Ministry for Culture and Heritage Annual Report 2008 - 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 statement of service performance, and for 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 designed to provide reasonable assurance as to the integrity and reliability of financial reporting.

In my opinion, these financial statements and statement of service performance fairly reflect the financial position and operations of the Ministry for the year ended 30 June 2008.

Signed:

Martin Matthews
Chief Executive
26 September 2007

Countersigned by:

Ngaire Caird
Chief Financial Officer
26 September 2008

STATEMENT OF ACCOUNTING POLICIES FOR YEAR ENDED 30 JUNE 2007

Reporting Entity

The Ministry for Culture and Heritage (the Ministry) is a government department as defined by section 2 of the Public Finance Act 1989 and is domiciled in New Zealand.

In addition, the Ministry has reported on Crown activities and trust monies which it administers.

The primary objective of the Ministry is to provide services to the public rather than making a financial return. Accordingly, the Ministry has designated itself as a public benefit entity for the purposes of New Zealand equivalents to International Financial Reporting Standards (NZ IFRS).

Reporting Period

The financial statements of the Ministry are for the year ended 30 June 2008. The financial statements were authorised for issue by the Chief Executive of the Ministry on 26 September 2008.

Basis of Preparation

The financial statements of the Ministry have been prepared in accordance with the requirements of the Public Finance Act 1989, which includes the requirements to comply with New Zealand generally accepted accounting practices (NZ GAAP).

These financial statements have been prepared in accordance with, and comply with, NZ IFRS as appropriate for public benefit entities.

The accounting policies set out below have been applied consistently to all periods presented in these financial statements and in preparing an opening NZ IFRS statement of financial position as at 1 July 2006 for the purposes of the transition to NZ IFRS.

The financial statements have been prepared on a historical cost basis, modified by the revaluation of certain assets and liabilities as identified in this statement of accounting policies.

The financial statements are presented in New Zealand dollars and all values are rounded to the nearest thousand dollars ($’000). The functional currency of the Ministry is New Zealand dollars.

Standards, amendments and interpretations issued but not yet effective that have not been early adopted, and which are relevant to the Ministry include:

NZ IAS 1 Presentation of Financial Statements (revised 2007) replaces NZ IAS 1 Presentation of Financial Statements (issued 2004) and is effective for reporting periods beginning on or after 1 January 2009. The revised standard requires information in financial statements to be aggregated on the basis of shared characteristics and to introduce a statement of comprehensive income. This will enable readers to analyse changes in equity resulting from transactions with the Crown in its capacity as ‘owner’ separately from ‘non-owner’ changes. The revised standard gives the Ministry the option of presenting items of income and expense and components of other comprehensive income either in a single statement of comprehensive income with subtotals, or in two separate statements (a separate income statement followed by a statement of comprehensive income). The Ministry expects it will apply the revised standard for the first time for the year ended 30 June 2010, and is yet to decide whether it will prepare a single statement of comprehensive income or a separate income statement followed by a statement of comprehensive income.

Revenue

Revenue is measured at the fair value of consideration received.

Revenue Crown

Revenue earned from the supply of outputs to the Crown is recognised as revenue when earned.

Other Revenue

Other departmental and 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.

Crown Operations

In 2006/07 the Ministry’s Crown activities included collection of commercial tenancies income and recovery of rates. There was no such activity in 2007/08.

Capital Charge

The capital charge is recognised as an expense in the period to which the charge relates.

Leases

Operating Leases

An operating lease is a lease that does not transfer substantially all the risks and rewards incidental to ownership of an asset. Lease payments under an operating lease are recognised as an expense on a straight line basis over the lease term. The Ministry leases office premises. As the lessor retains all the risks and rewards of ownership, these leases are classified as operating leases.

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.

Cash and Cash Equivalents

Cash includes cash on hand and held in bank accounts.

Debtors and Other Receivables

Debtors and other receivables are initially measured at fair value and subsequently measured at amortised cost using the effective interest rate, less impairment changes.

Impairment of a receivable is established when there is objective evidence that the Ministry will not be able to collect amounts due according to the original terms of the receivable. Significant financial difficulties of the debtor, probability that the debtor will enter into bankruptcy, and default in payments are considered indicators that the debtor is impaired. The amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted using the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the statement of financial performance. Overdue receivables that are renegotiated are reclassified as current (i.e. not past due).

Property, Plant and Equipment

Property, plant and equipment consists of leasehold improvements, furniture and fittings and office equipment.

Property, plant and equipment is shown at cost or valuation, less accumulated depreciation and impairment losses.

Individual assets or groups of assets are capitalised if their cost is greater than $1,000 (except for computing equipment where the threshold has been set at $2,000) and recorded at historical cost less accumulated depreciation. The initial cost of an 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, less accumulated depreciation and accumulated impairment losses. Leasehold improvement costs include significant project management and related fees.

Additions

The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits or service potential associated with the item will flow to the Ministry and the cost of the item can be measured reliably.

In most instances, an item of property, plant and equipment is recognised at its cost. Where an asset is acquired at no cost, or for a nominal cost, it is recognised at fair value as at the date of acquisition.

Disposals

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount of the asset. Gains and losses on disposals are included in the statement of financial performance. When revalued assets are sold, the amounts included in the property, plant and equipment revaluation reserves in respect of those assets are transferred to general funds.

Subsequent Costs

Costs incurred subsequent to initial acquisition are capitalised only when it is probable that future economic benefits or service potential associated with the item will flow to the Ministry and the cost of the item can be measured reliably.

Depreciation

Depreciation is provided on a straight-line basis on all property, plant and equipment, at rates that will write off the cost (or valuation) of the assets to their estimated residual values over their useful lives. The useful lives and associated depreciation rates of major classes of assets have been estimated as follows:

Office Furniture	5 years	20%
Personal Computers	3 years	33%
Other Computer Equipment	4 years	25%
Office Equipment	5 years	20%
Works of Art	100 years	1%

Leasehold improvements are depreciated over the unexpired period of the lease or the estimated remaining 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.

The residual value and useful life of an asset is reviewed, and adjusted if applicable, at each financial year end.

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.

Revaluation

Asset classes are carried at depreciated historical cost. The carrying values of revalued items are reviewed at each balance date to ensure that those values are not materially different to fair value. Additions between revaluations are recorded at cost.

Accounting for Revaluations

The Ministry accounts for revaluations of property, plant and equipment on a class of asset basis.

The results of revaluing are credited or debited to an asset revaluation reserve for that class of asset. Where this results in a debit balance in the asset revaluation reserve, this balance is expensed in the statement of financial performance. Any subsequent increase on revaluation that offsets a previous decrease in value recognised in the statement of financial performance will be recognised first in the statement of financial performance up to the amount previously expensed, and then credited to the revaluation reserve for that class of asset.

Intangible Assets

Software Acquisition

Software is capitalised if its cost is greater than $5,000. Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. Costs associated with maintaining computer software are recognised as an expense when incurred.

Amortisation

The carrying value of an intangible asset with a finite life is amortised on a straight-line basis over its useful life. Amortisation begins when the asset is available for use and ceases at the date that the asset is derecognised. The amortisation charge for each period is recognised in the statement of financial performance.

The useful lives and associated amortisation rates of major classes of intangible assets have been estimated as follows:

Acquired Computer Software	3 years	33%
Annual software licences	1 year	100%

Creditors and Other Payables

Creditors and other payables are initially measured at fair value and subsequently measured at amortised cost using the effective interest method.

Employee Entitlements

Short-term Employee Entitlements

Employee entitlements that the Ministry expects to be settled within 12 months of balance date are measured at nominal values based on accrued entitlements at current rates of pay.

These include salaries and wages accrued up to balance date, annual leave earned but not yet taken at balance date, and retiring and long service leave entitlements expected to be settled within 12 months.

The Ministry recognises a liability and an expense for bonuses where it is contractually obliged to pay them, or where there is a past practice that has created a constructive obligation.

Long-term Employee Entitlements

Entitlements that are payable beyond 12 months, such as long service leave and retiring leave have been calculated on an actuarial basis. The calculations are based on:

likely future entitlements based on years of service, years to entitlement, the likelihood that staff will reach the point of entitlement and contractual entitlements information; and
the present value of the estimated future cash flows. A weighted average discount rate of 5.75% and a salary inflation factor of 2.75% were used. The discount rate is based on the weighted average of government bonds with terms to maturity similar to those of the relevant liabilities. The inflation factor is based on the expected long-term increase in remuneration for employees.

Superannuation Schemes

Defined Contribution Schemes

Obligations for contributions to the State Sector Retirement Savings Scheme, Kiwisaver, the Government Superannuation Fund, and Global Retirement Trust Superannuation are accounted for as defined contribution schemes and are recognised as an expense in the statement of financial performance as incurred.

Taxpayers’ Funds

Taxpayers’ funds is the Crown’s investment in the Ministry and is measured as the difference between total assets and total liabilities. Taxpayers’ funds is disaggregated and classified as general funds and property, plant and equipment revaluation reserves.

Commitments

Expenses yet to be incurred on non-cancellable contracts that have been entered into on or before balance date are disclosed as commitments to the extent that there are equally unperformed obligations. Commitments relating to employment contracts are not disclosed.

Cancellable commitments that have penalty or exit costs explicit in the agreement on exercising that option to cancel are included in the statement of commitments at the value of that penalty or exit cost.

Goods and Services Tax (GST)

The net amount of GST recoverable from, or payable to, the Inland Revenue Department (IRD) is included as part of receivables or payables in the statement of financial position.

The net GST paid to, or received from the IRD, including the GST relating to investing and financing activities, is classified as an operating cash flow in the statement of cash flows.

Commitments and contingencies are disclosed exclusive of GST.

Income Tax

Government Departments are exempt from income tax as public authorities. Accordingly, no charge for income tax has been provided for.

Budget Figures

The budget figures are those included in the Ministry’s Statement of Intent for the year ended 30 June 2008, which are consistent with the financial information in the Main Estimates. In addition, the financial statements also present the updated budget information from the Supplementary Estimates.

Foreign Currency

Foreign currency transactions are converted at the New Zealand dollar exchange rate at the date of the transaction.

Statement of Cost Accounting Policies

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

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

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

For the year ended 30 June 2008, direct costs accounted for 70% of the Ministry’s costs (2007: 78%).

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

For the year ended 30 June 2008, indirect costs accounted for 30% of the Ministry’s costs (2007: 22%).

Changes in Accounting Policies

Accounting policies are changed only if the change is required by a standard or interpretation or otherwise provides more reliable and more relevant information.

There have been no significant changes in cost accounting policies, since the date of the last audited financial statements.

Critical Accounting Estimates and Assumptions

In preparing these financial statements the Ministry has made estimates and assumptions concerning the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

Retirement and Long Service Leave

Note 10 provides an analysis of the exposure in relation to estimates and uncertainties surrounding retirement and long service leave liabilities.

Critical Judgements in Applying the Ministry’s Accounting Policies

Management has not exercised any critical judgements in applying the Ministry’s accounting policies for the period ended 30 June 2008.

Statement of Financial Performance for the Year Ended 30 June 2008

		2007/08	2007/08	2007/08	2006/07
	Note	Actual	Main Estimates	Supp. Estimates	Actual
		$(000)	$(000)	$(000)	$(000)
Income
Revenue Crown		15,056	14,695	15,056	15,921
Revenue other - departments	1	348	245	346	284
Revenue other - third parties	1	136	90	129	288
Gains on disposal of property, plant and equipment		-	-	-	4
Total income		15,540	15,030	15,531	16,497
Expenditure
Personnel costs	2	7,899	7,435	7,826	7,029
Other operating expense	3	5,987	7,044	7,256	8,598
Depreciation and amortisation expense	4	318	426	334	243
Capital charge	5	91	125	115	106
Total expenses		14,295	15,030	15,531	15,976
Loss on disposal of property, plant and equipment		4	-	-	-
Net Surplus		1,241	-	-	521

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 14 in the Notes to the Financial Statements (page 47).

Statement of Financial Position as at 30 June 2008

		2007/08	2007/08	2007/08	2006/07
	Note	Actual	Main Estimates	Supp. Estimates	Actual
		$(000)	$(000)	$(000)	$(000)
Assets
Current assets
Cash and cash equivalents		1,893	1,177	93	507
Debtors and other receivables	6	1,258	235	1,150	1,810
Prepayments		53	10	80	90
Total current assets		3,204	1,422	1,323	2,407

Non-current assets
Property, plant and equipment	7	1,086	756	1,098	853
Intangible assets	8	32	667	41	35
Total non-current assets		1,118	1,423	1,139	888
*Total Assets*		4,322	2,845	2,462	3,295

Liabilities
Current liabilities
Creditors and other payables	9	1,440	645	845	786
Repayment of surplus to the Crown	11	1,241	-	-	1,176
Employee entitlements	10	393	280	395	361
Total current liabilities		3,074	925	1,240	2,323

Non-current liabilities
Employee entitlements	10	116	133	90	90
Total non-current liabilities		116	133	90	90
*Total Liabilities*		3,190	1,058	1,330	2,413
Taxpayers’ funds		1,132	1,787	1,132	88z2

The repayment of surplus is required to be paid by 31 October of each year.

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 14 in the Notes to the Financial Statements (Page 47).

Signed:

Martin Matthews
Chief Executive
26 September 2007

Countersigned by:

Ngaire Caird
Chief Financial Officer
26 September 2008

Statement of Changes in Taxpayers’ Funds for the Year Ended 30 June 2008

	2007/08	2007/08	2007/08	2006/07
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Taxpayers' funds as at 1 July	882	1,537	882	1,280
Net surplus	1,241	-	-	521
Total recognised revenues and expenses for the year	1,241	-	-	521
Repayment of surplus to the Crown	(1,241)	-	-	(1,176)
Capital contribution	250	250	250	257
Taxpayers' funds as at 30 June	1,132	1,787	1,132	882

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

Statement of Cash Flows for the Year Ended 30 June 2008

	2007/08	2007/08	2007/08	2006/07
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Cash flows from operating activities
Receipts from Crown	15,665	14,695	15,665	15,605
Receipts from revenue department/other	427	335	526	604
Payments to employees	(7,801)	(7,405)	(7,735)	(6,974)
Payments to suppliers	(5,263)	(7,074)	(7,244)	(8,498)
Goods and services tax (net)	(72)	-	-	200
Payments for capital charge	(91)	(125)	(115)	(106)
Net cash flows from operating activities	2,865	426	1,097	831

Cash flows from investing activities
Receipts from disposal of property, plant and equipment	-	-	-	4
Purchase of property, plant and equipment	(501)	(426)	(520)	(505)
Purchase of intangible assets	(52)	-	(65)	(39)
Net cash flows from investing activities	(553)	(426)	(585)	(540)

Cash flows from financing activities
Capital contribution	250	250	250	257
Repayment of surplus	(1,176)	-	(1,176)	(1,547)
Net cash flows from financing activities	(926)	250	(926)	(1,290)
Net increase/(decrease) in cash held	1,386	250	(414)	(999)
Cash at beginning of year	507	927	507	1,506
Cash at the end of the year	1,893	1,177	93	507

The GST (net) component of operating activities reflects the net GST paid and received with the Inland Revenue Department.
The GST (net) component has been presented on a net basis, as the gross amounts do not provide meaningful information for financial statement purposes.

Reconciliation of Net Surplus to Net Cash Flow from Operating Activities for the Year Ended 30 June 2008

		2007/08	2007/08	2007/08	2006/07
	Note	Actual	Main Estimates	Supp. Estimates	Actual
		$(000)	$(000)	$(000)	$(000)
Net surplus/(deficit)		1,241	-	-	521
Add/(less) non-cash items:
Depreciation and amortisation		318	426	334	243
Write-off of website		-	-	-	390
Inc/(decrease) in non-current employee entitlements		26	-	-	(43)
Total non-cash items		344	426	334	590

Add/(less) items classified as investing or financing activities:
(Gains)/losses on disposal of property, plant and equipment		4	-	-	(4)

Add/(less) movements in working capital items:
(Inc)/decrease in debtors and other receivables		552	-	660	(399)
(Inc)/decrease in prepayments		37	-	10	(78)
Inc/(decrease) in creditors and other payables		655	-	59	115
Inc/(decrease) in current employee entitlements		32	-	34	86
Net movements in working capital items		1,276	-	763	(276)
Net cash flows from operating activities		2,865	426	1,097	831

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 2008

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 (158sqm) 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 2009. The accommodation lease for Level Five includes two car parks. The amounts disclosed below as future commitments are based on the current rental rates.

	2007/08	2006/07
	Actual	Actual
Non-cancellable accommodation leases:	$(000)	$(000)
Less than one year	457	457
One to two years	457	457
Two to five years	800	1,258
More than five years	-	-
Total non-cancellable operating lease commitments	1,714	2,172

The total cost incurred in rental and leasing costs in 2007/08 is $476,000. 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 18 square metres.
The Ministry does not have any non-departmental commitments as at 30 June 2008 (2007: 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 and Contingent Assets as at 30 June 2008

Quantifiable contingent liabilities and assets are as follows:

	2007/08	2006/07
	Actual	Actual
	$(000)	$(000)
Departmental	-	-
Non-Departmental	-	-

Statement of Departmental Expenditure Against Appropriations for the Year Ended 30 June 2008

	2007/08	2007/08	2007/08	2006/07
	Expenditure Actual	Appropriation Main Estimates	Appropriation Supp. Estimates	Expenditure Actual
	$(000)	$(000)	$(000)	$(000)
Vote Arts, Culture and Heritage Appropriations for output expenses
Heritage Services	5,605	6,387	6,201	6,510
International Cultural Diplomacy	2,030	2,089	2,120	3,584
Policy Advice and Grants Administration	6,566	6,456	7,112	5,784
Total Vote Arts, Culture and Heritage	14,201	14,932	15,433	15,878
Vote Sport and Recreation Appropriations for output expenses
Purchase Advice and Monitoring of Sport and Recreation Crown Entities	98	98	98	98
Total Vote Sport and Recreation	98	98	98	98
Total	14,299	15,030	15,531	15,976

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

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

Changes to Appropriations in 2007/08 Supplementary Estimates

The Ministry’s 2007/08 departmental output appropriations were increased by $501,000 in the 2007/08 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 decreased by $186,000 due to:

a number of funding transfers from 2006/07 to 2007/08 for ongoing projects and subsequent funding transfers from 2007/08 to 2008/09;
a reclassification of funding from Policy Advice and Grants Administration to Heritage Services in respect of the Protected Objects Act (1975) and an adjustment to overhead allocation; and
changes in departmental and third-party revenue.

International Cultural Diplomacy: This appropriation was increased by $31,000 due to:

a funding transfer from 2006/07 to 2007/08.

Policy Advice and Grants Administration: This appropriation was increased by $656,000 due to:

a number of funding transfers from 2006/07 to 2007/08 for ongoing projects and subsequent funding transfers from 2007/08 to 2008/09;
a reclassification of funding from Policy Advice and Grants Administration to Heritage Services in respect of the Protected Objects Act (1975) and an adjustment to overhead allocation; and
changes in departmental and third-party revenue.

Statement of Unappropriated Expenditure for the Year Ended 30 June 2008

	2007/08	2007/08	2007/08	2007/08
	Actual	Main Estimates	Supp. Estimates	Unappropriated Expenditure
	$(000)	$(000	$(000	$(000)
Vote Arts, Culture and Heritage	-	-	-	-
Vote Sport and Recreation	-	-	-	-

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

Statement of Trust Money Administered on Behalf of the Crown for the Year Ended 30 June 2008

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 2007/08	Capital Contributions	Capital Distributions (Awards)	Revenue	Expenses	Closing Net Assets 2007/08
	$(000)	$(000)	$(000)	$(000)	$(000)	$(000)
New Zealand Encyclopedia	1	-	-	-	-	1
New Zealand Historical Atlas	98	-	-	8	-	106
New Zealand History Research	1,500	-	(100)	48	-	1,448
Australian Trust for Oral History	1,531	-	-	95	-	1,626
Dictionary of New Zealand Biography	259	-	-	11	(8)	262
War History	-	481	-	34	-	515
Total	3,389	481	(100)	196	(8)	3,958

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 2007/08 financial year 11 awards in history were made totalling $100,000 and ranging in value from $4,000 to $25,000 (2006/07: 11 awards; $95,000; $4,000 to $20,000).

Australian Sesquicentennial Gift Trust for Awards in Oral History
This trust was established to hold funds from the Government of the Commonwealth of Australia, gifted to New Zealand in 1990 specifically to gather oral histories of importance to New Zealand. The income from these funds is used for the promotion of oral history in New Zealand. During the 2007/08 financial year eight awards in oral history were made totalling $60,500 and ranging in value from $2,000 to $12,000 (2006/07: 9 awards; $45,700; $2,000 to $8,250).

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.

War History Trust
This trust was established to hold funds bequeathed to the Ministry for Culture and Heritage by Mr Watson, a long-time supporter of research into New Zealand’s military history. The funds and any interest income are to be used for the researching and writing of works on New Zealand’s involvement in overseas conflicts.

Notes to the Financial Statements for the Year Ended 30 June 2008

Note 1: Revenue Other

Revenue Other was derived from the following sources:

	2007/08		2006/07
	Other Government Departments	Other Sources	Other Government Departments	Other Sources
Contract history projects	102	-	61	39
Seconded staff	83	50	78	-
State Sector Retirement Savings Scheme (SSRSS) –recovery from State Services Commission	161	-	145	-
Contribution towards Digital Broadcasting Strategy project	-	60	-	198
Publication sales/royalties	-	25	-	50
Antiquities dealers’ licences	2	1	-	1
Total revenue other	348	136	284	288

Note 2: Personnel Costs

	2007/08	2007/08	2007/08	2006/07
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Salaries and wages	7,305	7,000	7,240	6,593
Training and development	174	200	200	103
Employer contributions to superannuation funds*	218	205	220	209
Other personnel costs	202	30	166	124
Total personnel costs	7,899	7,435	7,826	7,029

* Employer contributions to defined contribution plans include contributions to the State Sector Retirement Savings Scheme, Kiwisaver, Government Superannuation Fund and the Global Retirement Trust Superannuation.

Note 3: Other Operating Expenses

	2007/08	2007/08	2007/08	2006/07
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Administration costs*	2,582	3,793	3,926	5,089
Rental and leasing costs	476	400	477	453
Other occupancy costs	237	252	252	223
Publicity and research	248	342	342	339
Information communication technology**	725	649	649	1,228
Transfers to International Cultural Diplomacy Programme agencies***	1,675	1,560	1,560	1,218
Audit fees for financial statement audit (Audit New Zealand)	38	34	44	38
Audit fees for NZ IFRS transition (Audit New Zealand)	6	14	6	10
Total operating costs	5,987	7,044	7,256	8,598

* Includes initiatives under the Cultural Diplomacy International Programme. See page 65 for a breakdown of initiatives in 2007/08.
** The 2006/07 comparative figure of $1.228 million includes $770,000 for web development costs for the NZLive website which have been
expensed under NZ IFRS. These costs were capitalised in the financial statements for the year ended 30 June 2007.
*** The 2006/07 comparative figure of $1.218 million includes $954,000 which was incorrectly classified as an administration cost in the financial statements for the year ended 30 June 2007.

Note 4: Depreciation and Amortisation

	2007/08	2007/08	2007/08	2006/07
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Depreciation – Property, Plant and Equipment
Computer equipment	83	73	86	99
Office equipment	21	19	21	21
Office furniture	17	20	20	8
Leasehold improvements	143	120	148	84
Works of Art	-	-	-	-

Amortisation – Intangible Assets
Computer software	54	194	59	31
Total depreciation and amortisation	318	426	334	243

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 2008 was 7.5% (2007: 7.5%).

Note 6: Debtors and Other Receivables

	2007/08	2007/08	2007/08	2006/07
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Debtor Crown	1,000	-	1,000	1,609
Trade debtors	258	120	150	51
GST receivables	-	115	-	-
Other receivables	-	-	-	150
Total debtors and other receivables	1,258	235	1,150	1,810

The carrying value of debtors and other receivables approximates their fair value.

As at 30 June 2008 all overdue trade debtors have been assessed for impairment as detailed below (a provision is not required):

	2007			2008
	Gross	Impairment	Net	Gross	Impairment	Net
	$(000)	$(000)	$(000)	$(000)	$(000)	$(000)
Not past due	51	-	51	241	-	241
Past due 1-30 days	-	-	-	-	-	-
Past due 31-60 days	-	-	-	-	-	-
Past due 61-90 days	-	-	-	-	-	-
Past due > 91 days	-	-	-	17	-	17
Total	51	-	51	258	-	258

A provision for doubtful debts has not been calculated. No losses are expected for the Ministry’s pool of debtors.

Note 7: Property, Plant and Equipment

	Computer Equipment	Office Equipment	Office Furniture	Leasehold Improvements	Works of Art	Total
	$(000)	$(000)	$(000)	$(000)	$(000)	$(000)
Cost or Valuation
Balance at 1 July 2006	500	148	311	727	20	1,706
Additions	62	32	54	357	-	505
Disposals	-	(10)	-	-	-	(10)
Balance at 30 June and 1 July 2007	562	170	365	1,084	20	2,201
Additions	83	16	173	229	-	501
Disposals	(25)	(18)	(158)	-	-	(201)
Other asset adjustment (rounding)	-	(1)	-	-	-	(1)
Balance at 30 June 2008	620	167	380	1,313	20	2,500
Accumulated Depreciation and Impairment Losses
Balance at 1 July 2006	315	99	293	439	-	1,146
Depreciation expense	99	21	8	84	-	212
Elimination on disposal	-	(10)	-	-	-	(10)
Impairment losses	-	-	-	-	-	-
Balance at 30 June and 1 July 2007	414	110	301	523	-	1,348
Depreciation expense	83	21	17	143	-	264
Elimination on disposal	(25)	(17)	(156)	-	-	(198)
Impairment losses	-	-	-	-	-	-
Balance at 30 June 2008	472	114	162	666	-	1,414
Carrying Amounts
At 1 July 2006	185	49	18	288	20	560
At 30 June and 1 July 2007	148	60	64	561	20	853
At 30 June 2008	148	53	218	647	20	1,086

Note 8: Intangible Assets

	Acquired Software
	$(000)
Cost or Valuation
Balance at 1 July 2006	241
Additions	39
Disposals	-
Balance at 30 June and 1 July 2007	280
Additions	52
Disposals	(167)
Other asset adjustment (rounding)	(1)
Balance at 30 June 2008	164
Accumulated Amortisation and Impairment Losses
Balance at 1 July 2006	214
Depreciation expense	31
Elimination on disposal	-
Impairment losses	-
Balance at 30 June and 1 July 2007	245
Depreciation expense	54
Elimination on disposal	(167)
Impairment losses	-
Balance at 30 June 2008	132
Carrying Amounts
At 1 July 2006	27
At 30 June and 1 July 2007	35
At 30 June 2008	32

There are no restrictions over the title of the Ministry’s intangible assets,
nor are any intangible assets pledged as security for liabilities.

Note 9: Creditors and Other Payables

	2007/08	2007/08	2007/08	2006/07
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Trade creditors	943	315	430	351
PAYE payable	87	80	80	78
GST payable	13	-	85	85
Accrued expenses	397	250	250	272
Total creditors and payables	1,440	645	845	786

Creditors and other payables are non-interest bearing and are normally settled on 30-day terms, therefore the carrying value of creditors and other payables approximates their fair value.

Note 10: Employee Entitlements

	2007/08	2007/08	2007/08	2006/07
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Current employee entitlements are represented by:
Annual leave	341	270	345	316
Long-service leave	52	10	50	45
Total current portion	393	280	395	361
Non-current employee entitlements are represented by:
Long-service leave	22	25	20	21
Retirement leave	94	108	70	69
Total non-current portion	116	133	90	90
Total employee entitlements	509	413	485	451

The present value of the retirement and long service leave obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. Two key assumptions used in calculating this liability are the discount rate and the salary inflation factor. Any changes in these assumptions will impact on the carrying amount of the liability.
In determining the appropriate discount rate the Ministry considered the interest rates on NZ Government Bonds which have terms to maturity that match, as closely as possible, the estimated future cash outflows. The salary inflation factor has been determined after considering historical salary inflation patterns and after obtaining advice from an independent actuary.
If the discount rate were to differ by 1% from the Ministry’s estimates, with all other factors held constant, the carrying amount of the liability would be an estimated $23,000 higher/lower.
If the salary inflation factor were to differ by 1% from the Ministry’s estimates, with all other factors held constant, the carrying amount of the liability would be an estimated $22,000 higher/lower.

Note 11: Repayment of Surplus

	2007/08	2007/08	2007/08	2006/07
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Net surplus/(deficit)	1,241	-	-	521
Add: Adjustment to intangible asset under NZ IFRS	-	-	-	655
Total repayment of surplus	1,241	-	-	1,176

Note 12: 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 2007: Nil).

Liquidity risk

Liquidity risk is the risk that the Ministry will encounter difficulty raising liquid funds to meet commitments as they fall due.
In meeting its liquidity requirements, the Ministry closely monitors its forecast cash requirements with expected cash drawdowns from the New Zealand Debt Management Office. The Ministry maintains a target level of available cash to meet liquidity requirements.
The Ministry’s financial liabilities will be settled in less than six months. The amounts disclosed are the contractual undiscounted cash flows.

Note 13: 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, Crown entities and state-owned enterprises on an arm’s length basis. Those transactions that occur within a normal supplier or client relationship on terms and conditions no more or less favourable than those which it is reasonable to expect the Ministry would have adopted if dealing with that entity at arm’s length in the same circumstance are not disclosed.
There was one close family member of a senior manager employed briefly by the Ministry during the year. The terms and conditions of this employment were no more favourable than the Ministry would have implemented in any other circumstances.

No provision has been required, nor any expense recognised, for impairment of receivables from related parties.

Note 14: Variance Explanations

Explanations for major variances from the Ministry’s estimated figures in the Statement of Intent are as follows.

Statement of Financial Performance

Personnel costs

Personnel costs are $464,000 higher than budgeted due to higher than expected increases in remuneration and higher than budgeted positions (at the time of preparing the 2007/08 main estimates). The increase in staff numbers was a result of capability funding received in the 2007 Budget. The breakdown of the capability funding was not known until well after the 2007/08 Main Estimates were submitted; therefore the budget for personnel costs in the Statement of Intent was underestimated.

Operating costs

Operating costs are $1.057 million lower than budgeted in the Statement of Intent mainly due to timing differences for various projects which span a number of financial years. Approval in-principle was obtained to carry forward unspent operating funding in the 2007/08 financial year to 2008/09 for:

Te Ara – the Encyclopedia of New Zealand project ($350,000)
NZLive.com (cultural portal project) ($260,000)
New Zealand Memorial Park ($215,000)
Strategic Policy Development and Sector Leadership ($150,000)
Agency reviews ($135,000)
International Cultural Diplomacy Programme ($90,000)
From Memory War Oral History Programme ($30,000).

The above in-principle expense transfers total $1.230 million and account for the variance between the 2007/08 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 (refer Statement of Departmental Expenditure Against Appropriations).

The $1.241 million operating surplus was primarily generated from the timing differences mentioned above. This surplus will be returned to the Crown as required under the Public Finance Act 1989.

Statements of Financial Position and Cash Flows

Debtors and Other Receivables

Debtors and other receivables are $1.023 million higher than budgeted mainly due to the $1 million balance for Debtor Crown, which arose because $1 million revenue Crown was not drawn down from the NZDMO in relation to the in-principle expense transfers mentioned above.

Creditors and Payables

Creditors and other payables are $595,000 higher than budgeted due to creditors submitting final invoices for work that was not finalised until late June 2008, including: a leasehold reconfiguration, website development, contribution to the Anzac statue on Sydney Harbour bridge, agency assistance/reviews and legislative compliance. When preparing the budget figures for the Statement of Intent it was envisaged that these projects would be completed well before June 2008.

Employee Entitlements

The increase in total employee entitlements is mainly due to an increase in untaken annual leave, and milestone anniversaries being reached by some of the employees who are entitled to retirement leave.

Property, Plant and Equipment

Capital expenditure is $330,000 higher than budgeted due to expenditure on leasehold improvements. The nature and extent of the improvements was unknown at the time of preparing the Statement of Intent.

Working Capital

The Ministry’s working capital position in 2007/08 ($130,000) improved by $46,000 compared to 2006/07 ($84,000). Contributing factors include: capital expenditure totalling $553,000 in 2007/08 was partly funded by a capital injection of $250,000, and the residual capital expenditure was less than the depreciation and amortisation expense incurred; of the $553,000 capital expenditure incurred in 2007/08, approximately $395,000 was spent on leasehold improvements and furniture and fittings in the second half of 2007/08 that was not depreciated until the end of June 2008 when the project was finalised.

Statement of Cash Flows

Cash outflows for payments to suppliers was less than budgeted due to the timing differences and late submission of invoices mentioned above.

Note 15: Key Management Personnel Compensation

Total Remuneration	30 June 2008	30 June 2007
Salaries and other short-term employee benefits	1,461	1,256
Post-employment benefits	-	-
Other long-term benefits	30	-
Termination benefits	-	-
Total key management personnel compensation	1,491	1,256

Key management personnel include the Chief Executive and the nine senior managers (2007: eight senior managers).

Salaries and wages and other short-term employee benefits include salaries, allowances, employer contributions to superannuation and movement in annual leave.

Other long-term benefits include increases in long service leave liability and/or retirement leave liability. The net movement of nil for other long-term benefits in 2007 is due to an increase in retirement leave and long service leave for the year offset by an adjustment of the probability rates applied to retirement leave for one senior manager.

Note 16: Post Balance Date Events

There are no significant post balance date events to report.

Note 17: Explanation of Transition to New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS)

The Ministry’s financial statements for the year ended 30 June 2008 are the first financial statements that comply with NZ IFRS. The Ministry has applied First-time Adoption of NZ IFRS (NZ IFRS 1) in preparing these financial statements. The Ministry’s transition date is 1 July 2006. The Ministry prepared its opening NZ IFRS balance sheet at that date. The reporting date of these financial statements is 30 June 2008. The Ministry NZ IFRS adoption date is 1 July 2007. In preparing the financial statements in accordance with NZ IFRS, the Ministry has applied the mandatory exceptions and no optional exemptions from full retrospective application of NZ IFRS.

The only mandatory exception from retrospective application that applies to the Ministry is the requirement for estimates under NZ IFRS at July 2006 and 30 June 2007 to be consistent with estimates made for the same date under NZ GAAP.

Reconciliation of Equity

The following table shows the changes in equity, resulting from the transition from previous NZ GAAP to NZ IFRS as at 1 July 2006 and 30 June 2007.

Note	Previous NZ GAAP 1 July 2006	Effect on transition to NZ IFRS 1 July 2006	NZ IFRS 1 July 2006	Previous NZ GAAP 30 June 2007	Effect on transition to NZ IFRS 30 June 2007	NZ IFRS 30 June 2007
	$(000)	$(000)	$(000)	$(000)	$(000)	$(000)
Assets
Current assets
Cash and cash equivalents	1,506	-	1,506	507	-	507
Debtors and other receivables a	1,526	(115)	1,411	1,810	-	1,810
Prepayments	12	-	12	90	-	90
Total current assets	3,044	(115)	2,929	2,407	-	2,407

Non-current assets
Property, plant and equipment b	977	-	977	1,543	(690)	853
Intangible assets c	-	-	-	-	35	35
Total non-current assets	977	-	977	1,543	(655)	888
*Total assets*	4,021	(115)	3,906	3,950	(655)	3,295

Liabilities
Current liabilities
Creditors and other payables a	786	(115)	671	786	-	786
Repayment of surplus	1,547	-	1,547	1,176	-	1,176
Employee entitlements	275	-	275	361	-	361
Total current liabilities	2,608	(115)	2,493	2,323	-	2,323

Non-current liabilities
Employee entitlements	133	-	133	90	-	90
Total non-current liabilities	133	-	133	90	-	90
*Total liabilities*	2,741	(115)	2,626	2,413	-	2,413
Net Assets	1,280	-	1,280	1,537	(655)	882

Taxpayers’ funds
General funds b	1,280	-	1,280	1,537	(655)	882
Total taxpayers’ funds	1,280	-	1,280	1,537	(655)	882

Explanatory notes – Reconciliation of equity

a. Debtors and other receivables / creditors and other payables – GST receivable

Under previous NZ GAAP GST receivable ($115,000) was classified as a receivable (a current asset). NZ IFRS requires the Ministry to classify GST receivable as a credit to net GST payable (a current liability).

b. Property, plant and equipment – website

It was determined that a ministry website that was capitalised under previous NZ GAAP should be expensed under NZ IFRS in consideration of IAS 38 Intangible Assets and NZ SIC 32 Intangible Assets – Website Costs.

c. Intangible assets – computer software

Computer software was classified as property, plant and equipment under previous NZ GAAP. Computer software has been reclassified as an intangible asset on transition to NZ IFRS.

Reconciliation of Surplus

The following table shows the changes in the Ministry’s surplus, resulting from the transition from previous NZ GAAP to NZ IFRS for the year ended 30 June 2007.

	Note	Previous NZ GAAP 30 June 2007	Effect on transition to NZ IFRS 30 June 2007	NZ IFRS 30 June 2007
		$(000)	$(000)	$(000)
Income
Revenue Crown		15,921	-	15,921
Revenue other		572	-	572
Gains	a	-	4	4
Total income		16,493	4	16,497

Expenditure
Personnel costs		7,029	-	7,029
Depreciation and amortisation expense	b	358	(115)	243
Capital charge		106	-	106
Other operating expenses	b	7,828	770	8,598
Total expenditure		15,321	655	15,976
Profit of disposal of assets	a	4	(4)	-
Net surplus/(deficit)		1,176	(655)	521

Explanatory notes - Reconciliation of surplus

a. Gain on disposal of assets

Under NZ IFRS gain on disposal of assets is recorded as a gain under income. Under GAAP gain/(loss) on disposal of assets was classified in a separate line item within the Statement of Financial Performance.

b. Depreciation and amortisation expense and loss on intangible asset

It was determined that a ministry website that was capitalised under NZ GAAP should be expensed under NZ IFRS in consideration of IAS 38 Intangible Assets and NZ SIC 32 Intangible Assets – Website Costs.

Statement of Cash Flows

Any adjustments to the statement of cash flows on transition to NZ IFRS are in relation to the items mentioned in the reconciliation of equity and reconciliation of surplus above.

Non-departmental Schedules and Statements:
Vote Arts, Culture and Heritage and Vote Sport and Recreation
for the Year Ended 30 June 2008

Reporting Entity

These non-departmental schedules and statements present financial information on public funds managed by the Ministry on behalf of the Crown.
These non-departmental balances are consolidated into the Financial Statements of the Government. For a full understanding of the Crown’s financial position, results of operations and cash flows for the year, reference should also be made to the Financial Statements of the Government for the year ended 30 June 2008.

Statement of Accounting Policies: Non-Departmental

The non-departmental schedules and statements have been prepared in accordance with the Government’s accounting policies as set out in the Financial Statements of the Government, and in accordance with relevant Treasury Instructions and Treasury Circulars.

Measurement and recognition rules applied in the preparation of these non-departmental schedules and statements are consistent with New Zealand generally accepted accounting practice, as appropriate for public benefit entities.

This is the first set of financial statements prepared using NZ IFRS. The comparatives for the year ended 30 June 2007 have been restated to NZ IFRS accordingly. Reconciliations of income and expenses and assets and liabilities for the year ended 30 June 2007 under NZ IFRS to the balances reported in the 30 June 2007 financial statements are detailed in note 3.
The accounting policies set out below have been applied consistently to all periods presented in these financial statements and in preparing an opening NZ IFRS statement of financial position as at 1 July 2006 for the purposes of the transition to NZ IFRS.

The following particular accounting policies have been applied:

Budget Figures

The budget figures are those included in the Ministry’s Statement of Intent for the year ended 30 June 2008, which are consistent with the financial information in the Main Estimates. In addition, these financial statements also present the updated budget information from the Supplementary Estimates.

Foreign Exchange

Foreign currency transactions are translated into New Zealand dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the schedule of non-departmental income or expenses.
The Crown uses a foreign exchange forward contract to manage a foreign exchange exposure. The notional principal amount outstanding at balance date on the hedged purchase commitment with respect to the annual payment made to the Commonwealth War Graves Commission to maintain overseas war graves and memorials was $2.643 million (30 June 2007: 2.737 million).

Revenue

Revenue from fines and other receipts are recognised when received.

Grant Expenditure

Non-discretionary grants are those grants awarded if the grant application meets the specified criteria and are recognised as expenditure when an application that meets the specified criteria for the grant has been received.
Discretionary grants are those grants where the Ministry has no obligation to award on receipt of the grant application and are recognised as expenditure when approved by the grants approvals committee and the approval has been communicated to the applicant.

Goods and Services Tax

All items in the financial statements, including appropriation statements, are stated exclusive of GST, except for receivables and payables, which are stated on a GST inclusive basis. In accordance with Treasury instructions, GST is returned on revenue received on behalf of the Crown, where applicable. However, an input tax deduction is not claimed on non-departmental expenditure. Instead, the amount of GST applicable to non-departmental expenditure is recognised as a separate expense and eliminated against GST revenue on consolidation of the government’s financial statements.

Property, Plant and Equipment

Property, plant and equipment assets comprise the National War Memorial and the Massey War Memorial, administered on behalf of the Crown. These assets are carried at fair value less subsequent impairment losses and, for non-land assets, less subsequent accumulated depreciation. These assets are revalued at least every three years. In the intervening period between the scheduled revaluations if it is established that the memorial’s carrying value may be materially different from its fair value a revaluation will be sought.

Depreciation is charged on a straight-line basis at rates calculated to allocate the cost or valuation of an item of property, plant and equipment, less any estimated residual value, over its estimated useful life, as follows:

Buildings

Schedule of Non-departmental Revenue and Receipts for the Year Ended 30 June 2008

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

	2007/08	2007/08	2006/07
	Actual	Forecast*	Actual
	$(000)	$(000)	$(000)
Vote Arts, Culture and Heritage
Broadcasting Standards Authority – fines	24	22	11
Commercial tenancies income	-	-	213
Canterbury Museum – return of Regional Museums Policy funding	-	-	7,354
Total Arts, Culture and Heritage	24	22	7,578

Vote Sport and Recreation
SPARC – Return of funds held on behalf of the Crown – Prime Minister’s Sport Scholarships	6,490	6,490	-
Total Sport and Recreation	6,490	6,490	-
Total non-departmental revenue and receipts	6,514	6,512	7,578

These schedules are to be read in conjunction with the accompanying Statement of Accounting Polices.
* This includes adjustments made in the Supplementary Estimates.

Schedule of Non-departmental Expenses for the Year Ended 30 June 2008

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 xpenditure and Appropriations on page 54.

	2007/08	2007/08	2006/07
	Expenditure	Appropriation	Expenditure
	Actual	Voted *	Actual
	$(000)	$(000)	$(000)
Grants, subsidy and benefit expenses	12,282	32,674	10,783
Other operating expenses	302,876	303,824	272,447
Depreciation – buildings	185	185	185
GST input expense	38,460	41,038	33,664
Total non-departmental expenditure	353,803	377,721	317,079

These schedules are to be read in conjunction with the accompanying Statement of Accounting Polices.
* This includes adjustments made in the Supplementary Estimates.

Statement of Non-departmental Expenditure and Capital Expenditure against Appropriations for the Year Ended 30 June 2008

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

	2007/08	2007/08	2006/07
	Expenditure	Appropriation	Expenditure
	Actual	Voted *	Actual
	$(000)	$(000)	$(000)
Vote Arts, Culture and Heritage
Appropriation for non-departmental output expenses
Management of Historic Places	10,859	10,859	10,409
Museum Services	21,744	21,744	21,263
Performing Arts Services	18,283	18,283	18,284
Promotion and Support of the Arts and Film	25,563	25,563	25,563
Protection of Taonga Tūturu	79	79	-
Public Broadcasting Services	156,919	157,279	136,364
Total appropriations for output expenses	233,447	233,807	211,883

Appropriation for other expenses to be incurred by the Crown
Commonwealth War Graves	2,643	2,643	2,330
Development and Maintenance of War Graves, Historic Graves and Monuments	516	516	516
Gallipoli Memorial Projects	-	-	48
Kerikeri Heritage Bypass	2,556	3,144	1,037
New Zealand Memorial in London	-	-	1,323
Regional Museums	7,989	28,380	6,489
Treaty of Waitangi Commemorations	288	288	288
Total appropriations for other expenses to be incurred by the Crown	13,992	34,971	12,031

Appropriation for capital expenditure
Museum of New Zealand Te Papa Tongarewa	10,000	10,000	15,500
New Zealand Historic Places Trust	2,000	2,000	850
New Zealand Film Commission	946	946	-
Radio New Zealand	521	521	-
Total appropriations for capital expenditure	13,467	13,467	16,350
Total Vote Arts, Culture and Heritage	260,906	282,245	240,264

Vote Sport and Recreation
Appropriation for non-departmental output expenses
Sports Anti-Doping	1,691	1,691	1,623
Sport, Fitness and Leisure Programmes	52,288	52,288	49,796
Children and Young People’s Lifestyles	9,632	9,632	3,788
Total appropriations for output expenses	63,611	63,611	55,207

Appropriation for benefits and other unrequited expenses
Sport Education Scholarships	4,250	4,250	4,250
Total appropriations for benefits and other unrequited expenses	4,250	4,250	4,250

Appropriation for other expenses to be incurred by the Crown
Miscellaneous Grants	43	44	44
Total appropriations for other expenses to be incurred by the Crown	43	44	44

Total Vote Sport and Recreation	67,904	67,905	59,501

* This includes adjustments made in the Supplementary Estimates.

Explanation of major budget variances

Explanations for major variances from the Ministry’s non-departmental estimated figures in the Main Estimates are as follows:

Schedule of non-departmental expenditure and capital expenditure against appropriations

Public Broadcasting Services was underspent by a net amount of $360,000, which includes $660,000 in regard to timing of expenditure on the digital terrestrial platform costs of Freeview. Approval in-principle was obtained to carry forward the unspent funding to 2008/09, offset by advance funding of $300,000 to the National Pacific Radio Trust.

Approval was obtained in-principle to carry forward to 2008/09 the remaining $588,000 towards the construction of the Kerikeri Heritage Bypass, to protect the nationally significant heritage buildings Kemp House and the Stone Store.

Regional Museums was underspent by $20.391 million due to a delay in gaining resource consent for the Auckland Art Gallery capital development project. Approval in-principle was obtained to carry forward the unspent funding to 2008/09.

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

Schedule of Recipients of Non-departmental Outputs Funding for the Year Ended 30 June 2008

	$(000)
Vote Arts, Culture and Heritage
Management of Historic Places
Antarctic Heritage Trust	356
New Zealand Historic Places Trust	10,503
	10,859
Museum Services
Museum of New Zealand Te Papa Tongarewa	20,574
New Zealand Film Archive	1,170
	21,744
Performing Arts Services
New Zealand Symphony Orchestra	12,346
Royal New Zealand Ballet	3,534
Aotearoa Traditional Māori Performing Arts Society	1,247
New Zealand Music Commission	1,156
	18,283
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
Protection of Taonga Tūturu
Regional Museums: Auckland War Memorial Museum, Canterbury Museum and Otago Museum	29
Conservation service providers	50
	79
Public Broadcasting Services
Broadcasting Commission (NZ On Air)	109,813
Television New Zealand	37,668
National Pacific Radio Trust	3,300
Radio New Zealand International	1,900
Broadcasting Standards Authority	609
Freeview	3,629
	156,919
Total Vote Arts Culture and Heritage	233,447

Vote Sport and Recreation
Sports Anti-Doping
Drug Free Sport New Zealand	1,691
	1,691
Sport, Fitness and Leisure Programmes
Sport and Recreation New Zealand	52,288
	52,288
Children and Young People’s Lifestyles
Sport and Recreation New Zealand	9,632
	9,632

Total Vote Sport and Recreation	63,611

Schedule of Non-departmental Assets as at 30 June 2008

	2007/08	2007/08	2006/07
	Actual	Forecast	Actual
	$(000)	$(000)	$(000)
Assets
Current assets
Cash at bank and at hand	2,304	1,153	962
Total current assets	2,304	1,153	962

Non-current assets
Property, plant and equipment:
Land
- Massey Memorial (at valuation 30 June 2006)	580	580	580
- National War Memorial (at valuation 30 June 2006)	5,300	5,300	5,300
- New Zealand Memorial Park (at cost)	4,967	4,967	4,967
Total land	10,847	10,847	10,847
Buildings
- Massey Memorial (at valuation 30 June 2006)	980	980	980
Accumulated depreciation	(40)	(40)	(20)
- National War Memorial (at valuation 30 June 2006)	8,280	8,280	8,280
Accumulated depreciation	(330)	(330)	(165)
Buildings carrying value	8,890	8,890	9,075
Total non-current assets	19,737	19,737	19,922
Total assets	22,041	20,890	20,884

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

In addition the Ministry monitors a number of Crown Entities. The investment in those entities is recorded within the financial statements of the Government on a line-by-line basis. No disclosure is made in this schedule.

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 (independent valuer) 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. Balance of revaluation reserve at 30 June 2008 for land ($4.570 million) and buildings ($599,000).

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

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

Schedule of Non-departmental Liabilities as at 30 June 2008

	Note	2007/08			2007/08	2006/07
		Actual			Forecast	Actual
		$(000)			$(000)	$(000)
Current Liabilities
Creditors and other payables 1			1,023	650			885
Total liabilities			1,023	650			885

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

Schedule of Non-departmental Contingent Liabilities and Contingent Assets as at 30 June 2008

The Ministry on behalf of the Crown has no contingent liabilities or contingent assets.

Note 1: Creditors and Other Payables

	2007/08	2007/08	2007/08	2006/07
	Actual	Main Estimates	Supp. Estimates	Actual
	$(000)	$(000)	$(000)	$(000)
Creditors	79	50	80	40
Accrued expenses	944	600	720	845
Total creditors and payables	1,023	650	800	885

Creditors and other payables are non-interest bearing and are normally settled on 30-day terms, therefore the carrying value of creditors and other payables approximates their fair value.

Note 2: Explanation of Transition to New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS)

There have been no adjustments to non-departmental asset and liabilities or income and expenses on transition to NZ IFRS.