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Notes to the financial statements

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 that 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 applying New Zealand equivalents to International Financial Reporting Standards (NZ IFRS).

The financial statements of the Ministry are for the year ended 30 June 2014. The financial statements were authorised for issue by the Chief Executive of the Ministry on 5 September 2014.

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 practice (NZ GAAP), and Treasury Instructions.

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

Measurement base

The financial statements have been prepared on a historical cost basis. 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

There have been no changes in accounting policies during the year.

Standards, amendments, and interpretations issued that are not yet effective and have not been early adopted

The Minister of Commerce has approved a new Accounting Standards Framework (incorporating a Tier Strategy) developed by the External Reporting Board (XRB).  Under this Accounting Standards Framework, the Ministry is classified as a Tier 2 reporting entity and it will be able to apply a reduced disclosure regime under the public sector Public Benefit Entity Standards (PAS).  The effective date for the new standards for public sector entities is for reporting periods beginning on or after 1 July 2014.  This means the Ministry will transition to the new standards in preparing its 30 June 2015 financial statements.

Due to the change in the Accounting Standards Framework for public benefit entities, it is expected that all new NZ IFRS and amendments to existing NZ IFRS will not be applicable to public benefit entities. Therefore, the XRB has effectively frozen the financial reporting requirements for public benefit entities up until the new Accounting Standard Framework is effective. Accordingly, no disclosure has been made about new or amended NZ IFRS that exclude public benefit entities from their scope.

The Ministry anticipates that these standards will have no material impact on the financial statements in the period of initial application.  It is likely that the changes arising from this framework will affect the disclosures required in the financial statements.  However, it is not practicable to provide a reasonable estimate until a detailed review has been completed.

Significant Accounting Policies

Budget and forecast figures

The budget figures are those included in the Information Supporting the Estimates of Appropriations (Budget) for the year ending 30 June 2014 and the Supplementary Estimates of Appropriations (Revised Budget) for the year ending 30 June 2014. The Budget is 2013 Budget Economic and Fiscal Update (BEFU 2013) and the Revised Budget is SUPPS 2014.

The forecast figures are those included in the Estimates of Appropriations for the year ending 30 June 2015. The Forecast is 2014 Budget and Economic and Fiscal Update (BEFU 2014).

The budget and forecast figures have been prepared in accordance with NZ GAAP, using accounting policies that are consistent with those adopted in preparing these financial statements. Forecast information has been included for the following financial year for the first time as required by the Public Finance Amendment Act 2013.

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, contributions to other one-off projects, and reimbursement for costs of staff on secondment to other agencies. 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.

Foreign currency transactions

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 are recognised in the surplus or deficit. 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 surplus or deficit.

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 term of the lease.

Financial instruments

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 which case the transaction costs are recognised in the surplus or deficit.

Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less.

Debtors and other receivables

Debtors and other receivables are recorded at their face value, less any provision for impairment. 

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, receivership or liquidation, 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 a provision for impairment account, and the amount of the loss is recognised in the surplus or deficit. Overdue receivables that are renegotiated are reclassified as current (that is, not past due).

Property, plant and equipment

Property, plant and equipment consist of artwork, leasehold improvements, office furniture, office equipment, computer equipment and motor vehicles.

Property, plant and equipment is measured at cost less accumulated depreciation and impairment losses.

Individual assets, or groups of assets, are capitalised if their cost is greater than $2,000. The value of an individual asset that is less than $2,000 and is part of a group of similar assets is capitalised. In addition, information communications technology (ICT) assets that individually cost more than $1,000 each and have a useful life greater than 12 months are capitalised.

Additions

The cost of an item of property, plant and equipment is recognised as an asset 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 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 disposal proceeds with the carrying amount of the asset. Gains and losses on disposals are included in the surplus or deficit.

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 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%
Office Equipment  5 years  20%
Computer Equipment – PC based 3 – 5 years; 20% - 33%
Computer Equipment – other than PCs; 3 – 5 years; 20% - 33%
Motor Vehicles 3 years 33%
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 the shorter. 

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

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. 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 surplus or deficit.

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

Acquired Computer Software 3 years   33%

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 value in use.

Value in use is depreciated replacement cost for an asset where future economic benefits or service potential of the asset are not primarily dependent on the asset’s 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. The impairment loss is recognised in the surplus or deficit. The reversal of an impairment loss is also recognised in the surplus or deficit.

Creditors and other payables

Creditors and other payables are non-interest bearing and are normally settled on 30-day terms. Creditors and other payables are recorded at their face value.

Employee entitlements

Short-term employee entitlements

Employee entitlements expected 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, and retiring and long service leave entitlements expected to be settled within 12 months.

A liability and an expense are recognised for bonuses where the Ministry has a contractual obligation or where there is a past practice that has created a constructive obligation.

Long-term employee entitlements

Employee entitlements that are due to be settled beyond 12 months after the end of the reporting period in which the employee renders the related service, such as long service leave and retiring leave, are calculated on an actuarial basis. 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, and contractual entitlements information; and

· the present value of the estimated future cash flows.

Expected future payments are discounted using market yields on government bonds at balance date with terms to maturity that match, as closely as possible, the estimated future cash outflows for entitlements. The inflation factor is based on the expected long-term increase in remuneration for employees. The Ministry uses the risk-free discount rates and consumer price index assumptions published annually by The Treasury.

Presentation of employee entitlements

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

The Ministry does not recognise any provision for sick leave as employees are not entitled to accrue sick leave during their period of employment.

Superannuation schemes

Defined contribution schemes

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

Equity

Equity is the Crown’s investment in the Ministry and is measured as the difference between total assets and total liabilities. Equity is classified as taxpayers’ funds.

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.

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 lower of the remaining contractual commitment and the value of that penalty or exit cost.

Goods and services tax

All items in the financial statements, including appropriation statements, are stated exclusive of goods and service tax (GST), except for receivables and payables, which are stated on a GST-inclusive basis. Where GST is not recoverable as input tax, then 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.

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 in an economically feasible manner with a specific output.

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.

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

Critical accounting estimates and assumptions

In preparing these financial statements, estimates and assumptions have been made concerning the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions 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 referred to below:

Retirement and long service leave

An analysis of the exposure in relation to estimates and uncertainties surrounding retirement and long service leave liabilities is disclosed in note 11.

Critical judgements in applying accounting policies

Management has exercised the following critical judgements in applying accounting policies for the year ended 30 June 2014.

Operating leases

Determining whether a lease agreement is a finance lease or an operating lease requires judgement as to whether the agreement transfers substantially all the risks and rewards of ownership to the Ministry. Judgement is required on various aspects that include, but are not limited to, the fair value of the leased asset, the economic life of the leased asset, whether or not to include renewal options in the lease term, and determining an appropriate discount rate to calculate the present value of the minimum lease payments. Classification as a finance lease means the asset is recognised in the statement of financial position as property, plant and equipment, whereas with an operating lease no such asset is recognised. The Ministry has exercised its judgement on the appropriate classification of equipment leases, and has determined all lease arrangements to be operating leases.

Note 2: Other Revenue

 

Actual

  2013

$000

Actual
2014

$000

Forecast

2015

$000

Publication sales/royalties

9

16

Non Crown revenue – Frankfurt Book Fair

975

Non Crown revenue – WW100

178

533

525

Other revenue

136

317

Total other revenue

1,298

866

525

Note 3: Personnel costs

 

Actual

  2013

$000

Actual
2014

$000

Forecast

2015

$000

Salaries and wages

11,065

11,131

8,500

Training and development

115

151

150

Employer contributions to defined contribution plans

316

368

323

Other personnel costs

133

66

127

Total personnel costs

11,629

11,716

9,100

Employer contributions to defined contribution plans include contributions to the State Sector Retirement Savings Scheme, Kiwisaver, Global Retirement Trust Superannuation and Government Superannuation Fund. The Ministry had 117 full-time equivalent (FTE) positions (including vacancies) at 30 June 2014 (2013: 126).

Note 4: Other operating expenses

 

 

Actual

  2013

$000

Actual
2014

$000

Forecast

2015

$000

Fees to auditor

 

 

 

- fees to Audit New Zealand for audit of financial statements

51

57

 

53

- fees to Audit New Zealand for other services

Rental and leasing expenses

430

413

450

Other occupancy expenses

1,334

1,265

1,300

Publicity and research

4,454

2,871

2,200

Professional and specialist services

1,970

2,445

2,241

Travel and associated expenses

1,126

405

500

Information communication technology

962

851

850

Transfer to agencies*

821

260

200

 

 

 

 

Other operating expenses

1,437

327

386

Total operating expenses

12,585

8,894

8,180

* Transfers to agencies includes Cultural Diplomacy International Programme agencies.

Note 5: Property, plant and equipment

Computer
equipment

$000

Office equipment

$000

Office furniture

$000

Leasehold improvements
$000

Vehicles

$000

Works
of art

$000

Total

$000

Cost

 

 

 

 

 

 

 

Balance at 1 July 2012

593

151

406

303

262

21

1,736

Additions

124

5

8

8

145

Disposals

(180)

(5)

(185)

Balance at 30 June and
1 July 2013

537

151

414

311

262

21

1,696

Additions

271

271

Disposals

(73)

(3)

(49)

(262)

(387)

Balance at 30 June 2014

735

148

365

311

21

1,580

Accumulated depreciation and impairment losses

 

 

 

 

 

Balance at 1 July 2012

451

128

362

33

60

1

1,035

Depreciation expense

118

8

42

117

48

1

334

Elimination on disposal

(180)

(5)

(185)

Balance at 30 June and
1 July 2013

389

131

404

150

108

2

1,184

Depreciation expense

105

7

4

119

23

258

Elimination on disposal

(64)

(3)

(49)

(131)

(247)

Balance at 30 June 2014

430

135

359

269

2

1,195

Carrying amounts

 

 

 

 

 

 

 

At 1 July 2012

142

23

44

270

202

20

701

At 30 June and 1 July 2013

148

20

10

161

154

19

512

At 30 June 2014

305

13

6

42

19

385

The amount of property, plant and equipment in the course of construction is nil (2013: nil).

There are no restrictions over the title of the Ministry’s assets. No assets are pledged as security for liabilities.

Note 6: Intangible assets

 

Total

$000

Acquired computer software

 

Cost

 

Balance at 1 July 2012

278

Additions

23

Disposals

Balance at 30 June and 1 July 2013

301

Additions

46

Disposals

(5)

Balance at 30 June 2014

342

Accumulated amortisation and impairment losses

 

Balance at 1 July 2012

204

Amortisation expense

71

Elimination on disposal

-

Balance at 30 June and 1 July 2013

275

Amortisation expense

27

Elimination on disposal

(5)

Balance at 30 June 2014

297

Carrying amounts

 

At 1 July 2012

74

At 30 June and 1 July 2013

26

At 30 June 2014

45

There are no restrictions over the title of the Ministry’s intangible assets. No intangible assets are pledged as security for liabilities.

Note 7: Capital charge

The Ministry pays a capital charge to the Crown on its equity (adjusted for memorandum accounts) as at 30 June and 31 December each year. The capital charge rate for the year ended 30 June 2014 was 8% (2013: 8%).

Note 8: Debtors and other receivables

 

Actual

  2013

$000

Actual
2014

$000

Trade debtors

497

646

Total debtors and other receivables

497

646

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

Ageing profile of receivables

All of the Ministry’s debtors and other receivables are current (within 30 days) except for debtors to the value of $40,691.90 which are between 60 and 90 days old (2013: all current except for debtors to the value of $6,400 which were between 60 and 90 days old).

Impairment of receivables

The Ministry has assessed that no provision for impairment is required as no losses are expected for the Ministry’s pool of debtors.

Note 9: Creditors and other payables

 

Actual

  2013

$000

Actual
2014

$000

Trade creditors

1,069

378

PAYE payable

120

143

GST payable

111

(21)

Accrued expenses

770

861

Total creditors and other payables

2,070

1,361

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: Return of operating surplus

The return of operating surplus to the Crown is required to be paid by 31 October of each year. The total surplus to be returned is $662,000 (2013: $2.876 million) as per the Statement of Comprehensive Income.

Note 11: Employee entitlements

 

Actual

  2013

$000

Actual
2014

$000

Current portion

 

 

Annual leave

571

493

Long service leave

42

51

Total current portion

613

544

Non-current portion

 

 

Long service leave

54

51

Retirement leave

23

25

Total non-current portion

77

76

Total employee entitlements

690

620

The measurement of the long service and retirement 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 include the discount rate and the salary inflation factor. 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 2014. The salary inflation factor has been determined after considering historical patterns and after obtaining advice from an independent actuary. The Ministry uses the risk-free discount rates and consumer price index assumptions published annually by The Treasury.

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 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 $5,000 higher/lower.

Discount rates and salary inflation applied:

Employee entitlement variables

2015

%

2016

%

2017

%

Discount rates

3.70

4.04

5.50

Salary inflation

1.50

3.50

3.50

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

 

Actual

  2013

$000

Actual
2014

$000

Net surplus/(deficit)

2,876

664

Add/(less) non-cash items

 

 

Depreciation and amortisation

405

285

Total non-cash items

405

285

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

 

 

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

0

(9)

Add/(less) movements in deferrals and accruals

 

 

(Increase)/decrease in debtors and other receivables

3,385

(149)

(Increase)/decrease in prepayments

67

16

Increase/(decrease) in creditors and other payables

(827)

(709)

Increase/(decrease) in current employee entitlements

(2)

(69)

Net movements in working capital items

2,623

(911)

Net cash flow from operating activities

5,904

29

Note 13: Related party transactions

All related party transactions have been entered into on an arms’ length basis.

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.

Significant transactions with government-related entities

The Ministry has received funding from the Crown of $20.809 million (2013: $26.313 million) to provide services to the public for the year ended 30 June 2014.

Collectively, but not individually, significant transactions with government-related entities

In conducting its activities, the Ministry is required to pay various taxes and levies (such as GST, FBT, PAYE, and ACC levies) to the Crown and entities related to the Crown. The payment of these taxes and levies, other than income tax, is based on the standard terms and conditions that apply to all tax and levy payers. The Ministry is exempt from paying income tax.

The Ministry also receives revenue from and purchases goods and services from entities controlled, significantly influenced, or jointly controlled by the Crown.

Revenue from these government-related entities for the year ended 30 June 2014 totalled $0.825 million (2013: $1.1 million). This revenue included funding contributions towards specific projects, including the First World War Centenary Commemorations, from the State Services Commission, Ministry of Foreign Affairs and Trade, Department of Corrections, Ministry of Justice, Department of Internal Affairs, New Zealand Defence Force, New Zealand Film Commission, Massey University, New Zealand Post and Health Promotion Agency.

Purchases from these government-related entities for the year ended 30 June 2014 totalled $0.845 million (2013: $1.9 million). These purchases included air travel from Air New Zealand, legal services from Crown Law Office, electricity from Genesis Energy, and postal services from New Zealand Post.

Transactions with key management personnel and their close family members

Key management personnel compensation

 

Actual

  2013

$000

Actual
2014

$000

Salaries and other short-term employee benefits

999

955

Other long-term benefits

7

3

Total key management personnel compensation

1,006

958

Key management personnel of the Ministry comprise the Minister for Arts, Culture and Heritage, the Minister of Broadcasting, the Minister for Sport and Recreation, the Chief Executive, and the four members of the Ministry Leadership Team.

The above key management personnel compensation excludes the remuneration and other benefits the Minister for Arts, Culture and Heritage, the Minister of Broadcasting, and the Minister for Sport and Recreation receives. The Ministers’ remuneration and other benefits are not received only for their role as a member of key management personnel of the Ministry. The Ministers’ remuneration and other benefits are set by the Remuneration Authority under the Civil List Act 1979 and are paid under Permanent Legislative Authority, and not paid by the Ministry.

There is one close family member of key management personnel employed by the Ministry. The terms and conditions of this arrangement was no more favourable than the Ministry would have adopted if there were no relationship to key management personnel.

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, and liquidity risk. The Ministry has a series of policies to manage the risks associated with financial instruments and seeks to minimise exposure from financial instruments. These policies do not allow any transactions that are speculative in nature 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.

Due 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 a financial instrument will fluctuate, or the cash flows from a financial instrument will fluctuate, due to changes in market interest rates.

The Ministry has no exposure to interest rate risk because it has no interest-bearing financial instruments.

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, credit risk arises 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 8). There is no collateral held as security against these financial instruments.

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.

Contractual maturity analysis of financial liabilities, excluding derivatives

All creditors and other payables will mature within 6 months (2013: within 6 months).

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

  2013

$000

Actual
2014

$000

Loans and receivables

 

 

Cash and cash equivalents

5,967

2,951

Debtors and other receivables

497

646

Total loans and receivables

6,464

3,597

Financial liabilities measured at amortised cost

 

 

Creditors and other payables

2,070

1,361

Note 16: Capital management

The Ministry’s capital is its equity (taxpayers’ funds), which is represented by 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 Budget processes, Treasury Instructions, and the Public Finance Act 1989.

The objective of managing the Ministry’s equity is to ensure that the Ministry effectively achieves its goals and objectives for which it was established, while remaining a going concern.

Note 17: Explanation of major variances against budget

Explanations for major variances from the Ministry’s budgeted figures in the Information Supporting the Estimates are as follows:

Statement of comprehensive income

Crown Revenue

Crown revenue was $1.780 million lower than originally budgeted due to transfers of WW100 funding carried forward to 2014/15 and out years.

Other operating expenses

Other operating expenses were $3.898 million less than budget due to the timing of projects, including First World War commemorations.

Statement of financial position

Cash and cash equivalents

Cash and cash equivalents were $0.552 million greater than budget due the surplus of $0.662 million.

Statement of cash flows

Receipts from the Crown were $3.429 million greater than budget due to the timing of cash drawn down from Treasury in 2011/12, which matched closely to actual cash expenditure, meaning a debtor remained at 30 June 2012. This debtor was received in cash in 2012/13. There was no debtor to be drawn down in 2013/14.

Note 18: Events after the balance date

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 2014.


Updated on 23rd July 2015