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Notes to the financial statements for the year ended 30 June 2010

Notes to the financial statements for the year ended 30 June 2010

Note 1: Statement of accounting policies

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.

The Ministry has also 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 make 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).

The financial statements of the Ministry are for the year ended 30 June 2010. The financial statements were authorised for issue by the Chief Executive of the Ministry on 30 September 2010.

Basis of preparation

Statement of compliance

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

These financial statements comply with NZ IFRS, and other applicable financial reporting standards, as appropriate for public benefit entities.

The accounting policies set out below have been applied consistently to all periods presented in these financial statements.

Measurement base

The financial statements have been prepared on a historical cost basis, modified by the revaluation of certain assets and liabilities. Some assets and liabilities are recorded at ‘fair value’, the amount for which an item could be exchanged or a liability settled between knowledgeable and willing parties in an arm’s-length transaction.

Functional and presentation currency

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.

Changes in accounting policies

The Ministry has adopted NZ IAS 1 Presentation of Financial Statements (Revised 2007), which replaces NZ IAS 1 Presentation of Financial Statements(Issued 2004). The revised standard requires information in financial statements to be aggregated on the basis of shared characteristics. It also introduces a statement of comprehensive income that will enable readers to analyse changes in taxpayers’ funds resulting from transactions with the Crown in its capacity as ‘owner’ separately from ‘non-owner’ changes. Under the revised IAS 1, the Ministry has decided to prepare a single statement of comprehensive income to replace the statement of financial performance for the year ended 30 June 2010.

Standards, amendments and interpretations issued but not yet effective, and which have not been early-adopted

The standards, amendments and interpretations relevant to the Ministry that have been issued but are not yet effective and have not been early-adopted are NZ IAS 24 and NZ IFRS 9.

NZ IAS 24 Related Party Disclosures (Revised 2009) replaces NZ IAS 24 Related Party Disclosures (Issued 2004) and is effective for reporting periods commencing on or after 1 January 2011. The revised standard:

i)  Removes the previous disclosure concessions applied by the Ministry for arm’s-length transactions between the Ministry and entities controlled or significantly influenced by the Crown. The effect of the revised standard is that more information is required to be disclosed about transactions between the Ministry and entities controlled or significantly influenced by the Crown.

ii)Provides clarity on the need to disclose related-party transactions with Ministers of the Crown. The Ministry will be exempted from certain disclosure requirements relating to transactions with Ministers of the Crown, with the exception of transactions with the Minister for Arts, Culture and Heritage, the Minister of Broadcasting and the Minister for Sport and Recreation. The latter requirement could result in additional disclosures should there be any related-party transactions with these Ministers.

iii)Clarifies that related-party transactions include commitments made to related parties.

The Ministry expects to adopt the revised standard for the year ended 30 June 2011.

NZ IFRS 9 Financial Instruments will eventually replace NZ IAS 39 Financial Instruments: Recognition and Measurement. NZ IAS 39 is being replaced in three main phases: Phase 1, Classification and Measurement; Phase 2, Impairment Methodology; and Phase 3, Hedge Accounting.

Phase 1 has been completed and the results have been incorporated in NZ IFRS 9. This uses a single approach to determine whether a financial asset is measured at amortised cost or fair value, replacing the many different rules in NZ IAS 39. The new approach is based on how an entity manages its financial instruments (its business model) and the contractual cash flow characteristics of the financial assets. The new standard also requires the use of a single impairment method, in place of the many different impairment methods in NZ IAS 39.

The new standard is required to be adopted for the year ended 30 June 2014. The Ministry has not yet assessed the effect of the new standard and expects it will not be early-adopted.

Significant accounting policies

Revenue

Revenue is measured at the fair value of consideration received or receivable.

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 from the undertaking of historical projects on a full cost-recovery basis, and from the State Services Commission which funds the State Sector Retirement Savings Scheme and Kiwisaver. Revenue is recognised when earned and is reported in the financial period to which it relates.

Capital charge

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

Borrowing costs

All borrowing costs are recognised as expenses in the period in which they are incurred.

Foreign currency transactions

Foreign currency transactions are converted 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 are recognised in the statement of comprehensive income.

Leases

Operating leases

An operating lease is a lease that does not transfer the risks and rewards incidental to ownership of an asset to the lessee. Lease payments under an operating lease are recognised as an expense on a straight-line basis over the term of the lease.

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 include cash and bank balances, and accounts receivable and payable.

Financial assets and financial liabilities are initially measured at fair value plus transaction costs, unless they are carried at fair value through surplus or deficit. In the latter case the transaction costs are recognised in the statement of comprehensive income.

Cash and cash equivalents

Cash and cash equivalents include cash on hand and funds on deposit with banks. They are measured at face value.

Debtors and other receivables

Debtors and other receivables are measured initially at fair value and subsequently at amortised cost using the effective interest method, 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.

Indicators that the debtor is impaired include significant financial difficulties, the probability that it will enter into bankruptcy, and default in payments. The amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at 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 comprehensive income. Overdue receivables that have been renegotiated are reclassified as current (i.e., not past due).

Property, plant and equipment

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

Property, plant and equipment are 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 $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 plus 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

An item of property, plant or equipment is recognised as an asset 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 or equipment is recognised at its cost. Where an asset is acquired at no or 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 comprehensive income. 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 down 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%

Leasehold improvements

Determined by the
lease period remaining

Office equipment

5 years

20%

Computer equipment – PC-based

3 years

33%

Computer equipment – other than PCs

4 years

25%

Works of art

100 years

1%

 

 

 

Leasehold improvements are depreciated over the unexpired period of the lease or the estimated remaining useful life of the improvements, whichever is shorter. 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

All asset classes are carried at depreciated historical cost. The carrying values of revalued items are reviewed at each balance date to ensure that they do not differ materially from fair value. Additions between revaluations are recorded at cost.

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 other comprehensive income and are accumulated to an asset revaluation reserve for that class of asset. Any resulting debit balance in the asset revaluation reserve is expressed as an expense in the statement of comprehensive income. Any subsequent increase in value will be recognised first in the surplus or deficit up to the amount previously expensed, and then in other comprehensive income.

Intangible assets

Software acquisition

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring into use the specific software. Software is capitalised if its cost is greater than $2,000. Costs associated with maintaining computer software are recognised as expenses when incurred.

Staff training costs are recognised as expenses 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. Amortisationbegins 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 comprehensive income.

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%

Impairment of property, plant and equipment, and intangible assets

Property, plant and equipment and intangible assets that have a finite useful life are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use.

Value in use is the depreciated replacement cost for an asset whose future economic benefits or service potential are not primarily dependent on its ability to generate net cash inflows and where the Ministry would, if deprived of the asset, replace its remaining future economic benefits or service potential.

If an asset’s carrying amount exceeds its recoverable amount, the asset is impaired and the carrying amount is written down to the recoverable amount. For revalued assets, the impairment loss is recognised against the revaluation reserve for that class of asset. Where that results in a debit balance in the revaluation reserve, the balance is recognised in the statement of comprehensive income. For assets not carried at a revalued amount, the total impairment loss is recognised in the statement of comprehensive income.

Creditors and other payables

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

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 and time off in lieu earned but not yet taken at balance date, retiring and long service leave entitlements expected to be settled within 12 months, and sick leave.

The Ministry recognises a liability and an expense for bonuses where it is 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 a model for use by government entities that was developed by the Treasury during 2008/09 in consultation with a firm of actuaries.

The calculations are based on likely future entitlements accruing to staff based on years of service; years to entitlement; the likelihood that staff will reach the point of entitlement; contractual entitlements information; and the present value of the estimated future cash flows.

The discount rate is based on New Zealand government bond data at 30 June 2010.

Presentation of employee entitlements

Sick leave, annual leave, long service leave and retirement gratuities expected to be settled within 12 months of balance date are classified as current liabilities. All other employee entitlements are classified as non-current liabilities.

Superannuation schemes

Defined contribution schemes

Obligations for contributions to the State Sector Retirement Savings Scheme, Kiwisaver, and Global Retirement Trust Superannuation are accounted for as defined contribution schemes and are recognised as expenses in the statement of comprehensive income as incurred.

Defined benefit schemes

Obligations for contributions to the Government Superannuation Fund are accounted for as defined benefit schemes and are recognised as expenses in the statement of comprehensive income 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 into general funds and property, plant and equipment revaluation reserves.

Commitments

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

Commitments that will incur penalty or exit costs if an option to cancel is exercised are included in the statement of commitments at the value of that penalty or exit cost.

Goods and services tax (GST)

Most items in the financial statements, including appropriation statements, are stated exclusive of GST. The only exceptions are receivables and payables, which are stated on a GST-inclusive basis. Where GST is not recoverable as input tax, it is recognised as part of the related asset or expense.

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 consistent with the financial information in the Main Estimates. These financial statements also present the updated budget information from the Supplementary Estimates.

The budget figures have been prepared in accordance with NZ GAAP, using accounting policies that are consistent with those adopted in preparing these financial statements.

Statement of cost accounting policies

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

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

Direct costs are charged directly to outputs. Indirect costs are allocated to outputs through a two-stage process. The costs are assigned to cost centres within the Ministry, and then allocated to outputs on the basis of the direct staff costs attributable to the outputs of that cost centre.

Depreciation and capital charge are allocated on the basis of asset utilisation. Personnel costs are charged directly to the cost centre within the output to which they belong and at the time they were incurred.

Critical accounting estimates and assumptions

In preparing these financial statements, estimates and assumptions have been made that may differ from the subsequent actual results. Where appropriate, the judgment or assumption made is provided in the relevant accounting policy or in the relevant note.

Estimates and assumptions are reviewed on an ongoing basis. They are based on historical experience and other factors that are believed to be reasonable under the circumstances. Where revisions to accounting estimates are made, these are recognised in the period to which the estimate is revised.

Note 2: Revenue

Actual 2008/09

$000

 

Actual 2009/10

$000

175

Contract history projects

127

49

Seconded staff

182

State Sector Retirement Savings Scheme and Kiwisaver recoveries

196

15

Publication sales/royalties

22

2

Other revenue

54

423

Total revenue other

399

Note 3: Personnel costs

Actual 2008/09

$000

 

Actual 2009/10

$000

7,869

Salaries and wages

8,329

183

Training and development

181

246

Employer contributions to superannuation funds

242

154

Other personnel costs

136

8,452

Total personnel costs

8,888

 

Employer contributions to defined contribution plans include contributions to the State Sector Retirement Savings Scheme, Kiwisaver and Global Retirement Trust Superannuation. Employer contributions are also made to the Government Superannuation Fund – a defined benefit scheme.

Note 4: Capital charge

The Ministry pays a capital charge to the Crown on its taxpayers’ funds as at 30 June and 31 December each year. The capital charge rate for the year ended 30 June 2010 was 7.5% (2009: 7.5%).

Note 5: Other operating expenses

Actual 2008/09

$000

 

Actual 2009/10

$000

42

Audit fees for financial statement audit (Audit New Zealand)

44

Other fees paid to the auditor

11

472

Rental and leasing expenses

519

214

Other occupancy expenses

201

194

Publicity and research

178

843

Professional and specialist services

952

238

Travel and associated expenses

234

741

Information communication technology

795

1,223

Transfer to agencies*

969

701

Other operating expenses

764

4,668

Total operating expenses

4,667

 

To increase disclosure, additional categories were introduced in 2009/10. The figures for 2008/09 have been reworked to reflect this.

* Transfers to agencies includes Cultural Diplomacy International Programme agencies.

Note 6: Debtors and other receivables

Actual 2008/09

$000

 

Actual 2009/10

$000

181

Trade debtors

128

60

GST receivables

241

Total debtors and other receivables

128

 

The carrying value of debtors and other receivables approximates their fair value. No debtor is past due and the Ministry has assessed that no provision for impairment is required as no losses are expected for the Ministry’s pool of debtors.

Note 7: Property, plant and equipment

Computer
equipment

$000

Office equipment

$000

Office furniture

$000

Leasehold improvements
$000

Works
of art

$000

Total

$000

Cost or valuation

 

 

 

 

 

 

Balance at 1 July 2008

620

167

380

1,313

20

2,500

Additions

90

14

29

71

204

Disposals

(29)

(17)

(46)

Other asset adjustment (rounding)

1

1

1

3

Balance at 30 June and 1 July 2009

681

165

409

1,385

21

2,661

Additions

210

7

7

43

267

Disposals

(115)

(2)

(117)

Other asset adjustment (rounding)

1

(1)

(1)

(1)

Balance at 30 June 2010

776

171

415

1,427

21

2,810

Accumulated depreciation and impairment losses

 

 

 

 

 

 

Balance at 1 July 2008

472

114

162

666

1,414

Depreciation expense

93

19

52

216

380

Elimination on disposal

(29)

(17)

(46)

Balance at 30 June and 1 July 2009

536

116

214

882

1,748

Depreciation expense

105

20

51

219

1

396

Elimination on disposal

(115)

(2)

(117)

Other asset adjustment (rounding)

(1)

2

(1)

Balance at 30 June 2010

525

134

267

1,100

1

2,027

Carrying amounts

 

 

 

 

 

 

At 1 July 2008

148

53

218

647

20

1,086

At 30 June and 1 July 2009

145

49

195

503

21

913

At 30 June 2010

251

37

148

327

20

783

Note 8: Intangible assets

 

Total

$000

Cost or valuation

 

Balance at 1 July 2008

164

Additions

43

Disposals

Other asset adjustment (rounding)

Balance at 30 June and 1 July 2009

207

Additions

232

Disposals

(2)

Balance at 30 June 2010

437

Accumulated amortisation and impairment losses

 

Balance at 1 July 2008

132

Amortisation expense

58

Elimination on disposal

Balance at 30 June and 1 July 2009

190

Amortisation expense

41

Elimination on disposal

(2)

Balance at 30 June 2010

229

Carrying amounts

 

At 1 July 2008

32

At 30 June and 1 July 2009

17

At 30 June 2010

208

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

Actual 2008/09

$000

 

Actual 2009/10

$000

213

Trade creditors

478

Crown revenue received in advance*

890

88

PAYE payable

101

GST payable

1

838

Accrued expenses

407

1,139

Total creditors and payables

1,877

 

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

* Cabinet agreed in late June 2010 to transfer funding for the Cultural Diplomacy International Programme from 2009/10 to 2010/11. The cash had already been drawn down, so the $890,000 is recorded as an advance as at 30 June 2010.

Note 10: Return of operating surplus

Any operating surplus is required to be paid to the Crown by 31 October each year.

Note 11: Employee entitlements

Actual 2008/09

$000

 

Actual 2009/10

$000

 

Current employee entitlements

 

385

Annual leave

399

73

Long service leave

61

Other leave entitlements

29

458

Total current portion

489

 

Non-current employee entitlements

 

39

Long service leave

43

54

Retirement leave

39

93

Total non-current portion

82

551

Total employee entitlements

571

 

The measurement of the long service and retirement leave obligations depends on a number of factors, including the assumptions that are made about the discount rate and the salary inflation rate. Any changes in these assumptions will affect the carrying amount of the liability.

The discount rate is based on New Zealand government bond data at 30 June 2010. The salary inflation rate has been determined after considering historical 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 $5,000 higher/lower. If the salary inflation 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 $5,000 higher/lower.

Note 12: Reconciliation of net surplus to net cash flow from operating activities

This reconciliation discloses the non-cash adjustments applied to the surplus reported in the statement of comprehensive income to arrive at the net cash flow from operating activities disclosed in the statement of cash flows.

Actual 2008/09

$000

 

Actual 2009/10

$000

1,494

Net surplus/(deficit)

634

 

Add/(less) non-cash items:

 

438

Depreciation and amortisation

437

(23)

Increase/(decrease) in non-current employee entitlements

(11)

415

Total non-cash items

426

 

Add/(less) items classified as investing or financing activities:

 

(Gains)/losses on disposal of property, plant and equipment

 

Add/(less) movements in working capital items:

 

1,017

(Increase)/decrease in debtors and other receivables

113

20

(Increase)/decrease in prepayments

(691)

(301)

(Increase)/decrease in creditors and other payables

738

65

(Increase)/decrease in current employee entitlements

31

801

Net movements in working capital items

191

2,710

Net cash flow from operating activities

1,251

Note 13: Related party transactions and key management personnel

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 transacts with other government departments, Crown entities and state-owned enterprises on an arm’s-length basis. 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 circumstances are not disclosed.

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

Where close family members of key management personnel are employed by the Ministry, the terms and conditions of those arrangements are no more favourable than the Ministry would have adopted were there no such relationship.

The Ministry purchases advertising and educational services from Victoria University. One member of the senior management team currently serves on the Victoria University Council. In 2010 the cost of these services was $14,717 (2009: $19,720). The services were supplied under normal commercial terms. There are no outstanding balances at 30 June 2010 (2009: $0).

Key management personnel compensation

Actual 2008/09

$000

 

Actual 2009/10

$000

1,390

Salaries and other short-term employee benefits

1,480

2

Other long-term benefits

4

1,392

Total key management personnel compensation

1,484

The key management personnel are the Chief Executive and the eight members (2009: nine members) of the senior management team. The salary figure was lower in 2008/09 as the Ministry carried a vacancy while awaiting the appointment of a permanent Chief Executive, who started work in June 2009.

Note 14: Financial instrument risks

The Ministry’s activities expose it to a low level of financial instrument risks, which include market risk, credit risk, currency risk, interest rate risk and liquidity rate risk. The Ministry has a series of policies to manage the risks associated with financial instruments, to which it seeks to minimise its exposure. These policies do not allow any speculative transactions to be entered into.

Market risk

Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument 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 fair value of or the cash flows from a financial instrument will fluctuate because of changes in market interest rates. The Ministry has no interest-bearing financial instruments and so has no exposure to interest rate risk.

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 debtors and deposits with banks. The Ministry is only permitted to deposit funds with Westpac, a registered bank, and enter into foreign exchange forward contracts with the New Zealand Debt Management Office. These entities have high credit ratings. For its other financial instruments, the Ministry does not have significant concentrations of credit risk.

The Ministry’s maximum credit exposure for each class of financial instrument is represented by the total carrying amount of cash and cash equivalents and net debtors (Note 6: Debtors and other receivables). There is no collateral held as security against these financial instruments, including those that are overdue or impaired.

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 are outlined in Note 9: Creditors and other payables.

Note 15: Financial instrument categories

The carrying amounts of financial assets and financial liabilities in each of the NZ IAS 39 categories are as follows:

Actual 2008/09

$000

 

Actual 2009/10

$000

 

Loans and receivables

 

3,112

Cash and cash equivalents

2,371

241

Debtors and other receivables (Note 6)

128

 

Financial liabilities measured at amortised cost

 

1,139

Creditors and other payables (Note 9)

1,877

Note 16: Capital management

The Ministry’s capital is its equity (or taxpayers’ funds), represented by its net assets.

The Ministry manages its revenues, expenses, assets, liabilities and general financial dealings prudently. The Ministry’s equity is largely managed as a by-product of managing income, expenses, assets, liabilities and compliance with the government’s Budget processes, Treasury instructions and the Public Finance Act 1989.

Equity is managed with the objective of ensuring that the Ministry effectively achieves the goals and objectives for which it was established, while remaining a going concern.

Note 17: Explanation of major variations

Significant variances from the Main Estimates for 2009/10 are explained below:

Note

Actual 2009/10

$000

Main Estimates

Variance

increase/

(decrease)

 2009/10

$000

Variance

increase/

(decrease)

 2009/10

 %

Statement of comprehensive income

 

 

 

 

Revenue Crown

a

14,312

16,061

(1,749)

(11)

Revenue from other departments

b

323

202

121

60

Revenue from third parties

c

76

76

Other operating costs

d

4,667

6,824

(2,157)

(32)

Statement of financial position

 

 

 

 

 

Debtors and other receivables

e

128

240

(112)

(47)

Prepayments

f

724

75

649

865

Creditors and other payables

f

1,877

960

917

96

Cash and cash equivalents

g

2,371

1,475

896

61

Intangible assets

h

208

208

 

a) Revenue Crown decreased by $1.749 million during 2009/10 as funding was transferred from 2009/10 to 2010/11 to fund various initiatives and projects, including those associated with the Cultural Diplomacy International Programme and the 2011 Rugby World Cup.

b) The Ministry produces a range of historical works, some of which are funded by other departments. During 2009/10 revenue of $134,000 was received, which was not anticipated when the Main Estimates were finalised.

c) One-off funds associated with Digital Switchover were collected from industry during 2009/10. These were not forecast or known at the start of the financial year.

d) Operating costs are $2.157 million lower than budgeted in the Main Estimates. This is mainly due to timing differences for projects which span a number of  financial years, and the generation of a net surplus of $634,000 which will be returned to the Crown as required under the Public Finance Act 1989. This resulted in less Revenue Crown being required during the year (see also (a) above).

e) Debtors and other receivables are $112,000 lower than budgeted, mainly due to the 30 June 2010 balances being below historical levels, and because the Ministry collected cash before year-end.

f)As outlined in Note 9 Creditors and payables and (a) above, Cabinet agreed in late June 2010 to transfer funding for the Cultural Diplomacy International Programme from 2009/10 to 2010/11. A number of projects had deliverables due in the 2010/11 financial year but required cash distributions before 30 June 2010. These are held as prepayments until the deliverables are completed.

g) The higher-than-budgeted cash balance was primarily the result of three significant and un-forecast events. The Ministry had larger than expected creditors and other payables (as above), a large prepayments account (as above), and a surplus of $634,000 at 30 June 2010.

h) During 2009/10 the Ministry purchased and implemented a new electronic document and records management system. At the time of finalising the Main Estimates, this project was not expected to be completed by the end of the financial year and was therefore excluded.

Note 18: Events after the reporting period

No event has occurred since the end of the financial period (not otherwise dealt with in the financial statements) that has affected, or may significantly affect, the Ministry’s operations or state of affairs for the year ended 30 June 2010.


Updated on 23rd July 2015