Rescinded [2009-10-01] - Policy on the Contingent Liabilities of the Government of Canada and Consequential Policies with Regard to the Reporting of the Financial Position of, and Insurance Schemes Operated by, Crown Corporations - TB Circular 1984-63
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This tb circular is replaced by:
- Contingencies, Directive on [2009-10-01]
- Use of the Consolidated Revenue Fund for Crown Corporations, Directive on the [2009-10-01]
Circular No.: 1984-63
T.B. No.: 795416
File No.: 4415-00
To: Deputy Head of Departments and Heads of Agencies and Crown Corporations
Subject: Policy on the contingent liabilities of the Government of Canada and consequential policies with regard to the reporting of the financial position of, and insurance schemes operated by, Crown Corporations
The purpose of this circular is to state the policy on the contingent liabilities of the Government of Canada and consequential policies with regard to the reporting of the financial position of, and insurance schemes operated by, Crown corporations, as recommended by the Minister of Finance and the President of the Treasury Board and approved by the Treasury Board of Canada.
2. Application and Cancellations
This circular supersedes Circulars 1980-28 and 1980-41 and applies to all departments as defined in Section 2 of the Financial Administration Act.
Crown corporations, as defined in paragraph 5, are subject to the sections of the policy dealing with the financial position of, and insurance schemes operated by, Crown corporations. These Crown corporations are listed in Part I and Part II of Schedule C of the Financial Administration Act. In addition, the Bank of Canada, the Canada Council, the Canadian Broadcasting Corporation, the Canadian Film Development Corporation, the Canadian Wheat Board, the International Development Research Centre and the National Arts Centre Corporation, are subject to these sections of the policy. Finally, wholly-owned subsidiaries of any of the above Crown corporations that are not consolidated in their parent corporation's financial statements, are subject to these sections of the policy.
The policy is to be effective:
- for year-end submissions, commencing with the fiscal year 1983-84; and
- for quarterly submissions other than fiscal year end, commencing with the quarter ended June 30, 1984.
On June 30, 1980, Treasury Board Circular 1980-28 (Policy on the Contingent Liabilities of the Government of Canada) was promulgated. Treasury Board Circular 1980-41, which was released shortly thereafter, made a slight amendment to the original circular.
Circular 1980-28 established a system for gathering information on contingent liabilities of the Government of Canada, the financial position of agent Crown corporations, and insurance schemes operated by agent Crown corporations. Since that time, however, a need has arisen to include information in the financial statements of the Government of Canada, for non-agent as well as agent Crown corporations. This circular therefore expands the coverage of the previous circular, to include non-agent parent Crown corporations and certain wholly-owned subsidiaries.
The following terms are used in this policy with the meanings specified:
Crown corporation - a parent Crown corporation or a wholly-owned subsidiary; a parent Crown corporation is wholly-owned directly by the Crown, but does not include a departmental corporation; a wholly-owned subsidiary is wholly-owned by one or more parent Crown corporations directly or indirectly through any number of subsidiaries each of which is wholly-owned directly or indirectly by one or more parent Crown corporations* . These include the corporations listed in Part I and Part II of Schedule C of the Financial Administration Act, the Bank of Canada, the Canada Council, the Canadian Broadcasting Corporation, the Canadian Film Development Corporation, the Canadian Wheat Board, the International Development Research Centre and the National Arts Centre Corporation.
Borrowings - contracts entered into for the use of money; examples are: certificates of indebtedness (bonds), notes payable, bank loans payable, and other loans and advances.
Contingent liability - a potential liability which may become an actual liability when one or more future events occur or fail to occur.
Insurance scheme - an insurance program whereby insured individuals and organizations pay a fee based on the estimated amount needed to meet future claims.
Government of Canada Accounting Entity - as an accounting entity, the Government of Canada is defined as all the departments named in Schedule A of the financial Administration Act; any division or branch of the Public Service of Canada, including a commission appointed under the Inquiries Act designated by the Governor in Council as a department for purposes of the Financial Administration Act; the staffs of the Senate, the House of Commons, and the Library of Parliament; and, any corporation named in Schedule B of the Financial Administration Act.
Contingent Liabilities Of The Government
6. Statutory Requirements
Part VI of the Financial Administration Act requires that accounts be kept to show (Section 54(2)(a)), and the Public Accounts disclose (Section 55(2)(b)), "the contingent liabilities of Canada"
Contingent liabilities of the Government of Canada include:
- explicit guarantees by the government of the following types of obligations
of entities which are not Crown corporations:
- insurance programs operated by the Government of Canada;
- other explicit guarantees (excludes borrowings); and
- other potential losses arising from pending and threatened litigation relating to claims and assessments in respect of breach of contract, damages to persons and property, and like items.
8. Amounts to be Reported
The amount to be reported as a contingent liability of the Government of Canada is the specific amount when known; otherwise an estimate should be provided, where possible, along with a narrative description of the circumstances.
Where guarantees have been issued by the government, the percentage of average net claims to the average outstanding guarantees over the sixty-month period ending on the reporting date, is to be reported.
When Parliament has limited the aggregate value of guarantees, such limit shall be reported to disclose the utilization of the authority granted by Parliament.
9. Responsibility for Reporting
The Senior Financial Officer of each department and agency within the accounting entity is responsible for:
- identifying the contingent liabilities,
- determining the amounts, and
- reporting the information required to the Receiver General for Canada,
for the organizations and departmental corporations reporting through their Minister.
10. Disclosure Requirements
As a minimum, contingent liabilities are disclosed in a note to the audited financial statements of the government and are described in more detail in the "Statement of Contingent Liabilities" found in Volume 1 of the Public Accounts of Canada.
Financial Position Of Crown Corporations
Included are the assets, liabilities (including identification of borrowings on behalf of the Crown), equity and contingent liabilities of Crown corporations which are outside the accounting entity.
12. Amounts to be Reported
The amounts to be reported are the values of the following items as shown in the accounts of the Crown corporations.
- Total assets separately identifying claims against the government and other Crown corporations.
- Borrowings separately identifying obligations to the government and other Crown corporations. Where any such borrowings are explicitly guaranteed under an authority of Parliament, the authorized limit of such guarantees will also be reported.
- All other liabilities.
- Financial interest of the government
- Obligations to the government.
- Share capital and contributed surplus.
- Retained earnings/deficit.
13. Responsibility for Reporting
The Chief Executive Officer of each Crown corporation is responsible for:
- identifying the assets, liabilities, equity and contingent liabilities of the corporation;
- ensuring that the amounts are calculated in accordance with the presentation in the annual report;
- reporting the information required to the Receiver General for Canada.
Parent Crown corporations should report the amounts in paragraph 12 on a consolidated basis. Where a wholly-owned subsidiary is not consolidated, its parent Crown corporation must ensure that the amounts in paragraph 12 are reported for that subsidiary.
14. Disclosure Requirements
A separate note to the audited financial statements of the government will summarize the information required in paragraph 12.
A table is to be included in Volume I of the Public Accounts disclosing (as a minimum) the information requested in paragraph 12 for each Crown corporation.
Insurance Schemes Of Crown Corporations
Included are all insurance schemes operated by Crown corporations, where a fund or provision for claims has been established in the accounts of the corporation.
16. Amounts to be Reported
As a minimum, the following items are to be reported for such insurance schemes:
- amount of insurance in force;
- amount of the fund or provision;
- amount of net claims paid during the year;
- average of net claims paid over the most recent five years.
17. Responsibility for Reporting
The Chief Executive Officer of each Crown corporation is responsible for:
- identifying the insurance schemes operated by the corporation;
- determining the amounts;
- reporting the information required to the Receiver General for Canada; and
- providing an assessment of the adequacy of insurance funds or provisions using Department of Insurance standards wherever applicable.
Parent Crown corporations should report the amounts in paragraph 16 on a consolidated basis. Where a wholly-owned subsidiary is not consolidated, its parent Crown corporation must ensure that the amounts in paragraph 16 are reported for that subsidiary.
18. Disclosure Requirements
A separate note to the audited financial statements of the government will summarize the information required in paragraph 16.
Frequency Of Reporting And Enquiries
19. Frequency of Reporting
Commencing with the quarter ending March 31, 1984, and for each subsequent quarter, the Senior Financial Officer or Chief Executive Officer, as appropriate, shall submit to the Receiver General statements, as at the end of each quarter, of the contingent liabilities, the financial position of the Crown corporation, and the pertinent statistics of insurance schemes as described in this policy for the organizations for which he or she has the responsibility for reporting. These statements are to be sumitted in accordance with Receiver General Directives.
For further information concerning this circular contact:Director, Public Accounts Directorate
Government of Canada Reporting Division
Policy Development Branch,
Office of the Comptroller General of Canada,
Deputy Comptroller General,
Policy Development Branch.