Note 19: Explanation of major variances against budget

Explanations for major variances from the Office’s forecast figures in the Annual Plan 2007/08 are as follows:

Statement of financial performance

Audit fees and other income was $4.54 million higher than the Main Estimates. Of this increase, $2.37 million is attributable to NZ IFRS conversion audits, which are larger than earlier anticipated, particularly for local government and council-controlled entities. The balance of the increase is associated with attest audits, in relation both to the stage of completion of 30 June audits at balance date and to finalising fees as they are agreed with clients. This includes work completed by both Audit New Zealand and contracted audit service providers.

Personnel costs were higher due to Audit New Zealand delivery of the above additional work.

Operating costs were higher due to the above additional work completed by contracted audit service providers.

Depreciation and amortisation expense was lower due to the replacement of key information systems being deferred to 2008/09.

Capital charge expense was higher due to the capital charge and offsetting interest components now being reported separately. Formerly, these were offset, with the net capital charge cost being reported only in the Statement of financial performance.

Statement of movements in taxpayers’ funds

The figures reported in the Main Estimates do not include the adjustments arising from the move to NZ IFRS. The reconciliation of the resulting change in taxpayers’ funds is shown in Note 21.

Statement of financial position

The higher cash balance, higher receivables and higher work in progress all relate to the timing of invoicing and receipts for audit engagements. The higher creditors and other payables balance relates to the timing of accounts payment runs and the year-end accounting close-off.

The increase in employee entitlements relates to increased annual leave entitlements due to increases in staff leave entitlements and remuneration, and the number of days accrued for salaries payable.

Statement of cash flows

The differences in operating items all relate to the Statement of financial position items noted above.