Ministry for Culture and Heritage Annual Report 2006 - financial statements

In this section

Financial Statements

Statement of Responsibility

In terms of sections 35 and 45 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 2006.

Signed:

Martin Matthews
Chief Executive
30 September 2006

Countersigned by:

Matthew Archer
Manager Corporate Services
30 September 2006

STATEMENT OF ACCOUNTING POLICIES FOR YEAR ENDED 30 JUNE 2006

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 sections 35 and 45 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 and from the State Services Commission which funds the State Sector Superannuation Retirement Savings Scheme. 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:

Asset Category	Depreciation Rate
Office Furniture	20% per annum
Computer Equipment and Software: - Personal Computers	33 ⅓ % per annum
- Computer Equipment other than Personal Computers	25% per annum
- Software Licensing and Development Costs	33 ⅓ % 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 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 uncollectible 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 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 to which they belong.

For the year ended 30 June 2006, direct costs accounted for 73% of the Ministry’s costs (2005: 72%).

Basis for assigning indirect and corporate 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 2006, indirect costs accounted for 27% of the Ministry’s costs (2005: 28%).

Goods and Services Tax (GST)

All 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 2006

		2005/06	2005/06	2005/06	2004/05
		Actual $(000)	Main Estimates $(000)	Supp. Estimates $(000)	Actual $(000)
REVENUE	Note
Crown		12,184	11,917	13,160	9,472
Departments	[1]	287	101	261	214
Other	[1]	162	275	167	223
Total revenue		12,633	12,293	13,588	9,909
EXPENDITURE
Personnel costs	[2]	6,333	5,852	6,493	5,738
Operating costs	[3]	4,306	5,884	6,657	3,737
Depreciation	[4]	367	462	343	339
Capital charge	[5]	80	95	95	66
Total expenses		11,086	12,293	13,588	9,880
Net surplus		1,547	0	0	29

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 13 in the Notes to the Financial Statements.

STATEMENT OF MOVEMENTS IN TAXPAYERS' FUNDS FOR THE YEAR ENDED 30 JUNE 2006

	2005/06	2005/06	2005/06	2004/05
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Taxpayers’ funds as at 1 July	826	826	826	826
Net surplus	1,547	0	0	29
Total recognised revenues and expenses for the year	1,547	0	0	29
Capital contribution	454	711	711	0
Provision for repayment of surplus to the Crown	(1,547)	0	0	(29)
Taxpayers’ funds as at 30 June	1,280	1,537	1,537	826

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 2006

		2005/06	2005/06	2005/06	2004/05
		Actual	Main Estimates	Supp. Estimates	Actual
	Note	$(000)	$(000)	$(000)	$(000)
Taxpayers’ Funds		1,280	1,537	1,537	826
Represented by:
Current Assets
Cash		1,506	1,179	1,628	696
Debtors and receivables	[6]	1,526	70	102	349
Prepayments		12	0	2	2
Total current assets		3,044	1,249	1,732	1,047
LESS Current Liabilities
Creditors and payables	[8]	786	521	697	595
Provision for repayment of surplus to the Crown		1,547	0	0	29
Deferred revenue		0	0	0	4
Provision for employee entitlements	[9]	275	250	280	282
Total current liabilities		2,608	771	977	910
Working Capital		436	478	755	137
ADD Non-Current Assets
Fixed assets	[7]	977	1,139	867	773
LESS Non-Current Liabilities
Provision for employee entitlements	[9]	133	80	85	84
Net Assets		1,280	1,537	1,537	826

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 13 in the Notes to the Financial Statements.

Signed:

Martin Matthews
Chief Executive
30 September 2006

Countersigned by:

Matthew Archer
Manager Corporate Services
30 September 2006

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2006

	2005/06	2005/06	2005/06	2004/05
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Cash flows – Operating Activities
Cash was provided from:
Supply of outputs to
- Crown	10,988	11,917	13,257	9,416
- Customers	477	376	574	282
	11,465	12,293	13831	9,698
Cash was applied to:
Produce outputs
- Personnel	(6,295)	(5,782)	(6,494)	(5,751)
- Operating	(4,121)	(5,954)	(6,675)	(3,690)
- Net GST paid	(13)	0	120	(193)
- Capital charge	(80)	(95)	(95)	(66)
	(10,509)	(11,831)	(13,162)	(9,700)
Net cash flows from operating activities	956	462	687	(2)
Cash flows – Investing Activities
Cash was provided from:
Sale of fixed assets	0	0	0	0
Cash disbursed for:
Purchase of fixed assets	(571)	(811)	(437)	(86)
Net cash flows from investing activities	(571)	(811)	(437)	(86)
Cash flows – Financing Activities
Cash was provided from:
Capital contribution	454	711	711	0
Cash disbursed for:
Repayment of surplus	(29)	0	(29)	(90)
Net cash flows from financing activities	425	711	682	(90)
Net increase in cash held	810	362	932	(178)
Add opening cash	696	817	696	874
Closing cash	1,506	1,179	1,628	696

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 13 in the Notes to the Financial Statements

RECONCILIATION OF NET SURPLUS TO NET CASH FLOW FROM OPERATING ACTIVITIES FOR THE YEAR ENDED 30 JUNE 2006

	2005/06	2005/06	2005/06	2004/05
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Net surplus	1,547	0	0	29
Add/(less) non-cash items:
Depreciation	367	462	343	339
Inc/(dec) in non-current employee entitlements	49	0	1	4
Total non-cash items	416	462	344	343
Add/(less) movements in working capital items:
(Inc)/dec in debtors and receivables	(1,177)	0	247	(226)
(Inc)/dec in prepayments	(10)	0	0	(2)
Inc/(dec) in creditors and payables	191	0	102	(85)
Inc/(dec) in current employee entitlements	(7)	0	(2)	26
Inc/(dec) in deferred income	(4)	0	(4)	(87)
Working capital movement – net	(1,007)	0	343	(374)
Add/(less) investing activity items:
Net loss/(gain) on sale of fixed assets	0	0	0	0
Net cash flows from operating activities	956	462	687	(2)

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 2006

The Ministry has non-cancellable leases on its office premises in Wellington. The Ministry occupies Level 5 (1,223.3sqm) and part of Level 1 (331.6sqm) 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 through until 30 June 2007. The accommodation lease for Level 5 includes two car parks. The amounts disclosed below as future commitments are based on the current rental rates.

	2005/06	2004/05
	Actual	Actual
Non-cancellable accommodation leases:	$(000)	$(000)
Less than one year	215	333
One to two years	0	215
Two to five years	0	0
More than five years	0	0
Total non-cancellable operating lease commitments	215	548

The total cost incurred in rental and leasing costs in 2005/06 was $354,000. This figure includes the cost of renting four additional car parks under cancellable operating lease agreements. The space allocation per person on Ministry office space at balance date is approximately 17 square metres.

The Ministry does not have any non-departmental commitments as at 30 June 2006 (2005: 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 2006

Quantifiable contingent liabilities are as follows:
	2005/06	2004/05
	Actual	Actual
	$(000)	$(000)
Departmental	0	0
Non-Departmental	250,000	0

The $250 million is in regard to a Deed of Indemnification signed by the Minister of Finance for the exhibition Impressions of Land, Sea and Sky: The Art of John Constable. The deed is due to be lifted in October 2006.

STATEMENT OF UNAPPROPRIATED EXPENDITURE FOR THE YEAR ENDED 30 JUNE 2006

	2005/06	2005/06	2005/06	2005/06
	Actual	Main Estimates	Supp. Estimates	Unappropriated Expenditure
	$(000)	$(000)	$(000)	$(000)
Vote Arts, Culture and Heritage
Other Expenses to be Incurred by the Crown:
New Zealand Memorial in Korea	105	60	105	45
Capital Expenditure:
National Memorial Park in Wellington	4,953	0	5,140	4,952

In Budget 2005 the government approved funding of $60,000 in 2005/06 for the construction of a New Zealand Memorial in Korea. Additional expenditure of $45,000 was incurred on the installation through the unforeseen necessity to engage a sub-contractor and architect to manage the installation on site. The shortfall was addressed through a fiscally neutral transfer from the non-departmental other expense appropriation ‘Development and Maintenance of War Graves, Historic Graves and Monuments’ in the 2006 March Baseline Update.

In Budget 2004 the government approved funding of $6 million in 2004/05 and $2.5 million in 2006/07 for the acquisition of land on Buckle Street in Wellington opposite the National War Memorial, for the establishment of a National Memorial Park. At the end of 2004/05 negotiations were continuing for the acquisition of the Buckle Street properties from Transit New Zealand. Agreement had not been reached over the extent of the land available or the purchase price. Any agreement was conditional on approval by Cabinet which extended the time it took to conclude the purchase. An in-principle transfer of $6 million was agreed as part of the 2004/05 March Baseline Update. The land was transferred to the Ministry from Transit New Zealand on 27 October 2005, and $5.986 million was confirmed as an expense transfer from 2004/05 to 2005/06 in the 2005/06 October Baseline Update to meet the cost of the transaction.

The Ministry reported $104,000 non-departmental unappropriated expenditure for 2004/05 in respect of the New Zealand Memorial in London project, which was due to a timing issue.

STATEMENT OF DEPARTMENTAL EXPENDITURE AND APPROPRIATIONS FOR THE YEAR ENDED 30 JUNE 2006

	2005/06	2005/06	2005/06	2005/06	2005/06
	Expend- iture Actual	Appro- priation Main Estimates	Appro- priation Supp. Estimates	Section 5 Transfers	Final Appro- priation
	$(000)	$(000)	$(000)	$(000)	$(000)
Vote Arts, Culture and Heritage Appropriations for outputs
Heritage Services	4,951	4,703	5,545	0	5,545
International Cultural Diplomacy	1,576	2,089	3,102	0	3,102
Policy Advice and Grants Administration	4,461	5,403	4,843	0	4,843
Total Vote Arts, Culture and Heritage	10,988	12,195	13,490	0	13,490
Vote Sport and Recreation Appropriations for outputs
Purchase Advice and Monitoring of Sport and Recreation Crown Entities	98	98	98	0	98
Total Vote Sport and Recreation	11,086	12,293	13,588	0	13,588

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 2005/06 Supplementary Estimates

The Ministry’s 2005/06 departmental output appropriations were increased by $1.295 million in the 2005/06 Supplementary Estimates. A brief explanation for the changes to the three Vote Arts, Culture and Heritage departmental outputs is as follows.

Heritage Services: This appropriation was increased by $842,000 due to:

a fiscally neutral adjustment to align baselines with the 2005/06 output plan ($551,000);
an increase in funding for project management and operating costs for the National War Memorial on Buckle Street in Wellington ($291,000);
an increase for recovery of remuneration for staff seconded to Department of Internal Affairs ($150,000);
an increase for a fellowship awarded from the Leadership Development Centre ($45,000);
a transfer from 2004/05 for the New Zealand Memorial in London ($13,000);
an increase for the State Sector Retirement Savings Scheme ($6,000);
a transfer from 2004/05 for Te Ara, the Encyclopedia of New Zealand ($3,000); and
a forecast reduction in contract history activity (-$217,000).

International Cultural Diplomacy: This appropriation was increased by $1.013 million due to:

a transfer from 2004/05 ($1.011 million); and
an increase for the State Sector Retirement Savings Scheme ($2,000).

Policy Advice and Grants Administration: This appropriation was decreased by $560,000 due to:

a fiscally neutral adjustment to align baselines with the 2005/06 output plan (-$551,000);
a return of savings to the Crown for Cultural Portal project savings in depreciation and capital charge (-$132,000);
a transfer from 2004/05 for Cultural Well-being ($57,000)
an increase for funding contributions towards the digital television research project ($55,000); and
an increase for the State Sector Retirement Savings Scheme ($11,000).

STATEMENT OF TRUST MONEY ADMINISTERED ON BEHALF OF THE CROWN FOR THE YEAR ENDED 30 JUNE 2006

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 2005/06	Capital Contri- i butions	Capital Distri- butions (Awards)	Revenue	Expenses	Closing Net Assets 2005/06
	$(000)	$(000)	$(000)	$(000)	$(000)	$(000)
New Zealand Encyclopedia	1	0	0	0	0	1
New Zealand Historical Atlas	79	0	0	7	0	86
New Zealand History Research	1,485	0	(90)	95	0	1,490
Australian Trust for Oral History	1,463	0	(80)	96	0	1,479
Dictionary of New Zealand Biography	416	0	0	29	(97)	348
Total	3,444	0	(170)	227	(97)	3,404

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 and groups for historical research and writing projects. During the 2005/06 financial year ten awards in history were made totalling $90,000 and ranging in value from $3,000 to $26,000 (2004/05: 13 awards; $90,000; $3,000 to $12,000).

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 2005/06 financial year 14 awards in oral history were made totalling $79,600 and ranging in value from $2,000 to $10,000 (2004/05: 18 awards; $83,540; $2,000 to $6,200).

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 2006

Note 1: Third Party Revenue

Third party revenue was derived from the following sources.

	2005/06		2004/05
	Other Government Departments	Other Sources	Other Government Departments	Other Sources
Contract history projects	62	60	94	219
Seconded staff	101	0	68	0
State Sector Retirement Savings Scheme (SSRSS) funding from State Services Commission	124	0	52	0
Leadership Development Centre Fellowship Award	0	45	0	0
Contribution towards Digital Broadcasting Strategy project	0	55	0	0
Publication sales	0	1	0	3
Antiquities dealers’ licences	0	1	0	1
Total third party revenue	287	162	214	223

Note 2: Personnel Costs

	2005/06	2005/06	2005/06	2004/05
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Salaries and wages	5,875	5,483	6,061	5,464
Training and development	149	72	146	63
Superannuation	185	155	192	103
Other personnel costs	124	142	94	108
Total personnel costs	6,333	5,852	6,493	5,738

Note 3: Operating Costs

	2005/06	2005/06	2005/06	2004/05
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Administration costs	2,368	2,886	2,459	1,729
Rental and leasing costs	354	355	354	353
Other occupancy costs	203	108	279	114
Publicity and research	254	218	235	247
IT and communications	403	301	408	294
International Cultural Diplomacy Programme delivery costs	702	1,995	2,900	979
Audit fees (Audit New Zealand)	22	21	22	21
Fees to auditors for other services provided	0	0	0	0
Total operating costs	4,306	5,884	6,657	3,737

Note 4: Depreciation

	2005/06	2005/06	2005/06	2004/05
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Computer equipment	90	112	85	93
Computer software	98	196	100	79
Office equipment	19	17	17	24
Office furniture	37	37	37	42
Leasehold improvements	123	100	104	101
Works of art	0	0	0	0
Total depreciation	367	462	343	339

Note 5: 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 2006 was 8% (2005: 8%)

Note 6: Debtors and Receivables

	2005/06	2005/06	2005/06	2004/05
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Debtor Crown	1,293	0	0	97
Trade debtors	10	10	10	105
GST receivables	115	0	0	102
Other receivables	108	60	92	45
Total debtors and receivables	1,526	70	102	349

Note 7: Fixed Assets

	2005/06	2004/05
	Actual	Actual
	$(000)	$(000)
Computer Equipment
At Cost:
Opening Balance	364	348
Additions	136	16
(Disposals)	0	0
Closing Balance	500	364
Accumulated Depreciation:
Opening Balance	225	132
Depreciation Charge	90	93
(Disposal)	0	0
Closing Balance	315	225
Computer Equipment – net current value	185	139

Computer Software
At Cost:
Opening Balance	228	181
Additions	402	47
(Disposals)	0	0
Closing Balance	630	228
Accumulated Depreciation:
Opening Balance	116	37
Depreciation Charge	98	79
(Disposal)	0	0
Closing Balance	214	116
Computer Software – net current value	416	112

Office Equipment
At Cost:
Opening Balance	118	118
Additions	30	0
(Disposals)	0	0
Closing Balance	148	118
Accumulated Depreciation:
Opening Balance	80	56
Depreciation Charge	19	24
(Disposal)	0	0
Closing Balance	99	80
Office Equipment – net current value	49	38
Office Furniture
At Cost:
Opening Balance	308	296
Additions	3	12
(Disposals)	0	0
Closing Balance	311	308
Accumulated Depreciation:
Opening Balance	256	214
Depreciation Charge	37	42
(Disposal)	0	0
Closing Balance	293	256
Office Furniture – net current value	18	52

Leasehold Improvements
At Cost:
Opening Balance	727	727
Additions	0	0
(Disposals)	0	0
Closing Balance	727	727
Accumulated Depreciation:
Opening Balance	316	215
Depreciation Charge	123	101
(Disposal)	0	0
Closing Balance	439	316
Leasehold Improvements – net current value	288	411

Works of Art
At Cost:
Opening Balance	21	10
Additions	0	11
(Disposals)	0	0
Closing Balance	21	21
Accumulated Depreciation:
Opening Balance	0	0
Depreciation Charge	0	0
(Disposal)	0	0
Closing Balance	0	0
Works of Art – net current value	21	21

Total Fixed Assets
At Cost:
Opening Balance	1,766	1,680
Additions	571	86
(Disposals)	0	0
Closing Balance	2,337	1,766
Accumulated Depreciation:
Opening Balance	993	654
Depreciation Charge	367	339
(Disposal)	0	0
Closing Balance	1,360	993
Total carrying amount of Fixed Assets – net current value	977	773

Note 8: Creditors and Payables

	2005/06	2005/06	2005/06	2004/05
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Trade creditors	394	151	157	178
PAYE payable	66	70	70	70
GST payable	0	50	120	0
Accrued expenses	326	250	350	347
Total creditors and payables	786	521	697	595

Note 9: Provision for Employee Entitlements

	2005/06	2005/06	2005/06	2004/05
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Current liabilities
Annual leave	265	240	270	255
Long service leave	10	10	10	27
Total current portion	275	250	280	282
Non-current liabilities
Long service leave	63	20	25	25
Retirement leave	70	60	60	59
Total non-current portion	133	80	85	84
Total employee entitlements	408	330	365	366

Note 10: 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 the Ministry 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 2005: Nil).

Note 11: 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 12: Contingencies

The Ministry has no contingent assets for the year ended 30 June 2006 (2005: Nil).

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

Note 13: Variance Explanations

The following factors account for the significant baseline movements between 2004/05 and 2005/06.

In the 2005/06 October Baseline Update, $1 million was approved to be carried forward from 2004/05 to 2005/06 for the Cultural Diplomacy International Programme. The 2005/06 budget provided new funding for a Cultural Portal project ($562,000), funding for a Public Broadcasting Programme of Action ($425,000), increased funding for minor value discretionary bids ($396,000), an increase in funding for project management and operating costs for the National War Memorial on Buckle Street in Wellington ($291,000), additional funding for technology and associated costs of key Ministry projects ($250,000), and funding for the Protected Objects Amendment Bill ($208,000).

Approval in-principle was obtained to carry forward any unspent operating funding in the 2005/06 financial year to 2006/07 for:

International Cultural Diplomacy Programme ($1.6 million);
New Zealand Memorial in London project ($339,000);
Cultural Portal project ($260,000);
amendments to the Antiquities Act ($115,000);
Te Ara, the Encyclopedia of New Zealand project ($90,000);
Cultural Well-being project ($80,000);
Agency Assistance Programme ($42,000); and
Agency Reviews ($21,000).

The above maximum in-principle expense transfers total $2.547 million, and account for the variance between the 2005/06 total expenses (actual) and the total revenue Crown (Supplementary Estimates), recognised in the Statement of Financial Performance. The actual amount of expense transfers is restricted to the amount of unspent appropriation available under the outputs to which the above activities relate, and is disclosed as a note under the Statement of Departmental Expenditure and Appropriations.

The $1.547 million operating surplus was primarily generated from timing differences in the International Cultural Diplomacy Programme. This surplus will be returned to the Crown as required under the Public Finance Act 1989.

Statements of Financial Position and Cash Flows

The $299,000 improvement in the Ministry’s working capital position from 2004/05 ($137,000) to 2005/06 ($436,000) is mainly due to capital expenditure being less than the depreciation expense incurred in 2005/06. During 2005/06 there was an outlay of $571,000 on fixed assets (2004/05: $86,000). However, $390,000 is attributable to work in progress for the Cultural Portal project, which was not depreciated at 30 June 2006. The outlay on capital expenditure excluding the Cultural Portal amounted to $181,000, being $186,000 less than depreciation incurred for 2005/06 ($367,000).

The working capital was further enhanced by a capital contribution received for the Cultural Portal project ($454,000) of which only $390,000 was expended.

Note 14: Employee Remuneration

This note sets out the number of employees and former employees who received over $100,000 in total remuneration during the year. Total remuneration includes the annual cost to the Ministry of all elements of contracted remuneration packages (salaries together with any benefits including motor vehicles, superannuation scheme contributions made by the Ministry and fringe benefit tax). The information below reflects the amount actually paid, or, in the case of benefits, actually provided during the year.

The remuneration package for the Chief Executive is set in accordance with the terms of the contract of employment, which is negotiated by the Ministry in consultation with the State Services Commission. The remuneration of other senior managers is set by the Chief Executive in consultation with the Human Resources Manager of the Ministry. In setting compensation for all senior managers, market information for similar management positions within the New Zealand Public Sector is assessed. The information used for this purpose includes benchmark compensation indicators contained in the results of surveys conducted by remuneration specialists.

Total Remuneration	Number of Employees
	30 June 2005	30 June 2006

$100,000 to $109,999	4	2
$110,000 to $119,999	2	4
$120,000 to $129,999	-	1
$130,000 to $139,999	-	-
$140,000 to $149,999	1	1

The current Chief Executive remuneration package was set at an amount not exceeding $259,999 per annum. At the date these financial statements were approved there was one employee, being the Chief Executive, whose remuneration package exceeded $200,000 per annum.

Note 15: Transition to New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS)

The Ministry will be adopting NZ IFRS for the first time in its audited financial statements for the year ended 30 June 2008. This timetable is in line with the adoption of NZ equivalents to IFRS in the consolidated financial statements of the Government reporting entity.

The Ministry will be adopting the accounting policies of the financial statements of the Government. The Ministry is in the process of evaluating the differences, if any, between current policies and the policies of the financial statements of the Government. This will culminate in the production of a provisional NZ IRFS opening balance sheet as at 1 July 2006, by December 2006. This provisionl balance sheet will be subject to audit assurance.

Implementation of NZ IFRS will be managed within the finance group of the Ministry. At this stage no material issues have been identified. However, the actual impact of adopting NZ IFRS may vary from this initial assessment, and the variation may be material.

Note 16: 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 2006

Reporting Entity

The following non-departmental statements and schedules record the 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 $2.430 million (30 June 2005: $2.337 million).

Accounting standard FRS-3 Accounting for Property, Plant and Equipment requires all cultural and heritage assets that meet the definition of Property, Plant and Equipment and can be reliably measured, to be recognised in the entity’s financial statements. The National War Memorial and Massey Memorial are Crown heritage property assets managed by the Ministry. These assets are carried at fair value and are revalued at least every three years, in accordance with FRS-3. In the intervening period between the scheduled revaluations if it is established that either memorials’ carrying value may be materially different from its fair value a revaluation will be sought.

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 2006.

SCHEDULE OF NON-DEPARTMENTAL REVENUE AND RECEIPTS FOR THE YEAR ENDED 30 JUNE 2006

(Figures for 2004/05 are GST inclusive where applicable)

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

	2005/06	2005/06	2004/05
	Actual	Forecast	Actual
	$(000)	$(000)	$(000)
Vote Arts, Culture and Heritage
Broadcasting Standards Authority – Fines	10	7	11
Commercial Tenancies Income	270	151	0
Total non-departmental revenue and receipts	280	158	11

SCHEDULE OF NON-DEPARTMENTAL EXPENSES FOR THE YEAR ENDED 30 JUNE 2006

(Figures for 2004/05 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 48 to 49.

	2005/06	2005/06	2004/05
	Expenditure	Appropriation	Expenditure
	Actual	Voted *	Actual
	$(000)	$(000)	$(000)
Vote Arts, Culture and Heritage
Non-departmental output expenses	198,482	198,782	215,279
Other expenses to be incurred by the Crown	10,055	19,170	16,136
Depreciation – Buildings	177	177	176
Revaluation losses	0	0	818
Total Vote Arts, Culture and Heritage	208,714	218,129	232,409

Vote Sport and Recreation
Non-departmental output expenses	45,686	45,686	42,920
Benefits and other unrequited expenses	5,000	5,000	5,000
Other expenses to be incurred by the Crown	44	44	50
Total Vote Sport and Recreation	50,730	50,730	47,970
Total non-departmental expenses	259,444	268,859	280,379

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

* This includes adjustments made in the Supplementary Estimates.

STATEMENT OF NON-DEPARTMENTAL EXPENDITURE AND APPROPRIATIONS FOR THE YEAR ENDED 30 JUNE 2006

(Figures for 2004/05 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.

		2005/06		2005/06	2004/05
		Expenditure		Appropriation	Expenditure
		Actual		Voted *	Actual
		$(000)		$(000)	$(000)
Vote Arts, Culture and Heritage Appropriations for non-departmental output expenses
Management of Historic Places		8,309		8,609	7,682
Museum Services		21,479		21,479	21,231
Performing Arts Services		17,415		17,415	16,788
Promotion and Support of the Arts and Film		28,159		28,159	28,960
Public Broadcasting Funding		123,120		123,120	140,618
Sub-total		198,482		198,782	215,279

Appropriations for other expenses to be incurred by the Crown
Antarctic Heritage Trust		0		0	100
Commonwealth War Graves		2,272		2,272	2,305
Development and Maintenance of War Graves, Historic Graves and Monuments		591		591	478
Gallipoli Memorial Projects		0		402	11
Kerikeri Heritage Bypass		691		2,415	0
New Zealand Memorial in Korea		105		105	0
New Zealand Memorial in London		1,573		2,896	104
Pūkaki Trust		0		0	8
Regional Museums		4,711		10,360	10,946
Theatre Royal Christchurch		0		0	1,688
Treaty of Waitangi Commemorations		283		288	316
Waitangi National Trust Board		6		18	180
Sub-total		10,232		19,347	16,136

Appropriations for capital expenditure
Creative New Zealand		788		788	0
Museum of New Zealand Te Papa Tongarewa		12,500		12,500	10,868
National Memorial Park in Wellington		4,953		5,140	14
New Zealand Historic Places Trust	350		350		0
Radio New Zealand	2,643		2,643		3,849
Tomb of the Unknown Warrior		0		0	1,805
Sub-total		21,234		21,421	16,536
Total Vote Arts, Culture and Heritage		229,948		239,550	247,951

Vote Sport and Recreation Appropriations for non-departmental output expenses
Drugs Testing of Sports Persons		1,441		1,441	1,531
Sport, Fitness and Leisure Programmes		44,245		44,245	37,389
High Performance Sport		0		0	4,000
Sub-total		45,686		45,686	42,920

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		44		44	50
Sub-total		44		44	50

Total Vote Sport and Recreation		50,730		50,730	47,970

* This includes adjustments made in the Supplementary Estimates.

Explanation of major budget variances under Vote Arts, Culture and Heritage

Non-departmental output expenses

Management of Historic Places (underspent by $300,000) – in February 2006, Cabinet approved funding of $300,000 to assist with the protection and preservation of three ponga structures discovered on a building site on Taranaki Street in Wellington. The parties involved, however, reached a solution to protect and conserve the structures by redesigning the development.

Other expenses to be incurred by the Crown

Approval has been obtained in-principle to carry forward the following unspent appropriated amounts to 2006/07:

the remaining $400,000 against the Gallipoli Memorial Projects, for the proposed Artist Residency programme and an exhibition at the Gallipoli Visitor Centre;
the remaining $1.724 million towards the construction of the Kerikeri Heritage Bypass, to protect the nationally significant heritage buildings Kemp House and the Stone Store;
the remaining $1.323 million against the New Zealand Memorial in London project, which will be completed by the end of October 2006; and
the remaining $5.649 million against Regional Museums, in order to be able to reconsider applications for funding under the Regional Museums Policy for Capital Construction Projects within the 2006/07 round.

Capital Expenditure

Approval in-principle has been obtained to carry forward the remaining capital funding of $187,000 to 2006/07 towards developing a National Memorial Park in Buckle Street, opposite the National War Memorial in Wellington.

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

Schedule of Recipients of Non-Departmental Output Class Funding for the year ended 30 June 2006

	$(000)
Management of Historic Places
Antarctic Heritage Trust	356
New Zealand Historic Places Trust	7,753
New Zealand Archaeological Association	200
	8,309

Museum Services
Museum of New Zealand Te Papa Tongarewa	20,574
New Zealand Film Archive	886
Regional Museums: Auckland War Memorial Museum, Canterbury Museum, and Otago Museum	19
	21,479

Performing Arts Services
New Zealand Symphony Orchestra	11,727
Royal New Zealand Ballet	3,284
Aotearoa Traditional Māori Performing Arts Society	1,248
New Zealand Music Industry Commission	1,156
	17,415

Promotion and Support of the Arts and Film
Arts Council of New Zealand Toi Aotearoa (Creative New Zealand)	17,286
New Zealand Film Commission	10,873
	28,159

Public Broadcasting Funding
Broadcasting Commission (NZ On Air)	100,838
Television New Zealand	16,773
National Pacific Radio Trust	3,000
Radio New Zealand International	1,900
Broadcasting Standards Authority	609
	123,120

Drugs Testing of Sports Persons
New Zealand Sports Drug Agency	1,441
Sport, Fitness and Leisure Programmes
Sport and Recreation New Zealand	44,245

SCHEDULE OF NON-DEPARTMENTAL ASSETS AS AT 30 JUNE 2006

	2005/06	2005/06	2004/05
	Actual	Forecast	Actual
	$(000)	$(000)	$(000)
Current assets
Cash and bank balances	1,583	(31,378)	500
Receivables and advances	8	0	2
Total current assets	1,591	(31,378)	502
Non-current assets
Physical assets:
Land
- Massey Memorial (at valuation 30 June 2006)	580	450	450
- National War Memorial (at valuation 30 June 2006)	5,300	4,600	4,600
- National Memorial Park in Wellington	4,967	5,155	14
Buildings
- Massey Memorial (at valuation 30 June 2006)	980	832	832
Accumulated depreciation	0	(50)	(33)
- National War Memorial (at valuation 30 June 2006)	8,280	8,040	8,040
Accumulated depreciation	0	(161)	0
Total non-current assets	20,107	18,866	13,903
Total assets	21,698	(12,512)	14,405

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 Crown has a security interest in the capital assets owned by the National Pacific Radio Trust.

The National War Memorial and Massey War Memorial were revalued as at 30 June 2006. This revaluation resulted in an increment to the buildings’ revaluation reserve of $401,000 for the National War Memorial and $198,000 for the Massey Memorial, and an increment to the land revaluation reserve of $700,000 for the National War Memorial and $130,000 for the Massey Memorial. The valuation was completed by Beca Valuations using market-based evidence (land) and depreciated replacement cost (buildings) in accordance with accounting standard FRS-3. Both Memorials will be revalued to fair value as at 30 June 2009.

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.

SCHEDULE OF NON-DEPARTMENTAL LIABILITIES AS AT 30 JUNE 2006

	2005/06	2005/06	2004/05
	Actual	Forecast	Actual
	$(000)	$(000)	$(000)
Current liabilities
Creditors and payables	785	100	5,964
Total liabilities	785	100	5,964

The greater-than-forecast liabilities at year-end are primarily due to:

Late in the 2004/05 financial year, the government agreed to provide $1.969 million funding from the Regional Museums Policy for Capital Construction Projects to the Dowse Art Gallery as a contribution towards its redevelopment project. A memorandum of understanding between the Associate Minister for Arts, Culture and Heritage and the Hutt City Council was signed on 29 June 2005. The first instalment of $1 million was made on 11 July 2005 and the second instalment of $500,000 was made on 14 December 2005. The remaining balance of $469,000 was expected to be paid during 2005/06, but will now be paid during 2006/07.

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