SFO Annual Report 2017 2

SFOAnnualReport2017 2

Highlightsof2017NewZealandtopstheworldforperceivedlowlevelsofpublicsectorcorruption

100%custodialsentenceshandeddownforconvictionsachieved

40%morecomplaintsrespondedtointhesamenumberofdays

TheSFO’sbiennialFraudandCorruptionConferenceinFebruaryattracted200+participantsandencouragedgreaterawarenessoffinancialcrime

FirstgovernmentdepartmenttopublishanonlineAnnualReportannualreport2017.sfo.govt.nz


Contents

Director’soverview............................................................................................................................4

Ourrole..............................................................................................................................................6

Strategicobjectives............................................................................................................................8

2020StrategicPlan...........................................................................................................................11

Keyinvestigationresults..................................................................................................................12

Oursystems,processesandtechnology..........................................................................................19

Ourpeople.......................................................................................................................................21

FinancialStatements............................................................................................................................26

Statementofresponsibility..............................................................................................................26

Statementofperformance...............................................................................................................27

Outputexpense:investigationandprosecutionofseriousfinancialcrime.....................................28

Financialstatements........................................................................................................................32

Notestofinancialstatements..........................................................................................................39

Statementsofexpensesandcapitalexpenditure...........................................................................56

IndependentAuditor'sReport.........................................................................................................57

Appendix1–Useofstatutorypowers.............................................................................................60


Director’soverview‘Bringingtogethertheoldandthenew’wasthethemeoftheSeriousFraudOffice’ssecondInternationalFraudandCorruptionConference,heldinAucklandinFebruary2017.Fraudandcorruptionareage-oldcrimesbuttoday’sperpetratorsarefindingnewwaystodeceiveandcorrupt.Thechallengeforlawenforcement,governmentandthebusinesscommunityistostayonestepaheadoftheoffendersbyembracingnewmethodsandtechnologiestodetectandprosecutethoseresponsible,aswellasopportunitiestopreventoffendingandtoeducateanddeterpotentialoffenders.Thisyear’sAnnualReporthighlightsprogressinthisarea.

ActiononpublicsectorcorruptionNewZealandmadeawelcomereturntojointtopranking,scoring90alongwithDenmark,intheTransparencyInternational(TI)CorruptionPerceptionsIndex2016.Theindexmeasuresperceivedlevelsofpublicsectorcorruption.Acollaborativeinvestmentbypublicsectororganisations,regulators,JusticeSectoragencies,theStateServicesCommission,andprofessionalservicesfirmshasalsoseenourpublicservicemovetowardsaproactiveapproachtopreventingcorruption.Despitethesepositiveindicators,NewZealandisalivetothethreatposedbycorruption.TheSFOisactivelyworkingacrossthepublicsector,coordinatingananti-corruptionworkprogramme,whichisintheplanningstages.Theworkwilladdresseducation,preventionanddeterrence–importantelementsinbuildingastrongsocietywithintegrityasacentralcharacteristic–aswellasdetection,investigationandprosecution.

TheSFOhasprosecutedemployeesfrombothAucklandTransportandtheMinistryofTransportforsignificantfraudsthisyear.Thesecases,likemostofthosewepursue,werecomplexandembeddedinarelationalcontext.Itwouldbeeasytogetlostinthemyriadofminorissuesinvolvedinthesemattersbutoftensuchissuesmakelittle,ifany,differencetotheoutcomeortothelengthofsentence.Astrategicapproachtocaseinvestigationandprosecution,focusingonthehigh-impactoffending,ensuresweuseourresourcestomaximumeffect.

NewZealand’scommitmenttotheLondon-basedInternationalAnti-CorruptionCoordinationCentre(IACCC)isbeingembedded.TheSFOisleadingourparticipationintheIACCCwithNZPolice.NewZealandhasrepresentationatthecentreandtogetherwithPoliceAssistantCommissionerInvestigations,RichardChambers,IamonthegovernancegroupoftheIACCC,whichwassetuptofacilitatecooperationacrossinternationaljurisdictionsoncasesofhigh-levelcorruption.TheSFOhasalsocontinuedourinternationalemphasisoncombattingcorruptionbyparticipatingintheOECDpeerreviewprocessoftheAnti-BriberyConventionandinthePhase1reviewinFebruary2017ofNewZealand’scompliancewiththeUnitedNationsConventionAgainstCorruption(UNCAC).

EmbracingpartnershipsandnewsystemsInDecember2016,wewelcomedthenewMinisteroftheSFO,DeputyPrimeMinistertheHonPaulaBennett.AkeygovernmentpriorityisthatagenciesworktogethertoachievethebestoutcomesforNewZealand.TheSFOisdiscussingwithpartneragenciestheconceptofasystem-widefinancialcrimestrategy.Thisproposalconsidersthecreationofasystem-wideapproachbygovernmentagencieswithrolestoplayineducation,preventionandenforcement.ItrespondstoakeyrecommendationintheSFO’s2014PerformanceImprovementFramework─thattheweaknessesinherentinagenciesholdingsub-setsofknowledgeneedstobeaddressedbyasystematic,joined-upresponse.

TheSFOismovingaheadwithotherprojectsthatsitwithintheninekeyinterventionsinour2020StrategicPlan.Aspartofawiderbusinesssystemstransformation,weweresuccessfulinpresentingthebusinesscaseforfundingnewcaseandevidencemanagementsystemsandwillcompleteimplementationinthe2017/2018year.Wehavemadecontinuousimprovementstoorganisationaldesigntoalignwiththesenewsystemsandfinishedtheyearontargetwiththeagency’sbudget.


Asasmall,agileagencywecontinuetoinnovateandleadthewayinbestpractice,movingtocloud-basedaccountingandpublishingourfirstIntegratedStatementofStrategicIntentthatincorporatestheSFO’sFour-yearBusinessPlanandanupdatedStatementofIntent.

TheSFO’ssizeandthespecialistnatureofrolesofferslimitedinternalabilityforemployeedevelopment,somethingweacknowledgebysupportingemployeeprofessionaldevelopmentwhereverpossible–thisyearnotablywithactingmanagementroles.Twoofourspecialistswithfuture-thinkingrolesarefeaturedinthisyear’sreport.Theyaretaskedwithensuringwecanconfidentlymeetfuturewavesofincreasinglydigitalfinancialcrime.

Allouremployeesmakevaluablecontributionstogrowingastronger,morecapableagency.Ithankthemfortheirachievementsin2016/2017andlookforwardtoseeingwhatwecanachievetogetherintheyearahead.

JulieRead

ChiefExecutiveandDirector

TheSFOhashadastrategicyear,implementinginnovativeprojectsthatfuture-prooftheagencytoinvestigateandprosecutetomorrow’s

perpetratorsoffinancialcrime.

VisionAproductiveandprosperousNewZealand,safefromfinancialcrime,briberyandcorruption.

CoreprinciplesExcellence:Westrivetobeaworld-classfinancialcrimeandcorruptionagency.

Pride:IntheworkwedoandourcontributiontoNewZealand.

Connect:Recognisingourownstrengthsandopportunities,andthosearisingfromclosecollaborationwithandconnectionsacrossagenciesandsectors.


Ourrole

WhoweareTheSFOistheleadlawenforcementagencyforinvestigatingandprosecutingseriousfinancialcrime.Inparticular,wearetheleadagencyforbriberyandcorruptioninvestigations.

ThepresenceofanagencydedicatedtowhitecollarcrimeisintegraltoNewZealand’sreputationfortransparency,integrity,fair-mindednessandlowlevelsofcorruption.AspecialistagencysuchastheSFOisconsideredinternationallyasthegoldstandardforrespondingtocomplexfinancialcrime.

Theagency’shighlyexperiencedteamof54employeesisbasedinAuckland.Mostarefrontlinefinancialcrimeinvestigationspecialistswhoexaminepossibleinstancesofoffendingand,whereappropriate,prosecutetoholdtheoffenderstoaccount.TheSeniorLeadershipTeamdevelopsourstrategicdirectionandkeyrelationships.

SeriousFraudOfficeSeniorLeadershipTeam.Fromleft:NickPaterson,GrahamGill,CarolPalmer,JulieRead,RebeccaRolls,PaulO’Neil

HowwedeterminecasestoinvestigateTheSFOhasstatutoryindependence;operationaldecisionsaremadewithoutministerialdirection,wehavetherighttocompeltheproductionofdocumentsandtheansweringofquestions.

Asagovernmentagencywithlimitedresources,wemustfocusonarelativelysmallnumberofcasesthatsignificantlyimpacttheeconomyortheNewZealandpublic.Inthecaseofbriberyorcorruption,weinvestigatecrimesthatcouldundermineconfidenceinthepublicsectororareofsignificantpublicinterest.Casesareprioritisedusingasetofcriteriathataddressesthescaleofthecrimeanditsimpactonvictims,thecomplexityandthedegreeofpublicinterest.

Thedecisiontoprosecuteisbasedonsufficientevidenceandpublicinterest.WhileitisnottheroleoftheSFOtofindguiltortoseekcompensationforlossessufferedbyvictims–thatsitswiththecourts–publicdisclosureandcustodialsentences,whereimposed,arestrongdeterrentsofwhitecollarcrime.Weplayanimportantroleinachievingbothresults.High-profilecasesarealsoanopportunityforustoshareourexpertiseabouttheimpactofcomplexfinancialcrime,bothonimmediatevictimsandthewiderpublicandprivatesectors.


WhowepartnerwithTomaximisevalue-for-moneyandprovideanall-of-governmentresponsetofinancialcrime,wecollaboratewithotherlawenforcementandregulatoryagencies.Ourpartnersinclude:

• NewZealandPolice(Police)• MinistryofJustice(MoJ)• CrownLawOffice(CLO)• NewZealandCustomsService(Customs)• DepartmentofInternalAffairs(DIA)• OrganisedandFinancialCrimeAgencyofNewZealand(OFCANZ)• OfficeoftheAuditor-General(OAG)• MinistryofBusiness,InnovationandEmployment(MBIE)• InlandRevenueDepartment(InlandRevenue)• CommerceCommission(ComCom)• FinancialMarketsAuthority(FMA).

Wealsomaintainstrategicpartnershipswithrelevantprivatesectorinterests,suchasaccountingfirmsandinsolvencypractitioners.

Ourinternationalcounterpartsinclude:

• UKSeriousFraudOffice(UKSFO)• InternationalAnti-CorruptionCoordinationCentre(IACCC)• FederalBureauofInvestigation(FBI)• IndependentCommissionAgainstCorruption(ICAC)HongKong• CorruptPracticesInvestigationBureau(CPIB)Singapore• AustralianFederalPolice(AFP)• EuropeanAnti-FraudAgency(OLAF).

Theinternationalforaweareactivelyinvolvedwithare:

• APEC’sAnti-CorruptionandTransparencyWorkingGroup(ACTWG)• OECDWorkingGrouponBribery• UnitedNationsConventionAgainstCorruption(UNCAC)• EconomicCrimeAgenciesNetwork(ECAN).


StrategicobjectivesTheSFOcontributesto:

• theGovernment’spriorityofbuildingamorecompetitiveandproductiveeconomy–includingactivelycollaboratingwithpublicandprivatesectorpartnerstominimisetheriskofbriberyandcorruption;andthesixkeyareasintheBusinessGrowthAgenda

• theCriminalJusticeSector’sfour-yearmissionofamoreagilecriminaljusticesystemthatdeliversfairandproportionatecriminaljusticeserviceswhenandwheretheyaremostrequiredtomeettheneedsofNewZealanders

• BetterPublicService(BPS)resultarea7ofreducingseriouscrime.

Asastand-aloneagencywhosecorebusinessisinvestigatingandprosecutingwhite-collarcrime,wehavelimitedabilitytocontributetothecurrentJusticeSectortargetedareasforreducingseriouscrime,i.e.familyandsexualviolence,gangs,andMaorire-offendingrates.Byfocusingonthemostcomplexandtime-consumingcasesoffinancialcrime,theSFOfreesotherJusticeSectoragenciestofocustheireffortsonthesemorevulnerableareasofsociety.

Inprosecutinginvestmentandmortgagefraud,wedoprovidejusticeformanyvulnerablevictimswhogetcaughtupinsuchscams,althoughwedonothavecontroloversentenceshandedoutforthecrimeswesuccessfullyprosecute.Thatresponsibilityrestswiththecourts.

AsidefromBPS7,theJusticeSectorstrategicprioritiestowhichwedirectlycontributeare:

• reducepressureacrosstheJusticepipeline–byensuringoperationalprocessesareefficientandeffective

• improvehowweworktogethertoachieveoursharedgoals–aninvestmentapproachtojusticethroughimprovingouruseofdata,increasingsector-widecollaborationandstrengtheningourframeworkandresponsestocombatcorruption.

In2016/2017,theSFOengagedinasignificantandinnovativeprojecttodevelopanIntegratedStatementofStrategicIntent(ISSI)2016-2020thatmergestwokeyplanningdocuments:ourStatementofIntentandFour-yearBusinessPlan.

TheninekeyinterventionsintheSFO’sStrategicPlan2020(seepage11)haveunderpinnedthedevelopmentofnewISSIperformancemeasuresforthenextfouryears.TheoutcometablesbelowcombinethenewmeasuresintheISSIthatwehavechosentoincludeinthisAnnualReport,withexplanationsofwherethewordingvariesfromtheStatementofIntent(SOI)2016/2017(althoughthetrendresultsarecontinuous);andthemeasuresfor2016/17thatwearerequiredtoreporton,whichhavebeendiscontinuedoramendedintheISSI(thesearegrey).Note:newmeasureswerenotpreviouslyaudited.


Outcome1:Aconfidentbusinessenvironmentthatislargelyfreeofseriousfinancialcrime

Impacts Indicators Measures TrendResults

NewZealandisasafeplacetoinvestanddobusiness*

Businessessaythatlawenforcementactionismaintainingorimprovingtheintegrityofourfinancialandcommercialmarkets

and

Thepublichavetrustandconfidencethatfinancialcriminalswillbeprosecutedandsentenced

BiennialSFOStakeholderSurvey**

“HoweffectivehaveSFOinvestigationsandprosecutionsbeen?”

Maintainorimproveon7.1(scaleof10)

and

BiennialPublicSurvey

Publicfeelthat“NewZealandisasafeplacetoinvest”

2016/17:7.7

2014/15:7.3

2012/13:7.7

2010/11:7.1

2015/16:63%***baseline

Ourreputationforlowlevelsoffinancialcrime,briberyandcorruptionprovidesaglobalcompetitiveadvantagetoNewZealandbusinesses****

NewZealand’srankingofcorruption-freenations

TransparencyInternationalCorruptionPerceptionIndex

Achieverankingwithinthetopthree

2016:1stequalDenmark

2015:4th

2014:2nd

2013:1stequalDenmark

2012:1stequalFinland,Denmark

2011:1st

*ThemeasuresandtrendresultsremainthesameastheSOI2016/2017,howeverthewordingoftheimpactandindicatorstatementhavebeenalteredintheISSItoalignwiththeoutcomesintheSFO’sStrategicPlan2016-2020.Previouslywordingread:Businessandinvestorconfidenceintheintegrityofourfinancialandcommercialmarketsismaintainedorincreased.And,“Thosewhosaythatlawenforcementactionismaintainingorimprovingtheintegrityofourfinancialandcommercialmarkets.”Thebiennialpublicsurveyresultisanewmeasureforthisimpact.

**The2017independentsurveyrequestedtheparticipationof55keySFOstakeholdersinNewZealand.Ofthese,39wereinterviewedabouttheirperceptionsoftheSFO’sperformance,usingaratingscaleof1-10.Thissurveyisqualitativeresearchwithnomarginoferror.Thenextsurveywillbeconductedin2019.

***Thenewmeasureswerenotpreviouslyaudited.

****NowinOutcome1ratherthanOutcome2toreflecttheincreasedfocusonthebusinesssectorintheSFO’sStrategicPlan2016-2020.ThewordingoftheimpactstatementhasalsochangedtoalignwiththeoutcomesintheSFO’sStrategicPlan2016-2020.IntheSOI2016/2017itread:“NewZealandmaintainsitsinternationalreputationforverylowlevelsofbriberyandcorruption.”


Outcome2:Ajustsocietythatislargelyfreeoffraud,briberyandcorruption

Impacts Indicators Measures TrendResults

Increasecross-agencycapabilitytoachieveJusticeSectorsharedgoals

CollaborationacrosstheJusticeSectorandotheragencies

Numberofjointinvestigations

2016/17:2*baseline

Educateandinteractwiththecommunity

BiennialPublicSurvey

PublicagreetheSFO:“doesagoodjobindemonstratingtheconsequencesofseriousfinancialcrime”

2015/16:53%*

Confidenceincreasesthatthemaindefendantinfinancialcrimecasesisheldtoaccount

Frequencyofcustodialsentencesbeingorderedwhereaconvictionagainstthemaindefendantwasobtained

Annualanalysis,includingtrendscompiledbytheSFO:

Maintainorincreasefrom75%ofcases

2016/17:100%*

baseline

*Thenewmeasureswerenotpreviouslyaudited.

StatementofIntentmeasuresfor2016/2017(discontinuedoramendedinISSI)

Publicandvictims’confidencethatthosewhocommitfinancialcrimeareheldtoaccountisincreased(amendedwordinginISSI)

Frequencyofcustodialsentencesbeingorderedwhereaconvictionwasobtained(amendedwordinginISSI)

Annualanalysis,includingtrendscompiledbytheSFO:

Maintainorincreasefrom75%ofcases

2016/17:notmeasured*

2015/16:89%*

2014/15:69%

2013/14:89%

2012/13:84%

2011/12:95%

VictimsoffinancialcrimeperceivethattheactionsoftheSFOhelptoensurethatperpetratorsoffinancialcrimeareheldtoaccount

SFOComplainantsandVictims’Survey

“TheactionsoftheSFOmakeadifferenceandhelpdeterseriousfinancialcrime.”

Maintainorincreasefrom65%ofrespondents

2016/17:notmeasured**

2015/16:Surveydiscontinued**

2013/14:38%

2011/12:65%

*Resultsnolongerdirectlycomparableasthemethodofcalculationchangedin2015/16toincludehomedetention.Althoughnotatermofimprisonment,homedetentionisacustodialsentence.Thismeasurehasbeenamendedtopertainonlytoconvictionofthemaindefendant.NotethattheSFO’sroleistoputtheappropriatecasesbeforetheCourts,nottodeterminesentences.

**TheComplainantsandVictims’Surveywasdiscontinuedfollowinganevaluationofitsusefulnessand/orpotentiallyconfusingmessages.AlthoughSFOprosecutionscaninvolvehundredsoreventhousandsofvictims,wedonotholdresponsibilityforsomefactorsthatareunderstandablyimportanttovictims,e.g.decidingpenaltiesandrecoveringlosses.Victimresponsestohowwellweperformourrolecanbeinfluencedbythesemeasures,whichwehavenocontrolover.


Strategic Plan2016-2020

Our vision is …

A productive andprosperous New Zealandsafe from financial crime,bribery and corruptionSo that …• New Zealand is a safe place to invest and do business• Our reputation for low levels of financial crime, bribery and corruption provides

a global competitive advantage to New Zealand businesses

We will become a stronger, more capable agency that will:

Conduct investigations and prosecutions of the highest quality and effectiveness

Align the SFO’s role, objectives, functions and activities with those of our key stakeholders

Lead the understanding of financial crime, bribery and corruption in the private and public sectors

Lead in the sharing of financial crime intelligence sharing between agencies to identify and prevent threats

Contribute tofinancial crime law reform and policy

Prevent financialcrime througheducation and advice

To do this we need to:

Attract and retain the best

people

Challengeand support

our team to be the best

Invest in the right tools and systems

Have a culture of continuous improvement

Achieve more through effective collaboration with our NZ partners

Enhanceconnections

with overseasagencies

Use intelligence

to understand the financial crime

landscape

Support thecreation of a

financial crimepolicy forum

Educate and interact

with the community

2020StrategicPlan


KeyinvestigationresultsTheSFOtypicallyhas50-55casesunderinvestigationorprosecutionatanyonetime.Overhalfofallcases(58%)extendbeyond12months.From2014through2016,thetotalvalueoffraudforcasesprosecutedbytheSFOexceeded$150million–withanaveragefraudvalueperprosecutedcaseofover$8million.

In2016/2017,wereceived831complaints,thehighest-evernumber(600isaverage).Ofthese,25becamePart1enquiries,todeterminewhetherallegationsoffraudshouldprogresstoafullinvestigation.Eightprogresseddirectlytoafullinvestigation.Wecommenced10prosecutions,thesamenumberasin2015/2016buta67percentincreaseon2014/2015.

Whereappropriate,werefercomplaintswhicharenotinvestigatedbytheSFOtorelevantagencies.

Forresultsindetail,seeourOutputexpenseonpage28.

Publicsectorbriberyandcorruption NewZealand’sreturntofirstequalplacingwithDenmark,scoring90,ontheTransparencyInternational(TI)CorruptionPerceptionsIndex(CPI)forperceivedlevelsofpublicsectorcorruptionrancountertothegeneraltrendofresultsfor2016.Morecountriesdeclinedthanimproved,andtheglobalaveragescoreof43isanindicatorofendemiccorruptioninacountry’spublicsector.Nineteenoutof30AsiaPacificcountriesscored40orless.

TheSFOhasbeenworkingwithTItoachievebettermutualunderstandingofthecomplexindexmethodology,whichwillensureweadvocateforappropriatepolicyandlegislativereformsandtaketherightactionstoretainthishighranking.

DespitethelowlevelsofcorruptioninNewZealandthereisnowgreaterawarenessofitsexistenceandawillingnesstoaddresstheoffendingwhenitoccurs.Thisyearhasseenanupliftincorruption-relatedcomplaints,includingallegationswithingovernmentdepartments.Theincreaseispartlyduetotheeducationandawarenessworkwedowithstakeholderagenciesandthepublic,positioningourselvesastheleadagencyforcorruptionmatters.Thehigh-profileAucklandTransportcasethatwasconcludedinFebruary2017withjailsentencesimposedhasalsoraisedawareness.

AucklandTransportInFebruary2017,StephenBorlasewassentencedtofiveyearssixmonths’imprisonmentandMurrayNoonetofiveyears’imprisonmentforcorruptionandbriberyoffencestotalling$1.2million.Theverdictandsentencingfollowedaseven-weektrialinAuckland.ItwasNewZealand’slargestbriberycase.

BarrieGeorgehadearlierbeensentencedin2016to10monthsofhomedetentionforalesserroleinthesameoffending.

Theoffendingtookplacebetween2006and2013attheformerRodneyDistrictCouncilandAucklandTransport.Overthesevenyears,MrNoonehad,concurrentwithseniormanagementrolesinroadmaintenance,regularlyinvoicedengineeringconsultingcompanyProjenzover$1millionforconsultancyservicestherewasnodocumentaryevidencehehadeverprovided.Hehadalsotakeninappropriategifts.Thepaymentsandgiftswereundisclosed.ProjenzhadbeensetupbyMrBorlase.Ithadobtainednumerouscouncilroadmaintenancesupplycontractsduringthesevenyears.

MinistryofTransportJoanneHarrison,formerGeneralManagerofOrganisationalDevelopmentattheMinistryofTransport,wasalsoimprisonedinFebruary,forthreeyears’sevenmonths.MsHarrisonhadfraudulentlyobtainedapproximately$726,000fromheremployerbycreatinginvoicesto


paythreeentitieslinkedtotheoffending.Themoneywasusedtopayoffpersonalcreditcardsandthemortgageonapropertyshehadpurchasedin2008.

MsHarrisonleftthecountryin2016afterthefraudulentinvoiceswerediscoveredandtransferredtheownershipofthepropertyinitsentiretytoherhusband.ShereturnedfromCanadatofacecharges.

Otherhigh-profilecaseresultsfor2017Thelawappliestoeveryone

SirRalphNgatataLovewasjailedfortwoyears’sixmonthsinOctober2016.Theretiredprofessoremeritus,MaorileaderandTreatyofWaitanginegotiatorwasprosecutedforhisroleinfraudrelatedtoasignificantcommercialpropertydevelopmentinWellington.ThelandwasownedbytheWellingtonTenthsTrust,ofwhichSirNgatataLovewastheChair.ItadministersMaorireservelandlargelyintheurbanWellingtonarea.

SirNgatataLovearrangedforatotalof$1,687,500tobepaidintohispartnerLorraineSkiffington’saccount,forthepair’sbenefit.Thepaymentswerepartofapremiumthedeveloperswerewillingtopayforleaseholdrightsontheland.Theywerenotdisclosedtotheremainingtrustees.ThemoneywasusedtopaydownthemortgageonalargehomeinPlimmertonthepairhadboughtmonthsearlier.

TheoffendingwasuncoveredonlyafterInlandRevenuebeganinvestigatingMsSkiffington’saccountants.MsSkiffington,alawyerwhohadheldsenioradvisoryroleswithincentralgovernment,hadherchargespermanentlystayedinAugust2015duetoill-health.SirNgatataLove’sson,MateneLove,pleadedguiltytoachargeundertheSecretCommissionsActandwassentencedtosixmonthsofhomedetentioninOctober2015.

OperationChestnutuncoveredgamingmachinefraudThreemenwerefoundguiltyinJune2017ofmultiplechargesinrelationtoamulti-million-dollargamingmachinefraud.ThecaseisNewZealand’slargestintheClass4gamblingsectorandoneofthemostextensiveinter-agencyinvestigations.ItwasprosecutedbytheSFOfollowingajointinvestigationwiththeDepartmentofInternalAffairs(DIA)andtheOrganisedandFinancialCrimeAgencyofNewZealand(OFCANZ).

Theinvestigationbeganin2012,examininggrantsmadebyBluegrassTrustdatingbackto2006.BlenheimracingpersonalityMichaelO'Brienhadbeenrunningan‘invoicesforgrants’schemewithracingclubs,usinghospitalityconsultantPaulMaxashiscovertoobtaingamblingoperatorlicencesforBluegrassTrustanditsvenuesfromtheDIA.Thetrustdistributedover$11.8millionofcharitablegrantsfromgamingmachineprofits,influencedbyMrO’Brienwhoearnedover$1millionayearfromhislobbyingactions.

MrO'BrienwasfoundguiltyoffivechargesofdeceivingDIA,datingfrom2009to2013,twoforBluegrassTrustandthreerelatingtogamingmachinevenues,andwassentencedtofouryearssixmonths’imprisonment.Maxwasfoundguiltyofthreechargesoffraudulentlyobtaininggamblinglicencesforthreevenuesandwassentencedto12monthsofhomedetention.KevinCoffeywasfoundguiltyofonechargeofmakingfalserepresentationstodeceiveDIAandwassentencedto12monthsofhomedetention.MrO’Brien’sfatherPatrickO’BrienhadalsobeenchargedinrelationtothecasebuttheformerHarnessNewZealandchairmanwastakenoutofthetrialduetoillhealth.


InternationalcooperationIntervention:Enhanceconnectionswithoverseasagencies

TheSFOplaysaroleinrespondingtointernationalexpectationsinrelationtocorruption–frombodiessuchastheOECD,theUNandAPEC.NewZealandratifiedtheUnitedNationsConventionAgainstCorruption(UNCAC)inDecember2015.InFebruarythisyear,thePhase1reviewofourcompliancewiththeUNCACprinciplestookplace.Thetwo-dayreviewprocessinvolvingtheSFO,CrownLawOffice,PoliceandMinistryofJusticeofficialsmeetingwithreviewersfromTurkeyandCameroonhasresultedinafavourablereportandrecommendationsforfurtheraction.

Inturn,theSFOassistedthisyearwiththereviewprocessoftheOECDAnti-BriberyConventionandattendedthesecondOECDGlobalNetworkofLawEnforcementPractitionersagainstCorruption,inParisinDecember2016.

WeattendedthethirdmeetingofAPEC’ssub-foraACT-NETinPeruinAugust2016.TheAnti-CorruptionAuthoritiesandLawEnforcementAgenciesNetworkistheoperationalarmofthestrategicAnti-CorruptionandTransparencyWorkingGroup(ACTWG).ACT-NETaimstoestablishanddevelopaninter-economynetworkofanti-corruptionandlawenforcementofficerstoenhanceinformalcooperationacrossjurisdictionsoninvestigationsintobribery,corruptionandmoneylaundering.

ThisaimhasbeenfurtherstrengthenedbytheestablishmentoftheInternationalAnti-CorruptionCoordinationCentre(IACCC)inLondon,followingthe2016Anti-CorruptionSummit.

NewZealandnowhasrepresentationatthecentreandtheSFODirectorsitsonthegovernancegroup.TheSFOisalsoparticipatinginasummitcommitmenttoestablishanaccessibleandcentraldatabaseofcompanieswithfinalconvictionsforbriberyandcorruptionoffences,bysupportingtheNewZealandpubliccentralregisterofcompanybeneficialownership.

OneofourGeneralManagersattendedtheEconomicCrimeAgenciesNetwork(ECAN)meetinginLondoninMarch2017.Asaresult,wehavebeenapproachedbyanAsianagencytoenterintoamemorandumofunderstandingtoassistwithcapacitybuildingandinformationsharing.

SupportweprovideothersIntervention:Enhanceconnectionswithoverseasagencies;Educateandinteractwiththecommunity

- ThePacificIslandsTheSFOcompletedathree-yearcasewiththeCookIslandsPoliceagainstformeroppositionleaderTeinaBishop,involvingaloanobtainedbyMrBishopfromasubsidiaryofaforeignfishingcompanyandthesubsequentgrantingoffishinglicences.ThiswasthefirsttimeasentenceofimprisonmentwashandeddowntoaCookIslanderforcorruptactivitieswhileservingasaMinisteroftheCrown.Thesentencewasappealedandsubsequentlyreduced.

InTonga,weassistedthePolicewithforensicaccountingduringaninvestigationintopassportfraudbymultipleoffenders.Thiscaseisongoing.

Intervention:AchievemorethrougheffectivecollaborationwithourNZpartners

- NewZealandPolice

InJune2017,NimeshKumarAminwassentencedtothreeyears’twomonthsimprisonmentplus$105,000reparation,followingajoint18-monthinvestigationintoallegedcreditcardfraudwhilehewastheownerofatravelagencyinMangeretradingasPanworldTravel.MrAmindefraudedairlines,eventorganisersandindividualsofalmost$1millionofflight-relatedtravel.Policeledtheenquiry,whiletheSFOparticipatedinthesearchwarrantprocessandassistedwithforensicaccounting.


TheSFOalsoassistedPolicewithanAAdriverlicensingcorruptioninvestigation,providingforensicaccountingandassistancefromourElectronicForensicsUnit.

PreventingfinancialcrimethrougheducationandadviceIntervention:Educateandinteractwiththecommunity

TheSFOheldanothertargetedeventforaselectlistofinviteesfromtheutilitiessectorinOctober2016.Energy,waterandcouncilrepresentativesmetwiththeseniorleadershipteamtodiscusstheimportanceofanagencysuchastheSFO,whichisdedicatedtofightingwhitecollarcrimeandhowwecanbuildrelationshipswiththeprivatesector.Itwasanopportunitytodiscussfacetofacehowwecanworktogethertoachieveourgoalsandtosharesomeinsightandadvicerelatedtothatparticularindustry.Theseeventsarewellreceivedandwillcontinuethroughout2017.

Ourwebsitewww.sfo.govt.nzprovidesonlineadviceforbothprivateandpublicsectororganisationsonhowtodetectandpreventfinancialfraud.Ouradvicesectionlinkstocomprehensiveanti-corruptiononlinetrainingdesignedbyleadingexpertsinthefield.

FraudconferenceandfilmfestivalTheSFOwasproudtohostoursecondFraudandCorruptionConferenceattheSkyCityConferenceCentreinFebruary2017inAuckland.

Stayingonestepaheadoffinancialcrimerequiresacollectiveresponse.WhiletheSFOistheleadlawenforcementagencyforinvestigatingandprosecutingseriousorcomplexfinancialcrime,includingbriberyandcorruption,wecan’tachieveexcellentresultsandprotectNewZealand’sreputationbyworkingalone.

TheSFO’sstrategicplanfocuseson:

• understandingfinancialcrime,briberyandcorruptionintheprivateandpublicsectors• preventionthrougheducationandadvice• continuedimprovementsinourtools,systemsandintelligence• enhancingourconnectionswithNewZealandandoverseasagencies.

HoldingtheFraudandCorruptionConferencewasawayofsharingthisfocuswiththecommunitiesweinteractwithinourwork.Wewanttoencouragethosecommunitiestostayonestepahead.Peoplefromallareasofourstakeholdercommunityattendedtheday,illustratingthatthereisundeniableinterestinaligningwiththeSFO’sgoalsandcreatinganenvironmentofintegritysothatbusinesscanprosper.Thisyear,weofferedafulldayofinternationalspeakerstodiscussthenewthreatsthatcomeintoplayasourcultural,socialandfinanciallandscapechanges.

1. HonChrisFinlayson–governmentpolicysettingWewereprivilegedtohavetheAttorney-Generalopenourconference.HebeganbyremindingtheaudienceofNewZealand’shard-earnedreputationasoneoftheleastcorruptcountriesintheworld.ThetopicofcorruptionhasbeenarecentfocusfortheSFOforreasonsthattheAttorney-Generalemphasised;itunderminestheruleoflaw,erodesjustice,it’sbadforbusiness,itintroducesuncertaintyandinthepublicsectorinparticular,itdivertsresourcesawayfrompriorities.

2. MargotGatlandandAndrewBarnard–AucklandTransportMargotisaseniorlawyerwiththeSFOandAndrewisaseniorinvestigator.TheywerepartoftheteamthatsuccessfullyprosecutedtheAucklandTransportcasewhichconcludedinFebruary2017.


3. NickMcKenzie–ajournalist’sexperienceNickisaninformedandenlighteningAustralianinvestigativenewspaperandbroadcastjournalist.Hehasathoroughknowledgeofcoveringcorruptionandintegrityissuesinpublicsectorandpolicingagencies,thecriminaljusticesystem,corporatecorruptionandinternationalbriberybylargemultinationals.Nickspokeaboutthewayshisworkhasuncoveredfraudinareasfromreservebankcurrencyprintingtotheglobaloilindustry.

4. StevevanAperen–truthorlies:theeyeshaveit

AformerAustralianPolicedetective,SteveisalsoknownastheHumanLieDetector.Hesharedallsortsoftipsandtrickswiththeaudienceonhowtospotaliar.Healsosharedsomeinsightintohowharditactuallyisforapersontolie.Ittakesalotofmentalprocessingandtheliesneedotherliestobackthemup.

5. DavidGreen–DeferredProsecutionAgreementsTheDirectoroftheUKSeriousFraudOfficealsojoinedusattheconference.TheNewZealandSFOwasbasedonthesameplatformastheUKwhenitwascreated–theRoskillmodel.SomethingwhichhasdifferentiatedtheUKofficefromhereinNewZealandisthatin2014aconceptcalledDeferredProsecutionAgreements(DPAs)becameavailabletotheUKSFO.

6. AlexandraWrage–briberyandcorruptionAlexandraisapassionatecampaignerinthefightagainstbriberyandcorruption.SheisthefounderofTRACEInternationalwhoadvocateforcommercialtransparencyworldwide.Shespokeofherbeliefthatthepublicandtheprivatesectorarenaturalalliesinthefightagainstbriberyandcorruption.

7. PaulO’Neil–changestoNewZealand’slegislationAsGeneralCounselfortheSFOsinceDecember2016,PaulpresentedonthesuiteoflegislativechangesthathaverecentlybeenintroducedinNewZealandtocombatfraudandcorruption.

8. KeraLanglois–USNavycasestudies KeraisaSpecialAgentwiththeUnitedStatesNavalCriminalInvestigativeService(NCIS)basedinSingapore.TheyareasmallorganisationbutwithalargefootprintgiventheUSnavalpresencearoundtheworld.Kera’spresentationfocusedonvariouscasestudies.

9. MichaelPKelly–businessemailcompromises(cyberscams)MichaelisanFBISupervisorySpecialAgentfromBoston.HespokeaboutthebiggesttypeoffinancialfraudtheUSAisexperiencing:businessemailcompromises.Hedescribedthesefraudsasravagingthecountry,scary,challenging,andofhighdollarvalueandhighvolume.

Foranexpandeddescriptionofeachspeaker’scontent,seeouronlineannualreportatwww.sfo.govt.nz


AucklandFraudFilmFestivalCoincidingwithInternationalFraudAwarenessWeekinNovember2016,theInternationalFraudFilmFestivalwasheldatAuckland’sQTheatre.LaunchedbythethenMinisteroftheSFOHonJudithCollins,thetwo-dayfestivalfeaturedinternationalfilmstacklingissuesofcybercrimeandcorruption,andpaneldiscussions.Itaimedtofostercross-industrycollaborationinthefightagainstfraud.

TheSFOisaco-partnerinthefilmfestival,withmembershipontheFestivalBoardandSteeringCommittee.Planningforthe2017festivaliswellunderway.

Developingasystem-wideapproachtofinancialcrimeandcorruptionIntervention:Useintelligencetounderstandthefinancialcrimelandscape

Discussionsthisyearwithpartneragencieshaveledtoagreementontheneedforanoverarchingfinancialcrimeandcorruptionstrategy.Aseriesofworkshopswereheldwithkeyagencieswhichproducedsomescenariosofwhatsuchanall-of-governmentstrategymightlooklike.Theprogressionofthisworkhastemporarilybeendelayedtoallowustofocusmorecloselyoncorruptionmatters.AspartofabroaderconsiderationoftheriskswhichmaybeposedtoNewZealandbycorruption,theSFOisleadingaprojecttodevelopaworkplantorespondtopotentialcorruptionriskswiththesupportofourpartnersincentralandlocalgovernment,includingtheStateServicesCommission,Police,theDepartmentofPrimeMinisterandCabinet,theMinistryofJusticeandtheMinistryofBusiness,InnovationandEmployment.Theinitialreportbackisscheduledformid-November2017.

BeingfitforthefutureIntervention:Useintelligencetounderstandthefinancialcrimelandscape

Beingintelligenceledmeansdoingmorethansimplyreactingtocasesthatcomethroughourdoors.Itmeansaccuratelypredictinghowchangesintechnologyandsocietywillimpactonthefinancialcrimespace,sharingthatknowledgewithpartneragenciesanddevelopingstrategiestorespondrapidly,collectivelyandeffectively.Weemployspecialiststomapthisterritory.

RobVaudreySeniorIntelligenceAnalystRobVaudreyjoinedtheSFOinlate2015,relocatingfromtheUKafter14yearsworkingforRevenueandCustomsinLondon.

InhisworkintheUK,Robhadbecomeanexpertanalystoftherisksposedbymoneylaundering,participatinginacross-lawenforcementgroupintheUKtonavigatethatlandscapeandpromotejoined-upresponses.ThatwasexactlywhatwehiredhimtodoattheSFO;leadthedevelopmentofanSFOfinancialcrimeintelligencestrategytodrivethebusiness,toensureweunderstandthesourceofrisksinthisfast-pacedenvironment,andtomapastrategicpathwayforawhole-of-governmentresponsetofinancialcrime.

AlthoughsomeofthedetailsoftheNewZealandcontextdivergefromhisUKexperience,theenvironmenthediscoveredonarrivalmirroredthatoftheUK,whereamoreintegratedresponsewouldpreventcriminalsexploitingtheintersticesbetweenagenciesandeliminateduplicationofknowledgeandservices.

Rob’sroleintacticalandstrategicintelligencesupportforourinvestigationandprosecutionteamsisanunusualoccupation.Whenaskedwhathedoes,Robtendstoreducetheinterrogationsbysayinghe’saconsultant.


ShaneMannixPrincipalElectronicForensicsInvestigatorShaneMannixcametotheSFOonsecondmentfromthePoliceandwassuchavaluedassetthathestayedfor22monthsandwasthenhired.

ShanehassincetrainedasaCertifiedForensicComputerExaminerthroughtheInternationalAssociationofComputerInvestigativeSpecialists(IACIS)andnowheadsourElectronicForensicsUnit(EFU).

Digitalevidenceisaninescapablerealityforfinancialcrimeinvestigators.Theproportionofdigitaltopaperevidenceisrapidlygrowing.TheequivalentofatruckfullofpaperevidencecannowarriveinourofficeonatinyUSBstick.

“Ascloudcomputingbecomesthenorm,informationisincreasinglybeingheldoffsiteindatacentresratherthanonalocalcomputer”,hesays.“Encryptionisarealissueforus.Providersarerightlyconcernedaboutprotectingtheircustomers’dataandareincreasinglystoringitinencryptedformthateventheycan’taccess.Manycomputerdrivesarealsoencryptednow.”

Expertelectronicforensicsinvestigatorshavetheskillstounlockdevicesandaccesshiddenordeletedfiles.Theyhaveavailablespecialisttoolssuchaspassword-breakingsoftwarethatiscapableofguessinghundredsofthousandsofpasswordspersecond.

Digitalevidencefromsmalldevicessuchasphonesisalsofragileandcanbeerasedordestroyedifnotseizedintime.Shaneaddsvaluetoinvestigationsbyhelpingteamsattheearlystageofacasetounderstandtheriskswithdigitalevidencegathering,andtoputaplaninplace.Hisknowledgeassistsourteamstobesmartandtargetedabouthowtheydealwithelectronicevidence.

Shanehasthefreedomtoinnovateinhisroleandcreateacentreofexcellencefortheunit.Heisdevelopinge-trainingforourinvestigatorsandalsocollaborateswithotherNewZealandlawenforcementagencies,alongwithbeinganactivememberoftheIACISportal,whereforensicinvestigatorsshareproblems,knowledgeandskills.


Oursystems,processesandtechnologyIntervention:Investintherighttoolsandsystems

TheSFO’sfocusforitssystemstransformationprojecthasfouroverarchingpriorities:secure,digital,stableandmobile.Theseprioritiesareguidingthetransitionfromnow-datedtoolstofullyintegratedsystemsthatwillincreasethespeed,accuracyandefficiencyofouroperations.

CaseandevidencemanagementsystemsModerncaseandevidencemanagementtoolsareneededtomanageandanalysetheincreasingvolumesandcomplexityofevidentiarydocumentsanddata,andtostayaheadoftheexploitationoftechnologytofacilitatecrime.

CaseandevidencemanagementarethemajordriversoftheSFO’scorebusinessfunctions.Currentcapitalexpenditurelimitsaresufficientonlyforthemaintenanceofexistingsystems,soabusinesscasewassubmittedthisyearforadditionalinvestmentinthenewsystems.Onthisbasis,$2.28millionoverfouryearshasbeenapprovedinBudget2017,andtheSFOisnowinapositionforthe2017/2018yeartoimplementthesystems,whichareexpectedtoberolledoutinDecember2017.

AligningorganisationdesignandnewsystemsAsasmall,agilegovernmentagency,theSFOiswell-positionedtomakecontinuousimprovementstoorganisationaldesign,andtoinnovate.From1May2017,weinstigatedoperationalchanges:

• changedreportinglinesforevidencemanagement(InvestigationSupportandtheElectronicForensicsUnit)

• triallingcombiningtwoinvestigationteamsintoone.

Theseimprovementsaredesignedtoprovideamoreconsistentapproachtocasemanagement,andtoalignwiththeforthcomingsystemchangesforevidenceandcasemanagement.ForaninsightintotheworkoftheEFU,seetheprofileonourEFUPrincipal.

Thisyear,theCorporateServicesteamwasrestructuredwithnewrolesrespondingtostrategicshiftsinbusinesspractice.Threeoutoffournewroleshavebeenrecruited:FinanceBusinessPartner,HumanResourcesBusinessAdvisorandOfficeCoordinator.TheBusinessAdvisorrolewasnotfilledasat30June.

OurHRBusinessPartnerprovidesspecialistsupportandadvicetotheseniorleadershipteamandsupportsthedeliveryoftheHRworkprogrammeforemployees.OurFinanceBusinessPartnerisleveragingthenewcloud-basedaccountingsolutiontoprovidestrategicadvicetothebusinessonfinance-relatedmatters.

“TheSFOhasbeenwillingtobreaknewground,takingupthechallengeofpilotingcloud-basedaccounting.It’sbeenalearningjourneyforallofus,takingthetimetoensurewedoitrightwithregardtoimportantissueslikesecurityandprivacy.WhenwetakeotherCentralAgenciesSharedServicesclientsonthat

journeytheywillreapthebenefitsofthepatienceandcooperativespiritthattheSFOhasbroughttoaprojectthatticksalltherightboxes,especiallythe

government'sCloudFirstpolicy.”

GlennMcStayChiefFinancialOfficer,TheTreasury


InnovationsinpublicservicebestpracticeLastyearwewerethefirstgovernmentagencytointroduceacloud-basedengagementsurveytoolcalledAskYourTeam.Thisyear,theagencyachievedarangeof‘firsts’andbestpractice:

Project Benefits

Firstpublicservicedepartmenttomigratetoacloud-basedaccountingsolution,supportedbyCentralAgenciesSharedServices

Sophisticatedandreal-timeinformation─availableonanydeviceandbeyondjustthecorefinanceteam─isintroducingmoremeaningfulinformationonwhichtobaselivebudgetaryandotherfinancialplanningdecisions

FirstgovernmentagencytopublishanIntegratedStatementofStrategicIntent

Mergestwostatutoryplanningdocuments–StatementofIntentandFour-yearBusinessPlan–creatingcostefficiencyandmorepublictransparencyandaccountabilityforuseofpublicmoney.Moremeaningfulplanningdocumentfortheseniorleadershipteam

FirstgovernmentagencytoproduceanonlineAnnualReport2017

EnablestheSFOtogathermoremeaningfuldataonreachandhowtheAnnualReportisbeingviewed,andreducesprintcosts.Moreengagingfortheviewer

NewwebsitefeedbackTheSFO’s2016revisionofthewebsiteprovidesabetterexperienceforourstakeholders.

“Whatanamazingjobonthenewwebsite!It’ssouserfriendly,relevantandwritteninplainEnglish!!”

StacySmith,QualityAssuranceManager,ServiceCentreMBIE


OurpeopleInterventions:Attractandretainthebestpeople;Challengeandsupportourteamtobethebest;Haveacultureofcontinuousimprovement

OursuccessinachievingprioritieswithinalimitedbudgetanddeliveringBetterPublicServicesreliesinlargepartonretainingandcontinuallyenhancingthecapabilitiesofoursmall,streamlinedworkforce,85percentofwhomperformfrontlineactivities.Aninspiring2020StrategicPlanandmeaningfulprinciplescontinuetobeattheheartoftheSFO’swork.

EmployeeengagementTheAskYourTeam(AYT)surveyintroducedin2015/16offersastrongacross-the-businessview.TheAYTmeasureforleadershipandculturehasanaspirationalthreepercentannualimprovementonourbaselinescore.Thisyear’spositiveshiftshowswearemakingexcellentprogress.Feedbackfromemployeesaboutissueswithsystemsreinforcesthedirectionwearetakingininvestinginnew,moreefficientsystems.

DiversityandinclusionNewZealandisthefifthmostethnicallydiversecountryintheOECD,andthepublicserviceneedstorepresentcontemporaryNewZealandifitistoretainpublicconfidence.

Giventhat40percentofAucklandresidentswerebornoverseas,theSFOisideallylocatedtoaccessadiversetalentpoolandincreaseitsunderstandingofethnicdiversity.Differingbusinessculturesposeachallengefortheworkoftheagency.TheissueishowbesttocommunicateandrespondtocultureswhoseapproachestocorruptionandgovernanceareatvariancetothatofNewZealand.TheSFOworkstocreateanenvironmentwhereemployeescanusetheirculturalbackgroundstoenableustobemosteffective.Theagency’sannualemployeeconferencealsopromotesafocusondiversity.Ourdiversityprofileisshownbelow.Wewillcontinuetoconsiderethnicdiversityinourrecruitmentprocesses.

Workisstillrequiredtoaddressthestructuralandsystemicissuesthatpreventwomenreachingtheirpotential.Onaverage,womeninNewZealandearn14percentlessthanmenandthegenderpaygapinsomepublicsectoragenciesisashighas39percent.MonitoringoftheSFOgenderpaygapshowsthegaphasbeenconsistentlylowerthanthenationalaverage,presentlysittingat7.2percent.OneoftheSFO’sgeneralmanagersisamemberoftheGovernmentWomen’sNetwork(GWN)governancegroup.TheGWNisaprofessionalemployee-lednetworkworkingtocreateastepchangeforwomeninpublicservice.WesentsixwomenemployeestothesecondWomeninthePublicSectorSummitinWellingtoninApril2017.

Thisyear’sstaticresultisnotduetogenderbiasbutisaresultofthebandingpaysystemthattakesintoaccountexperience,seniorityandcompetencies.Ourfive-yeargoalistocontinuallyreducethegap.Thisyear,wesubmittedtotheStateServicesCommissionanAgencyActionPlandetailingthepathwaytoattainingthisgoal,including:

• comprehensiveindividualdevelopmentplans

• equalopportunitiestodevelopthroughmentoring,secondments,promotionsandprojectgroupinvolvement.

TrainingopportunitiesGiventhenatureofourfast-evolvingandspecialistrole,trainingisessentialtomaintainingouredge.SecondmentsandvacantroleshavegiventhreeemployeestheopportunitythisyeartogainexperienceactinginGeneralManagerandsenioraccountingroles.OneofourInvestigationsGeneralManagerswassecondedintotheDepartmentofInternalAffairsfor12months,threeemployeesweresecondedtoPoliceandonewillgototheCommerceCommissioninearly2017/2018.


Thisyear,anumberofemployeesparticipatedininternationaltrainingopportunitiesinspecialisedareas:

• OneofourprincipallawyersattendedtheInternationalConventionAgainstCorruption(ICAC)NationalInvestigationsSymposiuminSydneyNovember2016.Thisbiennialsymposiuminvitedpublicsectorinvestigatorsandcomplainthandlerstoincreasetheirinvestigativeknowledge,skillsandtechniques.

• Oneofourprincipalinvestigatorsparticipatedinafour-weekChiefInvestigatorsCommandCourserunbyICAC.TheannualHongKong-basedcoursewasheldinNovember2016anddevelopscase-relatedleadershipandmanagementskills.

• OneofourprosecutorsattendedtheFirstSpecialisationCourseforJuniorProsecutorsoninternationalcriminallawandcooperationinpenalmatters.ThecoursewasheldinJuly2016inItalyandattracted50prosecutorsfrom34countries.Itprovidedvaluableinsightsintothehurdlesalljurisdictionsfaceunderdifferentcountries’mutualassistanceregimesandstrategiestomitigatethesedifficulties.

• OneinvestigatorandonelawyerattendedanICACInternationalSeminaronFinancialInvestigationinHongKonginJune2017.Themed‘Cuttingthefinancialveinofthecorrupt’,thetwo-dayseminarfocusedonassetrecoveryandenhancedcooperation.

• Twoemployeesattendedthe28thAnnualAssociationofCertifiedFraudExaminers(ACFE)GlobalFraudConferenceinJune2017inNashville,USA.Theconferencecoveredsubjectssuchasusingsocialmediatogiveanedgeininvestigations,anddetectingdeception.

Ouroperationsteamattendedatwo-dayworkshopinAucklandondetectingliesanddeception,runbyoneoftheSFOFraudandCorruptionConferenceinternationalexperts.


AsnapshotofpeopleperformanceThisoverviewshowsworkforcedatatrendinginapositivedirectionacrossarangeofindicators.Wearenowalmostatafullworkforceof55,havingpromotedspecialistskillsinelectronicforensicsandintelligenceanalysts.ADataAnalystpositionandtheBusinessAdvisorrolearestilloutstanding.Thisyear’sturnoverresulthasbeenimpactedbyoneextendedsickleaveandtheCorporateServicesrestructure.


KeycapabilitiesThetablebelowliststheindicatorsandassociatedmeasuresthatweusetocheckourprogressonachievingtheIntegratedStatementofStrategicIntent(ISSI).

Capability Indicators MeasureandTarget TrendResults

Leadershipandorganisationalculture

Haveacultureofcontinuousimprovement

AskYourTeam

Levelofengagement

2016/17:70%

2015/16:60%

baseline

Attractandretainthebestpeople

Unplannedturnover 2016/17:16.98%

2015/16:5.9%

2014/15:19.3%

Challengeandsupportourteamtobethebest

AskYourTeam

A3%annualimprovementinleadershipandculturebaselinescore

2016/17:71%culture,68%leadership

2015/16:63%culture,53%leadership

baseline

Technology,systemsandprocesses

Investintherighttoolsandsystems

AskYourTeam

“Wehavethetechnologytosupportourbusiness”

2016/17:58%*

2015/16:66%

baseline

Relationshipsandpartnerships

PartneragenciesindicatesatisfactionwiththeirrelationshipwithSFOtodemonstrateeffectivecommunicationandcollaboration

BiennialSFOStakeholderSurvey

Ratingiseightoutof10orhigher

2016/17:7.9

2014/158.3

2012/13:7.2

*Thisresultreflectstheneedforthesystemstransformationprojectnowunderway,anditisexpectedthatthis,alongwiththenewcloud-basedaccountingsolutionimplementedin2016/2017willpositivelyimpactnextyear’sresult.


CapabilitymeasuresdiscontinuedThefollowingmeasuresintheSFO2014-2018StatementofIntenthavebeendiscontinuedorarenolongerrelevanttothe2020Strategy.

Capability Indicators MeasureandTarget TrendResults

People–effectiveperformancemanagement

Performancemanagementprocessesareembedded

90%ofperformanceagreementsarecompletedby30Septemberand95%ofappraisalsarecompletedby31Julyofeachyear

2016/17:Discontinued

2015/16:0%performanceagreements*96%Appraisals

2014/15:Notcompleted

Employees’engagement intheirorganisation

EmployeeEngagementSurvey

‘MyJob’responseis66%orhigher

2015/16:Discontinued**

2014/15:Notconducted

Communication Communicationtocomplainants,victimsandwitnessesiseffective

SFOComplainantsandVictims’Survey

“MyconcernswereunderstoodandconsideredbySFO”

Responseis89%orhigher

2014/15:Discontinued***

*Theperformancemanagementsystemwasredesignedin2015,whichdelayedcompletionoftheperformanceagreements.Thesewere100percentcompletedbyDecember2015.Thismeasurewasdiscontinuedin2016/17,asitwasdeemednotuseful.

**TheSFOEmployeeEngagementSurveywasdiscontinuedin2014/15andreplacedbyanewAskYourTeamtool,withthefirstbaselineresultsin2015/16.The‘myjob’questionhasbeenreplacedwithanewagree/disagreequestion:Wehavethetechnologytosupportourbusiness.

***TheComplainantsandVictims’Surveywasdiscontinuedin2014/15,followinganevaluationofitsusefulnessand/orpotentiallyconfusingmessages.Principalinvestigators,lawyersandforensicaccountantsarenowinvolvedfromthepointwhenthecomplaintarrivestoensureanimprovedservice.


FinancialStatements

Statementofresponsibility

AsChiefExecutiveandDirectoroftheSeriousFraudOffice,Iamresponsiblefor:

• thepreparationoftheSeriousFraudOffice’sfinancialstatements,andstatementsofexpensesandcapital expenditure,andforthejudgementsexpressedinthem;

• havinginplaceasystemofinternalcontroldesignedtoprovidereasonableassuranceastotheintegrityandreliabilityoffinancialreporting;

• ensuringthatend-of-yearperformanceinformationoneachappropriationadministeredbytheSeriousFraudOfficeisprovidedinaccordancewithsections19Ato19CofthePublicFinanceAct1989,whetherornotthatinformationisincludedinthisannualreport;and

• theaccuracyofanyend-of-yearperformanceinformationpreparedbytheSeriousFraudOffice,whether ornotthatinformationisincludedintheannualreport.

Inmyopinion:

• thefinancialstatementsfairlyreflectthefinancialpositionoftheSeriousFraudOfficeasat30June2017anditsoperationsfortheyearendedonthatdate;and

• theforecastfinancialstatementsfairlyreflecttheforecastfinancialpositionoftheSeriousFraudOfficeasat30June2018anditsoperationsfortheyearendingonthatdate.

JulieRead

ChiefExecutiveandDirector

27September2017


Statementofperformance

StatisticaltrendsTheSeriousFraudOfficeprovidedserviceswithinVoteSeriousFraudinordertoimpactontheoutcomesof:

• aconfidentbusinessenvironmentthatislargelyfreeofseriousfinancialcrime• ajustsocietythatislargelyfreeoffraud,briberyandcorruption.

Performancemeasuresandstandardshavebeenestablishedtomonitortheefficiencyandeffectivenessofmanagingthethreekeyactivitiesofcomplaints,investigationsandprosecutionswithintheoutputexpense.Thispageprovidesasnapshotofourperformance.ThemeasuresforPart1enquirieswereinstigatedin2015/16sothe2014/15resultshavenodirectcomparison.InvestigationscommencedrefersonlytoPart2investigations.Priorto2014/15resultsincludedwhatarenowseparatePart1enquiries.Timelinessachievedforinvestigationshasreducedduetochangesinworkpracticesaspartofseparatingenquiriesandinvestigations.


Outputexpense:investigationandprosecutionofseriousfinancialcrime

DescriptionThisoutputexpenseprovidesforservicesbytheSFOtodetect,investigateandprosecuteseriousfinancialcrimes,includingactivitiesdirectedatmakingthecommissionoffinancialcrimesmoredifficult,anddetectionandprosecutionmoreeffective.Theseactivitiesincludeworkoutsideourcorerolesuchaseducatingthoseintheindustrythroughattendingeventsorspeakingopportunities.Weproactivelycommunicateandraiseawarenessofourworkwithourstakeholders.TheSFOalsoactivelyresearchesandgathersknowledgefrominternationalbodiestoimproveoureffectiveness.

ComplaintsComplaintsarefirstevaluatedbytheEvaluationandIntelligenceteamtodeterminewhetherornottheyfitthecriteriasetforinvestigationsbytheSFO.IfthematterfallswithinthemandateoftheSFO,thecomplaintmovestothePart1enquiryphase.Ifnot,thecomplaintiseitherreferredtotheappropriateagency,orclosedandthecomplainantisnotified.Thenumberofcomplaintsisnotaperformancetarget.

Actual2015/16 PerformanceMeasure BudgetStandard2016/17

Actual2016/17

15 QuantityNumberofevaluationsinitiatedbytheSFOcommenced

15 15

91% TimelinessPercentageofcomplaintsevaluatedwithin30workingdays*

80% 94%

*Doesnotincludeopencomplaintsattheendofthefinancialyearwhichmaystillhavemetthe30workingdays’measure.

Actualperformance:Complaints

Thisyear,theSFOreceived831complaints,thehighest-evernumberofcomplaints.TheSFOhaslifteditspublicprofile,raisingpublicawarenessoftheworkoftheSFOandtheimpactofseriousfinancialcrime.Despitethe40percentincreaseincomplaintsover2015/16,thenumberofPart1enquiriesthatresultedhasnotchanged.TheSFOexceededitsstandardfortimelinessinevaluatingcomplaints.ThosewhichdidnotmeettheSFO’smandatearereferredtothemostappropriateagencytoassistthecomplainant.

Part1enquiriesIn2015/16,weintroducedaPart1enquiriestargetasaresultofchangesinourinvestigationprocesses,implementedtorealisegreaterefficiencies.Part1enquiriesalignwithPart1oftheSFOAct,whichprovidestheagencywithlimitedpowerstocarryoutanenquiryintotheaffairsofanypersonwheretheDirectorsuspectsthattheinvestigationmaydiscloseseriousorcomplexfraud.

ThePart1enquiriestargetenablestheSFOtobetterdeterminewhetherallegationsoffraudshouldprogresstoafullinvestigationandthescopeofthatinvestigation.DistinctPart1enquiriesandPart2investigationstargetsalsoprovidegreatertransparencyandseparationbetweenthetwo,reflectingourupdatedoperationalpractices.


Actual2015/16 PerformanceMeasure BudgetStandard2016/17

Actual2016/17

31 Part1enquiriesQuantityNumberofPart1enquiriescommenced

30-40 25

90% TimelinessPercentageofPart1enquiriescompletedwithin3months*

80% 86%

*DoesnotincludeopenPart1enquiriesattheendofthefinancialyearwhichmaystillhavemetthethreemonths’measure.

Actualperformance:Part1enquiries

Duringtheyear,eightevaluatedcomplaintsthatwouldordinarilyhavebecomePart1enquiriesweredirectedstraighttoPart2investigations.Thesecaseswerefast-trackedeitherduetotheurgencyoftheissueorthequalityofevidenceprovided.Hadthisnotoccurred,theSFOwouldhavemetthequantitystandardforthismeasure(reaching33enquiries).

InvestigationsPart2oftheSFOActprovidestheSFOwithmoreextensiveandcoercivepowerstoinvestigatematterswheretherearereasonablegroundstobelievethatanoffenceinvolvingseriousorcomplexfraudmayhavebeencommitted.OnceaPart1enquirymeetsthecriteria,theformalinvestigationisundertakenbyaninvestigationteam.

Actual2015/16 PerformanceMeasure BudgetStandard2016/17 Actual2016/17

16 QuantityNumberofinvestigationsformallycommenced

20-25

18

42%

TimelinessPercentageofcasesinvestigatedwithintargetedtime

60%within12months

27%

100% Percentageofformalpost-investigationreviewsthatmeettheSFOqualitycriteria(Note1)

90% 71%

*Doesnotincludeopeninvestigationsattheendofthefinancialyearwhichmaystillhavemetthe60%measure.

Actualperformance:Investigations

TheSFOopened18formalinvestigationsthisyear,thehighestnumberforthepastthreeyears.Thisresultwasprimarilyduetoreceivingmorecasesthatmetthecriteriaforformalinvestigation.

ThePart2investigationsmeasureforquantityhasbeenrevisedfor2017/18.Thetarget,whenimplementedin2015/16toreflectupdatedoperationalpractices,wasastretchtargetbuthasproventobeunachievable.Additionally,themeasureforopeningnewPart2investigationsimpactsnegativelyontheachievementofthetimelinessstandard,giventhelimitedinvestigativeresources.


Thetimelinesstargetisbeingrevisedfor2017/18,asitwasnotupdatedin2015/16.Thenewmeasurewillcreatetwocategoriesofcases(AandB).CategoryAcaseswillbethoseassessedasbeingofahighlycomplexnatureandaccordinglytakemoretimetocomplete.CategoryBcaseswillbethosethat,whileassessedaslesscomplex,arestillimportant.

TheSFOalsoexpectstoachieveincreasedefficienciesfromthenewcaseandevidencemanagementsystemsbeingimplementedin2017/18.

ProsecutionsAdecisiononwhetherornottocommenceaprosecutionismadebyapplyingtheProsecutionGuidelinesissuedbytheSolicitor-General.ThedecisionisalsosupportedbytheadviceofProsecutionPanelCounselandtheSFOteamassignedtotheparticularinvestigation.ThePanelmemberprovidestheDirectorwiththeiropinionontheproposedprosecutionandreviewstheproposedcharges.

Actual2015/16

PerformanceMeasure BudgetStandard2016/17

Actual2016/17

10 QuantityNumberofcasesbroughttoprosecution

10-12 10

91% QualityPercentageofformalpost-prosecutionreviewsthatmeettheSFOqualitycriteria(Note1)

90% 100%

Actualperformance:Prosecutions

Thisyear’sperformanceisinlinewiththestandardandwiththe2015/16result.Thesustained67percentimprovementinthepasttwoyearsisexplainedbytheimpactoftwonewbusinesspractices.Firstly,theintroductionofPart1enquiries,whichprovidesbetterscopingoftheinvestigations,particularlythosethatcanbeexpeditedquickly.Secondly,theimplementationofregularprioritisationmeetingsthatresultinmorefocussedapplicationofresources.

Note1:Formalwrittenqualityassurancereviewsareconductedfollowingeachinvestigationandprosecution,andinclude:

• asummaryofissuesarisingduringthecourseofthecase

• anyrecommendationsforchangestoimproveSFOpolicies,casemanagementproceduresorexternalissues

• anoverallassessmentofthequalityoftheconductoftheinvestigationortheprosecution

• recommendationsfromthequalityassurancereviewsareconsideredbytheseniorleadershipteamwithintwomonthsofthecompletionofthereview.


Capitalperformance

Actual2016 PerformanceMeasure BudgetStandard2017

Actual2017

Completed1July2015

ThecapitalplanisdevelopedandmanagedthroughouttheyearCapitalplanforimplementation

1July2016

Completed1July2016

Financialperformance

2016Actual$000

2017Mainestimates

$000

2017Suppestimates

$000

2017Actual$000

2018Mainestimates

$000

Revenue

Crown 9,255 9,255 9,280 9,280 9,935

Other 281 85 235 456 85

Totalrevenue 9,536 9,340 9,515 9,736 10,020

Expenditure 8,853 9,340 9,515 9,418 10,020

Netsurplus 683 0 0 318 0

TherehavebeennomaterialchangesbetweenNewZealandequivalentstoInternationalFinancialReportingStandards(NZIFRS)andInternationalPublicSectorAccountingStandards(IPSAS).


Financialstatements

Statementofcomprehensiverevenueandexpense

fortheyearended30June2017

Actual2016$000

NotesActual2017$000

UnauditedBudget

2017$000

UnauditedForecast

2018$000

Revenue

9,255 RevenueCrown 2 9,280 9,255 9,935

281 Otherrevenue 2 456 85 85

9,536 Totalrevenue 9,736 9,340 10,020

Expenses

5,985 Personnelcosts 3 6,439 6,262 6,398

2,634 Otherexpenses 6 2,803 2,889 3,439

197 Depreciationandamortisationexpense 8,9 148 153 156

36 Capitalcharge 4 28 36 27

1 Financecosts 5 0 0 0

8,853 Totalexpenses 9,418 9,340 10,020

683 Surplus/(deficit) 318 0 0

0 Othercomprehensiverevenueandexpense 0 0 0

683 Totalcomprehensiverevenueandexpense 318 0 0

Theaccompanyingnotesformpartofthesefinancialstatements.

Explanationsofmajorvariancesagainsttheoriginal2016/17budgetareprovidedinnote18.


Statementoffinancialposition

asat30June2017

Actual2016$000

Notes Actual2017

$000

UnauditedBudget2017

$000

UnauditedForecast

2018$000

Assets

Currentassets

2,213 Cashandcashequivalents

1,583 1,665 1,347

11 Receivables 7 41 0 0

96 Prepayments

72 48 77

2,320 Totalcurrentassets

1,696 1,713 1,424

Non-currentassets

499 Property,plantandequipment 8 474 415 393

5 Intangibleassets 9 3 43 909

504 Totalnon-currentassets

477 458 1,302

2,824 Totalassets

2,173 2,171 2,726

Liabilities

Currentliabilities

1,270 Payables 10 910 1,348 993

683 Returnofoperatingsurplus 11 318 0 0

305 Employeeentitlements 13 374 290 326

0 Provisions 12 0 0 0

2,258 Totalcurrentliabilities

1,602 1,638 1,319

Non-currentliabilities

5 Employeeentitlements 13 5 6 6

109 Provisions 12 114 75 109

114 Totalnon-currentliabilities

119 81 115

2,372 Totalliabilities

1,721 1,719 1,434

452 Netassets

452 452 1,292

Equity

452 Taxpayers’ funds14

452 452 1,292

452 Totalequity

452 452 1,292

Theaccompanyingnotesformpartofthesefinancialstatements.Explanationsofmajorvariancesagainsttheoriginal2016/17budgetareprovidedinnote18.


Statementofchangesinequity


Actual2016$000

NotesActual2017

$000

UnauditedBudget2017

$000

UnauditedForecast

2018$000

452 Balanceat1July 452 452 452

683 Totalcomprehensiverevenueandexpense 318 0 0

Ownertransactions

0 Capitalinjection 0 0 840

(683) ReturnofoperatingsurplustotheCrown 11 (318) 0 0

452 Balanceat30June 14 452 452 1,292


Explanationsofmajorvariancesagainstoriginalthe2016/17budgetareprovidedinnote18.


Statementofcashflows


Actual2016$000

NotesActual2017

$000

UnauditedBudget2017

$000

UnauditedForecast

2018$000

Cashflowsfromoperatingactivities

9,255 ReceiptsfromRevenueCrown 9,251 9,255 9,935

281 Receiptsfromotherrevenue 456 85 85

(3,389) Paymentstosuppliers (3,538) (2,979) (3,577)

(5,649) Paymentstoemployees (6,012) (6,262) (6,436)

(36) Paymentsforcapitalcharge (36) (36) (27)

(21) Goodsandservicestax(net) 55 53 59

441 Netcashflowfromoperatingactivities 176 116 39

Cashflowsfrominvestingactivities

(199)Purchaseofproperty,plantandequipment

(122) (65) (50)

(5) Purchaseofintangibleassets 0 (35) (890)

(204) Netcashflowfrominvestingactivities (122) (100) (940)

Cashflowsfromfinancingactivities

0 CapitalInjections 0 0 840

(153) Returnofoperatingsurplus 11 (683) 0 0

(153) Netcashflowfromfinancingactivities (683) 0 840

84 Net(decrease)/increaseincash (630) 16 (61)

2,129 Cashatthebeginningoftheyear 2,213 1,649 1,408

2,213 Cashattheendoftheyear 1,583 1,665 1,347


Explanationsofmajorvariancesagainstoriginal2016/17budgetareprovidedinnote18.


Statementofcashflows

fortheyearended30June2017(Continued)Reconciliationofnetsurplus/(deficit)tonetcashflowfromoperatingactivities.

Actual2016

$000

NotesActual2017

$000

683 Netsurplus/(deficit) 318

Add/(less)non-cashitems:

197 Depreciationandamortisationexpense 8,9 148

197 Totalnon-cashitems 148

Add/(less)itemsclassifiedasinvestingorfinancingactivities:

3 (Gains)/lossesondisposalofproperty,plantandequipment 0

3 Totalitemsclassifiedasinvestingorfinancingactivities

Add/(less)movementsinstatementoffinancialpositionitems:

(6) (Inc)/decinreceivables 7 (30)

(29) (Inc)/decinprepayments 24

42 Inc/(dec)inpayablesanddeferredrevenue 10 (360)

17 Inc/(dec)inemployeeentitlements 13 69

(466) Inc/(dec)inprovisions 12 5

(442) Netmovementinworkingcapitalitems (290)

441 Netcashflowfromoperatingactivities 176


Explanationsofmajorvariancesagainsttheoriginal2016/17budgetareprovidedinnote18.

TherehavebeennomaterialchangesbetweenNZIFRSandIPSAS.


Statementofcommitments

asat30June2017

Capitalcommitments

TheSeriousFraudOfficehasnocapitalcommitmentsasat30June2017(2016:$nil).

OperatingleasesaslesseeAnoperatingleaseisaleasethatdoesnottransfersubstantiallyalltherisksandrewardsincidentaltoownershipofanassettothelessee.Leasepaymentsunderanoperatingleasearerecognisedasanexpenseonastraight-linebasisovertheleaseterm.Leaseincentivesreceivedarerecognisedinthesurplusordeficitasareductionofrentalexpenseovertheleaseterm.

TheSeriousFraudOfficeleasesproperty,plantandequipmentinthenormalcourseofitsbusiness.TheprimaryleaseagreementrelatestothecurrentofficeaccommodationonLevel6at21QueenStreet,Auckland.Thefutureaggregateminimumleasepaymentstobepaidunderthisnon-cancellableoperatingleaseisasfollows:

Actual2016*$000

Actual2017$000

511 Notlaterthanoneyear 511

2,045 Laterthanoneyearandnotlaterthanfiveyears 2,045

855 Laterthanfiveyears 341

3,411 Totalnon-cancellableoperatingleasecommitments 2,897

During2015/16,theSeriousFraudOfficeenteredintoaco-locationagreementwherebyofficespaceonLevel6,21QueenStreet,AucklandwasallocatedtoCrownLawfortheirsoleuse,thetermsandconditionsofwhicharerecordedinaMemorandumofUnderstanding.TheMemorandumofUnderstandingisdeemedtocontainalease.TheAgreementexpireson3March2023,howevercanbeterminatedongiving12months’notice.Theminimumfutureleasepaymentofoneyearhasanestimatedvalueof$85,000.Theminimumvalueofpaymentstobereceivedoverthefulltermoftheco-locationagreementwithCrownLawat30June2017isestimatedtobe$336,000(2016:$365,000).


Statementofcontingentliabilitiesandcontingentassets

asat30June2017

ContingentliabilitiesTheSeriousFraudOfficehasnoquantifiableorunquantifiablecontingentliabilitiesasat30June2017(2016:$nil).

ContingentassetsTheSeriousFraudOfficehasnocontingentassetsasat30June2017(2016:$50,000).

Theprioryearcontingentassetconcernedamake-goodobligationregardingasubleaseat120MayoralDrive,AucklandwhichexpiredinFebruary2016thatwasdisputedbythetenant.ThismatterwasresolvedinMarch2017andthecontingentassetremoved.



Notestofinancialstatements1 StatementofaccountingpoliciesReportingentityTheSeriousFraudOfficeisagovernmentdepartmentasdefinedbysection2ofthePublicFinanceAct1989andisdomiciledandoperatesinNewZealand.TherelevantlegislationgoverningtheSeriousFraudOffice’soperationsincludesthePublicFinanceAct1989andtheStateSectorAct1988.

TheSeriousFraudOffice’sultimateparentistheNewZealandCrown.

TheSeriousFraudOffice’sprimaryobjectiveistoprovideservicestotheNewZealandpublic.

TheSeriousFraudOfficedoesnotoperatetomakeafinancialreturn.

TheSeriousFraudOfficehasdesignateditselfasapublicbenefitentity(PBE)forfinancialreportingpurposesofcomplyingwithgenerallyacceptedaccountingpractice.

ThefinancialstatementsoftheSeriousFraudOfficearefortheyearended30June2017,andwereapprovedforissuebytheChiefExecutiveandDirectoron27September2017.

BasisofpreparationThefinancialstatementshavebeenpreparedonagoing-concernbasis,andtheaccountingpolicieshavebeenappliedconsistentlythroughouttheyear.

StatementofcomplianceThefinancialstatementsoftheSeriousFraudOfficehavebeenpreparedinaccordancewiththerequirementsofthePublicFinanceAct1989,whichincludetherequirementtocomplywithNewZealandgenerallyacceptedaccountingpractice(NZGAAP)andTreasuryinstructions.

ThesefinancialstatementshavebeenpreparedinaccordancewithandcomplywithPBEStandardsReducedDisclosureRegime(RDR)concessionsappliedonthebasisthatexpenditureexceeds$2millionbutislessthan$30million.

PresentationcurrencyandroundingThefinancialstatementsarepresentedinNewZealanddollarsandallvaluesareroundedtothenearestthousanddollars($000).

ChangesinaccountingpoliciesTherehavebeennochangesintheSeriousFraudOffice’saccountingpoliciessincethedateofthelastauditedfinancialstatements.

Impairmentofproperty,plantandequipmentandintangibleassetsTheSeriousFraudOfficedoesnotholdanycashgeneratingassets.Assetsareconsideredcashgeneratingwheretheirprimaryobjectiveistogenerateacommercialreturn.

Non-cashgeneratingassetsIntangibleassetssubsequentlymeasuredatcosthaveanindefiniteusefullifeorarenotyetavailableforuse,arenotsubjecttoamortisationandaretestedannuallyforimpairment.

Property,plant,andequipmentandintangibleassetsheldatcostthathaveafiniteusefullifearereviewedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamountmaynotberecoverable.Animpairmentlossisrecognisedfortheamountbywhichtheasset’scarryingamountexceedsitsrecoverableserviceamount.Therecoverableserviceamountisthehigherofanasset’sfairvaluelesscoststosellandvalueinuse.


Statementofaccountingpolicies(continued)

Valueinuseisthepresentvalueoftheasset’sremainingservicepotential.Valueinuseisdeterminedusinganapproachbasedoneitheradepreciatedreplacementcostapproach,restorationcostapproach,oraserviceunitsapproach.Themostappropriateapproachusedtomeasurevalueinusedependsonthenatureoftheimpairmentandavailabilityofinformation.

Ifanasset’scarryingamountexceedsitsrecoverableserviceamount,theassetisregardedasimpairedandthecarryingamountiswritten-downtotherecoverableamount.Thetotalimpairmentlossisrecognisedinthesurplusordeficit.

Thereversalofanimpairmentlossisrecognisedinthesurplusordeficit.

StandardsissuedandnotyeteffectiveandnotearlyadoptedStandardsandamendments,issuedbutnotyeteffectivethathavenotbeenearlyadopted,andwhicharerelevanttotheSeriousFraudOfficeare:

FinancialinstrumentsInJanuary2017,theExternalReportingBoardissuedPBEIFRS9FinancialInstruments.ThisreplacesPBEIPSAS29FinancialInstruments:RecognitionandMeasurement.PBEIFRS9iseffectiveforannualperiodsbeginningonorafter1January2021,withearlierapplicationpermitted.Themainchangesunderthestandardare:

• newfinancialassetclassificationrequirementsfordeterminingwhetheranassetismeasuredatfairvalueoramortisedcost

• anewimpairmentmodelforfinancialassetsbasedonexpectedlosses,whichmayresultintheearlierrecognitionofimpairmentlosses

• revisedhedgeaccountingrequirementstobetterreflectthemanagementofrisks.

ThetimingoftheSeriousFraudOfficeadoptingPBEIFRS9willbeguidedbytheTreasury’sdecisiononwhentheFinancialStatementsofGovernmentwilladoptPBEIFRS9.TheSeriousFraudOfficehasnotyetassessedtheeffectsofthenewstandard.

SummaryofsignificantaccountingpoliciesSignificantaccountingpoliciesareincludedinthenotestowhichtheyrelate.

Significantaccountingpoliciesthatdonotrelatetoaspecificnoteareoutlinedbelow.

ForeigncurrencytransactionsForeigncurrencytransactions(includingthoseforwhichforwardforeignexchangecontractsareheld)aretranslatedintoNZ$(thefunctionalcurrency)usingthespotexchangeratesatthedatesofthetransactions.Foreignexchangegainsandlossesresultingfromthesettlementofsuchtransactionsandfromthetranslationatyear-endexchangeratesofmonetaryassetsandliabilitiesdenominatedinforeigncurrenciesarerecognisedinthesurplusordeficit.

CashandcashequivalentsCashandcashequivalentsincludescashonhand,depositsheldatcallwithbanks,andothershort-termhighlyliquidinvestmentswithoriginalmaturitiesofthreemonthsorless.

TheSeriousFraudOfficeisonlypermittedtoexpenditscashandcashequivalentswithinthescopeandlimitsofitsappropriations.


GoodsandservicestaxItemsinthefinancialstatementsarestatedexclusiveofGST,exceptforreceivablesandpayables,whicharestatedonaGST-inclusivebasis.WhereGSTisnotrecoverableasinputtax,itisrecognisedaspartoftherelatedassetorexpense.

ThenetamountofGSTrecoverablefrom,orpayableto,theInlandRevenueDepartment(InlandRevenue)isincludedaspartofreceivablesorpayablesinthestatementoffinancialposition.

ThenetGSTpaidtoorreceivedfromtheIRD,includingtheGSTrelatingtoinvestingandfinancingactivities,isclassifiedasanoperatingcashflowinthestatementofcashflows.

IncometaxTheSeriousFraudOfficeisapublicauthorityandconsequentlyisexemptfromincometax.Accordingly,noprovisionhasbeenmadeforincometax.

StatementofcostaccountingpoliciesTheSeriousFraudOfficehasasingleappropriationforallitsactivities,thereforenocostallocationisrequired.

CriticalaccountingestimatesandassumptionsInpreparingthesefinancialstatements,estimatesandassumptionshavebeenmadeconcerningthefuture.Theseestimatesandassumptionsmaydifferfromthesubsequentactualresults.Estimatesandassumptionsarecontinuallyevaluatedandarebasedonhistoricalexperienceandotherfactors,includingexpectationsoffutureeventsthatarebelievedtobereasonableunderthecircumstances.Theestimatesandassumptionsthathaveasignificantriskofcausingamaterialadjustmenttothecarryingamountsofassetsandliabilitieswithinthenextfinancialyearareinrespectof:

• assessingtheusefullivesofsoftware–seenote9.• measuringlongserviceleave–seenote13.

CriticaljudgementsinapplyingaccountingpoliciesManagementhasexercisedthefollowingcriticaljudgementinapplyingaccountingpoliciesfortheyearended30June2017.Innote12Provisions,theSeriousFraudOfficehasexerciseditsjudgementindeterminingthelevelofthemake-goodrequiredfortheQueenStreetleasewhichexpireson3March2023.

BudgetandforecastfiguresBasisofthebudgetandforecastfigures

The2017budgetfiguresarefortheyearended30June2017andwerepublishedintheAnnualReport2016.TheyareconsistentwiththeSeriousFraudOffice’sbestestimatefinancialforecastinformationsubmittedtotheTreasuryfortheBudgetEconomicandFiscalUpdate(BEFU)fortheyearending2016/17.

The2018forecastfiguresarefortheyearending30June2018,whichareconsistentwiththebestestimatefinancialforecastinformationsubmittedtotheTreasuryfortheBEFUfortheyearending2017/18.

TheforecastfinancialstatementshavebeenpreparedasrequiredbythePublicFinanceAct1989tocommunicateforecastfinancialinformationforaccountabilitypurposes.

Thebudgetandforecastfiguresareunauditedandhavebeenpreparedusingtheaccountingpoliciesadoptedinpreparingthesefinancialstatements.

The30June2018forecastfigureshavebeenpreparedinaccordancewithandcomplywithPBEFRS42ProspectiveFinancialStatements.

TheforecastfinancialstatementswereapprovedforissuebytheChiefExecutiveon19April2017.


TheChiefExecutiveisresponsiblefortheforecastfinancialstatements,includingtheappropriatenessoftheassumptionsunderlyingthemandallotherrequireddisclosures.

WhiletheSeriousFraudOfficeregularlyupdatesitsforecasts,updatedforecastfinancialstatementsfortheyearending30June2018willnotbepublished.

SignificantassumptionsusedinpreparingtheforecastfinancialinformationTheforecastfigurescontainedinthesefinancialstatementsreflecttheSeriousFraudOffice’spurposeandactivitiesandarebasedonanumberofassumptionsonwhatmayoccurduringthe2017/18year.TheforecastfigureshavebeencompiledonthebasisofexistinggovernmentpoliciesandministerialexpectationsatthetimetheMainEstimateswerefinalised.Themainassumptions,whichwereadoptedasat19April2017,wereasfollows:

• TheSeriousFraudOffice'sactivitiesandoutputexpectationswillremainsubstantiallythesameasthepreviousyearfocusingontheGovernment’spriorities.

• Personnelcostswerebasedon55full-timeequivalentemployees,whichtakesintoaccountemployeeturnover.

• OperatingcostswerebasedonhistoricalexperienceandotherfactorsthatarebelievedtobereasonableinthecircumstancesandaretheSeriousFraudOffice’sbestestimateoffuturecoststhatwillbeincurred.

• Remunerationratesarebasedoncurrentwagesandsalarycosts,adjustedforanticipatedremunerationchanges.

• Estimatedyear-endinformationfor2016/17wasusedastheopeningpositionforthe2017/18forecasts.

Theactualfinancialresultsachievedfor30June2018arelikelytovaryfromtheforecastinformationpresented,andthevariationsmaybematerial.

Sincetheapprovaloftheforecaststherehavebeennosignificantchangesoreventsthatwouldhaveamaterialimpactontheforecasts.

2 Revenue

RevenueThespecificaccountingpoliciesforsignificantrevenueitemsareexplainedbelow:

–RevenueCrownTheSeriousFraudOfficeisprimarilyfundedfromtheCrown.TheamountofrevenuerecognisedtakesintoaccountanyamendmentstoappropriationsapprovedintheAppropriation(SupplementaryEstimates)Act2017fortheyearandcertainotherunconditionalfundingadjustmentsformallyapprovedpriortobalancedate.TherearenoconditionsattachedtothefundingfromtheCrownotherthanassociatedexpensescanbeincurredonlywithinthescopeandlimitsoftheSeriousFraudOffice’sfoundinglegislation,theSeriousFraudAct1990.ThefairvalueofrevenuefromtheCrownhasbeendeterminedtobeequivalenttotheamountsdueinthefundingarrangements.


–OtherrevenueRentalreceiptsunderanoperatingsubleasearerecognisedasrevenueonastraight-linebasisovertheleaseterm.

Actual2016$000

Actual2017$000

281 Rentalrevenuefromsubleases 84

0 Recoveryforemployeesonsecondment 248

0 AttendancefeesreceivedfortheFraudandCorruptionConference

89

0 Other 35

281 Totalotherrevenue 456

3 Personnelcosts

Actual2016$000

Actual2017$000

5,670 Salariesandwages 6,111

1 Definedcontributionplanemployercontributions 1

17 Increase/(decrease)inemployeeentitlements 63

226 Employeetraininganddevelopment 174

71 Other 90

5,985 Totalpersonnelcosts 6,439

EmployercontributionstodefinedcontributionplansincludecontributionstotheStateSectorRetirementSavingSchemeandKiwiSaverthatareexpensedinsurplusordeficitasincurred.

4 CapitalchargeThecapitalchargeisrecognisedasanexpenseintheperiodtowhichthechargerelates.TheSeriousFraudOfficepaysacapitalchargetotheCrownonitstaxpayers’fundsat30Juneand31Decembereachyear.Thecapitalchargeratefortheyearended30June2017was7%toDecember2016then6%to30June2017(2016:8%).

5 Financecosts

Actual2016$000

Actual2017$000

1 Discountunwindonprovisions(note12 0

1 Totalfinancecosts 0


6 Otherexpenses

Actual2016$000

Actual2017$000

UnauditedBudget2017

$000

UnauditedForecast

2018$000

41Feestoauditor

– feestoAuditNewZealandforauditoffinancialstatements

42 42 45

478 Rentalandoperatingleaseexpense 415 415 427

34 Leasemake-goodprovision 0 0 0

(98) Onerouscontracts 0 0 0

108 Other occupancy expenses 80 90 112

91 Legalfeesonpanelofprosecutors 159 140 96

268 Consultancy 308 200 628

277 Travel 357 372 355

742 ITandtelecommunications 706 860 745

3 Netlossondisposalofproperty,plantandequipment 0 0 0

12 Professional services 39 15 35

371 Specialistadvice–caserelated 266 442 342

307 Otherexpenses 431 313 654

2,634 Totalotherexpenses 2,803 2,889 3,439

7 ReceivablesShort-termreceivablesarerecordedattheamountdue.

Actual2016$000

Actual2017$000

11 Debtors (gross) 41

0 Less:provisionforimpairment 0

11 Netdebtors 41

Totalreceivables

Totalreceivablescomprise:

11Receivablesfromsupplierrefunds(exchange transactions) 12

0 Receivables (non-exchange transactions) 29

Allreceivablesareconsideredcurrent.


8 Property,plantandequipment

Property,plantandequipmentconsistsofthefollowingassetclasses:officefurniture,fixturesandfittings,officeequipment,computerequipmentandmotorvehicles.TheSeriousFraudofficedoesnotownanylandorbuildings.

Individualassets,orgroupsofassets,arecapitalisediftheircostisgreaterthan$2,000(excludingGST).Thevalueofanindividualassetthatislessthan$2,000(excludingGST)andispartofagroupofsimilarassetsiscapitalised.

–AdditionsThecostofanitemofproperty,plantandequipmentisrecognisedasanassetonlywhenitisprobablethatthefutureeconomicbenefitsorservicepotentialassociatedwiththeitemwillflowtotheSeriousFraudOfficeandthecostoftheitemcanbemeasuredreliably.

Work-in-progressisrecognisedatcostlessimpairmentandisnotdepreciated.

Inmostinstances,anitemofproperty,plantandequipmentisinitiallyrecognisedatitscost.

Whereanassetisacquiredthroughanon-exchangetransaction,itisrecognisedatitsfairvalueasatthedateofacquisition.

DisposalsGainsandlossesondisposalsaredeterminedbycomparingtheproceedswiththecarryingamountoftheasset.Gainsandlossesondisposalsareincludedinthesurplusordeficit.

SubsequentcostsCostsincurredsubsequenttotheinitialacquisitionarecapitalisedonlywhenitisprobablethatfutureeconomicbenefitsorservicepotentialassociatedwiththeitemwillflowtotheSeriousFraudOfficeandthecostoftheitemcanbemeasuredreliably.

Thecostsofday-to-dayservicingofproperty,plantandequipmentarerecognisedinthesurplusordeficitastheyareincurred.

DepreciationDepreciationisprovidedonastraight-linebasisonallproperty,plantandequipmentatratesthatwillwrite-offthecostoftheassetstotheirestimatedresidualvaluesovertheirusefullives.Theusefullivesandassociateddepreciationratesofmajorclassesofproperty,plantandequipmenthavebeenestimatedasfollows:

Usefullife Depreciationrate

Computerequipment 3years 33%

Furnitureandofficeequipment 3-5years 20%-33%

Motorvehicles 6-7years 15%

Leaseholdimprovementsaredepreciatedovertheunexpiredperiodoftheleaseortheestimatedremainingusefullivesoftheimprovements,whicheveristheshorter.

Theresidualvalueandusefullifeofanassetisreviewed,andadjustedifapplicable,ateachfinancialyearend.


Movementsforeachclassofproperty,plantandequipmentareasfollows:

Officefurniture,fixturesand

fittings$000

Officeequipment

$000

Computerequipment

$000

Motorvehicles

$000

Total$000

Cost

Balanceat1July2015 750 199 615 41 1,605

Additions 142 0 55 0 197

Disposals (204) (16) (47) 0 (267)

Balanceat30June2016 688 183 623 41 1,535

Balanceat1July2016

Additions 79 18 25 0 122

Disposals (45) (90) (113) 0 (248)

Balanceat30June2017 722 111 535 41 1,409

Accumulateddepreciationandimpairmentlosses

Balanceat1July2015 401 178 513 14 1,106

Depreciation expense 122 13 53 6 194

Eliminateondisposal (201) (16) (47) 0 (264)

Balanceat30June2016 322 175 519 20 1,036

Balanceat1July2016

Depreciation expense 76 8 56 6 146

Eliminateondisposal (45) (90) (113) 0 (248)

Balanceat30June2017 353 93 462 26 934

Carryingamounts

At1July2015 349 21 102 27 499

At30Juneand1July2016 366 8 104 21 499

At30June2017 369 18 73 15 475

TherearenorestrictionsoverthetitleoftheSeriousFraudOffice’sproperty,plantandequipment,norareanyproperty,plantandequipmentpledgedassecuritiesforliabilities.


9 Intangibleassets

Intangibleassets

–SoftwareacquisitionanddevelopmentAcquiredcomputersoftwarelicensesarecapitalisedonthebasisofthecostsincurredtoacquireandbringtousethespecificsoftware.Softwareiscapitalisedifitscostis$2,000(excludingGST)ormore.

CoststhataredirectlyassociatedwiththedevelopmentofsoftwareforinternalusebytheSeriousFraudOfficearerecognisedasanintangibleasset.Directcostsincludethecostofmaterialandservices,employeecostsanddirectlyattributableoverheads.

Employeetrainingcostsarerecognisedasanexpensewhenincurred.

Costsassociatedwithmaintainingcomputersoftwarearerecognisedasanexpensewhenincurred.

Costsofsoftwareupdatesorupgradesareonlycapitalisedwhentheyincreasetheusefulnessorvalueofthesoftware.

CostsassociatedwiththedevelopmentandmaintenanceoftheSeriousFraudOffice’swebsitearerecognisedasanexpensewhenincurred.

–AmortisationThecarryingvalueofanassetwithafinitelifeisamortisedonastraight-linebasisoveritsusefullife.Amortisationbeginswhentheassetisavailableforuseandceasesatthedatethattheassetisderecognised.Theamortisationchargeforeachfinancialyearisrecognisedinthesurplusordeficit.

Theusefullivesandassociatedamortisationratesofmajorclassesofintangibleassetshavebeenestimatedasfollows:

Usefullife Depreciationrate

Acquiredcomputersoftware 3-5years 20%-33%

Developedcomputersoftware 3years 33%

UsefullivesofsoftwareTheusefullifeofsoftwareisdeterminedatthetimethesoftwareisacquiredandbroughtintouseandisreviewedateachreportingdateforappropriateness.Forcomputersoftwarelicenses,theusefulliferepresentsmanagement'sviewoftheexpectedperiodoverwhichtheSeriousFraudOfficewillreceivebenefitsfromthesoftware,butnotexceedingthelicenseterm.ForinternallygeneratedsoftwaredevelopedbytheSeriousFraudOffice,theusefullifeisbasedonhistoricalexperiencewithsimilarsystemsaswellasanticipationoffutureeventsthatmayimpacttheusefullife,suchaschangesintechnology.


Acquiredsoftware$000

Cost

Balanceat1July2015 158

Additions 5

Disposals 0

Balanceat30June2016 163


Additions 0

Disposals (12)


Accumulatedamortisationandimpairmentlosses


Amortisationexpense 3

EliminateonDisposal 0



Amortisationexpense 2

Eliminateondisposal (12)


Carryingamounts

At1July2015 3

At30Juneand1July2016 5

At30June2017 3

TherearenorestrictionsoverthetitleoftheSeriousFraudOffice’sintangibleassets,norareanyintangibleassetspledgedassecuritiesforliabilities.


10 PayablesShort-termpayablesarerecordedattheamountpayable.

Actual2016

$000 Actual2017

$000

Payables

428 Creditors 161

123 Accrued expenses 136

641 Accruedrentpayable 546

1,192 Totalpayables 843

Payablesanddeferredrevenueundernon-exchangetransactions

78 Taxespayable(e.g.GSTandrates) 67

1,270 Totalpayables 910

11 Returnofoperatingsurplus

Actual2016$000

Actual2017$000

683 Netsurplus 318

683 Totalreturnofoperatingsurplus 318

ThereturnofoperatingsurplustotheCrownisrequiredtobepaidby31Octoberofeachyear.


12 ProvisionsAprovisionisrecognisedforfutureexpenditureofuncertainamountortimingwhenthereisapresentobligation(legalorconstructive)asaresultofapastevent,itisprobablethatanoutflowofresourcesembodyingeconomicbenefitsorservicewillberequiredtosettletheobligation,andareliableestimatecanbemadeoftheamountoftheobligation.Provisionsarenotrecognisedfornetdeficitsfromfutureoperatingactivities.

Provisionsaremeasuredatthepresentvalueoftheexpenditureexpectedtoberequiredtosettletheobligationusingapre-taxdiscountratebasedonmarketyieldsongovernmentbondsatbalancedatewithtermsofmaturitythatmatch,ascloselyaspossible,theestimatedtimingofthefuturecashoutflows.

Actual2016$000

Actual2017$000

Currentportion

0 Onerouscontracts 0

0 Lease make-good 0

0 Totalcurrentportion 0

Non-currentportion

109 Lease make-good 114

0 Onerouscontracts 0

109 Totalnon-currentportion 114

109 Totalprovisions 114

Movementsforeachclassofprovisionareasfollows:

Leasemake-good$000

Onerouscontracts$000

Total$000

Balance1July2015 478 97 575

Additionalprovisionsmade 34 0 34

Amountsused (145) (96) (241)

Discountunwind(note5) 0 1 1

Unusedamountsreversed (258) (1) (259)

Balance30June2016 109 0 109

Balance1July2016 109 0 109

Additionalprovisionsmade 5 0 5

Balanceat30June2017 114 0 114


Leasemake-goodInrespectof21QueenStreetleasedpremises,theSeriousFraudOfficeisrequiredattheexpiryoftheleasetermtomake-goodanydamagecausedtothepremisesandtoremoveanyfixturesorfittingsinstalledbytheSeriousFraudOffice.

TheQueenStreetleaseexpireson3March2023.Themake-goodprovisionforQueenStreetwasrevaluedduringtheyearfollowinganexternalreviewofitsadequacytomeetobligationswhentheleaseexpires.Asthereisnorightofrenewalonthelease,itisexpectedthatthetimingoftheexpectedcashoutflowtomake-goodwilloccurattheexpiryofthelease.

OnerouscontractsTheSeriousFraudOfficehasnoonerouscontractsat30June2017(2016:$nil).

13 Employeeentitlements

Short-termemployeeentitlementsEmployeebenefitsthatareduetobesettledwithin12monthsaftertheendoftheperiodinwhichtheemployeesrenderstherelatedservicearemeasuresbasedonaccruedentitlementsatcurrentratesofpay.Theseincludesalariesandwagesaccrueduptobalancedate,annualandlongserviceleaveearnedbutnotyettakenatbalancedate,andsickleave.AliabilityisrecognisedforbonuseswheretheSeriousFraudOfficehasacontractualobligationorwherethereisapastpracticethathascreatedaconstructiveobligationandareasonableestimateoftheobligationcanbemade.

Long-termemployeeentitlementsEmployeebenefitsthatareduetobesettledbeyond12monthsaftertheendofthereportingperiodinwhichtheemployeerenderstheservice,suchaslongserviceleave,havebeencalculatedbasedontheircurrentaccruedvalue.Thecurrentaccruedvalueisthepresentvalue,basedonastraight-linebasis,spreadovertheperiodoftimeuntiltheentitlementbecomesavailable.

Annualleave,vestedlongserviceleaveandnon-vestedlongserviceleavethatareexpectedtobesettledwithin12monthsofbalancedateareclassifiedasacurrentliability.Allotheremployeeentitlementsareclassifiedasanon-currentliability.


SuperannuationSchemesObligationsforcontributionstotheStateSectorRetirementSavingsSchemeandKiwiSaverareaccountedforasdefinedcontributionsuperannuationschemesandarerecognisedasanexpenseinthesurplusordeficitasincurred.

TheSeriousFraudOfficedoesnotcontributetoanydefinedbenefitschemes.

Actual2016$000

Actual2017$000

Currentportion

21 Accruedsalariesandwages 45

284 Annualleave 318

0 Longserviceleaveandretirementgratuities 11

305 Totalcurrentportion 374

Non-currentportion

5 Longserviceleaveandretirementgratuities 5

310 Totalemployeeentitlements 379

MeasuringretirementandlongserviceleaveobligationsThemeasurementofthelongserviceobligationwasbasedonassessmentof54(2016:50)employeesasat30June2017.Fiveemployeeshadalongserviceleaveentitlementofwhichnonewastakenduringtheyear.

14 EquityEquityistheCrown’sinvestmentinTheSeriousFraudOfficeandismeasuredasthedifferencebetweentotalassetsandtotalliabilities.Equityisdisaggregatedandclassifiedastaxpayers’funds,memorandumaccountsandpropertyrevaluationreserves.MemorandumaccountsandpropertyrevaluationreservesdonotapplytotheSeriousFraudOffice

Actual2016$000

Actual2017$000

Taxpayers’funds

452 Balanceat1July 452

683 Surplus/(deficit) 318

(683) ReturnofoperatingsurplustotheCrown (318)

452 Balanceat30June 452

452 Totalequity 452


15 Relatedparty transactions

TheSeriousFraudOfficeisawhollyownedentityoftheCrown.

Relatedpartydisclosureshavenotbeenmadefortransactionswithrelatedpartiesthatarewithinanormalsupplierorclient/recipientrelationshipontermsandconditionsnomoreorlessfavourablethanthosethatitisreasonabletoexpecttheSeriousFraudOfficewouldhaveadoptedifdealingwithanentityatarms-length,inthesamecircumstances.Further,transactionswithothergovernmentagencies(forexample,governmentdepartmentsandCrownentities)arenotdisclosedasrelatedpartytransactionswhentheyareconsistentwiththenormaloperatingarrangementsbetweengovernmentagenciesandundertakenonthenormaltermsandconditionsforsuchtransactions.

RelatedpartytransactionsrequiredtobedisclosedTheSeriousFraudOfficehasnorelatedpartytransactionsitisrequiredtodisclosein2017(2016:nil).

KeymanagementpersonnelcompensationKeymanagementpersonneloftheSeriousFraudOfficecomprisedoftheChiefExecutiveandDirectorandthefivemembersoftheseniorleadershipteam.TheseleadershippositionsaretheGeneralManagerEvaluationandIntelligence,GeneralManagerInvestigations(x2),GeneralManagerCorporateServicesandGeneralCounsel.

OneGeneralManagerInvestigationswassecondedtotheDepartmentofInternalAffairs.Remunerationwasrecoveredasanexpenserecovery.

Relatedpartytransactionsinvolvingkeymanagementpersonnel(ortheirclosefamilymembers)• Therewerenoclosefamilymembersofkeymanagementpersonnelemployedbythe

SeriousFraudOffice(2016:nil).• Therewerenorelatedpartytransactionsinvolvingkeymanagementpersonnelortheirclose

familymembersin2017(2016:nil).

TheabovekeymanagementpersonneldisclosureexcludestheMinisterresponsiblefortheSeriousFraudOffice.TheMinister’sremunerationandotherbenefitsarenotreceivedonlyforherroleasamemberofkeymanagementpersonneloftheSeriousFraudOffice.

TheMinister’sremunerationandotherbenefitsaresetbytheRemunerationAuthorityundertheCivilListAct1979andarepaidunderPermanentLegislativeAuthority,andnotpaidbytheSeriousFraudOffice.

Inaddition,during2016/17anumberofsecondmentarrangementswereinplace.TwoSeriousFraudOfficeFTEsweresecondedouttotheNewZealandPolicetoundertakeinvestigativeservices,fundedbytheNewZealandPolice.OneFTEwassecondedtoandfundedbytheDepartmentofInternalAffairs.Allsecondmentswereonnormaltermsandconditions.

Actual2016$000

Actual2017$000

SeniorLeadershipTeam,includingtheChiefExecutive

1,306,000 Remuneration 1,309,000

6FTEs Fulltimeequivalentmembers 6FTEs1

1ThisnumberincludesoneemployeewhojoinedtheSFOduringtheyear.


16 Eventsafterthebalancedate

Therearenosignificanteventsafterthebalancedate.

17 Financial instruments

Financialinstrumentcategories

ThecarryingamountsoffinancialassetsandfinancialliabilitiesineachoftheNZIAS39categoriesareasfollows:

Actual2016$000

Actual2017$000

Loansandreceivables

2,213 Cashandcashequivalents 1,583

11 Receivables 41

2,224 Totalloansandreceivables 1,624

Financialliabilitiesmeasured

1,270 Payables(excludingrevenueinadvance) 910

TheSeriousFraudOfficehasaletterofcreditfacilitywithWestpacof$175,000in2017(2016:$175,000)toallowforthepaymentofemployeesalariesbydirectcredit.

18 Explanationofmajorvariancesagainst budget

ExplanationsformajorvariancesfromtheSeriousFraudOffice’soriginal2016/17budgetfiguresareasfollows:

StatementofcomprehensiverevenueandexpensesRevenueCrownRevenueCrownrevenuewas$25,000morethanbudget.Thisisduetoanadditional$32,000tofundtheNewZealandcontributiontotheInternationalAnti-corruptionCo-ordinationCentre(IACCC).Also,thecapitalchargeexpensewasreducedby$7,000followingaratereductionoftwopercentagepoints.

OtherrevenueIncludesunbudgetedincomeof:

• $248,000fortherecoveryofcostsforemployeeswhoweresecondedtoothergovernmentdepartments

• $88,000forfeesreceivedtoattendtheFraudandCorruptionConferenceheldbytheSFOinFebruary2017.


–ExpensesPersonnelcostsincreasedexpenditureof$177,000reflectsadditionalresourcerequiredtocoveremployeesonsecondmentwiththeDepartmentofInternalAffairsandNewZealandPolice.

OtherexpensesTheoverallfavourablevarianceof$86,000isprimarilydueto:

• reducedspecialistadviceutilisedoncasesof$176,000,inparticularlowerutilisationofdocumentmanagementservices$41,000andexternalcase-relatedcontractorsof$64,000asaresultofthevariablecaselifecyclemixduringanygivenperiodintime

• unbudgetedcostof$101,000oftheFraudandCorruptionConferenceheldinAucklandinMay2017.ThebudgetwasincreasedintheSupplementaryEstimateswiththecostfundedfromotherrevenue.

Statementoffinancialposition–CurrentliabilitiesCurrentliabilitieswere$36,000lessthanbudget.Thiswasduetoacombinationoflesspayables(inclusiveofoperatingsurplus)of$120,000,andanincreaseinemployeeentitlementsof$84,000duetoanincreasedsalaryaccrualandemployeeleaveprovisions.

StatementofcashflowsAdditionalotherrevenueof$371,000froma)recoveryofcostsof$248,000foremployeesonsecondment,andb)unbudgetedsalesof$88,000fortheFraudandCorruptionConferenceinFebruary2017.Paymentstosuppliersandemployeeswere$309,000morethanbudgetduetoadditionalresourcerequiredtocoveremployeesonsecondment.Inaddition,therewerecashoutflowsinexcessofbudgetforassetpurchasesof$22,000andrepaymenttotheCrownofthe2015/16surplusof$683,000.

19 AdjustmentsarisingontransitiontothenewPBEaccountingstandards

ReclassificationadjustmentsTherehavebeennoreclassificationsonthefaceofthefinancialstatementsinadoptingthenewPBEaccountingstandards.


Statementsofexpensesandcapitalexpenditure

Statementofactualexpensesandcapitalexpenditureincurredagainstappropriationfortheyearended30June2017AnnualandpermanentappropriationsforVoteSeriousFraud

Expenditureafterremeasurements

2016$000

Appropriationtitle

Expenditureafterremeasurements

2017$000

Approvedappropriation

2017*$000

Locationofend-of-yearperformance

information**

Departmentaloutputexpenses

8,853Investigationandprosecutionofseriousfinancialcrime 9,418 9,515 Pages27to31

8,853 Totaldepartmentaloutputexpense 9,418 9,515

Departmentalcapitalexpenditure

201SeriousFraudOffice–PermanentLegislativeAuthorityundersection24(1)ofthePFA 122 130 Page31

*ThesearetheappropriationsfromtheSupplementaryEstimates,adjustedforanytransfersundersection26AofthePFA.

**Thenumbersinthiscolumnrepresentwheretheend-of-yearperformanceinformationhasbeenreportedforeachappropriationadministeredbytheSeriousFraudOfficeinthisAnnualReportonthesespecificpages.

Statementofexpensesandcapitalexpenditureincurredwithout,orinexcessof,appropriationorotherauthority

fortheyearended30June2017$nil(2016:$nil)

Expensesandcapitalexpenditureincurredinexcessofappropriation$nil(2016:$nil)

Expensesandcapitalexpenditurewithoutappropriationoutsidethescopeorperiodofappropriation$nil(2016:$nil)

Statementofdepartmentalcapitalinjectionswithout,orinexcessofauthorityfortheyearended30June2017TheSeriousFraudOfficehasnotreceivedanycapitalinjectionsduringtheyearwithout,orinexcessof,authority(2016:nil).


IndependentAuditor'sReport

TothereadersoftheSeriousFraudOffice'sannualreportfortheyearended30June2017

TheAuditor-GeneralistheauditoroftheSeriousFraudOffice.TheAuditor-Generalhasappointedme,JRSmaill,usingthestaffandresourcesofAuditNewZealand,tocarryout,onhisbehalf,theauditof:

• thefinancialstatementsoftheSeriousFraudOfficeonpages32to55and,thatcomprisethestatementoffinancialposition,statementofcommitments,statementofcontingentliabilitiesandcontingentassetsasat30June2017,thestatementofcomprehensiverevenueandexpense,statementofchangesinequity,andstatementofcashflowsfortheyearendedonthatdateandthenotestothefinancialstatementsthatincludeaccountingpoliciesandotherexplanatoryinformation;

• theperformanceinformationpreparedbytheSeriousFraudOfficefortheyearended30June2017onpages8to10and27to31;and

• thestatementsofexpensesandcapitalexpenditureoftheSeriousFraudOfficefortheyearended30June2017onpage56.

OpinionInouropinion:

• thefinancialstatementsoftheSeriousFraudOfficeonpages32to55:

• presentfairly,inallmaterialrespects:

─ itsfinancialpositionasat30June2017;and

─ itsfinancialperformanceandcashflowsfortheyearendedonthatdate;and

• complywithgenerallyacceptedaccountingpracticeinNewZealandinaccordancewithPublicBenefitEntityReportingStandards;

• theperformanceinformationoftheSeriousFraudOfficeonpages8to10and27to31:

• presentsfairly,inallmaterialrespects,fortheyearended30June2017:

─ whathasbeenachievedwiththeappropriation;and

─ theactualexpensesorcapitalexpenditureincurredcomparedwiththeappropriatedorforecastexpensesorcapitalexpenditure;and

• complieswithgenerallyacceptedaccountingpracticeinNewZealand;and

• thestatementsofexpensesandcapitalexpenditureoftheSeriousFraudOfficeonpage56arepresentedfairly,inallmaterialrespects,inaccordancewiththerequirementsofsection45AofthePublicFinanceAct1989.

Ourauditwascompletedon27September2017.Thisisthedateatwhichouropinionisexpressed.

Thebasisforouropinionisexplainedbelow.Inaddition,weoutlinetheresponsibilitiesoftheChiefExecutiveandourresponsibilitiesrelatingtotheinformationtobeaudited,wecommentonotherinformation,andweexplainourindependence.

BasisforouropinionWecarriedoutourauditinaccordancewiththeAuditor-General'sAuditingStandards,whichincorporatetheProfessionalandEthical Standards and the International Standards on Auditing (New Zealand) issued by the New Zealand Auditing andAssuranceStandardsBoard.Our responsibilitiesunder thosestandardsare furtherdescribed in theResponsibilitiesof theauditorsectionofourreport.

WehavefulfilledourresponsibilitiesinaccordancewiththeAuditor-General'sAuditingStandards.

Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.


ResponsibilitiesoftheChiefExecutivefortheinformationtobeauditedTheChiefExecutiveisresponsibleonbehalfoftheSeriousFraudOfficeforpreparing:

• financialstatementsthatpresentfairlytheSeriousFraudOffice'sfinancialposition,financialperformance,anditscashflows,andthatcomplywithgenerallyacceptedaccountingpracticeinNewZealand;

• performanceinformationthatpresentsfairlywhathasbeenachievedwitheachappropriation,theexpenditureincurredascomparedwithexpenditureexpectedtobeincurred,andthatcomplieswithgenerallyacceptedaccountingpracticeinNewZealand;and

• statementsofexpensesandcapitalexpenditureoftheSeriousFraudOffice,thatarepresentedfairly,inaccordancewiththerequirementsofthePublicFinanceAct1989.

TheChiefExecutiveisresponsibleforsuchinternalcontrolasisdeterminedisnecessarytoenablethepreparationoftheinformationtobeauditedthatisfreefrommaterialmisstatement,whetherduetofraudorerror.

Inpreparingtheinformationtobeaudited,theChiefExecutiveisresponsibleonbehalfoftheSeriousFraudOfficeforassessingtheSeriousFraudOffice'sabilitytocontinueasagoingconcern.TheChiefExecutiveisalsoresponsiblefordisclosing,asapplicable,mattersrelatedtogoingconcernandusingthegoingconcernbasisofaccounting,unlessthereisanintentiontomergeortoterminatetheactivitiesoftheSeriousFraudOffice,orthereisnorealisticalternativebuttodoso.

TheChiefExecutive'sresponsibilitiesarisefromthePublicFinanceAct1989.

ResponsibilitiesoftheauditorfortheinformationtobeauditedOurobjectivesaretoobtainreasonableassuranceaboutwhethertheinformationweaudited,asawhole,isfreefrommaterialmisstatement,whetherduetofraudorerror,andtoissueanauditor'sreportthatincludesouropinion.

Reasonableassuranceisahighlevelofassurance,butisnotaguaranteethatanauditcarriedoutinaccordancewiththeAuditor-General'sAuditingStandardswillalwaysdetectamaterialmisstatementwhenitexists.Misstatementsaredifferencesoromissionsofamountsordisclosures,andcanarisefromfraudorerror.Misstatementsareconsideredmaterialif,individuallyorintheaggregate,theycouldreasonablybeexpectedtoinfluencethedecisionsofreaders,takenonthebasisoftheinformationweaudited.

Forthebudgetinformationreportedintheinformationweaudited,ourprocedureswerelimitedtocheckingthattheinformationagreedtothe2014/18statementofintentandrelevantEstimatesandSupplementaryEstimatesofAppropriations2016/17,andthe2016/17forecastfinancialfiguresincludedintheSeriousFraudOffice's2015/16AnnualReport.

Wedidnotevaluatethesecurityandcontrolsovertheelectronicpublicationoftheinformationweaudited.

AspartofanauditinaccordancewiththeAuditor-General'sAuditingStandards,weexerciseprofessionaliudgementandmaintainprofessionalscepticismthroughouttheaudit.Also:

• Weidentifyandassesstherisksofmaterialmisstatementoftheinformationweaudited,whetherduetofraudorerror,designandperformauditproceduresresponsivetothoserisks,andobtainauditevidencethatissufficientandappropriatetoprovideabasisforouropinion.Theriskofnotdetectingamaterialmisstatementresultingfromfraudishigherthanforoneresultingfromerror,asfraudmayinvolvecollusion,forgery,intentionalomissions,misrepresentations,ortheoverrideofinternalcontrol.

• Weobtainanunderstandingofintemalcontrolrelevanttotheauditinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheSeriousFraudOffice'sinternalcontrol.

• WeevaluatetheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesandrelateddisclosuresmadebytheChiefExecutive.

• WeevaluatetheappropriatenessofthereportedperformanceinformationwithintheSeriousFraudOffice'sframeworkforreportingitsperformance.

• WeconcludeontheappropriatenessoftheuseofthegoingconcernbasisofaccountingbytheChiefExecutiveand,basedontheauditevidenceobtained,whetheramaterialuncertaintyexistsrelatedtoeventsorconditionsthatmaycastsignificantdoubtontheSeriousFraudOffice'sabilitytocontinueasagoingconcern.Ifweconcludethatamaterialuncertaintyexists,wearerequiredtodrawattentioninourauditor'sreporttotherelateddisclosuresintheinformationweauditedor,ifsuchdisclosuresareinadequate,tomodifyouropinion.Ourconclusionsarebasedontheauditevidenceobtaineduptothedateofourauditor'sreport.However,futureeventsorconditionsmaycausetheSeriousFraudOfficetoceasetocontinueasagoingconcern.

• Weevaluatetheoverallpresentation,structureandcontentoftheinformationweaudited,includingthedisclosures,and whether the information we audited represents the underlying transactions and events in a manner thatachievesfairpresentation.


WecommunicatewiththeChiefExecutiveregarding,amongothermatters,theplannedscopeandtimingoftheauditandsignificantauditfindings,includinganysignificantdeficienciesininternalcontrolthatweidentifyduringouraudit.

OurresponsibilitiesarisefromthePublicAuditAct2001.

OtherinformationTheChiefExecutiveisresponsiblefortheotherinformation.Theotherinformationcomprisestheinformationincludedonpages4to7andpages11to26,butdoesnotincludetheinformationweaudited,andourauditor'sreportthereon.

Ouropinionontheinformationweauditeddoesnotcovertheotherinformationandwedonotexpressanyformofauditopinionorassuranceconclusionthereon.

Inconnectionwiththeinformationtobeaudited,ourresponsibilityistoreadtheotherinformation.Indoingso,weconsiderwhethertheotherinformationismateriallyinconsistentwiththeinformationweauditedorourknowledgeobtainedintheaudit,orotherwiseappearstobemateriallymisstated.If,basedonourwork,weconcludethatthereisamaterialmisstatementofthisotherinformation,wearerequiredtoreportthatfact.Wehavenothingtoreportinthisregard.

IndependenceWe are independent of the Serious Fraud Office in accordance with the independence requirements of the Auditor-General'sAuditingStandards,whichincorporatetheindependencerequirementsofProfessionalandEthicalStandard1(Revised):CodeofEthicsforAssurancePractitionersissuedbytheNewZealandAuditingandAssuranceStandardsBoard.

Otherthaninourcapacityasauditor,wehavenorelationshipwith,orinterests,intheSeriousFraudOffice.

JRSmaillAuditNewZealandOnbehalfoftheAuditor-GeneralAuckland,NewZealand


Appendix1–Useofstatutorypowers

Useofstatutorypowers

Ananalysisofthe‘UseofStatutoryPowers’asnoticesissuedundertheActissummarisedinthetablesbelow

Section Part1ofAct 2016/17 2015/16 2014/15 2013/14 2012/13

s5(1)(a)Requiringdocuments 36 63 56 147 108

s5(1)(b) Supplyinformation 1 3 1 13 25

s6 Searchwarrantobtained 0 0 2 0 0

Total 37 66 59 160 133

Section Part2ofAct 2016/17 2015/16 2014/15 2013/14 2012/13

s9c(1)(c) Attend 65 71 32 63 66

s9(1)(d)Requiringanswerstoquestions 68 72 32 64 73

s9(1)(e)Requiringinformation 386 480 88 128 216

s9(1)(f)Requiringdocuments 136 177 341 361 620

s10 Searchwarrantobtained 7 13 42 33 33

s36(2) 34 30 0 0 36

Total 696 843 535 9031,044

SeriousFraudOfficePOBox7124,WellesleyStreet,Auckland1141Level6,21QueenStreet,Auckland1010

Phone093030121

Fax093030142

Email: [email protected]

sfo.govt.nz

ComplaintsEmail:[email protected]:0800109800

Exceptwhereotherwisenoted,thisworkislicensedunder

creativecommons.org/licenses/by/3.0/nz

ISSN1176-9630(Print)

ISSN1174-0213(Online)

E.40AnnualReport(2017)PresentedtotheHouseofRepresentativespursuanttosection44(1)ofthePublicFinanceAct1989

SFO Annual Report 2017 2

Documents

Transcript of SFO Annual Report 2017 2