Each year we receive funding from the Government to deliver specific services. This funding is called an appropriation.
An appropriation is a parliamentary authorisation for the Government or an Office of Parliament to incur expenses or capital expenditure. Expenditure can only be incurred under an appropriation or other statutory authority.
Over the past 5 years, our total spend has decreased by $54 million as we transform our organisation. Our total spend excluding the Transformation appropriation has decreased by $50 million over the same period.
Inland Revenue’s funding through appropriations
We were funded through 4 appropriations in 2020-21.
- Services for Customers multi-category appropriation - $586 million.
- Services to Other Agencies - $5 million.
- Transformation multi-year appropriation - $130 million.
- Policy Advice - $12 million.
Operating expenditure from 2016-17 to 2020-21
The figures in the table below are in $millions.
| 2016-17 | 2017-18 | 2018-19 | 2019-20 | 2020-21 | |
|---|---|---|---|---|---|
| Policy Advice | $9 | $9 | $10 | $10 | $11 |
| Services for Customers multi-category appropriation | $635 | $592 | $610 | $641 | $581 |
| Services to Other Agencies | $2 | $4 | $5 | $6 | $5 |
| Transformation | $133 | $197 | $203 | $167 | $129 |
Expenditure incurred against departmental appropriations
We finished the 2020-21 year within all departmental appropriations. In 2020-21, our total spend was $726 million. This was $7 million lower than our operating appropriations. This will form part of our in-principle expense transfers from 2020-21 to 2021-22. The lower spend is mainly due to the timing of delivering COVID-19 related initiatives and the Research and Development Tax Incentive scheme.
2020-21 expenditure against operation appropriations
The figures in the table below are in $millions.
| Appropriation | Expenditure | ||
|---|---|---|---|
| Services for customers multi-category appropriation | $586 | $581 | |
| Policy advice | $12 | $11 |
|
| Services to other agencies | $5 | $5 | |
| Transformation multi-year appropriation | $130 | $129 | |
Our operating expenditure
Our operating expenditure against appropriations excluding remeasurements (expenditure that does not require an appropriation) was $725.8 million.
Operating funding of $1.4 million in our Transformation multi-year appropriation will be transferred to 2021-22.
Operating expenditure by cost categories
Our expenditure includes personnel, operating, depreciation and amortisation, and capital charge. Our total personnel costs for 2020-21 were $418.7 million. These costs were directly related to our employees’ remuneration, severance costs associated with transformation, employee entitlements and training and development costs. Operating costs for the year were $227.7 million. Approximately 91% of these operating costs relate to contractors, information technology and telecommunications, rental (accommodation leases), consultants and office expenses.
Breakdown of expenditure by cost category
The figures in the table below are in $millions.
| 2019-20 | 2020-21 | |
|---|---|---|
| Personnel | $436 | $419 |
| Operating | $297 | $228 |
| Depreciation and amortisation | $67 | $56 |
| Capital charge | $23 | $23 |
Our capital expenditure
Capital expenditure is the purchase or development of assets by, and for the use of, Inland Revenue, as authorised by section 24(1) of the Public Finance Act 1989.
We spent $65 million on capital investment in 2020-21. This was lower than our revised capital budget of $89.3 million, mainly due to re-phasing the capital plan for the transformation programme and moving transformation contingency to the final year of the programme.
Our capital asset management priorities for 2020-21 were:
- Maintain and improve business infrastructure (target: 10% of total capital expenditure; actual: 10%)
Our investment profile for maintaining and improving business infrastructure includes technology replacements and accommodation fit-outs.
- Implement business transformation (target: 90% of total capital expenditure; actual: 90%)
Our investment profile for transformation includes implementing core and supporting capabilities, including technology, for a modern, digital revenue system for New Zealand. We spent 90% of our capital expenditure on transformation.
Go to the following page for details of departmental capital injections.
Statement of departmental capital injections
For details of departmental capital expenditure incurred against appropriations, refer to the Statement of departmental budgeted and actual expenses and capital expenditure incurred against appropriations.
Overall Investor Confidence Rating
The 2019 Investor Confidence Rating for Inland Revenue is A.
The Investor Confidence Rating is a 3-yearly assessment of the performance of investment-intensive agencies that manage investments and assets that are critical to the delivery of government services.
Our transformation expenditure
Our expenditure to date on transformation is under budget. We spent $1,308.9 million (excluding depreciation and capital charge) on transformation between 1 July 2014 and 30 June 2021. This includes $875.6 million in operating expenditure and $433.3 million in capital expenditure. We’re delivering transformation within the approved funding and have already returned efficiencies of approximately $129 million to the Crown. Further efficiencies will be delivered in line with the transformation business case.
Our future outlook
Operating expenditure for 2021-22 is forecast to be $899.2 million, an increase of $173.2 million from 2020-21. Capital expenditure for 2021–22 is forecast to be $162.6 million, an increase of $97.6 million from 2020-21. Our capital investment in 2020-21 was $65 million, contributing to the growth of our net assets. This is mostly driven by investing in more intangible assets as we further transform our organisation.