Notes to the Financial Statements

NOTE 1: STATEMENT OF ACCOUNTING POLICIES

REPORTING ENTITY

Te Puni Kōkiri is a Government Department as defined by section 2 of the Public Finance Act 1989. Accordingly, Te Puni Kōkiri 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 department are for the year ended 30 June 2010. The financial statements were authorised for issue by the Chief Executive of Te Puni Kōkiri on 30 September 2010.

In addition, Te Puni Kōkiri has reported the Crown activities that it administers.

STATEMENT OF COMPLIANCE

The financial statements of Te Puni Kōkiri have been prepared in accordance with the requirements of the Public Finance Act 1989, which includes the requirement 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.

The financial statements have been prepared on an 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 Te Puni Kōkiri is New Zealand dollars.

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 changes in accounting policies. All policies have been applied on a basis consistent with the previous year.

The Ministry has adopted the following revisions to accounting standards during the financial year, which have had only a presentational or disclosure effect:

• NZ IAS 1 Presentation of Financial Statements (Revised 2007) 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 and introduces a statement of comprehensive income. The statement of comprehensive income will enable readers to analyse changes in equity resulting from nonowner changes separately from transactions with owners. The Ministry has decided to prepare a single statement of comprehensive income for the year ended 30 June 2010 under the revised standard. Financial statement information for the year ended 30 June 2009 has been restated accordingly. Items of other comprehensive income presented in the statement of comprehensive income were previously recognised directly in the statement of changes in equity.
  
• Amendments to NZ IFRS 7 Financial Instruments: Disclosures. The amendments introduce a threelevel fair value disclosure hierarchy that distinguishes fair value measurements by the significance of valuation inputs used, and requires the maturity analysis of derivative liabilities to be presented separately from nonderivative financial liability contractual maturity analysis. This new information is disclosed in note 15. The transitional provisions of the amendments do not require disclosure of comparative information in the first year of application. The Ministry has elected to disclose comparative information.

STANDARDS, AMENDMENTS, AND INTERPRETATIONS ISSUED THAT ARE NOT YET EFFECTIVE AND HAVE NOT BEEN EARLY ADOPTED

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

1. 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:
2. Removes the previous disclosure concessions applied by the Ministry for armslength 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.
3. Provides clarity on the disclosure of related party transactions with Ministers of the Crown. Further, with the exception of the Minister of Māori Affairs, the Associate Minister of Māori Affairs and the Minister Responsible for Whānau Ora, the Ministry will be provided with an exemption from certain disclosure requirements relating to transactions with other Ministers of the Crown. The clarification could result in additional disclosures should there be any related party transactions with Ministers of the Crown.
4. Clarifies that related party transactions include commitments with related parties.

The Ministry expects it will early 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 through the following 3 main phases: Phase 1 Classification and Measurement, Phase 2 Impairment Methodology, and Phase 3 Hedge Accounting. Phase 1 on the classification and measurement of financial assets has been completed and has been published in the new financial instrument standard NZ IFRS 9. NZ IFRS 9 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 approach in NZ IFRS 9 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 a single impairment method to be used, replacing 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

The following particular accounting policies that materially affect the measurement of financial results and financial position have been applied.

The accrual basis of accounting has been used unless otherwise stated.

REVENUE

Te Puni Kōkiri derives revenue through the provision of outputs to the Crown and for services to third parties. Revenue is measured at the fair value of consideration received.

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

CAPITAL CHARGE

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

OPERATING LEASES

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased items are classified as operating leases. Lease payments under an operating lease are recognised as an expense on a straight line basis over the lease term.

FINANCIAL INSTRUMENTS

Te Puni Kōkiri is party to financial instruments as part of its normal operations. These financial instruments include bank accounts, debtors and creditors. All financial instruments are recognised in the Statement of Financial Position and all revenue and expenses in relation to financial instruments are recognised in the Statement of Comprehensive Income.

Designation of financial assets and financial liabilities by individual entities into instrument categories is determined by the business purpose of the financial instruments, policies and practices for their management, their relationship with other instruments and the reporting costs and benefits associated with each designation.

All foreign exchange transactions are translated at the rates of exchange applicable in each transaction. Te Puni Kōkiri does not carry any balances in foreign currencies.

CASH AND CASH EQUIVALENTS

Cash includes cash on hand and funds on deposit with banks and is measured at face value.

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 comprehensive income. Overdue receivables that are renegotiated are reclassified as current (i.e. not past due).

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of leasehold improvements, furniture and office equipment, EDP hardware, software that are an integral part of running the hardware, and motor vehicles. Property, plant and equipment is shown at cost less accumulated depreciation and impairment losses. Individual assets, or group of assets, are capitalised if their cost is greater than $5,000. The value of an individual asset that is less than $5,000 and is purchased as part of a group of similar assets is capitalised.

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 comprehensive income in the period in which the transaction occurs. 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 straightline basis on all property, plant and equipment, at rates that will write off 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: Computer Equipment 4 years 25% Motor Vehicles 5 years 20% Office Equipment 5 years 20% Furniture and Fittings 5 years 20% Leasehold Improvements up to 12 years* Software Development 3 1/3 years 30% * Leasehold improvements are depreciated over the unexpired period of the lease or the estimated remaining useful lives of the improvements, whichever is the shorter.

INTANGIBLE ASSETS

SOFTWARE ACQUISITION AND DEVELOPMENT

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. Costs that are directly associated with the development of software for internal use by the Ministry, are recognised as an intangible asset. Direct costs include the software development, employee costs and an appropriate portion of relevant overheads. Staff training costs are recognised as an expense when incurred.

AMORTISATION

The carrying value of an intangible asset with a finite life is amortised on a straightline 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 Comprehensive Income. The useful lives and associated amortisation rates of major classes of intangible assets have been estimated as follows:

Acquired computer software	3 1/3 years	30%
Developed computer software	3 1/3 years	30%

IMPAIRMENT OF NON-FINANCIAL ASSETS

Intangible assets that have an indefinite useful life or not yet available for use at the balance sheet date is tested for impairment annually. 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 the 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 entity 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 total impairment loss is recognised in the statement of comprehensive income. For 2009/10, no impairment loss has been recognised (nil 2008/09).

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

Te Puni Kōkiri recognises a liability for sick leave to the extent that absences in the coming year are expected to be greater than the sick leave entitlements earned in the coming year. The amount is calculated based on the unused sick leave entitlement that can be carried forward at balance date, to the extent that the Ministry anticipates it will be used by staff to cover those future absences.

The Ministry recognises a liability and an expense for performance payments 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.

PRESENTATION OF EMPLOYEE ENTITLEMENTS

Sick leave, annual leave, vested long service leave, and nonvested 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 noncurrent liability.

SUPERANNUATION SCHEMES

DEFINED CONTRIBUTION SCHEMES

Obligations for contributions to the State Sector Retirement Savings Scheme, KiwiSaver and the Government Superannuation Fund are accounted for as defined contribution schemes and are recognised as an expense in the statement of comprehensive income as incurred.

PROVISIONS

The Ministry recognises a provision for future expenditure of uncertain amount or timing when there is a present obligation (either legal or constructive) as a result of a past event, it is probable that an outflow of future economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not recognised for future operating losses.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as a finance cost.

TAXPAYERS' FUNDS

Taxpayers' funds is the Crown's investment in the Ministry and is measured as the difference between total assets and total liabilities.

COMMITMENTS

Expenses yet to be incurred on noncancellable 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 value of that penalty or exit cost.

GOODS AND SERVICES TAX (GST)

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. 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.

CONTINGENT ASSETS AND LIABILITIES

Contingent assets and liabilities are disclosed at the point at which the contingency is evident. Contingent liabilities are disclosed if the possibility that they will crystallise is not remote. Contingent assets are disclosed if it is probable that the benefits will be realised.

NET OPERATING SURPLUS

The net operating surplus for the period is repayable to the Crown and a provision for this repayment is shown in the Statement of Financial Position.

BUDGET FIGURES

The budget figures are those included in the Ministry's Forecast Financial Statement published in the Information Supporting the Estimates of Appropriation for the year ending 30 June 2010. In addition, the financial statements also present the updated budget information from the 2009/10 Supplementary Estimates.

STATEMENT OF COST ACCOUNTING POLICIES

Te Puni Kōkiri has determined the cost of outputs using the cost allocation system outlined below.

CRITERIA FOR DIRECT COSTS

‘Direct costs' are those costs that are directly attributed to an output.

CRITERIA FOR INDIRECT COSTS

‘Indirect costs' are those costs that cannot be attributed in an economically feasible manner, to a specific output.

These include depreciation and capital charge which are charged to outputs on the basis of fulltime equivalents (FTEs) attributable to each output.

Personnel costs (excluding those of Support Services Wahanga and the Office of the Chief Executive) are allocated to outputs based on budgeted FTEs attributable to each output. Property and other premises costs, such as maintenance, are charged to wahanga (business units) on the basis of budgeted FTEs.

Corporate overheads are allocated to outputs on the basis of budgeted FTEs attributable to each output.

There have been no changes in cost accounting policies.

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 10.

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 2010.

Note 2: Revenue Other

30-Jun-09 Actual $000		30-Jun-10 Actual $000
0	KiwiSaver employer's contribution	120
0	Māori Trustee-service fees	330
2	Other Revenue	3
2	Total Other Revenue	453

Note 3: Personnel Costs

30-Jun-09 Actual $000		30-Jun-10 Actual $000
31,798	Salaries and Wages	28,110
787	Other Personnel Costs	330
32,585	Total Personnel Costs	28,735

Note 4: Operating Costs

30-Jun-09 Actual $000		30-Jun-10 Actual $000
143	Audit fees for audit of financial statements	143
0	Other fees charged by auditors	13
3,295	Operating lease rentals	2,867
155	Overseas and Pacific Travel	83
2,474	Domestic Travel	1,748
950	Printing, Books and Publicity	809
1,306	Contract Workers	1,065
5,132	Consultancy Fees	3,088
1,835	MBFS Commission	2,024
3,783	Programmes	4,758
1,190	Telecommunications	1,049
255	Computer Related Expense	289
14	Koha	18
726	Conference/Hui	511
980	Legal Fees	488
266	Māori Wardens uniforms	222
1,210	Building Maintenance/Heat, Light & Power/Rates	1,090
620	Motor Vehicle running costs	448
248	Software Maintenance	297
2,287	Other Operating Costs	1,574
26,869	Total Operating Costs	22,584

Note 5: Depreciation Charge

30-Jun-09 Actual $000		30-Jun-10 Actual $000
245	EDP Equipment	203
488	Motor Vehicles	568
5	Office Equipment	2
170	Furniture & Fittings	163
454	Leasehold Improvements	445
93	Software Systems	100
1,455	Total Depreciation Costs	1,481

Note 6: Capital Charge

30-Jun-09 Actual $000		30-Jun-10 Actual $000
355	Te Puni Kōkiri 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%)	346

Note 7: Property, Plant and Equipment

	EDP Equipment	Motor Vehicles $000	Office Equipment $000	Furniture & Fittings $000	Leasehold Improvements $000	Total $000
Cost or valuation
Balance at 1 July 2008	1,953	1,662	252	896	2,339	7,102
Additions	238	2,040	16	39	39	2372
Disposals	(299)	(498)	3	239	(239)	(794)
Balance at 30 June 2008	1,892	3,204	271	1,174	2,139	8,680
Balance at 1 July 2009	1,892	3,204	271	1,174	2,139	8,680
Additions	383	117	-	23	-	523
Transfer to Māori Trustee	(25)	(354)	(16)	(31)	(37)	(463)
Disposals	(912)	(102)	-	(1)	-	(1,015)
Balance at 30 June 2010	1,338	2,865	255	1,165	2,102	7,725
Accumulated depreciation
Balance at 1 July 2008	1,491	425	249	415	1,330	3,910
Depreciation expense	244	488	5	164	461	1,362
Eliminate on disposal	(295)	(329)	1	224	(224)	(623)
Balance at 30 June 2009	1,440	584	255	803	1,567	4,649
Balance at 1 July 2009	1,440	584	255	803	1,567	4,649
Depreciation expense	203	568	3	179	429	1,382
Eliminate on disposal	(913)	(37)	-	(1)	-	(951)
Transfer to Māori Trustee	(4)	(79)	(3)	(3)	(1)	(90)
Balance at 30 June 2010	726	1,036	255	978	1,995	4,990
Carrying amounts
At 1 July 2008	462	1,237	3	481	1,009	3,192
At 30 June and 1 July 2009	452	2,620	16	371	572	4,031
At 30 June 2010	612	1,829	-	187	107	2,735

Note 8: Intangible Assets

	Acquired software $000s	Internally generated software $000s	Total $000s
Cost or valuation
Balance at 1 July 2008	1,368	529	1,897
Additions	89	43	132
Disposals	-	-	-
Balance at 30 June 2009	1,457	572	2,029
Balance at 1 July 2009	1,457	572*	2,029
Additions	21	-	21
Disposals	(336)	-	(336)
Transfer to Māori Trustee	-	(109)	(109)
Balance at 30 June 2010	1,142	463	1,605
Accumulated amortisation
Balance at 1 July 2008	1,181	379	1,560
Amortisation expense	66	27	93
Balance at 30 June 2009	1,247	406	1,653
Balance at 1 July 2009	1,247	406	1,653
Amortisation expense	99	-	99
Disposals	(336)	-	(336)
Transfer to Māori Trustee	-	(27)	(27)
Balance at 30 June 2010	1,010	379	1,389
Carrying amounts
At 1 July 2008	187	150	337
At 30 June and 1 July 2009	210	166	376
At 30 June 2010	132	84	216

*Amount includes workinprogress of $83,000 ($83,000 in 2008/09).

Note 9: Creditors and Payables

30-Jun-09 Actual $000		30-Jun-10 Actual $000
948	Trade Creditors	2,408
1,811	Accrued Expenses	2,421
(622)	GST payable	189
2,137	Total creditors and payables	5,018

Note 10: Employee Entitlements

30-Jun-09 Actual $000		30-Jun-10 Actual $000
	Current Liabilities
1,728	Annual Leave	1,461
818	Salaries and Wages	546
16	Long Service and Retirement Leave	9
2,562	Total current portion	2,016
	Non-Current Liabilities
297	Long Service and Retirement Leave	331
297	Total noncurrent portion	331
2,859	Total employee entitlements	2,347

The decrease in employee entitlements is largely due to lower salary and wage accrual as at balance date due to timing of the last pay run for 2009/10. For the calculation of long service leave, discount rates of 3.48% for year 1, 4.45% for year 2 and 6.00% for year 3 and onwards with a long term salary inflation factor of 3.5% were used. These rates and the model for calculations were provided by the Treasury.

Note 11: Related party transactions and key management personnel

Related party transactions

The Ministry is a wholly owned entity of the Crown. The Government significantly influences the roles of the department as well as being its major source of revenue.

Te Puni Kōkiri enters into transactions with other government departments, Crown entities and stateowned 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 Te Puni Kōkiri would have adopted if dealing with that entity at arm's length in the same circumstance are not disclosed.

Transactions with related parties

Māori Trustee
The Māori Trustee was a member of the Ministry's Executive Leadership Team till 30 June 2009. In September 2007, Te Puni Kōkiri entered into a Māori Potential Fund contract with the Māori Trustee to the value of $3.020 million (GST exclusive) for the period from 10 September 2007 to 30 June 2010. The contract expired on 30 June 2010, with a total of $2.095 million (GST exclusive) expensed.

This contract is to ‘develop Māori globallycompetitive icon businesses in the agribusiness sector, focusing on developing niche products for the world markets, developing the basis for increasing productivity from the natural resources, by adding value through technology, management practices, and market relationships'.

Although the Māori Potential Fund contract is with the Māori Trustee, the project is a joint partnership between the Māori Trustee, Federation of Māori Authorities and the Poutama Trust.

Te Puni Kōkiri staff
Te Puni Kōkiri staff who work in local communities may in a private capacity hold executive or advisory positions in local organisations. Some of these organisations may receive funding via Te Puni Kōkiri. These organisations are therefore considered related parties of Te Puni Kōkiri.

Te Puni Kōkiri staff are required to declare any real or potential conflicts of interest. Steps are then taken to ensure that staff members with a conflict of interest are not involved in any Te Puni Kōkiri decisions involving a group/organisation they may be involved with in a private capacity.

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

Ministerial Economic Taskforce
The Ministerial Economic Taskforce was established in March 2009 to take forward the ideas presented at the Māori Economic Workshop in January 2009. The Taskforce is chaired by the Minister of Māori Affairs and comprises seven independent members.

During 2009/10, Te Puni Kōkiri has entered into transactions with organisations associated with Taskforce members on an arm's length basis. The individual Taskforce members were precluded from Taskforce decisions on endorsement of the respective projects.

Significant projects that occured within a normal supplier or client relationship on terms and conditions no more or less favourable than those which it is reasonable to expect Te Puni Kōkiri would have adopted if dealing with those entities at arm's length in the same circumstance are disclosed below.

Te Roopu Pakihi
Te Puni Kōkiri entered into a Māori Potential Fund contract with Te Roopu Pakihi for $304,000 (GST exclusive) for the period December 2009 to April 2010. The remaining value of the contract is $64,000.

The contract is to ‘form a national association of regional Māori Business Networks; establish a Local Partnership Support Programme; and complete ‘He Hapori Whakatupu Mātauranga'a Māori framework which identifies community needs and provides developmental opportunities.'

Daphne Luke is a member of the Māori Economic Taskforce and chair of its Small and Medium sized Enterprises Workstream. She has also provided project management services to Te Roopu Pakihi as part of this project.

Te Ohu Kai Moana
Te Puni Kōkiri entered into a Māori Potential Fund contract with Te Ohu Kai Moana for $315,000 (GST exclusive) for the period December 2009 to August 2010.

The contract is to ‘undertake stakeholder consultation and a business plan for collectivising the Māori lobster quota and related assets.'

Ngahiwi Tomoana is a member of the Māori Economic Taskforce and chair of its Primary Sector Workstream. He is also the Chair of Te Ohu Kai Moana.

Burleigh Evatt Consulting Limited
Te Puni Kōkiri entered into a Māori Potential Fund contract with Burleigh Evatt Consulting Limited for $120,000 (GST exclusive) for the period February 2010 to April 2010.

The contract was to ‘undertake a scoping study that will draw out issues affecting the demand and supply of capital to Māori enterprises based on previous studies and a series of indepth interviews with key stakeholders in the sector, in particular those managing collectively owned assets and those operating in and advising on the capital markets.'

June McCabe is a member of the Maori Economic Taskforce and chair of its Investment, Capital and Enterprise Workstream. In view of the nature of the study and her specialist skills in this area she provided consultancy services to Burleigh Evatt Consulting Limited. Ms McCabe declared her interest and did not vote when the Maori Economic Taskforce endorsed this project.

Key management personnel compensation

30 Jun 09 Actual $000s		30 Jun 10 Actual $000s
1,382	Salaries and other shortterm employee benefits	1,133
3	Other long-term benefits	-
1,385	Total key management personnel compensation	1,133

Key management personnel include the Chief Executive and the four members of the Executive Leadership Team (ELT). Included in last year's actual is the Māori Trustee, who was a member of the Ministry's Executive Leadership Team till 30 June 2009. Included in 2009/10 financial year is a new position for Deputy Secretary Whānau and Social Policy which was created part way during the year.

Key management personnel compensation excludes the remuneration and other benefits the Minister of Māori Affairs, the Associate Minister of Māori Affairs and the Minister Responsible for Whānau Ora receives. 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 Te Puni Kōkiri.

Note 12: Capital Management

Te Puni Kōkiri's capital is its taxpayers' funds, which is represented by net assets. The Ministry manages its revenue, expenses, assets, liabilities and general financial dealings prudently. Its equity is largely managed as a byproduct of managing the above, as well as compliance with the Government budget processes and Treasury instructions. The objective of managing the Ministry's equity is to ensure the Ministry effectively achieves its goals and objectives for which it has been established, whilst remaining a going concern.

Note 13: Explanation for Significant Budget Changes

Refer to “The Supplementary Estimates of Appropriations for the year ending 30 June 2010” for an explanation of significant budget changes between the 2009 Main Estimates and 2009/10 Supplementary Estimates for Vote Māori Affairs (B.7 – Pages 757 and 775).

Note 14: Explanation for Significant Variances

The following notes explain significant variances between Main Estimates and Actuals.

Statement of Comprehensive Income (page 73)

	30-Jun-10 Actual $000s	30-Jun-10 Main Estimates $000s	Variance $000s
Personnel	28,735	35,228	(6,493)
Operating	22,584	26,677	(4,093)
Depreciation and amortisation	1,481	1,768	(287)
Capital charge	346	533	(187)

Personnel: The variance is largely due to the budgets in Main Estimates not reflecting the impact of separation of the Māori Trust Office from Te Puni Kōkiri. The variance also refelcts a combination of number of positions remaining vacant or taking longer than expected time to be appointed, and lower than anticipated costs for the December 2009 remuneration increase.

Operating: The variance is largely due to the budgets in Main Estimates not reflecting the impact of separation of the Māori Trust Office from Te Puni Kōkiri. The variance also reflects savings in Contractors/Consultants and Conference/Hui costs due to a concerted effort across the Ministry to demonstrate a responsible attitude to the current economic recession and Value for Money principles of the government. This has led to greater scrutiny of expenditure decisions and reduced expenditure in some cases.

Depreciation and amortisation: The budgets in the Main Estimates included depreciation costs for the purchase of new assets for the standalone Māori Trustee entity ($1.995m). This appropriation was later transferred to NON-DEPARTMENTAL Capital appropriation, hence did not attract any depreciation expenses.

Capital charge: The budgets in the Main Estimates did not reflect the impact of separation of the Māori Trust Office from Te Puni Kōkiri. With the enactment of the Māori Trustee Amendment Act 2009, the respective MTO balances were moved from Te Puni Kōkiri to the new standalone Māori Trustee entity. This equated to a total of $1.525 million reduction in Taxpayers' equity of Te Puni Kōkiri. The actual capital charge paid was based on the revised taxpayers' equity.

Statement of Financial Position (page 75)

	30-Jun-10 Actual $000s	30-Jun-10 Main Estimates $000s	Variance $000s
Cash and cash equivalents	10,384	7,037	3,347
Property, plant and equipment	2,735	4,462	(1,727)
Intangible assets	216	993	(777)
Creditors and other payables	5,018	2,000	3,018
Taxpayers' Funds	4,621	8,056	(3,435)

Cash and cash equivalents: The increase in cash is largely due to the Net Operating surplus and higher than anticipated creditors and other payables at year end.

Property, plant and equipment: The budgets in the Main Estimates included costs for the purchase of new assets for the standalone Māori Trustee entity ($1.315m). This was later transferred to Non-Departmental Capital appropriation. The variance also relates to postponement of purchase of a number of EDP hardware and Leasehold Improvement assets.

Intangible assets: The variance largely relates to delays in delivery and postponement of purchase of a number of intangible assets including GIS Mapping ($0.120 million) and new assets for the standalone Māori Trustee entity ($0.680 million).

Creditors and Payables: The variance largely reflects the trade creditors balance as at balance date due to timing of the final cheque run for 2009/10.

Taxpayers' Funds: In Budget 2008, new funding was appropriated for the purchase of new assets for the standalone Māori Trustee entity ($1.171 million in 2008/09 and $1.995 million in 2009/10). With the enactment of the Māori Trustee Amendment Act 2009, the respective MTO balances were moved from Te Puni Kōkiri to the new standalone Māori Trustee entity ($1.525 million) and funding of $1.995 million was transferred to NON-DEPARTMENTAL Capital appropriation.

Statement of Departmental Expenditure and Capital Expenditure Appropriations

	30-Jun-10 Actual $000s	30-Jun-10 Main Estimates $000s	Variance $000s
Policy-Crown Māori Relationships	5,832	6,883	(1,051)
Relationships and Information	7,726	8,965	(1,239)
Services to the Maori Trustee	-	10,004	(10,004)
Whanau Ora Administration	1,019	-	1,019

Policy-Crown Māori Relationships: The decrease largely relates to reallocation of resources to recognise increased activity in the PolicySocial and Cultural output.

Relationships and Information: The decrease largely relates to reallocation of resources to recognise increased activity in the PolicySocial and Cultural output.

Services to the Māori Trustee: With the enactment of the Māori Trustee Amendment Act 2009, this departmental appropriation has been transferred to Non-Departmental Output Expense: Māori Trustee Functions. A corresponding decrease is reflected in the Crown Revenue (see Statement of Comprehensive Income, page 56).

Whānau Ora Administration: This is a new appropriation approved in Budget 2010 for implementing, developing and evaluating the whānau ora service delivery approach.

Note 15: Financial instrument

30 Jun 09 Actual $000s		30 Jun 10 Actual $000s
	Loans and receivables
11,905	Cash and cash equivalents	10,384
87	Debtors and other receivables	373
11,992	Total loans and receivables	10,757
	Financial liabilities measured at amortised cost
2,137	Creditors and other payables	5,018

The Ministry's activities expose it to a variety of financial instrument risks, including 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.

The Ministry's foreign exchange management policy requires the Ministry to manage currency risk arising from future transactions and recognised liabilities by covering all material foreign exchange exposures as soon as they arise with approved instruments and counterparties.

The Ministry considers foreign exchange exposure to be material where the transaction exposure limit for an individual currency exceeds NZ$100,000.

The Ministry has two approved instruments that can be used to cover foreign exchange exposure;

• Spot foreign exchange contract for not more than two business day settlements; and
• Forward foreign exchange contract for settlement at a future date.

The Ministry's policy has been approved by the Treasury and is in accordance with the requirements of the Treasury Guidelines for the Management of Crown and Departmental ForeignExchange Exposure.

The Ministry has minimal exposure to currency risk. Foreign exchange exposure is predominantly limited to:

• Personnel based overseas e.g. training and secondments;
• Accommodation and other costs related to international travel (including travel advances paid in foreign currency); and
• Purchasing goods and services from foreign suppliers' e.g. international consultants and journal subscriptions.

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 rate

The Ministry has no interest bearing financial instruments and, accordingly, has no exposure to interest rate risk.

Credit risk

Credit risk is the risk that a third party will default on its obligation to the Ministry, causing the Ministry to incur a loss.

In the normal course of its business, credit risk arises from debtors, deposits with banks and derivative financial instrument assets.

The Ministry is only permitted to deposit funds with Westpac, a registered bank, and enter into foreign exchange spot and forward contracts with the New Zealand Debt Management Office or any counterparty that meets the minimum credit rating criteria. 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. There is no collateral held as security against these financial instruments, including those instruments 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 table below analyses the Ministry's financial liabilities that will be settled based on the remaining period at balance sheet date to the contractual maturity date. The amounts disclosed are the contractual undiscounted cash flows, which is also the carrying amount.

$000	Less than 6 months	Between 6 months and 1 year	Between 1 and 5 years	Over 5 years 2010
22010
Creditors and other payables	5,018	-	-	-
2009	1,019	-	1,019
Creditors and other payable	2,137

NON-DEPARTMENTAL STATEMENTS AND SCHEDULES FOR THE YEAR ENDED 30 JUNE 2010

The following NON-DEPARTMENTAL statements and schedules record the income, expenses, assets, liabilities, commitments and contingent assets and liabilities that the Ministry manages on behalf of the Crown.

SCHEDULE OF NON-DEPARTMENTAL REVENUE FOR THE YEAR ENDED 30 JUNE 2010

The Schedule of NON-DEPARTMENTAL Revenue shows budgeted revenue against actual revenue. Figures are GST exclusive.

30-Jun-09 Actual $000		Note	30-Jun-10 Actual $000s	30-Jun-10 Main Estimates $000s	30-Jun-10 Supps Estimates $000s
	Current Revenue
	Non-Tax Revenue
23	Interest on Advances		8	155	10
93	Miscellaneous Receipts
8,864	Māori Trustee	2	-	3,802	-
-	Mortgage Repayments Intended for Housing Corporation of New Zealand		-	10	10
8,980	Total Current Revenue		136	3,967	2
	Capital Revenue
876	Repayment of Advances		54	325	54
-	Revaluation of Crown land	3	-	-	-
-	Gain on Sale of Properties		5	-	-
876	Total Capital Revenue		59	325	54
9,856	Total Crown Revenue		195	4,292	74

The accompanying notes form part of these financial statements. For a full understanding of the Crown's financial position and the results of its operations for the year, refer to the consolidated Financial Statements of the Government for the year ended 30 June 2010.

SCHEDULE OF NON-DEPARTMENTAL EXPENSES FOR THE YEAR ENDED 30 JUNE 2010

The Schedule of Expenses summarises NON-DEPARTMENTAL expenses that Te Puni Kōkiri administers on behalf of the Crown. Further details are provided in the Statement of Expenditure and Capital Expenditure Appropriations on pages 88 to 89. Figures are GST exclusive.

30-Jun-09 Actual $000		30-Jun-10 Actual $000s	30-Jun-10 Main Estimates $000s	30-Jun-10 Supps Estimates $000s
	Non-Departmental Expenses
	Operating Annual Appropriations
95,680	Non-Departmental Output Expenses	103,524	96,027	104,977
478	Benefits and Other Unrequited Expenses	478	480	480
39,020	Other Expenses to be Incurred by the Crown	15,579	13,662	15,789
135,17	Total Operating Annual Appropriations	119,581	828	121,246
828	Capital Expenditure	3,995	2,000	3,995
15	Appropriations for Other Expenses	15	24	15
677	Loss on Revaluation of Land	-	-	-
(232)	Provision for Write Off'sRural Lending	(10)	-	-
136,466	Total Non-Departmental Expenses	123,581	112,193	125,256

STATEMENT OF NON-DEPARTMENTAL EXPENDITURE AND CAPITAL EXPENDITURE APPROPRIATIONS FOR THE YEAR ENDED 30 JUNE 2010

In terms of the Public Finance Act 1989, approval has been sought under section 26(c) from the Minister of Finance for unappropriated expenditure totalling $7.0 million for the year ended 30 June 2010 ($6,156.46 for the year ended 30 June 2009).

30-Jun-09 Unappropriated Expenditure $000s		30-Jun-10 Unappropriated Expenditure	30-Jun-10 Main Estimates $000s	30-Jun-10 Supps Estimates $000s
	Non-Departmental Other Expenses
6	Administrative Expenses for Crown Land-30 June 2009	-	13	13
	(Direct costs of Crown land administered by Te Puni Kōkiri under Part 2 of the Māori Affairs Restructuring Act 1989. Previously these costs had been netted against rental income. The unappropriated expenditure relates to expenditure incurred during 2008/09 prior to Cabinet approval under imprest supply to the new appropriation)
	Wharewaka – Waterfront Development-30 June 2010	7,000	-	7,000
	One-off funding of $7.0 million was appropriated in Budget 2008 to support the construction of a Wharewaka complex on the Wellington Waterfront. Delays in finalising an appropriate governance arrangement for the project resulted in a delay in expending the appropriation with an in-principle expense transfer approved in the 2009 March Baseline Update to transfer the full appropriation from 2008/09 to 2009/10
	Due to an oversight, the $7.0 million was subsequently paid in full to the Wharewaka o Pōneke Charitable Trust on 24 August 2009, on furnishing of the appropriate accountability documents. However, as this expenditure occurred prior to the Minister of Māori Affairs and the Minister of Finance jointly confirming the final amount of the expense transfer and authorising the necessary change to appropriation being included in the 2009/10 Supplementary Estimates and, in interim expense being met from the imprest supply, the expenditure was technically unappropriated.

The accompanying notes form part of these financial statements. For a full understanding of the Crown's financial position and the results of its operations for the year, refer to the consolidated Financial Statements of the Government for the year ended 30 June 2010

SCHEDULE OF NON-DEPARTMENTAL ASSETS AS AT 30 JUNE 2010

Non-Departmental assets are administered by Te Puni Kōkiri on behalf of the Crown. As these assets are neither controlled by Te Puni Kōkiri nor used in the production of Te Puni Kōkiri outputs, they are not reported in the department's Statement of Financial Position.

Non-Departmental Assets administered by Te Puni Kōkiri on behalf of the Crown include:

30-Jun-09 Actual		Note	30-Jun-10 Actual $000	30-Jun-10 Main Estimates $000	30-Jun-10 Supps Estimates $000s
	Current Assets
42,500	Cash		29,585	60,141	65,767
21,106	Accounts Receivable/Prepayments		-	-	1,203
63,606	Total Current Assets		29,585	60,141	66,970
	Non-Current Assets
	Māori Trust Office
70,207	Māori Trustee-Debt	2	-	-	-
(70,207)	Māori Trustee-Debt Provision	2	-	-	-
-	Total Non Current Assets		-	-	-
	Investments
	Rural Lending
1,389	Total Loans	14	-	-	-
(357)	Less : Provision for doubtful debts		-	-	-
1,032	Māori Land Development
	&Investments comprise Advances to -
179	Crown owned stations	17	-	-	-
(179)	Less: Provision for doubtful debts		-	-	-
1,032	Total Investments		-	-	-
	Property Plant  and Equipment
3,125	Land		3,330	3,803	3,125
67,763	Total non-department assets administered by Te Puni Kōkiri		32,915	63,944	70,095

An explanation of major variances against budget is detailed in note 19.

The accompanying notes form part of these financial statements. For a full understanding of the Crown's financial position and the results of its operations for the year, refer to the consolidated Financial Statements of the Government for the year ended 30 June 2010.

SCHEDULE OF NON-DEPARTMENTAL LIABILITIES AS AT 30 JUNE 2010

30-Jun-09 Actual $000s		30-Jun-10 Actual $000s	30-Jun-10 Main Estimates $000s	30-Jun-10 Supps Estimates $000s
	Current Liabilities
1,692	Creditors and Payables	5,435	500	4,120
42	Other Liabilites	467	-	-
1,734	Total Current Liabilities	5,902	500	4,120

SCHEDULE OF NON-DEPARTMENTAL COMMITMENTS AS AT 30 JUNE 2010

the Scheduleof Non-Departmental commitments shows the future contractual obligations (exclusive of GST) that will become liabilities if and when the terms and condtions of exisitng contracts are met.

30-Jun-10 Actual $000s		30-Jun-10 Actual $000s
	Catergory
5,336	Māori Potential Fund	2,408
69,438	Crown Entities and Non-Government Organisations	91,350
74,774	Total Crown Commitments by Catergory	93,758
	Out year commitments
74,726	Less than one year	93,501
48	One to two years	257
-	Two to five years	-
-	More than five years	-
74,774	Total Crown Commitments by out year	93,758

STATEMENT OF NON-DEPARTMENTAL CONTINGENT ASSETS AND LIABILITIES AS AT 30 JUNE 2010

The Statement of Non-Departmental Contingent Assets and Liabilities shows amounts at balance date that could potentially become assets or liabilities depending on the occurrence of one or more uncertain future events after 30 June 2010. It does not include general or unspecified business risks or conditions. This schedule is exclusive of GST.

30-Jun-09 Actual $000s	Less than one year	30-Jun-10 Actual $000s
48	Income Tax, GST and Gift duty indemnity	-
16,447	Total Contingent Liabilities	-

Where contingent liabilities have arisen as a consequence of legal action being taken against the Crown, the amount included is the amount claimed and thus the maximum potential cost. It does not represent either an admission that the claim is valid or an estimation of the possible amount of any award against the Crown.

Contingent assets
The Ministry on behalf of the Crown has no contingent assets (2008/09 nil).

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