- Fiscal Monitor 2003 -

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Highlights of financial results for April 2003 

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Note to readers

Beginning with this Fiscal Monitor, the financial results will be presented on full accrual accounting. This has necessitated a recasting of the previously published monthly financial results for 2002-03. It has also resulted in a number of classification and terminology changes. The Statement of Assets and Liabilities will be presented once final results for 2002–03 are published.

In the 2003 budget, the Government implemented its commitment to present its financial statements on a full accrual accounting basis. Previously, the Government’s financial statements were prepared under modified accrual accounting. Full accrual accounting provides a more comprehensive reporting of assets and liabilities and a more transparent picture of the Government’s financial position. Under full accrual, the budgetary balance is now more reflective of current economic developments, rather than being influenced by prior-year developments. It is the accounting standard recommended for senior levels of government in Canada by the Public Sector Accounting Board of the Canadian Institute of Chartered Accountants and has been strongly recommended by the Auditor General of Canada and the House of Commons Standing Committee on Public Accounts.

The shift to full accrual accounting primarily affects tax revenues and the recognition of non-financial, or capital, assets. Tax revenues are now primarily accounted for in the period to which they relate, not when they are received, as was the case under modified accrual. Under full accrual, the costs of capital assets are now being spread over the useful lives of these assets. Under modified accrual, such costs were recognized in the year of purchase. For more information on the implementation and effects of full accrual accounting, please refer to Annex 6 of The Budget Plan 2003, which is available at www.fin.gc.ca.

Budgetary surplus of $0.4 billion in April 2003

There was a budgetary surplus of $0.4 billion in April 2003, up from a restated deficit of $0.2 billion in April 2002. This $0.6-billion year-over-year improvement in the budgetary balance was attributable to higher budgetary revenues (up $1.1 billion) and lower public debt charges (down $0.2 billion), offset in part by higher program expenses (up $0.7  billion).

The increase in budgetary revenues, on a year-over-year basis, was due primarily to higher goods and services and corporate income tax revenues.

  • Goods and services tax revenues were up $0.5 billion, or 25.0  per cent, reflecting both an increase in the base subject to taxation and lower refunds.
  • Corporate income tax revenues were up $0.4 billion, or 29.4 per cent, attributable to higher installment payments–reflecting the strong growth in corporate profits in 2003–and lower refunds. As noted in the 2003 budget, the data to convert corporate tax revenues to accruals are not available in order to present the financial statements in a timely manner. As such, cash is used as a proxy for the accrual numbers.
  • Among the remaining major revenue components, personal income tax collections were up marginally ($0.1 billion, or 1.9 per cent), as employment, and therefore the number of Canadians paying taxes, was up over last year. Employment insurance premiums were marginally higher, also attributable to the increase in employment, which more than offset the reduction in premium rates (the employee rate for 2003 is $2.10 per $100 of insurable earnings, compared to $2.20 in 2002).

On a year-over-year basis, the $0.7-billion increase in program expenses was largely due to higher transfer payments, up $0.5 billion.

Among the major transfers:

  • Major transfers to persons were up $0.1 billion, or 3.3 per cent. The increase in elderly benefits reflects an increase in the number of individuals eligible for benefits and higher average benefits, which are indexed to inflation. The increase in EI benefits was attributable to higher regular benefits, reflecting an increase in the number of beneficiaries.
  • Major transfers to other levels of government were up $0.2 billion, or 7.4 per cent, primarily attributable to higher cash transfers under the Canada Health and Social Transfer, reflecting the February 2003 agreement reached by first ministers to increase funding from $18.6 billion in 2002–03 to $20.3 billion in 2003–04.
  • Subsidies and other transfers increased by $0.2 billion, primarily reflecting higher international assistance transfers.

Other program expenses consist of operating expenses for departments and agencies, including defence and Crown corporations. On a year-over-year basis, these expenses were up $0.2 billion, or 6.2 per cent, reflecting the impact of increased operating costs as well as policy initiatives announced in previous budgets.

Revenues and expenditures, April 2002 and 2003 (8 841 bytes)

Public debt charges were down $0.2 billion, or 6.0 per cent, attributable to both a decline in the stock of interest-bearing debt and a lower average effective interest rate on that debt.

Financial requirement of $4.9 billion in April 2003

The budgetary balance is presented on a full accrual basis of accounting, recording government assets and liabilities when they are receivable or incurred, regardless of when the cash is received or paid. In addition, the budgetary balance includes only those activities over which the Government has legislative control.

In contrast, financial source/requirement measures the difference between cash coming in to the Government and cash going out. This measure is affected not only by changes in the budgetary balance but also by the cash source/requirement resulting from the Government’s investing activities through its acquisition of capital assets, and its loans, financial investments and advances, as well as from other activities, including paying accounts payable and collecting accounts receivable, foreign exchange activities, and the amortization of its tangible capital assets. The difference between the budgetary balance and financial source/requirements is recorded in non-budgetary transactions.

Non-budgetary transactions resulted in a net requirement of $5.3 billion in April 2003, down $0.3 billion from the requirement in April 2002. Traditionally, there is a large requirement in the month of April, primarily reflecting the payment of accounts payable.

With a budgetary surplus of $0.4 billion and a net requirement of $5.3 billion from non-budgetary transactions, there was a financial requirement of $4.9 billion in April 2003, down $0.3 billion from April 2002.

Net financing activities down $4.3 billion

This financial requirement of $4.9 billion was financed by a draw down in cash balances. In addition, the Government reduced its cash balances by a further $4.3 billion to lower its interest-bearing debt. Cash balances at the end of April 2003 stood at $5.5 billion, down $9.1 billion from the previous period. The level of cash balances varies from month to month based on a number of factors including periodic large debt maturities, which can be quite volatile on a monthly basis.

Budgetary balance (7 593 bytes)

Federal debt, accumulated deficit (9 933 bytes)

Table 1
Summary statement of transactions


2002 2003

($ millions)
Budgetary transactions
  Revenues 13,349 14,438
  Program expenses -10,506 -11,192
    Public debt charges -3,002 -2,822

  Budgetary balance (deficit/surplus)1 -159 424
Non-budgetary transactions -5,034 -5,294
Financial source/requirements -5,193 -4,870
Net change in financing activities -1,095 -4,287
Net change in cash balances -6,288 -9,157
Cash balance at end of period 5,661 5,543

Note: Positive numbers indicate a net source of funds. Negative numbers indicate a net requirement for funds.

1 Under modified accrual, a surplus of $0.9 billion was recorded for April 2002.

Table 2
Budgetary revenues


2002 2003 Change

($ millions) (%)
Tax Revenues      
Income taxes      
  Personal income tax 5,811 5,920 1.9
  Corporate income tax 1,447 1,873 29.4
  Other income tax revenue 183 289 57.9

  Total income tax 7,441 8,082 8.6
Excise taxes and duties      
  Goods and services tax 2,182 2,728 25.0
  Customs import duties 257 243 -5.4
  Sales and excise taxes 705 733 4.0
  Air Travellers Security Charge 27 45 66.7

  Total excise taxes and duties 3,171 3,749 18.2

Total tax revenues 10,612 11,831 11.5
Employment insurance      
 premium 1,760 1,771 0.6
Other revenues 977 836 -14.4

Total budgetary revenues 13,349 14,438 8.2

Table 3
Budgetary expenditures


2002 2003 Change

($ millions) (%)
Transfer payments to:      
    Elderly benefits 2,114 2,201 4.1
    Employment insurance benefits 1,402 1,431 2.1

    Total 3,516 3,632 3.3
  Other levels of government      
    Canada Health and Social Transfer 1,550 1,692 9.2
    Fiscal transfers 877 879 0.2
    Alternative Payments for      
      Standing Programs -210 -191 -9.0

    Total 2,217 2,380 7.4
  Subsidies and other transfers      
    Agriculture 16 4 -75.0
    Foreign Affairs 41 199 385.4
    Health 110 95 -13.6
    Human Resources Development 70 134 91.4
    Indian and Northern Development 609 600 -1.5
    Industry and Regional Development 109 100 -8.3
    Other 184 187 1.6

    Total 1,139 1,319 15.8
  Total transfer payments 6,872 7,331 6.7
Other program expenses      
  Crown corporation expenses      
    Canadian Broadcasting Corporation 182 178 -2.2
    Canada Mortgage and Housing      
       Corporation 171 205 19.9
    Other 225 257 14.2

    Total 578 640 10.7
    Defence 789 815 3.3
    All other departments and agencies 2,267 2,406 6.1

    Total direct program spending 3,634 3,861 6.2
Total program expenses 10,506 11,192 6.5
Public debt charges 3,002 2,822 -6.0

Total budgetary expenditures 13,508 14,014 3.7

Table 4
The budgetary balance and financial source/requirement


2002 2003

($ millions)
Budgetary balance (deficit/surplus) -159 424
Non-budgetary transactions    
  Capital investing activities -20 -22
  Other investing activities -72 -213
  Other activities    
    Accounts payable, receivables, accruals, and       allowances -4,321 -5,161
    Foreign exchange activities -835 -106
    Amortization of tangible capital assets 214 208

    Total other activities -4,942 -5,059
Total non-budgetary transactions -5,034 -5,294
Net financial source/requirement -5,193 -4,870

Table 5
Financial source/requirement and net financing activities


  2002 2003

  ($ millions)
Net financial source/requirement -5,193 -4,870
Net increase (+)/decrease (-) in financing activities    
  Canadian currency borrowings    
    Marketable bonds -5,200 -1,054
    Treasury bills 4,300 -3,500
    Canada Savings Bonds -57 -94
    Other 0 0

    Total -957 -4,648
  Foreign currency borrowings 17 -51
  Pension and other accounts -155 412
  Net change in financing activities -1,095 -4,287
Change in cash balance -6,288 -9,157