance for the year ended 30 June Budget Note $000 $000 Income Revenue from the Crown 2 37,975 46,970 Revenue from the Crown for contracted services 2 19,093 11,197 Revenue from the National Land Transport Fund 2 1,792,000 2,003,601 Revenue for specific projects funded by the Crown 2 22,000 37,833 Revenue from third parties 3 112, ,927 Total income 1,984,034 2,204,528 Expenditure Personnel costs 4 96,132 93,520 Operating expenses 5 161, ,783 National Land Transport Programme 6 1,199,599 1,355,712 Specific projects funded by the Crown 20,431 33,000 Depreciation and amortisation expense 7 389, ,223 State highway asset write-off 25,734 15,325 Capital charge 8 1,893 2,138 Expenses relating to the delivery of outputs 1,894,385 2,013,701 Expenses relating to the merger 9 4,489 6,400 Total expenditure 1,898,874 2,020,101 Net surplus/(deficit) 10 85, ,427 Explanations of significant variances against budget are detailed in note 33. The accompanying notes form part of these financial statements. 58 NZ Transport Agency Annual report

61 Statement of financial position as at 30 June Budget Note $000 $000 Assets Current assets Cash and cash equivalents (< 90 days) ,477 68,677 Crown receivable 478, ,572 Debtors and other receivables 12 41,677 20,000 Prepayments Inventories Investments (none > 90 days) 0 39,830 Total current assets 628, ,479 Non-current assets Property, plant and equipment 13 17,762 12,245 State highway network 14 24,059,505 20,732,121 Bailey bridging 15 7,314 5,836 Intangible assets 16 18,002 31,129 Total non-current assets 24,102,583 20,781,331 Total assets 24,731,243 21,477,810 Liabilities Current liabilities Creditors and other payables , ,540 Lease make good provision Tolling funds held in trust for the Crown Employee entitlements 18 8,505 5,630 Total current liabilities 416, ,170 Non-current liabilities Employee entitlements 18 2,713 2,625 Total non-current liabilities 2,713 2,625 Total liabilities 418, ,795 Net Assets 24,312,400 21,132,015 Equity General funds 25,785 25,795 Retained funds operations 23,926 6,708 Retained funds National Land Transport Programme , ,463 Retained funds Specific projects funded by the Crown 1,569 4,833 State highway investment 14,870,869 15,178,394 State highway revaluation reserve 8,771,745 5,618,854 Third party fees and charges memorandum account (14,929) (17,032) Total equity 20 24,312,400 21,132,015 The accompanying notes form part of these financial statements. NZ Transport Agency Annual report 59

62 Statement of changes in equity for the year ended 30 June Budget Note $000 $000 Equity Opening balances General funds 18,795 18,805 Retained funds 160, ,031 State highway investment and revaluation reserve 20,976,019 20,045,235 Third party fees and charges memorandum account (4,901) (6,486) Total equity Opening balance 21,150,502 20,188,585 Amounts recognised directly in equity State highways Revaluation gains/(losses) taken to equity 2,290,020 0 Surplus/(deficit) for the year Retained funds 95, ,973 Third party fees and charges memorandum account (10,028) (10,546) 85, ,427 Total recognised income and expense 23,525,682 20,373,012 Capital contribution General funds 6,990 6,990 State highway investment 779, , , ,003 Equity Closing balance General funds 25,785 25,795 Retained funds 255, ,004 State highway investment and revaluation reserve 24,045,767 20,797,248 Third party fees and charges memorandum account (14,929) (17,032) Balance at 30 June 20 24,312,400 21,132,015 The accompanying notes form part of these financial statements. 60 NZ Transport Agency Annual report

63 Statement of cash flows for the year ended 30 June Budget Note $000 $000 Cash flows from operating activities Receipts from Crown revenue 79,068 15,775 Receipts from National Land Transport Fund revenue 1,733,787 2,146,941 Receipts from third party revenue 139, ,865 Interest received 8,533 7,062 Payments to employees (94,823) (86,871) Payments to suppliers (1,428,165) (1,949,447) Payments for capital charge (1,893) (2,138) Goods & services tax (net) 31,463 0 Net cash from operating activities , ,187 Cash flows from investing activities Receipts from sale of property, plant and equipment 13,776 15,050 Receipts from sale of investments 23,430 0 Purchase of property, plant and equipment (4,873) (10,650) State highway network (1,240,544) (1,042,620) Purchase of intangible assets (12,517) (7,850) Net cash from investing activities (1,220,728) (1,046,070) Cash flows from financing activities Capital contribution 786, ,003 Repayment of MVR&RM* and alcohol assessment surplus to the Crown (2,965) 0 Net cash from financing activities 783, ,003 Net (decrease)/increase in cash and cash equivalents 30,351 (47,880) Cash and cash equivalents at the beginning of the year 77, ,557 Cash and cash equivalents at the end of the year ,477 68,677 * MVR&RM Motor vehicle registry and revenue management output class. The GST (net) component of operating activities reflects the net GST paid and received with the Inland Revenue Department. The GST (net) component has been presented on a net basis, as the gross amounts do not provide meaningful information for financial statement purposes. The accompanying notes form part of these financial statements. NZ Transport Agency Annual report 61

64 Notes to the financial statements 1 Statement of accounting policies for the year ended 30 June Reporting entity The NZ Transport Agency (NZTA) is a Crown entity as defined by the Crown Entities Act 2004 and is domiciled in New Zealand. As such, the NZTA s ultimate parent is the New Zealand Crown. The NZTA is a new entity formed on 1 August 2008 through the amalgamation of Land Transport NZ and Transit NZ. The NZTA s primary objective is to provide services to the New Zealand public, as opposed to making a financial return. It has designated itself a public benefit entity for the purposes of New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS). The Board has adopted 1 July 2008 as the starting date for reporting purposes. This annual report incorporates the results of the two merged entities for the period 1 July to 31 July Clause 34 of schedule 2 of the Land Transport Management Amendment Act 2008 allows the NZTA to include in its annual report the combined results for the whole of the financial year ended 30 June. The financial statements for the NZTA are for the year ended 30 June, and were approved by the Board on 30 October. Basis of preparation Statement of Compliance The financial statements of the NZTA have been prepared in accordance with the requirements of the Crown Entities Act 2004, which includes the requirement to comply with New Zealand generally accepted accounting practice (NZ GAAP). Accordingly, the financial statements have been prepared in accordance with New Zealand International Financial Reporting Standards (NZ IFRS) as they apply to public benefit entities. Measurement base The financial statements have been prepared under the historical cost convention, as modified by the revaluation of the state highway network and Bailey bridging stock. The measurement of financial assets and financial liabilities are at fair value through profit or loss. The preparation of financial statements in conformity with NZ IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant, will be disclosed by way of separate notes to the financial statements. Functional and presentation currency The financial statements are presented in New Zealand dollars and all values are rounded to the nearest thousand dollars ($000). The functional currency of the NZTA is New Zealand dollars. Standards, amendments and interpretations issued that are not yet effective and have not been adopted as at 30 June The NZTA has adopted all standards, amendments and interpretations to existing standards that have been published and are mandatory for its accounting periods beginning on or after 1 July Standards, amendments and interpretations issued but not yet effective that have not been adopted, and which are relevant to the NZTA include: NZ IAS 1 Presentation of Financial Statements (revised 2007) replaces NZ IAS 1 Presentation of Financial Statements (issued 2004) and is effective for reporting periods beginning on or after 1 January. The revised standard requires information in financial statements to be aggregated on the basis of shared characteristics and introduces a statement of comprehensive income. The statement of comprehensive income will enable readers to analyse changes in equity resulting from non-owner changes separately from transactions with the Crown in its capacity as owner. The revised standard gives the NZTA the option of presenting items of income and expense and components of other comprehensive income either in a single statement of comprehensive income with subtotals, or in two separate statements (a separate income statement followed by a statement of comprehensive income). The NZTA intends to adopt this standard for the year ending 30 June 2010, and is yet to decide whether it will prepare a single statement of comprehensive income or a separate income statement followed by a statement of comprehensive income. NZ IAS 23 Borrowing Costs (revised 2007) replaces NZ IAS 23 Borrowing Costs (issued 2004) and is effective for reporting periods beginning on or after 1 January. The revised standard requires all borrowing costs to be capitalised if they are directly attributable to the acquisition, construction or production of a qualifying asset. The NZTA intends to adopt this standard for the year ending 30 June 2010, and has not yet determined the potential impact of the new standard. 62 NZ Transport Agency Annual report

65 Significant accounting policies 1.1 Revenue Revenue comprises the fair value of the consideration received or receivable for the provision of services in the ordinary course of the NZTA s business. Revenue is shown net of GST. Revenue is recognised when the amount of revenue can be reliably measured; it is probable that future economic benefits will flow to the entity when the specific criteria have been met for each of the NZTA s activities. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the activity giving rise to the revenue have been resolved. Revenue from the Crown The NZTA is primarily funded through revenue received from the Crown and the National Land Transport Fund, which is restricted in its use for the purpose of the NZTA meeting its objectives as specified in the Statement of intent. Revenue from the Crown and the National Land Transport Fund is recognised in line with our agreed drawdown on the appropriations. Other grants Non-government grants are recognised as revenue when they become receivable unless there is an obligation to return the funds if conditions of the grant are not met. If there is such an obligation the grants are initially recorded as grants received in advance, and recognised as revenue when conditions of the grant are satisfied Interest Interest income is recognised using the effective interest method. Interest income on an impaired financial asset is recognised using the original effective interest rate. Rental income Lease receipts are recognised as revenue on a straight-line basis over the lease term. Sales of publications Sales of publications are recognised when the product is sold to the customer. Provision of services Revenue derived through the provision of services to third parties is recognised when earned and is reported in the financial period to which it relates. Vested assets Where a physical asset is gifted to or acquired by the NZTA for nil or nominal cost, the fair value of the asset received is recognised as income. Such assets are recognised as income when control over the asset is obtained. 1.2 Capital charge The capital charge is recognised as an expense in the period to which the charge relates. The capital charge for 2008/09 has been calculated by applying the capital charge rate to the balance of General Funds. 1.3 Grant expenditure Non-discretionary grants are those grants awarded if the grant application meets the specified criteria and are recognised as expenditure when an application that meets the specified criteria for the grant has been received. Discretionary grants are those grants where the NZTA has no obligation to award on receipt of the grant application and are recognised as expenditure when approved and the approval has been communicated to the applicant. 1.4 Property, plant and equipment Property, plant and equipment asset classes consist of land, buildings, leasehold improvements, furniture and office equipment, and motor vehicles. Property, plant and equipment are shown at cost or valuation, less any accumulated depreciation and impairment losses. Additions The cost of an item of property, plant and equipment is recognised as an asset only when it is probable that future economic benefits or service potential associated with the item will flow to the NZTA and the cost of the item can be measured reliably. Where an asset is acquired at no cost, or for a nominal cost, it is recognised at fair value when control over the asset is obtained. Disposals Gains and losses on disposals are determined by comparing the proceeds with the carrying amount of the asset. Gains and losses on disposals are included in the statement of financial performance. When revalued assets are sold, the amounts included in revaluation reserves in respect of those assets are transferred to general funds. Subsequent costs Costs incurred subsequent to initial acquisition are capitalised only when it is probable that future economic benefits or service potential associated with the item will flow to the NZTA and the cost of the item can be measured reliably. The costs of day-to-day servicing of property, plant and equipment are recognised in the statement of financial performance as they are incurred. NZ Transport Agency Annual report 63

66 1.5 Valuation of State highways and Bailey bridging State highways are valued at depreciated replacement cost based on the estimated present cost of constructing the existing assets by the most appropriate method of construction, reduced by factors for the age and condition of the asset. Land associated with the state highway is valued using an opportunity cost based on adjacent use, as an approximation to fair value. Bailey bridging is valued at optimised depreciated replacement cost based on the optimum size of asset holding by the unit cost for each category of asset. In 2008/09, all 14 state highway regions were subject to a full revaluation. In future, a cyclical basis will be used so that each region is revalued at an interval not exceeding 3.5 years. Those regions that are not subject to full revaluation in a particular year will be subject to a valuation update through the use of price indices. Increases in the carrying amount arising on revaluation of the state highway are credited to the asset revaluation reserve. Decreases that offset previous increases of the same asset are charged against the asset revaluation reserve. All other decreases are charged to the statement of financial performance. Each year the difference between depreciation based on the revalued carrying amount of the asset charged to the statement of financial performance and depreciation based on the asset s original cost is transferred from the asset revaluation reserve to retained earnings. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the NZTA and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of financial performance during the financial period in which they are incurred. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount of the asset. Gains and losses on disposals are included in the statement of financial performance. When revalued assets are sold, the amounts included in the assets revaluation reserve in respect of those assets are transferred to general funds. Land, formation and the sub-base component of pavement (base) are not depreciated as the service potential of these components is considered not to reduce over time. 1.6 The useful lives and the associated depreciation rates of major classes of assets Depreciation is provided on a straight-line basis on all property, plant and equipment other than land, at rates that will write off the cost (or valuation) of the assets to their estimated residual values over their useful lives. The useful lives and associated depreciation rates of major classes of assets have been estimated as follows: Assets Useful life (years) Depreciation rate (%) State highways pavement (base) State highways pavement (surface) State highways drainage State highways traffic facilities State highways bridges State highways culverts & subways State highways other structures Bailey bridging panels Bailey bridging transoms Bailey bridging stringers Bailey bridging chord reinforcing Bailey bridging other miscellaneous Buildings Motor vehicles Computer equipment Plant Equipment Furniture & fittings Office equipment Leasehold improvements Life of lease NZ Transport Agency Annual report

67 1.7 Intangible assets Computer software The NZTA s policy requires an intangible asset to be recognised if, and only if: a. it is probable that the future economic benefits that are attributable to the asset will flow to the entity; and b. the cost of the asset can be measured reliably Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives (three to five years). Costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred. Costs that are directly associated with the production of identifiable and unique software products controlled by the NZTA and that will probably generate economic benefits exceeding costs beyond one year are recognised as intangible assets. Direct costs include the software development employee costs and an appropriate portion of relevant overheads. Computer software development costs recognised as assets are amortised over their estimated useful lives. Amortisation The carrying value of an intangible asset with a finite life is amortised on a straight-line basis over its useful life. Amortisation begins when the asset is available for use and ceases at the date that the asset is derecognised. The amortisation charge for each period is recognised in the statement of financial performance. The useful lives and associated amortisation rates of major classes of intangible assets have been estimated as follows: Assets Useful life (years) Depreciation rate (%) Computer software Impairment of non-financial assets Assets that have an indefinite useful life, such as land, are not subject to amortisation and are tested on a cyclical basis so that each region is reviewed at an interval not exceeding three and a half years for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Value in use is depreciated replacement cost for an asset where the future economic benefits or service potential of the asset are not primarily dependent on the asset s ability to generate net cash inflows and where the NZTA would, if deprived of the asset, replace its remaining future economic benefits or service potential. If an asset s carrying amount exceeds its recoverable amount, the asset is impaired and the carrying amount is written down to the recoverable amount. For re-valued assets the impairment loss is recognised against the revaluation reserve for that class of asset. Where that results in a debit balance in the revaluation reserve, the balance is recognised in the statement of financial performance. For assets not carried at a re-valued amount, the total impairment loss is recognised in the statement of financial performance. The reversal of an impairment loss on a re-valued asset is credited to the revaluation reserve. However, to the extent that an impairment loss for that class of asset was previously recognised in the statement of financial performance, a reversal of the impairment loss is also recognised in the statement of financial performance. For assets not carried at a re-valued amount the reversal of an impairment loss is recognised in the statement of financial performance. 1.9 Financial assets Financial assets are classified as loans and receivables. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. Loans and receivables are included in debtors and other receivables or cash and cash equivalents in the balance sheet Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses Debtors and other receivables Debtors and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of debtors and other receivables is established when there is objective evidence that the NZTA will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the statement of financial performance Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less. They are shown within current assets on the balance sheet. NZ Transport Agency Annual report 65

68 1.13 Creditors and other payables Creditors and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method Income tax The NZTA is a public authority and consequently is exempt from the payment of income tax. Accordingly, no charge for income tax has been provided for Employee entitlements Short-term employee entitlements Employee entitlements that the NZTA expects to be settled within 12 months of balance date are measured at undiscounted nominal values based on accrued entitlements at current rates of pay. These include salaries and wages accrued up to balance date, annual leave earned, but not yet taken at balance date, retiring and long service leave entitlements expected to be settled within 12 months, and sick leave. The NZTA recognises a liability for sick leave to the extent that compensated absences in the coming year are expected to be greater than the sick leave entitlements earned in the coming year. The amount is calculated based on the unused sick leave entitlement that can be carried forward at balance date, to the extent the NZTA anticipates it will be used by staff to cover those future absences. The NZTA recognises a liability and an expense for at risk payments where it is contractually obliged to pay them, or where there is a past practice that has created a constructive obligation. Long-term employee entitlements Entitlements that are payable beyond 12 months, such as long service leave and retirement leave, have been calculated on an actuarial basis. The calculations are based on: likely future entitlements accruing to staff, based on years of service, years to entitlement, the likelihood that staff will reach the point of entitlement and contractual entitlements information; and the present value of the estimated future cash flows. The discount rate is based on the weighted average of interest rates for government stock with terms to maturity similar to those of the relevant liabilities. The inflation factor is based on the expected long-term increase in remuneration for employees Superannuation defined contribution schemes Obligations for contributions to KiwiSaver, State Sector Retirement Savings Scheme, National Superannuation Scheme, Pension National Scheme, and Super Trust New Zealand are accounted for as defined contribution superannuation scheme and are recognised as an expense in the statement of financial performance as incurred Provisions Provisions for future expenditure are recognised when: the NZTA has a present legal or constructive obligation as a result of past events it is more likely than not that an outflow of resources will be required to settle the obligation the amount has been reliably estimated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as a finance cost Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made by the NZTA under operating leases (net of any incentives received from the lessor) are charged to the statement of financial performance on a straight-line basis over the period of the lease Jointly controlled operations The NZTA has interests in jointly controlled operations. It recognises in its financial statements: the assets that it controls and the liabilities that it incurs the expenses that it incurs from the operations of the jointly controlled operation GoodS and ServiceS Tax (GST) All items in the financial statements are presented exclusive of GST, except for receivables and payables, which are presented on a GST inclusive basis. Where GST is not recoverable as input tax then it is recognised as part of the related asset or expense. The net amount of GST recoverable from, or payable to, the Inland Revenue Department (IRD) is included as part of receivables or payables in the statement of financial position. The net GST paid to or received from the IRD, 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. 66 NZ Transport Agency Annual report

69 1.21 Budget figures The budget figures which appeared in the Statement of intent were prepared in accordance with NZ IFRS, using accounting policies that are consistent with those adopted by the NZTA for the preparation of these financial statements Cost allocation The NZTA has determined the cost of outputs using the cost allocation system outlined below. 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. Direct costs are charged directly to outputs. Indirect costs are charged to outputs based on cost drivers and related activity/usage information. The three types of indirect costs are: 1. Corporate overheads costs arising from the Board, Chief Executive, Group Managers, and business support units such as Finance, HR, IT, Legal, Audit and others. These costs are allocated to operational cost centres (cost centres that are responsible for delivering the output) using either full time equivalents (FTEs) (the number of staff) or the expenditure budget, as appropriate. 2. Regional office costs costs relating to operating and maintaining a regional office such as office rent and building management. These costs are allocated to operational cost centres using the number of FTEs in each region as cost driver. 3. Operational cost centres own shared costs costs incurred directly on account of more than one business activity within that operational cost centre. These shared costs are assigned to business activities based on the proportion of the estimated time spent on the affected business activities Critical accounting estimates and assumptions In preparing these financial statements the NZTA has made estimates and assumptions concerning the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: Property, plant and equipment useful lives and residual value When necessary the NZTA reviews the useful lives and residual values of its property, plant and equipment. Assessing the appropriateness of useful life and residual value estimates of property, plant and equipment requires the NZTA to consider a number of factors such as the physical condition of the asset, expected period of use of the asset by the NZTA, and expected disposal proceeds from the future sale of the asset. An incorrect estimate of the useful life or residual value will impact the depreciation expense recognised in the statement of financial performance, and carrying amount of the asset in the statement of financial position. The NZTA minimises the risk of this estimation uncertainty by: physical inspection and condition monitoring of assets asset management planning asset replacement programmes. The NZTA has not made significant changes to past assumptions concerning useful lives and residual values Critical judgements in applying the NZTA s accounting policies Management has exercised the following critical judgements in applying the NZTA s accounting policies for the period ended 30 June : Non-government grants The NZTA must exercise judgement when recognising grant income to determine if conditions of the grant contract have been satisfied. This judgement will be based on the facts and circumstances that are evident for each grant contract. State highway network & Bailey bridging State highways are valued at depreciated replacement cost based on the estimated present cost of constructing the existing assets by the most appropriate method of construction, reduced by factors for the age and condition of the asset. Land associated with the state highway is valued using an opportunity cost based on adjacent use, as an approximation to fair value. Bailey bridging is valued at optimised depreciated replacement cost based on the optimum size of asset holding by the unit cost for each category of asset. Critical judgements relate to: estimating the replacement cost of existing assets, including the impact of cost allocation and whether a cost should be capitalised or expensed. The NZTA incurs expenditure on maintaining state highways and on new and improved infrastructure for state highways. Professional judgement and engineering assessments are used to determine whether costs incurred on state highways should be capitalised or expensed. the age, condition and remaining economic life of existing assets, including the impact of maintenance thereon determining the optimum level of Bailey bridging stock Comparative figures There are no comparative figures as being a new entity, as this is the NZTA s first year of producing its annual report. NZ Transport Agency Annual report 67

70 2 Revenue from the Crown and NLTF The NZ Transport Agency has been provided with funding from the Crown for the specific purposes of the NZ Transport Agency as set out in its founding legislation and the scope of the relevant government appropriations. Apart from these general restrictions, there are no unfulfilled conditions or contingencies attached to government funding. 3 Revenue from third parties Budget Note $000 $000 Border inspection fees 1,101 2,027 Certification review fees 7,182 7,095 Driver licensing fees 25,378 25,760 Driver testing fees 14,776 15,216 Over dimension and overweight permits Rail licensing fees Standards development fee and certification levies 5,455 5,315 Tolling fees 1,589 0 Capital funds from tolling project Transport licensing fees 8,332 10,634 Fees and charges 65,590 67,143 Administration fee from Accident Compensation Corporation 12,302 11,732 Crash analysis system Rents and leases from property 19,793 17,000 Road Safety Trust Sale of road safety materials 978 1,000 Interest income 8,533 7,062 Miscellaneous revenue 2, Business units a 3,281 0 Total revenue from third parties 112, ,927 a. Revenue from business units These are activities the NZTA has undertaken, which are not funded from the NLTP, but where operating costs are covered by the income generated from these activities. Bailey bridging CAPTIF Training & education Auckland TMU Total $000 $000 $000 $000 $000 Revenue ,008 3,281 CAPTIF Canterbury Accelerated Pavement Testing Indoor Facility TMU Traffic Management Unit 68 NZ Transport Agency Annual report

71 4 Personnel costs $000 Salaries and wages 95,884 Employer contributions to defined contribution plans 248 Total personnel costs 96,132 An additional $5.680 million was paid to staff who are employed to manage state highway projects, which is more cost effective than employing contractors. These project management staff are charged directly to the projects. 5 Operating expenses Note $000 Fees to auditors: Audit fees for financial statement audit 320 Audit related fees for assurance and related services a 27 Operating lease expense 9,337 Impairment of receivables (note 12) 220 Commissions 44,310 Transaction costs 17,100 Professional services 29,423 Advertising 17,080 Publications and promotions 4,257 Information technology 21,661 Meeting and conferences 809 Staff travel 5,478 Phones 3,431 Office management 3,226 Building management 2,412 Courses, training & professional subscriptions 1,539 Other 685 Total operating expenses 161,315 a. The audit related fees was for a review of the NZTA s cost allocation model, and other assurance work on tender documents and purchasing policies. 6 National Land Transport Programme Budget $000 Total expenditure* 2,406,599 Capital expenditure on ALPURT project 33,544 Less capitalised expenditure (1,240,544) Total National Land Transport Programme 1,199,599 * See Supplementary information National Land Transport Programme. NZ Transport Agency Annual report 69

72 7 Depreciation and amortisation expense $000 Depreciation (note 13) 4,162 Depreciation on state highway network (note 14) 377,249 Depreciation on bailey bridging (note 15) 170 Amortisation (note 16) 7,700 Total depreciation and amortisation expense 389,281 8 Capital charge The NZ Transport Agency pays a capital charge to the Crown on its general funds as at 30 June and 31 December each year. The capital charge rate for the year ended 30 June was 7.5%. 9 Expenses relating to the merger $000 Expenses 4,489 Operating expenditure 4,489 Property, plant and equipment 1,200 Intangible assets 90 Capital expenditure 1,290 Total expenses relating to the merger (including capital) 5, Explanation of net surplus/(deficit) $000 Operating surplus 3,742 National Land Transport Programme surplus 497,519 Specific projects funded by the Crown surplus 1,569 State highway investment deficit (403,153) Third party fees and charges deficit (10,028) Surplus relating to the delivery of outputs 89,649 Expenses relating to the merger (4,489) Net surplus/(deficit) 85, NZ Transport Agency Annual report

73 11 Cash and cash equivalents Note $000 Cash on hand and at bank 20,128 Cash and cash equivalents for tolling accounts 2,174 Cash equivalents term deposits a 85,175 Total cash and cash equivalents 107,477 a. The carrying value of short-term deposits with maturity dates of three months or less approximates their fair value. The weighted average effective interest rate for term deposits is 2.95%. 12 Debtors and other receivables $000 Debtors and other receivables 44,498 Less : provision for impairment (2,821) Total debtors and other receivables 41,677 The carrying value of receivables approximates their fair value. As at 30 June, all overdue receivables have been assessed for impairment and appropriate provisions applied, as detailed below: Gross Impairment Operations Impairment NLTP Not past due date 36, ,854 Past due 1 30 days Past due days Past due days 1, ,349 Past due >91 days 5,302 (220) (2,601) 2,481 Total 44,498 (220) (2,601) 41,677 The provision for impairment has been calculated based on expected losses for the NZ Transport Agency s pool of debtors. Expected losses have been determined based on an analysis of the NZ Transport Agency s losses in previous periods, and review of specific debtors. Movements in the provision for impairment of receivables are as follows: Net $000 Balance at 1 July 0 Additional provisions made during the year (note 5) 220 Additional provisions made during the year (NLTP) 2,601 Receivables written-off during the period 0 Balance at 30 June 2,821 NZ Transport Agency Annual report 71

74 13 Property, plant and equipment Movements for each class of property, plant and equipment are as follows: Motor vehicles Computer equipment Furniture fittings Leasehold improvement Office, plant, & equipment Total $000 $000 Cost or valuation Balance at 1 July ,347 3,115 9,011 1,039 17,051 Additions 0 2,658 1,064 1, ,872 Disposals (30) (4) (43) (1,339) (10) (1,426) Balance at 30 June 509 6,001 4,136 9,480 1,371 21,497 Accumulated depreciation and impairment losses Balance at 1 July Depreciation expense 248 1, ,162 Eliminate on disposal (30) (4) (43) (340) (10) (427) Balance at 30 June 218 1, ,735 Carrying amounts At 1 July ,347 3,115 9,011 1,039 17,051 At 30 June 291 4,054 3,403 8,992 1,022 17,762 $000 $000 $000 $ NZ Transport Agency Annual report

75 14 State highway network Movements for the state highway network are as follows: State highways Total Cost or valuation Balance at 1 July ,946,772 20,946,772 Additions capital expenditure 1,240,544 1,240,544 Revaluation increase 2,288,948 2,288,948 Depreciation expense (377,249) (377,249) Disposals (13,776) (13,776) Asset write off (25,734) (25,734) Balance at 30 June 24,059,505 24,059,505 Carrying amounts At 1 July ,946,772 20,946,772 At 30 June 24,059,505 24,059,505 $000 The state highway valuation as at 30 June, was performed by Opus International Consultants Ltd. The principal valuer is J Vessey, BE (Civil), BA (Economics), FIPENZ (Civil), CPEng. $000 Depreciation Replacement cost Valuation $000 $000 $000 Land 0 8,672,810 8,672,810 Formation 0 6,460,910 6,460,910 Pavement (other) 50,580 3,915,020 3,117,240 Pavement (surface) 163,309 1,043, ,800 Drainage 14, , ,810 Traffic facilities 76,440 1,242, ,930 Bridges 54,880 5,139,860 2,981,360 Culverts & subways 6, , ,270 Other structures 11, , ,375 Total 377,249 28,881,000 24,059,505 NZ Transport Agency Annual report 73

76 15 Bailey bridging Movements for bailey bridging are as follows: Bailey bridging Total Cost or valuation Balance at 1 July ,412 6,412 Additions 0 0 Revaluation increase 1,072 1,072 Depreciation expense (170) (170) Disposals 0 0 Balance at 30 June 7,314 7,314 Carrying amounts At 1 July ,412 6,412 At 30 June 7,314 7,314 $000 The bailey bridging valuation as at 30 June, was performed by Opus International Consultants Ltd. The principal valuer is J Vessey, BE (Civil), BA (Economics), FIPENZ (Civil), CPEng. $000 Depreciation Replacement cost Valuation $000 $000 $000 Panels 75 5,280 2,187 Transoms 11 1,584 1,002 Stringers 13 1,800 1,038 Chord reinforcing 40 2,816 1,408 Other miscellaneous 31 3,294 1,679 Total ,774 7, Intangible assets Movements within intangible assets are as follows: Acquired software Total $000 $000 Cost Balance at 1 July ,185 13,185 Additions 12,517 12,517 Disposals 0 0 Balance at 30 June 25,702 25,702 Accumulated amortisation and impairment losses Balance at 1 July Amortisation expense 7,700 7,700 Disposals 0 0 Balance at 30 June 7,700 7,700 Carrying amounts At 1 July ,185 13,185 At 30 June 18,002 18,002 There are no restrictions over the title of the NZ Transport Agency s intangible assets, nor are any intangible assets pledged as security for liabilities. 74 NZ Transport Agency Annual report

77 17 Creditors and other payables $000 Creditors 214,230 Income in advance 1,083 Accrued expenses 190,879 Total creditors and other payables 406,192 Creditors and other payables are non-interest bearing and are normally settled on 30-day terms, therefore the carrying value of creditors and other payables is a reasonable approximation of their fair value. 18 Employee entitlements Note Current employee entitlements are represented by: Accrued salaries and wages 1,538 Annual leave 6,949 Sick leave 18 Total current portion 8,505 Non-current employee entitlements are represented by: Retirement and long service leave a 2,713 Total non-current portion 2,713 Total employee entitlements 11,218 $000 a. The present value of the retirement and long service leave obligations depend on a number of factors that are determined on an actuarial basis using a number of assumptions. Any changes in these assumptions will impact on the carrying amount of the liability. Actuarial valuations as at 30 June, was performed by Eriksen & Associates Ltd. The valuer is J Eriksen, Fellow of the NZ Society of Actuaries. 19 Retained funds National Land Transport Programme $000 Closing balance at the end of the year* 183,500 Capital contribution from NLTF Accelerated SH construction (30,000) Capital contribution from NLTF New & improved SH infrastructure (727,065) Capital expenditure on ALPURT project (33,544) Capitalised expenditure 1,240,544 Total retained funds National Land Transport Programme 633,435 * See Supplementary information National Land Transport Programme. NZ Transport Agency Annual report 75

78 20 Total equity Note General funds Balance at 1 July 18,795 Capital contribution 6,990 Balance at 30 June 25,785 Retained funds Operations Balance at 1 July 24,673 Surplus/(deficit) 85,160 Transfer to the National Land Transport Programme memorandum account (497,519) Transfer to specific projects funded by the Crown (1,569) Transfer to state highway investment 403,153 Transfer to the third party fees and charges memorandum account 10,028 Balance at 30 June 23,926 Retained funds National Land Transport Programme Balance at 1 July 135,916 Surplus/(deficit) including capital surplus/(deficit) 497,519 Balance at 30 June 633,435 Retained funds Specific projects funded by the Crown Balance at 1 July 0 Surplus/(deficit) 1,569 Balance at 30 June 1,569 State highway investment Balance at 1 July 14,494,294 Capital contribution 779,728 Depreciation on state highway network and bailey bridging (377,419) State highway asset write-off (25,734) Balance at 30 June 14,870,869 State highway revaluation reserve Balance at 1 July 6,481,725 Revaluation gains/(losses) State highway network 2,288,948 Revaluation gains/(losses) Bailey bridging 1,072 Balance at 30 June 8,771,745 Third party fees and charges memorandum account Balance at 1 July (4,901) Increase/(decrease) in reserve (10,028) Balance at 30 June a (14,929) Total equity 24,312,400 $000 a. Third party fees and charges memorandum account. The products which make up this memorandum account are detailed on the following page. 76 NZ Transport Agency Annual report

79 20 Total equity continued Balance at 1 July Revenue Expenditure Net surplus/ (deficit) Balance at 30 June $000 $000 $000 $000 $000 Border inspection fees 249 1,101 1,261 (160) 89 Certification review fees 257 7,182 9,313 (2,131) (1,874) Driver licensing fees* (4,765) 26,824 33,511 (6,687) (11,452) Driver testing fees (1,408) 14,776 15,905 (1,129) (2,537) OD/overweight permits (30) (1) Rail licensing fees (1,004) 871 1,398 (527) (1,531) Standards development 2,950 5,455 2,751 2,704 5,654 Tolling fees 0 1,589 2,230 (641) (641) Transport licensing fees (1,209) 8,332 9,759 (1,427) (2,636) Total (4,901) 66,314 76,342 (10,028) (14,929) * Driver licensing revenue includes fees and charges of $ million and $1.445 million Crown driver test subsidy. 21 Capital contribution General funds Transfer of the LANDATA asset from the Ministry of Transport 6,990 State highways investment Accelerated state highway construction 30,000 ALPURT B2 project 24,948 New and improved infrastructure for state highways 727,065 Realignment of Buckle Street (2,285) 779,728 Total capital contribution 786,718 $000 NZ Transport Agency Annual report 77

80 22 Reconciliation of net surplus/(deficit) to net cash from operating activities $000 Net surplus/(deficit) after tax 85,160 Add/(less) non-cash items: Depreciation and amortisation expense 389,281 State highway asset write-off 25,734 Increase/(decrease) in employee entitlements 2,713 Total non-cash items 417,728 Add/(less) movements in working capital items: (Increase)/decrease in Crown receivable (58,213) (Increase)/decrease in debtors and other receivables 34,923 (Increase)/decrease in prepayments and inventories 738 Increase/(decrease) in creditors and other payables (13,039) Increase/(decrease) in lease make good provision 565 Increase/(decrease) in tolling funds held in trust for MoT 868 Increase/(decrease) in employee entitlements (1,404) Net movements in working capital items (35,562) Net cash from operating activities 467,326 Refer to note 32 on NZTA opening balances for the opening movements in working capital items. 78 NZ Transport Agency Annual report

81 23 Capital commitments and operating leases Capital commitments The future aggregate construction contract commitments for the state highway network are as follows: Note $000 Not later than one year 418,690 Later than one year and not later than five years 338,667 Later than five years 0 Total capital commitments a 757,357 a. Capital commitments have not had administration costs or professional services allocated to them, as per accounting policies, as this is unable to be done on a project by project basis. National Land Transport Programme funding commitments The future aggregate funding commitments for the National Land Transport Programme are as follows: $000 Not later than one year 2,521,639 Later than one year and not later than five years 2,452,400 Later than five years 86,753 Total funding commitments 5,060,792 Operating leases as lessee The future aggregate minimum lease payments to be paid under non-cancellable operating leases are as follows: $000 Not later than one year 21,217 Later than one year and not later than five years 63,625 Later than five years 44,953 Total non-cancellable operating leases 129, Contingencies Contingent liabilities Contract and land settlements A claim in the High Court for $23 million has been made against the NZ Transport Agency for the potential revaluation of a property affected by the Kapiti western link route. There are other claims of around $1million relating to similar circumstances. Performance bonds Performance bonds by the NZ Transport Agency, entered into in the normal course of business to meet Resource Management Act requirements for third parties, totalled $5.142 million. Contingent assets The NZ Transport Agency has contingent assets of $0.601 million which depend on court rulings and other events. NZ Transport Agency Annual report 79

82 25 Related party transactions and key management personnel Related party transactions The NZ Transport Agency is a wholly owned entity of the Crown. The government significantly influences the role of the NZ Transport Agency in addition to being its major source of revenue. The NZ Transport Agency enters into transactions with government departments, state-owned enterprises and other Crown entities. Those transactions that occur within a normal supplier or client relationship on terms and conditions no more or less favourable than those which it is reasonable to expect the NZ Transport Agency would have adopted if dealing with that entity at arm s length in the same circumstances have not been disclosed as related party transactions. The following transactions were carried out with related parties other than those described above: All related party transactions have been entered into on an arms-length basis. The NZ Transport Agency receives funding from the Road Safety Trust for providing administrative support. The Chief Executive, or his nominee is a representative on the Road Safety Trust as a trustee. During the 2008/09 financial year Board members and staff of the NZ Transport Agency were involved in minor transactions with the motor vehicle registry and driver licensing systems when re-registering their vehicle or driver licences. Related party transactions Related party Board member Amount $000 Auckland Regional Transport Authority Mike Williams 24 Genesis Energy Mike Williams 1,555 GNS Mike Williams 6 KiwiRail Holdings Ltd Bryan Jackson 17 NZ Automobile Association Brian Roche/Garry Moore/Paul Fitzharris/ Christine Caughey/Grahame Hall 118 NZ Railways Corporation Bryan Jackson 19,410 Ontrack Mike Williams 106 PricewaterhouseCoopers Brian Roche 79 Urban Plus Ltd Bryan Jackson 105 Vehicle Testing Group Bryan Jackson 4,809 Key management personnel compensation $000 Salaries and other short-term employee benefits 4,279 Post-employment benefits 0 Other long-term benefits 0 Termination benefits 783 Total key management personnel compensation 5,062 Key management personnel include all board members, the Chief Executive, and the 12 members of the Senior Leadership Team. Also included are the Chief Executives and senior management teams from Transit NZ and Land Transport NZ. 80 NZ Transport Agency Annual report

83 26 Board member remuneration The total value of remuneration paid or payable to each board member during the year was: $000 Brian Roche (Chairperson) Appointed August Garry Moore 43 Christine Caughey Appointed August Paul Fitzharris 36 Grahame Hall 33 Bryan Jackson 38 Alick Shaw Appointed August Michael Williams Stepped down in December Ernesto Henriod Transit NZ Board member stepped down in August James Hill Transit NZ Board member stepped down in August Murray King Land Transport NZ Board member stepped down in July Gary McIvor Land Transport NZ Board member stepped down in July Gregory Presland Land Transport NZ Board member stepped down in July John Rutledge Land Transport NZ Board member stepped down in July Janet Stephenson Land Transport NZ Board member stepped down in July Total Board member remuneration 315 There have been no payments made to committee members appointed by the Board who are not Board members during the financial year. The NZ Transport Agency has effected Directors and Officers Liability and Professional Indemnity Insurance cover during the financial year in respect of the liability or costs of Board members and employees. The Board has also taken insurance cover covering personal accident and travel risk for Board members and employees where injury or loss occurs whilst on NZ Transport Agency business. NZ Transport Agency Annual report 81

84 27 Employee remuneration Total remuneration paid or payable 100, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,999 1 Total employees 222 During the year ended 30 June, 19 employees received compensation and other benefits in relation to cessation totalling $1,487,014. No Board members received compensation or other benefits in relation to cessation. 28 Events after the balance sheet date There were no significant events after the balance sheet date. 29 Categories of financial assets and liabilities The carrying amounts of financial assets and liabilities in each of the NZ IAS 39 categories are as follows: Loans and receivables Cash and cash equivalents 107,477 Crown receivable 478,415 Debtors and other receivables 41,677 Investments term deposits 0 Total loans and receivables 627,569 Financial liabilities measured at amortised cost Creditors and other payables 406,192 Total financial liabilities measured at amortised cost 406,192 $ NZ Transport Agency Annual report

85 30 Financial instrument risks The NZ Transport Agency s activities expose it to a variety of financial instrument risks, including market risk, credit risk and liquidity risk. The NZ Transport Agency has a series of policies to manage the risks associated with financial instruments and seeks to minimise exposure from financial instruments. These policies do not allow any transactions that are speculative in nature to be entered into. Market risk The interest rates on the NZ Transport Agency s investments are disclosed in note 11. Fair value interest rate risk Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. The NZ Transport Agency s exposure to fair value interest rate risk is limited to its bank deposits which are held at fixed rates of interest. Cash flow interest rate risk Cash flow interest rate risk is the risk that the cash flows from a financial instrument will fluctuate because of changes in market interest rates. Investments and borrowings issued at variable interest rates expose the NZ Transport Agency to cash flow interest rate risk. The NZ Transport Agency s investment policy requires a spread of investment maturity dates to limit exposure to short-term interest rate movements. The NZ Transport Agency currently has no variable interest rate investments. Currency risk A currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in foreign exchange rates. The NZ Transport Agency purchases goods and services overseas which require it to enter into transactions denominated in foreign currencies. Credit risk Credit risk is the risk that a third party will default on its obligation to the NZ Transport Agency, causing the NZ Transport Agency to incur a loss. Due to the timing of its cash inflows and outflows, the NZ Transport Agency invests surplus cash with registered banks. The NZ Transport Agency s investment policy limits the amount of credit exposure to any one institution. The NZ Transport Agency has processes in place to review the credit quality of customers prior to the granting of credit. The NZ Transport Agency s maximum credit exposure for each class of financial instrument is represented by the total carrying amount of cash and cash equivalents (note 11), and net debtors (note 12). There is no collateral held as security against these financial instruments, including those instruments that are overdue or impaired. The NZ Transport Agency has no significant concentrations of credit risk, as it has a small number of credit customers and only invests funds with registered banks with specified Standard and Poor s credit ratings. The NZ Transport Agency holds term deposits with the ANZ, ASB, BNZ, Citibank, Kiwibank, and Westpac. These banks are part of the Crown retail deposit guarantee scheme and so deposits held with these banks are guaranteed by the Crown up to $1 million. Liquidity risk Liquidity risk is the risk that the NZ Transport Agency will encounter difficulty raising liquid funds to meet commitments as they fall due. Prudent liquidity risk management implies maintaining sufficient cash. In meeting its liquidity requirements, the NZ Transport Agency maintains a target level of investments that must mature within specified timeframes. The table below analyses the NZ Transport Agency s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. Less than 6 months $000 Creditors and other payables (note 17) 406, Capital management The NZ Transport Agency s capital is its equity, which comprises accumulated funds and other reserves. Equity is represented by net assets. The NZ Transport Agency is subject to the financial management and accountability provisions of the Crown Entities Act 2004, which imposes restrictions in relation to borrowings, acquisition of securities issuing guarantees and indemnities and the use of derivatives. The NZ Transport Agency manages its equity as a by-product of prudent managing revenues, expenses, assets, liabilities, investments, and general financial dealings to ensure the NZ Transport Agency effectively achieves its objectives and purpose. NZ Transport Agency Annual report 83

86 32 NZTA opening balances The opening balance of the NZ Transport Agency is represented by the closing balances of the Land Transport NZ and Transit NZ after eliminating intercompany transactions between the two entities. Land Transport NZ 2008 Transit NZ 2008 Entity eliminations Opening balance Assets Current assets Cash and cash equivalents (< 90 days) 25,551 51, ,126 Crown receivable 420, ,202 Debtors and other receivables 45, ,932 (143,021) 76,600 Prepayments 1, ,455 Inventories Investments (none > 90 days) 23, ,430 Total current assets 516, ,507 (143,021) 599,187 Non-current assets Property, plant and equipment 14,196 2, ,051 State highway network 0 20,946, ,946,772 Bailey bridging 0 6, ,412 Intangible assets 11,354 1, ,185 Total non-current assets 25,550 20,957, ,983,420 Total assets 542,251 21,183,377 (143,021) 21,582,607 Liabilities Current liabilities Creditors and other payables 358, ,528 (143,021) 419,231 Employee entitlements 6,079 3, ,909 Provisions Repayment of surplus to the Crown 2, ,965 Total current liabilities 367, ,358 (143,021) 432,105 Total liabilities 367, ,358 (143,021) 432,105 Net assets 174,483 20,976, ,150,502 Equity General funds 18, ,795 Retained funds Operations 24, ,673 Retained funds National Land Transport Programme 135, ,916 $000 $000 $000 $000 State highway investment 0 14,494, ,494,294 State highway revaluation reserve 0 6,481, ,481,725 Third party fees and charges memorandum account (4,901) 0 0 (4,901) Total equity 174,483 20,976, ,150, NZ Transport Agency Annual report

87 33 Explanation of significant variances against budget Explanations for significant variations from the NZ Transport Agency s budgeted figures in the Statement of intent are as follows: Statement of financial performance Revenue from Crown Funding from the NLTF was $212 million lower than budgeted. This is mainly due to the transfer of $250 million of NLTF revenue to /10, as it was deemed surplus to requirements in the current year. National Land Transport Programme Expenditure on the National Land Transport Programme was $156 million lower than budgeted. This is mainly due to the change in mix between NLTP funded operating expenditure and capital expenditure. Statement of financial position Working capital Working capital is $141 million lower than budgeted. This is mainly due to active management of the level of cash held by the NZTA, offset by higher creditors than forecast. Non-current assets Total fixed assets were $3.3 billion higher than budgeted. This is mainly due to the revaluation of State highways assets. NZ Transport Agency Annual report 85

88 Audit report To the readers of NZ Transport Agency s financial statements and statement of service performance for the year ended 30 June. The Auditor-General is the auditor of the NZ Transport Agency (NZTA). The Auditor-General has appointed me, John O Connell, using the staff and resources of Audit New Zealand, to carry out the audit. The audit covers the financial statements and statement of service performance included in the annual report of the NZTA for the year ended 30 June. Unqualified Opinion In our opinion: The financial statements of the NZTA on pages 58 to 85: comply with generally accepted accounting practice in New Zealand; and fairly reflect: the NZTA s financial position as at 30 June ; and the results of its operations and cash flows for the year ended on that date. The statement of service performance of the NZTA on pages 35 to 56: complies with generally accepted accounting practice in New Zealand; and fairly reflects for each class of outputs: 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 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. The audit was completed on 30 October, 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 Board 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 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: determining whether significant financial and management controls are working and can be relied on to produce complete and accurate data; verifying samples of transactions and account balances; performing analyses to identify anomalies in the reported data; 86 NZ Transport Agency Annual report

89 reviewing significant estimates and judgements made by the Board; confirming year-end balances; determining whether accounting policies are appropriate and consistently applied; and 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 and 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 Board and the Auditor The Board is responsible for preparing the financial statements and 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 NZTA as at 30 June 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 NZTA 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. The Board s responsibilities arise from the Crown Entities Act 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 the Crown Entities Act 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 assurance assignments in the area of cost allocation, procurement and policy guidance. Other than the audit and these assignments, we have no relationship with or interests in NZTA. John O Connell Audit New Zealand On behalf of the Auditor-General Wellington, New Zealand NZ Transport Agency Annual report 87

90 Putting the scrutiny principle into practice Report on the implementation of systems and procedures to give effect to the scrutiny principle for the period 1 October 2008 to 30 June Background The Land Transport Management Act (LTMA) 2003 provides for a new operating principle for the NZ Transport Agency (NZTA), namely, that it must: ensure that it gives, when making decisions in respect of planning and funding under subpart 1 of Part 2, the same level of scrutiny to its own proposed activities and combinations of activities as it would to those proposed by approved organisations. (section 96(1)d.) The NZTA is required to do a number of things in relation to this principle, including developing systems and procedures to enable it to give effect to the scrutiny principle, and include a report on its implementation of the systems and procedures in its annual report. Systems and procedures The NZTA has set up two different sorts of systems and procedures required to give effect to the scrutiny principle: Operational procedures to enable employees and members of the NZTA to know when and how to comply with the principle in relation to individual decisions, including: following the same procedure for similar types of activities applying equivalent evaluation criteria requiring an equivalent level of information applying the same level of rigour to the analysis applying the same level of tolerance to cost estimate rigour applying the same criteria to decisions on procurement procedures. Monitoring procedures to provide quality assurance to the NZTA Board that employees and members are complying with the principle, including: internal reports to the NZTA s finance and audit committee, and an audit of performance by the internal audit team external an audit of performance by an independent consultant. Implementation of the procedures Operational procedures The NZTA has published its approach to giving effect to the scrutiny principle on its website page titled Decision making and the scrutiny principle ( scrutiny-principle.html). This page also lists the systems and procedures it has in place to apply the scrutiny principle and provides links to the manuals the procurement manuals and the Planning, programming and funding manual where the systems and procedures are set out in detail. Monitoring of the webpage during indicates the page is accessed between 120 and 160 times a month. A further link on this page links to a webpage that lists all the funding decisions the NZTA has made since August 2008 (prescribed date in the legislation is 1 October 2008) ( nz/newsroom/funding/index.html). The page is updated monthly once the NZTA Board has confirmed its previous month s decisions. Monitoring of the webpage during indicates the page is accessed between 260 and 400 times a month. 88 NZ Transport Agency Annual report

91 The key system used by the NZTA is the web-based Land Transport Programmes (LTP) online system. This system is used to manage the National Land Transport Programme. It contains all the activities proposed for funding and sets out for all applicants, both approved organisations and the NZTA for its own activities, the information required for the assessment and evaluation of the activities for funding. The system also records the decisions made by the NZTA, including any conditions applied to the funding. The system is totally transparent. Every approved organisation can see the details of their proposals, the NZTA s recommendations and decisions and those of any other approved organisation and the NZTA. This effectively provides assurance that the requirements placed on any one approved organisation can be compared against others. Monitoring procedures The NZTA commissioned its own report on the proposals to give effect to the scrutiny principle, and the actions taken to date to implement them. Work was carried out by an external consultant during December 2008/January, and a report was released in February. This report found that the systems and procedures were working well, and made a small number of recommendations for improvement. The NZTA s Assurance and Risk section has some review work of LTP online scheduled for the remainder of. Preliminary work has been carried out in conjunction with changes to the National Land Transport Programme claims process. There have been a substantial number of changes in the NLTP this year. A revised Government Policy Statement in May on land transport funding establishes the basic parameters. The NZTA has released an Investment and Revenue strategy, along with substantially modified procurement procedures, and a revised Planning, programming and funding manual. These multiple changes are now being implemented. Further follow-up on any outstanding process recommendations from the consultant s report will not be carried out, as the changes noted above are substantial enough to render them unnecessary. Any further work in 2010 will depend on the results of the upcoming LTP online audit work. NZ Transport Agency Annual report 89

92 Independent review report of the Auditor-General To the readers of the NZ Transport Agency s report on the implementation of systems and procedures to give effect to the scrutiny principle. We have completed a review of the report by the NZ Transport Agency (NZTA) on the implementation of systems and procedures to give effect to the scrutiny principle, on pages 88 to 89, for the period 1 October 2008 to 30 June. The Auditor-General is the auditor of the NZTA. The Auditor-General has appointed me, John O Connell, using the staff and resources of Audit New Zealand, to carry out the review on her behalf. Conclusion Based on our review, which is not an audit, nothing has come to our attention that causes us to believe that the report by the NZTA on the implementation of systems and procedures to give effect to the scrutiny principle, on pages 88 to 89, for the period 1 October 2008 to 30 June is not fairly stated. Our review was completed on 30 October, and is the date at which our conclusion is expressed. The basis of our review conclusion is explained below. In addition, we outline the responsibilities of the Board of the NZTA and the Auditor, and explain our independence. Basis of Conclusion We carried out our review in accordance with International Standard on Assurance Engagements (New Zealand) 3000: Assurance Engagements Other than Audits or Reviews of Historical Financial Information. Our review involved obtaining sufficient and appropriate evidence and explanations from Agency personnel to be able to conclude whether any matters have come to our attention to indicate that the information presented in the report has not been fairly stated. Our review was limited primarily to enquiries of Agency personnel, and reading the report to assess whether the information therein was consistent with our understanding of the NZTA s systems and procedures, as obtained during our annual audit of the NZTA. 90 NZ Transport Agency Annual report

93 Responsibilities of the Board of the NZ Transport Agency and the Auditor The Board is responsible for preparing a report on the implementation of systems and procedures to give effect to the scrutiny principle, pursuant to section 96(2)(b) of the Land Transport Management Amendment Act The NZTA s report is required to be included in its annual report. Section 96(3) of the Land Transport Management Amendment Act 2008 requires the Auditor- General to report on the NZTA s report on the implementation of the systems and procedures to give effect to the scrutiny principle. Independence When carrying out the review we followed the independence requirements of the Auditor-General, which incorporate the independence requirements of the Institute of Chartered Accountants of New Zealand. Other than the annual audit, and this review, we have carried out assurance assignments in the area of cost allocation, procurement and policy guidance. Other than the audit, the review and these assignments, we have no relationship with or interests in the NZTA. John O Connell Audit New Zealand On behalf of the Auditor-General Wellington, New Zealand Inclusion of Electronic Links in the Report by the NZ Transport Agency on the Implementation of Systems and Procedures to give Effect to the Scrutiny Principle Our review report relates to the report of the NZ Transport Agency (NZTA) on the implementation of systems and procedures to give effect to the scrutiny principle for the year ended 30 June. The NZTA s Board is responsible for the maintenance and integrity of the NZTA s website. We have not been engaged to report on the integrity of the NZTA s website. We accept no responsibility for any changes that may have occurred to the information that has been electronically linked from the above report to the NZTA s website after the date of our review report. NZ Transport Agency Annual report 91