Archived - Financial Statements (unaudited)
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For the year ended March 31, 2009
Statement of Management Responsibility
Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2009, and all information contained in this report rests with the management of the Department of Finance Canada. These financial statements have been prepared by management in accordance with Treasury Board accounting policies, which are consistent with Canadian generally accepted accounting principles for the public sector.
Management is responsible for the integrity and objectivity of the information in these financial statements. Some of the information in the financial statements is based on management's best estimates and judgment and gives due consideration to materiality. To fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the Department of Finance Canada's financial transactions. Financial information submitted to the Public Accounts of Canada and included in the Department's Departmental Performance Report is consistent with these financial statements.
Management maintains a system of financial management and internal control designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded, and that transactions are in accordance with theFinancial Administration Act, are executed in accordance with prescribed regulations, within Parliamentary authorities, and are properly recorded to maintain accountability of government funds. Management also seeks to ensure the objectivity and integrity of data in its financial statements by careful selection, training, and development of qualified staff, by organizational arrangements that provide appropriate divisions of responsibility, and by communication programs aimed at ensuring that regulations, policies, standards, and managerial authorities are understood throughout the Department of Finance Canada.
Management is supported by the Departmental Audit and Evaluation Committee. The role of the Committee is to provide to the Deputy Minister objective advice and guidance. The Committee approves the departmental audit and evaluation plans and oversees the internal audit and evaluation activities in the Department. It also reviews the results of audits and evaluations as well as management responses and action plans developed to address audit and evaluation recommendations.
The financial statements of the Department of Finance Canada have not been audited.
Chief Financial Officer
Acting Deputy Head
July 31, 2009
|Expenses (Note 4)|
|Transfer and Taxation Payment Programs||46,517,604||45,924,372|
|Treasury and Financial Affairs||30,068,575||33,345,701|
|Economic and Fiscal Policy Framework||142,190||118,544|
|Revenues (Note 5)|
|Transfer and Taxation Payment Programs||588,601||450,058|
|Treasury and Financial Affairs||4,850,205||4,379,907|
|Economic and Fiscal Policy Framework||252||100|
|Net Cost of Operations||71,289,311||74,558,552|
|The accompanying notes form an integral part of these financial statements.|
|Accounts receivable and advances (Note 6)||401,609||427,197|
|Taxes receivable under tax collection agreements (Note 7)||11,090,789||6,449,575|
|Foreign exchange accounts (Note 8)||51,708,538||42,299,109|
|Investment in Crown corporations (Note 9)||401,578||401,578|
|Crown Borrowings (Note 10)||76,422,196||4,821,138|
|Other loans, investments, and advances (Note 11)||3,865,989||4,097,677|
|Total financial assets||143,915,197||58,523,186|
|Tangible capital assets (Note 12)||4,044||3,584|
|Total non-financial assets||124,094||3,598|
|Accounts payable and accrued liabilities (Note 13)||1,128,905||3,416,921|
|Taxes payable under tax collection agreements (Note 14)||4,943,533||5,111,494|
|Interest payable (Note 15)||6,839,241||7,090,297|
|Notes payable to international organizations (Note 16)||420,414||350,679|
|Matured debt (Note 17)||80,130||91,698|
|Unmatured debt and other financial instruments (Note 18)||510,197,055||386,776,844|
|Other liabilities (Note 21)||140,642||460,839|
|Employee severance benefits (Note 22)||16,096||12,800|
|Equity of Canada||(379,726,725)||(344,784,788)|
|Total Liabilities and Equity||144,039,291||58,526,784|
|Contingent liabilities (Note 23)|
|Contractual obligations (Note 24)|
|The accompanying notes form an integral part of these financial statements.|
|Equity of Canada, beginning of year||(344,784,788)||(373,906,786)|
|Net cost of operations||(71,289,311)||(74,558,552)|
|Current year appropriations used (Note 3a)||215,640,076||86,379,638|
|Revenue not available for spending||(5,563,923)||(4,877,248)|
|Change in net position in the Consolidated Revenue Fund (Note 3c)||(173,746,535)||22,162,139|
|Services received without charge from other government departments (Note 25)||17,756||16,021|
|Equity of Canada, end of year||(379,726,725)||(344,784,788)|
|The accompanying notes form an integral part of these financial statements.|
|Net cost of operations||71,289,311||74,558,552|
|Amortization of tangible capital assets||(1,595)||(1,632)|
|Amortization for loan investments and advances||348,018||209,706|
|Amortization of debt discounts||(5,095,970)||(6,361,347)|
Concessionary portion of other loans,
investments, and advances
|Gain on disposition of securities||-||1,531|
|Gain on disposal and write-down of tangible capital assets||(3)||-|
|Unrealized foreign exchange gains and losses||58,750||(44,937)|
Services provided without charge from other
|Variations in Statement of Financial Position:|
|Increase (decrease) in assets||4,733,248||104,768|
|Decrease (increase) in liabilities||3,023,934||2,232,003|
|Cash used by operating activities||73,807,105||70,444,778|
|Capital investment activities|
|Acquisition of tangible capital assets||2,059||1,668|
|Cash used by capital investment activities||2,059||1,668|
|Net advances to (settlements from) the Exchange Fund Account||3,688,615||(1,076,934)|
|Issuance of notes payable to International Monetary Fund||(383,023)||(333,000)|
|Encashment of notes payable to International Monetary Fund||1,497,000||213,120|
|Issuance of loans receivable||132,244,113||5,273,968|
|Repayment of loans receivable||(60,873,044)||(1,285,757)|
|Cash used by investing activities||76,173,661||2,791,397|
|Encashment of notes payable to international organizations||321,266||322,604|
|Issuance of notes payable to international organizations||(384,280)||(318,280)|
|Net proceeds from cross-currency swaps||(561,706)||(373,718)|
|Issuance of debt||(539,569,672)||(330,774,706)|
|Repayment of debt||426,541,185||361,570,786|
|Net cash provided by the Government of Canada||(36,329,618)||(103,664,529)|
|Cash provided by financing activities||(149,982,825)||(73,237,843)|
|The accompanying notes form an integral part of these financial statements.|
1. Authority and Objectives
The Department of Finance Canada is established under the Financial Administration Act as a Department of the Government of Canada.
The goal of the Department of Finance Canada is to foster strong and sustainable economic growth, resulting in higher standards of living and an improved quality of life for Canadians. To achieve its strategic outcome and deliver results for Canadians, the Department of Finance Canada articulates its plans and priorities based on core program activities. These program activities were reviewed and updated for the 2008-2009 fiscal year, as approved by the Treasury Board, to better reflect the Department's operations. The 2007-2008 figured have been reclassified according to the new program activity structure for comparison purposes. The core business of the Department is organized into the following program activities:
Transfer and Taxation Payment Programs:This program activity administers transfer and taxation payments to provinces and territories. Payments are made in accordance with legislation and negotiated agreements to enable Canadian provinces and territories to provide their residents with public services. This program activity also covers commitments and agreements with international financial institutions aimed at aiding the economic advancement of developing countries. These commitments can result in payments, generally statutory transfer payments, to a variety of recipients, including individuals, organizations, and other levels of government.
Treasury and Financial Affairs:Canada's debt management activities include the funding of government operations, which involves the payment of debt service costs and investments in financial assets that are needed to establish a prudent liquidity position. This program activity supports the ongoing refinancing of government debt coming to maturity, the execution of the budget plan, and other financial operations of the government, including governance of the borrowing activities of major government-backed entities such as Crown corporations. The program is also responsible for the system of circulating Canadian currency (banknotes and coins) to meet the needs of the economy.
Economic and Fiscal Policy Framework:This program activity is the primary source of advice and recommendations to the Minister of Finance regarding issues, policies, and programs of the Government of Canada in the areas of economic, fiscal, and social policy; federal-provincial-territorial relations; financial affairs; taxation; and international trade and finance. The work conducted in this program area involves extensive research, analysis, and consultation and collaboration with partners in both the public and private sectors. In addition, it handles the negotiation of agreements and drafting of legislation
2. Summary of Significant Accounting Policies
The financial statements have been prepared in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.
Significant accounting policies are as follows:
a) Parliamentary appropriations
The Department of Finance Canada is financed by the Government of Canada through parliamentary appropriations. Appropriations provided to the Department of Finance Canada do not parallel financial reporting according to generally accepted accounting principles since appropriations are primarily based on cash flow requirements. Consequently, items recognized in the statement of operations and the statement of financial position are not necessarily the same as those provided through appropriations from Parliament. Note 3 provides a high-level reconciliation between the bases of reporting.
Investments in the Crown corporations are recorded at cost and are not consolidated.
Income from investments in Crown corporations includes dividends from the Bank of Canada and the Canada Development Investment Corporation, which are recognized when declared.
c) Net cash provided by Government
The Department of Finance Canada operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the Department is deposited to the CRF, and all cash disbursements made by the Department are paid from the CRF. The net cash provided by the Government is the difference between all cash receipts and all cash disbursements, including transactions between departments of the federal government.
d) Change in net position in the CRF
Change in net position in the CRF is the difference between the net cash provided by the government and appropriations used in a year, excluding the amount of non respendable revenue recorded by the Department of Finance Canada. It results from timing differences between when a transaction affects appropriations and when it is processed through the CRF.
Revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues:
- Interest on Receiver General bank deposits is recognized as revenue when earned.
- Uncashed Receiver General cheques and warrants and bank account cheques for all departments and agencies are recognized as revenue of the Department of Finance Canada if they remain outstanding 10 years after the date of issue.
- Unclaimed matured bonds are recognized as revenue if they remain unredeemed 15 years after the date of call or maturity, whichever is earlier.
- Unclaimed bank balances are recognized as revenue when there has been no owner activity in relation to the balance for a period of 40 years.
Expenses are recorded on the accrual basis:
- Transfer payments are recorded as expenses when the recipient has met the eligibility criteria or fulfilled the terms of a contractual transfer agreement or, in the case of transactions that do not form part of an existing program, when the government announces a decision to make a non-recurring transfer, provided the enabling legislation or authorization for payment receives parliamentary approval prior to the completion of the financial statements.
- Public debt charges are recognized when incurred and include interest, amortization of debt discounts, premiums and commissions, and servicing and issue costs.
- Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment.
- Services provided without charge by other government departments for accommodation, the employer's contribution to the health and dental insurance plans and legal services are recorded as operating expenses at their estimated cost.
g) Employee future benefits
Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer defined benefit pension plan administered by the Government of Canada. The Department's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. Current legislation does not require the Department to make contributions for any actuarial deficiencies of the Plan.
Severance benefits: Employees are entitled to severance benefits under labour contracts or conditions of employment. These benefits are accrued as employees render the services necessary to earn them. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the government as a whole.
h) Accounts receivable and advances
Accounts receivable and advances are stated at amounts expected to be ultimately realized; a provision is made for receivables where recovery is considered uncertain.
Coin inventory is valued at the lower of cost and net realizable value. Cost is determined by the average cost method.
j) Foreign exchange accounts
Short-term deposits, marketable securities, and special drawing rights held in the foreign exchange accounts are recorded at cost. Marketable securities are adjusted for amortization of purchase discounts and premiums. Purchases and sales of securities are recorded at the settlement date. Write-downs to reflect other than temporary impairment in the fair value of securities are included in foreign exchange revenues on the statement of operations. Canada's subscriptions to the capital of the International Monetary Fund are recorded at cost.
k) Translation of foreign currencies
Transactions involving foreign currencies are translated to Canadian dollars at the rate of exchange in effect at the date of those transactions. Assets and liabilities denominated in foreign currencies are translated to Canadian dollars at the rate prevailing on March 31. The resulting gains and losses are included in revenue or expenses in Treasury and Financial Affairs and Transfer and Taxation Payment Programs in the statement of operations.
l) Other loans, investments, and advances
Subscriptions and contributions are recorded at cost net of allowances.
Loans and advances are initially recorded at cost and are adjusted to reflect the concessionary terms of those loans made on a long-term, low interest, or interest-free basis and the portion of the loans that are expected to be repaid from future appropriations. An allowance for valuation is further used to reduce the carrying value of loans, investments, and advances to amounts that approximate their net realizable value. For loans and advances to international organizations, an allowance is established based on their concessionary terms and their collectability.
m) Derivative financial instruments
Derivative financial instruments are financial contracts that derive their value from underlying changes in interest rates, foreign exchange rates or other financial measures. Derivative financial instruments that the Department of Finance Canada currently uses include interest rate swaps and cross-currency swap agreements.
Cross-currency swaps are initially recorded at cost and are translated into Canadian dollars at the exchange rate in effect at the balance sheet date. For cross-currency swaps where domestic debt has been converted into foreign debt, any exchange gains or losses are offset by the exchange gains or losses on foreign currency advances to the Exchange Fund Account. For cross-currency swaps where foreign debt has been converted into US dollar debt, any exchange gains or losses are offset by the exchange gains or losses on the applicable foreign debt.
Interest paid and payable, and interest received and receivable on all derivative financial instruments is included in interest on unmatured debt.
n) Tangible capital assets
All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more and that meet the criteria outlined in TBAS 3.1 Capital Assets, are recorded at their acquisition cost. The Department of Finance Canada does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian Reserves and museum collections. Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:
|Asset class||Amortization period|
|Machinery and equipment||Three to five years|
|Leasehold improvements||Lesser of the remaining term of the lease or useful life of the improvement|
|Assets under construction||Once in service, in accordance with asset type|
o) Unmatured debt
Premiums and discounts on unmatured debt are amortized on a straight line basis over the term to maturity of the respective debt instrument. The corresponding amortization is recorded as part of public debt charges.
p) Other liabilities
Deposits from Crown corporations that are repayable are recorded in "Other Liabilities" in the statement of financial position.
q) Loan guarantees
The allowance for losses on the guarantees of the Canadian Wheat Board and Export Development Canada is determined based on the government's identification and evaluation of countries that have formally applied for debt relief, estimated probable losses that exist on the remaining portfolio, and changes in the economic conditions of sovereign debtors.
r) Contingent liabilities
Contingent liabilities are potential liabilities that may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.
s) Measurement uncertainty
The preparation of these financial statements in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable.
The most significant items where estimates are used are contingent liabilities, valuation allowances for loans receivable, discounts on loans receivable, transfer payments to provinces and territories, accruals of taxes receivable and taxes payable under tax collection agreements, the liability for employee severance benefits and the useful life of tangible capital assets. Actual results could significantly differ from those estimated. Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.
3. Parliamentary Appropriations
The Department of Finance Canada receives most of its funding through annual parliamentary appropriations. Items recognized in the statement of operations and the statement of financial position in one year may be funded through parliamentary appropriations in prior, current, or future years. Accordingly, the Department has different net results of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled in the following tables.
|Net cost of operations||71,289,311||74,558,552|
|Adjustments for items affecting net cost of operations but not affecting appropriations:|
|Revenue not available for spending||5,563,923||4,877,248|
|Quebec Youth Allowances Recovery prepayment||336,000||-|
|Allowance for bad debts||(213,432)||80,425|
|Employment Insurance enhancement measure||(124,000)||-|
|Allowance on loan guarantees||111,208||71,733|
|Services provided without charge||(17,756)||(16,021)|
|Employee severance benefits||(3,296)||804|
|Inventory charged to program expense||(2,414)||5,083|
|Amortization of tangible capital assets||(1,595)||(1,632)|
|Recoveries on prior year allowances||880||-|
|Other expenses not being charged to appropriations:|
|Transfer payment pursuant to the Budget Implementation Act||1,466,300||2,206,000|
|Crown Share Adjustment||-||(234,400)|
|Adjustments for items not affecting net cost of operations but affecting appropriations:|
|Advances and prepaid expenses||136,845,692||4,508,031|
|Issuance and encashment of notes payable||386,930||322,614|
|Acquisitions of tangible capital assets||1,530||687|
|Current year appropriations used||215,640,076||86,379,638|
|Vote 1 — Operating expenditures||123,392||99,139|
|Vote 5 — Grants and contributions||660,200||221,200|
| Less :
Appropriations available for future years
|Vote 1 — Operating expenditures||(12,269)||(7,583)|
|Vote 5 — Grants and contributions||(88,166)||(127,823)|
|Vote 10 – Transfer payments to the territorial governments||(6)||-|
|Spending of proceeds from disposal of surplus Crown assets||-||(22)|
|Current year appropriations used||215,640,076||86,379,638|
|Net cash provided by government||36,329,618||103,664,529|
|Revenue not available for spending||5,563,923||4,877,248|
|Change in net position in the Consolidated Revenue Fund:|
|Variation in assets and liabilities:|
|Unmatured and matured debt||123,408,643||(24,788,823)|
|Other loans, investments, and advances||(71,489,406)||(3,866,291)|
|Accounts payable and accrued liabilities||(2,957,495)||(2,576,282)|
|Foreign exchange accounts||(9,409,429)||1,878,990|
|Employee severance benefits||3,296||(804)|
|Tangible capital assets||(460)||(36)|
|Advances – Crown Borrowing Program||136,721,631||4,840,000|
|Issuance of notes payable for subscriptions||384,280||318,280|
|Other expenses not being charged to appropriation at the same time||1,800,032||1,985,422|
|Total change in net position in the Consolidated Revenue Fund||173,746,535||(22,162,139)|
|Current year appropriations used||215,640,076||86,379,638|
The following table presents details of expenses by category:
|Provinces and territories (Note 4a)||45,756,464||45,575,855|
|Allowance on loan guarantees (recovery)||(111,208)||(71,733)|
|Employment Insurance enhancement measure||124,000||-|
|Non-profit institutions and organizations||91||10|
|Total transfer payments||46,518,553||45,835,344|
|Public debt charges:|
|Interest on unmatured debt (Note 4b)||18,301,808||20,364,430|
|Interest on pension liabilities and other liabilities (Note 4c)||11,610,137||12,776,471|
|Other public debt charges||27,849||71,470|
|Total public debt charges||29,939,794||33,212,371|
|Operating expenses (Note 4d)||142,036||118,300|
|Cost of domestic coinage sold||128,782||177,654|
|Net foreign currency loss||-||44,757|
a) Transfer payments to provinces and territories
Transfer payments to provinces and territories are paid pursuant to the Federal-Provincial Fiscal Relations Act, Budget Implementation Acts, and other statutory authorities.
For the period ending March 31, transfer payments to provinces and territories includes the following:
|Canada Health Transfer||22,759,016||21,474,272|
|Canada Social Transfer||10,567,868||9,590,219|
|Alternative payments for standing programs (recovery)||(2,973,912)||(2,719,889)|
|Bill C-41 Community Development Trust||-||1,000,000|
|Youth Allowances Recovery||(668,659)||(607,805)|
|Crown Share Adjustment||95,100||234,400|
|Bill C-50 (An Act to implement certain provisions of the budget tabled in Parliament on February 26, 2008 ):|
|Public Transit Capital Trust 2008||-||500,000|
|Police Officers Recruitment Fund||-||400,000|
|Payment to Nova Scotia for Carbon Capture||-||245,000|
|Canada Social Transfer Transition Protection Payments||(91)||32,000|
|Bill C-52(An Act to implement certain provisions of the budget tabled in Parliament on March 19, 2007):|
|Child Care Spaces||-||250,000|
|Clean Air and Climate Change Trust Fund||-||(75)|
|Transitional Trust Fund||-||(62)|
|Incentive for the elimination of capital taxes||170,000||-|
|Total Transfer payments to provinces and territories||45,756,464||45,575,855|
b) Interest on unmatured debt
Interest on unmatured debt includes interest incurred, amortization of debt discounts, and premiums and net interest on cross-currency and interest rate swaps:
|Interest on domestic debt:|
|Bonds for Canada Pension Plan||67,453||129,685|
|Interest on foreign debt:|
|Marketable bonds (US and euro)||104,331||277,215|
|Euro medium-term notes (US and euro)||74,657||69,581|
|Canada bills (US)||56,516||83,004|
|Canada notes (yen)||10,548||8,864|
|Total Interest on unmatured debt||18,301,808||20,364,430|
c) Interest on pension liabilities and other liabilities
For the period ending March 31, interest on pension liabilities and other liabilities includes interest on the following:
|Employment Insurance fund||950,223||1,926,315|
|Other specified purpose accounts||285,165||310,179|
|Retirement compensation arrangement accounts||118,379||116,742|
|Special drawing rights allocations||26,348||46,472|
|Canada Pension Plan account||5,603||7,627|
|Total Interest on pension liabilities and other liabilities||11,610,137||12,776,471|
d) Operating expenses
The following table presents details of operating expenses by category:
|Salaries and wages||84,128||71,876|
|Professional and special services||17,041||15,220|
|Contributions to employee benefit plans||11,431||12,104|
|Transportation and telecommunications||5,338||4,838|
|Amortization of tangible capital assets||1,595||1,632|
|Machinery and equipment||1,423||2,146|
|Repairs and maintenance||274||690|
|Total Operating expenses||142,036||118,300|
The following table presents details of revenues by category:
|Exchange Fund Account||1,852,821||1,828,151|
|Dividends from the Bank of Canada||1,757,122||1,921,014|
|Canada Mortgage and Housing Corporation||525,657||-|
|Dividends from Canada Development Investment Corporation||217,000||234,200|
|Farm Credit Canada||168,510||19,945|
|Business Development Bank of Canada||105,817||1,870|
|Interest on Subscriptions to the International Monetary Fund||8,386||9,292|
|Total investment income||4,808,358||4,211,479|
|Interest on bank deposits||346,700||360,661|
|Sales of domestic coinage||171,195||203,566|
|Net foreign currency gain||57,610||-|
|Mortgage insurance premiums||21,334||13,850|
|Loan interest - Canada Lands Company Ltd.||2,886||5,184|
6. Accounts Receivable and Advances
The following table presents details of accounts receivable and advances:
|Receivables from other federal government departments and agencies||6,019||31,209|
|Deposits in transit to the Receiver General||68||6|
|Accrued investment income||278,020||395,846|
|Accrued interest income-Crown Borrowings||117,394||-|
|Receivables from external parties||108||136|
|Total Accounts receivable and advances||401,609||427,197|
7. Taxes Receivable under Tax Collection Agreements
The following table present the details of taxes receivable under tax collection agreements:
|Corporate income taxes||3,999,676||1,825,549|
|Personal income taxes||7,033,653||4,582,081|
|Harmonized Sales Tax||130,030||443,448|
|First Nations Goods and Services Tax||870||618|
|First Nations Sales Tax||417||437|
|Various provincial benefits||(73,857)||(402,558)|
|Total Taxes receivable under tax collection agreements||11,090,789||6,449,575|
Taxes receivable include taxes collectible by the CRA on behalf of provincial, territorial or Aboriginal governments that have not yet been remitted to the Department of Finance Canada.
8. Foreign Exchange Accounts
The foreign exchange accounts represent the largest component of the official international reserves of the Government of Canada and consist of the following:
|Investments held in the Exchange Fund Account||49,341,250||41,075,243|
|Accrued net revenue from Exchange Fund Account||1,852,821||1,828,151|
|Total investments held in Exchange Fund Account (Note 8a)||51,194,071||42,903,394|
|Subscriptions to the International Monetary Fund (Note 8b)||12,010,592||10,751,719|
|Notes payable to the International Monetary Fund (Note 8c)||(10,026,594)||(10,040,500)|
|Special drawing rights allocations (Note 8d)||(1,469,531)||(1,315,504)|
|Total Foreign Exchange Accounts||51,708,538||42,299,109|
a) Investments held in Exchange Fund Account
This account records the moneys advanced from the Government to the Exchange Fund Account, in Canadian and other currencies, for the purchase of gold, foreign currencies and securities, and special drawing rights (SDRs). The Exchange Fund Account is operated under the provisions of the Currency Act. The advances are limited to $60 billion by order of the Minister of Finance dated December 30, 2005.
The following table shows international reserves held in and advances to the Exchange Fund Account:
|US dollar cash on deposits||547,664||213,866|
|US dollar short-term deposits||-||1,372,017|
|US dollar marketable securities||27,404,794||17,281,066|
|Euro cash on deposits||272,496||243,965|
|Euro marketable securities||21,640,775||22,094,526|
|Japanese yen cash deposits||105,834||85,867|
|Japanese yen marketable securities||-||515,222|
|Special drawing rights||1,215,313||1,090,424|
|Total Investments held in Exchange Fund Account||51,194,071||42,903,394|
b) Subscriptions to the International Monetary Fund
This account records the value of Canada's subscription ("quota") to the capital of the International Monetary Fund (IMF). The IMF is an international organization of 184 member countries that operates in accordance with its Articles of Agreement. It has a large pool of liquid assets, or resources, comprising convertible national currencies, special drawing rights, and other widely used international currencies provided by its members that it makes available to help members finance temporary balance of payments problems.
Upon joining the IMF and following periodic quota reviews, member countries are assigned a quota, based broadly on their relative size in the world economy.
c) Notes payable to the International Monetary Fund
This account records non-marketable, non-interest bearing notes issued by the Government to the IMF. These notes are payable on demand and are subject to redemption or re-issue, depending on the needs of the IMF for Canadian currency.
At least 25 per cent of Canada's quota is held by the IMF in a Canadian-dollar cash deposit at the Bank of Canada. The IMF's remaining Canadian-dollar holdings are in the form of non-negotiable, non-interest-bearing demand notes that are cashed by the IMF subject to its requirements for Canadian currency.
d) Special drawing rights allocations
This account records the value of special drawing rights (SDRs) allocated to Canada by the IMF. A SDR is an international reserve asset created by the IMF to supplement existing official international reserves of member countries. It represents a liability of Canada, as circumstances could arise whereby Canada could be called upon to repay these allocations, in part or in total.
SDR allocations are repayable to the IMF if they are cancelled by the IMF's Board of Governors, the Special Drawing Rights Department is liquidated, the IMF is liquidated, or if Canada chooses to withdraw from the IMF or terminate its participation in the Special Drawing Rights Department.
Canada's SDR allocations are SDR779.3 million.
e) Notional cost
For the year ended March 31, 2009, the notional cost of funds advanced by the CRF to the Exchange Fund Account is $1,630 million ($1,792 million for the year ended March 31, 2008). The notional cost of advanced funds is comprised of the actual interest costs on foreign denominated debt and cross currency swaps for foreign currency advances, and an imputed interest cost calculated using the average funding rate of outstanding Government of Canada market debt, applicable to the net of Canadian dollar and SDR currency advances.
9. Investment in Crown Corporations
At March 31, the investment, at cost, is as follows:
|Canada Development Investment Corporation||395,658||395,658|
| 101 common shares without a par value. The remaining
balance of the investment
represents the Department of Finance Canada's contributed surplus of the Canada
Hibernia Holding Corporation.
|Bank of Canada||5,920||5,920|
shares with a par value of $50 each and $920,000 of premiums paid in
respect of the acquisition of shares held by the public.
|Canada Pension Plan Investment Board (CPPIB)||-||-|
| 10 shares
of the CPPIB at $10 per share, which represents 100 per cent of the
|Total Investment in Crown corporations||401,578||401,578|
10. Crown Borrowings
The Consolidated Borrowing Program was officially launched on April 21, 2008. Crown corporations will no longer be issuing debt in the capital and money markets, rather will be borrowing directly from the Government of Canada. The following table presents details of the Crown Borrowings:
|Face value|| Unamortized
| Net book
| Net book
|Farm Credit Canada||11,450,105||(8,016)||11,458,121||3,826,364|
| Business Development
Bank of Canada
|Canada Mortgage and Housing Corporation||57,680,825||350||57,680,475||-|
|Total Crown Borrowings||76,414,930||(7,266)||76,422,196||4,821,138|
Contractual maturities of unmatured loans by Crown corporations over the next five years, at face value, are as follows:
|Maturing year||Farm Credit Canada||Business Development Bank||Canada Mortgage and Housing Corporation 1||Total|
|2015 and beyond||300,000||65,000||708,225||1,073,225|
|1. Includes loans of $54,186,763 as of March 31, 2009 made through CMHC for the purchase of National Housing Act Mortgage Backed Securities.|
The effective average annual interest rates are as follows:
|Farm Credit Canada||Business Development Bank||Canada Mortgage and Housing Corporation|
|Short Term fix||0.429%||0.429%||0.497%|
|Long Term fix||2.918%||2.976%||3.317%|
|Short Term floating||0.323%||0.323%||-|
|Long Term floating||0.554%||0.350%||1.687%|
11. Other Loans, Investments, and Advances
The following table presents details of other loans, investments, and advances by category:
|Face value||Unamortized discounts||Net book
|Government business enterprises|
|Notes receivable from Canada Lands Company Ltd.
|Note receivable from Parc Downsview Park Inc.
|Provincial and territorial governments|
|Recoverable overpayments of transfer payments (Note 11c)||3,339,032||421,515||2,917,517||3,031,495|
|Recoverable overpayments of taxes payable under tax collection agreements (Note 11d)||710,456||105,519||604,937||707,344|
|Loans to Municipal Development and Loan Board (Note 11e)||315||-||315||360|
|Loans to the Winter Capital Projects Fund (Note 11f)||2,900||-||2,900||2,900|
|International and other organizations|
|Subscriptions and contributions to the International Development Association(Note 11g)||8,195,938||-||8,195,938||7,811,658|
|Subscriptions to the European Bank for Reconstruction and Development (Note 11h)||272,690||-||272,690||221,927|
|Subscriptions to the International Bank for Reconstruction and Development (Note 11i)||419,558||-||419,558||344,508|
|Loans to the International Monetary Fund’s Poverty Reduction and Growth Facility (Note 11j)||304,346||-||304,346||321,033|
|Subscriptions to the International Finance Corporation(Note 11k)||102,597||-||102,597||83,498|
|Subscriptions to the Multilateral Investment Guarantee Agency(Note 11l)||13,537||-||13,537||11,017|
|Advances to the Global Environment Facility (Note 11m)||10,000||-||10,000||10,000|
|Investment in loan portfolio acquired from Canadian Commercial Bank (Note 11n)||42,252||-||42,252||43,132|
|Less: Allowance for valuation||9,059,472||-||9,059,472||8,528,640|
|Total Other loans, investments, and advances||4,419,710||553,721||3,865,989||4,097,677|
Government Business Enterprises
a) Canada Lands Company Ltd. (CLC)
CLC has acquired an interest in a number of real properties from the government in consideration for the issuance of promissory notes, which bear no interest and are repayable from the proceeds of the sale of the properties in respect of which they were issued. The notes were discounted using the Consolidated Revenue Fund lending rate applicable to Crown corporations and recorded at their discounted value.
b) ParcDownsview Park Inc.
The promissory note is non-interest bearing and is repayable in full on July 31, 2050.
Provincial and territorial governments
c) Recoverable overpayments/underpayments of transfer payments
The underpayments / overpayments are non-interest bearing and are paid in subsequent years.
d) Recoverable overpayments of taxes payable under tax collection agreements
Recoveries are non-interest bearing and will take place over a 10-year period, which started in 2004–05.
e) Municipal Development and Loan Board
The loans bear interest at rates from 5.25 to 5.375 per cent per annum and are repayable in annual or semi-annual instalments over 15 to 50 years, with final instalments between April 1, 2009, and July 1, 2010.
f) Winter Capital Projects Fund
The loans bear interest at rates from 7.4 to 9.5 per cent per annum and are repayable either in annual instalments over 5 to 20 years, or at maturity. The loans are fully provisioned.
International and other organizations
g) International Development Association (IDA)
Contributions and subscriptions to IDA are made in non-negotiable, non-interest-bearing demand notes that are later encashed. During the year, transactions included participation through the issuance of notes payable. As at March 31, 2009, Canada's total participation in IDA amounted to C$8,195.9 million (C$7,811.7 million in 2008). The loans are fully provisioned.
h) European Bank for Reconstruction and Development
As at March 31, 2009, Canada had paid-in shares valued at US$216,197,668 (US$216,197,668 in 2008). Canada's contingent liability for the callable portion of its shares is US$612,420,000. The loans are fully provisioned.
i) International Bank for Reconstruction and Development (World Bank)
As at March 31, 2009, Canada subscribed to 44,795 shares. The total value of these shares is US$5,403.8 million, of which US$336 million has been paid in. The remaining portion is callable. The callable portion is subject to call by the Bank under certain circumstances. Canada's contingent liability for the callable portion of its shares is US$5,069 million. The loans are fully provisioned.
j) International Monetary Fund—Poverty Reduction and Growth Facility
As at March 31, 2009, Canada had lent a total of SDR700,000,000 (SDR700,000,000 in 2008) to the Poverty Reduction and Growth Facility. Of this amount, SDR538,605,953 (SDR509,823,177 in 2008) has been repaid. The outstanding balance of SDR161,394,047 (SDR190,176,823 in 2008) was translated into Canadian dollars at the year-end closing rate of exchange (1 SDR = C$1.88573).
k) International Finance Corporation
As at March 31, 2009, Canada subscribed to 81,342 shares. These shares have a total value of US$81.3 million, all of which has been paid in. The loans are fully provisioned.
l) Multilateral Investment Guarantee Agency
As at March 31, 2009, Canada subscribed to 5,225 shares. The total value of these shares is US$56.5 million, of which US$10.7 million is paid in and the remaining portion is callable. The callable portion is subject to call by the Agency under certain circumstances. Canada's contingent liability for the callable portion of its shares is US$45.8 million. The loans are fully provisioned.
m) Global Environment Facility
Advances to the Global Environment Facility (GEF) are made in non-negotiable, non-interest-bearing demand notes that are later encashed. As at March 31, 2009, advances to the GEF amounted to C$10,000,000. The loans are fully provisioned.
n) Canadian Commercial Bank
These funds represent the government's participation in the loan portfolio that was acquired from the Bank and the purchase of outstanding debentures from existing holders. The loans are fully provisioned.
12. Tangible Capital Assets
|Cost||Accumulated amortization||Net book value|
|Capital asset class||Opening balance||Acquisitions||Disposals and write-offs||Closing balance||Opening balance||Amortization||Disposals and write-offs||Closing balance||2009||2008|
|Machinery and equipment||12,473||2,059||(4,978)||9,554||8,907||1,579||(4,974)||5,512||4,042||3,566|
|Assets under construction||-||-||-||-||-||-||-||-||-||-|
Amortization expense for the year ended March 31, 2009 is $1,595,463 ($1,632,000 in 2008).
13. Accounts Payable and Accrued Liabilities
The following table presents details of accounts payable and accrued liabilities:
|Allowance for guarantees||317,096||428,304|
|Accounts payable—other government departments and agencies||502,414||392,743|
|Accrued vacation pay||4,901||5,186|
|Total Accounts payable and accrued liabilities||1,128,905||3,416,921|
The Governments of Canada and Ontario have jointly announced assistance to the automotive sector. The loan agreement between Canada, as represented by the Department of Finance, and the Ontario Financing Authority (OFA), is to facilitate Ontario's one-third participation in the assistance package being provided in the form of loans to the automotive sector. As of March 31, 2009, the OFA has provided funds to the Department of Finance totalling $83.3 million for the purpose of disbursing the automotive loans. The term loan to the automotive sector ($250 million) has been issued by Foreign Affairs and International Trade. As interest and principal are received by Foreign Affairs and International Trade on the term loan, the corresponding one-third will be remitted to the OFA by the Department of Finance.
14. Taxes Payable under Tax Collection Agreements
At March 31, the balance in the accounts pertaining to taxes collectible and payable to provinces, territories and Aboriginal governments under tax collection agreements is as follows:
|Personal income taxes||1,027,223||2,050,830|
|Corporate income taxes||3,480,149||2,674,900|
|Harmonized Sales Tax||434,874||384,544|
|First Nations Goods and Services Tax||870||783|
|First Nations Sales Tax||417||437|
|Total Taxes payable under tax collection agreements||4,943,533||5,111,494|
Pursuant to various tax collection agreements, the Canada Revenue Agency (CRA) collects and administers personal income tax, corporate income and capital taxes, harmonized sales tax, sales tax, and goods and services sales tax on behalf of certain provinces, territories and Aboriginal governments, and the Department of Finance Canada remits related payments to the applicable government. Given that the Government of Canada reports information on a fiscal year basis while tax information is calculated on a calendar year basis, there can be transactions related to several tax years during any given fiscal year. Taxes payable therefore include amounts assessed, estimates of assessments based upon cash received, adjustments from reassessments, and adjustments relating to previous tax years payable to provincial, territorial and Aboriginal governments.
15. Interest Payable
The following table presents details of interest payable:
|Total Interest payable||6,839,241||7,090,297|
16. Notes Payable to International Organizations
Non-interest bearing demand notes are issued in lieu of cash in respect of subscriptions and contributions to international organizations. The notes are presented for encashment according to their terms of agreement.
At March 31, the amount outstanding is as follows:
|International Development Association||384,280||318,280|
|International Bank of Reconstruction and Development||30,250||24,618|
|Multilateral Investment Guarantee Agency||4,046||3,293|
|European Bank for Reconstruction and Development||1,838||4,488|
|Total Notes payable to international organizations||420,414||350,679|
17. Matured Debt
Matured debt consists of debt that has matured but has not yet been redeemed.
At March 31, the amount outstanding is as follows:
|Retail debt (matured from 1992 to 2009)||66,078||76,641|
|Marketable bonds (matured from 1992 to 2009)||13,461||14,466|
|Treasury bills (matured from 1977 to 1996)||591||591|
|Total Matured debt||80,130||91,698|
18. Unmatured Debt and Other Financial Instruments
The Department of Finance Canada borrows in both domestic and international markets on behalf of the Government of Canada.
Domestic debt consists of Treasury bills, marketable bonds, retail debt, and bonds for Canada Pension Plan.
The Treasury bills balance at March 31, 2009, consists of $8 billion in odd issue bills, $68.6 billion in three-month bills, $44 billion in six-month bills, and $71.9 billion in 364-day bills.
Retail debts include Canada Savings Bonds which are redeemable on demand by the holder, with accrued interest calculated to the end of the previous month; no interest is paid if redeemed during the first three months following the date of issue.
Bonds for Canada Pension Plan and notes are interest-bearing certificates of indebtedness issued by the Government of Canada exclusively to the CPP Investment Fund and are redeemable at face value plus accrued interest.
Foreign debt is issued by the Government of Canada under the government's foreign currency borrowing program. It consists of marketable bonds; Canada notes; Canada bills; and euro medium-term notes. Marketable bonds include bonds assumed by Finance Canada on February 5, 2001, on the dissolution of Petro-Canada Limited.
Marketable bonds are either issued in US dollars and or in euro dollars. They are issued to provide long term foreign funds.
Canada bills are short-term certificates of indebtedness issued in the US money market.
Canada notes are issued in Japanese yen to provide additional source of medium-term foreign funds.
Euro medium-term notes are issued in the euro and thus provide Canada with an additional source of medium-term foreign funds.
At March 31, unmatured debt is composed of the following:
|Bonds for Canada Pension Plan||523,003||-||523,003||1,042,363|
|Euro medium‑term notes||1,675,500||(62)||1,675,562||1,621,300|
|Less: Securities held for the retirement of unmatured foreign debt||(267,863)||(218,081)|
|Cross‑currency revaluation :|
|Total Unmatured debt||510,197,055||386,776,844|
|Domestic debt market value||550,969,884||422,872,124|
|Foreign debt market value||10,457,232||9,813,367|
Contractual maturities of unmatured debt by currency over the next five years, at face value, are as follows:
|Maturing year|| Canadian
|2015 and beyond||178,174,893||66,627||-||178,241,520|
| 1. Includes Treasury bills, marketable bonds,
retail debt and bonds for Canada Pension Plan.
2. Includes marketable bonds issued in US dollars and Canada bills.
3. Includes euro medium-term notes issued in euro.
The effective average annual interest rates are as follows:
|Bonds for Canada Pension Plan||11.03||10.62|
|Foreign currency notes||4.50||3.87|
19. Derivative Financial Instruments
a) Swap agreements
Government debt is issued at both fixed and variable interest rates and is denominated in Canadian dollars, US dollars and other currencies. The government has entered into interest rate and cross-currency swap agreements to facilitate management of its debt structure. In the case of interest rate swap agreements, fixed interest rate funding has been converted to variable rates tied to the Banker's Acceptance rates of London Interbank Offered Rates (LIBOR). In the case of cross-currency swap agreements, Canadian-dollar and other foreign-currency debt has been converted into US dollars or other foreign currencies with either fixed interest rates or variable interest rates. As a normal practice, the government's swap positions are held to maturity. The government does not enter into swap agreements for speculative purposes.
The interest paid or payable and the interest received or receivable on all swap transactions are recorded as part of public debt charges. Unrealized gains or losses due to fluctuations in the foreign exchange value of the swaps are presented in the cross-currency swap revaluation account.
Swaps with contractual, notional principal amounts outstanding at March 31, are as follows:
|Maturing year||Interest rate swaps||Cross-currency swaps||Interest rate swaps||Cross-currency swaps|
|2015 and beyond||-||22,752,755||-||14,452,186|
b) Credit risk to swap agreements
The government manages its exposure to credit risk by dealing principally with financial institutions having credit ratings from at least two recognized rating agencies, one of which must be Moody's or Standard & Poor's. At the time of inception of the agreement, the credit rating of the institution must be at least A–.
The government does not have a significant concentration of credit risk with any individual institution and does not anticipate any credit loss with respect to its swap agreements.
The following table presents the notional amounts of the swap agreements by ratings assigned by Standard & Poor's:
c) Fair value of financial instruments
The following tables present the carrying value, notional value and the fair value of financial instruments. Fair values are government estimates and are generally calculated using market conditions at a specific point in time where a market exists. Fair values of instruments with a short lifespan or of a non-negotiable nature are assumed to approximate carrying values. Fair values may not reflect future market conditions nor the actual values obtainable should the instrument be exchanged on the market. The calculations are subjective in nature and involve inherent uncertainties due to unpredictability of future events.
|Carrying value||Fair value||Difference||Carrying value||Fair value||Difference|
|Foreign exchange Accounts||51,708,538||53,457,209||1,748,671||42,299,109||42,909,580||610,471|
|Notional value||Fair value||Notional value||Fair value|
|Interest rate and cross-currency swaps||40,014,072||(2,225,102)||32,722,130||2,027,930|
Fair value of the swap agreements are the estimated amount that the Government would receive or pay, based on market factors, if the agreements were terminated on March 31. They are established by discounting the expected future cash flows of the swap agreements by using fiscal year-end market interest and exchange rates. A positive (negative) fair value indicates that the Government would receive (make) a payment if the agreements were terminated.
20. Credit Risk
Interest rate and foreign currency risks are managed using a strategy of matching the duration structure and the currency of the Exchange Fund Account (EFA) assets and the related foreign currency borrowings of the Government of Canada. As at March 31, 2009, the EFA assets and the liabilities funding these assets were effectively matched, which means that most price changes would affect both sides of the statement of financial position equally. Assets related to the International Monetary Fund are only partially matched, as they are denominated in SDRs.
The Government of Canada's foreign currency assets and liabilities are held in mainly three currency portfolios: the US dollar, the euro, and the Japanese yen. At March 31, 2009, a one per cent appreciation of the Canadian dollar versus the US dollar, the euro, and the Japanese yen would have resulted in a foreign exchange gain of $17.3 million due to the unmatched exposure of the US dollar portfolio and in a foreign exchange loss of $2.5 million to the unmatched exposure of the euro portfolio. The Japanese yen portfolio was matched in terms of currency exposure at March 31, 2009.
21. Other Liabilities
The following table presents details of other liabilities:
|Canada Hibernia Holding Corporation (Note 21a)||93,506||78,478|
|Canada Eldor Inc. (Note 21b)||44,275||43,500|
|Quebec Youth Allowances Recovery prepayment||-||336,000|
|Common School Funds—Ontario and Quebec (Note 21c)||2,678||2,678|
|Foreign Claims Fund (Note 21d)||179||179|
|War Claims Fund—World War II (Note 21e)||4||4|
|Total Other Liabilities||140,642||460,839|
The deposits from the two wholly owned subsidiaries of the CDIC are interest bearing and are repayable.
a) Canada Hibernia Holding Corporation—Abandonment reserve fund
This account was established to record funds that will be used to defray the future abandonment costs that will occur at the closure of the Hibernia field.
b) Canada Eldor Inc.—Holdback—Privatization—CDIC
This account was established pursuant to subsection 129(1) of the Financial Administration Act. This special purpose money is to be used to meet costs incurred on the sale of Crown corporations and demand for payment by purchasers pursuant to the acquisition agreement and costs incurred by the CDIC in connection with their sale.
c) Common School Funds—Ontario and Quebec
This account was established under12 Victoria 1849, Chapter 200, to record the proceeds from the sale of lands set apart for the support and maintenance of common schools in Upper and Lower Canada, now Ontario and Quebec. Interest of $133,889—apportioned on the basis of population—is paid directly to these provinces on a semi-annual basis, at the rate of 5 per cent per annum, and is charged to interest on the public debt.
d) Foreign Claims Fund
This account was established by Vote 22a, Appropriation Act No. 9, 1966, to record (a) such part of the money received from the Custodian of Enemy Property, proceeds of the sale of property, and the earnings of property and (b) all amounts received from governments of other countries pursuant to agreements entered into after April 1, 1966, relating to the settlement of Canadian claims and also records payment of claims submitted, including payment of the expenses incurred in investigating and reporting on such claims.
e) War Claims Fund—World War II
This account was established by Vote 696, Appropriation Act No. 4, 1952, to record monies received from the Custodian of Enemy Property or from other sources and payments (a) to eligible claimants for compensation in respect of World War II; (b) of a supplementary award amounting to 50 per cent of the original award (PC 1958-1467, October 23, 1958); and (c) of expenses incurred in investigating and reporting on claims. The War Claims Commission was established to enquire into and report on claims made by Canadians arising out of World War II for which compensation may be paid from this fund. The expenses of the Commission are chargeable hereto.
22. Employee Benefits
a) Pension benefits
Employees of the Department of Finance Canada participate in the Public Service Pension Plan, which is sponsored and administered by the Government of Canada. Pension benefits accrue up to a maximum period of 35 years at a rate of 2 per cent per year of pensionable service times the average of the best five consecutive years of earnings. The benefits are integrated with the Canada and Quebec Pension Plan benefits and they are indexed to inflation.
Employees and the Department contribute to the cost of the Plan. The expense amounted to $8,253 thousand in 2008-09 ($8,824 thousand in 2007-08), which represents approximately 2.0 times (2.1 times in 2008-09) the contributions made by employees. The responsibility of the Department of Finance Canada with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.
b) Severance benefits
The Department of Finance Canada provides severance benefits to its employees based on eligibility, years of service and final salary. These severance benefits are not pre-funded. Benefits will be paid from future appropriations. Information about the severance benefits, measured as at March 31, is as follows.
|Accrued benefit obligation, beginning of year||12,800||13,604|
|Expense for the year||4,579||841|
|Benefits paid during the year||(1,283)||(1,645)|
|Accrued benefit obligation, end of year||16,096||12,800|
23. Contingent Liabilities
a) Claims and litigations
In the normal course of its operations, the Department of Finance Canada becomes involved in various claims or legal actions. Some of these potential liabilities may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded in the financial statements.
As at March 31, 2009, the Department of Finance Canada has contingent liabilities of $75 million ($75 million in 2008 as restated) based on the Department's legal assessment of the potential exposure. The existence and amount of the liability depend upon the future outcome of these legal actions, which are not currently determinable. No accrual for these contingent liabilities has been made in the financial statements.
b) Callable share capital
The Department of Finance Canada has callable share capital in certain international organizations that could require payments to those organizations. At March 31, 2009, callable share capital is $7,224 million ($5,879 million in 2008).
c) Loan guarantees
The Department of Finance Canada guarantees loans insured by the Genworth Financial Mortgage Insurance Company Canada, AIG United Guaranty and PMI Mortgage Insurance Company Canada. At March 31, 2009, the contingent liability related to the guarantees is $1,636 million ($1,576 million in 2008). Losses on loan guarantees are recorded in the accounts when it is likely that a payment will be made to honour a guarantee and where the amount of the anticipated loss can be reasonably estimated. The amount of the allowance for losses is determined by taking into consideration historical loss experience and current economic conditions.
Canadian Wheat Board
The Department of Finance Canada manages guarantees to the Canadian Wheat Board for the repayment of the principal and interest of all receivables resulting from sales made under the Credit Grain Sale Program for an amount of $274 million ($854 million in 2008) and a portion of credit sales made under the Agri-Food Credit Facility, which amounted to $58 million ($70 million in 2008).
Export Development Canada
The Department of Finance Canada administers the government's compensation arrangement regarding Export Development Canada's sovereign loans and guarantees. Under this arrangement, the government fully compensates Export Development Canada for the cost of existing debt reduction commitments and shares losses with Export Development Canada on new debt reduction on obligations contracted before March 31, 2001. The government has also agreed to share losses with Export Development Canada in the event of unilateral debt reduction on debts contracted after March 31, 2001. Total funds covered under this agreement amount to $1,332 million ($1,286 million in 2008). A total liability of $317 million as at March 31, 2009 ($428 million in 2008) was recorded.
d) Canadian Lenders Assurance Facility (CLAF) / Canadian Life Insurers Assurance Facility (CLIAF)
The Canadian Lenders Assurance Facility (CLAF) and the Canadian Life Insurers Assurance Facility (CLIAF) is a component of Canada's implementation of the G7 Plan of Action to stabilize financial markets, restore the flow of credit and support global economic growth.
The purpose of the CLAF is to ensure that Canadian financial institutions are not put at a competitive disadvantage when raising funds in the wholesale markets. Under the CLAF, the Government has agreed to provide a guarantee for up to three years on certain debt instruments issued by banks and other eligible deposit-taking institutions in consideration for an annual fee ranging from 110 to 155 basis points. It is up to each institution to decide whether or not to apply to participate in the program. The period for issuance of guaranteed instruments under the CLAF expires on December 31, 2009. As at March 31, 2009 no amount has been guaranteed by the Department of Finance Canada.
The purpose of the CLIAF is to ensure that life insurers, who access credit and compete for business at a global level, are not put at a competitive disadvantage relative to foreign insurers that benefit from guarantee programs provided by their home governments. The CLIAF will provide insurance companies with the wholesale term borrowing of federally regulated life insurance companies. A fee for the guaranteed amount sought will be calculated and charged to the applicant for each Guarantee Certificate when the related guaranteed instrument is issued. The fee will range from 110 to 180 basis points. The facility will be modeled after the CLAF. As at March 31, 2009 no amount has been guaranteed by the Department of Finance Canada.
e) Canadian Asset Backed Commercial Paper – Senior Funding Facility
On January 21, 2009, the Government of Canada, in partnership with the governments of Quebec, Alberta and Ontario and the Caisse de Dépôt et Placement du Québec confirmed their commitment to provide a Senior Funding Facility (SFF) as part of the court-approved restructuring agreement for Canadian asset-backed commercial paper (ABCP) (Montreal Accord). The Senior Funding Facility provides a liquidity backstop in the event of collateral calls related to the restructured ABCP notes that is senior to other Margin Funding Facilities and the amount of the original notes. The notes are financial instruments with maturities that average seven years. The new note structure is in the form of trusts called "Master Asset Vehicles", of which there are three distinct pools of investments (MAV1, MAV2, and MAV3). The Government of Canada's commitment to the SFF is $1.85 billion of the $3.45 billion facility, of which $550 million is, if drawn, subject to guarantees of repayment from the Provinces of Ontario and Alberta. The SFF commitment supports MAV1 and MAV2. As a supplement to other agreed liquidity facilities, the purpose of the SFF is to provide assurance to holders of the right to call for additional collateral underlying the original ABCP notes that, in the very remote event that certain credit market indices exceed agreed trigger levels, such additional collateral would be provided. The Government will receive a commitment fee of 1.19% per annum until December 2016 in respect to its net credit commitment of $1.3 billion. The SFF facility will expire in August 2010, one month following the expiry of an agreed moratorium on collateral calls, unless an amount has been drawn down and remains unpaid at that date. Any advances made under this facility will bear interest at a rate based on 0.3% plus the average rate for Canadian Dollar Bankers Acceptances rate for the period. The interest and principal on any amounts drawn from the Senior Funding Facility will be repaid prior the relevant Margin Funding Facility and the notes issued by the vehicles in question. During the post-moratorium period, from July 17, 2010 to August 16, 2010, the Government of Canada has the option, at its sole discretion, but shall not be required under any circumstances, to provide further commitments of collateral support to prevent a termination event in respect of the restructured notes. Each additional amount would be subject to the same terms and conditions as the present commitment.
24. Contractual Obligations
The nature of the Department's activities can result in some large multi-year contracts and obligations whereby the Department of Finance Canada will be obligated to make future payments when the services or goods are received.
Significant contractual obligations that can be reasonably estimated are summarized as follows:
|2010||2011||2012||2013||2014 and thereafter||Total|
| International Development
|International Development Association||51,000||51,000||51,000||51,000||1,220,000||1,424,000|
|African Development Fund||-||-||-||-||416,000||416,000|
25. Related Party Transactions
The Department of Finance Canada is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations. The Department of Finance Canada enters into transactions with these entities in the normal course of business and on normal trade terms. In addition, during the year, the Department received services that were obtained without charge from other government departments as presented below.
Services provided without charge
During the year, the Department of Finance Canada received without charge from other departments, accommodation, legal fees, and the employer's contribution to employee health and dental insurance plans. These services without charge have been recognized in the Department's statement of operations as follows:
The Government of Canada has structured some of its administrative activities for efficiency and cost-effectiveness purposes so that one department performs these on behalf of all departments without charge. The cost of these services, which include payroll and cheque issuance services provided by Public Works and Government Services Canada and audit services provided by the Office of the Auditor
|Employer's contribution to employee health and dental insurance plans||5,988||4,755|
General, are not included as an expense in the statement of operations.
26. Additional Information
Canadian Secured Credit Facility (CSCF)
The Canadian Secured Credit Facility (CSCF) was announced in Budget 2009 to purchase up to $12 billion of term asset-backed securities backed by loans and leases on vehicles and equipment. The facility is managed by Business Development Bank of Canada (BDC) within parameters jointly developed by the Department of Finance, Industry Canada, and BDC following a consultation process. The program was designed to reflect reasonable commercial terms and to encourage the return of a secondary market for this type of asset-backed security. Allocations totaling $11 billion were made under the CSCF in two tranches in May and June. Through July 31, 2009 no drawings on these allocations had been made. The balance of available funds will be made available in a subsequent allocation to take place in August 2009.
27. Comparative Information
Comparative figures have been reclassified to conform to the current year's presentation.
28. Subsequent Events
International Monetary Fund (IMF) Commitment
On July 8, 2009, the Government of Canada and the IMF signed a bilateral borrowing agreement, up to US $10 billion, between Canada and the IMF for additional temporary resources for member countries requiring balance of payment assistance during the economic crisis.