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Part B

Finance

The Law Commission is funded from money appropriated by Parliament.

This year the Commission again budgeted to operate at a deficit, funding the shortfall in income from its reserves. The Commission’s deficit budgeting strategy is designed to enable it to achieve its planned long-term operating level. In the coming year, the Commission will apply its reserves in a capital replacement programme and to meet part of its operating deficit. An increase in the annual appropriation may be necessary to enable the Commission to sustain its strategic operating goals.

In the 1995/96 year the Commission budgeted for operating expenditure of $3 748 070 of which $2 975 100 was to be provided by way of appropriation and $772 970 from other income and reserves.

The Commission’s actual operating expenditure was $3 576 090 of which $2 975 111 was by way of appropriation and $600 979 from other income and reserves.

The financial statements for the year ended 30 June 1996 follow.

FINANCIAL STATEMENts

STATEMENT OF RESPONSIBILITY

We acknowledge responsibility for the preparation of these financial statements and for the judgments used herein.

We acknowledge responsibility for establishing and maintaining a system of internal control designed to provide reasonable assurance as to the integrity and reliability of the Commission’s financial reporting.

In our opinion these annual financial statements fairly reflect the financial position and operations of the Law Commission for the year ended 30 June 1996.

R J Sutton
R E Buchanan
Deputy President
Director

STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 1996

1996
Budget
$
Note
1996
Annual
$
1995
Annual
$

INCOME

2 975 100
Government grant
2 975 111
3 019 556
150 000
Interest received
227 444
218 852
12 300
Sale of publications
19 393
17 437
–
Miscellaneous
1000
1433
3 137 400
Total income
3 222 948
3 257 278

EXPENDITURE

2 026 730
Personnel 6
1 949 075
1 944 024
252 100
Research and consultation
261 176
130 133
154 800
Publications
95 181
51 748
217 400
Travel
197 053
110 587
169 020
Library
180 257
154 934
509 100
Rent and rates
501 034
498 597
7 800
Audit fees
7 500
7 000
88 920
Depreciation
50 648
146 410
226,100
Services and supplies
231 455
237 617
11,100
Lease costs
11 110
11 110
85 000
Professional services
91 601
57 054
3 748 070
Total expenditure
3 576 090
3 349 214
(610 670)
Deficit for year 3
(353 142)
(91 936)

STATEMENT OF MOVEMENTS IN EQUITY FOR THE YEAR ENDED 30 JUNE 1996

1996
Budget
$
1996
Annual
$
1995
Annual
$
2 482 069
Crown Equity at start of financial year
2 482 069
2 574 005
(610 670)
Operating deficit for the year
(353 142)
(91 936)
(610 670)
Total recognised revenues and expenses for the year
(353 142)
(91 936)
1 871 399
Crown Equity at end of financial year
2 128 927
2 482 069

STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 1996

1996
Budget
$
1996
Annual
$
1995
Annual
$

CURRENT ASSETS

9 931
Bank of New Zealand
6 963
8 134
125 000
Call deposits
115 000
125 000
1 270 000
Short-term deposits 1
1 900 000
2 200 000
2 500
Accounts receivable
19 601
1 583
25 000
Prepayments
26 253
30 621
35 000
Interest receivable
34 187
41 342
15 000
Goods and services tax
14 296
10 899
1 482 431
2 116 300
2 417 579
648 968
FIXED ASSETS 2
314 789
257 888
2 131 399
TOTAL ASSETS
2 431 089
2 675 467

CURRENT LIABILITIES

260 000
Accounts payable and accruals
302 162
193 398
260 000
TOTAL LIABILITIES
302 162
193 398
1 871 399
CROWN EQUITY
2 128 927
2 482 069
2 131 399
TOTAL FUNDS EMPLOYED
2 431 089
2 675 467

R J Sutton
R E Buchanan
Deputy President
Director

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 1996

1996
Budget
$
Note
1996
Annual
$
1995
Annual
$

CASH FLOWS FROM OPERATING ACTIVITIES


Cash was provided from:

2 975 100
Government grant
2 975 111
3 019 556
11 383
Receipts from customers
11 063
20 269
156 342
Interest
234 600
219 644
3 142 825
3 220 774
3 259 469

Cash was disbursed to:

3 591 028
Suppliers and employees
3 424 396
3 282 931
(448 203)
Net cash used in operating activities 3
(203 622)
(23 462)

CASH FLOWS FROM INVESTING ACTIVITIES


Cash was provided from:

930 000
Investments 7
300 000
75 000
–
Proceeds sale of fixed assets
–
1 433
930 000
300 000
76 433

Cash was applied to:

480 000
Purchase of fixed assets
107 549
23 417
480 000
107 549
23 417
450 000
Net cash from investing activities
192 451
53 016
1 797
Net increase (decrease) in cash held
(11 171)
29 554
133 134
Add opening cash balance
133 134
103 580
134 931
Close cash balance carried forward
121 963
133 134

Represented by:

9 931
BNZ Current Account
6 963
8 134
125 000
BNZ Call Account
115 000
125 000
134 931
121 963
133 134

STATEMENT OF ACCOUNTING POLICIES

1 Reporting Entity

The financial statements presented here for the reporting entity, the Law Commission, are prepared pursuant to section 17 of the Law Commission Act 1985 and section 41(1) of the Public Finance Act 1989.

2 Measurement System

The accounting principles recognised as appropriate for the measurement and reporting of results and financial position on an historical cost basis have been applied.

3 Accounting Policies

4 Changes in Accounting Policies

There have been no changes in accounting policies. All policies have been applied on bases consistent with those used in previous years. Comparative figures have been restated where necessary to conform to the current year presentation.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 1996

1 Short term investments

Maturity
1996
$
1995
$
One month
950 000
950 000
Two months
650 000
500 000
Three months
300 000
750 000

1 900 000
2 200 000

Interest rates for deposits maturing in one month range from 8.50% to 10.05%. Interest rates for deposits maturing in two and three months range from 9.75% to 9.90%. The fair value of financial instruments is equivalent to the carrying amount disclosed in the Statement of Financial Position.

2 Fixed assets
1996

Cost
$
Accumulated
depreciation
$
Book
value
$
Computer equipment
420 108
380 374
39 734
Foundation library
185 643
–
185 643
Furniture and fittings
1 011 632
936 730
74 902
Office equipment
78 445
69 524
8 921
Computer software
6 986
1 397
5 589

1 702 814
1 388 025
314 789






1995

Cost
$
Accumulated
depreciation
$
Book
value
$
Computer equipment
393 918
348 506
45 412
Foundation library
185 643
–
185 643
Furniture and fittings
939 591
922 630
16 961
Office equipment
76 114
66 242
9 872

1 595 266
1 337 378
257 888

3 Reconciliation of statement of financial performance to statement of cash flows
1996
$
1995
$
Deficit for year
(353 142)
(91 936)
Profit sale of assets
–
(1 433)
Depreciation
50 648
146 410


(302 494)
53 041
Movements in working capital


(Increase)/decrease in accounts receivable
(18 018)
2 824
Decrease/(increase) in prepayments
4 368
(11 775)
Decrease/(increase) in interest receivable
7 155
792
(Increase)/decrease in GST
(3 397)
5 539
Increase/(decrease) in accounts payable
108 764
(73 883)


98 872
(76 503)
Net cash flow used in operating activities
(203 622)
(23 462)

4 Commitments

LEASE COMMITMENTS

Non-cancellable operating leases for rental of accommodation and office equipment.
1996
$
1995
$
Less than one year
546 555
533 054
Between one and two years
538 222
533 054
Between two and three years
–
524 271

1 084 777
1 590 379

CAPITAL COMMITMENTS

There were no capital commitments at balance date (1995 $nil).

5 Contingent Liabilities

There were no material contingent liabilities as at balance date (1995 $nil).

6 Remuneration of Members of the Commission
1996
$
1995
$
Total remuneration paid to members of the Commission
558 782
647 141

7 Disclosure of Cash Flows

The cash flows relating to the Commission’s investing activities have been netted off in the Statement of Cash Flows because the amounts involved are held in short-term deposits which are rolled over frequently during the year.

8  Financial Instruments

CREDIT RISK

Financial instruments which potentially expose the Commission to credit risk consist of bank balances, short term deposits and accounts receivable.

CONCENTRATION OF CREDIT RISK

There are no significant concentrations of credit risk with respect to accounts receivable. Investments are held in a New Zealand registered bank with an A credit rating.

9 Related Party Transactions

The Law Commission is a wholly owned entity of the Crown. Revenue derived from the Crown is the Commission’s major source of revenue as set out in the Statement of Financial Performance.

STATEMENT OF SERVICE PERFORMANCE FOR THE YEAR ENDED 30 JUNE 1996

Output class: Policy Advice
Budgeted Expenditure:
$3,748,070 (excluding GST)
Actual Expenditure:
$3,576,090 (excluding GST)

Statement of Objectives for 1995 / 96
Performance Measures
Outputs Produced
The Law Commission’s objectives are:

Projects
Projects
Projects
To carry through their various stages towards final report the projects for the reform and development of particular areas of law which have been included in the Commission’s programme.
Quantity
The number of projects included in the Commission’s programme is to be as determined by the Commission, taking account of section 7 of the Law Commission Act 1985.
The number of publications to be produced, or amount of other work to be done, within each project, is to be as set out in project plans approved by the Commission.
Quantity
The projects on the Commission’s programme during the period were
(a) those included in the programme as at l July 1995 (listed in the Com-mission’s report for the year ended 30 June 1995);
(b) a project on Mäori Custom Law, being under-taken on behalf of the Mäori Committee to the Law Commission, added to the programme in 1996.
The publications produced or other work done in the period 1 July 1995 to 30 June 1996 were as set out in project plans approved by the Commission. During the period the Commission approved modifications to some plans to take account of changed priorities or developments within the project itself.
See narrative account, pages 7 to 15, for a des-cription of all work done.

Quality
The Commission’s project work is to be of the standard set by the Commission, as assured by its internal processes and external review.1
Quality
All the Commission’s project work was performed to the standard set by the Commission, as assured by its internal processes and external review.1

Time
The time for the production of project work is to be as set out in approved project plans.
Time
The time taken for the production of project work was as set out in approved project plans, with such modifications as the Commission approved to take account of changed priorities or developments within the project itself.

Cost
The cost of project work is to be within the approved project budget.
Cost
The Commission set individual project budgets for all work to be done in the period 1 July 1995 to 30 June 1996 (or beyond if the budgeted phase of the project was to extend beyond the end of the financial year). Time and other expenditure was recorded against the project budget, and the Commission received monthly reports of actual time and cost against the project budget. The Commission’s expenditure on its projects as a whole was $3,166,510.2
Follow-up

To follow up all final reports by
  • taking part in discussions with interested individuals and groups, privately and in public forums, on the meaning and effect of the Commission’s recommendations,
  • discussing with relevant Ministers and their Departments the nature and the timing of the steps necessary to implement the Commission’s recommendations, and
  • participating in appropriate ways in the preparation of legislation implementing the Commission’s recommendations and in the parliamentary processes leading to its enactment.
Quantity
Follow-up is to
  • be discussed at the regular policy meetings between the Law Commission and the Ministry of Justice;
  • be discussed with the Minister of Justice, other Ministers or departments and parliamentary select committees as requested, or on the Commission’s initiative where appropriate;
  • involve participation in, or the convening of, seminars and conferences as appropriate and as opportunity offers.2
Quantity
Follow-up included
  • regular discussions and correspondence with the Minister of Justice, the Leader of the House, and the Ministry of Justice about the inclusion in the Government’s legislative programme of draft Acts recommended by the Law Commission;
  • advice to the Government Administration Select Committee in connection with the Commission’s recommendations on Arbitration (NZLC R20, 1991), as taken up in the Arbitration Bill 1995;
  • advice to the Ministry of Commerce in connection with the Commission’s recommendations in A Personal Property Securities Act for New Zealand (NZLC R8, 1989);
  • advice to the Attorney-General in connection with the Commission’s recommendations on A New Interpretation Act (NZLC R17S, 1990);
  • discussions and correspondence with the Department for Courts and the Ministry of Justice in connection with the Commission’s recommendations on Criminal Procedure: Part One: Disclosure and Committal (NZLC R14, 1990);
  • advice to the Ministry of Health in connection with the Commission’s recommendations on Community Safety: Mental Health and Criminal Justice Issues (NZLC R30, 1994);
  • discussions and correspondence with the Ministry of Justice about the implementation of other Law Commission reports.
See narrative account, pages 15 to 16, for a further description of work done.

Quality
To the Commission’s standards, as assured by its internal processes and external review.1
Quality
All follow-up work was performed to the Commission’s standards, as assured by its internal processes and external review.1

Time
As agreed, or otherwise at a time enabling the follow-up work to be effective, taking account of the Government’s legislative programme, the parliamentary timetable and other relevant factors.
Time
All follow-up work was undertaken as agreed, or otherwise at a time enabling it to be effective, taking account of the Government’s legislative programme, the parliamentary timetable and other relevant factors.

Cost
Within the budget for follow-up.
Cost
The Commission did not set a separate budget for follow-up for the 1995/96 financial year, but Commissioner and research officer time spent on discrete aspects of follow-up was charged to that output. The Commission’s expenditure on follow-up as a whole was $37,942.2,3
Advisory work

To provide advice, in accordance with s 5(l)(c) of the Law Commission Act 1985, on proposals by other agencies for the review or reform of the law.
Quantity
Advice is to be provided on proposals
  • referred to the Law Commission by the Minister of Justice, other Ministers or select committees, and, to the extent that resources permit, by other government agencies, and
  • on the Commission’s initiative where the proposals bear on the Commission’s project work or Commission involvement is an important step in achieving the Commission’s purpose and objectives.4
Quantity
The Commission received 27 new requests for advice from Cabinet Ministers, departments and select committees and other sources in the year to 30 June 1996. Work continued on 24 items carried over from the previous year.
See narrative account, page 17, and Appendix D, for a summary of work done.

Quality
To the Commission’s standards as assured by its internal processes and external review.1
Quality
All advice was provided to the Commission’s standards as assured by its internal processes and external review.1

Time
As agreed with the recipient, or otherwise at a time enabling the advice to be taken into account and acted upon within the timeframe of the recipient.
Time
All advice was provided as agreed with the recipient, or otherwise at a time enabling the advice to be taken into account and acted upon within the timeframe of the recipient.

Cost
Within the budget for advisory work.
Cost
The Commission set a budget of $375,000 for advisory work for the 1995/96 financial year. All Commissioner and research officer time spent on advisory work was charged to that output. The Commission’s expenditure on advisory work was $217,204.2
Legislation Advisory Committee

The output is the contribution to the work of the Legislation Advisory Committee to be provided by Sir Kenneth Keith in his capacity as a member of the Committee, the assistance of the Commission’s research and secretarial staff and the office accommodation made available for the Chairman of the Committee, Dr Mervyn Probine.
Quantity
As agreed with the Committee, subject to the availability of the Commission’s resources.
Quantity
The work done was as agreed with the Committee.
See narrative account, pages 17 to 18, and Appendix E, for a description of all work done.

Quality
To the Commission’s standards as assured by its internal processes and external review.1
Quality
All work was performed to the Commission’s standards as assured by its internal processes and external review.1

Time
As agreed with the Committee.
Time
All work was done within a timeframe agreed with the Committee.

Cost
To be within the Commission’s budget for its contribution to the work of the Legislation Advisory Committee.
Cost
The Commission set a budget of $168,000 for its contribution to the work of the Legislation Advisory Committee for the 1995/96 financial year. All Commissioner and research officer time spent on that contribution was charged to that output. The Commission’s expenditure on the output as a whole was $154,434.2, 5

Notes to the Statement of Service Performance

_______________________________________________

1 In the case of the Commission’s project work, external review involves both the use of expert consultants – to contribute to the writing, or to consider and comment on successive drafts – and also wide consultation with interested agencies and groups. In the early stages of a project, external review is directed at the project outline, the issues to be addressed, and (in some cases) the project terms of reference themselves. In the advanced stages of a project, external consultants contribute to the writing of, or consider and comment on drafts of, publications. Drafts are also frequently circulated to interested agencies and groups before publication. In most cases, a discussion paper is published and widely circulated, and submissions on it are invited and considered before the preparation of a final report which itself contains a description of the consultation process followed in the particular case.

Reports are published, tabled in Parliament and copies are distributed to interested or affected individuals and groups. They are submitted to appropriate legal journals for review, and a great deal of informal feedback is received from Ministers and parliamentary select committees, legal and other professional societies, judges, members of the legal profession, and law reform agencies, interested bodies and individuals in other countries.

In the case of follow-up, advisory work and assistance to the Legislation Advisory Committee, external review consists of the informal feedback received in the course of any consultations with officials or others (including the Legislation Committee of the New Zealand Law Society and the Legislation Advisory Committee itself) outside the Law Commission in the course of preparing the submission, advice or other document, or received from the recipient, together with evidence of the extent to which the submission, advice or other document is accepted and acted upon.

2 The Commission received monthly reports on the quantity and timeliness of all work done and on actual costs, as compared with budgeted costs, for each phase of its projects, for advisory work, and for assistance to the Legislation Advisory Committee.

3 For budgetary purposes, the Commission’s follow-up work is treated as if it were a single consolidated project. The Director received regular reports on the actual costs charged to particular items within the follow-up output.

4 For administrative and budgetary purposes, the Commission’s advisory work is treated as though it were a single, consolidated project. A budget is allocated in advance and resources organised so as to make one member of the research staff primarily available for advisory work. It is not always possible, however, to foresee the specific occasions on which the Commission will be asked (or will consider it appropriate) to provide advice and, consequently, what other research resources will have to be allocated to advisory work. Therefore the specification of quantity relates to the number of requests received and other items undertaken which bear on project work or enhance the achievement of the Commission’s purpose and objectives.

5 For budgetary purposes, the Commission’s contribution to the work of the Legislation Advisory Committee is treated as if it were a single consolidated project.

REPORT OF THE AUDIT OFFICE

TO THE READERS OF THE FINANCIAL STATEMENTS OF THE LAW COMMISSION FOR THE YEAR ENDED 30 JUNE 1996

We have audited the financial statements on pages 26 to 43. The financial statements provide information about the past financial and service performance of the Law Commission and its financial position as at 30 June 1996. This information is stated in accordance with the accounting policies set out on page 31.

Responsibilities of the members of the Law Commission

The Public Finance Act 1989 requires the members of the Law Commission (the members) to prepare financial statements in accordance with generally accepted accounting practice which fairly reflect the financial position of the Law Commission as at 30 June 1996, the results of its operations and cash flows and the service performance achievements for the year ended 30 June 1996.

Auditor’s responsibilities

Section 43(1) of the Public Finance Act 1989 requires the Audit Office to audit the financial statements presented by the members. It is the responsibility of the Audit Office to express an independent opinion on the financial statements and report its opinion to you.

The Controller and Auditor-General has appointed H C Lim, of Audit New Zealand, to undertake the audit.

Basis of opinion

An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements. It also includes assessing:

We conducted our audit in accordance with generally accepted auditing standards in New Zealand. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatements, whether caused by fraud or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the financial statements and the Law Commission’s compliance with significant legislative requirements.

Other than in our capacity as auditor acting on behalf of the Controller and Auditor-General, we have no relationship with or interests in the Law Commission.

Unqualified opinion

We have obtained all the information and explanations we have required.

In our opinion, the financial statements of the Law Commission on pages 26 to 43:

– the financial position as at 30 June 1996 and
– the results of its operations and cash flows for the year ended on that date and
– the service performance achievements in relation to the performance targets and other measures adopted for the year ended on that date.

Our audit was completed on 24 September 1996 and our unqualified opinion is expressed as at that date.

H C Lim

Audit New Zealand

On behalf of the Controller and Auditor-General

Wellington, New Zealand

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