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Section III: Supplementary Information

Departmental link to Government of Canada outcome areas

The following table shows actual spending for the most recently completed fiscal year and outlines the contribution of program activities to the relevant Government of Canada outcome areas used in the Canada's Performance Report.

Strategic Outcome: A strong and sustainable economy, resulting in increasing standards of living and improved quality of life for Canadians
Program Activity	Actual Spending 2007–08 ($ thousands)			Alignment to Government of Canada Outcome Area
	Budgetary	Non-Budgetary1	Total
Tax Policy	33,466		33,466	Strong economic growth
Economic and Fiscal Policy	15,247		15,247	Strong economic growth
Financial Sector Policy	20,357	4,844,000	4,864,357	A fair and secure marketplace
Economic Development and Corporate Finance	7,995		7,995	Strong economic growth
Federal-Provincial Relations and Social Policy	12,697		12,697	Strong economic growth
International Trade and Finance	16,024		16,024	A prosperous Canada through global commerce
Public Debt	33,212,372		33,212,372	All outcomes
Domestic Coinage	182,736		182,736	Strong economic growth
Transfer Payments to Provinces and Territories	47,211,456		47,211,456	Strong economic growth; Healthy Canadians
International Financial Organizations	500,675	322,614	823,289	Global poverty reduction through sustainable development
Total*	81,213,024	5,166,614	86,379,638
* Due to rounding, figures may not add to totals shown. 1. Non-budgetary items include loans to Crown corporations, issuance and payment of demand notes to the IDA, and payments and encashments of notes to the EBRD.

Alignment with Government of Canada outcome areas

Strong economic growth

The Department of Finance Canada provides analysis and advice on economic and fiscal matters in order to develop economic policies that lead to sustained economic growth. It also provides for a tax system that raises sufficient revenue in an economically efficient and fair manner to pay for public services and to invest strategically in areas that promote a more competitive and productive Canadian economy. In addition, the Department ensures that federal-provincial- territorial fiscal arrangements are consistent with the principles of efficiency and equity underlying the government's broad social and economic agenda and that they redistribute wealth across regions of the country. It also ensures that domestic circulating coinage continues to be supplied to meet the needs of the economy at a reasonable cost.

A fair and secure marketplace

The Department ensures that Canada's financial sector and domestic financial markets function well—conditions necessary to achieving a fair and secure marketplace.

A prosperous Canada through global commerce

The Department of Finance Canada helps improve Canada's overall economic performance through a stronger international trade and investment system that opens markets, enhances the competitiveness of domestic industries, and expands access for Canadian exports and investment in major foreign markets.

Healthy Canadians

The Department ensures that long-term, predictable, stable, formula-based transfer support for provinces and territories and improvements to the social policy framework are in place to support health care, education, and social safety net programs.

Global poverty reduction through sustainable development

The Department contributes to international initiatives to improve outcomes in developing economies through the effective use of international assistance, debt relief, and other means aimed at aiding the economic advancement of developing countries.

All outcomes

By keeping debt costs low and stable over time, the Department of Finance Canada helps to keep interest rates down, positions Canada to weather economic storms and respond to the demands of a changing society, and improves intergenerational equity by ensuring that future generations do not have to pay for the benefits received by their predecessors.

Table 1: Comparison of Planned to Actual Spending (Including FTEs)

Program Activity ($ thousands)	2005–06 Actual	2006–07 Actual	2007–08
			Main Estimates	Planned Spending	Total Authorities	Actual
Tax Policy1,4	30,594	30,805	32,525	32,689	35,797	33,466
Economic and Fiscal Policy4	14,481	14,500	14,932	15,007	16,186	15,247
Financial Sector Policy 2,3,4	20,993	101,443	18,022	18,113	4,934,982	4,864,357
Economic Development and Corporate Finance4	7,540	7,799	8,248	8,289	8,836	7,995
Federal-Provincial Relations and Social Policy4	14,146	14,497	12,236	12,298	13,335	12,697
International Trade and Finance4	14,352	14,903	15,799	15,879	16,833	16,024
Public Debt5	33,535,120	34,108,504	34,697,000	34,697,000	33,212,372	33,212,372
Domestic Coinage6	127,811	135,602	145,000	145,000	182,736	182,736
Transfer Payments to Provinces and Territories7	44,160,692	38,441,221	40,328,203	40,328,203	47,211,456	47,211,456
International Financial Organizations8,9	1,908,470	1,006,072	544,716	544,717	951,112	823,289
Total*	79,834,199	73,875,346	75,816,681	75,817,194	86,583,644	86,379,638
Less: Non-respendable revenue10	3,694,155	4,639,937	N/A	233,517	N/A	4,694,598
Plus: Cost of services received without charge	12,385	18,774	N/A	15,386	N/A	16,020
Total departmental spending*	76,152,429	69,254,183	75,816,681	75,599,063	86,583,644	81,701,060
Full-time equivalents	813	790	N/A	798	N/A	790

* Due to rounding, figures may not add to totals shown.

Notes:

1. Tax Policy program activity additional variances between "Total Authorities" and "Actual" are attributable to staff turnover and the later-than-expected start of the Advisory Panel on Canada's System of International Taxation.

2. Financial Sector Policy program activity "Total Authorities" includes the following items not included in "Planned Spending": $3.8 billion for loans to the Farm Credit Canada Act; $1 billion for loans to the Business Development Bank of Canada Act; $69 million of unused authority for payments to depositors of Canadian Commercial Bank, CCB Mortgage Investment Corporation, and Northland Bank pursuant to the Financial Institutions Depositors Compensation Act; $2 million for payment of liabilities previously transferred to revenues; and $4 million for advances to the Financial Consumer Agency of Canada.

3. Financial Sector Policy program activity additional variances between "Total Authorities" and "Actual" are primarily attributable to $69 million for unused authority for payments to depositors of Canadian Commercial Bank, CCB Mortgage Investment Corporation, and Northland Bank; variances for internal services surpluses as mentioned in Note 4 below, later-than-expected start for the Expert Panel on Securities Regulation; and staff turnover.

4. Variances between "Total Authorities" and "Actual" include $2.3 million in operating budget surpluses from internal services allocations primarily attributable to staff turnover.

5. Public Debt program activity variances between "Planned Spending" and "Actual" are attributable to lower interest rates during the year and a slightly higher-than-anticipated reduction in market debt.

6. Domestic Coinage program activity variances between "Planned Spending" and "Actual" are due to the inclusion of $42 million for recycled coin costs in the actual expenses.

7. Transfer Payment to Provinces and Territories program activity "Total Authorities" includes the following amounts approved after the preparation of the 2007 Main Estimates: $1.5 billion for the Clean Air and Climate Change Trust Fund; $1 billion for the Community Development Trust; $88 million for transfer payments in connection with the Budget Implementation Act, 2007; $250 million for child care spaces; $612 million for the Patient Wait Times Guarantee; $300 million for human papilloma virus immunization; $614 million for transitional payments; $250 million for the payment to Ontario for the transition to single administration of Ontario corporate tax. Details on transfer payments can be found in Table 6 of this report. Variances between "Planned Spending" and "Total Authorities" and "Actual" are primarily attributable to an increase of $1.2 billion in Fiscal Equalization; $79 million in Territorial Formula Financing; $118 million in Canada Health Transfer; and $795 million in the Canada Social Transfer.

8. International Financial Organizations program activity "Total Authorities" includes adjustments for the following items not in "Planned Spending": $89 million for net loss on exchange for international payments; $318 million for issuance and payment of non–interest bearing, non-negotiable demand notes to the International Development Association in accordance with the Bretton Woods and Related Agreements Act; and $4 million for issuance of demands notes to the European Bank for Reconstruction and Development.

9. International Financial Organizations program activity variance between "Total Authorities" and "Actual" is primarily attributable to a lapse of $128 million in Vote 5, Grants and Contributions, and mainly due to heavily indebted poor countries not meeting the International Monetary Fund's program requirements in accordance with multilateral debt relief initiatives agreed to at the Paris Club.

10. Details of the non-respendable revenue are listed in Table 4 of this report.

Table 2: Voted and Statutory Items

Vote or Statutory Item	Truncated Vote or Statutory Wording	2007–08 ($ thousands)
		Main Estimates	Planned Spending	Total Authorities	Actual
1	Operating expenditures1,2	89,343	89,855	99,139	91,556
5	Grants and contributions3	221,200	221,200	221,200	93,377
(S)	Minister of Finance—Salary and motor car allowance	75	75	74	74
(S)	Contributions to employee benefit plans	12,344	12,344	12,104	12,104
(S)	Transfer payments to territorial governments4	2,142,450	2,142,450	2,221,297	2,221,297
(S)	Payments to the International Development Association (IDA)	318,269	318,270	318,270	318,270
(S)	Purchase of domestic coinage5	145,000	145,000	182,736	182,736
(S)	Public debt—Interest and other costs6	34,697,000	34,697,000	33,212,372	33,212,372
(S)	Statutory subsidies	32,000	32,000	31,822	31,822
(S)	Fiscal Equalization7	11,676,353	11,676,353	12,924,677	12,924,677
(S)	Canada Health Transfer8	21,348,400	21,348,400	21,474,272	21,474,272
(S)	Canada Social Transfer9	8,800,000	8,800,000	9,590,219	9,590,219
(S)	Youth Allowances Recovery10,11	(661,000)	(661,000)	(943,805)	(943,805)
(S)	Alternative Payments for Standing Programs10	(3,010,000)	(3,010,000)	(2,719,889)	(2,719,889)
(S)	Payments pursuant to the Halifax Relief Commission Pension Continuation Act			18	18
(S)	Payments to depositors of Canadian Commercial Bank, CB Mortgage Investment Corporation, and Northland Bank pursuant to the Financial Institutions Depositors Compensation Act			68,572
(S)	Payment of liabilities previously transferred to revenue			1,848	1,848
(S)	Spending of proceeds from the disposal of surplus Crown assets			28
(S)	Net loss on exchange			89,177	89,177
(S)	Payment to British Columbia12			30,000	30,000
(S)	Payment to Yukon12			3,500	3,500
(S)	Payment to Northwest Territories12			54,400	54,400
(S)	Payment to Ontario12			250,000	250,000
(S)	Clean Air and Climate Change Trust Fund12			1,518,925	1,518,925
(S)	Patient Wait Times Guarantee12			612,000	612,000
(S)	Transitional payments12			614,038	614,038
(S)	Child care spaces12			250,000	250,000
(S)	Human papilloma virus immunization12			300,000	300,000
(S)	Community Development Trust13			1,000,000	1,000,000
(S)	Advances pursuant to subsection 12(2) of the Farm Credit Canada Act14			3,840,000	3,840,000
(S)	Advances pursuant to section 19 of the Business Development Bank of Canada Act14			1,000,000	1,000,000
(S)	Refunds of amounts credited to revenues in previous years			36	36
(S)	Advances pursuant to subsection 13(1) of the Financial Consumer Agency of Canada Act			4,000	4,000
(L10a)	Issuance and payment of demand notes to the International Development Association			318,280	318,280
(S)	Payments and encashments of notes to the European Bank for Reconstruction and Development—Capital subscriptions	5,247	5,247	4,334	4,334
	Total*	75,816,681	75,817,194	86,583,644	86,379,638

* Due to rounding, figures may not add to totals shown.

Notes:

1. "Total Authorities" includes adjustments from Supplementary Estimates or permanent allocations from various Treasury Board Votes for the following items not in "Planned Spending": $4.7 million for the 2006–07 operating budget carry forward; $2.7 million for centrally funded items; $1.6 million for collective bargaining agreements; $0.5 million for government-wide initiatives on internal audit.

2. "Operating expenditures" variances between "Total Authorities" and "Actual" are primarily attributable to staff turnover. Other factors include the later-than-expected start for the Advisory Panel on Canada's System of International Taxation and the Expert Panel on Securities Regulation.

3. "Grants and contributions" variances between "Total Authorities" and "Actual" are mainly due to heavily indebted poor countries not meeting the International Monetary Fund program requirements in accordance with multilateral debt relief initiatives agreed to at the Paris Club.

4. "Transfer payments to territorial governments" variances between "Planned Spending" and "Total Authorities" are primarily attributable to the new formula for Territorial Formula Financing that was announced in Budget 2007.

5. "Purchase of domestic coinage" variances between "Planned Spending" and "Total Authorities" are due to the inclusion of $42 million for recycled coin costs in the actual expenses.

6. "Public debt" variances between "Planned Spending" and "Total Authorities" are attributable to lower interest rates during the year and a slightly higher-than-anticipated reduction in market debt.

7. "Fiscal Equalization" variance between "Planned Spending" and "Total Authorities" is a result of the new formula for Equalization that was announced in Budget 2007.

8. "Canada Health Transfer" variance between "Planned Spending" and "Total Authorities" is attributable to the increase in the transfer payment rate as outlined in the 10-Year Plan to Strengthen Health Care.

9. "Canada Social Transfer" variance between "Planned Spending" and "Total Authorities" is attributable to the legislated amount for the Canada Social Transfer following the new commitments set out in Budget 2007.

10. Variances between "Planned Spending" and "Total Authorities" are the result of a decrease in the value of personal income tax points resulting in lower amounts to be recovered from Quebec.

11. In addition to the variances explained in Note 10, the Department received $336million from the Province of Quebec for the 2008–09 fiscal year on March 31, 2008. The recovery from the Province of Quebec for the 2007–08 fiscal year is therefore overstated. Without the early payment, the recovery would have been shown as $(607.8) million.

12. Approved in Budget 2007.

13. Community Development Trust approved in Budget 2008.

14. The Government announced in Budget 2007 that it plans to meet all of the domestic borrowing needs of Farm Credit Canada and the Business Development Bank of Canada through direct lending beginning in 2008. Before this change, these Crown corporations obtained funding directly through the capital markets, under their own name.

To view the tables noted below, please visit http://www.tbs-sct.gc.ca/dpr-rmr/st-ts-eng.asp.

Table 3: Loans, Investments, and Advances (Non-budgetary)

Table 4: Sources of Respendable and Non-Respendable Revenue

Table 5: User Fees and External Fees

Table 6: Details on Transfer Payment Programs (TPP)

Table 7: Sustainable Development Strategy

Table 8: Response to Parliamentary Committees and External Audits

Table 9: Internal Audits and Evaluations

Table 10: Horizontal Initiatives

In 2007–08, the Department of Finance Canada was the lead department on the following horizontal initiative: Canada's Anti-Money Laundering and Anti-Terrorist Financing Regime.

Supplementary information on the above-noted horizontal initiative can be found at
http://www.tbs-sct.gc.ca/rma/eppi-ibdrp/hrdb-rhbd/profil_e.asp.

Table 11: Travel Policies

Comparison to the Treasury Board of Canada Secretariat Special Travel Authorities

The Department of Finance Canada follows and uses the Treasury Board policy parameters.

Comparison to the Treasury Board of Canada Secretariat Travel Directive, Rates, and Allowances

The Department of Finance Canada follows and uses the Treasury Board policy parameters.

Table 12: Department of Finance Canada Financial Statements (Unaudited) for the Year Ended March 31, 2008

Statement of Management Responsibility

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2008, and all information contained in this report rests with the management of the Department of Finance Canada. These financial statements have been prepared by management in accordance with Treasury Board accounting policies, which are consistent with Canadian generally accepted accounting principles for the public sector.

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 fulfil its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the Department of Finance Canada's financial transactions. Financial information submitted to the Public Accounts of Canada and included in the Department's Departmental Performance Report is consistent with these financial statements.

Management maintains a system of financial management and internal control designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded, and that transactions are in accordance with the Financial Administration Act, are executed in accordance with prescribed regulations, within Parliamentary authorities, and are properly recorded to maintain accountability of government funds. Management also seeks to ensure the objectivity and integrity of data in its financial statements by careful selection, training, and development of qualified staff, by organizational arrangements that provide appropriate divisions of responsibility, and by communication programs aimed at ensuring that regulations, policies, standards, and managerial authorities are understood throughout the Department of Finance Canada.

The system of internal control is augmented by internal audit, which conducts periodic audits and reviews of different areas of the Department's operations. In addition, the Chief Audit Executive has free access to the 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 Minister of Finance.

The financial statements of the Department of Finance Canada have not been audited.

The paper version was signed by Rob Wright, Deputy Head Ottawa, Canada August 28, 2008

The paper version was signed by Kelly Gillis, CA, Senior Financial Officer

Department of Finance Canada
Statement of Operations (unaudited)
For the Year Ended March 31
($ thousands)

Restated
(Note 22)

	2008	2007
Expenses (Note 4)
Transfer Payments to Provinces and Territories	45,575,855	41,974,221
Public Debt	33,212,327	34,108,504
International Financial Organizations	304,367	190,802
Domestic Coinage	177,654	128,035
Tax Policy	38,172	36,781
Financial Sector Policy	20,859	65,511
International Trade and Finance	18,321	17,956
Economic and Fiscal Policy	17,423	17,325
Federal-Provincial Relations and Social Policy	14,485	17,719
Economic Development and Corporate Finance	9,154	9,309
Total Expenses	79,388,617	76,566,163
Revenues (Note 5)
Transfer Payments to Provinces and Territories	182,771	205,063
International Financial Organizations	23,403	36,768
Domestic Coinage	203,566	226,843
Tax Policy	13	59
Financial Sector Policy	4,180,908	4,141,198
International Trade and Finance	6	29
Economic and Fiscal Policy	6	52
Federal-Provincial Relations and Social Policy	5	32
Economic Development and Corporate Finance	239,387	158,084
Total Revenues	4,830,065	4,768,128
Net Cost of Operations	74,558,552	71,798,035

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

Department of Finance Canada
Statement of Financial Position (unaudited)
At March 31
($ thousands)

Restated
(Note 22)

	2008	2007
Assets
Financial assets
Accounts receivable and advances (Note 6)	6,876,772	6,777,102
Coin inventory	26,912	21,829
Foreign exchange accounts (Note 7)	42,299,109	44,178,099
Investment in Crown corporations (Note 8)	401,578	401,578
Other loans, investments, and advances (Note 9)	8,918,815	5,052,538
Total financial assets	58,523,186	56,431,146
Non-financial assets
Prepaid expenses	14	—
Tangible capital assets (Note 10)	3,584	3,548
Total non-financial assets	3,598	3,548
Total Assets	58,526,784	56,434,694
Liabilities
Accounts payable and accrued liabilities (Note 11)	3,416,921	4,356,295
Taxes payable under tax collection agreements (Note 12)	5,111,494	6,422,333
Interest payable (Note 13)	7,090,297	7,407,283
Notes payable to international organizations (Note 14)	350,679	359,761
Matured debt (Note 15)	91,698	108,961
Unmatured debt (Note 16)	386,776,844	411,548,404
Other liabilities (Note 17)	460,839	124,839
Employee severance benefits (Note 18)	12,800	13,604
	403,311,572	430,341,480
Equity of Canada	(344,784,788)	(373,906,786)
Total Liabilities and Equity	58,526,784	56,434,694
Contingent liabilities (Note 19)
Contractual obligations (Note 20)

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

Department of Finance Canada
Statement of Equity of Canada (unaudited)
At March 31
($ thousands)

Restated
(Note 22)

	2008	2007
Equity of Canada, beginning of year	(373,906,786)	(383,686,463)
Net cost of operations	(74,558,552)	(71,798,035)
Current year appropriations used (Note 3)	86,379,638	73,875,345
Revenue not available for spending (Note 3)	(4,877,248)	(4,844,881)
Change in net position in the Consolidated Revenue Fund (Note 3)	22,162,139	12,528,474
Services received without charge from other government departments (Note 21)	16,021	18,774
Equity of Canada, end of year	(344,784,788)	(373,906,786)

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

Department of Finance Canada
Statement of Cash Flow (unaudited)
For the Year Ended March 31
($ thousands)

Restated
(Note 22)

	2008	2007
Operating activities
Net cost of operations	74,558,552	71,798,035
Non-cash items:
Amortization of tangible capital assets	(1,632)	(1,472)
Amortization of loan discounts	209,706	207,031
Amortization of debt discounts and premiums	(6,361,347)	(6,153,043)
Concessionary portion of other loans, investments, and advances	(237,845)	(241,856)
Gain on disposition of securities	1,531	1,715
Gain on disposal and write-down of tangible capital assets	—	8
Unrealized foreign exchange gains and losses	(44,937)	(4,658)
Services provided without charge from other government departments	(16,021)	(18,774)
Variations in Statement of Financial Position:
Increase (decrease) in accounts receivable and advances	99,671	(1,099,665)
Increase in coin inventory	5,083	7,567
Increase in prepaid expenses	14	—
Decrease (increase) in liabilities:
Accounts payable and accrued liabilities	939,375	327,243
Employee severance benefits	804	(609)
Interest payable	316,985	341,432
Taxes payable under tax collection agreements	1,310,839	(409,956)
Other liabilities	(336,000)	83,573
Cash used by operating activities	70,444,778	64,836,571
Capital investment activities
Acquisition of tangible capital assets	1,668	1,808
Proceeds from disposal of tangible capital assets	—	(566)
Cash used by capital investment activities	1,668	1,242
Investing activities
Net advances to (settlements from) the Exchange Fund Account	(1,076,934)	2,469,709
Issuance of notes payable to the International Monetary Fund	(333,000)	(1,680,585)
Encashment of notes payable to the International Monetary Fund	213,120	1,267,000
Issuance of loans receivable	5,273,968	1,375,401
Repayment of loans receivable	(1,285,757)	(1,554,892)
Cash used by investing activities	2,791,397	1,876,633

Department of Finance Canada
Statement of Cash Flow(unaudited)
For the Year Ended March 31
($ thousands)

Restated
(Note 22)

	2008	2007
Financing activities
Encashment of notes payable to international organizations	322,604	324,768
Issuance of notes payable to international organizations	(318,280)	(318,270)
Net proceeds from cross-currency swaps	(373,718)	(183,919)
Issuance of debt	(330,774,706)	(355,819,562)
Repayment of debt	361,570,786	370,841,475
Net cash provided by the Government of Canada	(103,664,529)	(81,558,938)
Cash provided by financing activities	(73,237,843)	(66,714,446)

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

1. Authority and objectives

The Department of Finance Canada is established under the Financial Administration Act as a department of the Government of Canada.

The Department of Finance Canada is headed by the Minister of Finance, who has broad responsibility for the management and direction of the Department, the management of the Consolidated Revenue Fund (CRF), and the supervision, control, and direction of all matters relating to the financial affairs of Canada not by law assigned to the Treasury Board or to any other minister.

The goal of the Department of Finance Canada is to foster strong and sustainable economic growth, resulting in higher standards of living and an improved quality of life for Canadians. The core business of the Department is organized into the following program activities:

Tax Policy: Develops and evaluates federal taxation policies and legislation and provides advice and recommendations for changes aimed at improving the tax system while raising the required amount of revenue to finance government priorities. This program focusses on the following areas: personal income tax, business income tax, and sales and excise tax. The program is also involved with negotiating tax treaties, tax policy research and evaluation, as well as federal-
provincial-territorial and federal-Aboriginal tax coordination.

Economic and Fiscal Policy: Analyzes Canada's economic and fiscal situation, advises on fiscal matters, and provides analytical support on a wide range of economic and financial issues related to the government's macroeconomic policies.

Financial Sector Policy: Provides policy analysis on Canada's financial sector and on the regulation of federally chartered financial institutions, manages the federal government's borrowing program, and provides support regarding Crown corporation and financial market and exchange rate policy.

Economic Development and Corporate Finance: Provides policy and advice regarding financial implications of the government's microeconomic policies and programs, proposals for funding of programs, sectoral policy analysis, and corporate restructuring regarding Crown corporations and other corporate holdings.

Federal-Provincial Relations and Social Policy: Provides policy and advice on federal-provincial-territorial relations and social policy issues and their economic and fiscal implications.

International Trade and Finance: Manages the Department's participation in international financial institutions (including the IMF[Nv1], the World Bank Group, the Organisation for Economic Co-operation and Development, and the European Bank for Reconstruction and Development), international groups such as the G7, G20, and the Asia-Pacific Economic Cooperation forum, as well as trade and investment policy issues.

Public Debt: Manages the funding of interest and service costs of the public debt and the issuing costs of new borrowing.

Domestic Coinage: Is responsible for the payment of the production and distribution costs for domestic circulating coinage.

Transfer Payments to Provinces and Territories: Administers the transfer payments pursuant to statutes and agreements with provinces and territories.

International Financial Organizations: Administers international financial obligations and subscriptions.

2. Summary of significant accounting policies

The financial statements have been prepared in accordance with Treasury Board accounting policies, which are consistent with Canadian generally accepted accounting principles for the public sector.

Significant accounting policies are as follows:

a)  Parliamentary appropriations

The Department of Finance Canada is financed by the Government of Canada through parliamentary appropriations. Appropriations provided to the Department of Finance Canada
do not parallel financial reporting according to generally accepted accounting principles because appropriations are primarily based on cash flow requirements. Consequently, items recognized
in the statement of operations and the statements of financial position are not necessarily the same as those provided through appropriations from Parliament. Note 3 provides a high-level reconciliation between the bases of reporting.

b)  Consolidation

Financial statements as at March 31, 2007, included the accounts of the Canada Investment and Savings Agency, a special operating agency that administered retail debt. The accounts of the Canada Investment and Savings Agency were consolidated with those of the Department of Finance Canada and all interorganizational balances and transactions were eliminated for the year ending March 31, 2007.

The Government of Canada proceeded with the winding up of the Canada Investment and Savings Agency as of the end of the fiscal year, March 31, 2007. The financial statements as at March 31, 2008, therefore do not include the activities of the Canada Investment and Savings Agency.

Investments in government business enterprises are recorded at cost and are not consolidated.

c)  Net cash provided by government

The Department of Finance Canada operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the Department is deposited to the CRF, and all cash disbursements made by the Department are paid from the CRF. The net cash provided by the Government is the difference between all cash receipts and all cash disbursements, including transactions between departments of the federal government.

d)  Change in net position in the CRF

Change in net position in the CRF is the difference between the net cash provided by the government and appropriations used in a year, excluding the amount of non-respendable revenue recorded by the Department of Finance Canada. It results from timing differences between when a transaction affects appropriations and when it is processed through the CRF.

e)  Special drawing rights

A special drawing right (SDR) is an international reserve asset created by the IMF to supplement existing official international reserves of member countries. The value of an SDR is based on a basket of four major currencies: the euro, Japanese yen, pound sterling, and U.S. dollar. The composition of the basket is reviewed every five years to ensure that it is representative of the currencies used in international transactions and that the weights assigned to the currencies reflect their relative importance in the world's trading and financial systems.

f)  Revenues

Revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues:

• Interest on Receiver General bank deposits is recognized as revenue when earned.
• Uncashed Receiver General cheques and warrants and bank account cheques for all departments and agencies are recognized as revenue of the Department of Finance Canada if they remain outstanding 10 years after the date of issue.
• Unclaimed matured bonds are recognized as revenue if they remain unredeemed 15 years after the date of call or maturity, whichever is earlier.
• Unclaimed bank balances are recognized as revenue when there has been no owner activity in relation to the balance for a period of 20 years.

g)  Expenses

Expenses are recorded on the accrual basis:

• Transfer payments are recorded as expenses when the recipient has met the eligibility criteria or fulfilled the terms of a contractual transfer agreement or, in the case of transactions that do not form part of an existing program, when the government announces a decision to make a non-recurring transfer, provided the enabling legislation or authorization for payment receives parliamentary approval prior to the completion of the financial statements.
• Public debt charges are recognized when incurred and include interest, amortization of debt discounts, premiums and commissions, and servicing and issue costs.
• Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment.
• Services provided without charge by other government departments for accommodation, the employer's contributions to the health and dental insurance plans, and legal services are recorded as operating expenses at their estimated cost.

h)  Employee future benefits

Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multi-employer defined benefit pension plan administered by the Government of Canada. The Department's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. Current legislation does not require the Department to make contributions for any actuarial deficiencies of the Plan.

Severance benefits: Employees are entitled to severance benefits under labour contracts or conditions of employment. These benefits are accrued as employees render the services necessary to earn them. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the government as a whole.

i)  Accounts receivable and advances

Accounts receivable and advances are stated at amounts expected to be ultimately realized; a provision is made for receivables where recovery is considered uncertain.

j)  Inventory

Coin inventory is valued at the lower of cost and net realizable value. Cost is determined by the average cost method.

k)  Foreign exchange accounts

Short-term deposits, marketable securities, and special drawing rights held in the foreign exchange accounts are recorded at cost. Marketable securities are adjusted for amortization of purchase discounts and premiums. Purchases and sales of securities are recorded at the settlement date. Write-downs to reflect other than temporary impairment in the fair value of securities are included in foreign exchange revenues on the statement of operations. Canada's subscriptions to the capital of the IMF are recorded at cost.

l)  Investments in Crown corporations

Investments in the Canada Development Investment Corporation are at cost.

Income from investments in Crown corporations includes dividends from the Bank of Canada and the Canada Development Investment Corporation, which is recognized when declared.

m)  Foreign currency transactions

Transactions involving foreign currencies are translated into Canadian dollar equivalents using rates of exchange in effect at the time of those transactions. Monetary assets and liabilities denominated in a foreign currency are translated into Canadian dollars using the rate of exchange in effect on March 31.

Gains and losses resulting from foreign currency transactions are included in the statement of operations as revenues or expenses related to international financial organizations.

n)  Other loans, investments, and advances

Subscriptions and contributions are recorded at cost net of allowances.

The Department of Finance Canada does not make a return on investment and does not expect a return of capital unless it withdraws from an institution, which is unlikely. Since the terms of the subscriptions and contributions are so concessionary that the substance of the transaction is that all or a part of the investment is more in the nature of a grant, the entire investment is recognized, through an allowance, as an expense at the time the investment is made.

Loans and advances are initially recorded at cost and are adjusted to reflect the concessionary terms of those loans made on a long-term, low-interest, or interest-free basis and the portion of the loans that are expected to be repaid from future appropriations.

An allowance for valuation is further used to reduce the carrying value of loans, investments, and advances to amounts that approximate their net realizable value.

For loans and advances to international organizations, an allowance is established based on their concessionary terms and their collectibility.

o)  Derivative financial instruments

The Department of Finance Canada enters into interest rate and cross-currency swaps to facilitate the management of its debt structure.

Interest rate swaps are agreements where counterparties exchange fixed- and floating-rate interest payments based on notional principal amounts of a single currency. Cross-currency swaps are agreements where counterparties exchange fixed- or floating-rate interest payments and principal amounts in different currencies.

Interest rate swaps are used to convert fixed-rate debt into variable rates tied to the banker's acceptance rates or London Inter-Bank Offered Rates. Cross-currency swaps are primarily used to convert domestic debt to foreign debt to fund foreign currency advances to the Exchange Fund Account. In certain cases, cross-currency swaps are used to convert foreign debt into
U.S. dollar debt.

Cross-currency swaps are initially recorded at cost and are translated into Canadian dollars at the exchange rate in effect at the balance sheet date. For cross-currency swaps where domestic debt has been converted into foreign debt, any exchange gains or losses are offset by the exchange gains or losses on foreign currency advances to the Exchange Fund Account. For cross-currency swaps where foreign debt has been converted into U.S. dollar debt, any exchange gains or losses are offset by the exchange gains or losses on the applicable foreign debt.

Interest paid and payable, and interest received and receivable on all derivative financial instruments, is included in interest on unmatured debt.

p)  Tangible capital assets

All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. The Department of Finance Canada does not capitalize intangibles, works of art or historical treasures that have cultural, aesthetic or historical value, or 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:

Asset class	Amortization period
Machinery and equipment	Three to five years
Vehicles	Three years
Leasehold improvements	Lesser of the remaining term of the lease or useful life of the improvement
Assets under construction	Once in service, in accordance with asset type

q)  Taxes receivable and taxes payable under tax collection agreements

Pursuant to various tax collection agreements, the Canada Revenue Agency (CRA) collects and administers personal income tax, corporate income and capital taxes, harmonized sales tax, sales tax, and goods and services tax on behalf of certain provinces, territories, and Aboriginal governments, and the Department of Finance Canada remits related payments to the applicable government.

Given that the Government of Canada reports information on a fiscal-year basis while tax information is calculated on a calendar year basis, there can be transactions related to several tax years during any given fiscal year. Taxes receivable and taxes payable therefore include amounts assessed, estimates of assessments based upon cash received, adjustments from reassessments, and adjustments relating to previous tax years.

Taxes receivable also include taxes collectible by the CRA on behalf of provincial, territorial, or Aboriginal governments that have not yet been remitted to the Department of Finance Canada and are included in accounts receivable in the statement of financial position. Similarly, taxes payable include taxes that have not yet been remitted by the Department of Finance Canada to the appropriate provincial, territorial, or Aboriginal government.

r)  Unmatured debt

Premiums and discounts on public debt are amortized on a straight line basis over the term to maturity of the respective debt instrument. The corresponding amortization is recorded as part of public debt charges.

s)  Other liabilities

Deposits from Crown corporations that are non-interest bearing and repayable are recorded in "Other liabilities."

The common school funds account was established under 12 Victoria 1849,Chapter 200, to record the proceeds from the sale of lands set apart for the support and maintenance of common schools in Upper and Lower Canada, now Ontario and Quebec.

The foreign claims fund account was established by Vote 22a, Appropriation Act No. 9, 1966, to record the money received from the Custodian of Enemy Property.

The War Claims Fund—World War II account was established by Vote 696, Appropriation Act No. 4, 1952,to record monies received from the Custodian of Enemy Property or from other sources.

t)  Loan guarantees

The allowance for losses on the guarantees of the Canadian Wheat Board and Export Development Canada is determined based on the government's identification and evaluation of countries that have formally applied for debt relief, estimated probable losses that exist on the remaining portfolio, and changes in the economic conditions of sovereign debtors.

u)  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 an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

v)  Measurement uncertainty

The preparation of these financial statements in accordance with Treasury Board accounting policies, which are consistent with Canadian generally accepted accounting principles for the public sector, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable.

The most significant items where estimates are used are contingent liabilities, valuation allowances for loans receivable, discounts on loans receivable, transfer payments to provinces and territories, accruals of taxes receivable and taxes payable under tax collection agreements, the liability for employee severance benefits, and the useful life of tangible capital assets. Actual results could significantly differ from those estimated. Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.

3. Parliamentary appropriations

The Department of Finance Canada receives most of its funding through annual parliamentary appropriations. Items recognized in the statement of operations and the statement of financial position in one year may be funded through parliamentary appropriations in prior, current, or future years. Accordingly, the Department has different net results of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled in the following tables.

a) Reconciliation of net cost of operations to current year appropriations used

Restated
(Note 22)

	2008		2007
	($ thousands)
Net cost of operations	74,558,552	71,798,035
Adjustments for items affecting net cost of operations but not affecting appropriations:
Add (Less):
Revenue not available for spending	4,877,248	4,844,881
Allowance set-up for bad debt expenses	80,425	76,414
Allowance on loan guarantees	71,733	372,463
Services provided without charge from other government departments	(16,021)	(18,774)
Inventory charged to program expense	5,083	7,567
Amortization of tangible capital assets	(1,632)	(1,472)
Employee Severance Benefits	804	(609)
Other expenses not being charged to appropriations:
Transfer payment pursuant to the Budget Implementation Act	2,206,000	(3,533,000)
Crown Share Adjustment	(234,400)	—
Other	514	(785)
	6,989,754	1,746,685
Adjustments for items not affecting net cost of operations but affecting appropriations:
Add (Less):
Advances to Farm Credit Canada	3,840,000	—
Advances to Business Development Bank of Canada	1,000,000	—
Prepayment from Youth Allowances Recovery	(336,000)	—
Issuance of Notes payable for subscriptions and contributions to the International Development Association	318,280	318,270
Encashment of notes payable to the European Bank for Reconstruction and Development	4,334	6,498
Advances to the Financial Consumer Agency of Canada	4,000	5,000
Acquisitions of tangible capital assets	687	883
Accountable advances	17	(26)
Prepaid expenses	14	—
	4,831,332	330,625
Current year appropriations used	86,379,638	73,875,345

b) Appropriations provided and used

	2008	2007
	($ thousands)
Appropriations provided
Vote 1—Operating expenditures	99,139	102,606
Vote 5—Grants and contributions	221,200	398,605
	320,339	501,211
Statutory authorities:
Transfer payments to provinces and territories	47,211,456	38,441,221
Public debt charges	33,212,371	34,108,504
Issuance of loans and advances (non-budgetary)	5,162,280	323,270
Encashment of notes payable to the International Development Association	318,270	318,270
Purchases of coins	182,736	135,602
Foreign exchange losses	89,177	120,555
Other statutory authorities	70,548	2,166
Contributions to employee benefit plans	12,104	11,761
Encashment of notes payable to the European Bank for Reconstruction and Development	4,334	6,498
Spending of proceeds from disposal of surplus Crown assets	29	—
Transfer payments to international organizations	—	2,615
	86,263,305	73,470,462
Less: Appropriations available for future years	(68,578)	—
Lapsed appropriations
Vote 1—Operating expenditures	(7,583)	(13,320)
Vote 5—Grants and contributions	(127,823)	(83,008)
Spending of proceeds from disposal of surplus Crown assets	(22)	—
	(204,006)	(96,328)
Current year appropriations used	86,379,638	73,875,345

c) Reconciliation of net cash provided by government to current year appropriations used

Restated
(Note 22)

	2008	2007
	($ thousands)
Net cash provided by government	103,664,529	81,558,938
Revenue not available for spending	4,877,248	4,844,881
	108,541,777	86,403,819
Change in net position in the Consolidated Revenue Fund:
Variation in assets and liabilities:
Unmatured debt	(24,771,560)	(7,363,967)
Other loans, investments, and advances	(3,866,277)	209,735
Foreign exchange accounts	1,878,990	(3,351,577)
Taxes payable under tax collection agreements	(1,310,839)	409,956
Accounts payable and accrued liabilities	(939,375)	(327,243)
Interest payable	(316,986)	(341,432)
Accounts receivable	(99,670)	1,099,665
Matured debt	(17,263)	(17,214)
Notes payable to international organizations	(9,082)	(7,291)
Coin inventory	(5,083)	(7,567)
Employee severance benefits	(804)	609
Tangible capital assets	(36)	222
Prepaid expenses	(14)	—
Other liabilities	—	(83,573)
Other:
Advances Farm Credit Canada	3,840,000	—
Advances Business Development Bank of Canada	1,000,000	—
Issuance of notes payable for subscriptions to the International Development Association	318,280	318,270
Allowance set-up for bad debt expenses	80,425	76,414
Allowance for valuation of loans, investments and advances	71,733	372,463
Other expenses not being charged to appropriation at the same time:
Transfer payment pursuant to the Budget Implementation Act	2,206,000	(3,533,000)
Crown Share Adjustment	(234,400)	—
Other	13,822	17,056
Total change in the Consolidated Revenue Fund	(22,162,139)	(12,528,474)
Current year appropriations used	86,379,638	73,875,345

4. Expenses

The following table presents details of expenses by category:

Restated
(Note 22)

	2008	2007
	($ thousands)
Transfer payments:
Provinces and territories (Note 4a)	45,575,855	41,974,221
International organizations (Note 4b)	331,212	560,069
Allowance on loan guarantees	(71,733)	(372,463)
Non-profit institutions and organizations	10	—
Total transfer payments	45,835,344	42,161,827
Public debt charges:
Interest on unmatured debt (Note 4c)	20,364,430	21,182,870
Interest on other liabilities (Note 4d)	12,776,471	12,831,346
Other public debt charges	71,470	94,288
Total public debt charges	33,212,371	34,108,504
Cost of domestic coinage sold	177,654	128,035
Operating expenses (Note 4e)	118,300	121,483
Net foreign currency loss	44,757	46,112
Other expenses	191	202
Total Expenses	79,388,617	76,566,163

a)  Transfer payments to provinces and territories

Transfer payments to provinces and territories are paid pursuant to the Federal-Provincial Fiscal Relations Act, budget implementation acts, and other statutory authorities.

For the period ended March 31, transfer payments to provinces and territories included the following:

Restated
(Note 22)

	2008	2007
	($ thousands)
Canada Health Transfer	21,474,272	20,139,876
Fiscal equalization payments	12,924,677	11,535,064
Canada Social Transfer	9,590,219	8,500,000
Alternative payments for standing programs	(2,719,889)	(3,177,016)
Territorial financing	2,221,297	2,118,264
Bill C-41 Community Development Trust	1,000,000	—
Youth Allowances Recovery	(607,805)	(706,788)
Crown Share Adjustment	234,400	—
Bill C-50 (An Act to implement certain provisions of the budget tabled in Parliament on February 26, 2008):
Public Transit	500,000	—
Creation Police Officer Position	400,000	—
Carbon Capture	245,000	—
Canada Social Transfer Transition Protection Payment	32,000	—
Bill C-52 (An Act to implement certain provisions of the budget tabled in Parliament on March 19,2007):
Child Care Spaces	250,000	—
Clean Air and Climate Change Trust Fund	(75)	1,519,000
Transitional Trust Fund	(62)	614,100
Patient Wait Time Guarantee Trust Fund	—	612,000
Payment to Ontario	—	400,000
HPV Immunization	—	300,000
Payment to Northwest Territories	—	54,400
British Columbia Spirit Bear Rainforest	—	30,000
Payment to Yukon	—	3,500
Statutory subsidies	31,821	31,821
Total transfer payments to provinces and territories	45,575,855	41,974,221

b)  Transfer payments to international organizations

Transfer payments to international organizations consist of the following:

• Subscriptions and contributions to the International Development Association;
• Contributions to the International Monetary Fund's Poverty Reduction Growth Facility; and
• Grants and contributions to compensate Canadian creditor agencies whose scheduled receipts from debtor countries have been reduced by Canadian participation in the Paris Club debt or debt service reduction agreements and to contribute to international efforts to relieve the debt burdens of the world's poorest countries.

c)  Interest on unmatured debt

Interest on unmatured debt includes interest incurred, amortization of debt discounts, and premiums and net interest on cross-currency and interest rate swaps.

	2008	2007
	($ thousands)
Interest on domestic debt:
Treasury bills	4,611,408	4,691,568
Marketable bonds	14,605,487	15,031,258
Retail debt	579,186	719,613
Bonds for Canada Pension Plan	129,685	214,531
Promissory notes	—	205
	19,925,766	20,657,175
Interest on foreign debt:
Marketable bonds (US and euro)	277,215	337,743
Canada notes (yen)	8,864	9,267
Canada bills (US)	83,004	105,711
Euro medium-term notes (US and euro)	69,581	72,974
	438,664	525,695
Total interest on unmatured debt	20,364,430	21,182,870

d)  Interest on other liabilities

The Department of Finance Canada funds interest on interest-bearing specified purpose accounts established by all departments and agencies, including superannuation accounts and retirement compensation arrangement accounts established for the benefit of public service employees and members of the Royal Canadian Mounted Police and the Canadian Forces, the CPP Account, the Employment Insurance Fund, and other accounts.

Interest on other liabilities includes interest incurred on specified purpose accounts and interest on special drawing rights allocations.

For the period ended March 31, interest on other liabilities included interest on the following:

	2008	2007
	($ thousands)
Superannuation accounts	10,369,136	10,446,077
Employment Insurance Fund	1,926,315	1,912,249
Other specified purpose accounts	310,179	296,846
Retirement Compensation Arrangement accounts	116,742	115,416
Special drawing rights allocations	46,472	51,758
CPP account	7,627	9,000
Total Interest on other liabilities	12,776,471	12,831,346

e)  Operating expenses

The following table presents details of operating expenses by category:

	2008	2007
	($ thousands)
Salaries and wages	71,876	70,817
Professional and special services	15,220	14,481
Contributions to employee benefit plans	12,104	11,761
Accommodation	7,416	9,718
Transportation and telecommunications	4,838	4,972
Machinery and equipment	2,146	3,992
Information services	1,863	3,168
Amortization of tangible capital assets	1,632	1,472
Repairs and maintenance	690	542
Rentals	515	560
Total Operating expenses	118,300	121,483

 

5. Revenues

The following table presents details of revenues by category.

	2008	2007
	($ thousands)
Investment income:
Dividends from the Bank of Canada	1,921,014	1,983,529
Exchange Fund Account	1,828,151	1,765,275
Dividends from Canada Development Investment Corporation	234,200	156,000
Loan interest	197,007	219,243
Farm Credit Canada	19,945	—
Interest on Subscriptions to the International Monetary Fund (IMF)	9,292	22,753
Business Development Bank of Canada	1,870	—
Total investment income	4,211,479	4,146,800
Interest on bank deposits	360,661	351,230
Sales of domestic coinage	203,566	226,843
Loan interest—Canada Lands Company Ltd.	5,184	2,073
Other	49,175	41,182
Total Revenues	4,830,065	4,768,128

6. Accounts receivable and advances

The following table presents details of accounts receivable and advances.

	2008	2007
	($ thousands)
Taxes receivable under tax collection agreements	6,449,575	6,349,774
Receivables from other federal government departments and agencies	31,209	27,012
Deposits in transit to the Receiver General	6	4
Accrued investment income	395,846	400,266
Receivables from external parties	136	46
Total Accounts receivable and advances	6,876,772	6,777,102

7. Foreign exchange accounts

The foreign exchange accounts represent the largest component of the official international reserves of the Government of Canada and consist of the following:

	2008	2007
	($ thousands)
Investments held in the Exchange Fund Account	41,075,243	42,907,495
Accrued net revenue from the Exchange Fund Account	1,828,151	1,765,245
Total investments held in Exchange Fund Account (Note 7a)	42,903,394	44,672,740
Subscriptions to the International Monetary Fund (Note 7b)	10,751,719	11,105,783
Notes payable to the International Monetary Fund (Note 7c)	(10,040,500)	(10,241,599)
Special drawing rights allocations (Note 7d)	(1,315,504)	(1,358,825)
Total Foreign Exchange Accounts	42,299,109	44,178,099
Market Value	42,909,580	44,058,945

a)  Exchange Fund Account

The Exchange Fund Account is an actively managed portfolio of liquid foreign currency assets maintained to provide foreign currency liquidity for the Government of Canada and to provide the funds needed to help promote orderly conditions for the Canadian dollar in foreign exchange markets. It is governed by Part II of the Currency Act. Assets include cash and short-term deposits, marketable securities, special drawing rights, and gold.

The advances are limited to $60 billion by Order in Council dated April 25, 2001. Foreign currency is funded by the proceeds of foreign debt issued and domestic debt converted to
foreign debt through cross-currency swaps.

The following table presents the balances of the foreign exchange accounts.

	2008	2007
	($ thousands)
Cash and short-term deposits	1,570,189	1,925,167
Deposits held under repurchase agreements	338,745	2,540,120
Marketable securities	39,261,533	38,462,632
Special drawing rights	1,090,424	1,126,655
Gold	6,441	6,653
Accrued interest and other receivables	636,062	611,513
Total Investments held in the Exchange Fund Account	42,903,394	44,672,740

b)  Subscriptions to the International Monetary Fund (IMF)

The IMF is an international organization of 184 member countries that operates in accordance with its Articles of Agreement. It has a large pool of liquid assets, or resources, comprising convertible national currencies, special drawing rights,and other widely used international currencies provided by its members that it makes available to help members finance temporary balance of payments problems.

Upon joining the IMF and following periodic quota reviews, member countries are assigned a quota based broadly on their relative size in the world economy.

Quotas are denominated in special drawing rights (SDR) and determine a country's subscription, voting power, access to financing from the IMF, and share of SDR [Nv2] allocations. The subscription is equal to the quota and is payable in full to the IMF. Up to one-quarter of the subscription is paid in the form of widely accepted foreign currencies (such as the U.S. dollar, the euro, the Japanese yen, or the pound sterling) or SDRs. The remaining three-quarters is paid in the country's own currency.

c)  Notes payable to the International Monetary Fund

At least 25 per cent of Canada's quota is held by the IMF in a Canadian-dollar cash deposit at the Bank of Canada. The IMF's remaining Canadian-dollar holdings are in the form of non-negotiable, non–interest bearing demand notes that are cashed by the IMF subject to its requirements for Canadian currency.

d)  Special drawing rights allocations

The IMF allocates SDRs to countries that participate in the IMF's Special Drawing Rights Department.

SDR allocations are repayable to the IMF if they are cancelled by the IMF's Board of Governors, the Special Drawing Rights Department is liquidated, the IMF is liquidated, or if Canada chooses to withdraw from the IMF or terminate its participation in the Special Drawing Rights Department.

Canada's SDR allocations are SDR779.3 million.

8. Investment in Crown corporations

The Government of Canada wholly owns three Crown corporations: the Bank of Canada, the Canada Development Investment Corporation (CDIC), and the Canada Pension Plan Investment Board (CPPIB).

At March 31, the investment, at cost, is as follows:

	2008	2007
	($ thousands)
Canada Development Investment Corporation (note 8a)	395,658	395,658
Bank of Canada (note 8b)	5,920	5,920
Canada Pension Plan Investment Board (note 8c)	—	—
Total Investment in Crown corporations	401,578	401,578

a)  The Canada Development Investment Corporation (CDIC)

The CDIC is a wholly owned Crown corporation incorporated pursuant to the Canada Business Corporations Act. The Corporation's current mandate is to wind down its operations by divesting of its remaining assets in an orderly fashion and to ready the corporation for eventual windup. The Corporation wholly owns Canada Eldor Inc. and the Canada Hibernia Holding Corporation.

The Government of Canada owns 101 common shares without a par value. The remaining balance of the investment represents the Department of Finance Canada's contributed surplus of the Canada Hibernia Holding Corporation.

b)  Bank of Canada

The Bank of Canada is a wholly owned Crown corporation established by the Bank of Canada Act as the central bank in Canada to regulate credit and currency in the best interests of the economic life of the nation; to control and protect the external value of the national monetary unit; to mitigate by its influence fluctuations in the general level of production, trade, prices, and employment, so far as may be possible within the scope of monetary action; and to generally promote the economic and financial welfare of Canada.

The Bank of Canada has responsibilities for Canada's monetary policy issuing bank notes promoting the safety and efficiency of Canada's financial systems and providing funds management services and, pursuant to the Bank of Canada Act, is the fiscal agent of the Government of Canada.

The Government of Canada owns 100,000 shares with a par value of $50 each. The remaining balance of $920,000 represents premiums paid in respect of the acquisition, in 1938, of shares held by the public.

c)  The Canada Pension Plan Investment Board (CPPIB)

The CPPIB was incorporated under the CPPIB Act, S.C., 1997, C.40, to invest the assets of the CPP in order to meet the obligation to contributors and beneficiaries under the CPP.

The Government of Canada has purchased 10 shares of the CPPIB at $10 per share, which represents 100 per cent of the outstanding shares.

9. Other loans, investments, and advances

The following table presents details of other loans, investments, and advances by category.

	Face value		Discounts	Allowance	Net book value 2008	Net book value 2007
	($ thousands)
Government business enterprises
Notes receivable from Canada Lands Company CLC Limited (Note 9a)	46,826		11,174	—	35,652	47,394
Notes receivable from Parc Downsview Park Inc.	19,000		17,207	—	1,793	1,696
	65,826		28,381	—	37,445	49,090
Crown Borrowing Program
Farm Credit Canada (Note 9b)	3,840,000		13,636	—	3,826,364	—
Business Development Bank of Canada (Note 9c)	1,000,000		5,226	—	994,774	—
	4,840,000		18,862	—	4,821,138	—
Provincial and territorial governments
Recoverable overpayments of transfer payments (Note 9d)	3,574,923		543,428	—	3,031,495	3,833,175
Recoverable overpayments of taxes payable under tax collection agreements (Note 9e)	852,548		145,204	—	707,344	804,310
Loans to Municipal Development Loan Boards (Note 9f)	360		—	—	360	648
Loans for the Winter Capital Projects Fund (Note 9g)	2,900		—	2,900	—	—
	4,430,731		688,632	2,900	3,739,199	4,638,133
International organizations
Subscriptions to the European Bank for Reconstruction and Development (Note 9h)		221,927	—	221,927	—	—
Subscriptions to the International Bank of Reconstruction and Development (Note 9i)		344,508	—	344,508	—	—
Subscriptions to the International Finance Corporation (Note 9j)		83,498	—	83,498	—	—
Subscriptions to the Multilateral Investment Guarantee Agency (Note 9k)		11,017	—	11,017	—	—
Loans to the International Monetary Fund's Poverty Reduction and Growth Facility (Note 9l)		321,033	—	—	321,033	365,315
Advances to the Global Environment Facility (Note 9m)		10,000	—	10,000	—	—
Subscriptions and contributions to the International Development Association (Note 9n)		7,811,658	—	7,811,658	—	—
		8,803,641	—	8,482,608	321,033	365,315
Other organizations
Investment in loan portfolio acquired from Canadian Commercial Bank (Note 9o)		43,132	—	43,132	—	—
		43,132	—	43,132	—	—
Total other loans, investments, and advances		18,183,330	735,875	8,528,640	8,918,815	5,052,538

a)  The Canada Lands Company Ltd

The Canada Lands Company Ltd. (CLC) was incorporated under the Companies Act in 1956 and was continued under the Canada Business Corporations Act. The CLC has acquired an interest in a number of real properties from the government in consideration for the issuance of promissory notes, which bear no interest and are repayable from the proceeds of the sale of the properties in respect of which they were issued. The notes were discounted using the CRF lending rate applicable to Crown corporations and recorded at their discounted value.

b)  Farm Credit Canada

Farm Credit Canada (FCC) was established in 1959 by the Farm Credit Act as the successor to the Canadian Farm Loan Board and is a Crown corporation named in Part I of Schedule III to the Financial Administration Act. Farm Credit Canada is wholly owned by the Government of Canada and is not subject to the requirements of the Income Tax Act.

The FCC's role is to enhance rural Canada by providing business and financial solutions for farm families and agribusiness. Additionally, Farm Credit Canada may deliver specific programs for the Government of Canada on a cost-recovery basis.

Pursuant to subsection 12(2) of the Farm Credit Canada Act, the federal government has made short-term funding available to the FCC.

Loans have been made to the FCC for a total of $3,840,000. The loans bear interest from 2.025 per cent to 3.862 per cent and are repayable within a year.

c)  Business Development Bank of Canada

The Business Development Bank of Canada (BDC) was established in 1974 by the Business Development Bank of Canada Act, continued under its current name by an Act of Parliament on July 13, 1995, and is a Crown corporation named in Part I of Schedule III to the Financial Administration Act. The BDC is wholly owned by the Government of Canada and is not subject to the requirement of the Income Tax Act.

The role of the BDC is to promote and assist in the establishment and development of business enterprises in Canada, with specific attention to small- and medium-sized businesses. The BDC provides a wide range of lending, investment, and consulting services complementary to those of commercial financial institutions. The BDC offers Canadian companies services tailored to meet the current needs of small- and medium-sized businesses while earning an appropriate return on investment capital, which is used to further the BDC's activities.

Pursuant to section 19 of the Business Development Bank of Canada Act, the federal government has made short-term funding available to the BDC.

Loans have been made to the BDC for a total amount of $1,000,000. The loans bear interest from 2.025 per cent to 3.239 per cent and are repayable within a year.

d)  Recoverable overpayments of transfer payments

These amounts represent underpayments and overpayments in respect of provincial equalization entitlements under the Constitution Act, 1867 and the Constitution Act, 1982, the Federal-Provincial Fiscal Arrangements Act, and other statutory authority. The underpayments are non-interest bearing and are paid in subsequent years.

e)  Recoverable overpayments of taxes payable under tax collection agreements

These amounts represent overpayments made to provinces under tax collection agreements for the tax years 1997 to 1999 stemming from the misclassification of mutual fund trust capital gains refunds. Recoveries are non-interest bearing and will take place over a 10-year period, which started in 2004–05.

f)  Municipal Development and Loan Board

Loans have been made to provinces and municipalities to augment or accelerate municipal capital works programs. The loans bear interest at rates from 5.25 per cent to 5.375 per cent per annum and are repayable in annual or semi-annual instalments over 15 to 50 years, with final instalments between April 1, 2008, and July 1, 2009.

g)  Winter capital projects fund

Loans have been made to provinces, provincial agencies, and municipalities to assist in the creation of employment. The loans bear interest at rates from 7.4 per cent to 9.5 per cent per annum and are repayable either in annual instalments over 5 to 20 years or at maturity. The loans are fully provisioned.

h)  European Bank for Reconstruction and Development

At year-end, Canada subscribed to 68,000 shares of the European Bank for Reconstruction and Development's (EBRD) authorized capital valued at US$828.6 million. Only US$216.2 million or about 26 per cent of Canada's share subscription is paid in. The balance is callable, meaning the institution can request the resources in the unlikely event that it requires them to meet its financial obligations to bondholders. Payments for the share subscription are authorized by the Act. Each payment to the EBRD [Nv3] comprises cash and a promissory note.

As at March 31, 2008, Canada had paid-in shares valued at US$216,197,668 (US$216,197,668 in 2007). Canada's contingent liability for the callable portion of its shares is US$612,420,000.

i)  International Bank for Reconstruction and Development (World Bank)

This account records Canada's subscriptions to the capital of the International Bank for Reconstruction and Development, as authorized by the Bretton Woods and Related Agreements Act and various appropriation acts.

As at March 31, 2008, Canada subscribed to 44,795 shares. The total value of these shares is US$5,403.8 million, of which US$319.6 million plus US$16.4 million has been paid in. The remaining portion is callable. The callable portion is subject to call by the Bank under certain circumstances. Canada's contingent liability for the callable portion of its shares is US$5,069 million.

j)  International Finance Corporation

This account records Canada's subscriptions to the capital of the International Finance Corporation, which is part of the World Bank Group, as authorized by the Bretton Woods and Related Agreements Act and various appropriation acts.

As at March 31, 2008, Canada subscribed to 81,342 shares. These shares have a total value of US$81.3 million, all of which has been paid in.

k)  Multilateral Investment Guarantee Agency

This account records Canada's subscriptions to the capital of the Multilateral Investment Guarantee Agency, as authorized by the Bretton Woods and Related Agreements Act and various appropriation acts.

As at March 31, 2008, Canada subscribed to 5,225 shares. The total value of these shares is US$56.5 million, of which US$10.7 million is paid in and the remaining portion is callable. The callable portion is subject to call by the Agency under certain circumstances. Canada's contingent liability for the callable portion of its shares is US$45.8 million.

l)  International Monetary Fund—Poverty Reduction and Growth Facility

This account records the loan to the International Monetary Fund in order to provide assistance to debt-distressed, low-income countries, as authorized by the Bretton Woods and Related Agreements Act and various appropriation acts. The total loan authority pursuant to the Bretton Woods and Related Agreements Act was set at $550 million or such greater amount as may be fixed by the Governor in Council. The Governor in Council subsequently increased the limit to SDR700,000,000.

As at March 31, 2008, Canada had lent a total of SDR700,000,000 (SDR700,000,000 in 2007) to the Poverty Reduction and Growth Facility. Of this amount, SDR509,823,177 (SDR490,490,901 in 2007) has been repaid. The outstanding balance of SDR190,176,823 (SDR209,509,099 in 2007) was translated into Canadian dollars at the year-end closing rate of exchange (1 SDR equals C$1.68808).

m)  Global Environment Facility

This account records the funding of a facility for environmental funding in developing countries in the areas of ozone, climate change, biodiversity, and international waters, as authorized by the Bretton Woods and Related Agreements Act and various appropriation acts. Advances to the Global Environment Facility (GEF) are made in non-negotiable, non-interest-bearing demand notes that are later encashed.

As at March 31, 2008, advances to the GEF amounted to C$10,000,000.

n)  International Development Association

This account records Canada's contributions and subscriptions to the International Development Association (IDA), as authorized by the Bretton Woods and Related Agreements Act and various appropriation acts. The contributions and subscriptions to the IDA, which is part of the World Bank Group, are used to lend funds to the poorest developing countries for development purposes, on highly favourable terms (no interest, a 35- to 40-year maturity, and 10 years of grace). Contributions and subscriptions to IDA are made in non-negotiable, non-interest-bearing demand notes that are later encashed. During the year, transactions included participation through the issuance of notes payable.

As at March 31, 2008, Canada's total participation in IDA amounted to C$7,811.7 million
(C$7,493.3 million in 2007).

o)  Canadian Commercial Bank

Advances have been made to the Canadian Commercial Bank representing the government's participation in the support group as authorized by the Canadian Commercial Bank Financial Assistance Act. These funds represent the government's participation in the loan portfolio that was acquired from the Bank and the purchase of outstanding debentures from existing holders.

10. Tangible capital assets

($ thousands)

	Cost				Accumulated amortization				Net book value
Capital asset class	Opening balance	Acquisitions	Disposals and write-offs	Closing balance	Opening balance	Amortization	Disposals and write-offs	Closing balance	2008	2007
Machinery and equipment	11,326	2,062	(915)	12,473	8,206	1,616	(915)	8,907	3,566	3,120
Motor vehicles	101	—	—	101	67	16	—	83	18	34
Leasehold improvements	239	—	—	239	239	—	—	239	—	—
Assets under construction	394	—	(394)	—	—	—	—	—	—	394
Total	12,060	2,062	(1,309)	12,813	8,512	1,632	(915)	9,229	3,584	3,548

Amortization expense for the year ended March 31, 2008, is $1,632,000 ($1,472,000 in 2007).

Acquisitions of machinery and equipment and disposals and write-offs of assets under construction include an amount of $394 million that was transferred from Assets under construction upon completion of the asset. External acquisitions were therefore $1,668 million, as shown in the statement of cash flow.

11. Accounts payable and accrued liabilities

The following table presents details of accounts payable and accrued liabilities.

Restated
(Note 22)

	2008	2007
	($ thousands)
Accounts payable—external	2,590,688	3,566,715
Allowance for guarantees (Note 19)	428,304	500,037
Accounts payable—other government departments and agencies	392,743	284,829
Accrued vacation pay	5,186	4,714
Total Accounts payable and accrued liabilities	3,416,921	4,356,295

12. Taxes payable under tax collection agreements

At March 31, the balance in the accounts pertaining to taxes collectible and payable to provinces, territories, and Aboriginal governments under tax collection agreements is as follows.

	2008	2007
	($ thousands)
Corporate income taxes	2,674,900	2,626,344
Personal income taxes	2,050,830	3,392,512
Harmonized Sales Tax	384,544	402,494
First Nations Goods and Services Tax	783	370
First Nations Sales Tax	437	613
Total Taxes payable under tax collection agreements	5,111,494	6,422,333

13. Interest payable

The following table presents details of interest payable.

	2008	2007
	($ thousands)
Domestic bonds	4,164,454	4,183,917
Retail debt	2,690,795	2,974,153
Foreign bonds	235,048	249,213
Total Interest payable	7,090,297	7,407,283

14. Notes payable to international organizations

Non-interest bearing demand notes are issued in lieu of cash in respect of subscriptions and contributions to international organizations. The notes are presented for encashment according to their terms of agreement.

At March 31, the amount outstanding is as follows:

	2008	2007
	($ thousands)
International Development Association (Note 9n)	318,280	318,270
International Bank of Reconstruction and Development—USD (Note 9i)	24,618	27,690
European Bank for Reconstruction and Development—USD (Note 9h)	4,488	10,097
Multilateral Investment Guarantee Agency—USD (Note 9k)	3,293	3,704
Total Notes payable to international organizations	350,679	359,761

15. Matured debt

Matured debt consists of debt that has matured but has not yet been redeemed. Matured debt that has not been redeemed 15 years after the date of maturity or 5 years after the date of the call is recognized as revenue in the statement of operations.

At March 31, the amount outstanding is:

	2008	2007
	($ thousands)
Retail debt (matured from 1992 to 2008)	76,641	91,321
Marketable bonds (matured from 1992 to 2008)	14,466	17,049
Treasury bills (matured from 1977 to 1996)	591	591
Total Matured debt	91,698	108,961

16. Unmatured debt and other financial instruments

i. Unmatured debt

The Department of Finance Canada borrows in both domestic and international markets on behalf of the Government of Canada.

Domestic debt consists of Treasury bills, marketable bonds, retail debt, and bonds for the CPP.

Foreign debt consists of marketable bonds issued in US dollars and euros; Canada notes issued in Japanese yen; Canada bills issued in US dollars; and euro medium-term notes issued in euros. Marketable bonds include bonds assumed by the Department of Finance Canada on February 5, 2001, on the dissolution of Petro-Canada Limited.

The Treasury bills balance at March 31, 2008, consists of $9,500 million in odd issue bills, $33,500 million in three-month bills, $25,900 million in six-month bills, and $48,100 million in 364-day bills.

Canada Savings Bonds are redeemable on demand by the holder, with accrued interest calculated to the end of the previous month (no interest is paid if redeemed during the first 3 months following the date of issue).

Bonds for the CPP and notes are interest-bearing certificates of indebtedness issued by the Government of Canada exclusively to the CPP Investment Fund and are redeemable at face value plus accrued interest.

Canada bills are short-term certificates of indebtedness issued by the Government of Canada in the US money market under the government's foreign currency borrowing program. Canada bills provide Canada with an additional source of short-term US funds.

Canada notes are issued by the Government of Canada under the government's foreign currency borrowing program. Canada notes provide Canada with an additional source of medium-term foreign funds.

Euro medium-term notes are issued by the Government of Canada in the euro markets under the government's foreign currency borrowing program and thus provide Canada with an additional source of medium-term foreign funds.

At March 31, 2008, the amount outstanding is as follows:

	Face value	Unamortized discounts (premiums)	Net book value 2008	Net book value 2007
	($ thousands)
Domestic debt:
Treasury bills	117,000,000	1,194,726	115,805,274	132,531,860
Marketable bonds	253,801,723	5,014,100	248,787,623	252,827,834
Retail debt	13,068,208	—	13,068,208	15,175,014
Bonds for Canada Pension Plan	1,042,363	—	1,042,363	1,742,344
	384,912,294	6,208,826	378,703,468	402,277,052
Foreign debt:
Marketable bonds	6,096,747	258	6,096,489	6,652,076
Canada notes	515,000	(251)	515,251	490,451
Canada bills	1,483,503	5,234	1,478,269	1,836,920
Euro medium-term notes	1,620,500	(800)	1,621,300	1,628,201
	9,715,750	4,441	9,711,309	10,607,648
	394,628,044	6,213,267	388,414,777	412,884,700
Less: Securities held for the retirement of unmatured foreign debt			(218,081)	(245,382)
			388,196,696	412,639,318
Cross-currency revaluation (receivables of $34,141,982; payables of $32,722,130)			(1,419,852)	(1,090,914)
			386,776,844	411,548,404
Market value			432,735,337	449,977,772

Contractual maturities of unmatured debt by currency over the next five years, at face value, are as follows:

Maturing year	Canadian dollars[9]F	US dollars[10]	Japanese yen[11]F	Euro[12]	Total
	($ thousands)
2009	143,373,225	4,049,753	515,000	3,314,194	151,252,172
2010	27,630,186	162,079	—	1,620,500	29,412,765
2011	20,788,219	—	—	—	20,788,219
2012	20,877,334	—	—	—	20,877,334
2013	18,632,689	—	—	—	18,632,689
2014 and beyond	153,610,641	54,224	—	—	153,664,865
	384,912,294	4,266,056	515,000	4,934,694	394,628,044

The effective average annual interest rates are as follows:

	2008	2007
	(in %)
Treasury bills	3.60	4.20
Marketable bonds—domestic	5.11	5.24
Retail debt	3.50	3.54
Bonds for Canada Pension Plan	10.62	10.37
Marketable bonds—foreign	4.65	5.14
Canada bills	2.59	5.11
Foreign currency notes	3.87	3.92

ii. Derivative financial instruments

a) Swap agreements

Government debt is issued at both fixed and variable interest rates and is denominated in Canadian dollars, US dollars, and other currencies. The government has entered into interest rate and cross-currency swap agreements to facilitate management of its debt structure. In the case of interest rate swap agreements, fixed interest rate funding has been converted to variable rates tied to the Banker's acceptance rates of London Inter-Bank Offered Rates. In the case of cross-currency swap agreements, Canadian-dollar and other foreign-currency debt has been converted into US dollars or other foreign currencies with either fixed interest rates or variable interest rates. As a normal practice, the government's swap positions are held to maturity. The government does not enter into swap agreements for speculative purposes.

The interest paid or payable and the interest received or receivable on all swap transactions are recorded as part of public debt charges. Unrealized gains or losses due to fluctuations in the foreign exchange value of the swaps are presented in the cross-currency swap revaluation account.

Swaps with contractual or notional principal amounts outstanding at March 31, are as follows:

	2008		2007
Maturing year	Interest rate swaps	Cross-currency swaps	Interest rate swaps	Cross-currency swaps
	($ thousands)
2008	—	—	29,269	5,452,725
2009	1,231,800	2,548,525	1,385,520	2,705,375
2010	—	3,592,238	—	3,577,985
2011	—	2,803,567	—	2,743,881
2012	—	2,236,428	—	2,261,822
2013	—	2,713,258	—	2,844,411
2014 and beyond	—	17,596,314	—	13,469,582
	1,231,800	31,490,330	1,414,789	33,055,781

b) Credit risk to swap agreements

The government manages its exposure to credit risk by dealing principally with financial institutions having credit ratings from at least two recognized rating agencies, one of which must be Moody's or Standard & Poor's. At the time of inception of the agreement, the credit rating of the institution must be at least A–.

The government does not have a significant concentration of credit risk with any individual institution and does not anticipate any credit loss with respect to its swap agreements.

The following table presents the notional amounts of the swap agreements by ratings assigned by Standard & Poor's:

	2008	2007
	($ thousands)
AA+	5,212,000	9,649,000
AA	11,982,000	6,170,000
AA–	9,827,130	16,085,570
A+	5,496,000	2,393,000
A	205,000	173,000
	32,722,130	34,470,570

c) Fair value of financial instruments

The following table presents the carrying value and the fair value of financial assets and liabilities. Fair values are government estimates and are generally calculated using market conditions at a specific point in time where a market exists. Fair values of instruments with a short lifespan or of a non-negotiable nature are assumed to approximate carrying values. Fair values may not reflect future market conditions or the actual values obtainable should the instrument be exchanged on the market. The calculations are subjective in nature and involve inherent uncertainties due to unpredictability of future events.

	2008			2007
	Carrying Value	Fair Value	Difference	Carrying Value	Fair Value	Difference
($ thousands)
Foreign Exchange Accounts	42,299,109	42,909,580	610,471	44,178,099	44,058,945	(119,154)
Unmatured Debt	386,776,844	432,735,337	45,958,493	411,548,404	449,977,772	38,429,368

d) Fair value of financial instruments—Derivative financial instruments

The following table presents the fair value of derivative financial instruments with contractual or notional principal amounts outstanding at March 31.

	2008		2007
	Notional Value	Fair Value	Notional Value	Fair Value
	($ thousands)
Interest rate and cross-currency swaps	32,722,130	1,924,224	34,470,570	1,734,309

Fair value of the swap agreements are the estimated amount that the government would receive or pay, based on market factors, if the agreements were terminated on March 31. They are established by discounting the expected cash flows of the swap agreements by using fiscal year-end market interest and exchange rates. A positive (negative) fair value indicates that the government would receive (make) a payment if the agreements were terminated.

iii. Managing foreign currency risk and sensitivity analysis to foreign currency exposures

Interest rate and foreign currency risks are managed using a strategy of matching the duration structure and the currency of the Exchange Fund Account (EFA) assets and the related foreign currency borrowings of the Government of Canada. As at March 31, 2008, the EFA assets and the liabilities funding these assets were effectively matched, which means that most price changes would affect both sides of the Statement of Financial Position equally. Assets related to the IMF are only partially matched because they are denominated in SDRs.

The Government of Canada's foreign currency assets and liabilities are held in mainly three currency portfolios: the US dollar, the euro, and the Japanese yen. At March 31, 2008, a one per cent appreciation of the Canadian dollar versus the US dollar, the euro, and the Japanese yen would have resulted in a foreign exchange gain of $2 million due to the unmatched exposure of the US dollar portfolio and in a foreign exchange loss of $4 million to the unmatched exposure of the euro portfolio. The Japanese yen portfolio was matched in terms of currency exposure at March 31, 2008.

17. Other liabilities

The following table presents details of other liabilities.

	2008	2007
	($ thousands)
Deposits:
Canada Hibernia Holding Corporation (Note 17b)	78,478	78,478
Canada Eldor Inc. (Note 17a)	43,500	43,500
	121,978	121,978
Other Liabilities:
Quebec Youth Allowances Recovery Prepayment (Note 17c)	336,000	—
Common school funds—Ontario and Quebec (Note 17d)	2,678	2,678
Foreign Claims Fund (Note 17e)	179	179
War Claims Fund—World War II (Note 17f)	4	4
Total Other Liabilities	460,839	124,839

The deposits from two wholly owned subsidiaries of the CDIC are non-interest bearing and are repayable.

a)  Canada Eldor Inc.—Holdback—Privatization—CDIC

This account was established pursuant to subsection 129(1) of the Financial Administration Act. This special purpose money is to be used to meet costs incurred on the sale of Crown corporations and demand for payment by purchasers pursuant to the acquisition agreement and costs incurred by the CDIC in connection with their sale.

b)  Canada Hibernia Holding Corporation—Abandonment reserve fund

This account was established to record funds that will be used to defray the future abandonment costs that will occur at the closure of the Hibernia field.

c)  Quebec Youth Allowances Recovery Prepayment

The Department of Finance Canada received $336 million from the Province of Quebec relating to Youth Allowances Recovery for the 2008–09 fiscal year on March 31, 2008.

d)  Common school funds—Ontario and Quebec

This account was established under 12 Victoria 1849, Chapter 200, to record the proceeds from the sale of lands set apart for the support and maintenance of common schools in Upper and Lower Canada, now Ontario and Quebec. Interest of $133,889—apportioned on the basis of population—is paid directly to these provinces on a semi-annual basis, at the rate of 5 per cent per annum, and is charged to interest on the public debt.

e)  Foreign claims fund

This account was established by Vote 22a, Appropriation Act No. 9, 1966, to record (a) such part of the money received from the Custodian of Enemy Property, proceeds of the sale of property, and the earnings of property and (b) all amounts received from governments of other countries pursuant to agreements entered into after April 1, 1966, relating to the settlement of Canadian claims and also records payment of claims submitted, including payment of the expenses incurred in investigating and reporting on such claims.

f)  War claims fund—World War II

This account was established by Vote 696, Appropriation Act No. 4, 1952, to record monies received from the Custodian of Enemy Property or from other sources and payments (a) to eligible claimants for compensation in respect of World War II; (b) of a supplementary award amounting to 50 per cent of the original award (PC 1958-1467, October 23, 1958); and (c) of expenses incurred in investigating and reporting on claims. The War Claims Commission was established to enquire into and report on claims made by Canadians arising out of World War II for which compensation may be paid from this or any other fund established for the purpose. The expenses of the Commission are chargeable hereto.

18. Employee benefits

a)  Pension benefits

Employees of the Department of Finance Canada participate in the Public Service Pension Plan, which is sponsored and administered by the Government of Canada. Pension benefits accrue up to a maximum period of 35 years at a rate of 2 per cent per year of pensionable service times the average of the best five consecutive years of earnings. The benefits are integrated with the Canada and Quebec Pension Plan benefits and they are indexed to inflation.

Employees and the Department contribute to the cost of the Plan. The expense amounted to $8,824 thousand in 2007–08 ($8,668 thousand in 2006–07), which represents approximately 2.1 times (2.2 times in 2006–07) the contributions made by employees.

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

	2008	2007
	($ thousands)
Accrued benefit obligation, beginning of year	13,604	12,995
Expense for the year	841	2,019
Benefits paid during the year	(1,645)	(1,410)
Accrued benefit obligation, end of year	12,800	13,604

19. Contingent liabilities

a)  Claims and litigation

In the normal course of its operations, the Department of Finance Canada becomes involved in various claims or legal actions. Some of these potential liabilities 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 on the financial statements.

As at March 31, 2008, the Department of Finance Canada has contingent liabilities of $202 million ($207 million in 2007) based on the Department's legal assessment of the potential exposure. The existence and amount of the liability depend upon the future outcome of these legal actions, which are not currently determinable. No accrual for these contingent liabilities has been made in the financial statements.

b)  Callable share capital

The Department of Finance Canada has callable share capital in certain international organizations that could require payments to those organizations. At March 31, 2008, callable share capital is $5,879 million ($6,613 million in 2007).

c)  Loan guarantees

The Department of Finance Canada guarantees loans insured by the Genworth Financial Mortgage Insurance Company Canada and AIG United Guaranty. At March 31, 2008, the contingent liability related to the guarantees is $1,534 million ($1,196 million in 2007).
Losses on loan guarantees are recorded in the accounts when it is likely that a payment will be made to honour a guarantee and where the amount of the anticipated loss can be reasonably estimated. The amount of the allowance for losses is determined by taking into consideration historical loss experience and current economic conditions.

The Department of Finance Canada manages guarantees to the Canadian Wheat Board for the repayment of the principal and interest of all receivables resulting from sales made under the Credit Grain Sale Program for an amount of $854 million ($1,541 million in 2007) and a portion of credit sales made under the Agri-Food Credit Facility, which amounted to $70 million ($65 million in 2007).

The Department of Finance Canada administers the government's compensation arrangement regarding Export Development Canada's sovereign loans and guarantees. Under this arrangement, the government fully compensates Export Development Canada for the cost of existing debt reduction commitments and shares losses with Export Development Canada on new debt reduction on obligations contracted before March 31, 2001. The government has also agreed to share losses with Export Development Canada in the event of unilateral debt reduction on debts contracted after March 31, 2001. Total funds covered under this agreement amount to $1,286 million ($1,780 million in 2007).

A total liability of $428 million as at March 31, 2008, ($500 million in 2007) was recorded.

20. Contractual obligations

The nature of the Department's activities can result in some large multi-year contracts and obligations whereby the Department of Finance Canada will be obligated to make future payments when the services or goods are received.

Significant contractual obligations that can be reasonably estimated are summarized as follows:

	2009	2010		2011	2012	2013 and thereafter	Total
	($ thousands)
Undisbursed Loans and Advances
International Development Association	384,280		384,280	384,280	—	—	1,152,840
Transfer Payments
International Development Association	24,840		29,150	35,830	—	—	89,820
African Development Fund	7,840		10,780	12,820	—	—	31,440
Total	416,960		424,210	432,930	—	—	1,274,100

21. Related party transactions

The Department of Finance Canada is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations. The Department enters into transactions with these entities in the normal course of business and on normal trade terms. In addition, during the year, the Department received services that were obtained without charge from other government departments as presented below.

Services received without charge

During the year, the Department of Finance Canada received without charge from other departments, accommodation, legal fees, and the employer's contribution to employee health and dental insurance plans. These services without charge have been recognized in the Department's statement of operations as follows:

	2008	2007
	($ thousands)
Accommodation	7,416	9,718
Employer's contribution to employee health and dental insurance plans	4,755	4,898
Legal services	3,850	4,158
Total	16,021	18,774

The Government of Canada has structured some of its administrative activities for efficiency and cost-effectiveness purposes so that one department performs these on behalf of all departments without charge. The cost of these services, which include payroll and cheque issuance services provided by Public Works and Government Services Canada and audit services provided by the Office of the Auditor General, are not included as an expense in the statement of operations.

22. Restatement of comparative information

In 2007–08, the Department of Finance Canada reviewed the amount presented as transfer payments to provinces and territories for the year ended March 31, 2007, to include an amount
of $300 million related to the HPV Immunization program. Consequently, the comparative financial statements for the year ended March 31, 2007, have been restated. The effect of this adjustment is presented in the table below.

($ thousands)	As previously stated	Effect of the adjustment	Revised amount
Statement of Operations
Expenses—Transfer Payments to Provinces and Territories	41,674,221	300,000	41,974,221
Total Expenses	76,266,163	300,000	76,566,163
Net Cost of Operations	71,498,035	300,000	71,798,035
Statement of Financial Position
Accounts payable and accrued liabilities	4,056,295	300,000	4,356,295
Total Liabilities	430,041,480	300,000	430,341,480
Equity of Canada	(373,606,786)	(300,000)	(373,906,786)
Statement of Equity of Canada
Net cost of operations	71,498,035	300,000	71,798,035
Equity of Canada	(373,606,786)	(300,000)	(373,906,786)
Statement of Cash Flow
Net cost of operations	71,498,035	300,000	71,798,035
Variations in Statement of Financial Position: Decrease in Accounts payable and accrued liabilities	627,243	(300,000)	327,243
Note 3a Reconciliation of net cost of operations to current year appropriations used
Net cost of operations	71,498,035	300,000	71,798,035
Transfer payment pursuant to the Budget Implementation Act	3,233,000	300,000	3,533,000
Note 3c Reconciliation of net cash provided by government to current year appropriations used
Variation in assets and liabilities: Accounts payable and accrued liabilities	627,243	(300,000)	327,243
Transfer payment pursuant to the Budget Implementation Act	3,233,000	300,000	3,533,000
Note 4 Expenses
Transfer payments: Provinces and territories	41,674,221	300,000	41,974,221
Total Transfer payments	41,861,827	300,000	42,161,827
Total Expenses	76,266,163	300,000	76,566,163
Note 4a Transfer payments to provinces and territories
Bill C-52: HPV Immunization	—	300,000	300,000
Total transfer payments to provinces and territories	41,674,221	300,000	41,974,221
Note 11 Accounts payable and accrued liabilities
Accounts payable—external	3,266,715	300,000	3,566,715
Total Accounts payable and accrued liabilities	4,056,295	300,000	4,356,295

23. Comparative information

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

List of statutory reports and other departmental reports

Annual Financial Report of the Government of Canada and Fiscal Reference Tables

Annual Report to Parliament on the Operations of the Exchange Fund Account

Canada Investment and Savings Annual Report (http://www.csb.gc.ca)

Canadian Federal Budget

Debt Management Report

Debt Management Strategy

Departmental Performance Report

Economic and Fiscal Update

Economy in Brief—Quarterly

The Fiscal Monitor—Monthly

Government of Canada Securities—Quarterly

Report on Operations under the Bretton Woods and
Related Agreements Act

Report on Operations under the European Bank for Reconstruction and
Development Agreement Act

Report on Plans and Priorities

Sustainable Development Strategy

Tax Expenditures and Evaluations

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