Financial Statements

Statement of Responsibility
Statement of Accounting Policies
Statement of Financial Performance
Statement of Movement in Taxpayers' Funds
Statement of Financial Position
Statement of Cash Flows
Reconciliation of Net Surplus to Net Cash Flow from Operating Activities
Statement of Commitments
Statement of Contingent Liabilities
Statement of Unappropriated Expenditure
Statement of Departmental Expenditure and Appropriations
Statement of Trust Money Administered on Behalf of the Crown
Notes to the Financial Statements
Non-Departmental Schedules and Statements

Statement of Responsibility

In terms of Sections 35 and 37 of the Public Finance Act 1989, I am responsible, as Chief Executive of the Ministry for Culture and Heritage, for the preparation of the Ministry's financial statements and the judgements made in the process of producing those statements.

I have the responsibility of establishing and maintaining, and I have established and maintained, a system of internal control procedures that provide reasonable assurance as to the integrity and reliability of financial reporting.

In my opinion, these financial statements fairly reflect the financial position and operations of the Ministry for the year ended 30 June 2004.

Signed:

Martin Matthews
Chief Executive
30 September 2004

Countersigned by:

Matthew Archer
Manager Corporate Services
30 September 2004

Statement of Accounting Policies for the Year Ended 30 June 2004

Reporting Entity

The Ministry for Culture and Heritage is a government department as defined by section 2 of the Public Finance Act 1989.

These are the financial statements of the Ministry for Culture and Heritage prepared pursuant to section 35 of the Public Finance Act 1989.

In addition the Ministry has reported the Crown activities and trust monies that it administers.

Measurement System

These financial statements have been prepared on the basis of historical cost.

Accounting Policies

The following particular accounting policies have been adopted in the preparation of these financial statements:

Budget Figures

The Budget figures are those presented in the Budget Night Estimates (Main Estimates) and those amended by the Supplementary Estimates (Supp. Estimates) and any transfer made by Order in Council under section 5 of the Public Finance Act 1989.

Revenue

The Ministry derives revenue through the provision of outputs to the Crown and from services to third parties. Third party revenue is predominantly derived through the undertaking of historical projects on a full cost-recovery basis. Revenue is recognised when earned and is reported in the financial period to which it relates.

Fixed Assets

All fixed assets costing $1,000 or more are capitalised (except for computing equipment, where the threshold has been set at $2,000, and software licensing and development costs, where the threshold has been set at $5,000) and recorded at historical cost less accumulated depreciation.

The initial cost of a fixed asset is the value of the consideration given to acquire or create the asset and any directly attributable costs of bringing the asset to working condition for its intended use. Leasehold improvement costs include significant project management and related fees.

Depreciation

Depreciation is provided on a straight-line basis as follows:

Office furniture	20% per annum
Computer equipment and software:
- Personal computers	33⅓% per annum
- Computer equipment other than personal computers	25% per annum
- Software licensing and development costs	33⅓% per annum
Office equipment	20% per annum
Works of art	1% per annum

Leasehold improvements are depreciated over the unexpired period of the lease or the estimated useful lives of the improvements, whichever is shorter. Consequently, the depreciation rate for each asset will vary depending upon the lease period or the useful life of the improvements when the work is completed.

Items under construction are not depreciated. The total cost of a capital project is transferred to the appropriate asset class on its completion and then depreciated.

Debtors

Debtors are recorded at estimated realisable value, after providing for doubtful and uncollectable debts.

Leases

The Ministry leases office premises. As the lessor retains all the risks and rewards of ownership, these leases are classified as operating leases. Operating lease costs are expensed in the period in which they are incurred.

Provision for Employee Entitlements

Provision is made in respect of the Ministry's liability for annual, long service and retirement leave. Annual leave has been calculated on an actual entitlement basis at current rates of pay. Long service leave has been calculated on an actuarial basis based on the present value of expected future entitlements. Retirement leave has been calculated on a proportion-of-entitlement basis at current rates of pay. Entitlements expected to be settled within 12 months of reporting date are recognised as current liabilities in the Statement of Financial Position.

Statement of Cash Flows

Cash means cash balances on hand and held in bank accounts.

Operating activities include cash received from all income sources of the Ministry and record the cash payments made for the supply of goods and services.

Investing activities are those activities relating to the acquisition and disposal of non-current assets.

Financing activities comprise capital injections by, or repayment of capital to, the Crown.

Foreign Currency

Foreign currency transactions are converted at the New Zealand dollar exchange rate at the date of the transaction. Where a forward contract has been used to establish the price of a transaction, the forward rate specified in that foreign exchange contract is used to convert that transaction to New Zealand dollars. Consequently, no exchange gain or loss resulting from the difference between the forward exchange contract rate and the spot exchange rate on date of settlement is recognised.

Financial Instruments

The Ministry is party to financial instruments as part of its normal operations. These financial instruments include bank accounts, debtors and creditors. Revenue and expenses in relation to all financial instruments are recognised in the Statement of Financial Performance. All financial instruments are recognised in the Statement of Financial Position at their estimated fair value.

Cost Allocation

The Ministry has determined the cost of outputs using the cost allocation system outlined below.

Cost allocation policy

Direct costs are charged directly to significant activities. Indirect costs are charged to significant activities based on cost drivers and related activity/usage information.

Criteria for direct and indirect costs

Direct costs are those costs directly attributed to an output. Indirect costs are those costs that cannot be identified in an economically feasible manner with a specific output.

Direct costs assigned to outputs

Direct costs are charged directly to outputs. Personnel costs are charged directly to the unit within the output class to which they belong.

For the year ended 30 June 2004, direct costs accounted for 69% of the Ministry's costs (2003: 66%).

Basis for assigning indirect costs to outputs

Indirect costs are assigned to business units based on the proportion of staff in the unit.

For the year ended 30 June 2004, indirect costs accounted for 31% of the Ministry's costs (2003: 34%).

Goods and Services Tax (GST)

The Statement of Unappropriated Expenditure and the Statement of Departmental Expenditure and Appropriations are inclusive of GST. The Statement of Financial Position is exclusive of GST, except for Creditors and Debtors, which are GST inclusive. All other statements are GST exclusive.

The amount of GST owing to or from the Inland Revenue Department at balance date, being the difference between Output GST and Input GST, is included in Creditors and Payables or Debtors and Receivables (as appropriate).

Taxation

Government departments are exempt from the payment of income tax in terms of the Income Tax Act 1994. Accordingly, no charge for income tax has been provided for.

Commitments

Future expenses and liabilities to be incurred on contracts that have been entered into at balance date are disclosed as commitments to the extent that they are equally unperformed obligations. Commitments relating to employment contracts are not disclosed.

Contingent Liabilities

Contingent liabilities are disclosed at the point at which the contingency is evident.

Taxpayers' Funds

This is the Crown's net investment in the Ministry.

Changes in Accounting Policies

There have been no material changes to the Ministry's accounting policies, including cost allocation accounting policies, since the date of the last audited financial statements.

All policies have been applied on a basis consistent with the previous year.

Statement of Financial Performance for the Year Ended 30 June 2004

		2003/04	2003/04	2003/04	2002/03
		Actual	Main Estimates	Supp. Estimates	Actual
	Notes	$(000)	$(000)	$(000)	$(000)
REVENUE
Crown		8,143	7,696	8,283	6,042
Departments		144	0	15	164
Other		251	500	300	359
Total Revenue		8,538	8,196	8,598	6,565

EXPENDITURE
Personnel costs	1	5,153	5,413	4,917	3,768
Operating costs	2	2,956	2,510	3,343	2,063
Depreciation	3	275	199	276	180
Capital charge	4	64	74	64	57
Total Expenses		8,448	8,196	8,600	6,068

Net Surplus		90	0	(2)	497

This statement is to be read in conjunction with the accompanying Statement of Accounting Policies and Notes to the Financial Statements.

Statement of Movements in Taxpayers' Funds for the Year Ended 30 June 2004

	2003/04	2003/04	2003/04	2002/03
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Taxpayers' funds as at 1 July	676	676	676	676
Net surplus	90	0	(2)	497
Total recognised revenues and expenses for the year	90	0	(2)	497
Capital contribution	150	150	150	0
Provision for repayment of surplus to the Crown	(90)	0	0	(497)
Taxpayers' funds as at 30 June	826	826	824	676

This statement is to be read in conjunction with the accompanying Statement of Accounting Policies and Notes to the Financial Statements.

Statement of Financial Position as at 30 June 2004

		2003/04	2003/04	2003/04	2002/03
		Actual	Main Estimates	Supp. Estimates	Actual
	Note	$(000)	$(000)	$(000)	$(000)
Taxpayers' Funds		826	826	824	676
Represented by:
Current Assets
Cash		874	1,000	620	1,067
Debtors and receivables	5	123	191	102	98
Prepayments		0	54	0	0
Total current assets		997	1,245	722	1,165
Non-Current Assets
Fixed assets	6	1,026	642	1,020	687
Total non-current assets		1,026	642	1,020	687
Total assets		2,023	1,887	1,742	1,852
Current Liabilities
Creditors and payables	7	680	805	632	311
Provision for repayment of surplus to the Crown		90	0	0	497
Deferred revenue		91	0	0	82
Provision for employee entitlements	8	256	172	172	172
Total current liabilities		1,117	977	804	1,062
Non-Current Liabilities
Provision for employee entitlements	8	80	84	114	114
Total non-current liabilities		80	84	114	114
Total Liabilities		1,197	1,061	918	1,176
Net Assets		826	826	824	676

This statement is to be read in conjunction with the accompanying Statement of Accounting Policies and Notes to the Financial Statements.

For information on major budget variances refer to Note 12 in the Notes to the Financial Statements (page 48).

Signed:

Martin Matthews
Chief Executive
30 September 2004

Countersigned by:

Matthew Archer
Manager Corporate Services
30 September 2004

Statement of Cash Flows for the Year Ended 30 June 2004

	2003/04	2003/04	2003/04	2002/03
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Cash flows - Operating Activities
Cash was provided from:
Supply of outputs to
- Crown	8,102	7,696	8,283	6,042
- Customers	420	500	315	620
	8,522	8,196	8,598	6,662
Cash was applied to:
Produce outputs
- Personnel	(5,029)	(4,900)	(4,846)	(3,768)
- Operating	(2,721)	(3,023)	(3,198)	(2,447)
- Net GST paid	60	0	19	(31)
- Capital charge	(64)	(74)	(64)	(57)
	(7,754)	(7,997)	(8,089)	(6,303)
Net cash flows from operating activities	768	199	509	359
Cash flows - Investing Activities
Cash was provided from:
Sale of fixed assets	0	0	0	0
Cash disbursed for:
Purchase of fixed assets	(614)	(230)	(609)	(139)
Net cash flows from investing activities	(614)	(230)	(609)	(139)
Cash flows - Financing Activities
Cash was provided from:
Capital contribution	150	150	150	0
Cash disbursed for:
Payment of surplus	(497)	0	(497)	(95)
Net cash flows from financing activities	(347)	150	(347)	(95)
Net increase in cash held	(193)	119	(447)	125
Add opening cash	1,067	881	1,067	942
Closing cash	874	1,000	620	1,067

This statement is to be read in conjunction with the accompanying Statement of Accounting Policies and Notes to the Financial Statements.

For information on major budget variances refer to Note 12 in the Notes to the Financial Statements (page 48).

Reconciliation of Net Surplus to Net Cash Flow From Operating Activities For The Year Ended 30 June 2004

	2003/04	2003/04	2003/04	2002/03
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Net surplus	90	0	(2)	497
Add/(less) non-cash items:
Depreciation	275	199	276	180
Inc/(Dec) in non-current employee entitlements	(34)	0	0	13
Total non-cash items	241	199	276	193
Add/(less) movements in working capital items:
(Inc)/Dec in debtors and receivables	(25)	0	(4)	93
Inc/(Dec) in creditors and payables	369	0	321	(448)
Inc/(Dec) in current employee entitlements	84	0	0	17
Inc/(Dec) in deferred income	9	0	(82)	0
Working capital movement – net	437	0	235	(338)
Add/(less) investing activity items:
Net loss/(gain) on sale of fixed assets	0	0	0	7
Net cash flows from operating activities	768	199	509	359

This statement is to be read in conjunction with the accompanying Statement of Accounting Policies and Notes to the Financial Statements.

Statement of Commitments as at 30 June 2004

The Ministry has non-cancellable leases on its office premises in Wellington. The Ministry occupies Level 5 (1,223 sqm) and part of Level 1 (332 sqm) in Radio New Zealand (RNZ) House under two separate lease contracts, which run until 2007 and 2006 respectively. A contract for the lease of basement space for storage purposes runs until 30 June 2005. The accommodation lease for Level 5 includes two car parks. The amounts disclosed below as future commitments are based on the current rental rates.

	2003/04	2002/03
	Actual	Actual
Non-cancellable accommodation leases:	$(000)	$(000)
Less than one year	333	359
One to two years	328	289
Two to five years	209	469
More than five years	0	0
Total non-cancellable operating lease commitments	870	1,117

The figures for 2002/03 included the Ministry's former premises, which were sublet until the lease expired on 31 May 2004 at a rate that recovered all of the lease costs.

The total cost incurred in rental and leasing costs in 2003/04, other than on the sublet premises, was $320,000. This figure includes the cost of renting four additional car parks under cancellable operating lease agreements. The space allocation per person at balance date is approximately 19 square metres.

The Ministry does not have any non-departmental commitments as at 30 June 2004 (2003: Nil).

This statement is to be read in conjunction with the accompanying Statement of Accounting Policies and Notes to the Financial Statements.

Statement of Contingent Liabilities as at 30 June 2004

Quantifiable contingent liabilities are as follows:

	2003/04	2002/03
	Actual	Actual
	$(000)	$(000)
Departmental	0	0
Non-Departmental	36,000	242,921

The $36 million is in respect of a Deed of Indemnification signed by the Minister of Finance for the exhibition Everyday Miracles: The Art of Stanley Spencer. The deed was lifted on 2 August 2004. No incident or claim on the government's indemnity occurred in respect of either this exhibition or any of those that had been in place at 30 June 2003.

Statement of Unappropriated Expenditure For The Year Ended 30 June 2004

	2003/04	2003/04	2003/04
	Actual	Appropriation	Unappropriated Expenditure
	$(000)	$(000)	$(000)
Vote Arts, Culture and Heritage
Non-Departmental Output Class:
Public Broadcasting Funding
- National Pacific Radio Trust	2,581	2,086	495
- Other service providers	119,449	119,460
	122,030	121,546

Funding within this output class was provided to the National Pacific Radio Trust (NPRT) to establish a pilot national Pacific radio network. The NPRT incurred expenditure as a consequence of the need to cancel its agreement with its network provider and operate the radio network (Niu FM) itself. This resulted in actual costs exceeding those appropriated. This unappropriated expenditure has been approved by the Minister of Finance in terms of section 12 of the Public Finance Act 1989.

These statements are to be read in conjunction with the accompanying Statement of Accounting Policies and Notes to the Financial Statements.

Statement of Departmental Expenditure and Appropriations For The Year Ended 30 June 2004

(Figures are GST inclusive where applicable)

	2003/04	2003/04	2003/04
	Expenditure Actual	Appropriation Main Estimates	Appropriation Supp. Estimates
	$(000)	$(000)	$(000)
Vote Arts, Culture and Heritage
Appropriations for classes of outputs
Heritage Services	5,102	4,947	5,249
Policy Advice and Grants Administration	4,303	4,164	4,315
Appropriations for capital contribution
Capital investment	150	150	150
Total Vote Arts, Culture and Heritage	9,555	9,261	9,714
Vote Sport and Recreation
Appropriations for classes of outputs
Purchase Advice and Monitoring of Sport and Recreation Crown Entities	110	110	110
Total	9,665	9,371	9,824

Appropriations provide each Vote Minister with the authority to spend public money or incur expenses or liabilities on behalf of the Crown.

Changes to Appropriations in 2003/04 Supplementary Estimates

The Ministry's 2003/04 departmental output class appropriations were increased by $453,000 in the 2003/04 Supplementary Estimates. A brief explanation for the increases in the two Vote Arts, Culture and Heritage departmental output classes is as follows.

Heritage Services: This appropriation was increased by $302,000 due to

a carry forward of $551,000 funding for the online Encyclopedia from 2002/03;
a forecast reduction in contract history activity (-$225,000);
a carry forward of funding for the Tomb of the Unknown Warrior project administration
to 2004/05 (-$169,000);
an increase for the New Zealand Memorial in London project administration ($85,000); and
an increase for projects to commemorate the 90th anniversary of Anzac Day ($60,000).

Policy Advice and Grants Administration: This appropriation was increased by $151,000 due to

an increase to commence a review of government screen funding arrangements ($200,000);
a carry forward of funding to complete the Cultural Indicators Project in 2004/05 (-$66,000); and
an increase for the new State Superannuation scheme ($17,000).

Expense transfer from 2003/04 to 2004/05

In June 2004 approval was obtained to carry forward the unspent $147,000 operating funding under the Heritage Services departmental output class in regard to two projects - the online Encyclopedia of New Zealand ($62,000) and the New Zealand Memorial in London ($85,000). The transfers are necessary because of timing issues associated with the various project expenditures.

This statement is to be read in conjunction with the accompanying Statement of Accounting Policies and Notes to the Financial Statements.

Statement of Trust Money Administered on Behalf of the Crown For The Year Ended 30 June 2004

The following trust money was administered on behalf of the Crown under Part VII of the Public Finance Act 1989.

The statement shows the opening and closing net assets and the movements during the year.

	Opening Net Assets	Capital Contributions	Capital Distributions (Awards)	Revenue	Expenses	Closing Net Assets
	2003/04					2003/04
	$(000)	$(000)	$(000)	$(000)	$(000)	$(000)
New Zealand Encyclopedia	1	0	0	0	0	1
New Zealand Historical Atlas	34	0	0	37	0	71
New Zealand History Research	1,495	0	(93)	80	0	1,482
Australian Trust for Oral History	1,414	0	(43)	87	0	1,458
Dictionary of New Zealand Biography	414	0	0	30	(29)	415
Total	3,358	0	(136)	234	(29)	3,427

Under the Public Finance Act 1989 and by delegation from the Secretary to the Treasury, trust money can only be invested on deposit with New Zealand registered banks or in New Zealand Government Stock. Trust money is also managed so there is no significant concentration of credit risk. Interest rate risk is managed by investing across a wide range of maturity dates, but subject to liquidity requirements.

New Zealand Encyclopedia Trust

This trust was established to hold New Zealand Lottery Grants Board funds to be used for the feasibility study on the production of the Encyclopedia of New Zealand. The feasibility study was completed in 2001/02 and the government allocated funding for the online Encyclopedia of New Zealand project from 2002/03. The Trust is being held open to receive funds from sales of Encyclopedia publications. The funds will be used for the updating and publication of subsidiary volumes.

New Zealand Historical Atlas Trust

This trust was established to hold New Zealand Lottery Grants Board funds, donations and royalties from sales to be used for the production of the New Zealand Historical Atlas and subsidiary volumes.

New Zealand History Research Trust

This trust was established to hold New Zealand Lottery Grants Board funds to make awards to individuals for historical research and writing projects. During the 2003/04 financial year 11 awards in history were made totalling $92,687.50 and ranging in value from $2,000 to $30,000 (2002/03: 9 awards; $88,250; $3,000 to $26,000).

Australian Sesquicentennial Gift Trust for Awards in Oral History

This trust was established to hold funds from the Government of the Commonwealth of Australia. The income from these funds is used for the promotion of oral history in New Zealand.

During the 2003/04 financial year 13 awards in oral history were made totalling $42,900 and ranging in value from $1,000 to $5,080 (2002/03: 17 awards; $77,242.50; $1,000 to $9,000).

Dictionary of New Zealand Biography Trust

This trust was established to hold funds from the New Zealand Lottery Grants Board, funds from publication sales, and funds raised by private sponsorship or fundraising for the production of the Dictionary of New Zealand Biography and subsidiary volumes.

Notes to the Financial Statements for the Year ended 30 June 2004

Note 1: Personnel Costs

	2003/04	2003/04	2003/04	2002/03
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)

Salaries and wages	4,913	5,235	4,643	3,607
Training and development	99	100	100	5
Superannuation	55	51	83	45
Other personnel costs	86	27	91	111
Total personnel costs	5,153	5,413	4,917	3,768

An explanation for the increase in Training and Development expenditure is provided in Note 12.

Note 2: Operating Costs

	2003/04	2003/04	2003/04	2002/03
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Administration costs	2,297	1,905	2,732	1,389
Rental and leasing costs	320	291	291	298
Other occupancy costs	104	100	100	131
Publicity and research	120	100	100	55
Communications	95	100	100	174
Audit fees (Audit New Zealand)	20	14	20	16
Fees to auditors for other services provided	0	0	0	0
Total operating costs	2,956	2,510	3,343	2,063

Note 3: Depreciation

	2003/04	2003/04	2003/04	2002/03
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Office furniture	37	40	40	40
Leasehold improvements	97	33	95	79
Computer equipment and software	115	100	115	45
Office equipment	26	26	26	16
Works of art	0	0	0	0
Total depreciation	275	199	276	180

Note 4: Capital Charge

The Ministry pays a capital charge to the Crown on its taxpayers' funds as at 30 June and
31 December each year. The capital charge rate for the year ended 30 June 2004 was 8.5% (2003: 8.5%).

Note 5: Debtors and Receivables

	2003/04	2003/04	2003/04	2002/03
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Debtor Crown	41	0	0	0
Trade debtors	49	151	62	98
Receivables	33	40	40	0
Total debtors and receivables	123	191	102	98

Note 6: Fixed Assets

	2003/04 Actual			2002/03 Actual
	Cost	Accum. Deprec.	NBV	Cost	Accum. Deprec.	NBV
Office furniture	296	214	82	487	378	109
Leasehold improvements	727	215	512	584	143	441
Computer equipment and software	529	169	360	296	218	78
Office equipment	118	56	62	124	72	52
Works of art	10	0	10	3	0	3
Work in progress	0	0	0	4	0	4
Total fixed assets	1,680	654	1,026	1,498	811	687

Note 7: Creditors and Payables

	2003/04	2003/04	2003/04	2002/03
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Trade creditors	319	403	110	0
PAYE payable	113	110	110	39
GST payable	91	(8)	50	31
Accrued expenses	157	300	362	241
Total creditors and payables	680	805	632	311

Note 8: Provision for Employee Entitlements

	2003/04	2003/04	2003/04	2002/03
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Current Liabilities
Annual leave	238	172	172	172
Long service leave	18	0	0	0
Total current portion	256	172	172	172

Non-Current Liabilities
Long service leave	23	24	43	43
Retirement leave	57	60	71	71
Total non-current portion	80	84	114	114
Total employee entitlements	336	256	286	286

Note 9: Financial Instruments

The Ministry is party to financial instrument arrangements as part of its everyday operations. These financial instruments include bank balances, trade debtors, trade creditors and foreign currency forward contracts on behalf of the Crown.

Credit Risk

Credit risk is the risk that a third party will default on its obligations to the Ministry, causing the Ministry to incur a loss. In the normal course of its business the Ministry incurs credit risk from trade debtors and transactions with financial institutions.

The Ministry does not require any collateral or security to support financial instruments with financial institutions that it deals with, as these entities have high credit ratings. For its other financial instruments the Ministry does not have significant concentrations of credit risk.

Fair Value

The fair value of financial instruments is equivalent to the carrying amount disclosed in the Statement of Financial Position.

Currency Risk

Currency risk is the risk that debtors and creditors due in foreign currency will fluctuate because of changes in foreign exchange rates. Owing to the nature and limited number of foreign exchange transactions undertaken, the Ministry has no significant exposure to currency risk.

Interest Rate Risk

Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. This could impact on the return on investments or the cost of borrowing. The Ministry has no significant exposure to interest rate risk on its financial instruments.

Under section 46 of the Public Finance Act the Ministry cannot raise a loan without Ministerial approval, and no such loans have been raised. Accordingly, there is no interest rate exposure for funds borrowed (30 June 2003: Nil).

Note 10: Related Party Information

The Ministry is a wholly owned entity of the Crown. The government significantly influences the roles of the Ministry as well as being its major source of revenue.

The Ministry enters into numerous transactions with other government departments and Crown entities. These transactions are not considered to be related party transactions.

Note 11: Contingencies

The Ministry has no contingent assets for the year ended 30 June 2004 (2003: Nil).

Contingent liabilities are separately disclosed in the Statement of Contingent Liabilities.

Note 12: Major Budget Variations

During the latter half of 2002 the Ministry developed a detailed business case which identified the urgent and essential priorities requiring funding from 2003/04 onwards. It resulted in additional baseline funding of $1.5 million and a capital contribution of $150,000 being provided to the Ministry in the 2003/04 Budget, and allowed the Ministry to realign its resourcing to address key priorities more effectively. This increase in funding accounts for almost all of the difference in the Ministry's revenue Crown between 2002/03 (Actual) and 2003/04 (Main Estimates).

Statement of Financial Performance – Actual versus Budget (Supplementary Estimates)

In June 2004 approval was obtained to carry forward unspent operating funding as at year-end to 2004/05 for two projects – Te Ara, the online Encyclopedia of New Zealand ($55,000), and the New Zealand Memorial in London ($76,000). This accounts almost entirely for the total under-expenditure of $152,000. (The Debtor Crown figure - refer Note 5 - included in Debtors and Receivables on the Statement of Financial Position arises as a result of the carry forward being lower than forecast).

The operating surplus was primarily generated from higher than anticipated earnings from contract history projects for public sector clients.

The substantial increase in staff training and development expenditure (refer Note 1) reflects the successful implementation of a professional development programme, developed in consultation with the PSA in 2002/03, to strengthen the Ministry's strategic human resource capability as well as contribute to capacity building across the wider public sector.

Statements of Financial Position and Cash Flows - Actual versus Budget (Supplementary Estimates)

During 2003/04 the Ministry incurred higher than usual capital expenditure on the following:

implementing technology associated with Te Ara, the online Encyclopedia of New Zealand project;
upgrading of the Ministry's computer network hardware and software; and
reconfiguration of the Ministry's premises to accommodate the growing number of staff.

This capital expenditure (totalling $614,000) was funded through cash reserves generated from accumulated depreciation, along with the $150,000 capital contribution appropriated. This outlay has led to a temporary decline in the Ministry's working capital position.

A review of the Ministry's fixed assets register as a consequence of implementing a new accounting system, along with the expiry as at 31 May 2004 of the lease on the Ministry's former premises, has resulted in the disposal of a large number of fully depreciated assets.

Note 13: Post Balance Date Events

There are no post balance sheet date events to report.

Non-departmental Schedules and Statements: Vote Arts, Culture And Heritage and Vote Sport and Recreation for The Year Ended 30 June 2004

Reporting Entity

The following non-departmental statements and schedules record revenue and receipts, expenses, expenditure, assets and liabilities that the Ministry administers on behalf of the Crown.

Statement of Accounting Policies: Non-Departmental

Measurement and recognition rules applied in the preparation of these non-departmental financial schedules and statement are consistent with generally accepted accounting practice and Crown accounting policies.

The Crown uses foreign exchange forward contracts to manage foreign exchange exposure. The notional principal amount outstanding at balance date on hedged purchase commitments with respect to the annual payment made to the Commonwealth War Graves Commission to maintain overseas war graves and memorials was $2.458 million (30 June 2003: $2.213 million).

These non-departmental balances are consolidated into the Crown Financial Statements, and therefore readers of these statements and schedules should also refer to the consolidated audited Crown Financial Statements for the year ended 30 June 2004.

Schedule of Non-departmental Revenue and Receipts for the Year Ended 30 June 2004

(Figures are GST inclusive where applicable)

The schedule of revenue and receipts summarises non-departmental revenue that the Ministry collects on behalf of the Crown.

	2003/04	2003/04	2002/03
	Actual	Forecast	Actual
	$(000)	$(000)	$(000)
Vote Arts, Culture and Heritage
Broadcasting Standards Authority - Fines	14	0	0
Total non-departmental revenue and receipts	14	0	0

Schedule of Non-departmental Expenses for the Year Ended 30 June 2004

(Figures are GST inclusive where applicable)

The schedule of expenses summarises non-departmental expenses that the Ministry administers on behalf of the Crown. Further details are provided in the Statement of Non-Departmental Expenditure and Appropriations on pages 51 to 52.

	2003/04	2003/04	2002/03
	Expenditure	Appropriation	Expenditure
	Actual	Voted *	Actual
	$(000)	$(000)	$(000)
Vote Arts, Culture and Heritage
Non-departmental output classes	183,319	182,835	161,483
Other expenses to be incurred by the Crown	11,264	11,295	8,218
Depreciation – buildings	143	0	0
Total Vote Arts, Culture and Heritage	194,726	194,130	169,701
Vote Sport and Recreation
Non-departmental output classes	29,262	29,262	12,073
Benefits and other unrequited expenses	5,000	5,000	5,000
Other expenses to be incurred by the Crown	100	100	2,600
Total Vote Sport and Recreation	34,362	34,362	19,673
Total non-departmental expenses	229,088	228,492	189,374

*This includes adjustments made in the Supplementary Estimates.

These schedules are to be read in conjunction with the accompanying Statement of Accounting Policies on page 49.

Statement of Non-departmental Expenditure and Appropriations for the Year Ended 30 June 2004

(Figures are GST inclusive where applicable)

The Statement of Non-Departmental Expenditure and Appropriations details expenditure incurred against each appropriation administered by the Ministry on behalf of the Crown.

	2003/04	2003/04	2002/03
	Expenditure	Appropriation	Expenditure
	Actual	Voted *	Actual
	$(000)	$(000)	$(000)
Vote Arts, Culture and Heritage
Appropriations for non-departmental output classes
Museum Services	20,851	20,851	20,351
Performing Arts Services	16,188	16,188	15,487
Protection for Historic Places	6,547	6,547	4,484
Public Broadcasting Funding	122,030	121,546	113,213
Promotion and Support of Arts and Film	17,703	17,703	7,948
Sub-total	183,319	182,835	161,483
Appropriations for other expenses to be incurred by the Crown
Commonwealth War Graves	2,213	2,213	2,395
Development and Maintenance of War Graves, Historic Graves and Monuments	328	350	299
Antarctic Heritage Trust	100	100	200
Regional Museums	8,300	8,300	5,000
Treaty of Waitangi Commemorations	315	324	316
Pūkaki Trust	8	8	8
Sub-total	11,264	11,295	8,218
Appropriations for capital investment in other organisations
Museum of New Zealand Te Papa Tongarewa	9,000	9,000	9,000
National Pacific Radio Trust	0	0	1,095
Sub-total	9,000	9,000	10,095
Purchase or development of capital assets by the Crown
Tomb of the Unknown Warrior	511	546	520
Total Vote Arts, Culture and Heritage	204,094	203,676	180,316

Vote Sport and Recreation
Appropriations for non-departmental output classes
Drugs Testing of Sports Persons	1,281	1,281	1,092
Sport, Fitness and Leisure Programmes	23,981	23,981	10,981
High Performance Sport	4,000	4,000	0
Sub-total	29,262	29,262	12,073
Benefits and other unrequited expenses
Sport Education Scholarships	5,000	5,000	5,000
Appropriations for other expenses to be incurred by the Crown
Miscellaneous Grants	50	50	50
New Zealand Sports Hall of Fame	50	50	50
Sir Peter Blake Memorial Trust	0	0	2,500
Sub-total	100	100	2,600
Total Vote Sport and Recreation	34,362	34,362	19,673

* This includes adjustments made in the Supplementary Estimates.

Explanation of Significant Variances

Public Broadcasting Funding: Expenditure on output class Public Broadcasting Funding exceeded budget by $484,000, made up as follows:

additional expenditure of $495,000 was incurred by the National Pacific Radio Trust in establishing a pilot Pacific radio network (explained in more detail in the Statement of Unappropriated Expenditure on page 42); and
the expenditure incurred in producing the report Towards Precautionary Risk Management of TV Violence in New Zealand was $11,000 less than budgeted.

Tomb of the Unknown Warrior: In June 2004 approval was obtained to carry forward to 2004/05 any unspent 2003/04 capital funding for the construction of the Tomb of the Unknown Warrior at the National War Memorial in Wellington. The $35,000 to be carried forward will be added to the $1.771 million 2004/05 funding provided to complete the project in 2004. The total amount spent on this project to 30 June 2004 is included in the Schedule of Non-Departmental Assets.

This statement is to read in conjunction with the accompanying Statement of Accounting Policies on page 49.

Schedule of Non-departmental Assets as at 30 June 2004

	2003/04	2003/04	2002/03
	Actual	Forecast	Actual
	$(000)	$(000)	$(000)
Current assets
Cash and bank balances	557	1,655	1,405
Receivables and advances	4	3	3
Total current assets	561	1,658	1,408
Non-current assets
Physical assets:
Land (at valuation 30 May 2003)	2,390	2,390	2,390
Buildings (at valuation 30 May 2003)	7,140	7,140	7,140
Accumulated depreciation	(143)	(143)	0
Capital work in progress - Tomb of the Unknown Warrior	1,031	1,067	520
Total non-current assets	10,418	10,454	10,050
Total assets	10,979	12,112	11,458

The following points should be noted in addition to the above asset disclosures:

The investment in Crown entities that the Ministry monitors is recorded within the Crown financial statements on a line-by-line basis. The Ministry, on behalf of the Crown, made a capital contribution of $9 million per annum to the Museum of New Zealand Te Papa Tongarewa in 2002/03 and 2003/04.
The Crown has a security interest in the capital assets owned by National Pacific Radio Trust. The Ministry, on behalf of the Crown, has provided $1.445 million capital funding to the National Pacific Radio Trust in 2002/03.

The drop in cash balance from the level forecast arose from the decision to return accumulated surplus funding to the New Zealand Debt Management Office, and from a fall in creditors and payables balances outstanding as at 30 June 2004 compared with the previous year's level (refer to Schedule of Non-departmental Liabilities).

Physical assets were revalued as at 30 May 2003 by Beca Valuations Ltd using market-based evidence (land) and depreciated replacement cost (buildings) in accordance with accounting standard FRS-3. This revaluation resulted in the establishment of a Land and Buildings Reservation Reserve of $1.080 million.

Buildings are depreciated at 2% per annum on a straight-line basis.

This schedule is to read in conjunction with the accompanying Statement of Accounting Policies on page 49.

Schedule of Non-departmental Liabilities as at 30 June 2004

	2003/04	2003/04	2002/03
	Actual	Forecast	Actual
	$(000)	$(000)	$(000)
Current liabilities
Creditors and payables	174	300	330
Total liabilities	174	300	330

This schedule is to read in conjunction with the accompanying Statement of Accounting Policies on page 49.