Annual Report 2011

The Institute of Environmental Science and Research 

Annual Report 2011 

www.esr.cri.nz

The Institute of Environmental Science and Research 

Manaaki Tangata Taiao Hoki 

Protecting people and their environment through science 

Mt Albert 

Science Centre 

Kenepuru 


NCBID 

Wallaceville 

Christchurch 


18 Hampstead Road 

Mt Albert 

Private Bag 92 021 

Auckland 1142 

Tel: +64 9 815 3670 

Fax: +64 9 849 6046 

34 Kenepuru Drive 

Porirua 

PO Box 50 348 

Porirua 5240 

Tel: +64 4 914 0700 

Fax: +64 4 914 0770 

66 Ward Street 

Upper Hutt 

PO Box 40 158 

Upper Hutt 5140 

Tel: +64 4 529 0600 

Fax: +64 4 529 0601 

27 Creyke Road 

Ilam 

PO Box 29 181 

Christchurch 8540 

Tel: +64 3 351 6019 

Fax: +64 3 351 0010 

ISBN 1179 5123

Contents 

ESR at a glance 3 

Core programme areas 4 

Corporate governance 5 

Chair and Chief Executive Officer reports 8 

Statement of Core Purpose 10 

ESR and the Canterbury earthquakes 11 

Outcome 1: Safeguard the health of New Zealanders through 

improvements in the management of human biosecurity and 

threats to public health 13 

Outcome 2: Increase effectiveness of forensic science services 

applied to safety, security and justice investigations and processes 17 

Outcome 3: Enhance protection of New Zealand’s food-based 

economy through the management of food safety risks associated 

with traded goods 22 

Outcome 4: Improve the safety of freshwater and groundwater 

resources for human use and the safer use of biowastes 27 

Human resources 32 

Research 33 

Information management 34 

Capability Fund 35 

Financials 37 

ESR Annual Report 2011 | 1

2 | ESR Annual Report 2011

ESR at a glance 

The Institute of Environmental Science and Research. 

A Crown Research Institute (CRI) established in 1992. 

Annual operating revenue $51.4 million. 

9.5% return on equity to shareholders. 

Valued public good services provided in New Zealand $44.6 million. 

ESR provides science advice and services to government agencies, local 

authorities and the private sector. 

We are: 

> sole provider of forensic services to New Zealand 

Police 

> Principal science advisor to the Ministry of Health 

> Preferred science provider to the New Zealand 

Food Safety Authority, New Zealand Customs 

Service, Medsafe and the Department 

of Corrections 

> A science partner of Ministry of Agriculture 

and Forestry (MAF) 

> Science advisor for local authorities, industry 

organisations and the private sector. 

ESR’s core clients: 

> New Zealand Police 

> Ministry of Health 

> Ministry of Agriculture and Forestry. 

Research investors: 

> Ministry of Science and Innovation (MSI) 

> Health Research Council 

> The Royal Society of New Zealand 

> Marsden Fund 

MSI delegates $5.8m of Capability Funds to ESR 

to invest in science and research capability. 

Expertise: 

> 327 full-time-equivalent (FTE) scientists, technical 

specialists and support staff working at four sites: 

Auckland, Wellington (Kenepuru and Wallaceville) 

and Christchurch. 

Our staff cover a range of scientific disciplines and 

include public health physicians, environmental 

scientists, epidemiologists, chemists, forensic scientists, 

toxicologists, molecular biologists, microbiologists, 

social scientists, biostatisticians and geoinformaticians. 

Core scientific strengths: 

> Microbiology and virology (clinical and 

environmental) 

> Molecular biology 

> Chemistry 

> Epidemiology 

> Risk analysis 

> Surveillance 

> Social systems 

> Toxicology 

> Research. 

Laboratory accreditation: 

ESR’s environmental health laboratories and 

pharmaceutical and workplace drug testing laboratories 

are all accredited to comply with ISO 17025 or ISO 

15189 by International Accreditation New Zealand 

(IANZ). Some environmental health laboratories are 

also World Health Organization (WHO) accredited. 

The pharmaceutical laboratories also have Good 

Manufacturing Practice (GMP) certification. 

All of ESR’s forensic laboratories and operations are 

American Society of Crime Laboratory Directors/ 

Laboratory Accreditation Board International (ASCLD/ 

LAB) accredited, which also complies with the ISO 

17025 standard. 


Core programme areas 

Forensic 

ESR provides the New Zealand justice system with a comprehensive forensic service. This 

is underpinned by original research and the latest DNA technology. 

> Oversees and manages the New Zealand National DNA Databank. 

> Crime scene investigation and evidence recovery. 

> Physical evidence investigation. 

> DNA profiling, storing and matching. 

> Criminal and coronial toxicology. 

> Illicit drug analysis, including clandestine laboratory investigation. 

> Blood and breath alcohol and drug testing for drivers. 

> Pharmaceuticals. 

> Workplace drug testing. 

> Expert witnesses for court. 

> Training. 

Environmental health 

ESR provides key specialised scientific services to the public health sector. It is a core 

provider of public health and environmental health scientific services to the Ministry of 

Health and MAF. 

> Food programme. 

> Health programme. 

> Water programme. 

ESR is a founding partner organisation at the National Centre for Biosecurity and 

Infectious Disease NCBID) – Wallaceville. 

> Human biosecurity. 

> Microbial and chemical forensics. 

Social systems 

The work of ESR’s social systems group covers three broad areas of interrelated research: 

Healthy Communities, Sustainable Development and Science, Technology and 

Communities. 

> Health services improvement. 

> Risk and decision making. 

> Supporting Canterbury earthquake recovery – stakeholder engagement design 

and analysis. 

> Science for justice outcomes. 


Corporate governance 

ESR is one of eight CRIs created in 1992 with the reform of New Zealand’s state-funded 

science services. 

As a CRI, the Institute’s principal activity is to conduct scientific research in accordance with the purpose and 

principles of CRIs as set out in sections 4 and 5 of the Crown Research Institutes Act 1992. A Statement of Core 

Purpose (SCP) further clarifying ESR’s role and responsibilities was published by the Government in late 2010. 

ESR is wholly owned by the New Zealand Government and has an independent Board of Directors that is 

responsible for its strategic direction and operational performance. ESR has a Board of seven directors including 

the Chair. 

Responsibility for the operation and administration of the Institute is delegated to the Chief Executive Officer 

(CEO), who is accountable to the Board. 

The new Ministry of Science and Innovation performs the role of protecting the shareholders’ interests and 

investment in the Institute. The Statement of Corporate Intent (SCI) and Annual Report are tabled in parliament. 

Board of Directors 

Board members from left: Tahu Potiki, Elizabeth Hickey, Patricia Schnauer, Dr Susan Macken (Chair), Dr Judith Johnston, 

Ross Peat (Deputy Chair) and Professor Bill Denny. 

The Board acts on behalf of, and is accountable to, the Shareholding Ministers (the Minister of Finance and the 

Minister of Science and Innovation) and fulfils the regulatory expectations laid down in the Companies Act 1993, 

the Crown Research Institutes Act 1992, the Public Finance Act 1989 and the Crown Entities Act 2004. 

Board biographies 

Dr Susan Macken – Chair 

Dr Susan Macken has BSc and BCom degrees from the University of Auckland, and a PhD in economics from 

Cambridge University. She has worked for the World Bank as an economist, held various senior roles at Fletcher 

Challenge and is a former Chief Executive of the Problem Gambling Foundation and the Auckland Regional 

Economic Development Strategy. She is currently a business consultant and her current directorships include 

Bank of New Zealand, New Zealand Treasury, Ultimate Care Group, Fertility Associates and the Auckland 

Regional Amenities Funding Board. 


Ross Peat – Deputy chair 

Ross Peat has a wealth of experience in the IT/software industry. He spent nine years with IBM New Zealand 

followed by 14 years at Microsoft New Zealand, the last four as Managing Director. His current directorships 

include Healthsoft Limited and several New Zealand IT start-ups. 

Professor Bill Denny 

Bill Denny is a graduate of the University of Auckland and trained at Auckland and Oxford Universities as 

a medicinal chemist. He is currently a co-director of the Auckland Cancer Society Research Centre in the 

University of Auckland’s School of Medical Sciences where he has been closely involved in the development of 

eight drugs from the Centre into clinical trials, in collaboration with different industrial partners. He is a principal 

investigator in the Maurice Wilkins Centre and is co-Chair of the University’s Biopharma Research Initiative. 

Elizabeth Hickey 

Liz Hickey is a company director and chartered accountant. Current directorships include the Southern Cross 

Healthcare Group and the New Zealand Institute of Chartered Accountants. She is on the board of the Auckland 

Netball Centre, and is a co-opted member of the audit committee of the ASB Community Trust. 

Dr Judith Johnston 

Dr Judith Johnston has a BA(Hons) from the University of Otago, an MA from the University of Toronto and a 

PhD from the University of Auckland. She is Managing Director of her own management consulting company, 

Judith Johnston Limited. Judith has many years of experience in the public and private sectors, including with the 

Ministry of Justice, Ministry of Health and Department of Health. 

Tahu Potiki 

Tahu Potiki is Otago based and is affiliated to the iwi of Kai Tahu and Kati Mamoe. He has spent many years 

working in Māori development and was the CEO of Te Runanga o Ngāi Tahu for six years. He is now the Otakou 

representative to the Te Runanga o Ngāi Tahu tribal council. He has a background working in Māori health and 

education and practiced as a qualified social worker for many years. 

Tahu has served on four South Island DHBs and is currently on the Southern DHB whilst he is also a serving 

board member of the Māori Television Service, New Zealand Council for Educational Research and Relationship 

Services NZ. 

Patricia Schnauer 

Patricia Schnauer is a qualified barrister and solicitor and director of Schnauer and Co Limited, a law firm 

she established in 1987. In 1996 Patricia became a List Member of Parliament in the first MMP Coalition 

Government. She is Deputy Chair of North Shore Hospice and a Trustee of the North Harbour Stadium Trust. 

Strategic Leadership Team 

The responsibility for the operation and administration of ESR is delegated to the CEO, who heads the Strategic 

Leadership Team. This Team develops and implements strategies that keep ESR focused on achieving its goals and 

strategic business objectives. 

In May 2011 the Chief Executive, Dr John Hay, resigned and acting CEO, Dr Fiona Thomson-Carter, was 

appointed for the remainder of the financial year. 

CEO (acting) 

GM Environmental Health (acting) 

GM Forensic 

GM Business Development and Marketing 

GM Finance 

Chief Information Officer 

GM Human Resources 

GM Science and RESEARCH 

Dr Fiona Thomson-Carter 

Dr Virginia Hope 

Dr Keith Bedford 

David Talbot 

Peter O’Shea 

Leo Morta 

Terry McCaul 

Dr Val Orchard 



Chair’s report 

2010-2011 was a momentous year for New Zealand. For ESR, as for many 

organisations, the Christchurch earthquakes presented significant challenges 

to our people and our operations, and the slower and more protracted 

recovery in the economy impacted growth. 

After five years of year on year increases in earnings, ESR’s revenue has entered a 

consolidation phase with growth from existing business streams projected to be slow in the 

medium term. The organisation is focussed on revenue diversification through strategic 

initiatives that include acquisitions, new clients, and international sales. We expect to 

grow these new revenue sources significantly over the next three years. 

Our financial results for 2010-2011 reflect the impact of Christchurch events and 

continued fiscal restraint of government clients. Revenue at $51.4M was $2.0M down on 

budget. The Forensic business was ahead of budget in revenue and contribution, while 

both the Environmental Health and Social Systems businesses were significantly behind in 

both revenue and contribution. Research revenue was down on last year, and on budget, 

due to a reduction in ESR’s government research funding and limited new research 

funding. The net deficit in operational business contribution was substantially offset by 

savings in infrastructure costs. 

Despite these challenges ESR achieved over 8% return on equity on operational 

performance (9.5% after non-recurring taxation adjustments), and a pleasing net profit of 

$3.2M after tax, which was ahead of budget. 

ESR’s environment was positively impacted by the implementation of the 

recommendations of the Crown Research Institute Taskforce. The board completed a new 

Statement of Core Purpose. Developed in consultation with our clients and government, 

it provides a clear set of national outcomes in the justice, health and environmental 

sectors. Key areas of responsibility involve providing science and research services related 

to human biosecurity, public health, food and water safety, and forensic science. 

May 2011 marked the end of a rewarding relationship with the organisation for our Chief 

Executive Officer, Dr John Hay. John’s significant contribution, both as a scientist and 

leader, meant that he left ESR as a strong robust company. The board recruited a new 

CEO, Graham Smith, who takes up his position in August 2011. In the interim, ESR’s 

General Manager Environmental Health, Dr Fiona Thomson-Carter, is Acting Chief 

Executive. 

We look forward to the new financial year and the opportunities for ESR to deliver 

on its Statement of Core Purpose through the continued provision of its science and 

research, and the transfer of technology and knowledge with key stakeholders, including 

government, industry, the community and Māori. 

My thanks go to the management and staff of ESR for their professionalism and 

commitment in a challenging year. ESR’s continual delivery of outstanding operational 

and research science to New Zealand’s health and justice sectors is a tribute to them all. 

I also acknowledge the work and support of my board colleagues in undertaking the 

governance of ESR. 

Dr Susan Macken 

Chair 


Acting CEO’s report 

This was no ordinary year for any organisation in New Zealand. Reflecting in 

particular on the challenges posed to our Christchurch-based staff and their 

science during this extraordinary financial year, it is remarkable that we have 

been able to largely continue to deliver critical science to our core clients, 

despite the major earthquakes and subsequent aftershocks in Canterbury. 

It is testament to the professionalism and resilience of our Christchurch staff that forensic 

and environmental health services provided from our Christchurch Science Centre, 

although disrupted at times, continued. ESR scientists played key roles in the earthquake 

response and recovery processes most notably in Disaster Victim Identification, informing 

public health actions as a result of surveys of the Christchurch population, and analysis 

and advice of health hazards posed by liquefaction silts and contaminated water supplies. 

Our scientists made these significant contributions to their community while dealing with 

the day-to-day earthquake-related difficulties encountered in their personal lives. ESR has 

been proud to be able to support our staff in every way possible. 

In the more localised CRI environment, the first real changes invoked by implementation 

of the CRI Taskforce recommendations were apparent with the development of the new 

Statement of Core Purpose and Statement of Corporate Intent. ESR’s Core Purpose is to 

deliver benefit to New Zealand’s Justice and Health sectors. 

Continuing constraints on public sector funding affected ESR operations and we have 

adapted to, and planned for, the new environment while progressing our strategic 

initiatives and seeking to diversify and grow new revenue streams. To aid these endeavours, 

ESR has effected change internally, notably in planning the replacement of our Laboratory 

Information Management System, targeted management training and taking actions based 

on the findings of a staff culture survey. These initiatives will stand us in good stead to face 

the challenges to come. 

A particular highlight was the refurbishment of our Health Programme laboratories at 

the Kenepuru Science Centre, officially opened by the Minister of Health, the Hon Tony 

Ryall, in June. 

A customer satisfaction survey conducted during the year demonstrated that ESR’s services 

are much appreciated by our clients with 89% of those surveyed expressing significant 

levels of satisfaction. This outstanding result underscores the professionalism our staff 

brings to every aspect of their working lives at ESR. 

ESR’s science and expertise was featured in several national media events during the 

year including our work related synthetic cannabinoids, the introduction of spherical 

photography to explain forensic evidence in court, and the outbreak of E. coli O104 in 

Europe. 

Many varied collaborations and interactions with our international scientific networks 

ensured our science is continually refreshed and achieves the standards of international 

best practice. ESR’s new Science Advisory Panel is comprised of three international experts 

in their fields; we look forward to having their input into our science programmes. 

When meeting new ESR staff, I usually take the opportunity to say that no two days at 

ESR are ever the same; that assertion can also be made for the financial year just ended. 

An extraordinary year for ESR and New Zealand. 

Dr Fiona Thomson-Carter 

Chief Executive Officer – acting 


Statement of Core Purpose 

A key recommendation of the CRI Taskforce was for the Government 

to publish a SCP for each CRI, defining its purpose, the outcomes to 

be achieved, the scope of operation and the operating principles. ESR 

worked with clients, stakeholders and MSI over several months to 

develop its SCP, which was released in November 2010. 

ESR’s purpose is to deliver enhanced scientific and research services to the public health, 

food safety, security and justice systems and the environmental sector to improve the 

safety and contribute to the economic, environmental and social wellbeing of people and 

communities in New Zealand. 

SCP Outcomes 

ESR will fulfil its purpose through the provision of research and scientific services and 

the transfer of technology and knowledge in partnership with key stakeholders, including 

government, industry, the community and Māori, to: 

Outcome 1: Safeguard the health of New Zealanders through improvements in the 

management of human biosecurity and threats to public health 

Outcome 2: Increase the effectiveness of forensic science services applied to safety, 

security and justice investigations and processes 

Outcome 3: Enhance the protection of New Zealand’s food-based economy through the 

management of food safety risks associated with traded goods 

Outcome 4: Improve the safety of freshwater and groundwater resources for human use 

and the safer use of biowastes. 

The full SCP is available on www.esr.cri.nz. 

Strategic initiatives 

Consistent with our SCP, revenue diversification initiatives were set in four areas: 

> Enhancing and expanding our government service business by investing in and 

acquiring new scientific capabilities, technologies and enterprises 

> Expanding our international scientific and consultancy services and research 

collaborations to access new technologies and research revenue 

> Making use of online and digital technologies to deliver smart, new, effective, efficient 

and essential services to clients in New Zealand and overseas 

> Engaging with industry. Working with sector partners and commercialisation entities, 

ESR will utilise and transfer its intellectual property, intellectual knowledge and 

professional expertise to benefit New Zealand. 


ESR and the Canterbury earthquakes 

Our staff 

Immediately following the Christchurch earthquake on 22 February 2011, the ESR 

emergency response team convened with an incident controller in Wellington. Contact 

with our Christchurch Science Centre (CSC) ensured that all staff had been evacuated 

and the site was closed until a full structural assessment could be made. Regular 

communication was maintained with Christchurch staff until the site re-opened for 

business. 

> We are proud of our staff who re-established our Christchurch-based business quickly 

and who continue to produce high-calibre science under difficult circumstances. 

> Staff support mechanisms were put in place, including emergency accommodation, 

special leave, and travel for staff and families so they could have a break with friends 

and relatives. 

Sharing our quake-safe building 

As soon as the CSC building was declared safe and structurally sound, we offered business 

accommodation to affected CRIs and other local and central government agencies. The 

National Radiation Laboratory’s Japanese earthquake response team based themselves at 

the CSC as their own building was in a ‘red zone’. The University of Canterbury also used 

our meeting rooms for lectures. 

Operational support response 

> ESR forensic staff assisted with disaster victim identification (DVI). Specialist DNA 

staff were dispatched to Christchurch immediately and worked with a number of other 

agencies for several weeks under the direction of the coroner and police at Burnham 

Military Camp. The DNA laboratory in Auckland analysed samples. 

> ESR staff assisted Environment Canterbury and the Christchurch City Council to 

investigate post-quake water quality in the Avon River by assessing contaminant risks 

using our specialist faecal tracking tools. 

> We provided advice to Christchurch Community and Public Health on the security of 

groundwater sources in the Canterbury region concerning well-head protection around 

bores and aquifer movements. 

> Following the September, February and June Canterbury earthquakes, ESR provided 

information to health authorities and councils on the public health risks posed by 

exposure to liquefaction silt and dust. 

> The Health Intelligence team co-ordinated a phone survey assessing the health needs of 

Christchurch residents following the February quake. The Christchurch District Health 

Board used the survey to address problems of access to essential health services, such as 

GPs, pharmacies and safe drinking water. 

> ESR reported weekly to the Ministry of Health on Christchurch residents’ health 

status to give early warnings of local outbreaks of gastroenteritis and influenza. This 

information was complemented by ESR’s general surveillance and laboratory reference 

data, which tracks diseases and outbreaks nationwide. 



statement of core purpose Outcome 1 

Safeguard the health of New Zealanders 

through improvements in the management of 

human biosecurity and threats to public health 

As principal science advisor, ESR provides the Ministry of Health and the 

health sector with robust information for public health action and evidencebased 

policy-making. 

At the National Centre for Biosecurity and Infectious Disease (NCBID) we continued 

to work closely with the Ministry of Agriculture and Forestry (MAF) on operational and 

research projects. 

We provide health science services to district health boards and local government and offer 

national reference laboratory testing for hospital, community and medical laboratories. 

We are also responsible for collecting, overseeing and managing and distributing 

important health intelligence data and collections. We also undertake microbiological and 

epidemiological investigations into infectious disease outbreaks. 

With these comprehensive laboratory and disease surveillance data and systems, we 

provide advice and information to the health sector on a real-time basis. This includes 

issuing alerts to public health services of any unusual or increased disease activity locally 

and nationally. 

This year we: 

> issued 43 alerts to public health units based on our early warning notifiable disease 

surveillance 

> managed EpiSurv, New Zealand’s notifiable disease surveillance system 

> issued weekly, monthly, quarterly and annual surveillance and other reports 

> operated surveillance and health information websites, including www.surv.esr.cri.nz 

> managed the National Culture Collection – medical section 

> provided an outbreak investigation course for all public health units 

> presented at the 2010 Health Protection Officer training workshop 

> participated in multi-agency disease outbreak exercises. 


Refurbishment of reference and other disease 

laboratories 

ESR spent over $1 million upgrading laboratories at the Kenepuru Science Centre. The 

work was completed in January 2011 and ensured that facilities were up to date and 

continued to meet all user and accreditation requirements. The laboratories were officially 

opened by the Minister of Health, Hon Tony Ryall in June 2011. 

Clinical advisory panel established 

An external advisory panel of New Zealand and Australian microbiology experts was 

established to provide us with advice on laboratory testing and microbiology issues, 

including outbreak responses and infectious disease emergencies and the implementation 

and monitoring of performance and quality improvement standards. 

Food pathogens – lab survey 

An ESR survey of all New Zealand laboratories investigated how testing for the main food 

safety pathogens was undertaken. We also looked at the processes used by public health 

services for case investigation into food-related illnesses. This information will assist MAF 

(Food Safety) to identify priority actions related to testing and investigation. 

Vaccine store 

ESR manages the purchase, storage and distribution of vaccines for the national 

immunisation programme. This year we managed stockpiles of the MMR vaccine 

purchased for a measles outbreak. 

> We developed and ran the tender for the National Immunisation Schedule for 2011- 

2014 and performed an evaluation for the Ministry of Health. This led to the selection 

of a new pneumococcal vaccine and a significant reduction in the Ministry of Health’s 

annual budget for vaccine purchases. 


Focus on antibiotic resistance 

The Antibiotic Reference Laboratory received increasing numbers of bacterial isolates to 

investigate for emerging mechanisms of resistance. New resistance genes were identified 

for the first time in New Zealand, including the New Delhi strain, which is resistant to 

many antibiotics. All four patients identified here had received healthcare in India. Two 

other antibiotic-resistant strains were also identified here for the first time: KPC and 

OXA-48. 

Hospital-acquired infections 

ESR provides specialist typing for hospital laboratories investigating incidences of 

hospital-acquired infections. Increased funding this year enabled us to increase the rate 

of sample processing and implement new methods to provide faster and internationally 

comparable data. 

The incidence of hospital-acquired Clostridium difficile around the world has risen 

significantly and the emergence of hypervirulent strains has increased the need to monitor 

this bacterium. 

> We introduced specialist testing to identify these strains. 

> To date, hypervirulent strains have been identified from three patients in New Zealand 

hospitals. 

Survey of antimicrobial-resistant foodborne bacteria 

A survey undertaken for MAF indicated no human health implications from antimicrobial 

resistance in New Zealand food-producing animals and fresh produce. 

In a 12-month period from October 2009, ESR assessed antimicrobial resistance among 

Campylobacter, Salmonella, Escherichia coli and Enterococci isolated from carcasses of calves, 

pigs and broiler poultry in New Zealand abattoirs and processing plants. The assessment 

provided baseline information to monitor changes in resistance among bacteria from foodproducing 

animals, and information to guide policy decisions on the use of antimicrobials 

in animal husbandry. 


Research case study – 

international collaboration 

on flu 

NCBID partners ESR and MAF, 

and the World Health Organization 

Collaborating Centre in the United 

States, are investigating influenza 

virus circulation and exposure in New 

Zealand pigs. Research begun this year is 

providing important information on the 

ecology of virus circulation in pigs, the 

potential for inter-species transmission 

and the implications for animal and 

human health. 

Pigs have receptors for both human 

and avian viruses and can act as mixing 

vessels for the creation of new viruses. 

The recent pandemic influenza virus 

genetically originated from swine 

influenza viruses, but how it entered 

the human population is still not really 

understood. 

Earlier MAF surveys established that 

most New Zealand pigs had been 

infected with influenza AH3 viruses at 

some time in their lives. A further joint 

study undertaken this year by ESR, 

MAF and WHO showed an overall 

prevalence of 3.6% Influenza A antibody 

from porcine serum samples. 

These findings led to this new research 

project. Respiratory and blood samples 

will be taken from abattoir pigs to 

identify current circulating influenza 

strains and patterns of exposure. This 

information will be compared with our 

surveillance information on human 

influenza viruses. 

National Influenza Centre 

ESR is responsible for New Zealand’s national influenza surveillance. We are the contact 

nationally and internationally for the virological and epidemiological surveillance of 

influenza and recommend the composition of the annual influenza vaccine. 

> This year all the various streams of surveillance monitoring of flu were consolidated at 

ESR. In addition to our GP sentinel and laboratory-based surveillance, we took over 

reporting using Healthline and HealthStats data. 

> Flu information is analysed, reported and distributed weekly, monthly and annually 

to relevant national and international organisations. Data is analysed for any change, 

providing an early warning system of any real or potential outbreaks of influenza. 

> We continued our comprehensive testing, surveillance and research associated with the 

influenza pandemic. 

> ESR assessed the New Zealand experience with the second complete wave of pandemic 

influenza A(H1N1)09 in 2010. Hospitalisation and other rates suggested the overall 

impact in 2010 was about half to two-thirds that of the first wave in 2009. 

Research collaborations lead to new services 

New ways of detecting new microbes were established. Associate Professor Thomas Briese 

from Columbia University, an internationally recognised ‘microbe hunter’ and a 2011 

ESR International Fellow, spent time this year at ESR’s NCBID providing guidance 

and advice to staff. This microbe detection work is being funded through our Capability 

Funding. 

> Detection methods were originally developed at New York’s Columbia University and 

have been used to identify new viruses, including the third species of the common 

cold. New viruses or microbes can emerge from animals and cross into humans, or 

cause unusual illnesses in humans that have not previously been recognised. 

> A Health Research Council-funded study is using new technologies to find out what 

bacteria and viruses are causing stomach illnesses in New Zealanders. Most people 

don’t visit their doctors for stomach upsets or diarrhoea, and of those who do go, only 

20% are ever diagnosed by routine testing. 

Medicine testing 

We continued to monitor medicines for Medsafe, giving particular attention to ‘herbal 

medicine’ products, which are sometimes found to contain undeclared prescription 

medicines. Several varieties of ‘herbal’ erectile dysfunction product were withdrawn from 

sale this year following the identification of undeclared medicines in product casing. 

Supporting New Zealand Defence Forces overseas 

The New Zealand Defence Force (NZDF) operates its own Medical Stores and repacks 

pharmaceutical products into packs suitable for use in the field. The repacking operation 

is licensed by Medsafe and operates under the requirements of Good Manufacturing 

Practice. Determining the stability of pharmaceutical products and their expiry dates 

in these repackaged systems is critical to ensuring they are suitable for use by defence 

personnel, especially in combat situations. 

Drug and alcohol services 

Our social scientists undertook a comprehensive review for the Ministry of Health of 

how opioid substitution treatment is delivered in New Zealand. This work included 

interviewing stakeholders and identifying opportunities for improvement to the system. 

> It was funded by the Australian Drugs Policy Modelling Programme to provide a 

New Zealand comparison with Australian studies into similar services. 



Increase effectiveness of forensic science 

services applied to safety, security and justice 

investigations and processes 

ESR delivers cost-effective forensic services from the crime scene to the courtroom, 

providing independent science underpinning an effective and trusted criminal justice 

system. We directly support Government-agreed justice sector outcomes through the 

provision of mutually agreed contracted services for key government agencies. 

We support: 

> New Zealand Police in meeting its forensic priorities, key initiatives in its SCI, and 

a significant number of its cross-sector outcomes 

> the Department of Corrections in reducing drug use among prison inmates 

> courts through the provision of timely, high-quality scientific evidence supporting 

the criminal justice process 

> coroners and pathologists through toxicological and other investigations for 

coronial inquiries 

> New Zealand Customs Service border-control activities, particularly those related 

to drug seizures and supply 

> road safety agencies through drink- and drugged-driver testing. 

Forensic work also supports other government agencies through the provision 

of scientific knowledge, monitoring and advice on legal highs, party pills and 

prescription medicines to Medsafe and the Ministry of Health. 

Every day ESR’s 140 forensic staff investigate crime scenes, analyse a 

range of evidence in the laboratory, obtain and process DNA profiles, 

provide intelligence to investigators and present courtroom evidence 

as independent expert witnesses. 


Case study: DNA Databank 

turnaround times 

ESR worked with New Zealand Police 

to reduce turnaround times in ‘volume 

crime’ DNA evidence from an average 

of 28 days to five days or fewer (volume 

crime is defined as burglaries and thefts 

from vehicles). Under the terms of our 

Service Level Agreement with New 

Zealand Police these results are now 

provided within five days of police 

submitting samples. This turnaround 

time compares with a one-month 

average in Australia and up to two years 

in some USA states. 

In addition this year: 

> turnaround times for serious crime 

DNA analysis improved 

> profiles from individuals were 

generated and loaded to the National 

DNA Databank within three or four 

days of ESR receiving the samples 

> the link rate continued to be one 

of the best of any criminal DNA 

database in the world – around two 

out of every three profiles loaded 

provided investigators with links 

between an individual and a crime 

or crimes. 

At the end of June 2011, more than 

123,000 individual profiles and 

25,000 crime samples were held in the 

databases that make up the National 

DNA Databank. 

Disaster victim identification 

One of our major contributions during the year was to the DVI operations following the 

earthquake in Christchurch on 22 February 2011. DNA scientists joined the police and 

coronial DVI team at Burnham immediately after the quake, working round the clock for 

several weeks assisting with identifications. We undertook DNA sample analysis at our 

specialist DNA laboratory. 

DNA 

New Zealand’s forensic service provider model is cost effective and efficient: New Zealand 

is one of the few countries that doesn’t have a DNA backlog, and our turnaround times 

in DNA analysis are among the best in the world. As custodian of the National DNA 

Databank, ESR ensures that it is used as a primary criminal intelligence tool, is managed 

efficiently and meets all legislative standards. 

> Through the development of mutually agreed end-to-end processes with justice sector 

partners, this year we again improved the delivery of forensic services to investigators 

and the courts. 

> As a result of world-leading ESR research, a new DNA analysis technique was 

introduced for use in criminal investigations. It enables the identification of body 

fluid, which can be important in determining the source of a DNA profile, or in 

corroborating different versions of events. 

Crime scene investigations 

We continued to provide a 24/7 scene-callout service from our forensic service centres 

located in Christchurch, Wellington and Auckland, and from our physical evidence 

laboratory, which specialises in firearm-related incidents. 

> 238 serious crime scenes were attended. 


Forensic toxicology 

ESR provides New Zealand’s only forensic toxicology service, supporting the work of 

coroners, pathologists, New Zealand Police and Child, Youth and Family. Toxicological 

investigations determine the presence of alcohol, drugs, solvents, inhalants and poisons in 

samples. 

> We invested in a major piece of analytical equipment that allows a more rapid 

and specific identification of drugs, poisons and toxins for coronial and criminal 

toxicological investigations. 

> We tested, analysed and reported on 3837 samples for 1353 coronial cases and 122 

toxicological samples for serious crime cases. 

Drink- and drugged-driver testing 

ESR undertakes analysis for all evidential blood alcohol samples taken from drivers under 

the Land Transport Act 1998 and drugged-driver testing under provisions in the Land 

Transport Amendment Act 2009. 

> More than 6600 blood samples for alcohol and 139 drugged-driver samples were 

analysed. 

> 205 breath-alcohol-testing devices were calibrated, with our analysts available to 

present evidence in court. 

Forensic research 

ESR invests in forensic research through the Capability Fund to improve operational 

casework delivery. This year a new world-leading RNA analysis technique was transferred 

from research to operational use. 

> We collaborated with the University of Auckland on our joint postgraduate forensic 

science programme and hosted 21 national and international forensic science students. 

> Research and training programmes on blood spatter analysis were provided to USA 

forensic agencies. 

Case study: Crime scene virtual 

tour successfully used in court 

Jurors in a homicide trial took a 

virtual walk through the crime scene 

in a presentation used to explain the 

extensive forensic evidence associated 

with the case. The technology reduced 

court time spent explaining complex 

evidence and could alleviate the need 

for jurors to travel to the crime scene, 

therefore saving the justice system 

time and cost. It was the result of a 

research project evaluating the use of 

photographic and laser scanning in 

recording evidence at crime scenes. 

The technology was trialled in several 

other homicide investigations and is 

likely to be utilised to deliver detailed 

forensic evidence in several further court 

cases in the coming year. 


Links and knowledge transfer with 

justice sector 

ESR’s scientific services are provided to a range of justice sector players. We hold regular 

meetings with Crown solicitors and other judicial representatives. We provide lectures, 

presentations and training to the wider justice sector, including the Criminal Bar 

Association, Crown solicitors and the judiciary. We transfer forensic knowledge through 

training programmes to New Zealand Police and the New Zealand Customs Service. 

> New Zealand Police gave ESR a 91% overall satisfaction rating in a client survey. 

> ESR forensic staff were involved in and presented at the following Royal New Zealand 

Police College courses: 

– Three adult sexual assault courses 

– Five detective induction courses 

– A luminol photography course 

– A fire investigation – forensic awareness training course 

– The Scene of Crime Officer crime scene foundation course 

– The Scene of Crime Officer advanced course. 


ESR Annual Report 2011 | 21 

Focus on drugs 

ESR provides a range of scientific services related to drugs to New Zealand 

Police, the New Zealand Customs Service, the Department of Corrections’ 

prison service, the Ministry of Health, Medsafe and the coroners. This year we 

also became the sole commercial provider of drug testing in hair for Australia. 

Our drug services include: 

> prisoner drug testing for the Department of Corrections 

> analysing substances seized at the border for the New Zealand Customs Service and 

providing advice to support border agency operations 

> testing party pills, herbal medicines and other drugs for Medsafe and the Ministry of 

Health 

> analysing and advising on drug trends for government agencies 

> drugged-driver testing for New Zealand Police and the courts 

> methamphetamine laboratory investigations, decommissioning illegal meth labs, and 

analysing methamphetamine-associated drugs for border control and New Zealand 

Police 

> hair testing of P lab kids: Hair testing of children exposed to P lab operations found 

they had similar drug levels to those in adult users. This test enables police to link 

children to methamphetamine labs more accurately, and can be used as evidence in 

child neglect cases. 

Testing Kronic and other synthetic cannabinoids 

ESR tests revealed that two popular brands of legal synthetic cannabinoids contained 

illegal prescription medicine. These results led to an immediate Ministry of Healthordered 

recall of the products. A further 40 products available for sale in New Zealand 

were tested to establish exactly what was in them and if they contained any illegal 

substances. ESR identified a number of synthetic cannabinoids with ten of the products 

having four or more present. 

> ESR has included testing for synthetic cannabinoids in its workplace drug testing 

programme since July 2011 

> The first ‘Temporary Class Drug Notice’ under a new amendment to the Misuse of 

Drugs Act, was introduced by Government to deal with the situation. 

Keeping an eye on ‘Ecstasy’ 

Illicit drugs laboratory staff have been monitoring the substances found in ‘Ecstasy’ 

tablets. The ready market for legal party drugs has seen a significant number of novel 

drugs and substances appear in Ecstasy tablets, some of which infringe the ‘controlled 

drug analogue’ provisions of the New Zealand Misuse of Drugs Act 1975, and are illegal. 

> We found five illegal drug types in Ecstasy circulating in New Zealand, as well as some 

legal substances. 

Workplace drug testing 

ESR continued to provide alcohol- and drug-testing services to more than 1500 

New Zealand companies and undertook prisoner drug testing for the Department of 

Corrections. 

> We introduced a new hair test for long-term alcohol abuse. 

> Improved efficiencies in drugs-in-hair testing delivered faster reporting times and 

reduced costs for service users. 

> Investment in new analytical equipment enabled us to offer clients a full commercial 

oral fluid drug testing service. 

Border control – training Customs officers 

We delivered drug and forensic awareness training to more than 100 Customs officers 

in Auckland, Wellington and Christchurch. The training was designed to help Customs 

officers deal safely with illicit drugs and precursors, identify forensic evidence and support 

investigations right through to court prosecutions. 

www.esr.cri.nz 


Comparison of ESR’s 

Urine, Oral fluid and Hair 

drug testing services 

For further information, 

please contact the 

Workplace Drug Testing 

Helpdesk 

on (04) 914 0731 

Drug testing methods 

and their approximate detection periods 

1 2 5 

Timeline (Days) 

10 20 30+ Days 

Oral 

fluid 

Urine 

Hair 

12−24 

hours 

Concentration (not to scale) 

Cut off levels 

Positive results 

Negative 

results 

4 hours 

−20 days 

Up to 365 days 


Ur 

drug tes 

wor 

What does a positive result mean? 

A positive result means that the person tested has consumed 

drugs recently and has drugs or their metabolites in their 

system to a measured level. The measured level is above the 

cut-off levels determined by the AS/NZS 4308: 2008 urine 

testing standard. 

Drug detection times in urine. 

The detection times differ for individual drugs but essentially 

drugs can be detected in urine from 4 hours and up to 20 days 

following use. 

Is urine testing the best testing option 

for my business? 

Urine testing for drugs has been widely used in New Zealand 

workplaces for many years. ESR laboratory urine testing is 

proven to be a robust and effective testing method when used 

in conjunction with a company’s drug testing policy. 

Oral Fluid and Hair testing options are also available from 

ESR. A comparison of the three testing options is shown in 

the graph below. 

These publications and further 

information can be obtained from 

the Workplace Drug Testing 

helpdesk on (04) 914 0731 or 

email wdt@esr.cri.nz 



1 2 5 


10 20 30+ Days 

Oral 

fluid 

Urine 

Hair 

12−24 

hours 




Negative 

results 

4 hours 

−20 days 


URINE testing ORAL FLUID testing HAIR testing 

Testing Standards AS/NZS 4308:2 08 “Procedures for the co lection, 

detection and quantitation of drugs of abuse in urine” 

No specific standard for hair testing 

Testing Procedure Laboratory based with screening by i munoassay and 

confirmation of any positive screen results by mass 

spectrometry before reporting 

Laboratory based with scr ening by i munoassay and 

confirmation of any positive scr en results by mass 


Laboratory based with analysis by ma spectrometry 

Confirmation only testing available for urine specimens 

scr ened on-site as “not negative” 

Detects parent drugs and some metabolites Detects parent drugs and some metabolites 

Detects both the parent drug and/or their metabolites Onsite scr ening is not reliable for ca nabinoids 

Cut-o f 

Levels/ Target 

Concentrations 

Cut-o f levels exist and are documented in the Standard Target/nominated concentrations are documented No cut-o f levels or target concentrations documented 

Cut-o f levels reflect recent, relatively recent o regular 

use 

Target concentrations reflect very recent use of a drug 

Drug Detection 

Time 

“Days” for cannabis “Hours” for cannabis (very dependent on target/ 

nominated concentrations) 

From 7 days up t one year 

Can be up to thr e w eks after chronic use (i.e: more 

than 5 ca nabis cigare tes/day over a long period) 

Target concentrations indicate a detection time for 

ca nabis use of up to 6 hours and for other drugs up to 

24 hours 

Adulteration/ 

Substitution 

Adulteration or substitution is possible but laboratories 

and co lectors are aware of this and can check for 

adulteration 

Substitution is difficult as the mouth is checked prior to a 

witne sed co lection 

Adulteration is not po sible 

Robust collection procedures by NZQA certified co lectors 

greatly reduce the risk of this o cu ring 

Substitution is most unlikely due to co lection by a trained 

co lector and chain of custody requirements 

Cannabis Testing Tests for the presence of THC-Acid, the main product 

found in the urine after use of THC 

Tests for THC, the main active ingredient of cannabis. 

Results reflect what is left in the mouth after smoking 

and may not bl od levels 

Tests for THC and metabolites 

Pa sive Inhalation 

of Cannabis 

Testing wi l not give a positive result a the cut-o f levels 

used in the Standard 

Should not give a positive result on the target levels Testing for THC metabolites ensures there is no possibility 

of measuring pa sive inhalation 

Advantages Used extensively A positive result indicates use within a short time prior to 

co lection. This gives a stronger indication tha the person 

was “at risk” a the time of co lection. 

Can detect a history of drug use 

ESR laboratory testing has held up to legal challenge Some drug levels (not ca nabis) can be related to 

bl od levels 

Non invasive co lection 

Indicates “risk factor” but not how much “at risk” a 

person was a the time of co lection 

Witne sed co lection 

A plication Used for pre-employment, random, reasonable cause, 

post-incident and post rehabilitation 

G od for post-incident and post rehabilitation Suitable for use in medico-legal, family and crimina law 

cases, rehabilitation management, insurance and some 

workplace situations 

Comparison of ESR’s Urine, Oral Fluid and Hair drug testing services 

For further information, please contac the Workplace Drug Testing Helpdesk on (04) 914 0731 

Hair Testing 

for drug use 










1 2 5 


10 20 30+ Days 

Oral 

fluid 

Urine 

Hair 

12−24 

hours 




Negative 

results 

4 hours 

−20 days 


Could it be from passive smoking or 

ingestion? 

There is little scientific information about the effect of 

passive ingestion of a drug and the detection of that drug 

in hair. It is likely that the exposure would have to be at a 

high level and for a prolonged period for it to be detected in 

the hair. We also minimise the chance of reporting passive 

exposure in the hair by washing the samples before analysing. 

How much hair is needed? 

The amount of hair needed to test for all the drug classes is 

approximately the width of a pencil. This is taken from the 

back of the head and does not leave a visible bald patch. 

We can use hair from other parts of the body if head hair is 

not available. Growth rates are much more variable in other 

areas so time periods cannot be estimated. 

Oral Fluid and urine testing options are also available from 



Oral Fluid 

drug testing in the 

workplace 








Is oral fluid testing the best drug testing 

option for my business? 

The ability to detect the recent use of drugs makes oral fluid 

testing an ideal choice for post-incident type testing. Urine and 

hair testing options are also available from ESR. 

Will recent oral surgery affect the result? 

No. Oral surgery will not affect the resulting test in any way. 

Is oral fluid a ‘hazardous substance’? 

Oral fluid should be treated as a hazardous substance. As a 

human body fluid it could contain infectious organisms. Oral 

fluid specimens should be handled and treated as if infectious 

and capable of transmitting infection. All collection materials 

must be disposed of in an appropriate manner. 

How do you know it is that drug? 

Each sample is first screened to check for the evidence of the 

use of the drug classes stated above. 

Any presumptive positives are confirmed using a mass 

spectrometer, which looks specifically at the chemical structure 

of the drugs. This is unique for each drug and allows us to be 

certain that we are correctly reporting the presence of a drug. 

This means that we know whether the drug is from an over the 

counter medicine or illicit drug use. 

Does a positive result mean the 

individual is impaired? 

No. A positive result means the drug has been recently used 

but does not provide information on the effects it has had. 

FAQs 



Alcohol 

in the workplace 




Helpdesk on (04) 914 0731 

FAQs 

When can I use alcohol testing in my 

workplace? 

Alcohol testing is governed by the provisions of your drug 

and alcohol testing policy. Alcohol testing can be undertaken 

at any time in accordance with the Policy. However, testing 

is usually performed randomly, post-incident or for 

reasonable cause when alcohol use is suspected. 

Do not use if a person has used a breath freshener or other 

medicinal formulations containing alcohol in the last 

15 minutes. 


workplace? 








15 minutes. 

Replace 

image 


Testing Standards AS/NZS 4308:2008 “Procedures for the co lection, 



Testing Procedure Laboratory based with screening by immunoassay and 



Laboratory based with screening by immunoassay and 



Laboratory based with analysis by mass spectrometry 


screened on-site as “not negative” 


oth the parent drug and/or their metabolites Onsite screening is not reliable for cannabinoids 

umented No cut-off levels or target concentrations documented 



ingestion? 


passive ingestion of a drug and the detection of that drug in 

hair. It is likely that the exposure would have to be at a high 

level and for a prolonged period for the drug to be detected 

in the hair. We also minimise the chance of reporting passive 






Oral Fluid 


workplace 


































FAQs 



Alcohol 





Helpdesk on (04) 914 0731 

FAQs 


workplace? 








15 minutes. 


workplace? 








15 minutes. 

Hair Testing 

for drug use 










1 2 5 


10 20 30+ Days 

Oral 

fluid 

Urine 

Hair 

12−24 

hours 




Negative 

results 

4 hours 

−20 days 



ingestion? 

















Comparis 

Urine, Oral 

drug test 

Oral Fluid 


workplace 


































FAQs 



Urine 


workplace 



























1 2 5 


10 20 30+ Days 

Oral 

fluid 

Urine 

Hair 

12−24 

hours 




Negative 

results 

4 hours 

−20 days 


Replace 

image 









Helpdesk 

on (04) 914 0731 



1 2 5 


10 20 30+ Days 

Oral 

fluid 

Urine 

Hair 

12−24 

hours 




Negative 

results 

4 hours 

−20 days 



Ur 

drug tes 

wor 



























1 2 5 


10 20 30+ Days 

Oral 

fluid 

Urine 

Hair 

12−24 

hours 




Negative 

results 

4 hours 

−20 days 






Testing Procedure Laboratory based with scr ening by immunoa say and 

confirmation of any positive scr en results by ma s 


Laboratory based with scr ening by i munoa say and 








Cut-o f 



Cut-o f levels exist and are documented in the Standard Target/nominated concentrations are documented No cut-off levels or target concentrations documented 

Cut-off levels reflect recent, relatively recent o regular 

use 



Time 

“Days” for cannabis “Hours” for ca nabis (very dependent on target/ 




than 5 cannabis cigare tes/day over a long period) 



24 hours 

Adulteration/ 

Substitution 


and collectors are aware of this and can check for 

adulteration 


witne sed co lection 


Robust collection procedures by NZQA certified collectors 

greatly reduce the risk of this occurring 


collector and chain of custody requirements 

Ca nabis Testing Tests for the presence of THC-Acid, the main product 


Tests for THC, the main active ingredient of ca nabis. 


and may not blood levels 


Passive Inhalation 

of Cannabis 

Testing will not give a positive result at the cut-o f levels 


Should not give a positive result on the target levels Testing for THC metabolites ensures there is no po sibility 


Advantages Used extensively A positive result indicates use within a shor time prior to 


was “at risk” a the time of co lection. 


ESR laboratory testing has held up to legal cha lenge Some drug levels (not ca nabis) can be related to 

bl od levels 

Non invasive collection 


person was at the time of collection 

Witne sed co lection 



G od for post-incident and post rehabilitation Suitable for use in medico-legal, family and criminal law 





Hair Testing 

for drug use 










1 2 5 


10 20 30+ Days 

Oral 

fluid 

Urine 

Hair 

12−24 

hours 




Negative 

results 

4 hours 

−20 days 



ingestion? 

















Oral Fluid 


workplace 


































FAQs 



Alcohol 





Helpdesk on (04) 914 0731 

FAQs 


workplace? 








15 minutes. 


workplace? 








15 minutes. 

Replace 

image 

FAQ 


workplace? 



at any time in accordance with the policy. However, testing 




medicinal formulations containing alcohol in the previous 

15 minutes. 


workplace? 






















Detects both the parent drug and/or their metabolites Onsite screening is not reliable for cannabinoids 

Cut-off 



Cut-off levels exist and are documented in the Standard Target/nominated concentrations are documented No cut-off levels or target concentrations documented 

Cut-off levels reflect recent, relatively recent or regular 

use 



Time 



From 7 days up to one year 

Can be up to three weeks after chronic use (i.e: more 

than 5 cannabis cigarettes/day over a long period) 


cannabis use of up to 6 hours and for other drugs up to 

24 hours 

Adulteration/ 

Substitution 



adulteration 


witnessed collection 

Adulteration is not possible 

Robust co lection procedures by NZQA certified co lectors 











of Cannabis 

Testing wi l not give a positive result at the cut-off levels 



of measuring passive inhalation 


co lection. This gives a stronger indication that the person 

was “at risk” at the time of collection. 


ESR laboratory testing has held up to legal cha lenge Some drug levels (not cannabis) can be related to 

blood levels 



person was at the time of co lection 

Witnessed co lection 

Application Used for pre-employment, random, reasonable cause, 


Good for post-incident and post rehabilitation Suitable for use in medico-legal, family and criminal law 




For further information, please contact the Workplace Drug Testing Helpdesk on (04) 914 0731 

Hair Testing 

for drug use 










1 2 5 


10 20 30+ Days 

Oral 

fluid 

Urine 

Hair 

12−24 

hours 




Negative 

results 

4 hours 

−20 days 



ingestion? 

















Oral Fluid 


workplace 


































FAQs 

Hair Testing 

for drug use 










1 2 5 


10 20 30+ Days 

Oral 

fluid 

Urine 

Hair 

12−24 

hours 




Negative 

results 

4 hours 

−20 days 



ingestion? 


















Compari 

Urine, Oral 

drug test 



1 2 5 


10 20 30+ Days 

Oral 

fluid 

Urine 

Hair 

12−24 

hours 




Negative 

results 

4 hours 

−20 days 



Testing Standards AS/NZS 4308:2 08 “Procedures for the collection, 



Testing Procedure Laboratory based with scr ening by immunoa say and 

confirmation of any positive screen results by ma s 


Laboratory based with scr ening by immunoa say and 





scr ened on-site as “not negative” 



Cut-o f 



Cut-o f levels exist and are documented in the Standard Target/nominated concentrations are documented No cut-off levels or target concentrations documented 

Cut-o f levels reflect recent, relatively recent o regular 

use 



Time 

“Days” for ca nabis “Hours” for ca nabis (very dependent on target/ 







24 hours 

Adulteration/ 

Substitution 

Adulteration or substitution is po sible but laboratories 

and collectors are aware of this and can check for 

adulteration 


witnessed collection 




Substitution is most unlikely due to collection by a trained 









of Ca nabis 

Testing wi l not give a positive result at the cut-off levels 






was “at risk” a the time of collection. 


ESR laboratory testing has held up to legal cha lenge Some drug levels (not ca nabis) can be related to 

bl od levels 



person was a the time of collection 

Witne sed collection 








Oral Fluid 


workplace 


































FAQs 



Urine 


workplace 



























1 2 5 


10 20 30+ Days 

Oral 

fluid 

Urine 

Hair 

12−24 

hours 




Negative 

results 

4 hours 

−20 days 




Alcohol 





Helpdesk on (04) 914 0731 

FAQs 


workplace? 








15 minutes. 


workplace? 








15 minutes. 






Replace 

image 









Helpdesk 

on (04) 914 0731 



1 2 5 


10 20 30+ Days 

Oral 

fluid 

Urine 

Hair 

12−24 

hours 




Negative 

results 

4 hours 

−20 days 




Urine 


workplace 



























1 2 5 


10 20 30+ Days 

Oral 

fluid 

Urine 

Hair 

12−24 

hours 




Negative 

results 

4 hours 

−20 days 






Testing Procedure Laboratory based with scr ening by i munoa say and 

confirmation of any positive screen results by ma s 


Laboratory based with scr ening by i munoassay and 

confirmation of any positive scr en results by mass 






Detects both the parent drug and/or their metabolites Onsite screening is not reliable for ca nabinoids 

Cut-o f 




Cut-off levels reflect recent, relatively recent o regular 

use 



Time 

“Days” for ca nabis “Hours” for cannabis (very dependent on target/ 



Can be up to three w eks after chronic use (i.e: more 




24 hours 

Adulteration/ 

Substitution 



adulteration 


witne sed collection 


Robust co lection procedures by NZQA certified collectors 








and may not bl od levels 



of Ca nabis 

Testing wi l not give a positive result at the cut-o f levels 






was “at risk” a the time of collection. 


ESR laboratory testing has held up to legal challenge Some drug levels (not cannabis) can be related to 

bl od levels 



person was a the time of collection 

Witne sed collection 








Hair Testing 

for drug use 










1 2 5 


10 20 30+ Days 

Oral 

fluid 

Urine 

Hair 

12−24 

hours 




Negative 

results 

4 hours 

−20 days 



ingestion? 

















Oral Fluid 


workplace 


































FAQs 



Alcohol 





Helpdesk on (04) 914 0731 

FAQs 


workplace? 








15 minutes. 


workplace? 








15 minutes. 

Replace 

image 

FAQ 


workplace? 



at any time in accordance with the policy. However, testing 




medicinal formulations containing alcohol in the previous 

15 minutes. 


workplace? 






















Detects both the parent drug and/or their metabolites Onsite screening is not reliable for cannabinoids 

Cut-off 




Cut-off levels reflect recent, relatively recent or regular 

use 



Time 




Can be up to three weeks after chronic use (i.e: more 

than 5 cannabis cigarettes/day over a long period) 



24 hours 

Adulteration/ 

Substitution 



adulteration 


witnessed co lection 













of Cannabis 

Testing will not give a positive result at the cut-off levels 



of measuring passive inhalation 


collection. This gives a stronger indication that the person 

was “at risk” at the time of co lection. 


ESR laboratory testing has held up to legal challenge Some drug levels (not cannabis) can be related to 

blood levels 



person was at the time of collection 

Witnessed co lection 



Good for post-incident and post rehabilitation Suitable for use in medico-legal, family and criminal law 





Hair Testing 

for drug use 










1 2 5 


10 20 30+ Days 

Oral 

fluid 

Urine 

Hair 

12−24 

hours 




Negative 

results 

4 hours 

−20 days 



ingestion? 

















Oral Fluid 


workplace 


































FAQs 

Hair Testing 

for drug use 










1 2 5 


10 20 30+ Days 

Oral 

fluid 

Urine 

Hair 

12−24 

hours 




Negative 

results 

4 hours 

−20 days 



ingestion? 
























1 2 5 


10 20 30+ Days 

Oral 

fluid 

Urine 

Hair 

12−24 

hours 




Negative 

results 

4 hours 

−20 days 






Testing Procedure Laboratory based with scr ening by i munoa say and 



Laboratory based with scr ening by i munoa say and 





scr ened on-s


Enhance the protection of New Zealand’s foodbased 

economy through the management of 

food safety risks associated with traded goods 

ESR contributes to a healthy, safe and tradable food supply, providing 

advice, monitoring and diagnostic services, and food safety research. 

We are a major science provider to MAF (Food Safety). 

> We continued to develop our capabilities in risk analysis, risk modelling, food 

chemistry, microbiology and virology and delivered services to government and food 

industry clients. Our international research collaborations, particularly with China and 

the European Union, continued. 


Foodborne illnesses and food complaints 

The rapid and specific detection of pathogens causing human illness is vital for identifying 

causes and sources of infections and provides essential information to control foodborne 

diseases. ESR undertakes sample testing of suspected foodborne illness outbreaks for the 

public health service and MAF. 

> We tested clinical, food, water and environmental samples from 222 suspected 

foodborne illness episodes. 

Identifying Yersinia in food samples 

The gastrointestinal illness Yersiniosis is the third most frequently notified foodborne 

disease in New Zealand. Until now it has been difficult to test for in food and 

other samples. Using Capability Funding we developed tests which can identify the 

contaminated foods and the specific strains. 

Faster, cheaper testing for Campylobacter and pathogenic E. coli 

New ways of strain typing two important foodborne bacteria – Campylobacter and 

pathogenic E. coli were developed. ‘P-BIT’, or PCR Binary Typing method, is based on 

genome sequences of multiple strains. It provides a rapid, cost-effective typing system 

that can be utilised by any lab capable of PCR. Information can be shared easily among 

laboratories to help in identifying and responding to outbreaks. 

> The methods were published in international journals this year and laboratories in 

Poland, Ireland and Belgium are now utilising them. 

> Visiting fellow Professor Olivier Vandenberg (Head of the Campylobacter reference 

laboratory, Brussels) has commissioned additional research. 

> In complementary research, ESR took an existing approach used for detecting 

multiple genes in humans and adapted it for use in the detection and P-BIT typing of 

Campylobacter and pathogenic E. coli. 

> Up to 40 genes can be detected in a single reaction, making both the detection of 

multiple pathogens and P-BIT typing faster and cost effective. 

> With a Royal Society of New Zealand grant, staff visited a test-kit supplier overseas to 

initiate discussions on the commercialisation of this technology. 


Science and research for government 

One of our key roles is providing scientific analysis and advice for food safety regulation 

and policy. This year we: 

> completed 31 scientific reports for MAF 

> delivered food-safety-related reports to other agencies. 

The reports covered a range of scientific advice and research, including risk analysis and 

modelling, food contamination, foodborne diseases, chemical contaminants and dietary 

health. Reports are made available on the Government’s food safety website 

www.foodsafety.govt.nz and include: 

> annual report concerning foodborne diseases in New Zealand 2010 

> Campylobacter spp. in uncooked retail chicken meats 

> Campylobacter transmission: collaborative research. 

Total Diet Survey 

One of our major projects for MAF is planning, managing and undertaking the Total Diet 

Survey every five years. About 1400 kilograms of food are collected, prepared and sampled 

to find out what average New Zealanders eat. The Survey provides a scientific analysis 

of our total diet, broken into age and gender groups, and estimates dietary exposure to 

chemical residues, contaminants and selected nutrients. This year we completed the 2006- 

2011 survey and delivered comprehensive reports to MAF. 

> We have also been contracted to provide services for the Australian equivalent in 2011. 


Environmental and food virology 

ESR provides specialist services for the detection and identification of enteric viruses in 

environmental and food samples, including shellfish, fresh produce, sewage, sludge and 

environmental waters. We test for viruses implicated in outbreaks and provide analytical 

advice for local authorities, public health services, industry and food safety agencies. We 

are the only laboratory in the Pacific region to offer specialist virus testing. 

> We saw a significant increase in demand for the detection and monitoring of norovirus 

in shellfish, environmental waters and sewage, particularly from local authorities. 

> We undertook research for the Department of Health, Victoria, Australia, in relation 

to the survival of the hepatitis A virus on fresh and semi-dried tomatoes that caused 

a major outbreak. We have been re-contracted in the coming year to continue the 

development of the most promising control strategy identified. 

Seafood safety research 

Current testing methods can’t discriminate between infectious and non-infectious 

noroviruses, so we’re developing a new test to identify infectious noroviruses in shellfish 

and other foods as part of an MSI research programme. Research is also underway to find 

a norovirus-resistant shellfish by investigating the binding of noroviruses to shellfish. 

We’re evaluating a low-cost material to catch enteric viruses in seawater and freshwater 

and have developed specific virus tests to distinguish between human and animal faecal 

contamination. These tests are available for tracking virus pollution sources. 

Virucidals 

Capability Funded research continued into investigating how effective hand sanitisers and 

other virucidals are at killing viruses. A commercial service will be offered from early 2012. 

Biocontrol research 

Biocontrols harness the ability of naturally occuring agents that can damage or destroy 

pathogens. Our research is focusing on using bacteriophages (phages), to reduce meat 

contamination from common food pathogens. We consult and involve the meat industry 

in this MSI-funded research programme. 

> In November 2010 we hosted an Ministry of Foreign Affairs and Trade-funded Food 

Safety China relationship-building workshop on ‘Developing resources for food 

safety biocontrol’ that also involved colleagues from the Chinese Cereals and Oils 

Association. 

> A website was established to provide information relevant to the regulatory aspects of 

biocontrol of foodborne pathogens. 

IMPACT 

As lead agency, we continued research on the MSI-funded IMPACT project with 

Massey University and AgResearch. IMPACT stands for IMproved PAthogen Control 

Technologies. The six-year project is funded by MSI and will continue until 2013. 

IMPACT aims to eliminate or substantially reduce key pathogens in exported meat using 

natural, organic methods, compatible with New Zealand’s ‘clean and green’ image. 

Biofilms 

We have been investigating the production of a ‘clean green’ sanitiser for the food industry 

that is capable of decontaminating biofilms. Biofilms form when bacteria adhere to 

surfaces in some form of watery environment and pose a potential source of reinfection in 

industrial food processing and hospital environments. 

> A collaboration was established with China’s Jiangsu Academy of Agricultural Sciences 

to assist in the development of a specific enzyme solution that could destroy Listeria 

monocytogenes in soy milk. 


Collaborating with the EU on food safety 

ESR is involved in a major EU-funded food safety project – MoniQa. We are leading an 

international Campylobacter project evaluating test methodology. Our in-house results on 

six PCR assays for Campylobacter demonstrate the need for such a process. 

> In collaboration with United Kingdom scientists we published a paper on the impacts 

of climate change on the formation, distribution and uptake in food of environmental 

contaminants. 

> We hosted an international MoniQA Workshop ‘Assessing impacts of chemical 

contaminants in foods and feedstuffs’. Attendees included representatives from 

government agencies and universities, from New Zealand and overseas. 

Allergen testing 

Faster, cheaper laboratory methods for detecting allergens in foods were developed this 

year. Until now, testing allergens in foods has relied on labour-intensive analysis kits. 

The new method utilises a machine called an LCMS (liquid chromatography–mass 

spectrometry), which can quickly analyse a large number of samples, including highly 

processed and manufactured foods. 

> Methods for detecting wheat allergens (gluten) were developed. These are being 

validated in-house, with routine laboratory analysis expected to be available by 

early 2012. 

> Through the MoniQA network we are collaborating with other laboratories working on 

similar methods for peanut, dairy and egg allergen detection. 

Keeping freshly grown fruit and veg safe 

With Catalyst® R&D, ESR is involved in a MAF-commissioned research project to help 

local vegetable and fruit growers keep producing safe food and avoid problems that have 

occurred overseas. It will enable guidance to be given to growers on how to produce food 

as safely as possible. 

Future foods 

We are midway through an MSI-funded research project investigating social, cultural and 

consumer responses to a range of emerging future food technologies. 

> We have had local industry feedback that the project is providing a significant new 

approach, beyond traditional market research, to understand the drivers of consumer 

acceptance of novel food technologies. 

> There is considerable international interest in the research. 

> ESR was subcontracted to provide food safety advice, including risk profiling and 

analysis as part of a three-year Lincoln University MSI-funded project on a novel 

process to produce a new snack food. 



Improve the safety of freshwater and 

groundwater resources for human use and the 

safer use of biowastes 

ESR provides scientific advice and expertise for the management of 

drinking, recreational and waste water. As principal science advisor 

to the Ministry of Health, we provide advice supporting health 

and environmental public policy, action and information systems 

management. 

ESR has significant groundwater, wastewater and biosolids research capability and we are 

growing our knowledge in the greywater area. We are also improving microbiological and 

molecular techniques to solve environmental health issues. 


Drinking water 

ESR manages and produces a range of data and information vital to ensure the safe supply 

of New Zealand’s drinking water. 

On behalf of the Ministry of Health, we manage Water Information New Zealand 

(WINZ), a national database providing up-to-date national water supply information 

required for drinking-water quality management. WINZ meets the specific needs of local 

authorities to manage their drinking-water supplies. 

> ESR maintains a website (www.drinkingwater.org.nz) where WINZ and other 

information about water supply management is available. 

We undertook the annual review of drinking water, which describes the microbiological 

and chemical qualities of New Zealand’s drinking-water supplies. With a complete record 

from the early 1990s, it shows water quality and supply compliance over time. 

> We produced the annual register of community drinking-water supplies. 

Scientific water advice 

We provide on-demand advice to the Ministry of Health and public health units. Public 

health units request advice on a range of issues including sewage treatment, contaminated 

sites, water quality and chemical safety. A component of this work involves assessing the 

environmental health effects of resource consents involving contaminant discharges. 

> We also provided training courses to drinking-water assessors nationwide. 

Groundwater 

Groundwater is an important source of drinking and stock water, crop 

irrigation and industrial applications. Intensive agricultural and domestic 

sewage disposal can cause groundwater contamination from pesticides, 

animal waste and waterborne diseases. ESR has led an integrated 

groundwater research programme since 1993. Each year the programme 

provides important knowledge to government, local authorities, 

representatives of specific activity groups, and water managers. 

The four-yearly survey of pesticides was completed this year, the sixth 

survey since 1990. The results have proved so valuable for monitoring 

groundwater quality that regional councils have taken over funding from 

MSI and are incorporating the results into their ‘state of the environment’ 

reporting. 

Around 20% of wells sampled have detectable pesticides present but at 

concentrations that are much lower than drinking-water standards. Pesticide 

concentrations are trending downward slightly, and most wells show that 

groundwater quality is meeting acceptable limits for drinking water. 


Groundwater assimilative capacity 

A major new MSI-funded groundwater research programme of $1.5m per annum 

in partnership with Lincoln Ventures Limited began this year. It brings water quality 

management and land-use planning together by improving the scientific understanding 

of the linkage between land use, the subsurface environment and groundwater. 

> A key outcome is the development of tools to enable regional councils to achieve 

groundwater quality targets. 

> The research features collaboration with the United States Air Force Institute of 

Technology, Flinders University in Australia, the Commonwealth Scientific and 

Industrial Research Organisation (CSIRO) in Brisbane, and the University of 

California. New Zealand partners include Waikato Regional Council, Environment 

Canterbury and Environment Southland, which are supporting the research with cash 

co-funding and in-kind support this year. 

Clean water productive land research 

A new three-year MSI-funded research project began in October 2010. Led by 

AgResearch, it includes ESR, Landcare Research and the National Institute of Water and 

Atmospheric Research (NIWA). The research will enable rural industries and central and 

regional government to predict water quality contaminant loads (nutrients, sediment 

and faecal microbes) to surface water across space and time. The suggestion is that 80% 

of water contaminants come from 20% of the land. If these critical source areas can be 

identified, cost-effective mitigation measures can be implemented. 

> ESR research will focus on understanding contaminant sources and pathways at the 

interface between land and water. 

Tracking viruses through groundwater 

The Marsden Fund is supporting an ESR-led research project to make and test how mock 

viruses travel into groundwater. Little is known about the behaviour of viruses and other 

pathogens in groundwater, so ESR scientists are developing new tools to investigate how 

disease-causing viruses travel through aquifers. Real viruses can’t be used in field studies, 

so harmless surrogate nano-beads, altered to behave like real viruses, will be used to track 

what happens to them in aquifers. 

> The three-year research project is being undertaken in collaboration with the University 

of Canterbury and Victoria University of Wellington. 


Faecal source tracking 

ESR has pioneered research to identify whether faecal contamination of the environment 

is from human, animal or other sources. To transfer this new knowledge into science 

delivery we have purchased a new instrument that enables a high throughput of samples 

for analysis, more efficient processing of data and high-quality results. 

> This new service was used by regional and local authorities to identify leaking septic 

tanks, check stormwater drainage systems and investigate river contamination linked to 

dairy farm runoff. 

Water in the Pacific 

Since 1999 ESR has supported the Secretariat of the Pacific Community (SPC) and the 

World Health Organization with Pacific regional consultation and action plan preparation 

for wastewater management. This year we had input to the presentations given to the 

upcoming Pacific Island Forum leaders’ meeting, the Asia Pacific Water summit and the 

World Water Forum. 

> In 2010 we also took up leadership of an annual programme of monitoring and 

evaluation for an SPC division’s water and sanitation work programme. 

> Drinking-water safety training, advice and development delivery continued with 

the New Caledonian Government. ESR had also been contracted previously to help 

identify drinking-water projects for EU funding. These projects were funded this year 

and ESR’s involvement is continuing. 

> In Fiji we continued to work in collaboration with NIWA and the University of the 

South Pacific to provide public health risk assessments and health impact expertise 

for NZ Aid-funded projects. Our role has a specific focus on sustainable community 

drinking-water and wastewater treatment solutions for coastal Fijian villages. This work 

has led to the preparation of a major project proposal, which has been funded for the 

2011-2012 financial year through the NZ Aid State Sector Development Partnerships 

Fund. 

> We also investigated offshore water management opportunities in Bahrain and China 

in association with other New Zealand companies. 


Biosensors 

A biosensor research project run in partnership with Victoria University concluded this 

year. It explored the potential for developing rapid and cost-effective tests for chemical 

toxins or biological activities based on the response of yeast as a biosensor. Proof of 

concept was established for a reporter gene biosensor for copper. Competitive growth 

biosensors for 1080 were developed and can detect as little as 1µM 1080. Yeast biosensor 

strains for the detection of saxitoxin (a marine biotoxin that has significant economic and 

health consequences worldwide) were also discovered. 

Biowastes programme 

ESR is the lead organisation for the MSI-funded biowastes research programme. The 

partnership of ESR, Scion and Landcare Research together with other collaborators 

integrates all of New Zealand’s biosolids (sewage sludge) research. The team is currently 

focused on the implementation of biosolids solutions in two regions, Taupō and Kaikōura. 

The research will provide information and recommendations for regional land-use 

planning, national guidelines and policy directions. 

Assessing the impacts of chemical cocktails on the soil ecosystem 

Another focus of the programme is to understand what happens to mixtures of microcontaminants 

(metals and organic contaminants) when they interact with each other and 

with soil. It is now recognised that the additive effects from multiple chemicals can result 

in a combined effect greater than the sum of the individual effects. This year we started 

analysing historically contaminated soils to determine the impacts of specific metals and 

organic mixtures. 

Community case study 

Studies in Kaikōura and Mokai, near Taupō, are supporting a shared-learning process for 

end-users, Māori and other stakeholders to develop viable strategies for biowaste reuse. 

In collaboration with Māori research partner Te Rūnanga o Kaikōura and other 

organisations, researchers are helping the Kaikōura District Council and community to 

decide on the most appropriate way of reusing or managing stockpiled biosolids before a 

consent runs out in 2016. 

> Two hui were held with a range of stakeholders to assist with developing options 

for the reuse or management of the stockpiled biosolids. Further research and 

investigations into potential options are underway. 


Human resources 

The environment in which ESR operates continues to change. We 

have implemented a range of initiatives to adapt our culture to 

the new environment and employees are actively involved in all of 

them. 

Employee engagement 

Our Culture and Engagement survey has shown us that we have satisfactory levels of 

employee engagement – 58% engaged compared with world-class companies rating 

around 63%. Staff workgroups have been developing action plans to identify and 

implement improvements in areas highlighted by our survey and values workshops. 

The action plans align with our strategic human resources initiatives in maintaining our 

position as a good employer and exceptional organisation. 

Staffing 

ESR has 327 FTE staff. We are working to resume normal staff turnover trends 

following the impacts of the recession. There were no redundancies during the year, but 

process efficiencies, and natural attrition reduced the number of FTEs. 

Workforce diversity 

ESR is proud to have a very diverse and well balanced workforce. Almost 67.5% of the 

workforce are women and around 31% of the workforce are under the age of 40, which 

underpins succession planning. 

Learning and development 

A new learning and development framework has been created with our existing best 

practice talent management process, and a new performance management process will 

enable us to continue to develop key capabilities and progress science careers. 

Staff turnover and recruitment 

This year we lost a number of staff through a mixture of retirement, migration and 

career shifts. 

> Total staff turnover (12-month rolling average) was 12.4%, with science staff 15.4% 

and support 8.0%. 

Health and safety 

ESR provides all staff with comprehensive guidelines, training, mentoring and support 

to ensure their health and wellbeing at work. We foster continual improvements for our 

health and safety culture. Staff and the PSA (New Zealand Public Service Association) 

provide regular input through site-based Health and Safety Committees. 

We have maintained tertiary status in the ACC Workplace Safety Management Practices 

programme, reflecting our best practice framework and our culture of continual 

improvement. 

Good employer 

ESR is very proud of its reputation as a good employer. The flexibility we offer staff 

and our core value of Valuing People supported our staff in Christchurch during a very 

difficult year with the continual earthquakes. 


Research 

After many years of increasing research activity, 2010-2011 was a real challenge. ESR led 

and submitted 46 research bids to research investors and was a significant collaborator 

in eight others. However, ESR did not meet the research revenue stretch target of 

$12,918,000. A key reason was MSI not holding a contestable bidding round. 

ESR research funding 

15,000 

12,000 

9000 

8065 

9424 

12,918 

12,308 

11,517 

10,555 

10,379 

6000 

4744 

3000 

Target funding (2010/13 Strategic Plan) 

0 

2004 

2005 2006 2007 2008 2009 2010/11 

Contracted funding 

ESR investment in research 

The Capability Fund was allocated to the research projects indicated in the 2010 SCI and 

the achievements are shown on page 35. ESR is especially proud of the rapid pathway 

from research through evaluation to implementation into casework of the new mRNA 

technique, which is able to distinguish the body fluid type. 

The ESR SCP clearly defines four outcomes to which ESR will contribute. The allocation 

of the 2010-2011 Capability Fund has been retrospectively mapped to these outcomes 

and shown in the pie chart. 

Science communication for MSI 

The ESR social systems group secured a tender from MSI to improve the return on 

science investment by increasing information flow from scientists to users of science 

information. 

Key findings indicate that many of the incentives and constraints identified overseas 

are relevant for New Zealand scientists. Differences between CRIs and universities, 

such as commercial orientation, intellectual freedom and intellectual property rights, 

are also factors. 

Capability fund allocation 

by outcome 

16% 

18% 

40% 

26% 

Outcome 1 – Health 

Outcome 2 – Forensic 

Outcome 3 – Food 

Outcome 4 – Environmental 

Total Capability Funds: $5.8m 

15000 

12000 

11517 

12415 

12918 

11344 

10379 

9000 

9424 

8065 

6000 

4744 

3000 

0 

2004 

2005 2006 2007 2008 2009 2010/11 


Forging international collaborations 

ESR continued to support an awards programme to forge close international 

collaborations and bring innovation and new knowledge to ESR. 

The ESR International Fellowships are awarded to eminent scientists to enable them to 

spend time with their ESR hosts discussing new developments and future collaborations. 

The six Fellows who spent time with ESR were: 

Professor Steven Gorelick is a Professor of Earth Sciences at Stanford University, 

California, USA. 

Dr Roland Poms is the Chief Executive of the International Association for Cereal 

Science & Technology in Vienna, Austria and Professor of the University of Natural 

Resources and Life Sciences in Vienna. 

Professor Thomas Briese is an Associate Professor at the Clinical Epidemiology 

Center for Infection and Immunity in the Mailman School of Public Health, Columbia 

University, New York, USA. 

Professor Robin Williams is a Professor of Forensic Science Studies at the 

Northumbria University Centre for Forensic Science in the UK and also Professor 

Emeritus of Sociology at the Durham University School of Applied Social Sciences. 

Professor Adrian Linacre holds the South Australia Justice Chair in Forensic 

Science and Emerging DNA Technologies at Flinders University, South Australia. 

Dr David Baldwin is the Director of the Midwest Forensics Resource Center at Ames 

Laboratory, Iowa, USA. 

Information management 

We will: 

> enhance our operating information and communication technology (ICT) structures 

to deliver timely and quality information for our clients 

> establish enabling technologies that are intuitive and innovative will improve efficiency 

and business effectiveness 

> provide new information streams from existing and new data sources, enabling growth 

and marketing opportunities. 

A major investment was made to replace the laboratory information management systems 

(LIMS) used by all laboratory operations of the Environmental Health and Forensic 

business groups and consolidate them into a single LIMS platform. The consolidation 

of 13 labs into one single platform will go a long way to towards achieving efficiencies 

by effectively reducing costs in ongoing maintenance and support through providing a 

centralised, supported system. However, there are further benefits that can be achieved 

by providing extended business systems capabilities to our clients. The Workplace Drug 

Testing laboratory operation was the first recipient of the new LIMS, at the end of June 

2011. Further deployments will occur throughout the 2011-2012 financial year. 

Other information management developments including the establishment of an 

enterprise data warehouse. This will allow the implementation of a single set of effective 

business intelligence tools to: 

> enable information to be used as a decision support tool 

> allow ESR to expose the data to multiple audiences in a controlled way 

> improve ESR’s ability to deliver meaningful information to people when and where 

they need it. 

All these investments are designed to improve the integration and consolidation of 

our ‘backbone’ information management systems and processes to deliver operational 

efficiencies and to provide the agility that ESR requires to adapt to changes in legislation 

and client demand. It also provides the opportunity to build new products and services 

using online and digital technologies. 


Capability Fund – Priorities for investment 

A: Existing capabilities [maintain and enhance] – 60% of total 

Capability Areas of activity 2010/11 forecast Achievement 

Human 

biosecurity 

and disease 

surveillance 

Food safety 

Develop research 

capability and intelligent 

systems to underpin 

service delivery, with 

particular foci on 

biosecurity, enhanced 

detection and response 

to infectious diseases, 

and the impacts of 

climate change on 

health. 

Develop intelligent 

systems, molecular tools 

and risk assessment 

techniques that solve 

problems for clients. 

Establish nextgeneration 

pathogen 

identification system 

and biosensors and 

biomarkers for health. 

Maximise PCR using 

MPLA and implement 

EAT_FOOD 

methodology. 

Next-generation sequencing used to identify novel viruses 

and bacteria in several test cases and links enhanced with 

Columbia University, which has pioneered this approach. 

Successful respiratory disease study using multiplex 

detection of 28 common pathogens. Proteomic and 

genomic capabilities are revealing why some meningococcal 

strains are invasive. Identified candidate metastasis 

biomarkers for colorectal cancer with the Wakefield 

Biomedical Research Unit at Otago Medical School. Work 

continuing on cancer prognosis and diagnosis biomarkers. 

Testing of MPLA probes was successful and the project was 

aided by an International Mobility Fund award (The Royal 

Society of New Zealand) for collaboration with research 

partners in Belgium and the Netherlands. Techniques 

developed in EAT_FOOD have been applied to exposure 

estimates for aflatoxins for MAF. 

Forensic science 

Develop smarter 

forensic techniques and 

use new technology to 

provide more efficient 

and effective service 

delivery. 

Focus on techniques 

and technologies to 

assist with blood spatter 

analysis, crime scene 

assessments, drug testing 

in hair and the use of 

mRNA in casework. 

Novel techniques for modelling ballistic injury and blood 

spatter developed and options for technology transfer via a 

dedicated website underway. The new mRNA method for 

identifying specific body fluids has been operationalised 

for routine use in casework; further markers have also been 

identified. Laser microdissection of sperm from mixed cell 

samples implemented into sexual assault casework analysis. 

Drug testing using hair to show historical drug exposures 

during hair growth is now offered as a new service. 

B: New and emerging capabilities – 30% of total 


Health 

indicators 

and biosensor 

development 

Microbial 

and chemical 

forensics 

platform – 

ongoing 

Use envirogenomics 

and proteomics 

capabilities to develop 

targeted biomarkers and 

biosensors. 

CBRE (chemical, 

biological, radiological 

and explosive) science 

– undertake research 

to enable the rapid 

identification of 

microbes and chemicals, 

and chain of custody 

that underpins NCBID. 

Identify and compete 

for external research 

and service delivery 

opportunities to 

progressively replace 

Capability Funding. 

Negotiate new service 

delivery with clients. 

A chemical marker of tobacco addictiveness has been 

studied. External funds received from the Wellington 

Medical Research Foundation and the End Smoking Trust. 

ESR part of a successful Health Research Council tobacco 

cessation research grant. 

Yeast biosensors for copper and 1080 have been developed 

and tested but a decision was made to cease further work 

in this area. Health Research Council and Marsden 

Funds now support significant meningococcal research. 

Bioinfomatics expertise is being applied across ESR. 

The importance of this capability to NZ is understood 

by key parties.Negotiation with Department of Prime 

Minister and Cabinet, Fire Service, New Zealand Police 

and Ministry of Health undertaken during the year with a 

commitment made to fund this capability, but no contract 

has been signed to date. 



Forensic 

research 

platform – 

ongoing 

Undertake innovative 

‘beyond DNA’ forensic 

research. 

Continue to build 

research capability 

in applied molecular 

biology leading 

to innovation in 

forensic service 

delivery. Consolidate 

international reputation 

in blood spatter analysis 

using new technologies. 

Novel technologies continue to be researched with a view 

to providing additional forensic capability and more 

efficient, effective and essential service delivery to clients. 

Development and delivery of a fluid dynamics blood 

pattern analysis course in New Zealand, Canada and USA. 

Service science 

platform 

Develop new research 

capability in service 

science. 

Lead new international 

methodological 

developments in service 

science research using 

practical projects in 

collaboration with 

stakeholders. 

A new relationship has been established with the 

Canterbury Earthquake Recovery Authority (CERA) on 

innovative decision-making and engagement services. A 

new project with the Ministry of Justice will assist it to 

measure and monitor justice outcomes. Continued the 

relationship with New Zealand Police on community 

engagement. The risk and decision-making project 

has covered a number of areas, including Canterbury 

earthquake risk communication. A health services project 

has been developed with Canterbury DHB, Partnership 

PHO and Pegasus Health. 

Environmental 

health 

Take new directions in 

the biocontrol of foodborne 

pathogens. 

Undertake research 

on Yersiniosis in New 

Zealand. 

Clinical laboratory methods developed for identification 

of Yersiniosis. Improved typing methods to be adopted by 

the enteric reference laboratory at ESR. Biofilm research 

capability established. Fast and cost-effective ‘P-BIT’ enteric 

pathogen typing method, which also assesses pathogenicity, 

has been published and is being used internationally. 

C: Over the horizon [discovery and creative insight activity] – 

10% of total 

potential 


New technology 

– Futurewatch 

Combine MoRST 

and ESR Futurewatch 

programmes with a view 

to identifying new or 

disruptive technologies. 

Maintain a watching 

brief on new 

technologies useful for 

ESR activities, present 

and future. Take action 

as required. 

Relevant staff informed of new technologies. Ongoing 

subcontract to Industrial Research Limited for 

nanotechnology project. 


Financial section 


Non-financial performance measures 

Actual 

Target 

Benefit to New Zealand 

1. Value of public good services provided in New Zealand ($m) 45 50 

2. Invitations or elections to serve on national or international 

scientific agencies, boards or advisory committees 19 50 

Science Output 

1. Papers accepted for publication in international externally refereed 

scientific journals, series or books 67 95 

2. Papers in local, internally or editor-refereed journals, series or books 8 10 

3. Invited keynote and plenary presentations – costs paid in full or part 22 30 

4. Conference papers and abstracts 103 100 

5. Research monographs or books – – 

6. Scientific and technical reports 98 150 

7. Submissions for research and development funding 47 40 

Application and promotion of science 

1. Staff involvement in conferences, workshops, training sessions or hui 

– Number of events 192 250 

– Number of attendees 389 350 

2. Availability and use of ESR Culture Collection 1691 1800 

3. Number of Tech NZ contracts – 1 

4. Support for New Zealand Science system: 

Number of bids to funding agencies and papers for scientific journals refereed 120 200 

Number of MSc and PhD students supervised. Number of MSc and PhD theses 

externally examined 

5. Number of science-promoting media exposure events 164 150 

6. Number of science-related talks to schools, community groups and 

service clubs 11 40 

Good employer 

1. Staff turnover 

% of total staff (excluding redundancies and fixed-term contracts) 12 10 

2. Number of work days lost through workplace accidents 

Number of workdays lost as a % of total working days

Key financial performance measures 

Year Target Year 

ended 

ended 

30 June 2011 30 June 2010 

Revenue, $M 51.4 53.5 53.5 

EBIT* margin, % 7.0 7.2 8.0 

Return (NPAT**) on equity % 9.5 7.6 -1.6 

Return (EBIT) on assets, % 6.8 8.3 8.5 

Acid test, ratio 1.7 1.4 1.5 

Equity ratio 64.0 78.5 68.6 

Gearing 0.8 – 0.9 

Interest cover – – – 

Annualised Revenue/FTE, $’000s (including casual staff) 158.2 150.3 157.8 

* Earnings (Surplus) before Interest and Taxation 

** Net Profit (Surplus) After Taxation 

Statement of responsibility 

We certify that the Company has operated in accordance with the principles of the Crown Research Institutes 

Act 1992 and Companies Act 1993. The Company has also complied with all statutory environmental 

obligations. 

We acknowledge responsibility for the preparation of these financial statements and for the judgements used 

therein. 

Internal control procedures are considered to be sufficient to provide a reasonable assurance as to the integrity 

and reliability of the financial reports. 

In our opinion these financial statements fairly reflect the financial position and operations of the Institute of 

Environmental Science and Research Limited (ESR) for the year ended 30 June 2011. 

Dr Susan Macken Elizabeth Hickey Dr Fiona Thomson-Carter 

Chair Director Chief Executive Officer 


General disclosures 

Annual report 

The directors and management of ESR present the report of the Institute for the year ended 30 June 2011. 

Financial statements 

The financial statements for ESR, including the report of the auditor, for the year ended 30 June 2011 follow 

this report from page 42. 

PricewaterhouseCoopers has indicated its willingness to continue in office as auditor on behalf of the Controller 

and Auditor-General. Details of the auditor’s remuneration and expenses are disclosed in note 2 to the financial 

statements. 

Remuneration of directors 

The directors who held office in the period of this report and their total remuneration and other benefits were: 

Dr Susan Macken $46,000 

Ross Peat $28,750 

Elizabeth Hickey $23,250 

Tahu Potiki $23,000 

Professor William Denny $23,000 

Dr Judith Johnston $23,000 

Patricia Schnauer $23,000 

$190,000 

Disclosures of interest by directors 

General Disclosures 

The following are particulars of general disclosures of interest given during the year by the directors of the 

Company pursuant to section 140 (2) of the Companies Act 1993: 

Dr Susan Macken (Chair) 

Independent non-executive Director, Bank of New Zealand 

Director, Fertility Associates 

Director, Auckland Regional Amenities Funding Board 

Managing Director, STG Ltd 

Director, Blossom Bear Ltd 

Non-executive Director, New Zealand Treasury 

Director, Ultimate Care Group 

Ross Peat (Deputy Chair) 

Director, Healthsoft Ltd 

Director, Healthsoft Australia Ltd 

Director, Kinopta Ltd 

Director, YuVu Ltd 

Director, KlickEx Trading Ltd 

Director, KlickEx Corporation Ltd 

Member, Digital Auckland Working Party 

Member, University of Otago Business School Advisory Board 

Trustee, Hi Tech Trust 

Dr Judith Johnston 

Director, Petone Medical Centre Ltd 

Shareholder, Judith Johnston Ltd 

Clients of Judith Johnston Ltd 

Ministry of Education 

Maritime New Zealand 

Tertiary Education Commission 

State Services Commission 

IRD Risk & Assurance Committee 

Parliamentary Council Office Risk & Audit Committee 

New Zealand Qualifications Authority 

Open Polytechnic of New Zealand 

Department of Internal Affairs 



Director, Southern Cross Health Group 

Trustee, Southern Cross Health Trust 

Director, New Zealand Institute of Chartered Accountants 

Co-opted member of Audit & Risk Committee, ASB Community Trust 

Trustee, Sight Loss Services Charitable Trust Board 

Tahu Leslie Potiki 

Board Member, Southern District Health Board 

Councillor, New Zealand Council for Educational Research 

Director, Māori Television Service 

Elected Representative, Te Runanga o Ngāi Tahu 

Trustee, Ngāi Tahu Charitable Trust 

Board Member, Relationship Services New Zealand 

Director, Arataki Associates Ltd 

Patricia Schnauer 

Trustee, North Shore Hospice 

Trustee, North Harbour Stadium Trust 

Director, MILife Trustee Ltd 

Director, Millaw Services Ltd 

Professor William (Bill) Denny 

Director, Auckland Cancer Society Research Centre, University of Auckland 

Head, Scientific Advisory Committee, Australian Cancer Research Foundation Drug Discovery Centre, Sydney 

Member, Scientific Advisory Group, Australian Cooperative Research Centre for Cancer Therapeutics, 

Melbourne 

Member, Ministry of Health/Health Research Council Steering Committee for Cancer Research Partnership 

Member, Management Group, Maurice Wilkins Centre for Molecular Bioscience, University of Auckland 

Member, Senior Management Team, Cancer Society Auckland 

Shareholder, Proacta Inc, San Diego 

Shareholder, Pathway Therapeutics Ltd, San Francisco 

Directors’ interests 

No director held any interest in the shares of the Institute. The Institute has funding contracts with the 

Marsden Fund and the Foundation for Research, Science and Technology, which are negotiated at arm’s length 

with appropriate directors’ interests being declared. Except for these contracts no material contracts involving 

directors’ interests were entered into during, or subsequent to, the period covered by this report. 

Remuneration 

Total remuneration in respect of employees paid above $100,000 was as follows: 

Remuneration range 

No. of staff 

$100,000 – $109,999 14 

$110,000 – $119,999 7 

$120,000 – $129,999 6 

$130,000 – $139,999 6 

$140,000 – $149,999 1 

$170,000 – $179,999 3 

$180,000 – $189,999 3 

$200,000 – $209,999 3 

$370,000 – $379,999* 1 

*Chief Executive Officer 

Events subsequent to balance date 

The directors are not aware of any matter or circumstance since the end of the financial year that has significantly 

affected, or may significantly affect, the operation of the Institute. 

Dr Susan Macken Elizabeth Hickey Dr Fiona Thomson-Carter 

Chair Director Chief Executive Officer 


Independent auditor’s report 

To the readers of the Institute of Environmental Science and Research Limited’s financial statements for the year 

ended 30 June 2011. 

The Auditor-General is the auditor of the Institute of Environmental Science and Research Limited (the 

‘Institute’) and the Group, comprising the Institute and its dormant subsidiaries. The Auditor-General has 

appointed me, Chris Barber, using the staff and resources of PricewaterhouseCoopers, to carry out an audit of the 

financial statements of the Institute and Group on her behalf. 

We have audited the financial statements of the Institute and Group on pages 44 to 67, that comprise the 

statement of financial position as at 30 June 2011, the statement of comprehensive income, statement of changes 

in equity and statement of cash flows for the year ended on that date; and a summary of significant accounting 

policies and other explanatory information. 

Opinion on the Financial Statements 

In our opinion, the financial statements of the Institute and Group on pages 44 to 67: 

• comply with generally accepted accounting practice in New Zealand; and 

• comply with International Financial Reporting Standards; and 

• give a true and fair view of the Institute and Group’s: 

– financial position as at 30 June 2011; and 

– financial performance and cash flows for the year ended on that date. 

Opinion on other legal requirements 

In accordance with the Financial Reporting Act 1993 we report that, in our opinion, proper accounting records 

have been kept by the Institute and Group as far as appears from an examination of those records. 

Our audit was completed on 26 August 2011, and is the date at which our opinion is expressed. 

The basis of our opinion is explained below. In addition, we outline the responsibilities of the Board of Directors 

and our responsibilities, and we explain our independence. 

Basis of opinion 

We carried out our audit in accordance with the Auditor-General’s Auditing Standards, which incorporate 

the International Standards on Auditing (New Zealand). Those standards require that we comply with ethical 

requirements and plan and carry out our audit to obtain reasonable assurance about whether the financial 

statements are free from material misstatement. 

Material misstatements are differences or omissions of amounts and disclosures that would affect a reader’s overall 

understanding of the financial statements. If we had found material misstatements that were not corrected, we 

would have referred to them in our opinion. 

An audit involves carrying out procedures to obtain audit evidence about the amounts and disclosures in the 

financial statements. The procedures selected depend on our judgement, including our assessment of risks of 

material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments 

we consider internal control relevant to the entity’s preparation of the financial statements that give a true and 

fair view of the matters to which they relate. We consider internal control in order to design audit procedures that 

are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the 

entity’s internal control. 

An audit also involves evaluating: 

• the appropriateness of accounting policies used and whether they have been consistently applied; 

• the reasonableness of the significant accounting estimates and judgements made by the Board 

of Directors; 

42 | ESR Annual Report 2011 

• the adequacy of all disclosures in the financial statements; and 

• the overall presentation of the financial statements.

We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements. In 

accordance with the Financial Reporting Act 1993 we report that we have obtained all the information and 

explanations we have required. We believe we have obtained sufficient and appropriate audit evidence to provide a 

basis for our audit opinion. 

Responsibilities of the Board of Directors 

The Board of Directors is responsible for preparing financial statements that: 

• comply with generally accepted accounting practice in New Zealand; 

• give a true and fair view of the Institute and Group’s financial position, financial performance and 

cash flows. 

The Board of Directors is also responsible for such internal control as it determines is necessary to enable the 

preparation of financial statements that are free from material misstatement, whether due to fraud or error. 

The Board of Directors’ responsibilities arise from the Financial Reporting Act 1993 and the Crown Research 

Institutes Act 1992. 

Responsibilities of the Auditor 

We are responsible for expressing an independent opinion on the financial statements and reporting that opinion 

to you based on our audit. Our responsibility arises from section 15 of the Public Audit Act 2001 and the Crown 

Research Institutes Act 1992. 

Independence 

When carrying out the audit, we followed the independence requirements of the Auditor-General, which 

incorporate the independence requirements of the New Zealand Institute of Chartered Accountants. 

In addition to the audit, we have carried out assignments in the areas of taxation compliance and accounting 

advice, which are compatible with those independence requirements. Other than the audit and these assignments, 

we have no relationship with, or interests in, the Institute or any of its subsidiaries. 

Chris Barber 

On behalf of the Auditor-General 

Wellington, New Zealand 

PricewaterhouseCoopers 

Matters relating to the electronic presentation of the audited financial statements 

This audit report relates to the financial statements of the Company for the year ended 30 June 2011 included on 

the Company’s website. The Company’s Board of Directors is responsible for the maintenance and integrity of the 

Company’s website. We have not been engaged to report on the integrity of the Company’s website. We accept 

no responsibility for any changes that may have occurred to the financial statements since they were initially 

presented on the website. 

The audit report refers only to the financial statements named above. It does not provide an opinion on any other 

information which may have been hyperlinked to or from the financial statements. If readers of this report are 

concerned with the inherent risks arising from electronic data communication they should refer to the published 

hard copy of the audited financial statements and the related audit report dated 26 August 2011 to confirm the 

information included in the audited financial statements presented on this website. Legislation in New Zealand 

governing the preparation and dissemination of financial information may differ from legislation in other 

jurisdictions. 


Statement of Comprehensive Income 

For the year ended 30 June 2011 

Group actual Group budget Group actual 

year ended year ended year ended 

30 June 2011 30 June 2011 30 June 2010 

audited unaudited audited 

Note $’000s $’000s $’000s 

Operating revenue 

Revenue from rendering of services 51,440 53,476 53,470 

51,440 53,476 53,470 

Operating expenses 

Scientific materials and consumables used (7,388) (7,312) (6,914) 

Employee benefit expense (26,587) (27,416) (28,223) 

Depreciation and amortisation expense 5/6 (4,539) (5,459) (4,796) 

Other expenses 2 (9,309) (9,421) (9,282) 

(47,823) (49,608) (49,215) 

Operating profit 3,617 3,868 4,255 

Finance income – interest income 339 101 265 

Finance expense 3 (28) (24) (19) 

Net finance income 311 77 246 

Profit before income tax expense 3,928 3,945 4,501 

Income tax expense 4 (1,285) (1,183) (1,270) 

Income tax benefit / (expense) due to change in tax legislation 4 579 – (3,749) 

Profit / (loss) for the year attributable to the Institute’s owners 3,222 2,762 (518) 

Other comprehensive income – – – 

Total comprehensive income / (expense) for the year 

attributable to the Institute’s owners 3,222 2,762 (518) 

The accompanying notes form an integral part of these financial statements. 


Statement of Changes in Equity 


Group actual Group actual Group actual 

audited audited audited 

share retained 

capital earnings total 

Note $’000s $’000s $’000s 

Balance at 1 July 2009 8,494 24,282 32,776 

Loss for the year – (518) (518) 


Total comprehensive expense – (518) (518) 

Transactions with owners: 

Dividend 17 – – – 

Balance at 30 June 2010 8,494 23,764 32,258 

Profit for the year – 3,222 3,222 


Total comprehensive income – 3,222 3,222 

Transactions with owners: 

Dividend 17 – – – 

Balance at 30 June 2011 8,494 26,986 35,480 



Statement of Financial Position 

As at 30 June 2011 




Note $’000s $’000s $’000s 

Non-current assets 

Property, plant and equipment 5 30,207 37,233 30,499 

Intangible assets 6 4,375 – 2,171 

34,582 37,233 32,670 

Current assets 

Cash and cash equivalents 8 7,501 4,158 6,938 

Trade and other receivables 9 10,381 6,263 11,497 

Current tax receivable 10 249 – – 

Inventories 11 1,001 945 1,051 

19,132 11,366 19,486 

Current liabilities 

Trade and other payables 12 10,758 7,246 11,566 

Employee benefits 13 2,343 1,805 2,215 

Finance lease liabilities 14 164 – 190 

Provisions 15 – – 453 

Current tax payable 10 – 312 150 

13,265 9,363 14,574 

Net current assets / (liabilities) 5,867 2,003 4,912 

Non-current liabilities 

Employee benefits 13 800 1,275 702 

Provisions 15 – – 95 

Finance lease liabilities 14 129 – 106 

Deferred taxation 7 4,040 – 4,421 

4,969 1,275 5,324 

Net assets 35,480 37,961 32,258 

Equity 

Share capital 17 8,494 8,494 8,494 

Retained earnings 17 26,986 29,467 23,764 

Total equity 35,480 37,961 32,258 

The Board of Directors of the Institute of Environmental Science and Research Limited authorised these financial statements 

for issue on 26 August 2011. 

On behalf of the Board: 

Dr Susan Macken 

Chair 


Director 

Dated 26 August 2011 



Statement of Cash Flows 



year ended year ended year ended 



Note $’000s $’000s $’000s 

Cash flows from / (used in) operating activities 

Cash was provided from: 

Clients 51,897 53,417 52,340 

Interest received 312 101 265 

52,209 53,518 52,605 

Cash was applied to: 

Suppliers and employees (43,436) (44,944) (43,314) 

Interest paid (28) (24) (19) 

Income tax paid 10 (1,485) (1,145) (1,076) 

(44,949) (46,113) (44,409) 

Net cash inflow from operating activities 18 7,260 7,405 8,196 

Cash flows from / (used in) investing activities 

Cash was applied to: 

Purchase of property, plant and equipment (3,505) (8,737) (3,598) 

Purchase of intangible assets (2,989) – (678) 

(6,494) (8,737) (4,276) 

Net cash outflow from investing activities (6,494) (8,737) (4,276) 

Cash flows from / (used in) financing activities 

Cash was provided from / (applied to): 

Dividends paid – – (106) 

Finance lease payments (203) – (231) 

Net cash (outflow) / inflow from financing activities (203) – (337) 

Net increase / (decrease) in cash held 563 (1,332) 3,583 

Cash and cash equivalents at the beginning of the period 6,938 5,490 3,355 

Cash and cash equivalents at the end of the period 7,501 4,158 6,938 



48 | ESR Annual Report 2011 

Notes to the financial statements 

1. Statement of Significant Accounting Policies 

a) Reporting entity 

The financial statements of the Institute of Environmental Science and Research Limited (‘ESR’) have been 

prepared in accordance with the requirements of the Crown Entities Act 2004, the Crown Research Institutes Act 

1992, the Companies Act 1993 and the Financial Reporting Act 1993. 

ESR provides specialist scientific solutions, including working with the New Zealand justice and health sectors to 

promote the protection of people and their environment. 

ESR is a Crown Entity incorporated and domiciled in New Zealand. The address of its registered office is 34 

Kenepuru Drive, Porirua 5240. 

The reporting period for these financial statements is the year ended 30 June 2011. 

b) Basis of preparation 

The financial statements are prepared on the basis of historical cost. These policies have been consistently applied 

to all the periods presented, unless otherwise stated. 

The financial statements are Parent and Group financial statements. The two subsidiaries of ESR are dormant 

non-trading entities; consequently there is no difference between the financial statements of the Group and those 

of the Parent. 

c) Statement of compliance 

These financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting 

Practice (NZ GAAP). They comply with New Zealand equivalents to the International Financial Reporting 

Standards (NZ IFRS) and other applicable financial reporting standards, as appropriate for profit-oriented 

entities. These consolidated financial statements comply with International Financial Reporting Standards. 

d) Adoption status of relevant new financial reporting standards and 

interpretations 

1. New and amended standards adopted by the Group 

No new standards relevant to the Group’s operations were adopted during the financial year. 

2. Standards, amendments and interpretations to existing standards that are not yet effective and 

have not been early adopted by the Group 

The following standards and amendments to existing standards have been published and are mandatory for 

accounting periods beginning on or after 1 January 2011 or later periods, but the Group has not early adopted 

them: 

NZ IFRS 9, “Financial instruments”, issued in November 2010 (effective for periods beginning on or after 1 

January 2013, with early adoption allowed). NZ IFRS 9 replaces the multiple classification and measurement 

models in IAS 39 Financial instruments: Recognition and measurement with a single model that has only two 

classification categories: amortised cost and fair value. Classification of debt assets is driven by the entity’s business 

model for managing the financial assets and the contractual characteristics of the financial assets. All other 

financial assets, including investments in complex debt instruments and equity investments, must be recognised 

at fair value. All fair value movements must be taken to the income statement, except for equity investments that 

are not traded, which may be recorded in the income statement or in reserves. In addition recent additions to 

NZ IFRS 9 will simplify the designation and effectiveness testing requirements for financial instruments within 

hedging relationships. The Group has not determined when it will adopt NZ IFRS 9 and it is not expected to 

have a material impact on the Group’s financial statements. 

NZ IAS 24, “Related Party Disclosures”, issued in November 2009 (effective for periods beginning on or after 

1 January 2011, with early adoption allowed). NZ IAS 24 simplifies some of the disclosure requirements and 

clarifies the definition of a related party and removes the requirements for government-related entities to disclose 

details of all transactions with the Government and other government-related entities. It is not expected to have a 

material impact on the Group’s financial statements. 

FRS 44, “New Zealand Additional Disclosures”, issued in April 2011 (effective for periods beginning on or after 

1 July 2011, with early adoption allowed). FRS 44 sets out New Zealand-specific disclosures for entities that have 

adopted NZ IFRSs. The standard supports the objective of harmonising financial reporting standards in Australia 

and New Zealand. It is not expected to have a material impact on the Group’s financial statements. 

e) Accounting estimates and judgements 

The preparation of financial statements in conformity with NZ IFRS requires judgements, estimates and 

assumptions that affect the application of policies and reported amounts of assets and liabilities, income and

expenses. The estimates and associated assumptions are based on historical experience and various other factors 

that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. 

Management’s judgements, which have the most significant effect on amounts recognised in the financial 

statements, are found in Revenue, Taxation and Employee benefits. 

i) Revenue 

The Group uses the stage of completion method in accounting for its fixed price contracts to deliver scientific 

services. The use of the percentage of completion method requires the Group to estimate the services performed 

to date as a proportion of the total services to be performed. Stages of completion are calculated and reviewed 

monthly, and significant variances are investigated to ensure that the percentage of completion estimate is 

reasonable and in line with the overall project plan, estimated completion date and prior measurements of 

progress. 

ii) Taxation 

In May 2010 the Government announced a change to the depreciable nature of buildings. Up until the 2011 

income tax year depreciation on buildings up to 2% p.a. was eligible as a tax deduction. Post 2011, buildings 

cease to attract tax depreciation. In recognition of the fact that some entities had not fully split fit-out-related 

assets from building assets, the IRD agreed that an entity on a building-by-building basis could claim either of the 

following as a future tax deduction: 

1. 2% of 15% of the NBV of the building commencing from the 2012 income tax year: OR 

2. If the entity can split the fit-out element from building and provide support for the appropriateness of the split 

they could claim depreciation at the relevant tax rates upon these assets. 

ESR has commenced an exercise to identify and separate the fit-out components of buildings from the building 

structure. This exercise is in its preliminary stage. Given the early stage of the exercise, ESR has recognised an 

adjustment to deferred tax of $579,000 based upon the first option (15% of the NBV of buildings). Management 

believes that this provides a more reliable and supportable measure for such an adjustment as at 30 June 2011. 

iii) Employee benefits 

In determining the future entitlements of employees, management is required to make judgements on anticipated 

length of service, future salary levels and discount rates. Reference is made to historical data in determining 

appropriate factors to apply. 

Key assumptions: 

• Anticipated length of service: Management opinion is that current length of service and staff turnover rate 

provide an accurate basis for determining future length of service 

• Future salary levels: Management consider the rate of inflation and the current employment market over a 

three to five-year horizon in arriving at a suitable rate for wage increases 

• Discount rates: Management uses the five-year Government Bond interest rate as a discount factor, currently 

3.99% (2010: 4.85%). 

The pre-tax impact on the Statement of Comprehensive Income of fluctuations in the above assumptions is 

detailed in the table below: 

Discount rate Future salary level Attrition rate 

-1% +1% -1% +1% -1% +1% 

$000’s $000’s $000’s $000’s $000’s $000’s 

Personal development leave 120 (97) (7) 7 15 (15) 

Retirement leave 4 (4) (4) 4 0 0 

124 (101) (11) 11 15 (15) 

Parentheses indicate an increase in ESR’s profit. 

f) Principles of consolidation 

Subsidiaries 

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of ESR as at 30 June 

2011 and the results of the operations of all subsidiaries for the year then ended. ESR and its subsidiaries together 

are referred to in these financial statements as the Group. 

Subsidiaries are all those entities over which the Group has the power to govern financial and operating policies, 

generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of 

potential voting rights that are currently exercisable or convertible are considered when assessing whether ESR 

controls another entity. 


Subsidiaries that form part of the Group are consolidated from the date on which control is transferred to ESR. 

They are de-consolidated from the date that control ceases. 

The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost 

of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred 

or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in 

a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent 

of any non-controlling interest. The excess of the cost over the fair value of the Group’s share of the identifiable 

net assets acquired is recorded as goodwill. If the cost of acquisition is less than the Group’s share of the fair value 

of the identifiable net assets of the subsidiary acquired, the difference is recognised directly in the Statement of 

Comprehensive Income. 

Intercompany transactions, balances and unrealised gains on transactions between subsidiary companies are 

eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of 

the asset transferred. Accounting policies of subsidiaries are consistent with those policies adopted by the Group. 

g) Property, plant and equipment 

Items of property, plant and equipment are initially recorded at cost, and subsequently at cost less accumulated 

depreciation and impairment. The cost of property, plant and equipment includes the value of the consideration 

given to acquire the assets and the value of other directly attributable costs that have been incurred in bringing the 

assets to the locations and condition necessary for their intended use. 

The carrying amounts of plant, property and equipment are reviewed at least annually to determine if there is 

any indication of impairment. Where an asset’s recoverable amount is less than its carrying amount, it will be 

reported at its recoverable amount and an impairment loss will be recognised. Losses resulting from impairment 

are reported in the Statement of Comprehensive Income. 

Realised gains and losses arising from the disposal of property, plant and equipment are recognised in the 

Statement of Comprehensive Income in the periods in which the transactions occur. 

Depreciation is charged on a straight-line basis at rates calculated to allocate the cost of an item of property, 

plant and equipment, less any estimated residual value, over its estimated useful life. The estimated useful lives of 

different classes of property, plant and equipment are as follows: 

Freehold buildings 

Leasehold improvements 

Plant, equipment and vehicles 

IT equipment and internal software 

20 – 50 years 

10 years 

3 – 10 years 

3 years 

h) Intangible assets 

i) Computer software 

Items of computer software that do not comprise an integral part of the related hardware are treated as intangible 

assets with finite lives. Intangible assets with finite lives are recorded at cost, and subsequently recorded at 

cost less any accumulated amortisation and impairment losses. Amortisation is charged to the Statement of 

Comprehensive Income on a straight-line basis over the useful life of the asset. Typically, the estimated useful life 

of computer software is three years. 

ii) Development costs – internally generated intangible assets 

The cost of an internally generated intangible asset represents expenditure incurred in the development phase 

of the asset only. The development phase occurs after the following can be demonstrated: technical feasibility; 

ability to complete the asset; intention and ability to sell or use the asset; ability to generate probable future 

economic benefits; and development expenditure can be reliably measured. Expenditure incurred on research 

of an internally generated intangible asset is expensed when it is incurred. Where the research phase cannot be 

distinguished from the development phase, the expenditure is expensed when it is incurred. 

i) Impairment of non-financial assets 

Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances 

indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by 

which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an 

asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at 

the lowest levels for which there are separately identifiable cash flows (cash-generating units). 

j) Taxation 

The income tax expense for the period is the tax payable on the current period’s taxable income based on the 

national income tax rate for each jurisdiction. This is then adjusted by changes in deferred tax assets and liabilities 

attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in 

the financial statements, and unused tax losses. 


Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply 

when the assets are recovered or liabilities settle. The relevant tax rates are applied to the cumulative amount of 

deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made 

for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset 

or liability is recognised in relation to temporary differences if they arose in a transaction, other than a business 

combination, and at the time of the transaction did not affect either accounting profit or taxable profit or loss. 

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable 

that future taxable amounts will be available to utilise those temporary differences and losses. 

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount 

and the tax bases of investments in controlled entities where the Parent entity is able to control the timing of 

the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable 

future. 

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be 

available against which the temporary differences can be utilised. 

k) Cash and cash equivalents 

Cash means cash on hand, demand deposits and other highly liquid investments in which ESR has invested as 

part of its day-to-day cash management. The following definitions are used in the Statement of Cash Flows: 

• Investing activities are those activities relating to the acquisition, holding and disposal of fixed assets and 

investments 

• Financing activities are those activities that result in changes in the size and composition of the capital 

structure of ESR and this includes both equity and debt not falling within the definition of cash. Dividends 

paid in relation to the capital structure are included in financing activities 

• Operating activities are the principal revenue-producing activities and other activities that are not investing 

or financing activities. 

l) Trade and other receivables 

Trade receivables are stated at their estimated realisable value after providing against debts where collection is 

doubtful. An estimate of the value of doubtful debts is made based on a review of debts at year end. Bad debts are 

written off in the period in which they are identified. 

m) Inventories 

Stocks of consumables and work in progress are stated at the lower of cost and net realisable value. Cost is 

determined on a first in, first out basis. 

n) Trade and other payables 

These amounts represent the best estimate of the expenditure required to settle an obligation arising from goods 

or services provided to ESR prior to period end. These amounts are unsecured and are usually paid within 30 

days of recognition. Liabilities and provisions to be settled beyond 12 months are recorded at their present value. 

o) Employee benefits 

i) Wages, salaries and annual leave 

Liabilities for wages and salaries, including annual leave, that are expected to be settled within 12 months of the 

reporting date are recognised in respect of employees’ services up to the reporting date and are measured at the 

amounts expected to be paid when the liabilities are settled. 

Obligations for contributions to defined contribution retirement plans are recognised in the Statement of 

Comprehensive Income as they fall due. 

ii) Long service leave, retirement leave and development leave 

The liability for long service leave, retirement leave and development leave is recognised as an employee benefit 

liability and measured as the present value of expected future payments to be made in respect of services provided 

by employees up to the reporting date. Consideration is given to the expected future salary levels, experience of 

employee departures and periods of service. Expected future payments are discounted using market yields at the 

reporting date for Government Bonds with terms to maturity and currency that match, as closely as possible, the 

estimated future cash outflows. 

p) Leases 

Finance leases transfer to ESR, as lessee, substantially all the risks and rewards incidental to ownership of a leased 

asset. Initial recognition of a finance lease results in an asset and liability being recognised at amounts equal to the 

lower of the fair value of the leased asset or the present value of the minimum lease payments. Each lease payment 

is allocated between the liability and finance charges so as to achieve a constant rate of finance charge over the 


term of the lease. Property, plant and equipment acquired under a finance lease are depreciated over the shorter of 

the assets’ useful lives and lease terms. 

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified 

as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are 

charged to the Statement of Comprehensive Income on a straight-line basis over the period of the lease. 

q) Borrowings 

Borrowings are initially recognised at fair value, net of costs incurred. Borrowings are subsequently measured 

at amortised cost. Any differences between the proceeds (net of transaction costs) and the redemption amount 

is recognised in the Statement of Comprehensive Income over the period of the borrowing using the effective 

interest method. 

Borrowings are classified as current liabilities unless ESR has an unconditional right to defer settlement of the 

liability for at least 12 months after the balance date. 

r) Share capital 

Ordinary shares are classified as equity. 

Incremental costs directly attributable to the issue of new shares or options are shown as appropriate in equity as a 

deduction, net of tax, from the proceeds. 

s) Revenue 

i) Sales of goods and services 

Revenue is earned by ESR in exchange for the provision of outputs (services) to third parties. Revenue from the 

supply of services is measured at the fair value of consideration received. Revenue from the supply of services is 

recognised in the accounting period in which the services are rendered, by reference to the stage of completion 

of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services 

to be provided. Any revenue for which services have not been supplied as at the reporting date but for which 

payment has been received is deferred within the Statement of Financial Position as revenue in advance. 

ii) Interest income 

Interest income is recognised in the Statement of Comprehensive Income on a time proportion basis, using the 

effective interest rate method. 

iii) Vaccine revenue 

ESR purchases vaccines on behalf of the Ministry of Health. The Ministry of Health retains the risks and rewards 

related to the inventory and as such no inventory is recognised within ESR’s Statement of Financial Position. ESR 

receives and recognises commission revenue only in relation to the services performed. 

T) Foreign currency 

Items included in the financial statements of each of the Group’s entities are measured using the currency of the 

primary economic environment in which the entity operates. The Group financial statements are presented in 

New Zealand dollars (NZD), which is ESR’s functional and presentation currency. 

Transactions in foreign currencies are initially translated at the foreign exchange rates at the dates of the 

transactions. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the 

translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies, are 

recognised in the Statement of Comprehensive Income. 

Non-monetary assets and liabilities measured at historical cost in a foreign currency are translated using the 

exchange rate at the date of the transaction. 

u) Goods and services tax 

Items in the Statement of Comprehensive Income and Statement of Cash Flows are disclosed net of Goods and 

Services Tax (“GST”). All items in the Statement of Financial Position are stated net of GST with the exception of 

receivables and payables, which include GST invoiced. 

v) Dividends 

A provision is made for the amount of any dividend declared on or before the end of the financial year but not 

distributed at balance date. 

w) Financial instruments 

The designation of financial assets and financial liabilities by ESR into instrument categories is determined by the 

business purposes of the financial instruments, policies and practices of management, the relationship with other 

instruments and the reporting costs and benefits associated with each designation. The designations applied by 

ESR are reflected in the financial statements. 


i) Financial assets 

Classification 

The Group classifies its financial assets as loans and receivables. Management determines the classification of its 

financial assets at initial recognition. 

(a) Loans and receivables 

Loan and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted 

in an active market. They are included in current assets, except for maturities greater than 12 months after the 

reporting date. These are classified as non-current assets. ESR’s loans and receivables comprise “trade and other 

receivables” and “cash and cash equivalents” in the Statement of Financial Position. 

(b) Recognition and measurement 

Regular purchases and sales of financial assets are recognised on the trade-date – the date on which the Group 

commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all 

financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights 

to receive cash flows from the investments have expired or have been transferred and the Group has transferred 

substantially all risks and rewards of ownership. Loans and receivables are carried at amortised cost using the 

effective interest method. 

The Group assesses at each reporting date whether there is objective evidence that a financial asset or a group of 

financial assets is impaired. 

ii) Financial liabilities 

Financial liabilities held by ESR include trade and other payables. 

Such financial liabilities are recognised initially at fair value less transaction costs and subsequently measured at 

amortised cost using the effective interest rate method. Financial liabilities entered into with durations less than 

12 months are recognised at their nominal value. 

iii) Derivatives 

Derivative financial instruments are recognised both initially and subsequently at fair value. They are reported as 

either assets or liabilities depending on whether the derivative is in a net gain or net loss position. ESR does not 

use hedge accounting, and as such derivatives are classified as held-for-trading financial instruments with fair value 

gains or losses recognised in the Statement of Comprehensive Income. Such derivatives are entered into for risk 

management purposes. 

x) Provisions 

Provisions are recognised when: ESR has a present legal or constructive obligation as a result of past events; it 

is probable that an outflow of resources will be required to settle the obligation; and the amount can be reliably 

estimated. Restructuring provisions comprise employee termination payments. Provisions are not recognised for 

future operating losses. 

Provisions are measured at the present value of the expenditures expected to be required to settle each obligation 

using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to 

the obligation. The increase in the provision due to the passage of time is recognised as an interest expense. 

y) Changes in accounting policies 

Accounting policies have been applied on a basis consistent with the prior year. 


2. Other expenses include the following specific items: 

Group 

Group 


Note $’000s $’000s 

Fees paid to PricewaterhouseCoopers for: 

– the audit of the statutory financial statements 83 77 

Total audit-related fees paid to the auditor 83 77 

– non-audit-related services – taxation compliance 35 30 

– non-audit-related services – accounting advice – 5 

Total fees paid to auditor 118 112 

Defined contribution plan expense 197 181 

Directors’ fees 21 190 190 

Donations 4 11 

Bad debts written off 21 2 

Communications 1,496 1,723 

Consultancy fees 1,176 1,090 

Impairment of development costs – 40 

Foreign exchange loss 15 5 

Loss on sale of fixed assets 10 8 

Marketing and advertising 150 189 

Office and administration 1,139 1,157 

Occupancy 1,933 2,056 

Rental and operating lease costs 439 410 

Training and conferences 309 303 

Travel 1,347 1,180 

Restructuring expense – 693 

Business acquisition costs 262 – 

Given the nature of ESR’s principal business activities, research comprises part of ESR’s everyday business 

operations. As such, expenses relating to research are not separately identified. The cost of research to ESR 

is distributed between the relevant expense items, for example employee benefits and scientific materials 

used. 

Fees paid to the auditor for taxation compliance include work in relation to the review of ESR's annual tax return 

and other sundry taxation advice. 

During the year ESR incurred costs of $262,000 related to the potential acquisition of a business unit of a 

Government Ministry. The costs principally relate to financial and legal due diligence. It is expected that the 

acquisition will be completed in the June 2012 financial year. 

3. Finance expense 

Group 

Group 


$’000s 

$’000s 

Finance lease interest 28 19 

28 19 


4. Taxation 

The taxation charge has been calculated as follows: 

Group 

Group 


Note $’000s $’000s 

Profit before income tax expense 3,928 4,501 

Prima facie taxation at 30% 1,178 1,350 

Plus taxation effect of: 

Net prior year under / (over) estimation 21 (109) 

Impact of change in tax legislation – building depreciation (579) 4,133 

Impact of change in corporate income tax rate 25 (384) 

Non-deductible / (assessable) items 61 29 

Tax expense for the year 706 5,019 

The tax expense for the year is represented by: 

Current taxation 1,087 956 

Deferred taxation 7 (381) 4,063 

As a result of the change in tax legislation that was enacted on 27 May 2010, with effect from 1 July 2011 being 

the beginning of the 2012 income year, the tax depreciation rate on buildings with estimated useful lives of 50 

years or more will be reduced to 0%. This reduction in the tax depreciation rate has significantly reduced the tax 

base of ESR's buildings, as future tax deductions will no longer be available from the 2011-2012 income year. 

This has resulted in an increase to the deferred tax liability in relation to buildings by $4,133,000, which was 

recognised in the tax expense in the previous year. 

As a result of these changes, ESR has commenced a project to assess the division of its buildings between 

depreciable and non-depreciable components for tax purposes. As at 30 June 2011 ESR had made an initial 

assessment that 15% of buildings were depreciable. This is in line with the guidance provided by Inland 

Revenue. As a result a credit of $579,000 has been recognised in tax expense in the year ended 30 June 2011. 

Further work will be completed in the coming year to confirm the position. It is likely this will result in an 

additional adjustment. 

As a result of the change in the New Zealand corporate tax rate from 30% to 28% that was enacted on 27 

May 2010 and that will be effective from 1 July 2011, the relevant deferred tax balances have been remeasured. 

Deferred tax expected to reverse in the year to 30 June 2012 or later has been measured using the effective rate 

that will apply for the period (28%). 

706 5,019 


5. Property, plant and equipment 

Group 

Buildings 

and IT Plant, Assets 

Freehold leasehold equipment equipment under 

land improvements and software and vehicles construction Total 

$’000s $’000s $’000s $’000s $’000s $’000s 

At 1 July 2009 

Cost 476 22,798 10,596 22,675 814 57,359 

Accumulated depreciation – (3,649) (8,838) (14,088) – (26,575) 

Net book value at the beginning of the year 476 19,149 1,758 8,587 814 30,784 

Year ended 30 June 2010 


Additions – 184 745 1,541 941 3,411 

Transfers: 

– From assets under construction – 23 248 538 (809) – 

Disposals – – (10) (12) – (22) 

Depreciation for the year – (465) (1,136) (2,073) – (3,674) 

Net book value at the end of the year 476 18,891 1,605 8,581 946 30,499 

At 30 June 2010 

Cost 476 23,006 9,752 23,897 946 58,077 



Year ended 30 June 2011 


Additions – 718 608 1,912 267 3,505 

Transfers from assets under construction – 652 39 250 (941) – 

Disposals – (7) – (4) – (11) 

Depreciation for the year – (495) (1,019) (2,272) – (3,786) 


At 30 June 2011 

Cost 476 24,367 8,519 25,948 272 59,582 



IT equipment recognised under finance leases (where ESR is a lessee) included in the above table, has the 

following values. 

Group 

30 June 30 June 

2011 2010 

$’000s $’000s 

Cost – capitalised finance lease assets 686 631 

Accumulated depreciation (520) (331) 

Net book value at the end of the year 166 300 

ESR does not have any property, plant and equipment where title is restricted or used as security for liabilities. 


6. Intangible assets 

Group 

Computer Computer 

software – software – Assets 

externally internally Development under 

purchased generated costs construction Total 

$’000s $’000s $’000s $’000s $’000s 

At 1 July 2009 

Cost 2,664 1,253 308 470 4,695 

Accumulated amortisation (1,393) (804) (268) – (2,465) 

Net book value at the end of the year 1,271 449 40 470 2,230 


Net book value at the beginning of the year 1,271 449 40 470 2,230 

Additions 158 89 – 856 1,103 

Transfers from assets under construction 212 257 – (469) – 

Impairment losses – – (40) – (40) 

Amortisation for the year (677) (445) – – (1,122) 

Net book value at the end of the year 964 350 – 857 2,171 

At 30 June 2010 

Cost 3,113 1,599 308 857 5,877 

Accumulated amortisation and impairment losses (2,149) (1,249) (308) – (3,706) 

Net book value at the end of the year 964 350 – 857 2,171 


Net book value at the beginning of the year 964 350 – 857 2,171 

Additions 103 – – 2,854 2,957 

Transfers from assets under construction – – – – – 

Impairment losses – – – – – 

Amortisation for the year (589) (164) – – (753) 

Net book value at the end of the year 478 186 – 3,711 4,375 

At 30 June 2011 

Cost 2,224 2,183 – 3,711 8,118 

Accumulated amortisation and impairment losses (1,746) (1,997) – – (3,743) 

Net book value at the end of the year 478 186 – 3,711 4,375 

ESR does not have any intangible assets whose title is restricted or used as security for liabilities. 

Assets under construction relates to the development of a new operational system. This is expected to be fully 

implemented within the 2011-2012 financial year. 


7. Deferred taxation 

Deferred tax assets and liabilities are attributed to the following: 

Group Group 


$’000s $’000s 

Balance at the beginning of the year (4,421) (358) 

Statement of Comprehensive Income charge 381 (4,063) 

Balance at the end of the year (4,040) (4,421) 

Employee 

Accelerated tax benefits and 

depreciation provisions Total 

$’000s $’000s $’000s 


Balance at the beginning of the year (1,311) 953 (358) 

Change in corporate income tax rate 397 (13) 384 

Charged / (credited) to Statement of Comprehensive Income (4,370) (77) (4,447) 

Balance at the end of the year (5,284) 863 (4,421) 


Balance at the beginning of the year (5,284) 863 (4,421) 

(Under) / over provision in prior year (4) 214 210 

Deferred tax liability adjustment – (25) (25) 

Impact of change in tax legislation – building depreciation 579 – 579 

Charged / (credited) to Statement of Comprehensive Income (189) (194) (383) 

Balance at the end of the year (4,898) 858 (4,040) 

There are no unrecognised deferred tax assets or liabilities. 

Deferred tax liabilities expected to be settled within 12 months total $367,000 (2010: $394,000). 

8. Cash and cash equivalents 

Group Group 


$’000s $’000s 

Cash at bank and on hand 128 2 

Short-term deposits 7,373 6,936 

7,501 6,938 


9. Trade and other receivables 

Group Group 


$’000s $’000s 

Trade debtors 9,640 10,880 

Provision for doubtful debts (20) (29) 

9,620 10,851 

Prepayments 761 646 

Movements on ESR’s provision for impairment of trade receivables are as follows: 

10,381 11,497 

Group Group 


$’000s $’000s 

As at 1 July 29 31 

Provision for doubtful debts 12 – 

Receivables written off during the year as uncollectable (21) (2) 

As at 30 June 2011, trade receivables of $20,000 (2010: $29,000) were impaired and provided for. The 

individually impaired receivables mainly relate to customers, which are in unexpectedly difficult economic 

situations. The ageing of these receivables is as follows: 

20 29 

Group Group 


$’000s $’000s 

Past due 1 – 30 days – 11 

Past due 31 – 60 days – 9 

Past due > 61 days 20 9 

20 29 

As at 30 June 2011, trade receivables of $211,000 (2010: $242,000) were past due but not impaired. These 

relate to a number of customers for which there is no recent history of default. The ageing analysis of these trade 

receivables is as follows: 

Group Group 


$’000s $’000s 

Past due 1 – 30 days 57 78 

Past due 31 – 60 days 33 154 

Past due > 61 days 121 10 

211 242 

10. Income tax receivable / (payable) 

Group Group 


$’000s $’000s 

Balance at the beginning of the year (150) (229) 

Current year charge (1,083) (956) 

Prior period adjustment (3) (41) 

Provisional taxation payments 1,485 1,076 

Balance at the end of the year 249 (150) 


11. Inventories 

Group Group 


$’000s $’000s 

Scientific materials and consumables 1,001 1,051 

1,001 1,051 

12. Trade and other payables 

Group Group 


$’000s $’000s 

Accrued expenses 468 839 

Payroll and GST accruals 1,064 1,072 

Revenue in advance 1,234 1,052 

Trade payables 7,992 8,603 

10,758 11,566 

13. Employee benefits 

Group Group 


$’000s $’000s 

Annual leave accrual 2,048 1,871 

Personal development leave accrual 255 225 

Retirement leave accrual – 66 

Other 40 53 

Current liabilities 2,343 2,215 

Personal development leave accrual 690 598 

Retirement leave accrual 104 98 

Other 6 6 

Non-current liabilities 800 702 

14. Finance lease liabilities 

Future minimum lease payments are as follows: 

Group Group 


$’000s $’000s 

Not later than one year 178 199 

Later than one year and not later than five years 137 117 

Later than five years – – 

Total minimum lease payments 315 316 

Future finance charges on finance leases (22) (20) 

Present value of finance lease liabilities 293 296 

The finance leases relate to IT equipment. Upon termination of the initial lease period, ESR can choose to 

either extend the term further, or return the leased assets to the lessor. There is no option to purchase the leased 

assets upon termination of the lease. 

The present values of finance lease liabilities are as follows: 

Group Group 


$’000s $’000s 


Later than one year and not later than five years 129 106 

Later than five years – – 

293 296 


15. Provisions 

Warranty 

ESR is no longer obligated to provide technical assistance for a forensic system supplied to an international 

client and to rectify subsystems that do not perform satisfactorily. The provision was released in the current year 

(2010: $190,000). 

Restructuring 

No restructuring activities took place in the current year (2010: Due to the significant decline in the 

Pharmaceutical business and loss of some Health Service Descriptions, ESR has restructured a small portion of 

the business. The full cost associated with the restructuring was recognised in the previous period). 

Group Group 


$’000s $’000s 

Restructuring – current portion – 358 

Warranty – current portion – 95 

– 453 

Warranty – non current portion – 95 

Total provisions – 548 

Movements in each class of provisions are as follows: 

Warranty Restructuring Total 

$’000s $’000s $’000s 

As at 1 July 2010 190 358 548 

Utilisation – (358) (358) 

Additions – – – 

Release of provision to Statement of Comprehensive Income (190) – (190) 

Closing balance as at 30 June 2011 – – – 

16. Borrowings 

ESR holds a multi-option credit facility with Westpac Banking Corporation for $6,000,000 (2010: 

$6,000,000), which is provided subject to ESR meeting an equity ratio covenant specified by the bank. The 

facility expires in March 2014, and as at 30 June 2011 no borrowings have been entered into under this facility 

(30 June 2010: Nil). 

There were no breaches of the equity ratio covenant during the year. 

17. Equity 

Share capital 

Group Group 


$’000s $’000s 

8,494,000 ordinary shares (issued and fully paid) 8,494 8,494 

All ordinary shares rank equally with one vote attached to each fully paid ordinary share. Ordinary shares have 

no par value. 

No dividends were proposed or declared for the 30 June 2011 year (2010: Nil). 

Retained earnings 

Group Group 


$’000s $’000s 

Balance at the beginning of the year 23,764 24,282 

Dividend paid – – 

Profit / (loss) for the year 3,222 (518) 

Balance at the end of the year 26,986 23,764 


18. Reconciliation of profit / (loss) after taxation to cash flows from 

operating activities 

Group Group 

year ended year ended 


Note $’000s $’000s 

Profit / (loss) for the year after taxation 3,222 (518) 

Non-cash items: 

Depreciation and amortisation 4,539 4,796 

Finance charges on leases 203 – 

Impairment of investment – 40 

Bad debts written off 2 21 2 

(Decrease) / increase in deferred taxation liability 4 (381) 4,063 

Foreign exchange loss 12 5 

4,394 8,906 

Impact of changes in investing activities: 

Loss / (gain) on sale of assets 10 8 

10 8 

Financing 

Dividend payable – 106 

– 106 

Changes in working capital: 

Decrease / (increase) in trade and other receivables 1,116 (590) 

(Decrease) / increase in income tax payable (399) (79) 

Decrease / (increase) in inventories 50 (231) 

(Decrease) / increase in provisions (548) 154 

Increase / (decrease) in employment benefits 226 (41) 

(Decrease) / increase in financial liabilities (3) 4 

(Decrease) / increase in trade and other payables (808) 477 

(366) (306) 

Net cash inflow / (outflow) from operating activities 7,260 8,196 

19. Investments 

Subsidiary companies 

ESR has two wholly owned, non-trading, subsidiary companies: 

Country 

Balance 

of 

Name date incorporation 

ESR Limited 30 June New Zealand 

The Institute of Environmental Science and Research Limited 30 June Australia 

All subsidiaries have remained non-trading during the period. ESR Holdings Sdn Bhd was deregistered in the 

2010 year. 

At balance date the investment in these subsidiaries had a nil carrying value. 


20. Commitments 

Capital commitments 

Group Group 


$’000s $’000s 

Property, plant and equipment 212 759 

Total capital commitments 212 759 

Operating lease commitments 

The future aggregate minimum lease payments under non-cancellable operating leases are as follows: 

Group Group 


$’000s $’000s 


Later than one year and not later than five years 1,200 1,118 

Later than five years – 277 

Total operating commitments 1,533 1,706 

ESR leases land, a building, equipment and vehicles. There is a renewal option in respect of the land and 

building lease. There are no renewal options or options to purchase in respect of vehicles held under operating 

leases. 

ESR has a number of standard operational agreements for the purchase of materials and consumables that have 

both fixed and variable components, some of which extend beyond one year. 

21. Related party transactions and key management personnel 

Related party transactions 

ESR is a wholly owned entity of the Crown. ESR enters into transactions with other Crown entities and 

government departments. 

Related parties include the subsidiary entities disclosed in note 19. There were no transactions with these related 

parties in the year ended 30 June 2011 (30 June 2010: Nil). 

The following transactions were carried out with related parties: 

• There are close family members of key management personnel employed by ESR. The terms and conditions 

of those arrangements are no more favourable than those ESR would have adopted if there were no 

relationships with key management personnel 

• Fees paid to directors during the year were $190,000 (30 June 2010: $190,000), with no balances outstanding 

at balance date (30 June 2010: Nil). 

No provision was required, nor any expense recognised, for impairment of receivables from related parties. 

Key management personnel compensation 

Key management personnel comprise the Chief Executive Officer, members of the Strategic Leadership Team 

and the Directors. Key management personnel compensation is disclosed below. 

Group Group 


$’000s $’000s 

Salaries and other short-term employee benefits 1,840 1,873 

Other long-term employee benefits 78 83 

Directors’ fees 190 190 

Total key management personnel compensation 2,108 2,146 


22. Financial instruments by category 

Loans and 

receivables 

$’000s 

30 June 2010 

Assets as per balance sheet 

Trade and other receivables excluding prepayments 10,851 

Cash and cash equivalents 6,938 

Total 17,789 

Financial 

liabilities at 

amortised cost 

$’000s 

Liabilities as per balance sheet 

Finance lease liabilities 296 

Trade and other payables 9,442 

Total 9,738 

Loans and 

receivables 

$’000s 

30 June 2011 

Assets as per balance sheet 

Trade and other receivables excluding prepayments 9,620 

Cash and cash equivalents 7,501 

Total 17,121 

Financial 

liabilities at 

amortised cost 

$’000s 

Liabilities as per balance sheet 

Finance lease liabilities 293 

Trade and other payables 8,460 

Total 8,753 


23. Financial risk management 

ESR’s activities are exposed to a variety of financial risks: market risk, credit risk, liquidity risk, cash flow risk 

and fair value interest-rate risk. ESR’s overall risk management programme focuses on the unpredictability of 

financial markets and seeks to minimise potential adverse effects on ESR’s financial performance. The policies 

approved and financial instruments being utilised at balance date are outlined below. 

a) Market risk 

In accordance with its Treasury Management Policy, ESR uses derivative financial instruments to economically 

hedge its exposure to foreign exchange risks from its operational, financing and investment activities. These 

derivatives are classified at fair value through profit or loss, and gains and losses are recognised in the Statement 

of Comprehensive Income. 

i) Foreign exchange risk 

Foreign exchange risk occurs as a result of transactions denominated in a currency other than ESR’s functional 

currency of NZD. Currencies commonly transacted in and giving rise to foreign exchange risk include the 

US dollar, Australian dollar and the pound sterling. ESR is subject to foreign currency risk through its trade 

receivables and trade payables balances. 

Where a material foreign currency balance is entered into (exposures equivalent to greater than NZD 

$100,000), ESR is required by the Treasury Management Policy to hedge its exposure to the currency through 

the use of forward exchange contracts. 

ESR held no forward exchange contracts at 30 June 2011 (30 June 2010: Nil). 

The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies: 

Group Group 


$’000s $’000s 

Australian dollar 31 112 

Euro 16 – 

US dollar 34 26 

Other – 57 

81 195 

The carrying amounts of the Group’s trade and other payables were denominated in the following currencies: 

Group Group 


$’000s $’000s 

Australian dollar 58 2 

Canadian dollar 9 – 

US dollar 8 8 

Other 10 1 

85 11 

ii) Interest rate risk 

As at reporting date, ESR is subject to interest rate risk through the holding of cash and cash equivalents. ESR 

uses a mixture of call and short-term deposit investment accounts to hold excess funds. Available interest rates 

are monitored to ensure the best return on cash. 

When ESR is required to draw down its credit facilities, interest rate risk is managed through entering into a 

predetermined mixture of floating and fixed rate borrowings, depending on the level of borrowings entered into. 

ESR did not have any borrowings as at 30 June 2011 (30 June 2010: Nil). 

iii) Market risk sensitivity analysis 

ESR is exposed to market risk through the holding of the following financial instruments: cash, trade receivables 

and trade payables. ESR management has analysed the below sensitivities in market risk factors over a 12-month 

period: 

• Proportional foreign exchange rate movement of -10% (depreciation of NZD) and +10% (appreciation of 

NZD) against the foreign currencies; and 

• A parallel shift of +1% / -1% in market interest rates in New Zealand. 

If these movements were to occur (all other variables held constant), the impact on ESR’s reported profit before 

income tax expense and equity at balance date is presented below. 


Group 

30 JUNE 2010 

Carrying Interest rate Foreign exchange 

amount -100bp +100bp -10% +10% 

$’000s Profit Equity Profit Equity Profit Equity Profit Equity 

Financial assets 

Cash and cash equivalents 6,938 (69) (69) 69 69 – – – – 

Trade receivables 195 – – – – (20) (20) 18 18 

Financial liabilities 

Trade payables 11 – – – – (1) (1) 1 1 

Total (decrease) / increase (69) (69) 69 69 (21) (21) 19 19 

Group 

30 JUNE 2011 

Carrying Interest rate Foreign exchange 

amount -100bp +100bp -10% +10% 

$’000s Profit Equity Profit Equity Profit Equity Profit Equity 

Financial assets 

Cash and cash equivalents 7,501 (75) (75) 75 75 – – – – 

Trade receivables 81 – – – – 8 8 (7) (7) 

Financial liabilities 

Trade payables 85 – – – – (8) (8) 8 8 

Total (decrease) / increase (75) (75) 75 75 – – 1 1 

b) Credit risk 

Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in 

financial loss to ESR. The financial instruments, which expose ESR to credit risk, are principally cash and cash 

equivalents, and trade receivables. 

Bank balances and short-term investments (comprising cash and cash equivalents) are held with New Zealand 

registered banks in accordance with ESR’s Treasury Management Policy. The majority of high-value trade 

receivables comprise government entities and therefore the potential risk of default is low. ESR has a Contracts 

Policy that requires assessments of the credit worthiness of potential clients, where the value of a contract is 

material as defined in the Policy. 

A provision for doubtful debts is maintained in respect of trade receivables and this is reassessed on a regular 

basis. No collateral is held by ESR in respect of cash and cash equivalents, and trade receivables as at 30 June 

2011 (30 June 2010: Nil). 

The carrying amount of financial assets recognised in the Statement of Financial Position best represents ESR’s 

maximum exposure to credit risk at the reporting date. 

As at 30 June 2011 the trade receivables balance included $8,573,000 (30 June 2010: $9,831,000) owed by 

entities within, or owned by, the New Zealand Government. It is not believed that there is any material risk of 

loss with these receivables. 

c) Liquidity risk 

Prudent liquidity risk management implies the availability of funding through adequate levels of committed 

credit facilities. Liquidity risk is monitored through the forecasting of cash flows, and ensuring that the 

committed credit lines in place remain adequate for requirements. 

A contractual discounted maturity analysis of financial liabilities is presented below: 

Group 


Less Greater Less Greater 

Carrying than 1-2 2-5 than 5 Carrying than 1-2 2-5 than 5 

value 1 year years years years value 1 year years years years 

$’000s $’000s $’000s $’000s $’000s $’000s $’000s $’000s $’000s $’000s 

Trade payables 8,460 8,460 – – – 9,442 9,442 – – – 

Finance lease liabilities 293 178 90 47 – 296 199 102 15 – 

8,753 8,638 90 47 – 9,738 9,641 102 15 – 

As at 30 June 2011, ESR had no derivative financial instruments (30 June 2010: Nil). 


d) Fair values 

The carrying value of financial assets and liabilities recorded in the financial statements approximate their fair 

values. 

Fair value is generally based on the contracted amount payable / receivable of financial assets and financial 

liabilities, being the amount for which the financial instrument is to be exchanged. Fair value includes the 

impact of any assessed impairment of the financial instruments – please refer to the Statement of Significant 

Accounting Policies for details of each financial instrument and their recognition criteria. 

e) Capital risk management 

ESR’s objectives when managing capital are to maintain financial stability, achieve sustainable growth and to 

realise its strategic goals and targets, all within the risk appetite of its shareholder and management. 

In line with Government requirements, ESR monitors its capital structure through the return on equity and 

gearing ratios. The Government provides ESR with guideline targets with the expectation that an appropriate 

average return will be achieved over time, rather than requiring that ESR meet the specified targets annually. 

At reporting date, the Government-provided guideline targets are 9% for the return on equity, and 30% for the 

gearing ratio, (2010: same). 

Each year ESR internally sets return on equity and gearing ratio targets, bearing in mind the overall results 

expected by the Government. The ratios are reported in the Statement of Corporate Intent. 

The return on equity and gearing ratios as at 30 June 2011 and 30 June 2010 were as follows, along with the 

relevant annual targets set by ESR. 

The return on equity ratio was affected by the change in tax legislation enacted on 27 May 2010, which 

eliminated tax depreciation on buildings. 

Return on equity ratio 

Group 

Group 


$’000s 

$’000s 

Profit / (loss) for the year 3,222 (518) 

Average equity 33,869 32,517 

Actual ratio 9.5% (1.6%) 

Target ratio 8.0% 8.0% 

Gearing ratio 

Net debt 

Finance lease liabilities – current 164 190 

Finance lease liabilities – non current 129 106 

293 296 

Equity 35,480 32,258 

Actual ratio 0.8% 0.9% 

Target ratio 0.0% 0.0% 

24. Contingent liabilities 

The directors are satisfied that there are no claims outstanding that would have a material impact on ESR’s 

financial position, as at 30 June 2011 (30 June 2010: Nil). 

25. Subsequent events 

There were no events subsequent to reporting date that require disclosure in the financial statements. 


Registered office 

Kenepuru Science Centre 

34 Kenepuru Drive 

PO Box 50 348 

Porirua 5240 

New Zealand 

Telephone: +64 4 914 0700 

Fax: +64 4 914 0770 

Auditor 

Chris Barber of PricewaterhouseCoopers on 

behalf of the Auditor-General 

Banker 

The National Bank of New Zealand Limited 

Solicitor 

Buddle Findlay

Annual Report 2011 - Environmental Science & Research

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