Olympic Lottery Distribution Fund Account 2010-11 Annual Report and Accounts for the year ended 31 March 2011


Statement of Comprehensive Net Income for the Year Ended 31 March 2011



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Statement of Comprehensive Net Income for the Year Ended 31 March 2011


































2010-11




2009-10










Note

£000




£000

Income



















National Lottery

2

106,849




86,458

Transfer from NLDF

2

292,000

292,000

Investment Income

3

886




934






















Total Income










399,735




379,392






















Less: Operational Costs
















Department for Culture, Media and Sport

4

37




63

National Lottery Commission Grant in Aid

5

256




302

Other Expenses

6

43




43


































336




408






















Net Realised Income for Distribution




399,399




378,984
















Amounts authorised for payment to the Distributing Body




(357,110)




(382,583)






















Increase/(decrease) in Amounts Held for Distributing Body




42,289




(3,599)

Balance brought forward







109,310




112,909













151,599




109,310






















All transactions are in respect of continuing operations.



OLDF has no recognised gains or losses in year other than those that appear in the statement on comprehensive net income.
The notes on pages 16 to 23 form an integral part of these accounts.
Statement of Financial Position as at 31 March 2011




















2010-11

2009-10




Note

£000

£000

Current Assets






















Receivables

7

1,520

1,063

Investments held by CRND at fair value

8

150,141

108,304

Cash at Bank and in Hand




-

-

Total current assets




151,661

109,367

Current liabilities










Payables: Amounts falling due within one year

8

(62)

(57)













Total assets less liabilities

8

151,599

109,310













Represented by:






















Statement of comprehensive net income: amounts held for the Distributing Body

8

151,599

109,310












The notes on pages 16 to 23 form an integral part of these accounts.


Signed:


1 November 2011

Jonathan Stephens

Permanent Secretary and Accounting Officer



Department for Culture, Media and Sport

Statement of Cash Flows for the Year Ended 31 March 2011












2010-11




2009-10

Cash flows from Operating Activities

Note




£000




£000



















Cash received from Lottery operator







106,392




85,891

Transfer from NLDF







292,000




292,000

Cash paid for operating expenses







(331)




(777)

Cash paid to Distributing Body







(357,110)




(382,583)

Net cash inflow/(outflow) from operating activities

9




40,951




(5,469)



















Cash flows from investing activities


































Cash Paid to CRND for Investment







(398,061)




(377,114)

Cash received from CRND for distribution







357,110




382,583

Net cash inflow/(outflow) from investing activities







(40,951)




5,469



















Net increase/decrease in cash







-




-





































All investment income is re-invested by the Commissioners for the Reduction of the National Debt .

The notes on pages 16 to 23 form an integral part of these accounts.




Notes to the Financial Statements

1 Statement of Accounting Policies

Basis of Accounting

These accounts have been prepared in accordance with the accounts direction given by the Treasury. This Direction has been applied consistently in dealing with items that are considered material to the accounts. The accounting policies apply International Financial Reporting Standards (IFRS) as adapted or interpreted for the public sector context.


The particular policies adopted by the fund are described below.
Accounting convention
These accounts have been prepared under the historical cost convention, modified to account for the revaluation of assets at fair value.
Nature of Account Balances
Balances held in the OLDF remain under the stewardship of the Secretary of State. The amount attributable to the distributing body at the date the Statement of Financial Position was signed, and shown in these accounts, has been certified by the Secretary of State as being available for distribution by the body in respect of current and future commitments.
Recognition of Lottery Income
Proceeds from the Lottery due to the OLDF from the operator, Camelot Group plc, are calculated on an annual basis as set out in the Section 5 Licence. Payments are made to the OLDF on the basis of actual sales and prizes. The amounts recognised in these accounts for the lottery primary contribution include income receivable on ticket sales from 1 April 2010 in respect of all draws up to and including 31 March 2011.
The lottery primary contribution also includes income due to the OLDF from the sale of scratch cards. Under the terms of the licence, income is collected by Camelot and paid to the OLDF on packs of cards once a pack becomes settled. The retail value of each pack is £120. This occurs 30 days after a pack is activated or once 60% of the low tier prizes have been won, whichever is the sooner.
Lottery prizes that remain unclaimed for 180 days after a draw, or closure of a scratch card game or interactive instant win game, are paid to the OLDF. Accruals have been made for prizes expiring on or before 31 March but not paid to OLDF at this date.
Actual prizes, together with lottery duty and an element of Camelot’s fixed costs relating to sales, are deducted from weekly sales. The balance is pooled, to be shared between Camelot and the good causes.
Camelot must seek the National Lottery Commission’s approval for any promotional events, such as ‘Superdraws’ with guaranteed jackpot prize levels, that may reduce the net weekly proceeds into the OLDF. The NLC will only permit these promotions if they are satisfied that they are likely to increase proceeds for lottery good causes over a longer period.
Interest on the player’s trust fund is recognised in the accounts on an accruals basis.
In February 2008 a statutory Instrument (SI 2008 No.255 The payments into the Olympic Lottery Distribution Fund etc.) was passed which allowed for the transfer of up to £1,085m of future lottery income from the National Lottery Distribution Fund to the Olympic Lottery Distribution Fund in order to meet some of the costs of hosting the 2012 games. The transfer is in addition to £750m to be raised through dedicated Olympic lottery games and comprises £410m as originally envisaged when the Government decided to support London’s Olympic bid in 2003, and a further £675m arising from the establishment of the final public sector funding budget of £9.325 billion, announced by the Government in March 2007. The Payments into the Olympic Lottery Distribution Fund etc. Order 2008 made on 2 February 2008, enables £1,085m to be transferred as thirteen instalments of £73m each (paid quarterly), followed by two instalments of £68m each. The first transfer was made on 2 February 2009, and the last will be on or after 1 August 2012. Transfers from NLDF are accounted for when each instalment becomes due and disclosed in the statement of comprehensive net income. No prior year adjustment is required.

Of the additional £675m, £250m will be transferred from the arts, sport and national heritage good causes and £425m from the funds currently allocated to the Big Lottery Fund.



The support the Big Lottery Fund gives to the voluntary sector will be protected, and the Big Lottery Fund announced in June 2009 that 80% of its funding will in future go to the voluntary and community sector. DCMS had previously agreed with the Big Lottery Fund that it would honour its commitment to give 60-70% of its funding to the voluntary and community sector.
Recognition of Amounts Drawn by Distributor
The amounts recorded as drawn down by the distributing body represent the actual cash claims made by the Olympic Lottery Distributor.
Investments
Investments held by the CRND are valued in these accounts at fair value at 31 March 2011, these accounts only disclose the cash flows for the movement of cash between CRND OLDF and the lottery distributors.
HM Treasury has directed CRND, under sections 32(1) and 32 (2) of the 1993 ACT that the OLDF income be invested in those investments specified in paragraphs 1,2,3,5,5A, 5B,9 and 9A of Part II of Schedule 1 of the Trustee Investments Act 1961 in such manner as CRND shall, at their absolute discretion, determine.
Having taken account of DCMS’s wish to avoid negative income returns over a 3-month period, but without prejudice to their absolute discretion, CRND intend to exercise their investment powers in accordance with the investment framework.
Each quarter, DCMS reviews the investments in partnership with CRND.

Financial Instruments
The fund accounts for financial instruments in accordance with IAS 32 Financial Instruments: Presentation, IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7: Financial Instruments: Disclosures.
A financial instrument is any contract that gives rise to a financial asset in one entity, and a financial liability in another. Financial assets, liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. IAS 39 requires financial instruments to be measured in a way that reflects the fair value of the asset or liability.
Balances held at the OLDF are adjusted to fair value with any revaluation posted to a revaluation reserve. Any premium or discount on cost is amortised in the statement of comprehensive net income as an adjustment to the interest account.
Receivables are recognised at carrying value, reduced by appropriate allowances for estimated irrecoverable amounts. Payables are short term and are stated at carrying value in recognition that these liabilities fall due within one year.
No prior year adjustment is required as a result of the implementation of these reporting standards.
Impact of new IFRS and Financial Reporting Manual Amendments
The following new, revised or amended IFRS and FReM amendments will become effective for future reporting periods, and have not been adopted early in these financial statements:


  • IFRS 9 Financial Instruments (effective date 1 January 2013)

  • IAS 24 Related Party Disclosures

  • FRAB(98)06B and FRAB(103)05: Alignment of budgets, Estimates and accounts

  • FRAB(101)05: IAS20 and IAS 16: Accounting for Capital Government Grants and Similar Financing

Under IFRS9 financial assets should be classified on the basis of the entity’s business model for their management and their contractual cash flow characteristics. They should be measured at fair value and subsequently at either fair value or amortised cost. IFRS9 simplifies the clarification and measurement of financial assets, removing the numerous categories of financial assets specified in IAS 39 and resulting in one impairment method.



IAS 24 Related party disclosures simplifies the disclosure requirements for entities that are controlled, jointly controlled or significantly influenced by a government. Application of the revised IAS 24 is required for any reporting period beginning on or after 1 January 2011.
There are no other standards and interpretations in issue but not yet adopted that the department anticipates will have a material effect on future reporting periods.



2

Income from Lottery Activities
















2010-11




2009-10







£000




£000



















Basic Contribution from Lottery Operator under licence

103,293




77,529




Camelot adjustment 1

(66)




-




National Lottery Promotion Unit 2

(70)




(65)




New Media Sales

-




(209)




Primary Contribution (see note below)

103,157




77,255




Unclaimed Prizes

3,585




9,091




Interest on Players Trust Fund

-




-




Penalties on lost and stolen tickets

92




112




Income from Ancillary Activities

15




-







106,849




86,458




Transfer from National Lottery

292,000




292,000







398,849




378,458



Under the Licence to run the National Lottery, Camelot is allowed to recover certain amounts from the Primary Contribution figures. These adjustments are divided between the NLDF and OLDF in proportion to ticket sales


1 This adjustment was made in accordance with the conditions of the third licence competition. Flexibility around recharge arrangements was included in the tender contract to ensure a fair competition, and with the aim of enhancing future yields to maximise value to good causes. Further details can be found in the tender document for the third licence, available at
www.natlotcomm.gov.uk/assets-uploaded/documents/Invitationtoapplyforthethirdlicence
2 This recovers the OLDF share of the combined NLDF/OLDF contribution to the National Lottery Promotions Unit (NLPU).




3

Investment income
















2010-11




2009-10







£000




£000



















Interest received on investments

886




934



The investment objective for OLDF is to protect the capital of the fund and to provide for the Olympic Lottery Distributor’s liquidity needs. The range of permitted investments is restricted to those contained within a direction made by HM Treasury, and is implemented by CRND.


During the period of these accounts, the entire balance has been held as short term deposits rather than invested in gilts. There are therefore no profits/losses on sales of investments and no revaluation gains/losses.




4

Operational Costs: Department for Culture, Media and Sport







2010-11




2009-10







£000




£000



















Staff Costs

10




21




Other costs (including audit)

27




42






















37




63



















The external auditor's remuneration for the year was £23,500.



In 2010-11 five members of DCMS were engaged on OLDF matters. Their staff costs are charged in proportion to the amount of time they spend on OLDF duties. There was a reduction in the time spent on OLDF matters by DCMS staff, which has reduced the operational costs.









A share of the accommodation costs of the building occupied by DCMS has been charged to the OLDF, on the basis of the floor area occupied by DCMS staff engaged on OLDF matters as a proportion of the building as a whole.

Similarly a share of the Central Service Costs incurred by DCMS has been charged on the basis of the number of DCMS staff engaged on OLDF matters as a proportion of the total number of DCMS staff.





5

Reconciliation of National Lottery Commission Operational Costs



















DCMS recover the net costs of running the National Lottery Commission (NLC) from the NLDF and the Olympic Lottery Distribution Fund (OLDF). The net cost consists of the Grant in Aid paid to NLC less the licence fee income received by NLC and surrendered to DCMS in appropriations-in-aid.
The licence fee income is the sum of payments made by the lottery operator, Camelot, for each new Section 6 licence granted for new lottery games. .





2010-11




2009-10




£000




£000













Gross share of costs

266




302

Lottery Operator licence fee Income

(10)




(5)

Amount payable to DCMS

256




297

The total Grant in Aid paid to the National Lottery Commission was £4,521k with a total of £48,400 received by DCMS in operator licence fee income. The split between the NLDF and the OLDF is as follows:







NLDF

OLDF

Total




£000

£000

£000













Grant in Aid paid to NLC by DCMS

4255

266

4,521

Lottery Operator licence fee income

(38)

(10)

(48)

Amount recoverable by DCMS

4,217

256

4,473












6

Other expenses:







2010-11




2009-10







£000




£000



















Commissioners for the Reduction of the National Debt

43




43



This is the amount paid to the CRND for management of the OLDF Investment Fund Account.






7

Receivables:







2010-11

2009-10










£000

£000






















Ticket sales income due as a result of draws prior to year end


1,520

1,049







Investment income

-

14










1,520

1,063






















Intra-government balances













Balances with bodies external to government

1,520

1,049







Balances with other central government bodies

-

14










1,520

1,063





8

Balance on Olympic Lottery Distribution Fund































at 31 March 2011

at 31 March 2010







`

Cost

Fair Value

Cost

Fair Value













£000

£000

£000

£000































Investments held by the CRND

150,141

150,141

108,304

108,304







Receivables (note 7)

1,520

1,520

1,063

1,063







Payables

(62)

(62)

(57)

(57)







Balance held

151,599

151,599

109,310

109,310































Payables: Intra- government balances



















Balances with other central government bodies

(62)

(62)

(57)

(57)





























































Payables consist of £32k for DCMS operating costs and £30k for the NLC recovery of grant in aid .































Under s32 of the National Lottery etc Act 1993, all monies held by the National Debt Commissioners are regarded as investments by the Secretary of State.

During the period, all investments held by CRND on behalf of the OLDF - other than a small Ways and Means cash balance - were held as Call Notice Deposits. Funds held by CRND in these asset classes would meet the definition of cash under IAS 7 if they were held directly under the control of the Secretary of State as they are repayable on demand within one working day.

The call notice deposits  are demand deposits with the Debt   Management Account & the National   Loans Fund (NLF).

The funds are actually held at arm’s length by CRND in a revolving investment fund i.e. investment returns re-invested directly into the fund.  Thus, while the instruments held are highly liquid cash equivalents, the balance held is treated as an investment rather than as cash in accordance with IAS7.



For further details on the investing activities of CRND please refer to the Olympic Lottery Distribution Fund Investment Account published by CRND.









9

Reconciliation of Increase in Amounts Held for Distributing Body as disclosed in Statement of Comprehensive Net Income with Net Cash Inflow from Operating Activities.



















2010-11




2009-10







£000




£000



















Increase/(decrease) in amounts held for distributing body

42,289




(3,599)




Less Investment Income

(886)




(934)







41,403




(4,533)




(Increase)/decrease in lottery operator receivables

(457)




(567)




Increase/(decrease) in prepayment to DCMS for reimbursement of NLC costs

-




(366)




Increase/(decrease) in payables for operating expenses

5




(3)




Net cash inflow/(outflow) from operating activities

40,951




(5,469)


































It is the policy of the OLDF to hold a nil cash balance whenever possible and to transfer all funds to the CRND for investment on the day of receipt.



10

Financial Instruments










IAS 32 Financial Instruments: Presentation, IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7: Financial Instruments: Disclosure have been applied. IFRS 7 requires disclosures that allow users of the accounts to evaluate the significance of financial instruments for the entity’s financial position and performance, and the nature and extent of risks arising from financial instruments during the period.






Short term Receivables/Payables
As permitted by IFRS 7, receivables and payables which mature or become payable within 12 months of the balance sheet date have been omitted from this note.




11

Related Party Transactions










The OLDF is maintained under the control and management of the Secretary of State for DCMS. The DCMS is considered to be a related party. During the year, a number of staff employed by the DCMS worked on OLDF related activities and the fund used a number of the assets owned by DCMS. These costs were recharged to the fund by DCMS and are reflected in Note 4 of the accounts. DCMS is also the sponsoring department of the Olympic Lottery Distributor and the Olympic Delivery Authority which is the principal recipient of funding from the Olympic Lottery Distributor.
London 2012 Ltd was a related party since the former Secretary of State was a member of the company. London 2012 Ltd (a company limited by guarantee) was created to organise the UK bid for the Olympic and Paralympic games in 2012. Having achieved that objective it was dissolved on 27 April 2010.
The London Organising Committee of the Olympic Games and Paralympic Games Limited is a related party as the Secretary of State is a member of the Company.
The Olympic Park Legacy Company Limited was incorporated on 8 May 2009 as a not for profit company limited by guarantee. Its purpose is to plan, develop and maintain the Olympic Park and those facilities it will own after the London 2012 Games. The Government members at 31 March 2010 were the Secretary of State for Communities and Local Government and the Minister for the Olympics.
During the year the OLDF received £292m from the NLDF. The NLDF is under the management and control of the Secretary of State for DCMS, as such it is regarded as a related party.
CRND, which is ultimately part of HM Treasury, is also considered a related party.
No Minister, Board member, key manager or other related parties has undertaken any material transactions with the OLDF during the year.
For further details please see the DCMS annual report and accounts.




12

Events after the reporting period










These accounts were authorised for issue by the Accounting Officer of the Olympic Lottery Distribution Fund on the date the audit opinion was signed.
Work is ongoing with respect to the proposed merger of the National Lottery Commission and the Gambling Commission.
The Departments broad structure has changed in 2011-12. The Executive Board will provide support to the Accounting Officer.






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