Archived - Department of Finance Canada
Future-oriented Statement of Operations

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For the year ended
March 31

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.

 


Michael Horgan
Deputy Minister
Ottawa, Canada
January 14, 2011

 


Sherry Harrison
Chief Financial Officer

Department of Finance Canada
Future-oriented Statement of Operations
For the Year Ended March 31
($ thousands)
  Estimated
Results
2011
Forecast
2012
Expenses    
  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
  Internal services 68,533 60,551
 
Total expenses 80,724,580 83,790,881
 
Revenues    
  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
  Internal services 168 168
 
Total revenues 4,205,929 4,205,929
 
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:

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:

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.

c) Revenues

Revenues are accounted for on the accrual basis:

d) Expenses

Expenses are recorded on the accrual basis:

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

  Estimated
Results
2011
Forecast
2012
  ($ thousands)
Authorities requested    
Vote 1 – Operating expenditures 127,654 100,884
Vote 5 – Grants and contributions 145,260 181,416
Statutory amounts 84,449,455 85,375,088
 
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

  Estimated
Results
2011
Forecast
2012
  ($ thousands)
Net cost of operations 76,518,651 79,584,952
Adjustments for items affecting net cost of operations but
 not affecting authorities:
   
Add (less):    
  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)
  Other (44,592) (2,713)
 
  4,148,998 4,192,436
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:

  Estimated
Results
2011
Forecast
2012
  ($ thousands)
Accommodation 7,836 7,970
Employer’s contributions to the health and dental insurance plans 5,492 5,036
Legal services 3,901 4,057
 
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

  Estimated
Results
2011
Forecast
2012
  ($ thousands)
Expenses – Other Government departments and agencies 10,830,056 11,518,950
Revenues – Other Government departments and agencies 54 54

8. Segmented Information 

  2011
Total
2012

Economic and Fiscal Policy Framework Transfer and Taxation Payment Programs Treasury and Financial Affairs Internal Services Total
Transfer payments            
  Provinces and
   territories
   (Note 8a)
51,271,510 150,000 52,484,129 - - 52,634,129
  International
   organizations
614,811 - 606,591 - - 606,591
  Non-Profit institutions
   and organizations
100,384 - 30,916 - - 30,916
                                         
Total transfer
 payments
51,986,705 150,000 53,121,636 - - 53,271,636
             
Public debt charges
 (Note 8b)
28,432,000 - - 30,251,000 - 30,251,000
Operating expenses 158,022 71,450 646 - 60,551 132,647
Cost of domestic
 coinage sold
134,598 - - 124,598 - 124,598
Other expenses 13,255 11,000 - - - 11,000
 
Total expenses 80,724,580 232,450 53,122,282 30,375,598 60,551 83,790,881
 
Revenues            
Investment income            
  Crown borrowings
   - interest (Note 8c)
2,152,300 - - 2,152,300 - 2,152,300
  Exchange Fund
   Account (Note 8d)
1,616,898 - - 1,616,898 - 1,616,898
  Other interest 134,626 59 127,742 6,825 - 134,626
 
Total investment
 income
3,903,824 59 127,742 3,776,023 - 3,903,824
Sale of domestic
 coinage
179,276 - - 179,276 - 179,276
Interest on bank
 deposits
70,304 - - 70,304 - 70,304
Unclaimed cheques 29,351 - - 29,351 - 29,351
Guarantee fees 18,600 - 18,600 - - 18,600
Other 4,574 - - 4,406 168 4,574
 
Total revenues 4,205,929 59 146,342 4,059,360 168 4,205,929
 
Net cost from
 continuing
 operations
76,518,651 232,391 52,975,940 26,316,238 60,383 79,584,952

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.