Treasury Board Accounting Standard 1.2 - Departmental and Agency Financial Statements

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1. Effective Date

1.1 This Treasury Board Accounting Standard (TBAS) applies to financial statements prepared by government departments for the 2011-12 fiscal year and subsequent years.

1.2 This standard supersedes Treasury Board Accounting Standard 1.2 issued in 2010.

2. Application

2.1 This standard applies to any element of the federal public administration referred to in Section 2 of the Financial Administration Act (FAA) and that may be referred to using the terms "department," "government-wide" and "across government" throughout this document.

2.2 In this standard, any reference to all or part of Canadian accounting standards (such as the Public Sector Accounting (PSA) Handbook) shall be construed as a reference to the accounting standards valid at the time of publication of this document. Any subsequent changes to the referenced Canadian standards following the date of publication of this document would be considered for future inclusion.

2.3 Section 6.4.2 relating to the role of the Treasury Board of Canada Secretariat in monitoring compliance does not apply with respect to the Office of the Auditor General, the Office of the Privacy Commissioner, the Office of the Information Commissioner, the Office of the Chief Electoral Officer, the Office of the Commissioner of Lobbying, the Office of the Commissioner of Official Languages and the Office of the Public Sector Integrity Commissioner. The deputy heads of these organizations are solely responsible for monitoring and ensuring compliance with TBAS 1.2 within their organizations.

3. Context

3.1 The Government of Canada uses financial information as a strategic business resource to support decision-making and management activities, policy development, program and service delivery, evidential needs, as well as for historical purposes and as an accountability mechanism.

3.2 Parliament and Canadians expect the Government of Canada to be well managed, which includes decision-making based on reporting supported by integrated financial and related non-financial information that is fairly presented in all material respects, and is consistent, timely, relevant, reliable and complete. In addition, they expect transparency and accountability as to how government spends public funds to achieve results for Canadians.

3.3 The financial statements for the Government of Canada are prepared in accordance with the Government's accounting policies, which are based on Canadian public sector accounting standards.

3.4 Departments are integral components of the Government of Canada. They are administrative divisions that perform operations and deliver programs and services. As such, departments should prepare their financial statements in accordance with the same accounting policies as those of the Government of Canada.

3.5 While the Canadian public sector accounting standards address the accounting and disclosure of governments, government business enterprises, government not-for-profit organizations and other government organizations, the standards do not provide specific guidance regarding the entities that are integral components of the government (e.g., departments, funds, accounts).

3.6 This standard provides additional guidance regarding the preparation of departmental financial statements in order to complement the Canadian public sector accounting standards and to ensure that departmental financial statements present relevant financial information in a transparent and understandable manner to Parliamentarians and Canadians.

3.7 This standard is issued pursuant to Section 7 and Subsection 9(1) of the Financial Administration Act (FAA) and to Section 6 of the Policy on Financial Resource Management, Information and Reporting and Section 5.3 of the Policy on Financial Management Governance.

3.8 This standard is to be read in conjunction with the Policy on Financial Resource Management, Information and Reporting, the Policy on Financial Management Governance and the Policy on Internal Control.

4. Definitions

4.1 Generally Accepted Accounting Principles (GAAP) (Principes comptables généralement reconnus (PCGR))

Encompass broad principles and conventions of general application, as well as rules and procedures that determine accepted accounting practices at a particular time.

4.2 Reporting entity (Périmètre comptable)

The departmental reporting entity comprises the activities for which the deputy head (DH), as the accounting officer, is expected to maintain accounting control.

5. Standard Statement

5.1.1 The objective of this standard is to provide guidance regarding the preparation of departmental financial statements in order to complement the Canadian public sector accounting standards.

  • Annual departmental financial statements provide an accounting of the full nature and extent of the departmental activities for which the DH is accountable and expected to maintain accounting control.
  • Annual departmental financial statements are prepared on a consistent basis and are made public in a timely manner.

6. Requirements

The departmental Chief Financial Officer is responsible for:

6.1 Preparing the financial statements in accordance with the requirements outlined in this standard. The financial statements comprise:

  • A Statement of Financial Position;
  • A Statement of Operations and Departmental Net Financial Position;
  • A Statement of Change in Departmental Net Debt / Net Financial Assets;
  • A Statement of Cash Flows; and
  • Notes to the Financial Statements.

A statement of management responsibility also accompanies the departmental financial statements.

6.2 Ensuring that departmental financial statements are published annually as part of the departmental performance reporting process.

6.3 Consulting with the Office of the Comptroller General before engaging an external auditor to audit the financial statements.

6.4 Monitoring and Reporting Requirements

6.4.1 Deputy heads are responsible for:

6.4.2 The Treasury Board of Canada Secretariat is responsible for:

  • Monitoring compliance with all aspects of this standard and the achievement of expected results in a variety of ways, including but not limited to assessments under the Management Accountability Framework, Departmental Performance Reports, results of internal and external audits and studies, in addition to working directly with departments.

6.4.3 The Office of the Comptroller General is responsible for:

  • Reviewing the standard and its effectiveness at the five-year mark of implementation of the standard.

7. Consequences

7.1 The consequences of non-compliance with this standard are identified in Section 8 of the Policy on Financial Resource Management, Information and Reporting.

8. Roles and Responsibilities of Government Organizations

This section identifies other significant departments with respect to this standard. In and of itself, it does not confer an authority.

8.1.1 The Treasury Board of Canada Secretariat provides interpretive advice and guidance on this standard.

9. References

  • Public Sector Accounting (PSA) Handbook

10. Enquiries

Please direct enquiries about this standard to your department's headquarters. For interpretation of this standard, departmental headquarters should contact:

Assistant Comptroller General
Financial Management Sector
Office of the Comptroller General
Treasury Board of Canada Secretariat
Ottawa ON  K1A 0R5

Email: Contact Assistant Comptroller General at fin-www@tbs-sct.gc.ca
Fax: 613-952-9613


Appendix - Financial Statement Requirements and Related Model Package

Introduction

The objective of this appendix is to provide detailed requirements related to the form and content of departmental financial statements, as well as a model package. These requirements establish sound objectives for departmental financial statement reporting, a consistent definition of the departmental reporting entity and clear direction for the accounting and presentation of specific items such as the amounts due from or to the Consolidated Revenue Fund (CRF), services provided without charge, contingencies, etc.

The financial statement package is also part of this appendix and provides a model of financial statements. The model should be used in order to ensure presentation and disclosure consistency across departments. It sets out overall considerations for the presentation of financial statements, guidance for their structure, and minimum requirements for the content of financial statements prepared using the accrual basis of accounting while also providing information on the use of funding provided through annual parliamentary authorities.

1. Objectives of Departmental Financial Statements

1.1 The goal of departments is to deliver programs and services following the government's directions and priorities. Resources are provided to departments for the performance of their activities to fulfill their mandate, as reflected in their approved Program Activity Architecture (PAA) See footnote [1]. From time to time, ministerial portfolios are changed, new programs are created and other programs are either amalgamated or abolished. Central agencies, common services organizations and all other government departments work together to achieve the objectives of the whole of government.

1.2 The primary objective of departmental financial statements is to demonstrate accountability for the resources provided to and managed by a department on behalf of the Government of Canada.

1.3 Users of departmental financial statements should have the ability to compare financial performance among federal government departments. As such, one important feature of departmental financial statements is to provide users with comparable information on departments' cost of operations. Departments' cost of operations should therefore be measured in a consistent manner to achieve comparability among federal government departments.

1.4 The department's cost of operations represents expenses incurred and revenues earned for which the department has primary responsibility and accountability, as reflected in its approved PAA and Report on Plans and Priorities (RPP). As a guiding principle, expenses incurred by other government departments for which no consideration was exchanged, such as central agency functions and the activities of common services organizations, are not to be recognized in departmental financial statements except as provided in Section 3.6.3.2 and Section 3.6.3.3 as applicable, of this appendix.

1.5 Financial statements should demonstrate the accountability of a department for its resources, obligations and financial affairs, by providing information useful for:

1.5.1 Evaluating the department's management of its resources, obligations and financial affairs.

1.5.2 Assessing whether resources were administered by the department in accordance with limits established by the appropriate legislative authorities.

1.6 Departmental financial statements should provide information on the full nature and extent of the activities performed by the department to fulfill its mandate, including:

1.6.1 A description of the activities being reported on by the department, including its authority and objectives;

1.6.2 A description of the significant accounting policies of the department;

1.6.3 Information on the department's financial position, including:

1.6.3.1 The financial and non-financial assets that are available for use by the department in its activities;

1.6.3.2 The liabilities and contractual obligations arising from the department's activities for which it is accountable;

1.6.3.3 The changes in the department's financial position in the accounting period;

1.6.3.4 A departmental net debt / net financial assets indicator.

1.6.4 Information on the department's operations, including:

1.6.4.1 The expenses incurred by the department for the performance of its activities to fulfill its mandate, including specific significant services provided by other departments without charge.

1.6.4.2 The revenues generated by the department through the performance of its activities.

1.6.5 Information on elements that have had an impact on the departmental net debt or net financial assets position.

1.6.6 Information on the cash resources generated and used by the department through the performance of its activities.

2. Reporting Entity

2.1 The financial statements of a department include all those organizations that the deputy head (DH) is accountable for as the accounting officer of the department. This is different from a reporting entity that is based on a ministerial portfolio. The financial transactions of revolving funds, special operating agencies and consolidated specified purpose accounts which are under the DH's accountability as the accounting officer, will be included in the departmental financial statements to reflect the financial operations and position of the department as a single reporting entity. Transactions between the various sub-entities (i.e., intradepartmental transactions) must be eliminated.

2.2 Departments are generally not expected to have investments in other entities. Crown corporations are not consolidated in the financial statements of departments unless the DH is accountable for the Crown corporation. Part X of the Financial Administration Act (FAA) sets out the accountability of Crown corporations to Parliament as being through the responsible minister, not the department.

2.3 Payments to Crown corporations from appropriations are not included in the department's financial statements, as these funds do not relate to its activities. In these situations, the department is simply acting as a flow-through mechanism for administration purposes so that the Crown corporation may receive its Parliamentary authorities.

2.4 Since departments do not normally have the risks and rewards of ownership and since these assets are not normally under the DH's responsibility, investments in and loans and advances to Crown corporations, as well as any transactions related to these, such as interest revenue and dividends, are not to be recorded in the departmental financial statements, unless they are departmental assets over which the department has clear and demonstrated responsibilities.

2.5 Although they are not under the DH's responsibility and assuming that amounts are immaterial to the departmental financial statements, some organizations that meet the definition of a department pursuant to Section 2 of the FAA, such as commissions of inquiry, will be reported in the financial statements of the department through which their funding is provided.

3. Presentation and Disclosure

3.1 Statement of Financial Position

3.1.1 The purpose of the Statement of Financial Position is to present, as at the reporting date (normally March 31):

3.1.1.1 The liabilities arising from the department's activities for which it is responsible;

  • Liabilities are not classified as current or non-current but are listed generally in order of expected repayment.

3.1.1.2 The assets that are available for use to the department in its activities and for which the DH is accountable;

  • Assets are classified as either financial assets or non-financial assets and are reflected in the Statement of Financial Position as such. There is no distinction between current and non-current assets.
  • In addition, a distinction is made between financial assets that are available to discharge the department's liabilities versus the ones that are not. As the DH is expected to maintain accounting control, he or she has no authority regarding their disposition. As a result, financial assets that are not available to discharge the department's liabilities are considered to be held on behalf of the Government of Canada and are therefore presented in reduction of the entity's gross financial assets.
  • Amounts due from the CRF should be included as a financial asset in the Statement of Financial Position because they represent a legitimate charge against departmental authorities and they are available for use by the department in future periods without further authorities. Departments are allowed to net the amounts due from and amounts due to the CRF to present the balance as an asset or a liability.

3.1.1.3 The departmental net debt indicator, which is the difference between the sum of all liabilities and the sum of financial assets.

3.2 Statement of Operations and Departmental Net Financial Position

3.2.1 The purposes of the Statement of Operations and Departmental Net Financial Position are:

3.2.1.1 To report the expenses by major program or function, revenues by major type and the net cost of operations for the reporting period (normally the year ending March 31):

3.2.1.1.1 In addition, a distinction is made between revenues that are respendable versus the ones that are not. Although the DH is expected to maintain accounting control, he or she has no authority regarding their disposition. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the entity's gross revenues.

3.2.1.2 To present the evolution of the balance of the departmental net financial position for the reporting period.

3.2.1.2.1 Departments should use the program activity level of the entity's PAA in determining their major programs or functions. Where a department has a very large number of program activities, it may be appropriate to group certain program activities together.

3.2.1.2.2 Departments that have presented future-oriented financial statements in their RPP should include planned information in the Statement of Operations and Departmental Net Financial Position. The planned results information is the original forecast for the fiscal year. For example, the original forecast for 2011-12 included in the 2011-12 RPP is the planned results to be included in the 2011-12 financial statements.

3.2.1.2.3 Departmental net financial position represents the residual remaining when the department's total liabilities are deducted from its total assets, representing the "reported net economic resources" for which the DH is accountable. The main items affecting the balance of the departmental net financial position are:

  • The net cost of operations for the period ending at the reporting date; and
  • Government funding and net effect of transfers resulting from government reorganization, as follows:
    • The net cash provided by the Government of Canada;
    • The change in the amount due from the CRF;
    • The recorded amount of services provided without charge by other government departments; and
    • The net effect of transfers of assets and liabilities, as a result of government reorganization.

3.3 Statement of Change in Departmental Net Debt

3.3.1 The purpose of the Statement of Change in Departmental Net Debt is to explain the difference between the department's or the agency's net cost of operations reported in the Statement of Operations and Departmental Net Financial Position and the change in departmental net debt for the reporting period.

3.3.1.1 The main items explaining the difference between the net cost of operations and the change in departmental net debt are:

  • The change due to non-financial assets such as the change due to tangible capital assets, the change due to inventories and the change due to prepaid expenses.

3.3.2 Departments that have presented future-oriented financial statements in their RPP should include planned information in the Statement of Change in Departmental Net Debt. The planned results information is the original forecast for the fiscal year. For example, the original forecast for 2011-12 included in the 2011-12 RPP is the planned results to be included in the 2011-12 financial statements.

3.4 Statement of Cash Flows

3.4.1 The purpose of the Statement of Cash Flows is to present information on how the department generated and used cash in the reporting period.

3.4.1.1 The Statement of Cash Flows should present the net cash provided to the department for the reporting period.

3.5 Other Presentation and Disclosure Elements

3.5.1 The purpose of the notes to the departmental financial statements is to provide clarification or further explanation of items in the financial statements to help users better understand and interpret the financial statements.

3.5.1.1 Departments should include notes to the financial statements that are specific to the department's operations and that provide additional relevant information to allow readers to better understand and interpret the departmental financial statements. In preparing their financial statements, departments should determine the appropriate level of detail to be included in the notes so that the information provided is relevant, understandable and useful to a user of the financial statements.

3.5.2 In specific circumstances or situations not covered by this standard, departments must apply professional judgment in determining the content and presentation of their financial statements. The statements should communicate information that is relevant to users, reliable, comparable between periods, understandable and clearly presented in a manner that maximizes their usefulness. Entities should refer to the complete recognition, measurement, presentation and disclosure requirements contained in Treasury Board Accounting Standards and the Public Sector Accounting Handbook.

3.5.3 The financial statements may include items that are not recorded in the Central Financial Management and Reporting System (CFMRS) trial balance. These items, such as certain services provided without charge and amounts due from or to the CRF, are required for the presentation of the financial statements but are not to be recorded in the trial balance. Conversely, the financial statements may exclude items that are recorded in the CFMRS trial balance. These items, such as investments in and loans and advances to Crown corporations, as well as associated revenues or losses may not be required for the presentation of the department's financial statements.

3.5.4 Although the GST refundable advance account is shown under the Advance classification in the Government chart of accounts, the nature of the account at the departmental level is an account receivable. For presentation purposes, departments should include the amount in other government departments (OGD) accounts receivable or as a reduction to OGD payables.

3.6 Specific Items

Due to the unique nature of departmental financial statements, appropriate presentation and disclosure of the following items, should be provided:

  • Amounts due from or to the CRF;
  • Employee future benefits;
  • Services provided without charge; and
  • Contingencies.
3.6.1 Amounts Due From or To the CRF

3.6.1.1 The amount due from the CRF represents the net amount that the department is able to withdraw from the CRF in order to discharge its liabilities without generating any additional charges against its authorities in the year of the withdrawal. The amounts to be recorded at year-end as due from the CRF include:

  • Expenses incurred but not paid by the department that have been recorded as liabilities of the department at year-end and included in the current year or prior year's authorities used balance. These amounts could include payables at year-end (PAYE) and should exclude GST; and
  • Amounts received by the department prior to year-end that are available for respending in future years and are recorded as liabilities at year-end. These amounts could include amounts in non-consolidated special purpose accounts.

3.6.1.2 The amount due from the CRF should be reduced by any amounts due to the CRF by the department at year-end. Amounts due to the CRF at year-end could include:

  • Amounts recognized as revenue that have been credited to authorities used, but were not collected and deposited to the CRF at year-end. These amounts could include receivables at year-end from other government departments (RAYE-OGD); and
  • Amounts withdrawn from the CRF that have not been recorded as authorities used at year-end. These amounts could include accountable advances.
3.6.2 Employee Future Benefits

3.6.2.1 Employee future benefits, except severance liabilities, are not under the responsibility of departments. The Department's pension contributions should be recorded as expenses in the year incurred and represent the total departmental obligation to the plan.

3.6.2.2 The obligation related to the severance benefits earned by employees of a department should be recorded. It is calculated based on a whole of government actuarial valuation and distributed across departments on a percentage basis. For this obligation, the Government Accounting Policy and Reporting Division of Treasury Board of Canada Secretariat (the Secretariat) does provide guidance to departments on an annual basis.

3.6.3 Services Provided without Charge

3.6.3.1 Departments transact with each other on a regular basis, consistent with normal operating relationships between the entities. For the purposes of this Treasury Board Accounting Standard (TBAS), services between departments are categorized as follows:

  • Services provided on a recovery basis by one department to all other government departments such as the optional services as defined in the Common Services Policy. As per the Policy, optional services are mainly provided on a recovery basis through a revolving fund or a net voting authority.
  • Services provided by one department to all other government departments on a no-charge basis, including central agency functions such as the Receiver General, most of the mandatory services as defined in the Common Services Policy and most activities carried out by agents of Parliament such as the audit services provided by the Office of the Auditor General. Central agency functions and mandatory services and programs are not normally provided on a recovery basis.
  • Services provided by one department to all other government departments either without charge or on a recovery basis such as a specific central agency function and mandatory services and programs that are partially operating on a recovery basis. The most common services are legal services provided by the Department of Justice, the employer's contribution to the health and dental insurance plans paid by the Secretariat, accommodation provided by Public Works and Government Services Canada (PWGSC) and workers' compensation services provided by Human Resources and Skills Development Canada (HRSDC).
  • Services provided on a recovery basis result in a charge against the authorities of the receiving department.

3.6.3.2 To ensure comparability between departments, it is important that common services between departments be accounted for on a consistent basis regardless of whether the service was provided without charge or on a recovery basis. Therefore, services between departments should be accounted for as follows:

  • For services provided on a recovery basis by one department to all other government departments, the receiving department should record an expense at the settled amount, and the providing department should record a revenue at the settled amount.
  • For services provided without charge by one department to all other government departments, no expense should be recorded by the receiving department and no revenue should be recorded by the providing department. However, a description of the nature of these services should be disclosed in the notes. An example of this type of service without charge is the compensation services provided to all government departments by PWGSC.
  • For services provided by one department to other government departments either on a recovery basis or without charge, those provided on a recovery basis should be accounted for in the same manner as described above. Those provided without charge should be recorded by the receiving department as an expense at the estimated cost of the service provided, with a corresponding credit at the bottom of the Statement of Operations and Departmental Net Financial Position. The providing department should not record a revenue for these services. The nature and estimated cost of these services should be disclosed in the notes to the financial statements of both the receiving and providing department. At a minimum, these services will include:
    • Accommodation services provided by PWGSC;
    • Health and dental coverage administered by the Secretariat;
    • Legal services provided by the Department of Justice; and
    • Workers' compensation services provided by HRSDC.

The services recognized above are considered to be material and have a significant portion of their costs recovered by the providing department.

3.6.3.3 The above noted list of services is not exhaustive. Therefore, using the guiding principles included above, it is the department's responsibility to review the services received from other government departments to determine whether material additional services will need to be recorded and/or disclosed.

3.6.3.4 The department providing the service without charge should determine the estimated cost of the service and communicate in a timely manner, along with sufficient supporting details, the information to the recipient department for the purposes of annual financial statements.

3.6.3.5 Given the complexity, the assumed immateriality of the amounts involved and the desire to minimize administrative burden, services received without charge that meet the criteria for recognition and that relate to assets under construction are not to be capitalized as part of the assets' cost and should be expensed in the year by the receiving department. Should these costs be deemed material, the receiving department is to consult with the Government Accounting Policy and Reporting Division of the Secretariat, on the appropriate treatment.

3.6.4 Contingencies

3.6.4.1 Departments are to record contingencies, as per TBAS 3.6. The following two exceptions apply:

  • Where the magnitude of the estimated liability is so significant that its inclusion in expense/liabilities risks revealing the estimate of a potential liability; and
  • Where the contingency relates to decisions of the Secretariat as the public service employer and the potential impact of the claim extends across many departments.

In these situations, it may be necessary to limit the accounting treatment to note disclosure. Consultation with the Office of the Comptroller General is mandatory. The liability and related expense stemming from these contingencies should be communicated to the Secretariat so that they may be recorded in the consolidated financial statements. The Department will record the expense and liability in its accounts when there is no longer uncertainty surrounding the liability. In some cases, multiple departments may have to record their share of a liability related to contingencies.

4. Departmental Financial Statement Package

The financial statement package contained in this section cannot consider all unique circumstances and peculiarities and therefore, departmental personnel must use professional judgment in modifying the package to meet their reporting requirements. It should not be used as a template.

It is recognized that reporting needs may differ by department. Consequently, departments have the flexibility to adjust the format to meet their reporting requirements, provided all relevant TBAS reporting requirements are met.

For all purposes:

  • Financial statements that are subject to an external audit will have an auditor's report appended to them. For departments that are not audited, the financial statements must be annotated "unaudited" on each page;
  • Indicate on all statements whether amounts are in dollars or thousands of dollars. Amounts in the notes should be consistent with those used in the main statements;
  • All statements should cross-reference to other statements and notes as necessary. For example, the total receivables on the Statement of Financial Position (SFP) must equal the amount shown in the note on receivables and the increase/(decrease) in the receivables balance on the SFP must equal the amount shown on the Statement of Cash Flows based on the indirect method;
  • The term "the Department" has been used throughout this package. The name of the entity should replace "the Department" wherever possible;
  • If there are consolidated entities included in the financial statements, then the term consolidated should be added to the titles. For example, "Consolidated Financial Statements," "Consolidated Statement of Financial Position," etc. For the purpose of this TBAS, consolidated entities included in departmental financial statements refer to reporting entities for which a full set of financial statements is published; and
  • The external reader should readily understand terminology used in the financial statements. Consequently, those responsible for the preparation of the financial statements should not use government jargon or acronyms that are not widely understood outside the public service (e.g., the terms specified purpose accounts (SPAs) and consolidated specified purpose accounts are particular to government). These terms should be avoided and replaced with words that describe their substance.

Statement of Management Responsibility

Purpose:

In general terms, a Statement of Management Responsibility (SMR) states management responsibility for the financial statements and other financial information, as well as the financial reporting process that produces such statements and other information. The statement also sets out the role of the board of directors (if it exists) and the audit committee (if applicable) in relation to the external financial reporting process. The purpose of the statement is to communicate to users of the financial statements the key elements of responsibility for the representations made in the financial statements and other financial information, to clarify whose representations they are and the limits of their accuracy. It is to be signed by the deputy head and the Chief Financial Officer.

As accounting officers, and under the Treasury Board Policy on Internal Control, deputy heads are responsible for ensuring the maintenance of an effective departmental system of internal control. This includes a system of internal control over financial reporting.

Structure and Format:

The SMR may be modified or tailored, as required, to suit the department's mode of operation and to properly reflect the departmental context and realities, including variations that may stem from whether the entity is subject or not to a Core Control Audit by the Office of the Comptroller General.

The Comptroller General undertakes Core Control Audits in small departments and agencies to facilitate access to professional internal audit resources. For the purpose of adhering to the Treasury Board Policy on Internal Control, these organizations are able to use the results of such audits.

As a result, two templates of SMRs are provided below based on whether or not the organization is subject to Core Control Audits by the Office of the Comptroller General. In relation to the SMR template for departments not subject to a Core Control Audit and who are annexing the summary of results and action plans from the annual risk-based assessment of effectiveness of their internal controls over financial reporting, this annex is to be placed after the financial statement notes as the final component of this package. In addition, this annex should be titled "Annex to the Statement of Management Responsibility Including Internal Control Over Financial Reporting of [Department/Agency] for Fiscal Year 20XX-20XX (unaudited)". Finally departments are to ensure that each page of this annex is identified as unaudited through a footnote or header.

The SMR should be dated to indicate the points to which events have been taken into account. The date would normally be as near as practicable to, but not after the date of the auditor's report (as applicable) with a view to ensuring consistent consideration of subsequent events. Furthermore, the statement should be dated no earlier than the date when all the financial statements, including the related notes, have been prepared and those with the recognized authority have confirmed that they have taken responsibility for those financial statements.

Template for organizations not subject to Core Control Audits by the Office of the Comptroller General

Statement of Management Responsibility Including Internal Control Over Financial Reporting

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 20XX, and all information contained in these statements rests with the management of the [Department/Agency]. These financial statements have been prepared by management using the Government's accounting policies, which are based on Canadian public sector accounting standards.

Management is responsible for the integrity and objectivity of the information in these financial statements. Some of the information in the financial statements is based on management's best estimates and judgment, and gives due consideration to materiality. To fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the [Department/Agency]'s financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the [Department/Agency]'s Departmental Performance Report, is consistent with these financial statements.

Management is also responsible for maintaining an effective system of internal control over financial reporting (ICFR) designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are properly authorized and recorded in accordance with the Financial Administration Act and other applicable legislation, regulations, authorities and policies.

Management seeks to ensure the objectivity and integrity of data in its financial statements through careful selection, training and development of qualified staff; through organizational arrangements that provide appropriate divisions of responsibility; through communication programs aimed at ensuring that regulations, policies, standards, and managerial authorities are understood throughout the [Department/Agency] and through conducting an annual risk-based assessment of the effectiveness of the system of ICFR.

The system of ICFR is designed to mitigate risks to a reasonable level based on an ongoing process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.

A risk-based assessment of the system of ICFR for the year ended March 31, 20XX was completed in accordance with the Treasury Board Policy on Internal Control and the results and action plans are summarized in the annex.

As applicable add: The effectiveness and adequacy of the [Department/Agency]'s system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of the [Department/Agency]'s operations, and by the Departmental Audit Committee, which oversees management's responsibilities for maintaining adequate control systems and the quality of financial reporting, and which recommends the financial statements to the [deputy head of Department/Agency].

As applicable add: The Office of the Auditor General, the independent auditor for the Government of Canada, (or the firm of XX) has expressed an opinion on the fair presentation of the financial statements of [Department/Agency] which does not include an audit opinion on the annual assessment of the effectiveness of the department's internal controls over financial reporting, or

The financial statements of [Department/Agency] have not been audited.

 

Name, Deputy Head
[City where signed, e.g. Ottawa, Canada]
[Date signed]

Name, Chief Financial Officer

Template for organizations subject to Core Control Audits by the Office of the Comptroller General

Statement of Management Responsibility Including Internal Control Over Financial Reporting

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 20XX, and all information contained in these statements rests with the management of the [Department/Agency]. These financial statements have been prepared by management using the Government's accounting policies, which are based on Canadian public sector accounting standards.

Management is responsible for the integrity and objectivity of the information in these financial statements. Some of the information in the financial statements is based on management's best estimates and judgment, and gives due consideration to materiality. To fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the [Department/Agency]'s financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the [Department/Agency]'s Departmental Performance Report, is consistent with these financial statements.

Management is also responsible for maintaining an effective system of internal control over financial reporting (ICFR) designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are properly authorized and recorded in accordance with the Financial Administration Act and other applicable legislation, regulations, authorities and policies.

Management seeks to ensure the objectivity and integrity of data in its financial statements through careful selection, training and development of qualified staff; through organizational arrangements that provide appropriate divisions of responsibility; through communication programs aimed at ensuring that regulations, policies, standards, and managerial authorities are understood throughout the [Department/Agency] and through conducting an annual risk-based assessment of the effectiveness of the system of ICFR.

The system of ICFR is designed to mitigate risks to a reasonable level based on an on-going process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.

For organizations subject to a Core Control Audit and for which such an audit has taken place, add:

The [Department/Agency] is subject to periodic Core Control Audits performed by the Office of the Comptroller General and uses the results of such audits to comply with the Treasury Board Policy on Internal Control.

A Core Control Audit was performed in [fiscal year] by the Office of the Comptroller General of Canada (OCG). The Audit Report and related Management Action Plan are posted on the departmental web site at (hyperlinks to the audit report and Management Action Plan).

For organizations subject to a Core Control Audit but for which an audit has not taken place yet, add:

The [Department/Agency] will be subject to periodic Core Control Audits performed by the Office of the Comptroller General and will use the results of such audits to adhere to the Treasury Board Policy on Internal Control.

In the interim, the [Department/Agency] has undertaken a risk-based assessment of the system of ICFR for the year ended March 31, 20XX, in accordance with the Treasury Board Policy on Internal Control, and the [results and] action plan are summarized in the annex.

As applicable add: The Office of the Auditor General, the independent auditor for the Government of Canada, (or the firm of XX) has expressed an opinion on the fair presentation of the financial statements of [Department/Agency] which does not include an audit opinion on the annual assessment of the effectiveness of the department's internal controls over financial reporting, or

The financial statements of [Department/Agency] have not been audited.

 

Name, Deputy Head
[City where signed, e.g. Ottawa, Canada]
[Date signed]

Name, Chief Financial Officer

Department Name
Statement of Financial Position (Unaudited)
As at March 31

(in thousands of dollars)
  2012 2011
Restated
(note 18)

Contractual obligations (note 13)
Contingent liabilities (note 14)

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

Liabilities
Accounts payable and accrued liabilities (note 4) 190,441 162,016
Vacation pay and compensatory leave 47,866 47,441
Deferred revenue (note 5) 13,425 12,598
Lease obligation for tangible capital assets (note 6) 124 142
Employee future benefits (note 7) 63,796 61,454
Total gross liabilities 315,652 283,651
Liabilities held on behalf of Government See table note 1 *
Deferred revenues (note 5) (2,685) (2,520)
Total liabilities held on behalf of Government (2,685) (2,520)
Total net liabilities 312,967 281,131
Financial assets
Due from Consolidated Revenue Fund 156,302 150,000
Accounts receivable and advances (note 8) 31,160 14,088
Loans receivable (note 9) 3,450 9,440
Total gross financial assets 190,912 173,528
Financial assets held on behalf of Government See table note 1 *
Accounts receivable and advances (note 8) (10,000) (4,000)
Loans receivable (note 9) (3,450) (9,440)
Total financial assets held on behalf of Government (13,450) (13,440)
Total net financial assets 177,462 160,088
Departmental net debt See table note 2 ** 135,505 121,043
Non-financial assets
Prepaid expenses 2,379 25
Inventory (note 10) 21,796 11,199
Tangible capital assets (note 11) 1,242,797 1,257,513
Total non-financial assets 1,266,972 1,268,737
Departmental net financial position (note 12) 1,131,467 1,147,694

 

Name, Deputy Head
[City where signed, e.g. Ottawa, Canada]
[Date signed]

Name, Chief Financial Officer

The signature block is to be customized as applicable.

Explanatory Notes:

* Assets/liabilities held on behalf of Government are presented in these financial statements as the deputy head must maintain accounting control for these elements; however, they are later derecognized as the deputy head has no authority regarding their disposition.

** Departmental net debt is an intermediary calculation. It is calculated as the difference between the sum of all liabilities and the sum of net financial assets. If the difference between financial assets and liabilities is positive, the result would be a net financial asset. If that is the case, the financial assets should be presented before the liabilities in the Statement of Financial Position and notes should be reordered accordingly.

Department Name
Statement of Operations and Departmental Net Financial Position (Unaudited)
For the Year Ended March 31

(in thousands of dollars)
  2012See table note 3*
Planned
Results
2012 2011
Restated
(note 18)

Segmented information (note 17)

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

Expenses
Benefit programs and other services 781,968 802,142 743,256
Appeals 654,886 621,851 586,416
International issues 265,124 261,793 252,630
Internal services 79,400 78,500 72,400
Expenses incurred on behalf of Government (600) (500) (800)
Total expenses 1,780,778 1,763,786 1,653,902
Revenues
Regulatory fees 94,128 79,238 27,793
Miscellaneous revenues 11,976 10,018 7,560
Revenues earned on behalf of Government (20,195) (22,500) (19,251)
Total revenues 85,909 66,756 16,102
Net cost from continuing operations 1,694,869 1,697,030 1,637,800
Transferred operations (note 16) See table note 4 **
Expenses 13,700 15,000 20,000
Revenue 600 500 1,000
Net cost of transferred operations 13,100 14,500 19,000
Net cost of operations before government funding and transfers 1,707,969 1,711,530 1,656,800
Government funding and transfers
Net cash provided by Government 1,595,354 1,568,251 1,509,763
Change in due from Consolidated Revenue Fund 2,358 6,302 6,340
Services provided without charge by other government departments (note 15) 127,895 124,750 116,850
Transfer of assets and liabilities from (to) other government departments (note 16)See table note 5 *** 0 (4,000) 0
Net cost of operations after government funding and transfers (17,638) 16,227 23,847
Departmental net financial position - Beginning of year 1,145,657 1,147,694 1,171,541
Departmental net financial position - End of year 1,163,295 1,131,467 1,147,694

Explanatory Notes:

If there are no transferred operations the section should be removed from the statements and the "Net cost from continuing operations" subtotal label should be renamed "Net cost of operations".

* Planned Results column to be added as per corresponding future-oriented financial statements. See Section 3.2.1.2.2 of this TBAS.

** These represent the operating results prior to the Order-in-Council date of the transferred operations as a result of a government reorganization.

*** Would only be used if a department has transferred assets or liabilities to other departments as a result of a government reorganization, please refer to note 16 for more detail.

Department Name
Statement of Change in Departmental Net Debt (Unaudited)
For the Year Ended March 31

(in thousands of dollars)
  2012See table note 6*
Planned
Results
2012 2011

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

Net cost of operations after government funding and transfers (17,638) 16,227 23,847
Change due to tangible capital assets
Acquisition of tangible capital assets 91,160 76,906 123,925
Amortization of tangible capital assets (79,380) (74,564) (74,713)
Proceeds from disposal of tangible capital assets (15,203) (674) (41,159)
Net (loss) or gain on disposal of tangible capital assets including adjustments (5,321) (6,384) (3,472)
Transfer to other government departments 0 (10,000) 0
Total change due to tangible capital assets (8,744) (14,716) 4,581
Change due to inventories 5,392 10,597 1,000
Change due to prepaid expenses 2,425 2,354 (569)
Net increase (decrease) in departmental net debt (18,565) 14,462 28,859
Departmental net debt - Beginning of year 121,043 121,043 92,184
Departmental net debt - End of year 102,478 135,505 121,043

Explanatory Notes:

* Planned Results column to be added by departments as per corresponding future-oriented financial statements. See Section 3.3.2 of this TBAS.

Department Name
Statement of Cash Flows (Unaudited)
For the Year Ended March 31

(in thousands of dollars)
  2012 2011
Restated
(note 18)

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

Operating activities
Net cost of operations before government funding and transfers 1,711,530 1,656,800
Non-cash items:
Amortization of tangible capital assets (74,564) (74,713)
Gain (Loss) on disposal of tangible capital assets (6,384) (3,472)
Services provided without charge by other government departments (note 15) (124,750) (116,850)
Variations in Statement of Financial Position:
Increase (decrease) in accounts receivable and advances 11,072 (15,648)
Increase (decrease) in prepaid expenses 2,354 (569)
Increase (decrease) in inventory 10,597 1,000
Decrease (increase) in accounts payable and accrued liabilities (28,425) (14,918)
Decrease (increase) in vacation pay and compensatory leave (425) (1,500)
Decrease (increase) in deferred revenue (662) 63
Decrease (increase) in future employee benefits (2,342) (3,215)
Transfer of liabilities to other government departments (note 16) (6,000) 0
Cash used in operating activities 1,492,001 1,426,978
Capital investing activities
Acquisitions of tangible capital assets 76,906 123,925
Proceeds from disposal of tangible capital assets (674) (41,159)
Cash used in capital investing activities 76,232 82,766
Financing activities
Lease payments for tangible capital assets 18 19
Cash used in financing activities 18 19
Net cash provided by Government of Canada 1,568,251 1,509,763

Explanatory Notes:

This Statement of Cash Flows is intended to illustrate the presentation when using the indirect method.

Departments have the option of preparing the Statement of Cash Flows using the indirect method or the direct method.

A separate category called "Investing activities" should be added as applicable.

Department Name
Statement of Cash Flows (Unaudited)
For the Year Ended March 31

(in thousands of dollars)
  2012 2011
Restated
(note 18)

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

Operating activities
Cash received from:
Services and fees (76,758) (54,313)
Cash paid for:
Transfer payments 2,985 2,426
Salaries and employee benefits 1,050,753 1,006,118
Professional and special services 399,895 375,155
Utilities, materials and supplies 54,993 54,892
Travel and communication 39,851 31,515
Other 1,782 935
Revenues collected on behalf of Government 18,500 10,250
Cash used in operating activities 1,492,001 1,426,978
Capital investing activities
Acquisitions of tangible capital assets 76,906 123,925
Proceeds from disposal of tangible capital assets (674) (41,159)
Cash used in capital investing activities 76,232 82,766
Financing activities
Lease payments for tangible capital assets 18 19
Cash used in financing activities 18 19
Net cash provided by Government of Canada 1,568,251 1,509,763

Explanatory Notes:

This Statement of Cash Flows is intended to illustrate the presentation when using the direct method.

Departments have the option of preparing the Statement of Cash Flows using the indirect method or the direct method.

A separate category called "Investing activities" should be added as applicable.

Department Name
Notes to the Financial Statements (Unaudited)
For the Year Ended March 31

1. Authority and objectives

A brief description of the authority and objectives of the department must be included here.

As well, a description of the program activities (or other groupings) of the department should be included for those that are reported in the Statement of Operations and Departmental Net Financial Position and in the Segmented information note.

2. Summary of significant accounting policies

These financial statements have been prepared using the Government's accounting policies stated below, which are based on Canadian public sector accounting standards. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.

Significant accounting policies are as follows:

  1. Parliamentary authorities - The Department is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Department do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and Departmental Net Financial Position and in the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting. (Departments including planned results in the Statement of Operations and Departmental Net Financial Position should add the following: The planned results amounts in the Statement of Operations and Departmental Net Financial Position are the amounts reported in the future-oriented financial statements included in the 2011-12 Report on Plans and Priorities.)
  2. Consolidation - These consolidated financial statements include the accounts of the sub-entities that the deputy head (DH) is accountable for. The accounts of these sub-entities have been consolidated with those of the Department, and all inter-organizational balances and transactions have been eliminated. (Entities that are consolidated in the Department's financial statements should be listed in this note.)
  3. 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 Government.
  4. Amounts due from or to the CRF are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the net amount of cash that the Department is entitled to draw from the CRF without further authorities to discharge its liabilities.
  5. Revenues:

    Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.

    Funds received from external parties for specified purposes are recorded upon receipt as deferred revenue. These revenues are recognized in the period in which the related expenses are incurred.

    Funds that have been received are recorded as deferred revenue, provided the Department has an obligation to other parties for the provision of goods, services or the use of assets in the future.

    Other revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenue takes place.

    Revenues that are non-respendable are not available to discharge the Department's liabilities. While the DH is expected to maintain accounting control, he or she has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the entity's gross revenues.

  6. Expenses - Expenses are recorded on the accrual basis:

    Transfer payments are recorded as expenses when authorization for the payment exists and the recipient has met the eligibility criteria or the entitlements established for the transfer payment program. In situations where payments do not form part of an existing program, transfer payments are recorded as expenses 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. Transfer payments that become repayable as a result of conditions specified in the contribution agreement that have come into being are recorded as a reduction to transfer payment expense and as a receivable.

    Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.

    Services provided without charge by other government departments for accommodation, employer contributions to the health and dental insurance plans, legal services and workers' compensation are recorded as operating expenses at their estimated cost. (The department should adapt this note to its own situation.)

  7. Employee future benefits
    1. Pension benefits: Eligible employees participate in the Public Service Pension Plan (identify appropriate plan), a multiemployer pension plan administered by the Government. The Department's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. 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. (The department should adapt this note to its own situation.)
    2. Severance benefits: Employees entitled to severance benefits under labour contracts or conditions of employment earn these benefits as services necessary to earn them are rendered. 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.
  8. Accounts and loans receivable are stated at the lower of cost and net recoverable value. However, when the terms of the loans are concessionary, such as those provided with a low or no interest clause, they are recorded at their estimated present value. A portion of the unamortized discount is recorded as revenue each year to reflect the change in the present value of the loans outstanding. Transfer payments that are unconditionally repayable are recognized as loans receivable. A valuation allowance is recorded for accounts and loans receivable where recovery is considered uncertain.
  9. Contingent liabilities - Contingent liabilities are potential liabilities that may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded. If the likelihood is not determinable or if an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.
  10. Environmental liabilities - Environmental liabilities reflect the estimated costs related to the management and remediation of environmentally contaminated sites. Based on management's best estimates, a liability is accrued and an expense recorded when the contamination occurs or when the Department becomes aware of the contamination and is obligated, or is likely to be obligated to incur such costs. If the likelihood of the Department's obligation to incur these costs is not determinable, or if an amount cannot be reasonably estimated, the costs are disclosed as contingent liabilities in the notes to the financial statements.
  11. Inventory - Inventory consists of parts, materials and supplies held for future program delivery and not intended for resale. Inventory is valued at cost using the average cost method (to be modified as applicable.) If there is no longer any service potential, inventory is valued at the lower of cost or net realizable value. (This note should be adapted for departments that also have inventories held for resale as they should be recorded at the lower of cost or net realizable value.)
  12. 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 at year-end. Gains and losses resulting from foreign currency transactions are included in [specify the line] in the Statement of Operations and Departmental Net Financial Position with the exception of the foreign exchange gain or loss relating to a long-term foreign currency denominated monetary item which is recognized in the financial statements, deferred and amortized to revenue / expense over the remaining life of the monetary item. (This note is not required when the department does not have significant foreign exchange transactions.)
  13. Tangible capital assets - All tangible capital assets and leasehold improvements having an initial cost of $10,000 (If the department has a different threshold, then this amount should be reflected) or 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, assets located on Indian reserves and museum collections.

    Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows: (This portion of the note would be amended to reflect the amortization methodology, rates and classes of assets being used in the department. Classes should match those listed in note 11.)

    Asset ClassAmortization Period
    Buildings(Number) years
    Works and infrastructure(Number) years
    Machinery and equipment(Number) years
    Vehicles(Number) years
    Computer hardware(Number) years
    Computer software(Number) years
    Leasehold improvementsLesser of the remaining term of lease or useful life of the improvement
    Leased tangible capital assetsOver term of lease / useful life

    Assets under construction are recorded in the applicable capital asset class in the year that they become available for use and are not amortized until they become available for use.

  14. Measurement uncertainty - The preparation of these financial statements 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, environmental liabilities, the liability for employee future benefits and the useful life of tangible capital assets (list as applicable). 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. (This note should be enhanced if a department has a particular significant measurement uncertainty.)

Explanatory Notes:

Departments should not include accounting policy notes that are not relevant to their operations.

3. Parliamentary authorities

The Department receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Departmental Net Financial Position and the Statement of Financial Position in one year may be funded through parliamentary authorities in prior, current or future years. Accordingly, the Department has different net results of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled in the following tables:

(a) Reconciliation of net cost of operations to current year authorities used
  2012 2011
(in thousands of dollars)
Net cost of operations before government funding and transfers 1,711,530 1,656,800
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets (74,564) (74,713)
Gain (loss) on disposal of tangible capital assets (6,384) (3,472)
Services provided without charge by other government departments (124,750) (116,850)
Increase in vacation pay and compensatory leave See table note 7* (1,625) (1,500)
Increase in employee future benefits See table note 7* (7,142) (3,215)
Increase in accrued liabilities not charged to authorities (6,578) (4,912)
Bad debt expense (500) (350)
Refund of prior years' expenditures 1,625 3,350
Total items affecting net cost of operations but not affecting authorities (219,918) (201,662)
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisition of tangible capital assets 76,906 123,925
Proceeds from disposal of tangible capital assets (674) (41,159)
Decrease in lease obligations for tangible capital assets 18 19
Loans issued on behalf of Government 1,750 7,000
Increase in inventory 10,597 1,000
Increase in prepaid expenses 2,354 (569)
Total items not affecting net cost of operations but affecting authorities 90,951 90,216
Current year authorities used 1,582,563 1,545,354

Explanatory Notes:

* Usually these amounts are equal to the amounts found in the Cash Flow Statement as they are normally expensed using an F authority. In this case, the difference is due to the transfer of liabilities to other government departments.

(b) Authorities provided and used
  2012 2011
(in thousands of dollars)
Authorities provided:
Vote xx _ Operating expenditures 1,140,976 1,109,089
Vote xx _ Capital expenditures 130,766 126,865
Statutory amounts 364,956 361,517
Less:
Authorities available for future years (50,000) (49,000)
Lapsed: Operating (4,135) (3,117)
Current year authorities used 1,582,563 1,545,354

Explanatory Notes:

Note (b) should be modified to include only those authorities applicable to the department.

The amount to include is the total amount for each type of authority. There is no need to break the amounts down into more detail.

Amounts of authorities provided and used must agree with the amounts shown as Available for Use and Authorities Used as reflected in the Source and Disposition of Authorities in Volume II of the Public Accounts.

4. Accounts payable and accrued liabilities

The following table presents details of the Department's accounts payable and accrued liabilities:

  2012 2011
(in thousands of dollars)
Accounts payable - Other government departments and agencies 32,456 27,894
Accounts payable - External parties 144,266 126,116
Total accounts payable 176,722 154,010
Accrued liabilities 13,719 8,006
Total accounts payable and accrued liabilities 190,441 162,016

5. Deferred revenue

Deferred revenue represents the balance at year-end of unearned revenues stemming from amounts received from external parties that are restricted in order to fund the expenditures related to specific research projects and stemming from amounts received for fees prior to services being performed. Revenue is recognized in the period in which these expenditures are incurred or in which the service is performed. Details of the transactions related to this account are as follows:

  2012 2011
Restated
(note 18)
(in thousands of dollars)
Opening balance 12,598 10,068
Amounts received 1,509 3,660
Revenue recognized (682) (1,130)
Gross closing balance 13,425 12,598
Deferred revenues held on behalf of Government (2,685) (2,520)
Net closing balance 10,740 10,078

Explanatory Notes:

The above is an example of disclosure when a department generates deferred revenue from the collection of fees prior to the service being provided (e.g., licences, passports, etc.).

6. Lease obligation for tangible capital assets

The Department has entered into agreements to lease certain equipment under capital leases with a cost of $111,000 and accumulated amortization of $47,000 as at March 31, 2012 ($111,000 and $36,000 respectively as at March 31, 2011). The obligations related to the upcoming years include the following:

  2012 2011
(in thousands of dollars)
2012 0 19
2013 19 19
2014 19 19
2015 19 19
2016 and thereafter 103 103
Total future minimum lease payments 160 179
Less: imputed interest (2.3% to 6.0%) 36 37
Balance of obligations under leased tangible capital assets 124 142

Explanatory Notes:

The type of asset under capital lease should be disclosed.

Any significant restrictions imposed on the department as a result of the lease agreement should be disclosed.

For departments with significant tangible capital lease obligations, consult the disclosure requirements contained in PSG-2 and PSG-5, as applicable.

7. Employee future benefits

a) Pension benefits

The Department's employees participate in the Public Service Pension Plan, which is sponsored and administered by the Government. 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/Québec Pension Plans benefits and they are indexed to inflation.

Both the employees and the Department contribute to the cost of the Plan. The 2011-2012 expense amounts to $XXX ($YYY in 2010-2011), which represents approximately XX times ( YY times in 2010-2011) 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.

b) Severance benefits

The Department provides severance benefits to its employees based on eligibility, years of service and salary at termination of employment. These severance benefits are not pre-funded. Benefits will be paid from future authorities. Information about the severance benefits, measured as at March 31, is as follows:

As part of collective agreement negotiations with certain employee groups, and changes to conditions of employment for executives and certain non-represented employees, the accumulation of severance benefits under the employee severance pay program ceased for these employees commencing in 2012. Employees subject to these changes have been given the option to be immediately paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits on termination from the public service. These changes have been reflected in the calculation of the outstanding severance benefit obligation.

  2012 2011
(in thousands of dollars)
Accrued benefit obligation - Beginning of year 61,454 56,318
Transferred to other government department, effective November 15, 2011 (note 16) (4,800) 0
Subtotal 56,654 56,318
Expense for the year 9,310 7,306
Benefits paid during the year (2,168) (2,170)
Accrued benefit obligation - End of year 63,796 61,454

Explanatory Notes:

The "Transferred to other government department" line is only used when the department has transferred a program activity or business line as part of a government reorganization. This line is not to be used for the regular movement of employees between departments.

8. Accounts receivable and advances

The following table presents details of the Department's accounts receivable and advances balances:

  2012 2011
Restated
(note 18)
(in thousands of dollars)
Receivables - Other government departments and agencies 25,697 8,872
Receivables - External parties 5,632 6,941
Employee advances 345 322
Subtotal 31,674 16,135
Allowance for doubtful accounts on receivables from external parties (514) (2,047)
Gross accounts receivable 31,160 14,088
Accounts receivable held on behalf of Government (10,000) (4,000)
Net accounts receivable 21,160 10,088

9. Loans receivable

The following table presents details of the Department's loans and transfer payments recoverable balances:

  2012 2011
Restated
(note 18)
(in thousands of dollars)
Loans receivable 2,900 3,000
Less: Unamortized discount (1,400) (1,700)
Subtotal 1,500 1,300
Transfer payments recoverable 4,450 10,640
Subtotal 5,950 11,940
Less: Allowance for uncollectibility (2,500) (2,500)
Total loans receivable 3,450 9,440
a) Loans receivable from (name of recipient)

The loans receivable portfolio consists of 12 non-interest bearing loans issued in the years from 2001 to 2007, with prescribed annual repayment terms. The loans are recorded at their discounted net present values using market interest rates at the time of the loans. An allowance of $1,500,000 ($1,000,000 in 2010-2011) has been recorded.

b) Transfer payments recoverable

Transfer payments recoverable relate to contributions made to outside parties which are repayable based on conditions specified in the contribution agreement that have come into being. An allowance of $1,000,000 ($1,500,000 in 2010-2011) has been recorded.

Explanatory Notes:

This note is suggested for organizations that have repayable transfer payments or other loans receivable. It must be changed to reflect the department's particular operating environment.

Departments with significant repayable contributions and other loans receivable should consult the disclosure requirements in PS 3050.54 and .56 of the Public Sector Accounting Handbook to determine the extent of information to disclose.

10. Inventory

The following table presents details of the inventory, measured at cost using the average cost method.

  2012 2011
(in thousands of dollars)
Spare parts 16,346 5,987
Materials 3,521 3,978
Other 1,929 1,234
Total inventory 21,796 11,199

The cost of consumed inventory recognized as an expense in the Statement of Operations and Departmental Net Financial Position is $44,212,000 in 2011-2012 ($38,700,000 in 2010-2011).

11. Tangible capital assets


Capital Asset Class (in thousands of dollars)
Cost Accumulated Amortization Net Book Value
Opening Balance Acquisitions Adjustments See table note 8(1) Disposals and Write-Offs Closing Balance Opening Balance Amortization Adjustments See table note 8(1) Disposals and Write-Offs Closing Balance 2012 2011

(1) Adjustments include assets under construction of $58,492 that were transferred to the other categories upon completion of the assets.

Effective November 15, 2011, the Department transferred land and buildings with a net book value of $10,000,000 to (name of other department). This transfer is included in the adjustment columns (refer to note 16 for further detail on the transfer).

Land 12,989 0 (1,000) 0 11,989 0 0 0 0 0 11,989 12,989
Buildings 1,324,284 4,981 23,845 0 1,353,110 425,488 40,465 (6,809) 0 459,144 893,966 898,796
Works and infrastructure 370,059 3,128 10,694 0 383,881 202,792 17,267 0 0 220,059 163,822 167,267
Machinery and equipment 169,327 7,977 8,144 19,276 166,172 117,194 12,735 0 12,519 117,410 48,762 52,133
Vehicles 35,641 7,076 0 3,900 38,817 23,536 4,004 0 3,599 23,941 14,876 12,105
Leasehold improvements 1,255 67 0 0 1,322 95 82 0 0 177 1,145 1,160
Leased tangible capital assets 111 0 0 0 111 36 11 0 0 47 64 75
Computer hardware 0 0 0 0 0 0 0 0 0 0 0 0
Computer software 0 0 0 0 0 0 0 0 0 0 0 0
Assets under construction 112,988 53,677 (58,492) 0 108,173 0 0 0 0 0 108,173 112,988
Total 2,026,654 76,906 (16,809) 23,176 2,063,575 769,141 74,564 (6,809) 16,118 820,778 1,242,797 1,257,513

12. Departmental net financial position

A portion of the Department's net financial position is used for a specific purpose. Related revenues and expenses are included in the Statement of Operations and Departmental Net Financial Position.

The (name of account) was established pursuant to the (name of the Act) and related regulations to record fines and penalties levied by courts under the Act. The balance of the account is to be used for (state purpose). Activity in the account is as follows:

  2012 2011
(in thousands of dollars)
Account's name - Restricted
Balance - Beginning of year - Restricted 15,576 15,987
Revenues 1,291 1,576
Expenses (2,493) (1,987)
Balance - End of year - Restricted 14,374 15,576
Unrestricted 1,117,093 1,132,118
Departmental net financial position - End of year 1,131,467 1,147,694

Explanatory Notes:

This note is required only if the department has a consolidated specified purpose account for which it is responsible.

13. 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 in order to carry out its transfer payment programs or when the services/goods are received. Significant contractual obligations that can be reasonably estimated are summarized as follows:

  2013 2014 2015 2016 2017 and thereafter Total
(in thousands of dollars)
Transfer payments 3,000 2,500 1,000 0 0 6,500
Operating leases 1,000 1,000 1,000 900 100 4,000
Total 4,000 3,500 2,000 900 100 10,500

Explanatory Notes:

The department should provide details of significant contractual obligations. Significance is assessed based on the departmental materiality policy without consideration for Public Accounts materiality levels.

14. Contingent liabilities

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

(a) Contaminated sites

Liabilities are accrued to record the estimated costs related to the management and remediation of contaminated sites where the Department is obligated or likely to be obligated to incur such costs. The Department has identified approximately 50 sites (49 sites in 2010-2011) where such action is possible and for which a liability of $10,300,000 ($8,000,000 in 2010-2011) has been recorded in accrued liabilities. The Department has estimated additional clean-up costs of $13,000,000 ($14,000,000 in 2010-2011) that are not accrued, as these are not considered likely to be incurred at this time. The Department's ongoing efforts to assess contaminated sites may result in additional environmental liabilities related to newly identified sites, or changes in the assessments or intended use of existing sites. These liabilities will be accrued by the Department in the year in which they become likely and are reasonably estimable.

(b) Claims and litigation

Claims have been made against the Department in the normal course of operations. These claims include items with pleading amounts and other for which no amount is specified. While the total amount claimed in these actions is significant, their outcomes are not determinable. The Department has recorded an allowance for claims and litigations where it is likely that there will be a future payment and a reasonable estimate of the loss can be made. Claims and litigations for which the outcome is not determinable and a reasonable estimate can be made by management amount to approximately $20,000,000 ($14,000,000 in 2010-2011) at March 31, 2012.

Explanatory Notes:

The department should provide details of significant cases. Refer to disclosure requirements in PS 3300.28 of the Public Sector Accounting Handbook and TBAS 3.6.

For significant claims and litigations, departments must consult with the Government Accounting Policy and Reporting division of TBS before any note disclosure is made. Significance is assessed based on the departmental materiality policy without consideration for Public Accounts materiality levels.

15. Related party transactions

The Department is related as a result of common ownership to all government departments, agencies, and Crown corporations. The Department enters into transactions with these entities in the normal course of business and on normal trade terms. In addition, the Department has an agreement with the (name of other department) related to the provision of finance and administration services. During the year, the Department received (and provided if applicable) common services which were obtained without charge from other government departments as disclosed below.

(a) Common services provided without charge by other government departments

During the year, the Department received services without charge from certain common service organizations, related to accommodation, legal services, the employer's contribution to the health and dental insurance plans and workers' compensation coverage. These services provided without charge have been recorded in the Department's Statement of Operations and Departmental Net Financial Position as follows:

  2012 2011
(in thousands of dollars)
Employer_s contribution to the health and dental insurance plans 75,000 70,000
Accommodation 41,700 40,500
Legal services 6,850 5,250
Workers' compensation 1,200 1,100
Total 124,750 116,850

The Government has centralized some of its administrative activities for efficiency, cost-effectiveness purposes and economic delivery of programs to the public. As a result, the Government uses central agencies and common service organizations so that one department performs services for all other departments and agencies without charge. The costs of these services, such as the payroll and cheque issuance services provided by Public Works and Government Services Canada and audit services provided by the Office of the Auditor General are not included in the Department's Statement of Operations and Departmental Net Financial Position.

(b) Common services provided without charge to other government departments

During the year, the Department provided services without charge to other government departments, related to the provision of (name of services), in the amount of $17,000,000 ($15,000,000 in 2010-2011).

(c) Administration of programs on behalf of other government departments

Under a memorandum of understanding signed with (name of other department) on April 1, 2005, the Department administers program XXX in Northern Canadian communities. During the year, the Department incurred expenses of $XXX ($YYY in 2010-2011) on behalf of (name of other department). These expenses are reflected in the financial statements of (name of other department) and are not recorded in these financial statements.

(d) Other transactions with related parties
  2012 2011
(in thousands of dollars)
Accounts receivable - Other government departments and agencies 25,697 8,872
Accounts payable - Other government departments and agencies 32,456 27,894
Expenses - Other government departments and agencies 12,560 11,480
Revenues - Other government departments and agencies 2,388 2,277

Expenses and revenues disclosed in (d) exclude common services provided without charge, which are already disclosed in (a).

Explanatory Notes:

Note (b) is only required if a department (e.g., PWGSC, Treasury Board of Canada Secretariat, Justice Canada and HRSDC) provided services without charge to and recorded by other government departments.

Note (c) is only required for departments that administer significant amounts of funds on behalf of other government departments.

Note (d): If the amount of receivables and payables with related parties is presented elsewhere in the financial statements, there is no need to present the information in this note.

16. Transfers from/to other government departments

Effective November 15, 2011, the Department transferred responsibility for the (name of program/business line etc.) to the (name of other department) in accordance with (e.g., Act of Parliament, Order-in-Council, Treasury Board of Canada Secretariat Directive etc.), including the stewardship responsibility for the assets and liabilities related to the program. Accordingly, the Department transferred the following assets and liabilities related to the (name of program/business line etc.) to (name of other department) on November 15, 2011:

  2012
  (in thousands of dollars)
Assets:
Tangible capital assets (net book value) (note 11) 10,000
Total assets transferred 10,000
Liabilities:
Vacation pay and compensatory leave 1,200
Employee future benefits (note 7) 4,800
Total liabilities transferred 6,000
Adjustment to the departmental net financial position 4,000

In addition, the 2011 comparative figures have been reclassified on the Statement of Operations and Departmental Net Financial Position to present the revenues and expenses of the transferred operations.

During the transition period, the Department continued to administer the transferred activities on behalf of (name of other department). The administered revenues and expenses amounted to $543 and to $6,845 respectively, for the year. These revenues and expenses are not recorded in these financial statements. See table note 9*

Explanatory Notes:

This note is required in years when the department transfers significant assets and liabilities to another federal government department or agency or when the department receives transfers of significant assets and liabilities from another federal government department. These transactions would typically be a part of a government reorganization.

The transferred amounts should be measured at the carrying values reported by the transferring department.

The net assets or net liabilities transferred should be recorded as an adjustment to departmental net financial position in the Statement of Operations and Departmental Net Financial Position.

* These represent the transactions after the Act of Parliament, Order-in-Council, Treasury Board of Canada Secretariat Directive, etc. date.

The above example is for the transferring department. The receiving department's note disclosure for this transaction would be similar to the following:

Effective November 15, 2011, the Department was transferred the responsibility for the (name of program/business line etc.) from the (name of other department) in accordance with (e.g., Act of Parliament, Order-in-Council, Treasury Board of Canada Secretariat Directive, etc.), including the stewardship responsibility for the assets and liabilities related to the program. Accordingly, the Department received the following assets and liabilities related to the (name of program or business line, etc.) from (name of other department) on November 15, 2011:

  2012
  (in thousands of dollars)
Assets:
Tangible capital assets (net book value) (note 11) 10,000
Total assets received 10,000
Liabilities:
Vacation pay and compensatory leave 1,200
Employee future benefits (note 7) 4,800
Total liabilities received 6,000
Adjustment to the departmental net financial position 4,000

17. Segmented information

Presentation by segment is based on the Department's program activity architecture See table note 10*. The presentation by segment is based on the same accounting policies as described in the Summary of significant accounting policies in note 2. The following table presents the expenses incurred and revenues generated for the main program activities, by major object of expense and by major type of revenue. The segment results for the period are as follows:

  (in thousands of dollars)
  Benefit Programs and Other Services Appeals International Issues Internal Services Intersegment and Unallocated 2012 Total 2011 Total Restated (note 18)
Transfer payments
Industry 2,813 0 0 0 0 2,813 2,850
Individuals 255 0 0 0 0 255 58
Total transfer payments 3,068 0 0 0 0 3,068 2,908
Operating expenses
Salaries and employee benefits 513,158 399,123 147,450 65,620 0 1,125,351 1,049,122
Professional and special services 187,573 145,890 80,116 3,250 0 416,829 395,995
Amortization of tangible capital assets 33,554 26,097 13,913 1,000 0 74,564 74,713
Utilities, materials and supplies 19,926 15,498 6,296 2,560 0 44,280 48,460
Accommodation 19,575 15,225 6,170 2,530 0 43,500 42,250
Travel 15,996 12,441 5,653 1,456 0 35,546 21,448
Communication 5,762 4,481 1,729 832 0 12,804 13,805
Other 3,530 3,096 466 1,252 0 8,344 6,001
Expenses incurred on behalf of Government 0 (350) (150) 0 0 (500) (800)
Total operating expenses 799,074 621,501 261,643 78,500 0 1,760,718 1,650,994
Total expenses 802,142 621,501 261,643 78,500 0 1,763,786 1,653,902
Revenues
Regulatory fees 30,629 30,933 17,676 0 0 79,238 27,793
Miscellaneous revenues 9,261 482 275 0 0 10,018 7,560
Revenues earned on behalf of Government 0 (14,318) (8,182) 0 0 (22,500) (19,251)
Total revenues 39,890 17,097 9,769 0 0 66,756 16,102
Net cost from continuing operations 762,252 604,404 251,874 78,500 0 1,697,030 1,637,800

Explanatory Notes:

This note should be adapted by departments to their own specific situation.

Departments that need to group some of their program activities may do so.

The method of significant allocations to segments should be disclosed as applicable.

* Starting April 1st, 2012, "program activity architecture", will be referred to as "program alignment architecture", and "program activities" will be referred to as "programs".

18. Accounting changes

During 2011, amendments were made to Treasury Board Accounting Standard 1.2 - Departmental and Agency Financial Statements to improve financial reporting by government departments and agencies. The amendments are effective for financial reporting of fiscal years ending March 31, 2012, and later. The significant changes to the Department's financial statements are described below. These changes have been applied retroactively, and comparative information for 2010-11 has been restated.

Net debt (calculated as liabilities less financial assets) is now presented in the Statement of Financial Position. Accompanying this change, the Department now presents a Statement of Change in Net Debt and no longer presents a Statement of Equity.

Revenue and related accounts receivable are now presented net of non-respendable amounts in the Statement of Operations and Departmental Net Financial Position and Statement of Financial Position. The effect of this change was to increase the net cost of operations before government funding and transfers by $22,500,000 for 2012 ($19,251,000 for 2011) and decrease total financial assets by $13,450,000 for 2012 ($13,440,000 for 2011).

Government funding and transfers, as well as the credit related to services provided without charge by other government departments, are now recognized in the Statement of Operations and Departmental Net Financial Position below "Net cost of operations before government funding and transfers." In previous years, the Department recognized these transactions directly in the Statement of Equity of Canada. The effect of this change was to decrease the net cost of operations before government funding and transfers by $1,695,303,000 for 2012 ($1,632,953,000 for 2011).

  2011 As previously stated Effect of change 2011 Restated
  (in thousands of dollars)
Statement of Financial Position:
Liabilities held on behalf of Government 0 (2,520) (2,520)
Assets held on behalf of Government 0 (13,440) (13,440)
Departmental financial position 1,158,614 (10,920) 1,147,694
Statement of Operations and Departmental Net Financial Position:
Revenues 35,353 (19,251) 16,102
Expenses 1,654,702 (800) 1,653,902
Government funding and transfers
Net cash provided by Government 0 1,509,763 1,509,763
Change in due from Consolidated Revenue Fund 0 6,340 6,340
Services provided without charge by other government departments 0 116,850 116,850
Transfer of assets and liabilities from (to) other government departments 0 0 0

Explanatory Notes:

A similar note may be required in subsequent years for the adoption of new accounting policies by the department in that year.

19. Subsequent events

On August 1, 2012, the Government of Canada announced its decision to sell eight buildings. The buildings and land that are located in six major cities across Canada will be sold for an amount approximating $800,000,000. The impact of this sale, once finalized, will be reflected in the 2012-13 financial statements.

Explanatory Notes:

The above is an example of subsequent event disclosure for a significant or unusual event that has occurred between the date of the financial statements and the date of their completion that do not relate to conditions that existed at the date of the financial statements.

20. Comparative information

Comparative figures have been reclassified to conform to the current year's presentation.

Explanatory Notes:

This note is only required in years that the comparative figures have been changed from the prior year financial statements, due to reclassifications or changes in the groupings in financial statements presentation.

Date Modified: