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Future-oriented financial statements

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For the year ended March 31

Statement of Management Responsibility

Departmental management is responsible for these future-oriented financial statements, including responsibility for the appropriateness of the assumptions on which these statements are prepared. These statements are based on the best information available and assumptions adopted as at March 28, 2012 and reflect the plans described in the Report on Plans and Priorities.

Sherry Harrison, Chief Financial Officer
Ottawa, Canada
March 28, 2012

Michael Horgan, Deputy Minister
Ottawa, Canada
March 28, 2012

 

 

Department of Finance Canada
Future-oriented Statement of Financial Position
As at March 31
($ thousands)
  Estimated
Results
2012
Planned
Results
2013
Assets    
Financial assets    
  Due from the Consolidated Revenue Fund 6,721,206 6,853,092
  Coin inventory 24,293 24,893
  Accounts receivable (Note 6) 357,091 359,489
  Taxes receivable under tax collection agreements (Note 7) 6,111,595 6,501,108
  Foreign exchange accounts (Note 8) 56,911,160 56,406,160
  Crown borrowings (Note 9) 94,951,024 96,951,084
  Loans, investments, and advances (Note 10) 3,927,938 3,018,987
 
Total financial assets 169,004,307 170,114,813
 
Non-financial assets    
  Tangible capital assets (Note 11) 268 245
  Prepaid expenses (Note 21) 161,128 -
 
Total non-financial assets 161,396 245
 
Total assets 169,165,703 170,115,058
 
Liabilities    
  Accounts payable and accrued liabilities (Note 12) 5,277,119 4,460,356
  Taxes payable under tax collection agreements (Note 13) 6,144,122 6,221,499
  Interest payable 6,298,654 6,518,808
  Notes payable to international organizations 441,620 441,620
  Market debt (Note 14) 619,044,534 652,866,027
  Employee future benefits (Note 15) 8,598 2,903
 
Total liabilities 637,214,647 670,511,213
 
Equity of Canada (468,048,944) (500,396,155)
 
Total liabilities and equity 169,165,703 170,115,058

Contingent liabilities (Note 16)

Contractual obligations (Note 17)

The accompanying notes form an integral part of these future-oriented financial statements.

Sherry Harrison, Chief Financial Officer
Ottawa, Canada
March 28, 2012

Michael Horgan, Deputy Minister
Ottawa, Canada
March 28, 2012

Department of Finance Canada
Future-oriented Statement of Operations
For the Year Ended March 31
($ thousands)
  Estimated
Results
2012
Planned
Results
2013
Expenses    
  Transfer and taxation payment programs 55,162,480 56,479,033
  Treasury and financial affairs 28,516,637 28,981,400
  Economic and fiscal policy framework 75,949 70,987
  Internal services 93,055 59,716
 
Total expenses 83,848,121 85,591,136
 
Revenues    
  Transfer and taxation payment programs 81,240 89,497
  Treasury and financial affairs 4,259,984 3,769,586
  Economic and fiscal policy framework 59 59
  Internal services 106 106
 
Total revenues 4,341,389 3,859,248
 
Net cost of continuing operations 79,506,732 81,731,888

Segmented information (Note 20)

The accompanying notes form an integral part of the future-oriented financial statements.

Department of Finance Canada
Future-oriented Statement of Equity of Canada
For the Year Ended March 31
($ thousands)
  Estimated
Results
2012
Planned
Results
2013
Equity of Canada, beginning of year (445,671,617) (468,048,944)
Net cost of operations (79,506,732) (81,731,888)
Net cash provided by Government 57,328,307 49,233,863
Change in due from the Consolidated Revenue Fund (216,849) 131,886
Services provided without charge by other government departments (Note 18) 18,486 18,928
Transfer of assets to Shared Services Canada (Note 19) (539) -
 
Equity of Canada, end of year (468,048,944) (500,396,155)

The accompanying notes form an integral part of these future-oriented financial statements.

Department of Finance Canada
Statement of Cash Flow

For the Year Ended March 31
($ thousands)
  Estimated
Results
2012
Planned
Results
2013
Operating activities    
  Net cost of operations 79,506,732 81,731,888
  Non-cash items:    
    Amortization of tangible capital assets (203) (23)
    Services provided without charge by other government departments (18,486) (18,928)
  Variations in Statement of Financial Position:    
    Increase (decrease) in assets 2,031,717 231,383
    Increase (decrease) in liabilities 218,691 524,927
 
  Cash used in operating activities 81,738,451 82,469,247
Capital investing activities
    Acquisition of tangible capital assets 941 -
    Proceeds from disposal of tangible capital assets (539) -
 
  Cash used in capital investing activities 402 -
Investing activities
    Net change in the Foreign exchange accounts 8,404,182 (505,000)
    Net issuance of Crown borrowings (1,627,700) 2,000,060
    Net issuance of other borrowings 636,622 (908,951)
 
  Cash used in investing activities 7,413,104 586,109
Financing activities
    Notes payable to international organizations (30,975) -
    Net change in market debt (31,792,675) (33,821,493)
 
  Cash provided by financing activities (31,823,650) (33,821,493)
 
  Net cash provided by Government of Canada 57,328,307 49,233,863

The accompanying notes form an integral part of these future-oriented financial statements.

Notes to the Future-oriented 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 a strong economy and sound public finances 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.

Transfer and taxation payment programs: This program activity includes the administration of transfer and taxation payments to provinces and territories as well as taxation payments to Aboriginal governments in accordance with legislation and negotiated agreements. Also included in this program activity are commitments and agreements with international financial organizations aimed at supporting the economic advancement of developing countries. In addition, from time to time, the government will enter into agreements or enact legislation to respond to unforeseen pressures. 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: This program activity provides direction for Canada’s debt management activities, including the funding of interest costs for the debt and service costs for new borrowings. In addition, the program manages investments in financial assets needed to establish a prudent liquidity position. This program 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. This program activity is also responsible for the system of circulating Canadian currency (bank notes 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 on issues, policies and programs of the Government of Canada related to the areas of economic, fiscal and social policy; federal-provincial relations; financial affairs; taxation; and international trade and finance. The work conducted by this program activity involves extensive research, analysis, and consultation and collaboration with partners in both the public and private sectors, including the Cabinet and the Treasury Board; Parliament and parliamentary committees; the public and Canadian interest groups; departments, agencies and Crown corporations; provincial and territorial governments; financial market participants; the international economic and finance community; and the international trade community. In addition, this program activity includes policy advice on the development of Memoranda to Cabinet, negotiation of agreements, drafting of legislation and sponsoring of bills through the parliamentary process, which are subsequently administered by other program activities within the Department and by other government departments and agencies.

Internal services: Internal Services are activities and resources that are administered to support the needs of programs and other corporate obligations of an organization. The Internal Services categories are Management and Oversight Services, Communications and Consultations Services, Legal Services, Human Resources Management Services, Financial Management Services, Information Management Services, Information Technology Services, Real Property Services, Materiel Services, Acquisition Services, and Travel and Other Administrative Services. Internal Services include only those activities and resources that apply across an organization and not those provided specifically to a program.

2. Methodology and Significant Assumptions

These future-oriented financial statements have been prepared on the basis of the government priorities and the plans of the Department as described in the Report on Plans and Priorities.

The main assumptions employed in order to complete these future-oriented financial statements are as follows:

  • Operations and statutory requirements of the Department will remain substantially the same as the previous year;
  • Significant management estimates are consistent with those disclosed in the most recently published departmental financial statements unless otherwise indicated;
  • Expenses and revenues, including the determination of amounts internal and external to the government, are based on historical experience. This general historical pattern is expected to continue;
  • Financial requirements of the Government of Canada are assumed to remain consistent with those outlined in the 2012-2013 Debt Management Strategy and impact departmental-level financial assets and liabilities accordingly;
  • External economic and other market variables which can impact the net cost of operations of the Department are assumed to be consistent throughout the projection period in order to permit comparability of financial results. These variables can fluctuate significantly.
  • Estimated year end information for 2012 is used as the opening position for 2013 planned results.

These assumptions are employed solely for the completion of these future-oriented financial statements and are adopted as at March 28, 2012.

3. Variations and Changes to the Forecast Financial Information

While every attempt has been made to forecast final results for the remainder of 2012 and for 2013, actual results achieved for both years are likely to vary from the forecast information presented, and this variation could be material. Where necessary, the level of detail provided in these future-oriented financial statements has been summarized to accommodate the manner in which departmental balances are forecasted. Actual financial results with accompanying detailed disclosures are reported on annually in the departmental financial statements and Departmental Performance Report.

In preparing these future-oriented financial statements the Department of Finance Canada has made estimates and assumptions concerning the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Factors that could lead to material differences between the future-oriented financial statements and the historical financial statements include:

  • Foreign-exchange and interest rates;
  • The financial requirements of the Government of Canada;
  • Future legislative changes or changes in policy requirements;
  • Borrowing requirements of Crown Corporations participating in the Crown Borrowing Program;
  • Material changes in the levels or mix of the Official International Reserves of Canada; and,
  • Further changes to the departmental budget through additional new initiatives or technical adjustments later in the year. This could include but is not limited to Federal Budget announcements or changes to the anticipated timing of agreements.

Once the Report on Plans and Priorities is presented, the Department of Finance Canada will not be updating the forecast for any changes to authorities or forecast financial information made in ensuing supplementary estimates.

4. Summary of Significant Accounting Policies

The future-oriented financial statements have been prepared in accordance with the Treasury Board accounting policies in effect for the 2010-2011 fiscal year as well as those reasonably anticipated to be in effect in subsequent years at the time of preparation of these future-oriented financial statements.

These accounting policies, stated below, are based on Canadian generally accepted accounting principles for the public sector. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian generally accepted accounting principles.

Significant accounting policies are as follows:

a) Parliamentary authorities

The Department of Finance Canada is financed by the Government of Canada through parliamentary authorities. Financial reporting of authorities provided to the Department do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the future-oriented Statement of Operations and the future-oriented Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 5 provides a reconciliation between the bases of reporting.

b) 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 Government.

c) Amounts due from / to the Consolidated Revenue Fund

Amounts due from / to the CRF are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the net amount of cash that the Department is entitled to draw from the CRF without further parliamentary expenditures authorities to discharge its liabilities.

d) Revenues

Revenues are recorded on an accrual basis:

  • Investment income is recognized as revenue when earned.
  • Sale of domestic coinage is recognized in the period that the sale took place.
  • 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.
  • Guarantee fees are recognized when earned and are determined by reference to the terms of the guarantee program.

e) Expenses

Expenses are recorded on an 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 future-oriented financial statements.
  • Interest and other costs are recognized when incurred and include interest, amortization of debt discounts, premiums and commissions, and servicing and issue costs.
  • Operating expenses are recognized as incurred.
  • The cost of domestic coinage sold is recognized in the period in which the related sale took place.
  • Vacation pay and compensatory leave are accrued as the benefits are earned under the respective terms of employment.
  • Services provided without charge by other government departments for accommodation, the employer's contributions to the health and dental insurance plans, legal and other services are reported as operating expenses at their estimated cost.

f) Employee future benefits

Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multi-employer 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 labor 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.

g) Coin inventory

Coin inventory is valued at the lower of cost and net realizable value. Cost refers to the cost of production. Cost is determined using average cost method.

h) Accounts receivable

Accounts receivable and advances are stated at the lower of cost and net recoverable value; a valuation allowance is recorded for receivables where recovery is considered uncertain.

i) Foreign exchange accounts

Financial instruments that comprise 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, if any, are included in Exchange Fund Account revenues on the future-oriented Statement of Operations.

j) Foreign currency transactions

Transactions involving foreign currencies are translated to Canadian dollars at the rates of exchange in effect at the date of those transactions.

k) 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 authorities. 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.

l) 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 specified in the underlying contracts. Derivative financial instruments that the Department of Finance Canada is currently party to include cross-currency swap agreements and foreign exchange forward contracts.

Cross-currency swaps and foreign exchange forward contracts are initially recorded at cost and are translated into Canadian dollars at the exchange rate employed for the future-oriented Statement of Financial Position date. The translated values of cross-currency swap agreements are included as part of market debt reflecting their longer-term nature.

Interest paid and payable, and interest received and receivable on cross-currency swaps is included in interest on market debt.

m) Tangible capital assets

All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more 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
Machinery and equipment
Motor vehicles

Amortization Period
Three to five years
Three years

n) Market debt

Premiums and discounts on public 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 Interest and Other Costs.

The unamortized premium or discount arising on the buyback of bonds that are subsequently refinanced with similar debt with the intent of sustaining market liquidity is amortized over the remaining life of the old debt or the life of the new debt, whichever is shorter.

o) 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 future-oriented financial statements.

5. Parliamentary authorities ($ thousands)

The Department of Finance Canada receives most of its funding through annual parliamentary authorities. Items recognized in the future-oriented Statement of Operations and Financial Position in one year may be funded through parliamentary authorities 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:

a) Authorities requested

Authorities requested
($ thousands)
  Estimated
Results
2012
Planned
Results
2013
Authorities requested    
Vote 1 – Operating expenditures 129,842 101,791
Vote 5 – Grants and contributions 173,194 215,000
Statutory amounts 85,296,300 85,089,425
 
Forecast authorities available 85,599,336 85,406,216

Authorities presented reflect current forecasts of statutory items, approved initiatives included and expected to be included in Estimates documents and, when reasonable estimates can be made, estimates of amounts to be allocated from Treasury Board central votes.

b) Reconciliation of net cost of operations to requested authorities

Reconciliation of net cost of operations to requested authorities
($ thousands)
  Estimated
Results
2012
Planned
Results
2013
Net cost of operations 79,506,732 81,731,888
Adjustments for items affecting net cost of operations but not affecting authorities:    
  Revenue not available for spending 4,341,389 3,859,248
  Inventory charged to program expense 6,363 600
  Employee severance benefits 8,131 5,695
  Amortization of tangible capital assets (203) (23)
  Services provided without charge by other government departments (18,486) (18,928)
  Other 740,479 (302,741)
 
Total adjustments for items affecting net costs of operation but not affecting authorities 5,077,673 3,543,851
Adjustments for items not affecting net cost of operations but affecting authorities:
  Accounts payable external 863,477 130,477
  Loans, investments and advances 151,454 -
 
Forecast authorities available 85,599,336 85,406,216

6. Accounts receivable ($ thousands)

The following table presents details of accounts receivable:

Accounts receivable
($ thousands)
  Estimated
Results
2012
Planned
Results
2013
Accrued investment income 354,187 356,576
Receivables - other government departments and agencies 2,739 2,808
Receivables - external 165 105
 
Total accounts receivable 357,091 359,489

Accrued investment income includes interest receivable related to Crown Borrowings and guarantee fees receivable.

7. Taxes receivable under tax collection agreements

Taxes receivable refer to taxes estimated and planned to be collected or collectible by the Canada Revenue Agency on behalf of provincial, territorial or Aboriginal governments but not yet been remitted to the Department of Finance Canada.

The Department of Finance Canada will ultimately transfer these amounts directly to the participating provinces in accordance with established payment schedules. Amounts payable are described in note 13.

8. Foreign exchange accounts ($ thousands)

The foreign exchange accounts represent the largest component of the official international reserves of the Government of Canada.

Foreign exchange accounts
($ thousands)
  Estimated
Results
2012
Planned
Results
2013
Net investments in foreign exchange accounts 56,911,160 56,406,160

Net investments in foreign exchange accounts include securities and deposits held within the Exchange Fund Account of Canada and related accrued investment income and the value of subscriptions to, and loans receivable from, the International Monetary Fund. These investments are offset by the value of notes payable to the International Monetary Fund and Special Drawing Rights allocations.

9. Crown borrowings ($ thousands)

Crown borrowings represents estimated and planned loans made to Crown Corporations participating in the Crown Borrowing Program. Participating entities are the Business Development Bank of Canada, Canada Mortgage and Housing Corporation and Farm Credit Canada.

The Crown Borrowing Program provides direct lending to participating Crown Corporations from the Government of Canada.

Crown borrowings
($ thousands)
  Estimated Net
book value
2012
Face
Value
Unamortized
(discounts)
premiums
Planned Net
book value
2013
Crown Borrowings 94,951,024 96,948,192 2,892 96,951,084

10. Loans, investments and advances ($ thousands)

Loans, investments, and advances
($ thousands)
  Estimated Net
book value
2012
Face
Value
Unamortized
(discounts)
premiums
Estimated Net
book value
2013
Government business enterprises        
  Notes receivable from Canada Lands Company Ltd.
   (Note 10a)
59,480 73,445 13,400 60,045
  Note receivable from Parc Downsview Park Inc.
   (Note 10b)
2,240 19,000 16,500 2,500
 
Total government business enterprises 61,720 92,445 29,900 62,545
         
Provincial and territorial governments        
  Recoverable overpayments of transfer payments
   (Note 10c)
1,912,111 1,595,918 150,000 1,445,918
  Transitional assistance recoverable from British Columbia
   (Note 10d)
1,242,740 959,400 21,960 937,440
  Recoverable overpayments of taxes payable under
   tax collection agreements (Note 10e)
261,800 141,000 5,000 136,000
  Advances to Ontario (Note 10f) 135,442 135,329 12,280 123,049
  Advances to Prince Edward Island (Note 10f) 981 980 89 891
  Loans to Municipal Development and Loan Board
   (Note 10g)
315 315 - 315
  Loans to the Winter Capital Projects Fund (Note 10h) - 2,900 2,900 -
 
Total provincial and territorial governments 3,553,389 2,835,842 192,229 2,643,613
         
International and other organizations        
  Subscriptions and contributions to the International
   Development Association (Note 10i)
- 9,847,718 9,847,718 -
  Subscriptions to the European Bank for Reconstruction
   and Development (Note 10j)
- 209,625 209,625 -
  Subscriptions to the International Bank for Reconstruction
   and Development (Note 10k)
- 402,543 402,543 -
  Loans to the International Monetary Fund's Poverty
   Reduction and Growth Trust (Note 10l)
110,252 110,252 - 110,252
  Subscriptions to the International Finance Corporation
   (Note 10m)
- 78,870 78,870 -
  International Finance Corporation Global Agriculture
   and Food Securities Program (Note 10n)
- 48,000 48,000 -
  International Finance Corporation-Financial Mechanisms
   for Climate Change Facility (Note 10o)
202,577 268,577 66,000 202,577
  Subscriptions to the Multilateral Investment
   Guarantee Agency (Note 10p)
- 10,406 10,406 -
  Advances to the Global Environment Facility (Note 10q) - 10,000 10,000 -
  Investment in loan portfolio acquired from
   Canadian Commercial Bank (Note 10r)
- 42,202 42,202 -
 
Total international and other organizations 312,829 11,028,193 10,715,364 312,829
 
Total loans, investments and advances 3,927,938 13,956,480 10,937,493 3,018,987

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 are discounted using the Consolidated Revenue Fund lending rate applicable to Crown corporations at the time of issuance and are recorded at their discounted value at March 31.

b) Parc Downsview 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 of transfer payments

The overpayments are non-interest bearing and are recovered in subsequent years through on-going transfer payments.

d) Transitional assistance recoverable from British Columbia

The transitional assistance recoverable from British Columbia is non-interest bearing and is being recovered in equal annual amounts with final payment due in March, 2016. The amount has been discounted using the Consolidated Revenue Fund lending rate at the time of establishing the amount as receivable.

e) Recoverable overpayments of taxes payable under tax collection agreements

The recoveries are non-interest bearing and will take place over a 10 year period, which started in 2005.

f) Advances to Ontario and Prince Edward Island

Advances are non-interest bearing and are recovered in subsequent years through on-going transfer payments. Recoveries will take place over a 10 year period, beginning in 2013.

g) 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. The loans are currently due and final arrangement for the reimbursement of the remaining balance are being finalized.

h) 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

i) International Development Association (IDA)

This account records Canada's contributions and subscriptions to the International Development Association (IDA), as authorized by the Bretton Woods and Related Agreements Act, and various appropriation acts. The contributions and subscriptions to the IDA, which is part of the World Bank Group, are used to lend funds to the poorest developing countries for development purposes, on highly favorable terms. Contributions and subscriptions to the IDA are made in non-negotiable, non-interest bearing demand notes that are later encashed. These amounts are fully provisioned.

During the years presented, transactions are estimated and planned to include participation through the issuance of notes payable.

As at March 31, 2012, Canada’s total participation in IDA is estimated to amount to C$9,406.1 million. At March 31, 2013 Canada’s total participation in IDA is planned to amount to C$9,847.7 million.

j) European Bank for Reconstruction and Development

This account records Canada's subscriptions to the capital of the European Bank for Reconstruction and Development (EBRD), as authorized by the European Bank for Reconstruction and Development Agreement Act, and various appropriation acts. These amounts are fully provisioned.

Canada is estimated and planned to have subscribed to 71,435 shares of the EBRD's authorized capital valued at 714,350,000 EUR.

Only 212,850,000 EUR or about 30% of Canada's share subscription is estimated or planned to be "paid-in". The balance would be callable meaning the institution can request the resources in the unlikely event that it requires them to meet its financial obligations to bondholders. Payments for the share subscription are authorized by the Act. Each payment to the EBRD is comprised of cash and a promissory note.

Canada's contingent liability for the callable portion of its shares is estimated and planned to be 501,500,000 EUR. Canada's total estimated and planned cash contributions into the 'paid-in" capital of the EBRD total US$216,197,668.

k) International Bank for Reconstruction and Development (World Bank)

This account records Canada's subscriptions to the capital of the International Bank for Reconstruction and Development, as authorized by the Bretton Woods and Related Agreements Act, and various appropriation acts.

At March 31, 2012, the total value of these shares is estimated to be US$6,330 million, of which US$375 million plus C$16.4 million is estimated to have been paid-in. At March 31, 2013, the total value of these shares is planned to be US$6,673 million, of which US$395 million plus C$16.4 million is planned to have been paid-in. The remaining portion is callable. The callable portion is subject to call by the Bank under certain circumstances. At March 31, 2012, Canada’s contingent liability for the callable portion of its shares is estimated to be US$5,971 million. At March 31, 2013, Canada’s contingent liability is planned to be US$6,261 million.

l) International Monetary Fund - Poverty Reduction and Growth Trust

This account records the loan to the International Monetary Fund's Poverty Reduction and Growth Trust (formerly the Poverty Reduction and Growth Facility) in order to provide assistance to qualifying low-income countries as authorized by the Bretton Woods and Related Agreements Act, and various appropriation acts.

m) International Finance Corporation - Subscriptions

This account records Canada's subscription to the capital of the International Finance Corporation (IFC), which is part of the World Bank Group, as authorized by the Bretton Woods and Related Agreements Act, and various appropriation acts. Canada is estimated and planned to have subscribed to 81,342 shares. These shares have an estimated and planned value of US$81.3 million, all of which is estimated and planned to have been paid-in.

n) International Finance Corporation Global Agriculture and Food Securities Program

This account records Canada's financial assistance to the IFC for participation in the G8 Food Security Initiative (FSI) as authorized by the Bretton Woods and Related Agreements Act and various appropriation acts.

Advances to the IFC-FSI are estimated and planned to amount to C$48,000,000.

o) International Finance Corporation- Financial Mechanisms for Climate Change Facility

This account records Canada's financial support of the IFC's - Financial Mechanisms for Climate Change (FMCC) facility as authorized by the Bretton Woods and Related Agreements Act and various appropriation acts. The FMCC supports private sector engagement in climate change mitigation and adaptation activities through the provision of concessional financing arrangements.

Advances to the IFC-FMCC are estimated and planned to amount to C$268,577,000. Amounts will be recovered through the FMCC trust mechanism based on the terms and conditions of project funding which is administered by the IFC in accordance with the administration agreement signed between IFC and the Government of Canada.

p) Subscriptions to the Multilateral Investment Guarantee Agency

This account records Canada's subscriptions to the capital of the Multilateral Investment Guarantee Agency, as authorized by the Bretton Woods and Related Agreements Act, and various appropriation acts.

Canada is estimated and planned to have subscribed to 5,225 shares. The total value of these shares is estimated and planned to be US$56.5 million, of which US$10.7 million is estimated and planned to be paid-in with the remaining portion being 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 estimated and planned to be US$45.8 million.

q) Advances to the Global Environment Facility

This account records the funding of a facility for environmental funding in developing countries in the areas of ozone, climate change biodiversity and international waters as authorized by the Bretton Woods and Related Agreements Act, and various appropriation acts.

Advances to the Global Environment Facility (GEF) are made in non-negotiable, non-interest bearing demand notes that are later encashed.

Advances to the GEF are estimated and planned to amount to C$10,000,000.

r) Investment in loan portfolio acquired from Canadian Commercial Bank

Advances have been made the Canadian Commercial Bank representing the government’s participation in the support group as authorized by the Canadian Commercial Bank Financial Assistance Act. 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.

11. Tangible capital assets ($ thousands)

Tangible Capital Assets
($ thousands)
  Net Book Value Costs Accumulated Amortization Net Book Value
 



Capital asset class Estimated
Results
2012
Opening
balance
Acqui-
sitions
Disposal
and write-
offs
Closing
balance
Opening
balance
Amorti-
zation
Disposal
and write-
offs
Closing
balance
Planned
Results
2013
Machinery and equipment 252 624 - - 624 372 15 - 387 237
Motor vehicles 16 73 - - 73 57 8 - 65 8

Total capital assets 268 697 - - 697 429 23 - 452 245

Estimated amortization expense for the year ended March 31, 2012 is $203. Planned amortization expense for the year ended March 31, 2013 is $23.

12. Accounts payable and accrued liabilities ($ thousands)

The following table presents details of accounts payable and accrued liabilities:

Accounts payable and accrued liabilities
($ thousands)
  Estimated
Results
2012
Planned
Results
2013
Accounts payable - external (Note 12a) 4,983,028 4,166,265
Accounts payable - other government departments and agencies 289,455 289,455
Accrued vacation pay 4,636 4,636
 
Total accounts payable and accrued liabilities 5,277,119 4,460,356

a) Accounts payable - external

Included in accounts payable-external at March 31, 2012 is an estimated $2,200 million payable to Quebec with respect to transitional assistance for sales tax harmonization in those provinces.
At March 31, 2013, this amount payable is planned to be $1,467 million with final payment planned in the subsequent fiscal year.

Also included is an estimated and planned liability to the Province of Ontario which reflects Canada's estimated and planned obligation to Ontario for the province's one third interest in the Government's equity holdings in General Motors and Chrysler. These equity investments are currently registered to wholly-owned subsidiaries of the Canada Development Investment Corporation (CDIC), a Crown Corporation.

In light of Ontario's one-third contribution to the total Canadian financial assistance provided to General Motors and Chrysler, Canada has entered into an agreement with Ontario to transfer one-third of amounts received as a result of holding these investments, including dividends and proceeds from dispositions.

Amounts estimated and planned to be held on account of collateral cash deposits are also included in accounts payable. These amounts are offset by cash balances held in the Consolidated Revenue Funds.

13. Taxes payable under tax collection agreements

Pursuant to various tax collection agreements, the Canada Revenue Agency 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. Amounts collectible by the CRA, but not yet remitted to the Department of Finance Canada, are described at Note 7.

The Department of Finance Canada ultimately transfers these amounts directly to the participating provinces in accordance with established payment schedules.

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 will 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.

14. Market debt ($ thousands)

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 (CPP).

Retail debt includes 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.

Foreign debt is issued by the Government of Canada under the government’s foreign currency borrowing program. It consists of marketable bonds and Canada bills. Marketable bonds include bonds assumed by Finance Canada on the dissolution of Petro Canada Limited. Marketable bonds are either issued in US dollars and/or in euros. They are issued to provide long term foreign funds. Canada bills are short-term certificates of indebtedness issued in the US money market.

Cross-currency revaluation refers to the estimated and planned net notional value of cross-currency swap agreements. Cross-currency swap agreements are entered into to effectively convert portions of domestic debt into foreign debt in order to meet foreign funding requirements.

At March 31, market debt is estimated and planned to be composed of the following:

Market debt
($ thousands)
  Estimated Net
book value
2012
Face
Value
Unamortized
(discounts)
premiums
Planned Net
book value
2013
Domestic debt:        
  Treasury bills 162,290,378 159,000,000 (931,874) 158,068,126
  Marketable bonds 441,432,404 481,000,000 (3,475,982) 477,524,018
  Retail debt 9,000,000 9,000,000 - 9,000,000
 
Total domestic debt 612,722,782 649,000,000 (4,407,856) 644,592,144
 
Foreign debt: 10,939,024 13,000,000 (110,315) 12,889,685
 
Total domestic and foreign debt 623,661,806 662,000,000 (4,518,171) 657,481,829
   
Matured debt 255,006     255,006
Less: Securities held for the retirement of
  unmatured foreign debt
(51,183)     (49,713)
 
   
Net domestic and foreign debt 623,865,629     657,687,122
 
   
Cross-currency revaluation: (4,821,095)     (4,821,095)
 
   
Total market debt 619,044,534     652,866,027

15. Employee future benefits ($ thousands)

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 estimated expenses are $9,748 thousand in 2012 and the planned expenses are $10,017 in 2013.

The Department's responsibility 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 authorities. Information about the severance benefits, estimated as at the date of these statements, is as follows:

Severance benefits
($ thousands)
  Estimated
Results
2012
Planned
Results
2013
Accrued benefit obligation, beginning of year 16,729 8,598
Expense for the year (1,461) 754
Expected benefits payments during the year (6,670) (6,449)
 
Accrued benefit obligation, end of year 8,598 2,903

16. Contingent liabilities

Contingent liabilities arise in the normal course of operations and their ultimate disposition is unknown. They are grouped into three categories as follows:

a) Claims and litigations

Claims have been made against the Department in the normal course of operations. These claims include items with pleading amounts and other for which no amount is specified. Based on the Department's assessment, legal proceedings for claims estimated at $75 million were estimated to be pending at March 31, 2012. 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.

b) Callable share capital

The Department of Finance Canada has callable share capital in certain international organizations that could require payments to those organizations. Information related to these amounts is provided in note 10.

c) Loan guarantees

Mortgage Insurance

The Department of Finance Canada guarantees loans insured by the Genworth Financial Mortgage Insurance Company Canada, Canada Guarantee Mortgage Insurance Company and PMI Mortgage Insurance Company Canada. 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.

No amounts related to contingent liabilities have been forecasted in the future-oriented financial statements.

17. Contractual Obligations ($ thousands)

The nature of the Department’s activities can result in some large multi-year agreements and contracts and obligations whereby the Department of Finance Canada will be obligated to make future payments when the services/goods are received.

Significant contractual obligations that can be reasonably estimated and planned for are summarized as follows:

Contractual obligations
($ thousands)
  2013 2014 2015 2016 2017 and thereafter Total
Transfer payments            
  International Development Association 51,200 51,200 51,200 51,200 1,067,470 1,272,270
  African Development Fund - - - - 415,750 415,750
  Toronto Waterfront Revitalization Initiative 8,700 - - - - 8,700
  Harbourfront Centre Funding Program 5,000 5,000 5,000 3,000 - 18,000
 
Total contractual obligations 64,900 56,200 56,200 54,200 1,483,220 1,714,720

18. Related Party Transactions ($ thousands)

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. During the year, the Department received services that were obtained without charge from other government departments as presented below.

a) Common services provided without charge by other government departments

The Department of Finance Canada is estimated and planned to receive without charge from other departments, accommodation, legal services, and the employer’s contribution to the health and dental insurance plans. These services provided without charge have been recognized in the Department’s future-oriented Statement of Operations as follows:

Common services provided without charge by other government departments
($ thousands)
  Estimated
Results
2012
Planned
Results
2013
Accommodation 9,135 9,532
Employer's contributions to the health and dental insurance plans 6,832 6,832
Legal services 2,519 2,564
 
Total services received without charge 18,486 18,928

The Government of Canada has centralized some of its administrative activities for efficiency, cost-effectiveness purposes and economic delivery of programs to the public. As a result, the Government uses central agencies and common services organizations so that one department performs services for all other departments and agencies 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 General, are not included as an estimated or planned expense in the future-oriented Statement of Operations.

b) Administration of programs on behalf of other government departments

As of November 15, 2011, the Department of Finance Canada transferred certain information technology activities the Shared Services Canada (SSC). During the transition period, the Department of Finance Canada continues to administer those activities on behalf of SSC until March 31, 2012. At the date of these future-oriented financial statements, the Department of Finance Canada plans to incur expenses of $1,233 on behalf of Shared Services Canada. These forecasted expenses are not recorded in these future-oriented financial statements as they will be transferred to SSC.

c) Other transactions with related parties

Other transaction with related parties
($ thousands)
  Estimated
Results
2012
Planned
Results
2013
Expenses - Other Government departments and agencies 7,960,684 8,089,676
Revenues - Other Government departments and agencies 4,170 4,170

19. Transfers to other government department ($ thousands)

Effective November 15, 2011, the Department of Finance Canada transferred responsibility for certain information technology activities to the SSC in accordance with s31.1 of the Financial Administration Act and Order in Council P.C. 2011-1297 including the stewardship responsibility for the assets and liabilities related to the program. Accordingly, the Department of Finance Canada transferred the following assets related to the information technologies activities to Shared Services Canada on November 15, 2011:

Transfers to other government department
($ thousands)
Assets: Amount Transferred
Tangible capital assets (net book value) (Note 11) $539

20. Segmented Information ($ thousands)

Presentation by segment is based on the Department's program activity architecture. The presentation by segment is based on the same accounting policies as described in the summary of significant accounting policies in note 4. The following table presents the forecasted expenses incurred and forecasted revenues generated for the main program activities, by major object of expenses and by major type of revenues. The segmented results for the period are as follows:”. This comment does not apply to the French document since the text was incorporated.

Segmented Information
($ thousands)
    2013
   
  2012
Total
Economic and Fiscal Policy Framework Transfer and Taxation Payment Programs Treasury and Financial Affairs Internal Services Total
Expenses            
Transfer payments            
  Provinces and territories (Note 20a) 54,639,360 - 55,580,774 - - 55,580,774
  International organizations 493,691 - 884,559 - - 884,559
  Non-Profit institutions and organizations 28,783 - 13,700 - - 13,700
 
Total transfer payments 55,161,834 - 56,479,033 - - 56,479,033
Interest and other costs (Note 20b)            
  Interest on unmatured debt 18,824,000 - - 19,703,000 - 19,703,000
  Other interest costs 9,569,000 - - 9,159,000 - 9,159,000
Operating expenses 155,305 70,987 - - 59,716 130,703
Cost of domestic coinage sold 123,637 - - 119,400 - 119,400
Other expenses 14,345 - - - - -
 
Total expenses 83,848,121 70,987 56,479,033 28,981,400 59,716 85,591,136
 
Revenues            
Investment income            
  Crown borrowings - interest (Note 20c) 2,294,889 - - 2,241,321 - 2,241,321
  Exchange Fund Account (Note 20d) 1,689,517 - - 1,184,517 - 1,184,517
  Other interest 81,796 59 78,863 11,131 - 90,053
 
Total investment income 4,066,202 59 78,863 3,436,969 - 3,515,891
Sale of domestic coinage 115,388 - - 115,388 - 115,388
Interest on bank deposits 107,782 - - 175,952 - 175,952
Unclaimed cheques 38,314 - - 38,314 - 38,314
Guarantee fees 10,634 - 10,634 - - 10,634
Other 3,069 - - 2,963 106 3,069
 
Total revenues 4,341,389 59 89,497 3,769,586 106 3,859,248
 
Net cost of operations 79,506,732 70,928 56,389,536 25,211,814 59,610 81,731,888

a) 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 and are consistent with these described in the Department’s Report on Plans and Priorities.

b) Interest and other costs

Interest and other costs include the interest on market debt and on various superannuation accounts as prescribed by legislation. Also included are the amortization of premiums and discounts on unmatured debt, and the servicing costs and the costs of issuing new borrowings.

c) Crown borrowing interest

Estimated and planned Crown borrowing interest is comprised of interest revenue earned on direct lending to Crown Corporations participating in the Crown Borrowing Program.

d) Exchange fund account

Estimated and planned revenues from investments includes interest earned, amortization of premiums and discounts using the straight line method, gains or losses on sales of securities, and revenues from securities lending activities. Interest is accrued on short-term deposits, deposits held under repurchase agreements, marketable securities, and Special Drawing Rights.

21. Adoption of new accounting policy

As of April 1, 2012, the Government of Canada will adopt Public-Sector Accounting Standard 3410, Government Transfers. As of the date of these statements, the government has indicated it will be applying this standard prospectively. This accounting policy change is presented in these future-oriented financial statements on this basis.

As a result of this change in accounting policy, it is anticipated that the Department of Finance Canada will recognize an immediate transfer payment expense of approximately $161 million on April 1, 2012 in relation to amounts which had been previously disbursed but, given the timing of certain events, were presented as Prepaid Expenses. This expenditure is reflected in these financial statements as part of Transfer and taxation payment programs within the Future-Oriented Statement of Operations in 2012-2013.

In the event that this accounting policy change is applied on a different basis, the ultimate historical accounting treatment may vary from that presented.