Annual Financial Report of the Government of Canada
Fiscal Year 2003–2004: 2
- Table of Contents - Previous - 

Report of the Auditor General on the Condensed Financial Statements of the Government of Canada

To the Minister of Finance: 

The accompanying condensed statements of operations and accumulated deficit, financial position, change in net debt and cash flow are derived from the complete financial statements of the Government of Canada as at March 31, 2004, and for the year then ended on which I expressed an opinion without reservation in my Report to the House of Commons dated September 7, 2004.

My Report drew two matters I have raised before to Parliament’s attention: a concern about the Employment Insurance Account, and the recording of transfers to Foundations. For more complete information, readers should refer to my Report, which will be included in Volume I of the Public Accounts of Canada 2004, expected to be tabled in the House of Commons later this year.

The fair summarization of the complete financial statements is the responsibility of the Government. My responsibility, in accordance with the applicable Assurance Guideline of The Canadian Institute of Chartered Accountants, is to report on the condensed financial statements.

In my opinion, the accompanying condensed financial statements fairly summarize, in all material respects, the related complete financial statements in accordance with the criteria described in the Guideline referred to above.

Since these are condensed financial statements, readers are cautioned that these statements may not be appropriate for their purposes. For more information on the Government’s financial position, results of operations and cash flow, reference should be made to the related complete financial statements, which will also be included in Volume I of the Public Accounts of Canada 2004.



Sheila Fraser, FCA
Auditor General of Canada

Ottawa, Canada
September 7, 2004

---

Condensed Financial Statements of the Government of Canada

The fundamental purpose of these condensed financial statements is to provide an overview of the financial affairs and resources for which the Government is responsible under authority granted by Parliament. Responsibility for the integrity and objectivity of these statements rests with the Government.

These financial statements are extracted and condensed from the audited financial statements included in Section 2 of Volume I of the Public Accounts of Canada 2004, which are expected to be tabled in Parliament later this year. As these condensed financial statements are, by their nature, summarized, they do not include all disclosure required for financial reporting by governments in Canada. Readers interested in the disclosure of more detailed data should refer to the audited financial statements in the Public Accounts.

Table 10
Government of Canada
Condensed Statement of Operations and Accumulated Deficit for the Year Ended March 31, 2004

	2004		2003
	Budget1	Actual	Actual
	($ millions)
Revenues
Income tax	122,100	123,530	115,043
Other taxes and duties	43,100	41,365	41,357
Employment insurance premiums	17,600	17,546	17,870
Other revenues	14,500	16,106	15,962
Total revenues	197,300	198,547	190,232
Expenses
Transfer payments
Old age security and      related payments	26,800	26,902	25,692
Other levels of government	31,000	29,392	30,645
Employment insurance benefits	15,700	15,058	14,496
Other transfer payments	30,100	31,026	27,810
Total transfer payments	103,600	102,378	98,643
Other program expenses	52,100	51,317	47,350
Total program expenses	155,700	153,695	145,993
Interest on debt	37,600	35,769	37,270
Total expenses	193,300	189,464	183,263
Annual surplus	4,0002	9,083	6,969
Accumulated deficit,  beginning of year	510,6003	510,576	517,545
Accumulated deficit,  end of year	506,600	501,493	510,576
1 Derived from Budget 2003 and adjusted to a gross basis. 2 Budget 2003 disclosed the budgetary surplus as $4 billion before deducting reserves for contingency ($3 billion) and economic prudence ($1 billion). 3 Adjusted to the actual closing amount of previous year.

Table 11
Government of Canada
Condensed Statement of Financial Position as at March 31, 2004

	2004	2003
	($ millions)
Liabilities
Accounts payable and accrued liabilities	79,964	79,437
Interest-bearing debt
Unmatured debt	440,231	442,416
Pension and other liabilities	180,898	178,287
Total interest-bearing debt	621,129	620,703
Total liabilities	701,093	700,140
Financial assets
Cash and accounts receivable	70,921	62,626
Foreign exchange accounts	44,313	48,950
Loans, investments and advances	29,548	23,748
Total financial assets	144,782	135,324
Net debt	556,311	564,816
Non-financial assets
Tangible capital assets	47,745	47,034
Other	7,073	7,206
Total non-financial assets	54,818	54,240
Accumulated deficit	501,493	510,576

Table 12
Government of Canada
Condensed Statement of Change in Net Debt 
for the Year Ended March 31, 2004

	2004		2003
	Budget1	Actual	Actual
	($ millions)
Net debt, beginning of year	564,8002	564,816	570,907
Change in net debt during the year
Annual surplus	(4,000)3	(9,083)	(6,969)
Acquisition of tangible capital assets	4,700	4,535	5,051
Amortization of tangible capital assets	(3,100)	(3,502)	(3,341)
Other		(455)	(832)
Net decrease in net debt	(2,400)	(8,505)	(6,091)
Net debt, end of year	562,400	556,311	564,816
1 Derived from Budget 2003. 2 Adjusted to the actual closing amount of previous year. 3 Budget 2003 disclosed the budgetary surplus as $4 billion before deducting reserves  for contingency ($3 billion) and economic prudence ($1 billion).
Table 13 Government of Canada Condensed Statement of Cash Flow for the Year Ended March 31, 2004

	2004	2003
	($ millions)
Cash provided by operating activities
Annual surplus	9,083	6,969
Items not affecting cash	4,031	4,897
	13,114	11,866
Cash used for capital investment activities	(4,444)	(4,763)
Cash provided by (used for) investing activities	(2,425)	498
Total cash generated	6,245	7,601
Cash used to repay unmatured debt	(2,185)	(2,475)
Net increase in cash	4,060	5,126
Cash at beginning of year	16,486	11,360
Cash at end of year	20,546	16,486

Notes to the Condensed Financial Statements

1. Significant Accounting Policies

The Government of Canada reporting entity includes all departments, agencies, corporations and funds which are owned or controlled by the Government and which are accountable to Parliament. The financial activities of all these entities are consolidated in these statements, except for enterprise Crown corporations and other government business enterprises, which are not dependent on the Government for financing their activities. These corporations are reported under the modified equity basis of accounting. The Canada Pension Plan is excluded from the reporting entity as it is under the joint control of the Government and participating provinces.

The Government accounts for transactions on an accrual basis. Financial assets recorded on the Condensed Statement of Financial Position can provide resources to discharge liabilities or finance future operations and are recorded at the lower of cost or net realizable value. Non-financial assets cannot normally be converted into cash to finance future operations without disrupting government operations; they are recorded at cost less accumulated amortization. Liabilities are recorded at the estimated amount ultimately payable, with pension and other similar benefits being determined on an actuarial basis. Valuation allowances are established for loan guarantees, concessionary and sovereign loans, and other obligations.

Some amounts in these statements are based on estimates and assumptions made by the Government. By their nature, such estimates are subject to measurement uncertainty, although all of them are believed to be reasonable.

Comparative figures for 2003 have been reclassified to conform to the current year’s presentation.

2. Contractual Commitments

Contractual commitments that will materially affect the level of future expenses include transfer payment agreements, acquisitions of goods and services, operating leases and funding of international organizations. At March 31, 2004, contractual commitments amounted to approximately $56 billion ($57 billion in 2003).

3. Contingent Liabilities

Guarantees by the Government amount to $71 billion ($75 billion in 2003) net of any recorded allowance. In addition, there are a number of contaminated sites where the Government could be obligated to incur costs. There are thousands of claims and pending and threatened litigation cases against the Government; the total amount claimed in these instances is significant but the final outcome is not determinable. Where cases are likely to be lost and an estimate of loss can be made, an amount is recorded in the financial statements. Insurance in force relating to self-sustaining insurance programs operated by three enterprise Crown corporations amounted to approximately $688 billion ($646 billion in 2003). The Government expects that it will not incur any costs to cover insurance claims under these programs.

Other Sources of Information Public Accounts of Canada The Public Accounts of Canada, as required under section 64(1) of the Financial Administration Act, are tabled in the fall of each year by the President of the Treasury Board. This report is presented in three volumes: Volume I contains the Government’s audited financial statements and supporting schedules and information; Volume II contains details of financial operations by ministry; and Volume III contains additional information and analyses. Budget The budget, usually introduced in February, presents the Government’s overall fiscal plan, incorporating revenue projections and spending plans, which combine to determine the resulting budgetary balance. The budget also introduces proposals for changes in taxation. The Fiscal Monitor This monthly newsletter produced by the Department of Finance highlights the financial results of the Government together with the reasons underlying major variances. Debt Management Strategy This report is tabled annually in Parliament. It provides information on the federal government’s debt management strategy for the coming fiscal year. Debt Management Report This annual document provides an accounting of the key elements of federal debt strategy and describes various strategic and operational aspects of the Government’s debt program and cash management activities over the past fiscal year. Estimates Each year the Government prepares Estimates in support of its request to Parliament for authority to spend public monies. This request is formalized through the tabling of appropriation bills in Parliament. The Estimates are tabled in the House of Commons by the President of the Treasury Board and consist of three parts: Part I – The Government Expenditure Plan provides an overview of federal spending and summarizes the relationship of the key elements of the Main Estimates to the Expenditure Plan set out in the budget. Part II – The Main Estimates directly support the Appropriations Act. Part III – Departmental Expenditure Plans, which consist of two components—Reports on Plans and Priorities and Departmental Performance Reports.

- Table of Contents - Previous -