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Section III Financial and Supplementary Information
Summary of Financial Information
| Financial Resources ($ millions) | |||
|---|---|---|---|
| Year | 2004-2005 Actual |
2005-2006 Actual |
2006-2007 Planned & Actual |
| Total Spending | 1,815.1 | 2,057.9 | 2,401.1 & 2,190.0 |
At the outset of the 2006-2007 fiscal year, the department’s planned spending was $2,401.1 million. Through Main Estimates and Supplementary Estimates (A) and (B), the department was allocated total authorities of $3,015.3 million, including a statutory amount of $502.9 million for payments arising from the new Softwood Lumber Agreement and less any net-voted revenues. Actual spending was $2,190 million, net of $695 million of non-respendable revenues (primarily $623.4 million related to EDC) and including $81.4 million of services received without charge.
The department has three voted appropriations: operating expenditures, capital expenditures, and grants and contributions. The voted appropriations of the former International Trade Canada were combined with those of Foreign Affairs Canada in the 2006-2007 Supplementary Estimates to reflect the reintegration of the two departments. The department was also provided with the authority through its Vote 12a for $126.9 million for the forgiveness of debts and other obligations from various countries (see Table 3 for details).
Voted appropriations, including the amount for debt forgiveness, account for 80% of the department’s actual spending. In percentage terms by vote, Authorities for Operating Expenditures (Vote 1) make up approximately 58%, Authorities for Capital Expenditures (Vote 5) make up approximately 6%, Grants and Contributions (Vote 15) make up approximately 30%, and Debt Forgiveness (Vote 12a) accounts for approximately 6%.
Of the department’s grants and contributions expenditures, approximately 63% represent the assessed costs of Canada’s membership in international organizations such as the UN, the WHO and the ICAO. While the funds reside within DFAIT’s appropriations, the memberships are held on behalf of the entire Government of Canada.
Passport Canada is a special operating agency that manages and delivers passport services to Canadians through the use of the Passport Revolving Fund. Under this policy, Passport Canada is not funded via the regular Treasury Board process, but rather finances its activities through revenues generated from the sale of products, in accordance with Treasury Board guidelines.
Table 1: Comparison of Planned and Actual Spending (incl. FTEs)
Table 2: Resources by Program Activity
Table 3: Voted and Statutory Items
Table 4: Services Received Without Charge
Table 5: Loans, Investment and Advances (Non-budgetary)
Table 6: Sources of Respendable and Non-Respendable Revenue
Table 7: Passport Office Revolving Fund Financial Statements
Table 8: Resource Requirements by Branch and Program Activity
Table 9: User Fees (A—User Fees Act & B—Policy on Service Standards for External Fees)
Table 10: Progress Against the Department’s Regulatory Plan
Table 11: Details on Project Spending
Table 13: Details on Transfer Payment Programs (TPPs)
Table 14: Conditional Grants (Foundations)
Table 15: Financial Statements of Departments and Agencies (including Agents of Parliament) and Revolving Funds Financial Statements
Table 16: Responses to Parliamentary Committees, Audits and Evaluations
Table 17: Sustainable Development Strategy
Table 18: Procurement and Contracting
Table 19: Client-Centred Services
Table 20: Horizontal Initiatives
Table 21: Travel Policies
| 2004-2005 | 2005-2006 | 2006-2007 | ||||
| Actual | Actual | Main Estimates | Planned Spending | Total Authorities | Total Actuals | |
| Program Activity | ||||||
| International Security | - | - | 358.7 | 361.0 | 369.9 | 353.0 |
| Global Issues | 656.9 | 691.3 | 505.6 | 512.9 | 550.0 | 463.2 |
| Bilateral Relations | 129.9 | 185.1 | 134.0 | 165.7 | 140.1 | 127.0 |
| Strategic Policy and Public Diplomacy | 99.8 | 35.7 | 44.9 | 46.5 | 50.4 | 49.0 |
| Protocol | 38.6 | 38.8 | 43.4 | 42.5 | ||
| Common Services and Infrastructure (Support from Headquarters) | 377.4 | 169.6 | 187.9 | 212.8 | 212.1 | 209.3 |
| Common Services and Infrastructure (Missions Abroad) | 320.0 | 668.3 | 621.6 | 630.7 | 641.0 | 640.9 |
| Consular Affairs | 78.6 | 48.8 | 49.8 | 51.8 | 116.2 | 107.9 |
| Passport Services | 2.5 | (24.2) | 0.0 | - | 25.3 | (29.6) |
| Transfer Payments not specifically allocated | - | 10.2 | 0.0 | - | - | |
| Trade Policy and Negotiations | 107.7 | 65.6 | 51.8 | 51.7 | 557.3 | 542.2 |
| World Markets/Commercial Relations | 4.5 | 54.0 | 41.2 | 41.2 | 41.0 | 33.4 |
| International Business Development | 88.7 | 198.0 | 309.5 | 309.5 | 253.8 | 251.9 |
| Promotion of Foreign Direct Investment and S&T Cooperation | 7.9 | 9.0 | 10.5 | 12.1 | 14.8 | 12.9 |
| Total | 1,873.9 | 2,111.4 | 2,354.1 | 2,434.7 | 3,015.3 | 2,803.6 |
| Less: Non-respendable revenue * | 128.1 | 139.9 | N/A | 117.7 | N/A | 695.0 |
| Plus: Cost of services received without charge ** | 69.3 | 86.4 | N/A | 84.1 | N/A | 81.4 |
| Total Departmental Spending | 1,815.1 | 2,057.9 | N/A | 2,401.1 | N/A | 2,190.0 |
| Full-Time Equivalents | 10,431 | 11,273 | 11,513 | 11,519 | ||
| * The actual amount of non-respendable revenues includes the EDC portion of $623.4 million. See Table 6 for details. | ||||||
| ** Services received without charge usually include accommodation provided by PWGSC, the employer's share of employees' insurance premiums, and expenditures paid by TBS (excluding revolving funds), Workers' Compensation coverage provided by Social Development Canada, and services received from the Department of Justice Canada (see Table 4). | ||||||
| Note: Due to rounding, figures may not add to totals shown. | ||||||
Table 7: Passport Office Revolving Fund Financial Statements ($ millions)
User Fees (A—User Fees Act & B—Policy on Service Standards for External Fees)
| A. User Fee | Fee Type | Fee-setting Authority |
Date Last Modified |
2006-2007 | Planning Years | ||||||
| Forecast Revenue ($ 000) |
Actual Revenue ($ 000) |
Full Cost ($ 000) |
Performance Standard |
Performance Results | Fiscal Year | Forecast Revenue ($ 000) |
Estimated Full Cost ($ 000) |
||||
| Consular Services Fee | Other Cost Recovery | Consular Services Fees Regulations http://laws.justice.gc.ca/en/E-22/SOR-95-538/index.html pursuant to the Department of Foreign Affairs and International Trade Act. | The Consular Services Fee was introduced on November 8, 1995. It has not been modified. | 64,900 | 76,207 | n/a | See i) | In 2006-2007, consular officers dealt with over 1.3 million requests for consular services, which resulted in 244,700 cases being opened (including passport cases). Feedback indicated that 97% of respondents were satisfied or very satisfied with the overall service that they received (the same as in 2005-2006). An airport survey undertaken in March 2007 found that travellers who were familiar with the travel advisories on the consular website (http://www.voyage.gc.ca) were very positive in their assessment of this information source, with 87% saying it was very or somewhat useful. | 07-08 08-09 09-10 |
70,000 70,000 70,000 |
71,363 71,363 71,363 |
| Specialized Consular Services Fee | Other Cost Recovery | Consular Fees (Specialized Services) Regulations http://www.voyage.gc.ca/main/about/consular_fees-en.asp#1 pursuant to paragraph 19(1) (a) of the Financial Administration Act. | Fees have been collected since 1958 pursuant to the Regulations Respecting the Fees to be Charged for Consular Services, SOR / 58-133. The most recent modification occurred in 1998. | 3,100 | 3,189 source SMP |
n/a from SMP | See i) | Missions abroad reported dealing with 75,200 legal/notary cases (which includes service delivery and related inquiries) in 2006, an increase of 2% from the previous year. (Revenue also increased by 2%.) Client feedback from 33 clients demonstrated an overall satisfaction level with the legal/notary service of 96%. | 07-08 08-09 09-10 |
3,100 3,100 3,100 |
3,416 3,416 3,416 |
| Subtotal (R) Subtotal (O) Total |
Subtotal (R) Subtotal (O) Total |
Subtotal (R) Subtotal (O) Total |
Subtotal Subtotal Subtotal |
06-07 07-08 08-09 Total |
06-07 07-08 08-09 Total |
||||||
| B. Date Last Modified: N/A | |||||||||||
| C. Other Information: Due to rounding, figures may not add to totals shown. | |||||||||||
i) Performance standard: Every effort will be made to obtain solutions for specific problems and to provide the required service. However, our ability to do so and our success are conditioned, in many instances, by the laws and regulations of other countries as well as by the quality and level of cooperation offered by persons and organizations outside the Government of Canada.
| A. User Fee | Fee Type | Fee-setting Authority |
Date Last Modified |
2006-2007 | Planning Years | ||||||
| Forecast Revenue ($ 000) | Actual Revenue ($ 000) | A. User Fee | Fee Type | Fee-setting Authority |
Date Last Modified | Forecast Revenue ($ 000) | Actual Revenue ($ 000) | ||||
| Passport Canada Revolving Fund | Other products and services (O) | Passport Service fees regulation | Dec 11, 2001 | 198,087 | 231,518 | 216,649 (198,087) |
The standard turnaround times are 10 days for over-the counter applications and 20 days for mail-in applications | For the fiscal year, overall turnaround time standards were met for 77.9% of applications due to strong performance through November 2006. However, as volumes significantly exceeded capacity between December and March there was a decrease in performance for those 4 months. The percentage of applications processed within turnaround time standards between December and March was 36.9%. | 07-08 08-09 09-10 |
239,208 259,763 246,173 |
233,130 259,763 246,173 |
| B. Date Last Modified: | |||||||||||
| C. Other Information: Due to rounding, figures may not add to totals shown. | |||||||||||
| A. User Fee | Fee Type | Fee-setting Authority |
Date Last Modified |
2006-2007 | Planning Years | ||||||
| Forecast Revenue ($ 000) |
Actual Revenue ($ 000) |
A. User Fee | Fee Type | Fee-setting Authority |
Date Last Modified |
Forecast Revenue ($ 000) |
Actual Revenue ($ 000) |
||||
| Fees charged for the processing of access requests filed under the Access to Information Act (ATIA) | Other products and services (O) | Access to Information Act | 1992 | 8 | 4 | 1700 | Response provided within 30 days following receipt of request; the response time may be extended pursuant to section 9 of the ATIA. Notice of extension to be sent within 30 days after receipt of request. The Access to Information Act provides fuller details: http://laws.justice.gc.ca/en/A-1/218072.html. |
Statutory deadlines met at 82. 8% of the time. | 07-08 08-09 09-10 |
17 17 17 |
2000 2000 2000 |
| Sub-Total (R) Sub-total (O) Total |
Sub-Total (R) Sub-total (O) Total |
Sub-Total (R) Sub-total (O) Total |
Sub-total: Sub-total: Sub-total |
07-08 08-09 09-10 Total |
07-08 08-09 09-10 Total |
||||||
| B. Date Last Modified: N/A | |||||||||||
| C. Other Information: The department is implementing a comprehensive Business Plan to address the performance gap in processing of access requests and intends to significantly improve the overall service in the short and longer term. Due to rounding, figures may not add to totals shown. |
|||||||||||
| A. User Fee | Fee type | Fee-setting Authority | Date Last Modified | 2006-2007 | Planning Years | ||||||
| Revenue Forecast ($000) | Actual Revenue ($000) | Full Cost ($000) | Performance Standard | Performance Results | Fiscal Year | Forecast Revenue ($000) | Estimated Full Cost ($000) | ||||
| Property-Related Lettings and Sublettings. | (o) Other Cost Recovery (Lease of public property) | Department of Foreign Affairs and International Trade Act, FAA, TB Cost Recovery and Charging Policy, 1997 TB Decision on Net Voting, TB Real Property Revenue Policy | March 20, 1997 | 566 | 479 | 479 | Available space is let out to third parties as soon as an appropriate tenant is identified and terms are negotiated. Space is fully demised from main mission space. All transactions are in accordance with local and international laws and regulations governing property and diplomatic rights. | In 2006-2007 the department administered eight letting agreements. Ninety percent of surplus space is let out within six to eight months, and 90% of agreements are renewed in accordance with market standards. | 07-08 | 517 | 517 |
| 08-09 | 533 | 533 | |||||||||
| 09-10 | 542 | 542 | |||||||||
| B. Date Last Modified: March 20, 1997 | |||||||||||
| C. Other Information: Due to rounding, figures may not add to totals shown. | |||||||||||
| A. User Fee | Fee type | Fee-setting Authority | 2006-2007 | Planning Years | ||||||||
| Date Last Modified | Revenue Forecast ($000) | Actual Revenue ($000) | Fee Type | Full Cost ($000) | Performance Standard | Performance Results | Fiscal Year | Forecast Revenue ($000) | Estimated Full Cost ($000) | |||
| IYP | Other- Program Participation Fee (PPF) | TBS Charging Policy Authorization No. 828483 pursuant to section 19(1)(b) of the Financial Administration Act and subsection 4(2) of the User Fee Act (UFA). | Jan 2001 | 1,400 | 1,400 | The fee level ($150) is based on the underlying costs incurred to operate and manage the program. This fee is comparable to international norms. It is similar to fees charged to Canadian participants in Australia and New Zealand and is paid only by individuals accepted into the program. The pricing strategy is also designed to ensure that the related revenues do not exceed the cost of managing and delivering the program in Canada and abroad. Each year, DFAIT checks with Australia and New Zealand to ensure that the participation fee is still in line with fees these two countries charge to Canadian participants. | 1,400 | Young foreigners who pay the $150 PPF and who are eligible to participate in the IYP can expect to have their applications reviewed and processed and to receive their "Letters of Introduction" or rejection notice from Citizenship and Immigration (CIC) within approximately 10 working days. Refunds are issued to non-eligible applicants. | During 2006-2007, 33,000 young foreigners participated in the IYP in Canada. 23,000 young Canadians travelled abroad during the same period. Canada hosted almost 8,000 young Australians and fewer than 2,000 young New Zealanders in that same period. | 08-09 09-10 |
4,000 (with the Implementation of the new worldwide PPF) | |
| B. Date Last Modified: | ||||||||||||
| C. Other Information: Due to rounding, figures may not add to totals shown. | ||||||||||||
| Table 9B: Policy on Service Standards for External Fees |
| Supplementary information on the Policy on Service Standards can be found at http://www.tbs-sct.gc.ca/dpr-rmr/2006-2007/info/info-eng.asp. |
| Table 10: Progress Against the Department’s Regulatory Plan |
| Supplementary information on the Progress Against the Department’s Regulatory Plan can be found at http://www.tbs-sct.gc.ca/dpr-rmr/2006-2007/info/info-eng.asp. |
| Table 11: Details on Project Spending |
| Berlin, Germany: Chancery construction Dhaka, Bangladesh: Construction of diplomatic complex Moscow, Russia: Fit-up of new chancery and residential accommodation Rome, Italy: Chancery acquisition and fit-up Seoul, Korea: Construction of chancery and 7 staff quarters. |
| Supplementary information on Project Spending can be found at http://www.tbs-sct.gc.ca/dpr-rmr/2006-2007/info/info-eng.asp. |
|
| Further information on these projects can be found at http://www.tbs-sct.gc.ca/dpr-rmr/2006-2007/info/info-eng.asp. |
| Asia Pacific Foundation Centre for International Governance Innovation Forum of Federations |
| Supplementary information on Conditional Grants can be found at http://www.tbs-sct.gc.ca/dpr-rmr/2006-2007/info/info-eng.asp. |
Statement of Operations (Unaudited)
For the Year Ended March 31
(in thousands of dollars)
| 2007 | 2006 | ||||
|---|---|---|---|---|---|
| (Restated) | |||||
| Expenses from operations (Note 4) | |||||
| Trade Policy and Negotiations | $ | 557,991 | $ | 71,307 | |
| Global Issues | 473,171 | - | |||
| International Security | 381,813 | 709,412 | |||
| Common Services and Infrastructure: | |||||
| Missions Abroad | 622,708 | 704,246 | |||
| Support from Headquarters | 190,961 | 186,953 | |||
| Passport Services (Special Operating Agency) | 221,033 | 194,474 | |||
| Bilateral Relations | 123,538 | 253,299 | |||
| Consular Affairs | 111,576 | 52,415 | |||
| International Business Development | 93,253 | 53,222 | |||
| Strategic Policy and Public Diplomacy | 50,786 | 37,740 | |||
| Protocol | 42,735 | - | |||
| World Markets / Commercial Relations | 34,344 | - | |||
| Promotion of Foreign Direct Investment and Science and Technology Cooperation |
13,331 | 9,311 | |||
| Total expenses from operations | $ | 2,917,240 | $ | 2,272,379 | |
| Revenue from operations (Note 5) | |||||
| Trade Policy and Negotiations | 457 | 784 | |||
| Global Issues | 1,488 | - | |||
| International Security | 1,133 | 12,976 | |||
| Common Services and Infrastructure: | |||||
|
Missions Abroad
|
14,609 | 73,384 | |||
|
Support from Headquarters
|
12,358 | 29,842 | |||
| Passport Services (Special Operating Agency) | 235,298 | 196,032 | |||
| Bilateral Relations | 3,019 | 18,434 | |||
| Consular Affairs | 80,643 | 8,542 | |||
| International Business Development | 8,487 | 1,459 | |||
| Strategic Policy and Public Diplomacy | 1,863 | 2,915 | |||
| Protocol | 241 | - | |||
| World Markets / Commercial Relations | 533 | - | |||
| Promotion of Foreign Direct Investment and Science and Technology Cooperation |
110 | 84 | |||
| Total revenues from operations | $ | 360,239 | $ | 344,452 | |
| Net cost of operations | $ | 2,557,001 | $ | 1,927,927 | |
| Other: | |||||
| Dividend Revenue | $ | 350,000 | - | ||
| Canada Account | |||||
|
Expenses
|
$ | 52,872 | $ | 219,498 | |
|
Revenue
|
335,235 | 180,359 | |||
| Total other | $ | (632,363) | $ | 39,139 | |
| Net results | $ | 1,924,638 | $ | 1,967,066 | |
The accompanying notes form an integral part of these financial statements.
| 2007 | 2006 | ||||
|---|---|---|---|---|---|
| ASSETS | |||||
| Financial assets | |||||
|
Accounts receivable and advances (Note 6)
|
529,166 | 133,497 | |||
|
Investments in Crown corporations (Note 7)
|
991,200 | 991,200 | |||
|
Canada Account loans (Note 8)
|
1,975,237 | 2,215,808 | |||
| Total financial assets | $ | 3,495,603 | $ | 3,340,505 | |
| Non-financial assets | |||||
|
Prepaid expenses
|
$ | 8,800 | $ | 7,156 | |
|
Inventory for re-sale
|
1,592 | 2,507 | |||
|
Consumable inventory
|
2,843 | 2,676 | |||
|
Tangible capital assets (Note 9)
|
1,027,523 | 982,439 | |||
| Total non-financial assets | $ | 1,040,758 | $ | 994,778 | |
| TOTAL | $ | 4,536,361 | $ | 4,335,283 | |
| Liabilities | |||||
|
Accounts payable and accrued liabilities
|
$ | 802,249 | $ | 275,667 | |
|
Vacation pay and compensatory leave
|
42,418 | 39,290 | |||
|
Deferred revenue (Note 11)
|
2,376 | 151 | |||
|
Employee severance benefits (Note 12)
|
141,205 | 159,281 | |||
| Total liabilities | $ | 988,248 | $ | 474,389 | |
| Equity of Canada | $ | 3,548,113 | $ | 3,860,894 | |
| TOTAL | $ | 4,536,361 | $ | 4,335,283 | |
Contingent Liabilities (Note 13)
Contractual Obligations (Note 14)
| 2007 | 2006 | ||||
|---|---|---|---|---|---|
| (Restated) | |||||
| Equity of Canada , beginning of year | $ | 3,860,894 | $ | 3,807,549 | |
| Net results of operations | (1,924,638) | (1,967,066) | |||
| Current year appropriations used (Note 3) | 2,803,575 | 1,967,078 | |||
| Revenue not available for spending | (682,288) | (260,821) | |||
| Refund of prior year expenditures | (12,473) | (23,999) | |||
| Services provided without charge by other government departments (Note 15) | 81,400 | 86,400 | |||
| Change in net position in the Consolidated Revenue Fund (Note 3) | (578,357) | 251,753 | |||
| Equity of Canada, end of year | $ | 3,548,113 | $ | 3,860,894 | |
| 2007 | 2006 | ||||
|---|---|---|---|---|---|
| (Restated) | |||||
| Operating activities | |||||
|
Net results of operations
|
$ | 1,924,638 | $ | 1,967,066 | |
|
Non-cash items:
|
|||||
|
Amortization of tangible capital assets
|
$ | (74,344) | $ | (71,252) | |
|
(Loss) Gain on disposal and write-down of
|
|||||
|
tangible capital assets
|
2,326 | 11,013 | |||
|
Services provided without charge by other government departments
|
(81,400) | (86,400) | |||
|
Variations in statement of financial position:
|
|||||
|
Increase (decrease) in accounts receivable and advances
|
$ | 395,669 | $ | (106,594) | |
|
Increase (decrease) in prepaid expenses
|
1,644 | 1,411 | |||
|
Net increase (decrease) in Canada Account loans
|
(240,571) | 65,512 | |||
|
Increase (decrease) in inventory
|
(915) | 132 | |||
|
Increase (decrease) in consumable inventory
|
167 | 966 | |||
|
Decrease (increase) in accounts payable and accrued liabilities
|
(526,582) | 126,494 | |||
|
Decrease (increase) in vacation pay and compensatory leave
|
(3,128) | (1,321) | |||
|
Decrease (increase) in deferred revenue
|
(2,225) | 2 | |||
|
Decrease (increase) in employee severance benefits
|
18,076 | (14,354) | |||
| Cash used by operating activities | $ | 1,413,355 | $ | 1,892,675 | |
| Capital investment activities | |||||
|
Acquisition of tangible capital assets
|
$ | 122,232 | $ | 56,998 | |
|
Proceeds from disposal of tangible capital assets
|
(5,130) | (15,662) | |||
| Cash used by capital investment activities | $ | 117,102 | $ | 41,336 | |
| Financing activities | |||||
| Net cash provided by Government of Canada | $ | (1,530,457) | $ | (1,934,011) | |
Notes to the Financial Statements (unaudited)
For the year ended March 31, 2007, with comparative figures for 2006
1. Authority and Objectives
The Department of Foreign Affairs and International Trade (hereinafter called “the department”) operates under the legislation set out in the Department of Foreign Affairs and International Trade Act, RSC 1985, c. E-22. The department’s desired strategic outcomes are: advancing Canada’s interests internationally, serving Government abroad, serving Canadians abroad, understanding and advancing Canada’s economic interests internationally and enabling Canada to succeed in the global marketplace. The department does this through the following activities:
- Trade Policy and Negotiations analyzing, negotiating, advocating and representing Canada's international economic and commercial interests in Canada and abroad, in consultation with stakeholders.
- Global Issues advocating a stronger and more effective multilateral system, capable of addressing Canada's interests in global issues, in particular international economic relations and development, environment and sustainable development, human rights and human security.
- International Security advocating Canadian international security interests and human security program interests bilaterally and multilaterally, as well as managing the department's responsibilities with respect to security and intelligence.
- Common Services and Infrastructure managing and providing common services to government programs and partners operating abroad through mission and headquarters support.
- Passport Services managing and delivering passport services to Canadians through Passport Canada, a Special Operating Agency.
- Bilateral Relations conducting and promoting Canada’s bilateral relations, diplomatic, trade, investment and science and technology investment interests in Canada and abroad.
- Consular Affairs managing and delivering consular services to Canadians.
- International Business Development managing and delivering international business services to Canadians.
- Strategic Policy and Public Diplomacy leading the formation of Canada's overall international policy and the interdepartmental development of whole-of-government strategies, including public diplomacy.
- Protocol managing and facilitating the presence of foreign diplomats in Canada as well as planning and leading the official travel by the Governor General, the Prime Minister, Ministers of the Portfolio and all diplomatic officials’ events.
- World Markets / Commercial Relations integrating Canada's economic, trade, investment, and science and technology interests at the regional and bilateral level and managing commercial relations.
- Promotion of Foreign Direct Investment and Science and Technology Cooperation attracting, retaining and expanding foreign direct investment in Canada.
The department is also responsible for the Canada Account, which is administered by Export Development Canada (EDC). The Canada Account supports export transactions which, though within the scope of EDC’s authority, are considered to be outside of the organization’s risk tolerance. These transactions may instead be conducted under the Canada Account if they are deemed to be in Canada’s national interest by the Minister for International Trade and the Minister of Finance.
2. Summary of Significant Accounting Policies
The financial statements have been prepared in accordance with Treasury Board accounting policies, which are consistent with Canadian generally accepted accounting principles for the public sector.
Significant accounting policies are as follows:
(a) Parliamentary appropriations
The department is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to the department do not parallel financial reporting according to Canadian generally accepted accounting principles, since appropriations are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and the Statement of Financial
Position are not necessarily the same as those provided through appropriations from Parliament. Note 3 provides a high-level reconciliation between the bases of reporting.
(b) Consolidation
These financial statements include the accounts of Passport Canada. Revenue and expense transactions and asset and liability accounts between Passport Canada and the department have been eliminated. The department has recorded investments in the three Crown corporations: Canadian Commercial Corporation, Export Development Canada and the International Development Research Centre. These investments
are recorded at cost. The results of the Crown corporations are not consolidated in these financial statements due to the fact that the department is not deemed to control these entities.
(c) Net cash provided by Government
The department 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 Government is the difference between all cash receipts and all cash disbursements, including transactions between
departments of the federal government.
(d) Change in net position in the Consolidated Revenue Fund
The change in the net position of the CRF is the difference between the net cash provided by Government and appropriations used in a year, excluding the amount of non-respendable revenue recorded by the department. It results from timing differences between when a transaction affects appropriations and when it is processed through the CRF.
(e) Revenues
Revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues. The department also receives revenues from regulatory fees that are recognized in the period in which the service is provided. Revenues that have been received but not yet earned for specified purposes are recorded as deferred revenues.
(f) Expenses
Expenses are recorded on the accrual basis:
- grants are recognized in the year in which the conditions for payment are met. In the case of grants which do not form part of an existing program, the expense is recognized 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;
- contributions are recognized in the year in which the recipient has met the eligibility criteria or fulfilled the terms of a contractual transfer agreement;
- vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment;
- services provided without charge by other government departments for accommodation, the employer’s contribution to the health and dental insurance plans and legal services are recorded as operating expenses at their estimated cost.
(g) Employee future benefits
-
Pension benefits: Eligible Canada-based staff (CBS) participate in the Public Service Pension Plan, a multi-employer 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.
Locally engaged staff (LES) participate in the Pension Scheme for Employees of the Government of Canada Engaged Outside Canada 1996. The LES Plan is managed in accordance with the appropriate regulations and in accordance with the national legislation. LES pension coverage is established by the Treasury Board. Such coverage will meet the requirements of local law and be comparable to that provided by other good local employers. Therefore, the expenses and the basis for their calculation vary by country and staff participation. -
Severance benefits: Employees are entitled to severance benefits under labour contracts or conditions of employment. These benefits are accrued as employees render the services necessary to earn them. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.
(h) Cash
Cash for the department consists of the funds in transit from missions and funds received and not yet deposited, partially offset by credits in imprest accounts. This cash is for the facilitation of operations. All foreign currency accounts are valued at the rate as of March 31
(i) Accounts and loans receivables
Accounts and loans receivable are stated at amounts expected to be ultimately realized; a provision is made for receivables where recovery is considered uncertain.
Loans are subject to payment in the event of the default of the debtor. An allowance is used to reduce the carrying value of the accounts receivable and loans to amounts that approximate their net realizable value. Interest on receivables is applied in accordance with the policy that governs the account or the loan. Interest revenue is recognized at the time it is applied to the account.
Loan transactions with long repayment terms and/or low or zero interest rates are recorded in part as expenses when the economic value is reduced to such concessionary terms.
(j) Investments in Crown corporations
Investments in Crown corporations are recorded at cost. If there is a permanent impairment in value, an allowance is recorded to reduce the carrying value of the investment to a nominal amount.
(k) Repayable contributions
Repayable contributionsare contributions where the recipient is expected to repay the amount advanced. The contributions of the department include conditionally repayable contributions, which become either all or partly repayable if conditions specified in the contribution agreement come into effect. Accordingly, they are not recorded on the Statement of Financial Position until such time as the
conditions specified in the agreement are satisfied, at which time they are then recorded as a receivable and a reduction in transfer payment expenses. An estimated allowance for uncollectibility is recorded where appropriate.
(l) Inventories
Inventories consist of parts, materiel and supplies held for future program delivery and not intended for resale, as well as inventory for sale. All inventories are valued at cost. If they no longer have service potential, they are valued at the lower of cost or net realizable value.
(m) Foreign currency transactions
Transactions involving foreign currencies are translated into Canadian dollar equivalents using rates of exchange in effect at the time of those transactions. Monetary assets and liabilities denominated in a foreign currency are translated into Canadian dollars using the rate of exchange in effect on March 31. Losses on foreign exchange are presented in Note 4 Expenses, while gains on foreign
exchange are presented in Note 5 Revenues.
(n) Tangible capital assets
All tangible capital assets and leasehold improvements having an initial cost of $10,000or more are recorded at their acquisition cost. The department does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, and assets located in museum collections.
Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:
| Asset Class | Amortization Period |
| Buildings | 25 years |
| Works and Infrastructure | 30 years |
| Machinery and Equipment | 5 to 10 years |
| Vehicles | 5 years |
| Leasehold Improvements | Lesser of the life of the improvement or term of the lease |
| Assets Under Construction | Once in service in accordance with asset type |
(o) Contingent liabilities
Contingent liabilities are potential liabilities which may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded. If the likelihood is not
determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.
(p) Measurement uncertainty
The preparation of these financial statements in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the
financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are contingent liabilities, the liability for employee severance benefits and the useful life of tangible capital assets. Actual results could significantly differ from those estimated. Management's estimates
are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.
3. Parliamentary Appropriations
The Department receives most of its funding through annual Parliamentary appropriations. Items recognized in the statement of operations and the statement of financial position in one year may be funded through Parliamentary appropriations in prior, current or future years. Accordingly, the Department has different net results of operations for the year on a government-funding basis than on an
accrual-accounting basis. The differences are reconciled in the following tables:
a) Reconciliation of net results of operations to current year appropriations used:
| 2007 | 2006 | ||||
|---|---|---|---|---|---|
| (Restated) | |||||
| (in thousands of dollars) | |||||
| Net cost of operations | $ | 1,924,638 | $ | 1,967,066 | |
| Adjustments for items affecting net cost of operations but not affecting appropriations: | |||||
| Add (Less): | |||||
|
Services provided without charge by other government departments
|
$ | (81,400) | $ | (86,400) | |
|
Amortization of tangible capital assets
|
(74,344) | (71,252) | |||
|
Refund of prior year expenses
|
12,473 | 23,999 | |||
|
Revenue not available for spending
|
682,288 | 260,821 | |||
|
(Loss) gain on disposal and write down of
|
|||||
|
tangible capital assets
|
2,326 | 11,013 | |||
|
Proceeds from disposal of tangible capital assets
|
(5,130) | (15,662) | |||
|
Decrease (increase) in vacation pay and compensatory leave
|
(3,128) | (1,321) | |||
|
Decrease (increase) in employee severance benefits
|
18,076 | (14,354) | |||
|
Change in accounts payable not affecting appropriations
|
25,000 | - | |||
|
Change in the allowance for loans receivable
|
195,527 | (167,804) | |||
|
Other
|
(15,879) | 1,465 | |||
| $ | 2,680,447 | $ | 1,907,571 | ||
| Adjustments for items not affecting net cost of operations but affecting appropriations: | |||||
| Add (Less): | |||||
|
Acquisitions of tangible capital assets
|
$ | 122,232 | $ | 56,998 | |
|
Increase (decrease) in prepaid expenses
|
1,644 | 1,411 | |||
|
Increase (decrease) in inventory for resale
|
(915) | 132 | |||
|
Increase (decrease) in consumable inventory
|
167 | 966 | |||
| Current year appropriations used | $ | 2,803,575 | $ | 1,967,078 | |
b) Appropriations provided and used
| Appropriations Provided | |||||
|---|---|---|---|---|---|
| 2006 | 2005 | ||||
| (Restated) | |||||
| (in thousands of dollars) | |||||
| Vote 1 Operating Expenditures | $ | 1,321,511 | $ | 1,009,528 | |
| Vote 5 Capital Expenditures | 143,535 | 113,926 | |||
| Vote 10 Grants and Contributions | 750,714 | 675,779 | |||
| Vote 12a Debt Forgiveness | 126,923 | - | |||
| Statutory | 672,696 | 277,293 | |||
| Less: | |||||
| Appropriations available for future years | (55,598) | (36,247) | |||
| Lapsed appropriations: Operating | (51,611) | (13,527) | |||
| Lapsed appropriations: Capital | (7,136) | (3,645) | |||
| Lapsed appropriations: Grants and Contributions | (97,459) | (56,029) | |||
| Lapsed appropriations: Statutory | - | - | |||
| Current year appropriations used | $ | 2,803,575 | $ | 1,967,078 | |
c) Reconciliation of net cash provided by Government to current year appropriations used
| 2007 | 2006 | ||||
|---|---|---|---|---|---|
| (Restated) | |||||
| (in thousands of dollars) | |||||
| Net cash provided by Government | $ | 1,530,457 | $ | 1,934,011 | |
| Revenue not available for spending | 682,288 | 260,821 | |||
| Refund of prior year expenditures | 12,473 | 23,999 | |||
| Change in net position in the Consolidated Revenue Fund | |||||
| Decrease (increase) in accounts receivable and advances | (395,669) | 106,594 | |||
| Decrease (increase) in Canada Account loans | 436,098 | (233,316) | |||
| Variation in accounts payable, accrued | |||||
| liabilities and accrued payroll | 551,582 | (126,494) | |||
| Variation in deferred revenue | 2,225 | (2) | |||
| Other adjustments | (15,879) | 1,465 | |||
| 578,357 | (251,753) | ||||
| Current year appropriations used | $ | 2,803,575 | $ | 1,967,078 | |
4. Expenses
The following table presents details of expenses by category:
| 2007 | 2006 | ||||
|---|---|---|---|---|---|
| (in thousands of dollars) | |||||
| Transfer payments | |||||
|
Individuals
|
$ | 143 | $ | 78 | |
|
Industry
|
4,925 | 6,327 | |||
|
Other levels of government in Canada
|
10,842 | 10,229 | |||
|
Other countries and international organizations
|
885,649 | 337,718 | |||
|
Non-profit organizations
|
275,251 | 240,855 | |||
|
Other
|
25,583 | 23,651 | |||
| Total transfer payments | $ | 1,202,393 | $ | 618,858 | |
| Operating expenses | |||||
|
Salaries and employee benefits
|
876,178 | 881,172 | |||
|
Transportation and telecommunication
|
222,136 | 146,581 | |||
|
Professional and special services
|
182,951 | 204,455 | |||
|
Rentals
|
173,738 | 181,450 | |||
|
Acquisition of machinery and equipment, including parts and consumables
|
82,042 | 69,266 | |||
|
Amortization
|
74,344 | 71,252 | |||
|
Repairs and maintenance
|
41,696 | 34,105 | |||
|
Utilities, materials and supplies
|
40,405 | 40,289 | |||
|
Information
|
8,598 | 9,050 | |||
|
Foreign exchange loss
|
387 | 2,090 | |||
|
Other
|
12,372 | 13,811 | |||
| Total operating expenses | $ | 1,714,847 | $ | 1,653,521 | |
| Total expenses | $ | 2,917,240 | $ | 2,272,379 | |
5. Revenues
The following table presents details of revenues by category:
| 2007 | 2006 | ||||
|---|---|---|---|---|---|
| (in thousands of dollars) | |||||
|
Sale of goods and services
|
$ | 351,203 | $ | 332,037 | |
|
Other non-tax revenue
|
6,312 | 133 | |||
|
Gain on disposal of tangible capital assets
|
2,326 | 11,359 | |||
|
Interest on non-tax revenues
|
398 | 923 | |||
| Total revenues | $ | 360,239 | $ | 344,452 | |
6. Accounts Receivable and Advances
The following table presents details of accounts receivable and advances:
| 2007 | 2006 | ||||
|---|---|---|---|---|---|
| (in thousands of dollars) | |||||
|
Other government departments
|
$ | 56,422 | $ | 27,888 | |
|
External parties
|
630,803 | 324,729 | |||
|
Employee advances
|
16,146 | 16,542 | |||
|
Cash in transit
|
34,207 | 3,282 | |||
|
Other advances
|
28,391 | 30,584 | |||
|
Allowance for doubtful accounts
|
(236,803) | (269,528) | |||
| Total receivables, net of allowances | $ | 529,166 | $ | 133,497 | |
7. Investments in Crown Corporations
| 2007 | 2006 | ||||
|---|---|---|---|---|---|
| (in thousands of dollars) | |||||
|
Export Development Canada
|
$ | 983,200 | $ | 983,200 | |
|
Canadian Commercial Corporation
|
8,000 | 8,000 | |||
|
International Development Research Centre
|
- | - | |||
| Total investments in Crown corporations | $ | 991,200 | $ | 991,200 | |
Export Development Canada
Export Development Canada (EDC) is a Canadian Crown corporation that provides financing and risk-management services to Canadian exporters and investors in up to 200 markets worldwide. EDC is financially self-sufficient and operates on commercial principles. It is wholly owned by the Government of Canada, and is listed in Schedule III to the
Financial Administration Act, Part 1. EDC reports to Parliament through the Minister for International Trade. Included in this account are 9.8 million EDC shares issued to the Government of Canada at a value of $100 per share. Total authorized capital of EDC is $1,500,000,000, 15 million shares at a par value of $100 each.
During the year, the department recorded dividend revenue from EDC of $350,000,000 (2006 = $ nil).
Canadian Commercial Corporation
The Canadian Commercial Corporation (CCC) is an agent Crown Corporation listed in Part 1 of Schedule III of the Financial Administration Act. Included within the Corporation’s contributed surplus is paid-up capital by the department of
$8,000,000.
International Development Research Centre
The International Development Research Centre (IDRC) is a Crown corporation that was created by the Parliament of Canada in 1970. IDRC reports to Parliament through the Minister of Foreign Affairs. IDRC is principally funded by parliamentary appropriations. IDRC was incorporated with no share capital.
8. Canada Account Loans
This category consists of loans made to national governments and loans to non-sovereign entities. Loans to national governments and non-sovereign entities are administered by EDC through the Canada Account.
Pursuant to section 23 of the Export Development Act, the Minister for International Trade, with concurrence of the Minister of Finance, may authorize EDC to enter into certain transactions or class of transactions where the Minister is of the opinion it is in the national interest and where EDC has advised the Minister that it will not enter into such transactions. Such transactions could not be supported by EDC for reasons, one of which would be on the basis of EDC’s risk-management practices. Funding for such transactions is provided by the Minister of Finance out of the CRF and the transactions are administered by EDC on behalf of the Government of Canada. The department is authorized to issue a maximum of $13,000,000,000 for Canada Account loans and guarantees.
Loan transactions with long repayment terms and/or low or zero interest rates are recorded in part as expenses when the economic value is reduced due to such concessionary terms.
The following table presents the balances for loans made to national governments and non-sovereign entities:
| 2007 | 2006 | ||||
|---|---|---|---|---|---|
| (in thousands of dollars) | |||||
| Loans to national governments | |||||
| 1 to 5 year term, 0 percent to 3.5 percent interest per annum, with final repayments between March 2008 and December 2010 | $ | 1,540 | $ | 25,250 | |
| 6 to 10 year term, 4.30 percent (London Interbank Offered Rate (LIBOR)) to 9 percent interest per annum, with final repayments between July 2002 and December 2009 | 37,629 | 57,688 | |||
| 11 to 15 year term, 2.83 percent (LIBOR) interest to 8.25 percent (LIBOR) per annum, with final repayment between November 2008 and November 2024 | 99,403 | 118,413 | |||
| 16 to 20 year term, 0 percent (LIBOR) interest per annum, with final repayments between February 2010 and March 2011 | 6,666 | 9,337 | |||
| 21 to 25 year term, 0 percent to 3.00 percent (LIBOR) interest per annum, with final repayments between December 2009 and June 2021 | 37,019 | 42,975 | |||
| 31 to 55 year term, 0 percent to 5.37 percent (LIBOR) interest per annum, with final payments between December 2010 and December 2044 | 839,108 | 861,694 | |||
| $ | 1,021,365 | $ | 1,115,357 | ||
| Loans to non-sovereign entities | |||||
| 1 to 5 year term, 8.5 percent interest per annum, with final repayments between February 1995 and April 2005 | $ | 3,812 | $ | 3,859 | |
| 6 to 10 year term, 8.28 to 9.68 percent interest per annum, with final repayments between November 2006 and February 2008 | 27,178 | 28,325 | |||
| 11 to 15 year term, 3.84 percent (LIBOR) to 5.86 percent interest per annum, with final repayments between May 2006 and October 2020 | 2,281,803 | 2,622,896 | |||
| 16 to 20 year term, 0 percent interest per annum, with final repayments between June 2012 and November 2014 | 22,379 | 22,108 | |||
| 2,335,172 | 2,677,188 | ||||
| Other loans | 43,867 | 43,957 | |||
| 43,867 | 43,957 | ||||
| Less: | |||||
|
Portion expensed due to concessionary terms
|
$ | (703,791) | $ | (731,017) | |
|
Allowance for valuation
|
(721,376) | (889,677) | |||
| (1,425,167) | (1,620,694) | ||||
| Total | $ | 1,975,237 | $ | 2,215,808 | |
9. Tangible Capital Assets
(in thousands of dollars)
Amortization expense for the year ended March 31, 2007, is $74,344,486 (2006 = $71,252,000).
| Cost | Amortization | |||||||||
| Capital asset class | Opening balance | Acquisitions | Disposals and write-offs | Closing balance | Opening balance | Amortization | Disposals and write-offs | Closing balance | 2007 Net book value | 2006 Net book value |
| Land | 202,199 | 15,142 | 358 | 216,983 | 434,720 | 216,983 | 202,199 | |||
| Buildings | 1,011,258 | 48,914 | 2,394 | 1,057,778 | 45,742 | 762 | 479,700 | 578,078 | 576,538 | |
| Works and infrastructure | 1,204 | 1,204 | 88,827 | 1,204 | 1,204 | |||||
| Machinery and equipment | 112,191 | 6,181 | 1,919 | 116,453 | 18,598 | 6,152 | 1,703 | 93,276 | 23,177 | 23,364 |
| Vehicles | 35,428 | 7,855 | 4,603 | 38,680 | 36,842 | 4,588 | 4,003 | 19,183 | 19,497 | 16,830 |
| Leasehold improvements | 112,043 | 19,832 | 131,875 | 17,862 | 2 | 54,702 | 77,173 | 75,201 | ||
| Assets under construction | 87,103 | 24,308 | 111,411 | 111,411 | 87,103 | |||||
| Total | 1,561,426 | 122,232 | 9,274 | 1,674,384 | 578,987 | 74,344 | 6,470 | 646,861 | 1,027,523 | 982,439 |
10. Softwood Lumber Agreement
The Softwood Lumber Agreement (the “Agreement”) between the governments of the United States of America and Canada was authorized effective October 12, 2006. Under the authority of the Minister for International Trade, EDC was designated by the Government of Canada to administer the return of duties and interest owed to Canadian companies by the U.S. government. Under this arrangement, EDC purchased the rights to the duties and interest owed to Canadian softwood producers opting to participate in the deposit refund mechanism, with funds advanced by the department from the CRF.
As at March 31, 2007, the department accrued a liability of $502,919,703, representing the net amount due to members of the Coalition for Fair Lumber Imports, the binational industry council, and meritorious initiatives of the United States of America under the terms of the Agreement.
Amounts receivable by the department from EDC as at March 31, 2007, total $11,191,307. This balance is composed of $3,445,325 due to the department on funds advanced to EDC from the CRF to pay the Canadian companies, $5,509,583 due to overpayment to Canadian companies, and $2,236,399 of interest accrued on the advanced funds.
11. Deferred Revenue
Deferred revenue is composed of monies received as prepayment for services to be performed by the department on behalf of third parties; monies received from organizations outside the Government of Canada accounting entity for shared costs; and deposits and unclaimed cheques for passport fees. Details of the transactions related to this account are as follows:
| 2007 | 2006 | ||||
|---|---|---|---|---|---|
| (in thousands of dollars) | |||||
|
Opening balance
|
$ | 151 | $ | 153 | |
|
Funds received
|
2,230 | 5 | |||
|
Revenue recognized
|
(5) | (7) | |||
|
Closing balance
|
$ | 2,376 | $ | 151 | |
12. Employee Benefits
(a) Pension benefits:
The department's employees 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 percent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Quebec Pension Plans benefits and are
indexed to inflation.
Both the employees and the department contribute to the cost of the Plan. The 2006-2007 departmental expense amounts to $66,634,100 ($69,865,500 in 2005-2006), which represents approximately 2.2 times (2.6 times in 2005-2006) the contributions by employees.
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.
LES pension plans are provided depending upon the requirements of national legislation or normal practices of other reputable local employers. These vary by the individual mission. The 2006-2007 expense amounts to $33,565,600 ($38,264,500 in 2005-2006).
(b)Severance benefits:
The department provides severance benefits to its employees based on eligibility, years of service and final salary. These severance benefits for CBS and LES are not prefunded. Benefits will be paid from future appropriations. Information about the severance benefits, measured as at March 31, is as follows:
| 2007 | 2006 | ||||
|---|---|---|---|---|---|
| (in thousands of dollars) | |||||
|
Accrued benefit obligation, beginning of year
|
$ | 159,281 | $ | 144,927 | |
|
Expense or adjustment for the year
|
(3,850) | 25,952 | |||
|
Benefits paid or adjustment during the year
|
(14,226) | (11,598) | |||
|
Accrued benefit obligation, end of year
|
$ | 141,205 | $ | 159,281 | |
13. Contingent Liabilities
(a) Claims and litigation
Legal proceedings totalling approximately $13,263,859,304 ($12,996,706,485 in 2005-2006) were still pending at March 31, 2007. Some of these potential liabilities may translate into actual liabilities as a result of court decisions or out-of-court settlements. To the extent that future legal decisions are assessed as unfavourable, and a reasonable estimate of the loss can be made, estimated
liabilities are accrued and an expense is recorded in the financial statements.
(b) Loan guarantees
Loan guarantees relate to guarantees rendered on loans made to national governments and loans to non-sovereign entities which are administered by EDC through the Canada Account.
Loan guarantees by the department at March 31, 2007, amount to $532,352,766 ($1,289 million at March 31, 2006), for which an allowance of $87,616,717 ($103 million at March 31, 2006) has been recorded. These loan guarantees are subject to payment in the event of the default of the debtor. An allowance for valuation is used to reduce the carrying value of the loans to amounts that approximate their net realizable value. The allowance is determined based on the Government's identification and evaluation of countries that have formally applied for debt relief, estimated probable losses that exist on the remaining portfolio, and changes in the economic conditions of sovereign and non-sovereign debtors.
14. Contractual Obligations
The nature of the department's activities can result in some large multi-year contracts and obligations whereby the department will be obligated to make future payments when the services/goods are received. These obligations include long-term rental agreements for chancery offices. Significant contractual obligations that can be reasonably estimated are summarized as follows:
| (in thousands of dollars) | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 and there-after | Total | |||||||
|
Chancery lease New York, Consul General
|
$ | 3,000 | $ | 3,000 | $ | 3,000 | $ | 3,000 | $ | 3,000 | $ | 1,000 | $ | 16,000 |
|
Chancery lease Chicago
|
1,000 | 1,000 | 1,000 | 1,000 | 1,000 | 6,000 | 11,000 | |||||||
|
Purchase of passport materials
|
13,000 | - | - | - | - | - | 13,000 | |||||||
|
Undisbursed Canada Account loans and commitments
|
121,000 | 241,000 | 240,000 | 240,000 | 240,000 | 394,000 | 1,476,000 | |||||||
| Total | $ | 138,000 | $ | 245,000 | $ | 244,000 | $ | 244,000 | $ | 244,000 | $ | 401,000 | $ | 1,516,000 |
15. Related Party Transactions
The department is related as a result of common ownership to all Government of Canada departments, agencies and Crown corporations. The department enters into transactions with these entities in the normal course of business and on normal trade terms. Also, during the year, the department received services which were obtained without charge from other Government departments as presented in part (a).
(a) Services provided without charge:
During the year, the department received without charge from other departments, accommodation, legal fees and the employer's contribution to the health and dental insurance plans. These services without charge have been recognized in the department's Statement of Operations as follows:
| 2007 | 2006 | ||||
|---|---|---|---|---|---|
| (in thousands of dollars) | |||||
|
Accommodation
|
$ | 28,100 | $ | 28,500 | |
|
Employer's contribution to the health and dental insurance plans
|
50,400 | 51,400 | |||
|
Workers compensation charges
|
300 | 300 | |||
|
Legal services
|
2,600 | 6,200 | |||
| Total | $ | 81,400 | $ | 86,400 | |
(b) Payables and receivables outstanding at year end with related parties:
| 2007 | 2006 | ||||
|---|---|---|---|---|---|
| (in thousands of dollars) | |||||
|
Accounts receivable with other government departments and agencies
|
$ | 56,422 | $ | 27,888 | |
|
Accounts payable to other government departments and agencies
|
$ | 19,665 | $ | 23,414 | |
c) Administration of programs on behalf of other government departments
- Under its mandate, the department provides services and support for administering Government of Canada programs and personnel abroad. A generic interdepartmental memorandum of understanding (MOU) is in force between DFAIT and partner departments. This MOU sets out the financial and administrative responsibilities of DFAIT and partner department programs
located at Canada's missions abroad.
In the fiscal year ended March 31, 2007, expenses related to changes made to partner departments’ representation abroad are reflected in the financial statements of the department. Appropriations for the department are adjusted via the Annual Reference Level Updates (ARLU) and the fiscal year’s supplementary estimates.
This activity amounted to approximately $22,800,000 ($3,812,000 in 2005-2006) in-year funding received via Supplementary estimates and $8,942,000 ($5,134,000 in 2005-2006) of continuing activity handled through the ARLU.
- The department also has a number of MOUs with partner departments for the administration of unique, in-year programs delivered abroad. These expenses are reflected in the financial statements of our partner departments and not those of DFAIT.
The department administered approximately $173,716,755 for such activities as hospitality, travel, conference expenses, professional services, etc. Expenses reimbursed through cost recovery and revenues collected on behalf of our partner departments and remitted to them are reflected in the financial statements of our partner department and not those of DFAIT.
16. Correction of an Error
In the 2006 financial statements, expenses incurred by the International Development Research Centre and the Canadian Commercial Corporation were included in the department’s expenses and appropriations used. Per Treasury Board accounting guidelines, as Crown corporations are not considered to be under the control of departments, they are therefore not to be consolidated in the financial statements of the department. As a result, expenses and appropriations used were overstated by $144,361,000. This error has been corrected retroactively with restatement of these financial statements.
The impact of this prior period adjustment on the 2006 comparative figures is indicated in the table below:
| (in thousands of dollars) | |||
|
Statement of operations other expenses
|
$ | (144,361) | |
|
Statement of equity current year appropriations used
|
$ | (144,361) | |
17. Comparative Figures
Certain of the 2006 figures have been reclassified to conform to the financial statements presentation adopted in 2007.
Passport Canada
Notes to the Financial Statements
March 31, 2007
AUDITORS’ REPORT TO THE ASSISTANT DEPUTY MINISTER CORPORATE SERVICES, DEPARTMENT OF FOREIGN AFFAIRS AND INTERNATIONAL TRADE
We have audited the statement of financial position of the Passport Canada Revolving Fund as at March31, 2007 and the statements of operations and net assets and cash flows for the year then ended. These financial statements have been prepared to comply with Section 4 of the Treasury Board of Canada’s Policy on Special revenue Spending Authorities and the Revolving Funds Act. These financial statements are the responsibility of the management of the Passport Canada Revolving Fund. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material respects, the financial position of the Passport Canada Revolving Fund as at March 31, 2007 and the results of its operations and its cash flows for the year then ended in accordance with the accounting principles for revolving funds of the Government of Canada as described in note 2 to the financial statements.
These financial statements, which have not been, and were not intended to be, prepared in accordance with Canadian generally accepted accounting principles, are solely for the information and use of the management of the Passport Office Revolving Fund and the Treasury Bard of Canada Secretariat for the reporting on the use of the Fund authority. The financial statements are not intended to be
and should not be used by anyone other than the specified users or for any other purpose.
Charted Accountants, Licensed Public Accountants
Ottawa, Canada
May 16, 2007
1. Authority and purpose:
The Passport Canada Revolving Fund (“the Fund”) was established in 1969 to provide for the issue of appropriate travel documents to Canadian citizens and to certain permanent residents of Canada who are unable to obtain valid passports from their country of origin. The Revolving Funds Act authorized the operation of the Fund.The Fund has a continuing non-lapsing authority from
Parliament to make payments out of the Consolidated Revenue Fund for working capital, capital acquisitions and temporary financing of accumulated operating deficits, the total of which is not to exceed $4,000,000 at any time. An amount of $746,000, representing net assets assumed by the Fund and assets contributed to the Fund, was charged to this authority when the Fund became budgetary in
1981.
2. Significant accounting policies:
(a) Basis of accounting:
These financial statements have been prepared in accordance with the significant accounting policies set out below to comply with the requirements of Section 4 of the Treasury Board of Canada Policy on Special Revenue Spending Authorities and the reporting requirements for revolving funds prescribed by the Receiver General for Canada. The basis of accounting used in these financial statements
differs from Canadian generally accepted accounting principles because:
- Employees’ vacation pay and termination benefits liabilities are based on management’s estimate of the liabilities rather than based on actuarial valuations;
- revenues from passport service request fees are recognized upon receipt of payment and verification of an application for completeness as stated in the Regulations prescribing fees for passport services; and
- funding for capital assets received from Treasury Board is recorded as contributed capital and not as a reduction of the cost of capital assets.
(b) Revenue recognition:
Revenues from passport fees are recognized upon request for a passport service, which is upon receipt of payment and verification of the passport application for completeness. Deferred revenues are recognized for those passport applications for which the passport service request fee has been collected and deposited, but the applications have not been verified for completeness, as of March 31.
(c) Inventories:
The inventory of materials and supplies is carried at cost using the average cost method.
(d) Capital assets:
|
Assets
|
Years
|
| Capital Projects | Useful life of the project |
| Furniture | 10 years |
| Electronic data-processing (EDP) equipment | 3-5 years |
| Other machines and equipment | 5 years |
| Expenditures associated with the Technology Enhancement Plan (TEP) project are capitalized. The project costs have been separated into four categories, which are amortized on a straight-line basis over the useful life of each category as follows: | |
|
Assets
|
Years
|
| Technology Enhancement Plan (TEP) | |
|
Machines and equipment
|
10 years |
|
System
|
4 years |
|
Furniture
|
10 years |
|
Electronic data-processing (EDP) equipment
|
4 years |
Capital projects are amortized on a straight-line basis over the useful life of the project. Capital projects include leasehold improvements, which are amortized on a straight-line basis over the term of the lease.
Capital assets are recorded at cost and amortized from the year of acquisition on a straight-line basis over their estimated useful lives.
(e) Employee termination benefits:
Employees of Passport Canada are entitled to specified termination benefits, calculated based on salary levels in effect at the time of termination as provided for under collective agreements and conditions of employment. The cost of these benefits is recorded in the accounts as the benefits accrue to the employees.
(f) Pension plan:
Employees of Passport Canada are covered by the Public Service Retirement Pension Plan administered by the Government of Canada. Under present legislation, contributions made by Passport Canada to the Plan are limited to an amount equal to the employee’s contributions on account of current service. These contributions represent the total pension obligations of Passport Canada and are
charged to operations on a current basis. Passport Canada is not required under present legislation to make contributions with respect to actuarial deficiencies of the Public Service Superannuation Account and/or with respect to charges to the Consolidated Revenue Fund for the indexation of payments under the Supplementary Retirement Benefits Act.
(g) Use of estimates:
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. The more significant areas requiring the use of estimates relate to employee
termination benefits and to accrued liabilities. Actual results could differ from these estimates. These estimates are reviewed annually and as adjustments become necessary; they are recorded in the financial statements in the period in which they become known.
| Capital assets | Balance, beginning of year | Acquisitions | Disposals | Balance, end of year |
| Technology Enhancement | ||||
|
Plan project
|
33,877 | – | – | 33,877 |
|
Capital projects
|
69,955 | 6,759 | – | 76,714 |
|
Furniture
|
84 | – | – | 84 |
|
EDP equipment
|
6,791 | 178 | – | 6,969 |
|
Other machines and equipment
|
290 | 39 | – | 329 |
| 110,997 | 6,976 | – | 117,973 |
| Accumulated amortization | Balance, beginning of year | Acquisitions | Disposals | Balance, end of year |
| Technology Enhancement | ||||
|
Plan project
|
33,759 | 40 | – | 33,799 |
|
Capital projects
|
33,960 | 11,263 | – | 45,223 |
|
Furniture
|
56 | 9 | – | 65 |
|
EDP equipment
|
4,780 | 1,174 | – | 5,954 |
|
Other machines and equipment
|
214 | 32 | – | 246 |
| 72,769 | 12,518 | – | 85,287 | |
| Note: The capital projects category includes leasehold improvements. | ||||
4. Net assets
($ thousands)
|
2007
|
2006
|
|
|
Accumulated net charge against the Fund’s authority
|
(60,754) | (30,345) |
|
Accumulated surplus
|
52,571 | 37,702 |
|
Contributed capital
|
16,276 | 12,496 |
| 8,093 | 19,853 |
Accumulated net charge against the Fund’s authority:
Accumulated net charge against the Fund’s authority is the cash position of the Fund, held by the Government on the Fund’s behalf.
Accumulated surplus:
The accumulated surplus is an accumulation of each year’s surpluses including the absorption of the opening net assets of $746,000 upon establishment
of the Fund.
Contributed capital:
In the year, Passport Canada received $3,780,000 (2006 = $10,266,000) from Treasury Board to fund capital projects, principally for National Security
Initiatives and to address recommendations from the Office of the Auditor General.
5. Commitments:
($ thousand)
Passport Canada rents office premises and other office equipment under long-term operating leases, which expire in 2015. Future minimum lease payments by year are approximately as follows:
|
2007
|
11,591 |
|
2008
|
11,659 |
|
2009
|
11,719 |
|
2010
|
11,764 |
|
2011 and thereafter
|
47,611 |
| 94,344 |
Passport Canada signed a contract for the purchase of passport materials, which expires in May 2008. Future minimum payments by year are approximately:
|
2008
|
13,486 |
| 13,486 |
6. Related party transactions:
Through common ownership, Passport Canada is related to all Government of Canada created departments, agencies and Crown corporations. Payments for passport operations at missions abroad, accommodation and legal services are made to related parties in the normal course of business. All related party transactions are accounted for at the exchange amount, which represents the consideration agreed to by both parties.
As part of its operations Passport Canada, which is an agency of the Department of Foreign Affairs and International Trade (DFAIT), collects consular fees on behalf of DFAIT’s Consular Affairs division. These fees are not recorded as revenues in the statement of operations. In fiscal year 2007, the Fund collected and remitted to DFAIT $73,870,000 (2006 = $62,654,000) in consular fees.
7. Changes in current assets and liabilities:
($ thousands)
| 2007 | 2006 | |
| Changes in current assets and liabilities: | ||
|
Accounts receivable Government of Canada
|
(3,314) | 1,936 |
|
Accounts receivable Outside parties
|
212 | 170 |
|
Inventories
|
1,316 | (1,100) |
|
Prepaid expenses
|
-- | 195 |
| Accounts payable and accrued liabilities: | ||
|
Government of Canada
|
1,975 | (4,391) |
|
Outside parties accounts payable
|
1,758 | 1,924 |
|
Outside parties vacation pay
|
384 | 313 |
|
Outside parties contractors’ holdbacks
|
92 | 124 |
|
Deferred revenues
|
2,221 | -- |
| 4,644 | (829) |
8. Comparative figures:
Certain amounts for the 2006 fiscal year have been reclassified to make them comparative with the current year.
| Response to Parliamentary Committees |
| Foreign Affairs and International Trade Canada’s Office of the Inspector General (Internal Audit and Evaluation Bureau) was not asked to respond to any reports by parliamentary committees in fiscal year 2006-2007. |
| Response to the Auditor General (including to the Commissioner of the Environment and Sustainable Development) |
|
Office of the Auditor General—Commissioner of the Environment and Sustainable Development 2006, Chapter 1: Managing the Federal Approach to Climate Change. Foreign Affairs and International Trade Canada was audited because of its mandate for management of climate change issues in the international arena. The department was asked to provide information regarding greenhouse gas emissions reduction strategies and development of an emissions trading system. We were not called upon to respond to any specific recommendations in the report. Please see http://www.oag-bvg.gc.ca/domino/reports.nsf/html/c20060901ce.html. Office of the Auditor General—Commissioner of the Environment and Sustainable Development 2006, Chapter 4: Sustainable Development Strategies. International Trade Canada (separate from Foreign Affairs Canada at the time of the audit) was assessed against progress made in sustainable development strategies identified in a 2004 report; specifically, supporting the development and marketing of innovative pollution-reducing technologies by 2005. We received an unsatisfactory rating. International Trade Canada provided examples of relevant environmental initiatives; however, the Auditor General found that the department had not defined “innovative pollution-reducing strategies” for the purpose of tracking this commitment. Please see http://www.oag-bvg.gc.ca/domino/reports.nsf/html/c20060904ce.html. Office of the Auditor General—Commissioner of the Environment and Sustainable Development Follow-up to 2001-10 Chapter 1; 2002-10 Chapter 2; and 2004-10 Chapter 4. Follow-up conducted in March 2007. Report not yet published. Foreign Affairs and International Trade Canada was asked to provide an update on action taken on recommendations made in the chapters above, where we had previously received a progress rating lower than level 5: Full Implementation. The chapters encompass the following issues, respectively: Charting a Sustainable Course in the Great Lakes and St. Lawrence River Basin; The Legacy of Federal Contaminated Sites; and Assessing the Environmental Impact of Policies, Plans and Programs. |
| External Audits (Note: These refer to other external audits conducted by the Public Service Commission of Canada or the Office of the Commissioner of Official Languages.) |
| Foreign Affairs and International Trade Canada’s Office of the Inspector General (Internal Audit and Evaluation Bureau) was not asked to respond to any external audit recommendations in fiscal year 2006-2007. |
| Internal Audits or Evaluations |
|
Link to internal audits: http://www.international.gc.ca/department/auditreports/2006/2006-en.asp Internal audits, both of headquarters and missions abroad, were forecast in the 2006-2007 Report on Plans and Priorities. The following audits were conducted during 2006-2007. A list of audits that were not conducted is included at the end of the section, along with a status update. [* Not yet published; fieldwork conducted during 2006-2007.] 1. Headquarters Audits
Not Undertaken: 2. Mission Audits
Not Undertaken: 3. Evaluations Internal evaluations were forecast in the 2006-2007 Report on Plans and Priorities. The following evaluations were conducted during fiscal year 2006-2007. A list of evaluations that were not conducted is included at the end of the section, along with a status update. [* Not yet published; fieldwork conducted during 2006-2007.] Global Partnership Program, International Security Branch
Not Undertaken: |
Table 17: Sustainable Development Strategy
Please note the DPR period for 2006-2007 covers the last nine months of Foreign Affairs and International Trade Canada’s third Sustainable Development Strategy (SDS), Agenda 2006, as well as the first three months of its fourth SDS, Agenda 2009.
| Foreign Affairs and International Trade Canada | |
| Points to Address | Departmental Input |
| 1. What are the key goals, objectives, and/or long-term targets of the SDS? |
Agenda 2006, the third Sustainable Development Strategy for Foreign Affairs and International Trade Canada, defines key sustainable development initiatives for the period 2004-2006 that support four goals: ensure greater integration of sustainable development in departmental policies programs and operations; ensure that Canada’s commitment to sustainable development is evident in our bilateral, regional and multilateral relations; promote international security and respect for human rights, good governance and the rule of law as prerequisites for sustainable development; and implement the department’s priority commitments related to the World Summit on Sustainable Development. Agenda 2009, the department’s fourth SDS, defines key sustainable development initiatives for the period 2007-2009 that support two strategic goals: ensure greater integration of sustainable development in departmental policies, programs and operations; and advance Canada’s sustainable development interests related to foreign affairs and international trade. |
| 2. How do your key goals, objectives, and/or long-term targets help achieve your department’s strategic outcomes? | The department’s Strategic Priorities and Strategic Outcomes are supported by Agenda 2006 and Agenda 2009. DFAIT’s second and third Strategic Priorities link to greater international support for freedom and security, democracy, rule of law, human rights and environmental protection, which are cornerstones of sustainable development and the
objectives in both Agenda 2006 and Agenda 2009. For example, included are the effective management of Canada’s Global Partnership Program to eliminate weapons of mass destruction; effective management of the Peacebuilding and Human Security Program, created to advance Canada’s foreign policy objectives for human security; a strategic approach to
international energy issues including energy security; and progress on chemical use and production to lead to the minimization of significant effects on human health and the environment. There are objectives in both strategies that aim to enhance Canadian prosperity and employment by contributing to long-term economic growth and Canada’s reputation as a responsible trading partner, which supports Strategic Priority 9 (Promotion of Canada as a globally competitive location and partner for investment, innovation and value-added production). Strategic Priority 3 is advanced by initiatives such as working toward a strengthened, more effective and practical role for the Commission on Sustainable Development within the United Nations framework. The objectives and expected results of the commitments in Agenda 2006 and Agenda 2009 link very closely with Strategic Outcome 1 (Advancing Canada’s Interests Internationally). The second goal of Agenda 2009 is to advance Canada’s SD interests related to foreign affairs and international trade, which also links to Strategic Outcome 4 (Advancing Canada’s Commercial Interests Internationally). Specific commitments and expected outcomes from Agenda 2009 can be found at www.international.gc.ca/sd-dd. |
| 3. What were your targets for the reporting period? |
A sample of key targets for Agenda 2006 specific to the reporting period is listed below, as previously identified in the Report on Plans and Priorities 2006-2007. No targets for Agenda 2009 were due in the reporting period.
|
| 4. What is your progress to date? | A significant achievement of the reporting period was the development, approval and tabling of the department’s fourth SDS, Agenda 2009, on December 13, 2006. Annual progress in achieving the targets in Agenda 2006 (which covers the period to April 2006) is summarized in the 2004-2005 and 2005-2006 Departmental Performance Reports. For more substantive reporting and information on specific targets, see the annual progress reports at www.international.gc.ca/sd-dd. |
| 5. What adjustments have you made, if any? (To better set the context for this information, discuss how lessons learned have influenced your adjustments.) |
The separation, reorganization and subsequent reintegration of the department during the reporting period of Agenda 2006 have made the tracking of responsibility centres for the various targets difficult. Some commitments will not be completed as originally defined due to new reporting structures, changing priorities and the streamlining of resources. An evaluation of Agenda 2006 was completed to help guide the development of Agenda 2009. The broad suggestions included:
Environment Canada is undertaking a project related to SD management systems to help departments with reporting and monitoring of SDS commitments. DFAIT will participate in the process and adopt the recommendations where feasible. |
Table 18: Procurement and Contracting
|
Points to Address |
Department's Input |
| 1. Role played by procurement and contracting in delivering programs | Procurement and contracting play a fundamental role in support of program delivery. The department obtains highly specialized research and analytical advice through procurement, while contracting enables the department to effectively achieve its operational requirements. Its open, fair and transparent contracting processes for both goods and services support Canadian economic growth. |
| 2. Overview of how the department manages its contracting function |
In line with the government’s reform of its contracting and procurement practices, and in order to support the development of professionals in this field, DFAIT has streamlined and strengthened its contracting function from a highly decentralized framework. Specific contracting authorities are delegated to procurement specialists, a Departmental Contracting Review Board of senior managers acts as an approval board as well as strategic investors, and the department has introduced a more rigorous monitoring and reporting capacity. This reflects the department’s objective for the procurement community: to assist managers in delivering high-quality services and programs to Canadians. The department awards 27,181 contracts, valued at approximately $242,864,625. |
| 3. Progress and new initiatives enabling effective and efficient procurement practices |
The department has developed an intranet site that provides procurement operational policies and numerous tools. One of these tools is a template for Requests for Proposals (RFPs) for different types of professional service contracts. The site also provides information on established procurement instruments, such as standing offers, and outlines supply arrangements that are useful with regard to many types of services purchased by the department. The tools allow program managers to focus their efforts on the Statement of Work, the technical evaluations of bids and the performance of the contractor. Key Accomplishments: In support of this new framework, the department implemented a renewed training program for senior managers, as well as for delegated financial advisers, on their respective responsibilities. |
Table 19: Client-Centred Service
| Supplementary information on Client Centred-Services can be found at http://www.tbs-sct.gc.ca/dpr-rmr/2006-2007/info/info-eng.asp. |
Table 20: Horizontal Initiatives
| U.S. Enhanced Representation Initiative (ERI) Team Canada Inc Global Peace and Security Fund |
| Supplementary information on Horizontal Initiatives can be found at http://www.tbs-sct.gc.ca/dpr-rmr/2006-2007/info/info-eng.asp. |
| The Department of Foreign Affairs and International Trade follows the Treasury Board of Canada Secretariat Special Travel Authorities. |
| Supplementary information on Travel Policies can be found at http://www.tbs-sct.gc.ca/dpr-rmr/2006-2007/info/info-eng.asp. |