Export Education Levy Annual Report

Transcription

1 (Print) ISSN (Online) ISSN Export Education Levy Annual Report For the financial year ended 30 June 2015 Presented to the House of Representatives pursuant to section 238I (3) of the Education Act

2 2 Table of contents Background... 3 The Export Education Levy... 3 Purposes to which Levy funds may be put... 3 Government agencies responsibilities... 4 Ministry of Education... 4 New Zealand Qualifications Authority... 5 Education New Zealand... 5 International fee-paying students... 5 Enrolments... 6 Tuition fee income... 8 Export Education Levy income and expenditure... 9 Summary of income and expenditure... 9 Export Education Levy income by sector Expenditure Industry work programme Research Marketing and promotions Professional and institutional development Reimbursement of international students Administration and monitoring of the Code of Practice Key tasks of the Code Administrator (NZQA) International Education Appeal Authority International Education Review Panel Administration of the Export Education Levy Financial statements for the year ended 30 June Statement of responsibility Independent Auditor's Report Summary of significant accounting policies Statement of financial position Statement of financial performance Statement of movements in equity Statement of cash flows Statement of commitments Notes to the financial statements Note: All pictures used in this report are sourced from the Education New Zealand BrandLab (

3 Background 3 This document reports on the administration of the Export Education Levy for the financial year ended 30 June 2015, as required by section 238I of the Education Act. The Export Education Levy In 2003 the Government introduced an industry levy to fund a wide range of development and risk management initiatives for the export education sector. The Export Education Levy is authorised according to section 238 of the Education Act Regulations prescribing the levy first came into force on 10 January Purposes to which Levy funds may be put Section 238I of the Education Act states the purposes of the Export Education Levy: (1) The purposes to which the funds of the levy may be put are as follows: (a) the development, promotion, and quality assurance of the export education sector, which may include (without limitation) (i) (ii) (iii) (iv) (v) professional and institutional development; and marketing; and implementation of scholarship schemes; and research, and resource development; and support (financial or otherwise) of other bodies engaged in the development, promotion, or quality assurance of the export education sector; (b) the making of payments as set out in subsections (1A) and (1B); (c) the administration and audit of the code; (d) the general administration of the levy and associated purposes. (1A) Subsection (1B) applies if (a) an international student is or was enrolled with a private training establishment for a course of study or training; and (b) at the time of the student s enrolment the private training establishment held a current registration under Part 18; and (c) the private training establishment has not, cannot, or will not provide, in whole or in part, the course of study or training. (1B) If this subsection applies, the funds of the levy may be used for any of the following: (a) to make payment to any person to ensure the reimbursement of the student, in whole or in part, for tuition fees or for any payment other than tuition fees made by or on behalf of that student to the private training establishment in respect of the student s course of study or training if, and to the extent that, (i) the private training establishment has not refunded the tuition fees or other payment; and (ii) the agency responsible for the administration of the levy approves the reimbursement of the student as necessary and appropriate in the circumstances:

4 4 (b) with the approval of the Minister, to reimburse the Crown for any sum provided by the Crown and paid to any person to ensure the reimbursement of the student, in whole or in part, for tuition fees or for any payment other than tuition fees made by or on behalf of that student to the private training establishment in respect of the student s course of study or training if, and to the extent that, - (i) the private training establishment had not refunded the tuition fees or other payment; and (ii) the agency responsible for the administration of the levy approved the reimbursement of the student as necessary and appropriate in the circumstances: (c) with the approval of the Minister, to reimburse, in whole or in part, the agency responsible for the administration of the levy, or any Crown entity, for (i) costs incurred by that agency or Crown entity in placing the student with an alternative provider; or (ii) other costs incurred by that agency or Crown entity as a direct result of the private training establishment not providing the course of study or training. Government agencies responsibilities Ministry of Education Annual Report to Parliament Section 238I (3) of the Education Act refers to the requirement for an annual report: As soon as practicable after 1 July in each year, the agency responsible for the administration of the levy must present to the Minister an annual report on the administration of the levy, which must include audited financial statements prepared in accordance with generally accepted accounting practice; and the Minister must present a copy of the report to the House of Representatives. Administration of the Levy collection and Trust Account The levy is collected from education providers by the Ministry of Education and held in an Export Education Levy Trust Account, administered by the Ministry of Education. These funds are ring-fenced to ensure that strategic development work is on-going and securely resourced. Refund of tuition fees to international students The Ministry of Education, in conjunction with the New Zealand Qualifications Authority (NZQA), has responsibility for the refund of tuition fees for international students affected by the closure of private training establishments. Policy development The Ministry of Education leads the development of policy on the Export Education Levy, and reports to the responsible Minister. The Ministry develops policy options in consultation with other agencies, and with the international education sector.

5 5 New Zealand Qualifications Authority The New Zealand Qualifications Authority (NZQA) is responsible for the quality assurance and administration of the Code of Practice for the Pastoral Care of International Students. Education New Zealand Education New Zealand (ENZ) is responsible for operating the promotions, market research and professional development projects which are funded from the Export Education Levy. The bulk of ENZ operations are funded by the Crown through Vote Tertiary Education. International fee-paying students The Export Education Levy is payable by any education provider that enrols international fee-paying students. The Levy is made up of a flat fee component of $185 (excluding GST) payable by each provider, together with 0.45% of tuition fee income (excluding GST). State and state integrated schools pay the Export Education Levy as a component of their International Student Levy1. 1 The International Student Levy is authorised by section 4D of the Education Act This levy is only charged to state and state-integrated schools, at the rate of $ per international fee-paying student. This levy is deducted from the operating grants of state and integrated schools, on the basis of roll returns information.

6 Enrolments 6 Student enrolment statistics are collected on a trimester basis during each calendar year. During the 2014 calendar year enrolments of international fee-paying students totalled 103,321, which was a near 15% increase compared to enrolments during The increase has been attributed to the recovery of the international education sector in Canterbury; strong growth from key markets such as China, India and Thailand and from emerging markets such as Latin America and the Philippines; and increased numbers of students enrolling in postgraduate studies. The private training establishment (PTE) sector experienced the largest increase in international student enrolments. Information for the four-month period from 1 January to 30 April 2015 also showed an overall 20% increase in international fee-paying student enrolments, compared to the same period in 2014, from 60,734 to 73,118 enrolments. Detailed information on international student statistics can be found on and on the website of Education New Zealand ( A summary of international fee-paying student enrolments over the past 12 years is shown in Chart 1. From a peak of 126,503 enrolments in 2003 there was a 28% decline to 91,388 enrolments in By 2010 there had been a 9% recovery, followed by declining enrolments in the following three years until an increase of nearly 15% in 2014 to reach 103,321 enrolments. Chart 1: Trends in international fee-paying student enrolments by provider type * includes Colleges of Education. Note: Subsidiary Providers are separate units at some public tertiary institutions, registered schools or registered private training establishments. From 2006 the Ministry of Education has requested information from all levy-payers on the nationalities of their students. A trend evident since 2010 has been the rise in

7 7 enrolments of Chinese, and falls in South Korean students. The numbers of students from India rose rapidly from 2006, stabilised from 2010 to 2013, and rose again markedly in Chart 2: Number of international fee-paying students by top ten source countries 35,000 China 30,000 India Japan 25,000 South Korea 20,000 Thailand 15,000 Saudi Arabia 10,000 Germany Brazil 5,000 France Note: China includes the Hong Kong Special Administrative Region. Philippines

8 8 Tuition fee income Total tuition fee revenue to education providers in the 2014 calendar year was $883.8 million. This was nearly 17% overall growth in tuition fee revenue from international fee-paying students over The universities earned 39% of this total, followed by private training establishments with 30%. The school sector accounted for 15% of tuition fee income. Table 1: Tuition fee income during the calendar years 2013 and 2014 International tuition revenues by provider groups 2013 ($ million) 2014 ($ million) Proportion of total, 2013 Proportion of total, 2014 Primary schools Secondary schools Institutes of Technology/ Polytechnics (ITPs) Universities Private Training Establishments (PTEs): -SDR* PTEs -Non-SDR (i.e. unfunded) PTEs Subsidiary Providers % 15% 1% 14% 10% 7% % 43% 13% 39% 18% 5% % 13% 2% 14% 16% 3% 35% 49% 30% $755.3 $883.8 Totals Percentage change, * This means these PTEs receive government funding for their domestic students, and so are required to complete the Single Data Return (SDR). 17%

9 9 Export Education Levy income and expenditure Summary of income and expenditure Income from the Export Education Levy for the year ended 30 June 2015 was $4,584,557. This is an increase of more than 24% compared with the Levy income for the year ended 30 June Combined with the income from interest received and other income, total income was $4,677,618. Total expenditure during the financial year was $2,947,405. This left an operating surplus of $1,730,213 as reported in the Statement of Financial Performance for the year ended 30 June After making allowance for the operating surplus this year, the total equity in the Export Education Levy Trust Account as at 30 June 2015 was $4,894,235.

10 10 Export Education Levy income by sector The following table shows the breakdown by education sector, for the levy income received between 1 July 2014 and 30 June Universities contributed the highest proportion of the levy (35%), and private training establishments provided the second-highest proportion (33%). Table 2: Export Education Levy income by sector, year ended 30 June 2015 Sector Number of providers Levy Income $ excl GST % income by sector, 2014/15 Schools 595 $718,346 16% ITPs 18 $641,329 14% Universities 8 $1,602,077 35% Wānanga 1 $139 Private Training Establishments 182 $1,533,730 33% Subsidiary Providers 10 $88,936 2% TOTAL 814 $4,584, %

11 Expenditure 11 Industry work programme Education New Zealand (ENZ) has responsibility for managing and operating the international education industry work programme which is funded from the Export Education Levy. The Levy funding is in addition to the allocation from Vote Tertiary Education for international education programmes, which was $31,122,000 during 2014/15 2. This Crown funding is allocated to ENZ. During the 2014/15 financial year ENZ spent $2,265,500 of Levy funding on the industry work programme, with the objective of increasing the economic value of the industry from $2.6 billion in 2012 to $5.0 billion by This is consistent with a key objective of the Government s Leadership Statement for International Education, released on 20 September The international education markets targeted during 2014/15 included China, India and the Association of Southeast Asian Nations 3 (ASEAN), which were Tier 1 markets where there is significant government and/or industry interest. Tier 2 markets for the 2014/15 financial year were Japan, South Korea, Europe, the Americas and the Middle East. The ENZ activities which were also supported by funding from the Levy in the 2014/15 financial year are outlined below. Research ENZ started publishing a monthly student visa dashboard 44 on their website ( to make this market intelligence more accessible to the international education industry and stakeholders. Market intelligence was identified by industry as a priority action in the overarching industry strategic roadmap that was published in August Brand awareness research continued to be undertaken in Tier 1 and Tier 2 countries to monitor awareness of New Zealand as a study destination. Brand awareness increased during the year in Tier 1 markets from 59% (July 2013 April 2014) to 61% (July 2014 April 2015). Marketing and promotions ENZ s marketing and promotions activities are mainly funded from Vote Tertiary Education. The Levy contributes to the funding of activities including: events and agent seminars held overseas in-bound agent visits in regions media familiarisation visits to New Zealand alumni events social media campaigns new and updated digital platforms via the Study In New Zealand website. 2 Budget 2014/15 information on Vote Tertiary Education appropriations can be found on 3 The primary focus was on Indonesia, Malaysia, Thailand and Viet Nam. 4 The Student Visa Dashboard reports on trends in total, first-time and returning student visas approved for ENZ s target markets and other selected markets.

12 12 More detail on marketing and promotions activity led by Education New Zealand can be found in the Education New Zealand Annual Report 2014/15. Professional and institutional development ENZ held 23 professional development and country or sector specific seminars for the industry. More than 1,100 industry representatives attended the seminars in Auckland, Wellington, Christchurch, Tauranga, and Hawkes Bay. The attendees, representing all international education sectors, gave an overall satisfaction rating of 90 percent. Seminar topics included: business and marketing planning markets where ENZ has staff in market developing successful business proposals how to enhance the student experience social media 101, and advanced digital and content marketing Through its Regional Partnership Programme, ENZ provided support and co-funding to regions. The programme supports the regional development and growth of international education in partnership with international education providers, representative groups, local government economic development agencies and the international education industry. Reimbursement of international students Under sections 238I(1A) and (1B) of the Education Act 1989, the responsible Minister is empowered to use Export Education Levy funds to reimburse the Crown for expenses incurred in assisting international students affected by the closure of a private training establishment. During the financial year a total of $42,610 was used from the Trust Account to reimburse eleven international fee-paying students from one private training establishment that closed. The provider was Helipro Aviation Training Ltd.

13 Administration and monitoring of the Code of Practice 13 The mandatory Code of Practice for the Pastoral Care of International Students (the Code) is established under section 238F of the Education Act The Act requires a provider to be a signatory to the Code in order to enrol international students. The Code was introduced on 31 March 2002, was revised on 1 November 2010, and is being redrafted in 2015, following the passing of the Education Amendment Act The New Zealand Qualifications Authority (NZQA) is the appointed Administrator of the Code of Practice. During the financial year a total of $403,992 was spent on the administration of the Code by NZQA. Key tasks of the Code Administrator (NZQA) The key tasks of the Code Administrator (NZQA) under the current Code involve: Approval of applications to become a signatory to the Code Monitoring of Code compliance through administration of annual self-review and self-attestation return forms, and external evaluation and review (EER) reports undertaken by NZQA for the tertiary sector, and by the Education Review Office (ERO) for the schooling sector Investigation of identified areas of non-compliance and areas for improvement Seeking to resolve pastoral care issues requiring immediate attention Referring serious breaches to the International Education Appeal Authority (IEAA) which may impose an appropriate sanction or may recommend to the International Education Review Panel (the Review Panel) suspension or removal of the provider as a Code signatory Providing advice regarding the Code, and liaising and cooperating with other agencies and stakeholders involved with the care and safety of international students nationally and regionally (including Education New Zealand, Immigration New Zealand, and the Ministry of Education). Approval of signatories As at 30 June 2015 there were 1,096 Code signatories 5. Table 3 shows signatories by sector and type of provider. Table 3: Code Signatories by Sector and Provider Type to 30 June Primary Secondary Composite Total schools Public Tertiary Education Institutions Subsidiary Providers PTEs Total tertiary Total signatories 1,198 1,198 1,202 1,197 1,170 1,124 1,096 5 Although 1,096 providers were signatories to the Code of Practice only 814 actually enrolled international fee-paying students during 2014/15

14 14 Ongoing monitoring of signatories School sector overview During the 2014/15 financial year the Education Review Office (ERO) reviewed and reported on the quality of education and care for international students in 138 schools where at least one international student was enrolled. There were no reports by ERO to NZQA of non-compliance with the Code. Tertiary overview NZQA considers the educational outcomes for international students within every External Evaluation and Review (EER) undertaken for Code signatories. A review of Code requirements is also part of all validation visits undertaken by the Risk Team. No instances of significant non-compliance with the Code were identified during 2014/15. International Education Appeal Authority The International Education Appeal Authority (IEAA), which has three panel members, adjudicates on complaints received from international students or their authorised representatives, or referred to it by the Code Administrator concerning alleged breaches of the Code. In 2014/15 the IEAA received 31 new complaints from international students. Though slightly higher than in 2013/14, this number of complaints does not significantly change the trend of a declining number of complaints received since Twenty four of the 31 complaints received during 2014/15 (77%) concerned the refunding of fees. The remaining complaints were around issues such as enrolment, expulsion, academic and visa issues. Table 4: Complaints lodged with IEAA to 30 June Financial Year Number of Complaints Table 5: Complaints to IEAA for year ended 30 June 2015 by Provider Type Provider Type Number Primary school 0 Secondary/Composite school 2 Public Tertiary Education Institution 4 English Language School 2 Other Private Training Establishments 23 Total 31

15 15 International Education Review Panel The International Education Review Panel considers recommendations made by the IEAA when a signatory has committed a serious breach of the Code, or has not satisfactorily complied with a sanction imposed. The Review Panel submits annual reports to the Ministry of Education. No cases were referred by the IEAA to the Review Panel in 2014/15. Administration of the Export Education Levy The administration of the Export Education Levy is carried out by the Ministry of Education. Costs include the administration of levy collection, management of the Levy Trust Account funds, policy work associated with the Levy, computer hardware and software costs and the publication of the annual report. Expenditure on administration during the year ended 30 June 2015 totalled $138,645.

16 16 Export Education Levy Financial statements for the year ended 30 June 2015

17 Statement of responsibility 17 In Terms of Section 238I (3) of the Education Act 1989 The Ministry of Education as the agency responsible for administering the Export Education Levy has prepared these financial statements. The Secretary for Education accepts responsibility for the preparation of the annual financial statements and they have been prepared in accordance with generally accepted accounting practice. Appropriate systems of internal control have been employed to ensure that all transactions are executed with appropriate authorisation, that all transactions are correctly processed and accounted for in the financial records, and that the assets are properly safeguarded. In our opinion, the financial statements fairly reflect the financial position as at the end of the financial year and the financial performance and cash flows for the financial year ended 30 June We authorise the issuance of these financial statements on 6 November 2015.

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20 20 Summary of significant accounting policies Statement of compliance and basis of preparation Statement of compliance The Export Education Levy (the Levy) is a scheme administered by the Ministry of Education in accordance with section 238H of the Education Act 1989 (the Act ). These financial statements have been prepared in accordance with section 238I of this Act, which requires compliance with Generally Accepted Accounting Practice in New Zealand (NZ GAAP). The financial statements of the Export Education Levy comply with Public Benefit Entity (PBE) standards. The financial statements have been prepared in accordance with Tier 2 PBE Standards. Measurement base The financial statements have been prepared on a historical cost basis, unless otherwise stated. The financial statements are presented in New Zealand dollars and all values are rounded to the nearest dollar ($) unless otherwise stated. Effect of first-time adoption of PBE Standards on accounting policies and disclosures This is the first set of financial statements of the Levy that are presented in accordance with PBE standards. The Levy previously reported under old GAAP. The accounting policies adopted in these financial statements are consistent with those of the previous year, except for instances when the accounting or reporting requirements of a PBE standard are different to requirements under old GAAP as outlined below. The changes to accounting policies and disclosures caused by first time application of the PBE accounting standards are as follows: PBE IPSAS 1: Presentation of Financial Statements There are minor differences between PBE IPSAS 1 and old GAAP. These differences have an effect on disclosure only. The main changes in disclosures resulting from the application of PBE IPSAS 1 are the following: Receivables from exchange and non-exchange transactions: In the financial statements of the previous financial year, receivables were presented as a single balance. However, PBE IPSAS 1 requires receivables from nonexchange transactions and receivables from exchange transactions to be presented separately in the financial statements. This requirement affected the presentation of both current and comparative receivables figures.

21 21 PBE IPSAS 23: Revenue from Non-Exchange Transactions PBE IPSAS 23 prescribes the financial reporting requirements for revenue arising from non-exchange transactions. There is no equivalent financial reporting standard under old GAAP. The application of this standard affected the Levy s accounting for levy revenue. In the previous financial year, levies received were recognised as revenue when earned. However, PBE IPSAS 23 requires revenue from nonexchange transactions such as levies, to be recognised as revenue as soon as the inflow of resources can be recognised as an asset in the financial statements, unless the inflow of resources meets the definition of and recognition criteria for a liability. Non-exchange revenue from levies can only be deferred and recognised as a liability if there is a condition attached to the income that requires an entity to use the income as specified by the grantor or return the cash (or other resources transferred under the grant) if the entity does not perform as specified. In the previous two financial years (2013 and 2014), levies were received from participating educational institutions. These amounts were recognised as deferred revenue to the extent the levies had not yet been consumed. The levies received have no return obligation associated with them and therefore there is no specific condition attached to the levies. As a result of the initial application of PBE IPSAS 23, the entire amount of cash received in connection with these levies must be recognised as revenue. The current year and comparative figures in the statement of financial performance and statement of financial position for 2013 and 2014 have been amended accordingly, as shown below: Impact on statement of financial performance: 2014 $ Increase in levy income 51,017 Net impact on net surplus/deficit 51,017 Impact on net assets/equity: 2014 $ Increase in opening equity (as at 1 July 2013) 400,946 Increase in net surplus (as at 30 June 2014) 51,017 Total impact on net assets/equity 451,963 Impact on financial position: 2014 $ Decrease in deferred revenue (451,963) Decrease in total liabilities (451,963) The Levy has not elected to early adopt any new standards or interpretations that are issued but not yet effective as at 30 June 2015

22 Specific accounting policies Financial instruments 22 A financial instrument is any contract that gives rise to a financial asset of any entity and a financial liability or equity instrument of another entity. Financial assets Initial recognition and measurement All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded a fair value through surplus or deficit, transaction costs that are attributable to the acquisition of the financial asset. The Levy s financial assets include: cash and short term deposits and trade and other receivables. Subsequent measurement Loans and receivables This category of financial assets is the most relevant to the Levy. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The losses arising from impairment are recognised in the statement of financial performance in other operating expenses for receivables. This category generally applies to trade and other receivables. For more information on receivables, refer to Note 2. Derecognition A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised (i.e. removed from the statement of financial position) primarily when: The rights to receive cash flows from the asset have expired, or The Levy has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement; and either (a) the Levy has transferred substantially all the risks and rewards of the asset, or (b) the Levy has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset Impairment of financial assets Financial assets carried at amortised cost (loans and receivables). For financial assets carried at amortised cost, the Levy first assesses whether impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. Collectability of trade receivables is reviewed on an ongoing basis. An impairment provision is recognised when there is objective evidence that the Levy will not be able to collect

23 23 the receivable. Financial difficulties of the debtor, default payments or debts more than 90 days overdue are considered objective evidence of impairment. If the Levy determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment. The amount of any impairment loss identified is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognised in surplus or deficit. Interest income (recorded as interest received in the statement of financial performance) continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Financial liabilities Initial recognition and measurement All financial liabilities are recognised initially at fair value and, in the case of accounts payable, net or directly attributable transaction costs. The Levy s financial liabilities are accounts payable. Subsequent measurement Financial liabilities at amortised cost This is the category of financial liabilities relevant to the Levy. After initial recognition, accounts payable are subsequently measured at amortised cost using the effective interest rate method. Accounts payable arise from exchange transactions. Gains and losses are recognised in surplus or deficit when the liabilities are derecognised as well as through the effective interest rate amortisation process. Accounts payable are unsecured and are usually paid within 30 days of recognition. Due to their short-term nature they are not discounted. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or cost that are an integral part of the effective interest rate. Derecognition A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in surplus or deficit.

24 24 Revenue Revenue is recognised to the extent that it is probable that the economic benefits or services potential will flow to the Levy and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The specific recognition criteria described below must also be met before revenue is recognised. Revenue from non-exchange transactions Levies Levy revenue is derived from levies paid by participating educational institutions when earned. Revenue from exchange transactions Interest Revenue For all financial instruments measured at amortised cost, interest income is recorded using the effective interest rate. Effective interest rate is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Expenditure Expenses are largely derived from costs incurred by Education New Zealand and the operation of the Code of Practice office. Education New Zealand operates a work programme on behalf of the industry in the areas of professional development, marketing and research. This is recognised as an expense when the Export Education Levy Trust refunds the Ministry of Education who initially pay Education New Zealand. When education providers fail without fulfilling their contractual obligation to international students, the Export Education Levy provides support by refunding tuition fees to affected students. This is recognised as an expense when the Export Education Levy Trust fund refunds the Ministry of Education who initially pay the expense. Goods and Services Tax Revenues and expenses are recognised net of the amount of GST except: When the GST incurred on a purchase of services is not recoverable from the taxation authority, in which the GST is recognised as part of the cost of the expense item, as applicable; and In the case of receivables and payables, which are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

25 25 Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is classified as part of operating cash flows. The Ministry of Education as agent for the levy is a registered person in terms of the Goods and Services Tax Act All statements are GST exclusive except for Accounts Payable and Accounts Receivable in the Statement of Financial Position. Equity Equity is measured as the difference between total assets and total liabilities. Equity is made up of the accumulated surplus or deficit since the formation of the Levy. Significant accounting judgements, estimates and assumptions The preparation of the Levy s financial statements does not require management to make any significant judgements, estimates or assumptions. Statement of cash flows The year-end bank balance in the Statement of Cash Flows consists of bank accounts that form part of the day-to-day cash management of the Ministry as agency for the levy. The cash flows are classified into two activities: a) Operating Activities Includes cash received from all income sources including the Export Education Levy, bank interest and cash payments made for the supply of goods and services. b) Investing Activities The sources and use of this cash include the purchase of operational fixed assets. Comparatives Where changes in presentation of the financial statements have been made, comparative figures have been amended to reflect the changes.

26 26 EXPORT EDUCATION LEVY STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015 The Statement of Financial Position reports the total assets and liabilities of the Export Education Levy. The difference between the assets and the liabilities is the equity. Notes 30/06/15 30/06/14 $ $ Equity 4,894,235 3,164,022 Which is represented by: Current Assets Cash at Bank 1 4,831,864 3,425,605 Accounts Receivable 2 386, ,375 GST Receivable 40,269 82,094 Total current assets 5,259,059 3,696,074 Less Current Liabilities Accounts Payable (312,814) (522,752) Accrued Creditors (52,010) (9,300) Total current liabilities (364,824) (532,052) Net Assets 4,894,235 3,164,022 The accounting policies and notes are an integral part of the statement

27 27 EXPORT EDUCATION LEVY STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2015 The Statement of Financial Performance details the income and expenditure relating to all goods and services produced by the Ministry as agency for the Export Education Levy. Income Notes 30/06/15 30/06/14 $ $ Export Education Levies 4,584,557 3,705,459 Interest Received 91,287 41,058 Other income 1,774 98,644 Total Income 4,677,618 3,845,161 Expenditure Audit Fee 8,000 7,900 Export Education 3 2,939,373 2,977,418 Other Costs Total Expenditure 2,947,405 2,985,352 Net Surplus 1,730, ,809 The accounting policies and notes are an integral part of the statement

28 28 EXPORT EDUCATION LEVY STATEMENT OF MOVEMENTS IN EQUITY FOR THE YEAR ENDED 30 JUNE 2015 The Statement of Movements in Equity combines information about the net surplus with other aspects of the financial performance of the Export Education Levy to give a degree of measure of comprehensive income. This, together with the Statement of Financial Position, provides information for assessing the return on investment in the Export Education Levy. 30/06/15 30/06/14 $ $ Equity brought forward as at 1 July (restated) 3,164,022 2,304,213 Add net surplus 1,730, ,809 Total Recognised Revenues and Expenses for the Year 1,730, ,809 Total Equity as at 30 June 4,894,235 3,164,022 Certain amounts shown here do not correspond to the 2014 financial statements and reflect adjustments made due to first time adoption of PBE standards. The accounting policies and notes are an integral part of the statement

29 29 EXPORT EDUCATION LEVY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2015 The Statement of Cash Flows summarises the cash movements in and out of the Export Education Levy Trust Account during the year. Operating Activities Note 30/06/15 30/06/14 $ $ Cash was Received From Export Education Levy 4,409,407 3,717,245 Interest 68,163 48,015 Other Income 1,774 98,642 GST 14,406 45,497 4,493,750 3,909,399 Cash was Expended on Production of Outputs Reimbursement of Ministry of Education personnel costs (138,025) (99,394) Operating (2,949,466) (2,698,195) (3,087,491) (2,797,589) Net Cash Flows From Operating Activities 1,406,259 1,111,810 Cash at year start 3,425,605 2,313,795 Cash at year end 4,831,864 3,425,605 Represented by Cash at Bank 4,831,864 3,425,605 The accounting policies and notes are an integral part of the statement

30 30 Statement of Commitments There are no commitments at 30 June 2015 (Nil for the year ended 30 June 2014). Statement of Contingent Assets There are no contingent assets at 30 June 2015 (Nil for the year ended 30 June 2014). Statement of Contingent Liabilities There are no contingent liabilities at 30 June 2015 (Nil for the year ended 30 June 2014).

31 31 Notes to the Financial Statements Note 1 - Cash at Bank 30/06/15 30/06/14 $ $ Cheque Account 3,284,376 2,895,290 Short Term Investments 1,547, ,315 Total Bank 4,831,864 3,425,605 Note 2 - Accounts Receivable 30/06/15 30/06/14 $ $ Other Receivables (exchange transaction) Accrued Interest (exchange transaction) 25,626 - Levy income due but not received (non-exchange transaction) 360, ,680.0 Total Accounts Receivable 386, ,375 Note 3 - Export Education Levy Costs 30/06/15 30/06/14 Notes $ $ Professional & Industry Development 4 132, ,000 Promotions/Marketing 5 1,620,391 1,535,000 Research 6 512, ,000 Other 7 138, ,457 Code of Practice 8 403, ,152 IEAA 87, ,783 Bad debts written off 1,038 - Support for students affected by failure of providers 42,610 27,026 Total Export Education Levy Costs 2,939,373 2,977,418

32 32 Note 4 - Professional & Industry Development 30/06/15 30/06/14 $ $ Conferences - 60,000 Regional Partnerships Programme 123,000 - Stakeholder advisory committee travel - 6,000 Workshops, seminars and events 9,869 82,000 Agent training - 122,000 Total Professional Development 132, ,000 Note 5 - Promotions/Marketing 30/06/15 30/06/14 $ $ Agent and media familiarisation visits 67,500 75,000 Advertising, events, fairs & marketing campaigns 1,268, ,000 Brand, creative, traditional and digital media strategy, planning and buying 139, ,000 Enhancements to digital property 144,009 90,000 Total Promotion 1,620,391 1,535,000 Note 6 - Research 30/06/15 30/06/14 $ $ Market intelligence and brand health 512, ,000 Total Research 512, ,000

33 33 Note 7 - Other 30/06/15 30/06/14 $ $ Levy programme management - ENZ - 120,500 Printing of annual report Levy policy staff costs 50,787 31,966 Levy administration costs 87,238 67,433 Software maintenance Other services and contracts Total Other Expenses 138, ,457 Note 8 - Administration of Code 30/06/15 30/06/14 $ $ Reimbursement of NZQA costs 285, ,617 Travel and meetings 29,543 36,279 Communications 2,104 2,031 Office expenses 85,025 97,390 Resources 1,382 1,835 Total Code Office 403, ,152

34 34 Note 9 - Financial Instruments 2015 financial instruments are categorised as follows: Loans and receivables Financial liabilities at amortised cost Cash and cash equivalents 4,831,864 Accounts receivable 26,598 Levy income due but not received 360,328 Accounts payable 312,814 Total financial instruments 5,218, , financial instruments are categorised as follows: Loans and receivables Financial liabilities at amortised cost Cash and cash equivalents 3,425,605 Accounts receivable 695 Levy income due but not received 187,680 Accounts payable 520,752 Total financial instruments 3,613, ,752 Note 10 - Related Party Disclosure The Ministry of Education is a related party of the Export Education Levy. The Ministry of Education administers the Export Education Levy and provides policy advice to the government. These services are provided on an arm's length basis. The majority of the transactions with the Ministry of Education are reimbursements for payments made by the Ministry to third party providers. Note 11 - Events after balance date There are no material non-adjusting events after the reporting date.

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