Archived - Department of Finance Canada
Future-oriented Statement of Operations
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For the year ended
Statement of Management Responsibility
Departmental management is responsible for this future-oriented statement of operations, including responsibility for the appropriateness of the assumptions on which this statement is prepared. This statement is based on the best information available and assumptions adopted as at January 14, 2011 and reflects the plans described in the Report on Plans and Priorities.
January 14, 2011
Chief Financial Officer
|Transfer and taxation payment programs||51,987,724||53,122,282|
|Treasury and financial affairs||28,566,598||30,375,598|
|Economic and fiscal policy framework||101,725||232,450|
|Transfer and taxation payment programs||146,342||146,342|
|Treasury and financial affairs||4,059, 360||4,059,360|
|Economic and fiscal policy framework||59||59|
|Net cost of operations||76,518,651||79,584,952|
|Segmented information (note 8)
The accompanying notes form an integral part of the future-oriented financial statement of operations.
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.
Transfer and taxation payment programs: The Financial Administration Act created the Department of Finance Canada with a mandate that includes the supervision, control and direction of all matters relating to the financial affairs of Canada not by law assigned to the Treasury Board or any other minister. This program activity administers transfer and taxation payments to provinces and territories in accordance with legislation and negotiated agreements to provide for fiscal equalization and support for health and social programs and other shared priorities. Also included are commitments and agreements with international financial institutions aimed at aiding in 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: Provides direction of 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 regarding issues, policies and programs of the Government of Canada related to the areas of economic and social policy, federal-provincial fiscal relations, financial affairs, tax matters 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 government, Cabinet and 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 manages the negotiation of agreements, drafting of legislation and sponsoring of bills through the parliamentary process that are subsequently administered by other program activities within the department and by other government departments and agencies. The aim of this program activity is to create a sound and sustainable fiscal and economic framework that will generate sufficient revenues and provide for the management of expenditures in line with the Budget Plan and financial operations of the Government of Canada.
Internal services: Internal services are groups of related activities and resources that are administered to support the needs of programs and other corporate obligations of an organization. These groups are: Management and Oversight Services; Communication 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 to those provided specifically to a program.
2. Significant Assumptions
This future-oriented statement of operations has 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 used in the preparation of this future-oriented statement of operations are:
- The operations and statutory requirements of the Department will remain substantially the same as the previous year.
- Expenses and revenues, including the determination of amounts internal and external to the government are based on projected future results, past experience and trend analysis. Expenses and revenues are also consistent with relevant statutory, legal, contractual and policy requirements.
- All assumptions are consistent with those significant management assumptions disclosed in the most recently published Departmental Financial statements unless otherwise indicated.
- External economic variables which would otherwise impact the revenues of the Department have been assumed to be consistent over the projection period. Where applicable, underlying assets are assumed to remain at average historical levels throughout the projection period. Given the nature of these items actual conditions could vary significantly.
These assumptions are adopted as at January 14, 2011.
3. Variations and Change to the Forecast Financial Information
While every attempt has been made to accurately forecast final results for the remainder of 2011 and for 2012, actual results achieved for both years are likely to vary from the forecasted information presented, and this variation could be material.
In preparing this statement of operations the Department of Finance Canada has made estimates and assumptions concerning the future. These estimates and judgments may differ from the subsequent actual results. Estimates and judgments 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.
Some factors that could lead to material differences between the future-oriented statement of operations and the historical statement of operations include:
- Market interest-rates;
- Foreign-exchange rates;
- Future legislative changes or changes in policy requirements;
- Borrowing costs;
- 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;
- Further changes to the budget through additional new initiatives or technical adjustments later in the year.
The future-oriented statement of operations reflects significant statutory activities related to Government. Changes in the assumptions above will impact financial results within the statutory and legal framework within which each of these activities is managed.
Once the Report on Plans and Priorities is presented, the Department of Finance Canada will not be updating this future-oriented statement of operations for any changes to authorities or forecast financial information made in ensuing supplementary estimates.
4. Summary of Significant Accounting Policies
The future-oriented statement of operations has been prepared in accordance with the Treasury Board accounting policies and are based on Canadian generally accepted accounting principles for the public sector and are consistent with those prevailing in the published departmental financial statements for the year-ending March 31, 2010. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian generally accepted accounting principles.
Accounting policies of significance to the statement of operations are reproduced below:
a) Parliamentary authorities
The Department of Finance Canada is financed by the Government of Canada through parliamentary authorities. The cash accounting basis is used to recognized transactions affecting parliamentary authorities. The future-oriented statement of operations is based on accrual accounting. Consequently, items presented in the future-oriented statement of operations is 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.
Revenues are accounted for on the 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.
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.
- 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 expensed as the benefits accrue to employees under their respective terms of employment.
- Services received without charge from other government departments for accommodation, the employer's contributions to the health and dental insurance plans and legal services are recorded as operating expenses at their estimated cost.
e) 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 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.
f) 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.
g) Tangible capital assets
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|
|Motor vehicles||Three years|
5. Parliamentary Authorities
The Department of Finance Canada receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Operations 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
|Vote 1 – Operating expenditures||127,654||100,884|
|Vote 5 – Grants and contributions||145,260||181,416|
|Forecast authorities available||84,722,369||85,657,388|
Forecast authorities requested for the year ending March 31, 2012 are consistent with the planned spending amounts presented in the 2011-12 Report on Plans and Priorities. Estimated authorities requested for the year ending March 31, 2011 include amounts presented in the 2010-11 Main Estimates and Supplementary Estimates (A) and (B) and estimates of amounts to be allocated at year-end from Treasury Board central votes.
b) Reconciliation of net cost of operations to requested authorities
|Net cost of operations||76,518,651||79,584,952|
|Adjustments for items affecting net cost of operations but
not affecting authorities:
|Revenue not available for spending||4,205,929||4,205,929|
|Inventory charged to program expenses||5,402||5,402|
|Employee severance benefits||(475)||921|
|Amortization of tangible capital assets||(37)||(40)|
|Services received without charge||(17,229)||(17,063)|
|Adjustments for items not affecting net cost of operations but affecting authorities:|
|Transitional assistance provided under sales tax harmonization agreements||3,769,000||1,880,000|
|Payment related to the Fast Start Climate Change Financing Initiative||285,720||-|
|Forecast authorities available||84,722,369||85,657,388|
6. 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 forecast expenses are $9,638 thousand in 2011 and $9,928 thousand in 2012.
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. Estimated expenses at the date of this statement are $475 thousand in 2011 and recoveries of ($921) thousand in 2012.
7. 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.
a) Services received without charge
During the year, the Department of Finance Canada is forecasted to receive without charge from other departments, accommodation, legal fees, and the employer’s contribution to the health and dental insurance plans. These services received without charge have been recognized in the Department’s future-oriented statement of operations as follows:
|Employer’s contributions to the health and dental insurance plans||5,492||5,036|
|Total services received without charge||17,229||17,063|
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 General, are not included as an expense in the Statement of Operations.
b) Other transactions with related parties
|Expenses – Other Government departments and agencies||10,830,056||11,518,950|
|Revenues – Other Government departments and agencies||54||54|
|Economic and Fiscal Policy Framework||Transfer and Taxation Payment Programs||Treasury and Financial Affairs||Internal Services||Total|
| Provinces and
| Non-Profit institutions
|Public debt charges
|Cost of domestic
| Crown borrowings
- interest (Note 8c)
| Exchange Fund
Account (Note 8d)
|Sale of domestic
|Interest on bank
|Net cost from
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.
b) Public Debt
Public Debt charges include the interest on unmatured debt and on pensions, other future benefits and other liabilities, the amortization of premiums and discounts on unmatured debt, and the servicing costs and the costs of issuing new borrowings.
c) Crown borrowing interest
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
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.