Annual Report 2007

• Chief Executive
• Key Strategies and priorities
• Measuring progress
• Expenditure Administered by the Ministry
• Accountabilities

• Financial statements

• Statement of Objectives
• Audit Report

Ministry for Culture and Heritage Annual Report 2007 - financial statements

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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 2007.

Signed:

Martin Matthews
Chief Executive
28 September 2007

Countersigned by:

Matthew Archer
Manager Corporate Services
28 September 2007

STATEMENT OF ACCOUNTING POLICIES FOR YEAR ENDED 30 JUNE 2007

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	25-33 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 2007, direct costs accounted for 78% of the Ministry’s costs (2006: 73%).

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 2007, indirect costs accounted for 22% of the Ministry’s costs (2006: 27%).

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 2007

		2006/07	2006/07	2006/07	2005/06
	Note	Actual $(000)	Main Estimates $(000)	Supp. Estimates $(000)	Actual $(000)
Revenue
Crown		15,921	12,455	15,921	12,184
Departments	1	284	179	320	287
Other	1	288	167	288	162
Total revenue		16,493	12,801	16,529	12,633
Expenditure
Personnel costs	2	7,029	6,624	7,100	6,333
Operating costs	3	7,828	5,613	8,915	4,306
Depreciation	4	358	451	389	367
Capital charge	5	106	112	125	80
Total expenses		15,321	12,800	16,529	11,086
Gain on disposal of assets		4	-	-	-
Net surplus		1,176	1	-	1,547

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 2007

	2006/07	2006/07	2006/07	2005/06
	Actual $(000)	Main Estimates $(000)	Supp. Estimates $(000)	Actual $(000)
Taxpayers' funds as at 1 July	1,280	1,442	1,280	826
Net surplus	1,176	1	-	1,547
Total recognised revenues and expenses for the year	1,176	1	-	1,547
Capital contribution	257	95	257	454
Provision for repayment of surplus to the Crown	(1,176)	(1)	-	(1,547)
Taxpayers' funds as at 30 June	1,537	1,537	1,537	1,280

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 2007

		2006/07	2006/07	2006/07	2005/06
		Actual	Main Estimates	Supp. Estimates	Actual
	Note	$(000)	$(000)	$(000)	$(000)
Taxpayers' Funds		1,537	1.537	1,537	1,280
Represented by:
Current Assets
Cash		507	1,120	978	1,506
Debtors and receivables	6	1,810	90	235	1,526
Prepayments		90	2	10	12
Total current assets		2,407	1,212	1,223	3,044
LESS Current Liabilities
Creditors and payables	8	786	697	645	786
Provision for repayment of surplus to the Crown		1,176	1	-	1,547
Provision for employee entitlements	9	361	280	280	275
Total current liabilities		2,323	978	925	2,608
Working Capital		84	234	298	436
ADD Non-Current Assets
Fixed assets	7	1,543	1,388	1,324	977
LESS Non-Current Liabilities
Provision for employee entitlements	9	90	85	85	133
Net Assets		1,537	1,537	1,537	1,280

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
28 September 2007

Countersigned by:

Matthew Archer
Manager Corporate Services
28 September 2007

Statement of Cash Flows for the Year Ended 30 June 2007

	2006/07	2006/07	2006/07	2005/06
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Cash flows - Operating Activities
Cash was provided from:
Supply of outputs to
- Crown	15,605	12,455	17,214	10,988
- Customers	604	356	606	477
	16,209	12,811	17,820	11,465
Cash was applied to:
Produce outputs
- Personnel	(6,974)	(6,598)	(7,139)	(6,295)
- Operating	(8,118)	(5,639)	(9,058)	(4,121)
- Net GST paid	200	-	-	(13)
- Capital charge	(106)	(112)	(125)	(80)
	(14,998)	(12,349)	(16,322)	(10,509)
Net cash flows from operating activities	1,211	462	1,498	956
Cash flows - Investing Activities
Cash was provided from:
Disposal of fixed assets	4	-	-	-
Cash disbursed for:
Purchase of fixed assets	(924)	(972)	(736)	(571)
Net cash flows from investing activities	(920)	(972)	(736)	(571)
Cash flows - Financing Activities
Cash was provided from:
Capital contribution	257	95	257	454
Cash disbursed for:
Repayment of surplus	(1,547)	-	(1,547)	(29)
Net cash flows from financing activities	(1,290)	95	(1,290)	425
Net increase/(decrease) in cash held	(999)	(415)	(528)	810
Add opening cash	1,506	1,535	1,506	696
Closing cash	507	1,120	978	1,506

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 2007

	2006/07	2006/07	2006/07	2005/06
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Net surplus	1,176	1	-	1,547
Add/(less) non-cash items:
Depreciation	358	451	389	367
Inc/(dec) in non-current employee entitlements	(43)	-	(48)	49
Total non-cash items	315	451	341	416
Add/(less) movements in working capital items:
(Inc)/dec in debtors and receivables	(284)	10	1,291	(1,177)
(Inc)/dec in prepayments	(78)	-	2	(10)
Inc/(dec) in creditors and payables	-	-	(141)	191
Inc/(dec) in current employee entitlements	86	-	5	(7)
Inc/(dec) in deferred income	-	-	-	(4)
Working capital movement – net	(276)	10	1,157	(1,007)
Add/(less) investing activity items:
Net loss/(gain) on disposal of fixed assets	(4)	-	-	-
Net cash flows from operating activities	1,211	462	1,498	956

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 2007

The Ministry has non-cancellable leases on its office premises in Wellington. The Ministry occupies Level Five (1,223.3sqm), part of Level One (424sqm) and part of the Ground Floor (160.7sqm) in Radio New Zealand (RNZ) House. The Ministry has separate lease contracts for Level Five and Level One through to 31 March 2012. A lease contract is currently under negotiation for the Ground Floor. A contract for the lease of basement space for storage purposes runs through until 30 June 2008. The accommodation lease for Level Five includes two car parks. The amounts disclosed below as future commitments are based on the current rental rates.

	2006/07	2005/06
	Actual	Actual
Non-cancellable accommodation leases:	$(000)	$(000)
Less than one year	457	215
One to two years	457	-
Two to five years	1,258	-
More than five years	-	-
Total non-cancellable operating lease commitments	2,172	215

The total cost incurred in rental and leasing costs in 2006/07 was $453,000. 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 19 square metres.

The Ministry does not have any non-departmental commitments as at 30 June 2007 (2006: 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 2007

Quantifiable contingent liabilities are as follows:
	2006/07	2005/06
	Actual	Actual
	$(000)	$(000)
Departmental	-	-
Non-Departmental	-	250,000

The $250 million in 2005/06 was 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 was lifted in October 2006.

Statement of Unappropriated Expenditure for the Year Ended 30 June 2007

	2006/07	2006/07	2006/07	2006/07
	Actual	Main Estimates	Supp. Estimates	Unappropriated Expenditure
	$(000)	$(000)	$(000)	$(000)
Vote Arts, Culture and Heritage:	-	-	-	-
Vote Sport and Recreation :	-	-	-	-

 

Statement of Departmental Expenditure and Appropriations for the Year Ended 30 June 2007

	2006/07	2006/07	2006/07	2006/07
	Expenditure Actual	Appropriation Main Estimates	Appropriation Supp. Estimates	Final Appropriation
	$(000)	$(000)	$(000)	$(000)
Vote Arts, Culture and Heritage Appropriations for outputs
Heritage Services	6,510	5,142	7,251	7,251
International Cultural Diplomacy	3,584	2,091	3,615	3,615
Policy Advice and Grants Administration	5,129	5,469	5,565	5,565
Total Vote Arts, Culture and Heritage	15,223	12,702	16,431	16,431
Vote Sport and Recreation Appropriations for outputs
Purchase Advice and Monitoring of Sport and Recreation Crown Entities	98	98	98	98
Total	15,321	12,800	16,529	16,529

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 2006/07 Supplementary Estimates

The Ministry’s 2006/07 departmental output appropriations were increased by $3.729 million in the 2006/07 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 $2.109 million due to:

• increased funding for the New Zealand Memorial in London project
• new funding for a Vietnam war oral history project
• a number of funding transfers from 2005/06 to 2006/07 for various on-going projects, and
• changes in departmental and third-party revenue.

International Cultural Diplomacy: This appropriation was increased by $1.524 million due to:

• a funding transfer from 2005/06 to 2006/07.

Policy Advice and Grants Administration: This appropriation was increased by $96,000 due to:

• a number of funding transfers from 2005/06 to 2006/07 for various on-going projects, and
• changes in departmental and third-party revenue.

Statement of Trust Money Administered on Behalf of the Crown for the Year Ended 30 June 2007

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 2006/07	Capital Contri butions	Capital Distri butions (Awards)	Revenue	Expenses	Closing Net Assets 2006/07
	$(000)	$(000)	$(000)	$(000)	$(000)	$(000)
New Zealand Encyclopedia	1	-	-	-	-	1
New Zealand Historical Atlas	86	-	-	12	-	98
New Zealand History Research	1,490	-	(95)	105	-	1,500
Australian Trust for Oral History	1,479	-	(45)	97	-	1,531
Dictionary of New Zealand Biography	348	-	-	20	(109)	259
Total	3,404	-	(140)	234	(109)	3,389

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 2006/07 financial year 11 awards in history were made totalling $95,000 and ranging in value from $4,000 to $20,000 (2005/06: 10 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 2006/07 financial year nine awards in oral history were made totalling $45,700 and ranging in value from $2,000 to $8,250 (2005/06: 14 awards; $79,600; $2,000 to $10,000).

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 2007

Note 1: Third Party Revenue

Third party revenue was derived from the following sources.

	2006/07		2005/06
	Other Government Departments	Other Sources	Other Government Departments	Other Sources
Contract history projects	61	39	62	60
Seconded staff	78	-	101	-
State Sector Retirement Savings Scheme (SSRSS) funding from State Services Commission	145	-	124	-
Leadership Development Centre Fellowship Award	-	-	-	45
Contribution towards Digital Broadcasting Strategy project	-	198	-	55
Publication sales	-	50	-	1
Antiquities dealers’ licences	-	1	-	1
Total third party revenue	284	288	287	162

 

Note 2: Personnel Costs

	2006/07	2006/07	2006/07	2005/06
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Salaries and wages	6,593	6,244	6,673	5,875
Training and development	103	101	126	149
Superannuation	209	196	205	185
Other personnel costs	124	83	96	124
Total personnel costs	7,029	6,624	7,100	6,333

Note 3: Operating Costs

	2006/07	2006/07	2006/07	2005/06
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Administration costs*	6,043	3,957	7,069	2,368
Rental and leasing costs	453	384	466	354
Other occupancy costs	223	274	274	203
Publicity and research	339	298	259	254
IT and communications	458	485	620	403
International Cultural Diplomacy Programme delivery costs	264	193	193	702
Audit fees (Audit New Zealand)	38	22	34	22
Audit fees for NZ IFRS transition (Audit New Zealand)	10	-	-	-
Total operating costs	7,828	5,613	8,915	4,306

*Includes initiatives under the Cultural Diplomacy International Programme. See page 60 for a breakdown of initiatives in 2006/07.

Note 4: Depreciation

	2006/07	2006/07	2006/07	2005/06
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Computer equipment	99	83	100	90
Computer software	146	243	150	98
Office equipment	21	15	21	19
Office furniture	8	10	18	37
Leasehold improvements	84	100	100	123
Works of art	-	-	-	-
Total depreciation	358	451	389	367

 

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 2007 was 7.5% (2006: 8%).

Note 6: Debtors and Receivables

	2006/07	2006/07	2006/07	2005/06
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Debtor Crown	1,609	-	-	1,293
Trade debtors	51	10	10	10
GST receivables	-	-	115	115
Other receivables	150	80	110	108
Total debtors and receivables	1,810	90	235	1,526

Note 7: Fixed Assets

	2006/07	2005/06
	Actual	Actual
	$(000)	$(000)
Computer Equipment
At Cost:
Opening Balance	500	364
Additions	62	136
(Disposals)	-	-
Closing Balance	562	500
Accumulated Depreciation:
Opening Balance	315	225
Depreciation Charge	99	90
(Disposal)	-	-
Closing Balance	414	315
Computer Equipment – net current value	148	185
Computer Software
At Cost:
Opening Balance	630	228
Additions	419	402
(Disposals)	-	-
Closing Balance	1,049	630
Accumulated Depreciation:
Opening Balance	214	116
Depreciation Charge	146	98
(Disposal)	-	-
Closing Balance	360	214
Computer Software – net current value	689	416
Office Equipment
At Cost:
Opening Balance	148	118
Additions	32	30
(Disposals)	(10)	-
Closing Balance	170	148
Accumulated Depreciation:
Opening Balance	99	80
Depreciation Charge	21	19
(Disposal)	(10)	-
Closing Balance	110	99
Office Equipment – net current value	60	49
Office Furniture
At Cost:
Opening Balance	311	308
Additions	54	3
(Disposals)	-	-
Closing Balance	365	311
Accumulated Depreciation:
Opening Balance	293	256
Depreciation Charge	8	37
(Disposal)	-	-
Closing Balance	301	293
Office Furniture – net current value	64	18
Leasehold Improvements
At Cost:
Opening Balance	727	727
Additions	357	-
(Disposals)	-	-
Closing Balance	1084	727
Accumulated Depreciation:
Opening Balance	439	316
Depreciation Charge	84	123
(Disposal)	-	-
Closing Balance	523	439
Leasehold Improvements – net current value	561	288
Works of Art
At Cost:
Opening Balance	21	21
Additions	-	-
(Disposals)	-	-
Closing Balance	21	21
Accumulated Depreciation:
Opening Balance	-	-
(Disposal)	-	-
Closing Balance	-	-
Works of Art – net current value	21	21
Total Fixed Assets
At Cost:
Opening Balance	2,337	1,766
Additions	924	571
(Disposals)	(10)	-
Closing Balance	3,251	2,337
Accumulated Depreciation:
Opening Balance	1,360	993
Depreciation Charge	358	367
(Disposal)	(10)	-
Closing Balance	1,708	1,360
Total carrying amount of Fixed Assets – net current value	1,543	977

Note 8: Creditors and Payables

	2006/07	2006/07	2006/07	2005/06
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Trade creditors	351	157	225	394
PAYE payable	78	70	70	66
GST payable	85	120	-	-
Accrued expenses	272	350	350	326
Total creditors and payables	786	697	645	786

  Note 9: Provision for Employee Entitlements

	2006/07	2006/07	2006/07	2005/06
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Current Liabilities
Annual leave	316	270	270	265
Long-service leave	45	10	10	10
Total current portion	361	280	280	275
Non-Current Liabilities
Long-service leave	21	25	25	63
Retirement leave	69	60	60	70
Total non-current portion	90	85	85	133
Total employee entitlements	451	365	365	408

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 2006: 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 2007 (2006: Nil).

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

Note 13: Variance Explanations

Statement of Financial Performance

The following factors account for the significant baseline movements between 2005/06 and 2006/07:

• In the 2006/07 October Baseline Update expense transfers from 2005/06 to 2006/07 were approved for a number of projects that span more than one financial year, including the Cultural Diplomacy International Programme ($1.526 million), New Zealand Memorial in London project ($297,000), NZLive.com cultural portal ($218,000), Protected Objects Act Amendments ($115,000), Te Ara – The Encyclopedia of New Zealand project ($90,000), New Zealand Memorial Park ($75,000), Cultural Well-being ($75,000), Agency Assistance Programme ($42,000), and Agency reviews ($21,000). The New Zealand Memorial in London project also received additional funding of $500,000.
• In the 2006/07 March Baseline Update further funding of $356,000 was provided for the New Zealand Memorial in London project and new funding of $200,000 was provided for a Vietnam war oral history project.

The 2006/07 budget provided additional funding for technology and associated costs of key Ministry projects ($200,000), new funding for the First World War Centenary project ($152,000), and one-off funding to facilitate the integration of the Treaty of Waitangi Information Programme Website ($150,000).
Approval in-principle was obtained to carry forward unspent operating funding in the 2006/07 financial year to 2007/08 for:

• Te Ara – The Encyclopedia of New Zealand project ($250,000)
• NZLive.com (Cultural Portal project) ($225,000)
• Vietnam war oral history project ($170,000)
• New Zealand Memorial Park ($155,000)
• Agency reviews ($130,000)
• Agency Assistance Programme ($58,000)
• First World War Centenary project ($51,000)
• Treaty of Waitangi website project ($45,000)
• From Memory War Oral History Programme ($40,000)
• International Cultural Diplomacy Programme ($31,000)
• Amendments to the Protected Objects Act ($29,000), and
• Broadcasting conference ($11,000).

The above in-principle expense transfers total $1.195 million, and account for the variance between the 2006/07 total expenses (actual) and total revenue (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 $1.176 million operating surplus was primarily generated from timing differences for various projects which span a number of financial years. This surplus will be returned to the Crown as required under the Public Finance Act 1989.

Statements of Financial Position and Cash Flows

The $352,000 decrease in the Ministry’s working capital position from 2005/06 ($436,000) to 2006/07 ($84,000) is mainly due to capital expenditure ($924,000) being greater than the depreciation expense ($358,000) incurred in 2006/07. During 2006/07 there was an outlay of $924,000 on fixed assets, whereas in 2005/06 $571,000 was spent (refer Statement of Cash Flows). Of the total outlay, $380,000 was spent on the NZLive.com website (cultural portal project), increasing the total spent on the project to $770,000, being $59,000 more than the capital injection for the project ($710,000). The website will be expensed under the New Zealand equivalents to the International Financial Reporting Standards in 2007/08. The working capital position was further exacerbated by expenditure of $343,000 on leasehold improvements.

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 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 2006	30 June 2007
$100,000 to $109,999	2	3
$110,000 to $119,999	4	3
$120,000 to $129,999	1	2
$130,000 to $139,999	-	1
$140,000 to $149,999	1	-
$150,000 to $159,999	-	1
$190,000 to $199,999	-	1

The current Chief Executive’s remuneration package was set at an amount not exceeding $289,999 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 has evaluated the differences between current policies and the policies of the financial statements of the Government. A provisional NZ IRFS opening balance sheet was produced as at 1 July 2006, and was 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 2007

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 statements 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 $2.737 million (30 June 2006: $2.430 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 memorial’s 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 2007.

Schedule of Non-departmental Revenue and Receipts
for the Year Ended 30 June 2007

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

	2006/07	2006/07	2005/06
	Actual	Forecast	Actual
	$(000)	$(000)	$(000)
Vote Arts, Culture and Heritage
Broadcasting Standards Authority – Fines	11	7	10
Commercial Tenancies Income	213	219	270
Canterbury Museum – return of Regional Museums Policy funding	7,354	7,353	-
Total non-departmental revenue and receipts	7,578	7,579	280

 

Schedule of Non-departmental Expenses for the Year Ended 30 June 2007

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 below.

	2006/07	2006/07	2005/06
	Expenditure	Appropriation	Expenditure
	Actual	Voted *	Actual
	$(000)	$(000)	$(000)
Vote Arts, Culture and Heritage
Non-departmental output expenses	211,883	222,940	198,482
Other expenses to be incurred by the Crown	11,846	14,990	10,055
Depreciation – Buildings	185	185	177
Total Vote Arts, Culture and Heritage	223,914	238,115	208,714
Vote Sport and Recreation
Non-departmental output expenses	55,207	61,707	45,686
Benefits and other unrequited expenses	4,250	4,250	5,000
Other expenses to be incurred by the Crown	44	44	44
Total Vote Sport and Recreation	59,501	66,001	50,730
Total non-departmental expenses	283,415	304,116	259,444

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 2007

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

	2006/07	2006/07	2005/06
	Expenditure	Appropriation	Expenditure
	Actual	Voted *	Actual
	$(000)	$(000)	$(000)
Vote Arts, Culture and Heritage Appropriations for non-departmental output expenses
Management of Historic Places	10,409	10,409	8,309
Museum Services	21,263	21,263	21,479
Performing Arts Services	18,284	18,284	17,415
Promotion and Support of the Arts and Film	25,563	25,563	28,159
Public Broadcasting Funding	136,364	147,421	123,120
Sub-total	211,883	222,940	198,482
Appropriations for other expenses to be incurred by the Crown
Commonwealth War Graves	2,330	2,330	2,272
Development and Maintenance of War Graves, Historic Graves and Monuments	516	516	591
Gallipoli Memorial Projects	48	48	-
Kerikeri Heritage Bypass	1,037	4,181	691
New Zealand Memorial in Korea	-	-	105
New Zealand Memorial in London	1,323	1,323	1,573
Regional Museums	6,489	6,489	4,711
Treaty of Waitangi Commemorations	288	288	283
Waitangi National Trust Board	-	-	6
Sub-total	12,031	15,175	10,232
Appropriations for capital expenditure
Creative New Zealand	-	-	788
Museum of New Zealand Te Papa Tongarewa	15,500	15,500	12,500
New Zealand Memorial Park in Wellington	-	-	4,953
New Zealand Historic Places Trust	850	850	350
Radio New Zealand	-	-	2,643
Sub-total	16,350	16,350	21,234
Total Vote Arts, Culture and Heritage	240,264	254,465	229,948
Vote Sport and Recreation Appropriations for non-departmental output expenses
Drugs Testing of Sports Persons	1,623	1,623	1,441
Sport, Fitness and Leisure Programmes	49,796	49,796	44,245
Children and Young People’s Lifestyles	3,788	10,288	-
Sub-total	55,207	61,707	45,686
Benefits and other unrequited expenses
Sport Education Scholarships	4,250	4,250	5,000
Appropriations for other expenses to be incurred by the Crown
Miscellaneous Grants	44	44	44
Total Vote Sport and Recreation	59,501	66,001	50,730

* This includes adjustments made in the Supplementary Estimates.

Explanation of major budget variances

Non-departmental revenue and receipts

The $7.354 million (including interest) returned from Canterbury Museum was in relation to funding provided under the Regional Museums Policy for refurbishment and extension. The project did not proceed in its planned form as it did not obtain resource consent.

Non-departmental output expenses

• Public Broadcasting Funding was under-spent by $11.057 million. This comprises $7.8 million in regard to timing of expenditure on the TVNZ Digital Broadcasting Strategy and $3.257 million in regard to timing of expenditure on the digital terrestrial simulcast costs of Freeview. Approval in-principle was obtained to carry forward the unspent funding to 2007/08.
• Children and Young People’s Lifestyles was under-spent by $6.500 million due to timing issues. Approval in-principle was obtained to carry forward the unspent funding to 2007/08.

Other expenses to be incurred by the Crown

Approval was obtained in-principle to carry forward to 2007/08 the remaining $3.144 million towards the construction of the Kerikeri Heritage Bypass, to protect the nationally significant heritage buildings Kemp House and the Stone Store.

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 2007

	$(000)
Management of Historic Places
Antarctic Heritage Trust	356
New Zealand Historic Places Trust	9,903
New Zealand Archaeological Association	150
	10,409
Museum Services
Museum of New Zealand Te Papa Tongarewa	20,574
New Zealand Film Archive	670
Regional Museums: Auckland War Memorial Museum, Canterbury Museum, and Otago Museum	19
	21,263
Performing Arts Services
New Zealand Symphony Orchestra	12,346
Royal New Zealand Ballet	3,534
Aotearoa Traditional Māori Performing Arts Society	1,248
New Zealand Music Commission	1,156
	18,284
Promotion and Support of the Arts and Film
Arts Council of New Zealand Toi Aotearoa (Creative New Zealand)	15,452
New Zealand Film Commission	10,111
	25,563
Public Broadcasting Funding
Broadcasting Commission (NZ On Air)	106,671
Television New Zealand	22,051
National Pacific Radio Trust	3,390
Radio New Zealand International	1,900
Broadcasting Standards Authority	609
Freeview	1,743
	136,364
Drugs Testing of Sports Persons
Drug Free Sport New Zealand	1,623
Sport, Fitness and Leisure Programmes
Sport and Recreation New Zealand	53,584

Schedule of Non-departmental Assets as at 30 June 2007

	2006/07	2006/07	2005/06
	Actual	Forecast	Actual
	$(000)	$(000)	$(000)
Current assets
Cash and bank balances	962	1,769	1,583
Receivables and advances	-	-	8
Total current assets	962	1,769	1,591
Non-current assets
Physical assets:
Land
- Massey Memorial (at valuation 30 June 2007)	580	580	580
- National War Memorial (at valuation 30 June 2007)	5,300	5,300	5,300
- New Zealand Memorial Park in Wellington	4,967	4,967	4,967
Buildings
- Massey Memorial (at valuation 30 June 2007)	980	980	980
Accumulated depreciation	(20)	(20)	-
- National War Memorial (at valuation 30 June 2007)	8,280	8,280	8,280
Accumulated depreciation	(165)	(165)	-
Total non-current assets	19,922	19,922	20,107
Total assets	20,884	21,691	21,698

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 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 2007

	2006/07	2006/07	2005/06
	Actual	Forecast	Actual
	$(000)	$(000)	$(000)
Current liabilities
Creditors and payables	885	808	785
Total liabilities	885	808	785

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

Page last updated: October 18, 2007

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