Archived - Annual Financial Report of the Government of Canada
Fiscal Year – 2004-2005: 2

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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, 2005, and for the year then ended on which I expressed an opinion without reservation in my Report to the House of Commons dated August 31, 2005.

For more complete information, readers should refer to my Report, which will be included in Volume I of the Public Accounts of Canada 2005, 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 2005.


Sheila Fraser, FCA 

Auditor General of Canada

Ottawa, Canada 
August 31, 2005


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 2005, 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 11
Government of Canada
Condensed Statement of Operations and Accumulated Deficit
for the Year Ended March 31, 2005


  2005 2004


  Budget1 Actual Actual

  ($ millions)
Revenues      
  Income tax 125,200 132,037 123,530
  Other taxes and duties 41,700 42,857 41,365
  Employment insurance premiums 17,000 17,307 17,546
  Other revenues 16,900 19,457 16,106

Total revenues 200,800 211,658 198,547
Expenses      
  Transfer payments      
    Old age security and related payments 27,900 27,871 26,902
    Other levels of government 30,600 41,955 29,392
    Employment insurance benefits 15,700 14,748 15,058
    Other transfer payments 32,800 33,689 31,026
    Total transfer payments 107,000 118,263 102,378
  Other program expenses 54,400 57,647 51,317

Total program expenses 161,400 175,910 153,695
  Public debt charges 35,400 34,118 35,769

Total expenses 196,800 210,028 189,464

Annual surplus 4,0002 1,630 9,083
Accumulated deficit, beginning of year 501,5003 501,493 510,576

Accumulated deficit, end of year 497,500 499,863 501,493

1 Derived from Budget 2004 and adjusted to a gross basis.

2 Budget 2004 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 12
Government of Canada
Condensed Statement of Financial Position
as at March 31, 2005


2005 2004

($ millions)
Liabilities
  Accounts payable and accrued liabilities 90,473 79,964
  Interest-bearing debt
    Unmatured debt 435,460 440,231
    Pension and other liabilities 179,808 180,898

  Total interest-bearing debt 615,268 621,129

Total liabilities 705,741 701,093
Financial assets
  Cash and accounts receivable 76,281 70,921
  Foreign exchange accounts 40,871 44,313
  Loans, investments and advances 33,860 29,548

Total financial assets 151,012 144,782

Net debt 554,729 556,311
Non-financial assets
  Tangible capital assets 48,207 47,745
  Other 6,659 7,073

Total non-financial assets 54,866 54,818

Accumulated deficit 499,863 501,493

Table 13
Government of Canada
Condensed Statement of Change in Net Debt
for the Year Ended March 31, 2005


  2005 2004


  Budget1 Actual Actual

  ($ millions)
       
Net debt, beginning of year 556,3002 556,311 564,816
       
Change in net debt during the year      
  Annual surplus (4,000)3 (1,630) (9,083)
  Acquisition of tangible capital assets 4,600 4,619 4,535
  Amortization of tangible capital assets (3,100) (3,696) (3,502)
  Other   (875) (455)
 
Net decrease in net debt (2,500) (1,582) (8,505)
 
Net debt, end of year 553,800 554,729 556,311

1 Derived from Budget 2004.

2 Adjusted to the actual closing amount of previous year.

3 Budget 2004 disclosed the budgetary surplus as $4 billion before deducting reserves for contingency ($3 billion) and economic prudence ($1 billion).

Table 14
Government of Canada
Condensed Statement of Cash Flow
for the Year Ended March 31, 2005


  2005 2004

($ millions)
Cash provided by operating activities
  Annual surplus 1,630 9,083
  Items not affecting cash 4,508 4,031

6,138 13,114
Cash used for capital investment activities (4,475) (4,444)
Cash provided by (used for) investing activities 3,157 (2,425)

Total cash generated 4,820 6,245
Cash used to repay unmatured debt (4,771) (2,185)

Net increase in cash 49 4,060
Cash at beginning of year 20,546 16,486
 
Cash at end of year 20,595 20,546

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.

2. Contractual Obligations

Contractual obligations 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, 2005, contractual obligations amounted to approximately $63 billion ($56 billion in 2004).

3. Contingent Liabilities

Guarantees by the Government amount to $68 billion ($71 billion in 2004) 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 $719 billion ($688 billion in 2004). 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.

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