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Financial Statements For Year Ended March 31, 2007

Management Responsibility for Financial Statements

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2006 and all information contained in these statements rests with departmental management. 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 fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the department’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.

The financial statements of the department have not been audited.

signed on original	signed on original
John H. Sims Deputy Minister Ottawa, Canada	Terrance I. McAuley A/Assistant Deputy Minister, Corporate Services Senior Financial Officer
Date: July 14, 2008

 

Statement of Financial Position (unaudited)

As at March 31
(in dollars)

 

Assets
	2008	2007
Financial Assets
Receivables (Note 6)	41,240,530	27,811,772
Advances (Note7)	24,275	51,985
Total financial assets	41,264,805	27,863,757
Non-financial assets
Prepaid expenses	103,041	135,834
Tangible capital assets (Note 8)	32,668,131	36,683,852
Total non-financial assets	32,771,172	36,819,686
Total	74,035,977	64,683,443

 

Liabilities and Equity of Canada
Liabilities
Accounts payable and accrued liabilities (Note 9)	51,466,994	59,352,085
Transfer payments payable	719,988,875	612,001,885
Vacation pay and compensatory leave	15,147,948	17,268,384
Employee severance benefits (Note 10)	73,365,829	83,850,340
Family Law account (Note 12)	3,493,329	3,930,643
Total liabilities	863,462,975	776,403,337
Equity of Canada	(789,426,998)	(711,719,894)
Total	74,035,977	64,683,443

Contingent liabilities (Note 11)
Contractual obligations (Note 13)

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

Statement of Operations (unaudited)

As at March 31
(in dollars)

Expenses (Note 4)
Providing legal advisory and litigation services to government	523,575,103	526,014,088
Developing and implementing programs	369,481,048	360,646,912
Developing policies and laws	45,161,012	41,867,608
Providing prosecution services	-	121,275,989
Total expenses	938,217,163	1,049,804,597

 

Revenues (Note 5)
Providing legal advisory, litigation and legislative services to government	214,185,491	155,830,964
Developing policies and laws	8,308,858	7,087,850
Providing prosecution services	-	7,105,336
Total revenues	222,494,349	170,024,150
Net cost of operations	715,722,814	879,780,447

The accompanying notes form an integral part of these financial statements

Statement of Equity of Canada (unaudited)

For the year ended March 31
(in dollars)

	2008	2007
Equity of Canada, beginning of year	(711,719,894)	(540,277,983)
Net cost of operations	(715,722,814)	(879,780,447)
Current year appropriations used (Note 3)	686,162,764	974,223,007
Revenue not available for spending	(8,834,724)	(170,077,588)
Change in net position in the Consolidated Revenue Fund (Note 3)	(124,676,829)	(171,464,895)
Departmental reorganization - transfer of Net assets (Note 14)	19,249,751	-
Services provided without charge by other government departments (Note 15)	66,114,748	75,658,012
Equity of Canada, end of year	(789,426,998)	(711,719,894)

The accompanying notes form an integral part of these financial statements

Statement of Cash Flow (unaudited)

For the year ended March 31
(in dollars)

Operating activities	2008	2007
Net cost of operations	715,722,814	879,780,447
Non-cash items
Amortization of tangible capital assets (Note 8)	(10,569,878)	(11,115,407)
Disposal and transfer of capital assets	(4,976,141)	9,218
Services provided without charge by other government departments (Note 15)	(66,114,748)	(75,658,012)
Variations in Statement of Financial Position
Increase (decrease) in accounts receivable and advances	13,401,048	6,038,273
Decrease in prepaid expenses	(32,793)	(22,658)
Increase in liabilities	(87,059,638)	(179,327,922)
Cash used by operating activities	560,370,664	619,703,939
Capital investment activities
Acquisitions of tangible capital assets (Note 8)	11,530,298	13,000,181
Proceeds from disposal of tangible capital assets	-	(23,596)
Cash used by capital investment activities	11,530,298	12,976,585
Financing activities
Net cash provided by Government Canada	(552,651,211)	632,680,524
Departmental Reorganization (Note 14)	(19,249,751)	-
Cash used by financing activities	(571,900,962)	632,680,524

The accompanying notes form an integral part of these financial statements

---

Notes to the Financial Statements (unaudited)

1. Authority and objectives

The Department of Justice was created by an Act of Parliament in 1868 to be responsible for the legal affairs of the Government of Canada and to provide legal services to individual departments and agencies. The department’s work reflects the duties of its Minister’s dual role as Attorney General of Canada and as Minister of Justice.

The department conducts its 2 priorities along 3 program activities:

(a) A fair, relevant and accessible justice system that reflects Canadian values

(b) A federal government that is supported by effective and responsive legal services

In prior year, under program activity "Providing Prosecution Services", the department conducted criminal prosecution, including money laundering and drug prosecutions, and regulatory prosecutions such as those related to income tax, the competition law provisions on telemarketing, customs and immigration. Responding to international requests and trans-national crime and working to combat organized crime and terrorism. The Office of the Director of Public Prosecutions took over this activity and operate independently as a department since April 1, 2007.

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.

The significant accounting policies are as follows:

(a) Parliamentary appropriations
The department is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to the department do not parallel financial reporting according to generally accepted accounting principles since appropriations are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and the Statement of Financial Position are not necessarily the same as those provided through appropriations from Parliament. (Note 3) provides a high-level reconciliation between the bases of reporting.

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

(c) Change in net position in the Consolidated Revenue Fund
The change in net position in the Consolidated Revenue Fund is the difference between the net cash provided by Government and appropriations used in a year, excluding the amount of non-respendable revenue recorded by the department. It results from timing differences between when a transaction affects appropriations and when it is processed through the CRF.

(d) Revenues

• Revenues derived from the provision of legal services are recognized in the year services are rendered.
• Service and administration fees revenues under the Family Law programs are recognized based upon the services provided in the year, such as upon validation of the garnishment application or upon issuance of the divorce clearance certificate;
• Fines, forfeitures and court costs are recognized upon receipt of payment by the department.

(e) Expenses

• Grants are recognized in the year in which the conditions for payment are met. In the case of grants which do not form part of an existing program, the expense is recognized when the Government announces a decision to make a non-recurring transfer, provided the enabling legislation or authorization for payment receives parliamentary approval prior to the completion of the financial statements.
• Contributions are recognized in the year in which the recipient has met the eligibility criteria or fulfilled the terms of a contractual transfer agreement;
• Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment;
• Expenses related to the provision of legal services are limited to those costs borne and settled directly by the department. These legal services may or may not be recovered as revenue from the client department. The cost of legal services which are paid directly by client departments to outsoide suppliers such as Crown agents, are not included in the expenses of the department;
• Services provided without charge by other government departments for accommodation, the employer’s contribution to the health and dental insurance plans, and worker's compensation costs are recorded as operating expenses at their estimated cost.

(f) Employee future benefits

g) Receivables
Receivables are stated at amounts expected to be ultimately realized; a provision is made for receivables where recovery is considered uncertain.

(h) Contingent liabilities
Contingent liabilities are potential liabilities which may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

(i) Tangible capital assets
All tangible capital assets are recorded at their acquisition cost and amortized over their estimated useful life on a straight-line basis as follows:

Asset class	Acquisition cost equal or greater than	Amortization period
Office and other equipment	$10,000	5 to 8 years
Telecommunications equipment	$10,000	4 to 5 years
Informatics hardware	$1,000	3 to 5 years
nformatics software	$10,000	3 to 5 years
Furniture and furnishings	$1,000	10 years
Motor vehicles	$10,000	5 years
Leasehold improvements	$10,000	Lesser of useful life or term of the lease
Work in progress	In accordance with asset class	Once in service, in accordance with asset class

(j) Measurement uncertainty
The preparation of these financial statements in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are contingent liabilities, the liability for employee severance benefits and the useful life of tangible capital assets. Actual results could significantly differ from those estimated. Management’s estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.

3 Parliamentary appropriations

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

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

(in dollars)													2008			2007
Net cost of operations													715,722,814			879,780,447
Adjustments for items affecting net cost of operations but not affecting appropriations
Add (Less)
	Receivable from Treasury Board Secretariat for employee benefits												(3,477,341)			3,477,341
	Amortization of tangible capital assets											(10,569,878)			(11,115,407)
	Vacation pay and compensatory leave												(307,319)			(610,787)
	Employee severance benefits											(904,313)			(5,573,222)
	Refunds and reversals of previous year expenses											4,094,975			6,528,630
	Bad debt											(4,914,938)			(4,061,094)
	Revenue not available for spending												40,562,844			170,077,588
	Services provided without charge by other government departments (Note 15)												(66,114,748)			(75,658,012)
	Other											573,163			(1,600,000)
												41,057,555			81,465,037
Adjustments for items not affecting net cost of operations but affecting appropriations
Add (Less)
	Acquisitions of tangible capital assets											11,530,298			13,000,181
	Change in prepaid expenses											(32,793)			(22,658)
												11,497,505			12,977,523
Current year appropriations used												686,162,764			974,223,007

(b) Appropriations provided and used

(in dollars)				2008	2007
					Restated (Note 17)
Vote 1 - Operating expenditures				298,231,748	591,751,446
Vote 5 - Grants and contributions				380,188,415	364,007,415
Statutory Amounts				55,527,457	72,803,845
Less
Appropriations Available for future years				(491)	(837)
Voted Authorities lapsed				(47,784,365)	(54,338,862)
Current year appropriations used				(686,162,764)	974,223,007
(c) Reconciliation of net cash provided by Government to current year appropriations used
				2008	2007
Net cash provided by Government				552,651,211	632,680,524
Revenue not available for spending				40,562,844	170,077,588
Change in net position in the Consolidated Revenue Fund
Variation in accounts receivable and advances				(13,401,048)	(6,038,273)
Variation in accounts payable and accrued liabilities				100,101,899	170,775,314
Adjustments and refunds of previous year accounts payable				4,094,975	6,528,631
Other adjustments				2,152,883	199,223
				92,948,709	171,464,895
Current year appropriations used				686,162,764	974,223,007

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

4 Expenses

	(in dollars)												2008	2007
	Operating
	Salaries and employee benefits												455,623,621,	528,753,983
	Accommodation												38,142,768	43,911,327
	Professional and special services												35,182,564	65,121,464
	Travel and relocation												12,528,008	15,995,105
	Amortization of tangible capital assets												10,569,878	11,115,407
	Utilities, materials and supplies												7,923,845	8,779,083
	Communications												6,057,339	7,047,811
	Bad debt expense												4,914,938	4,061,094
	Information												4,320,820	5,123,369
	Repairs and maintenance												1,848,589	2,435,803
	Rentals												1,066,804	1,202,760
	Other												913,748	1,077,398
	Claims and ex-gratia payments												441,911	3,982,429
	Total operating expenses												579,534,833	698,607,033
	Transfer payments
	Provinces and territories												325,336,015	329,003,366
	Non-profit institutions and organizations												25,547,247	15,965,498
	Persons												7,360,922	6,053,428
	International organizations												438,146	175,272
	Total transfer payments												358,682,330	351,197,564
	Total expenses												938,217,163	1,049,804,597

5 Revenues

	(in dollars)												2008	2007
	Services
	Legal services												214,090,200	161,660,834
	Family Law fees												8,047,213	6,807,063
													222,137,413	168,467,897
	Other revenues
	Fines and forfeitures												261,442	967,907
	Rent from residential housing provided to employees												23,440	294,910
	Other												72,054	293,436
													356,936	1,556,253
													222,494,349	170,024,150

 

6. Receivables

(in dollars)	2008	2007
Federal government departments and agencies
Accounts receivable	37,745,968	23,960,098
External parties
Family Law	12,737,694	11,261,350
Less: allowance for doubtful accounts	(9,943,899)	(8,897,916)
	2,793,795	2,363,434
Other receivables	942,007	1,730,348
Less: allowance for doubtful accounts	(241,240)	(242,108)
	700,767	1,488,240
Total receivables	41,240,530	27,811,772

 

7. Advances

(in dollars)	2008	2007
Standing advances held by employees for travel and petty cash	24,275	28,380
Temporary advances to employees for travel	-	23,605
Total	24,275	51,985

 

8. Tangible capital assets

(in dollars)						Opening balance		Acquisitions			Disposals and transfers			Closing balance
Office and other equipment						573,176		90,965				(16,838)			647,303
Telecommunications equipment						1,621,519		1,105,915				-			2,727,434
Informatics hardware						18,877,007		3,391,407				(1,028,428)			21,239,986
Informatics software						16,260,857		1,126,789				518,984			17,906,630
Furniture and furnishings						14,420,163		1,827,230				(490,842)			15,756,551
Motor vehicles						156,435		-				(56,111)			100,234
Leasehold improvements						15,601,100		830,013				(3,573,089)			12,858,024
Work in progress - software development						840,677		2,725,018				(609,711)			2,955,984
Work in progress - leasehold improvements						2,178,288		432,961				(2,269,574)			341,675
Total tangible capital assets						70,529,222		11,530,298				(7,525,609)			74,533,911
Accumulated amortization
						Opening balance		Current year amortization			Disposals and transfers			Closing balance
(in dollars)
Office and other equipment						130,236		76,401				-			206,637
Telecommunications equipment						940,233		431,385				-			1,371,618
Informatics hardware						10,841,574		3,758,887				(471,457)			14,129,004
Informatics software						9,527,152		3,035,333				(66,625)			12,495,860
Furniture and furnishings						5,008,090		1,463,696				(152,519)			6,319,267
Motor vehicles						106,632		5,905				(28,751)			83,786
Leasehold improvements						7,291,453		1,798,271				(1,830,116)			7,259,608
Total accumulated amortization						33,845,370		10,569,878			(2,549,468)			41,865,780
Net book value
(in dollars)									2008			2007
Office and other equipment								440,666			442,940
Telecommunications equipment								1,355,816			681,286
Informatics hardware								7,110,982			8,035,433
Informatics software								5,410,770			6,733,705
Furniture and furnishings								9,437,284			9,412,073
Motor vehicles								16,538			49,803
Leasehold improvements								5,598,416			8,309,647
Work in progress - software development								2,955,984			840,677
Work in progress - leasehold improvements								341,675			2,178,288
Total net book value								32,668,131			36,683,852
Amortization expense for the year ended March 31, 2008 is $10,569,878 ($11,115,407 in 2006-07).

9. Accounts payable and accrued liabilities

(in dollars)	2008	2007
Federal government departments and agencies
Accounts payable	4,751,248	3,882,374
External parties
Accounts payable	34,850,964	43,042,988
Accrued salaries	10,839,782	10,626,723
Other liabilities	1,025,000	1,800,000
	46,715,746	55,469,711
Total	51,466,994	59,352,085

10. Employee benefits

(a) Pension benefits

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

Both the employees and the department contribute to the cost of the Plan. The expense presented below represents approximately 2.1 times (2.2 in 2006-07) the contributions by employees.

(in dollars)	2008	2007
Pension expense	40,405,024	53,534,084

The department's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.

(b) Severance benefits

The department provides severance benefits to its employees based on eligibility, years of service and 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:

(in dollars)	2008	2007
Accrued benefit obligation, beginning of year	83,850,340	78,277,118
Expense for the year	5,051,222	8,828,166
Benefits paid during the year	(4,146,909)	(3,254,944)
Departmental reorganization	(11,388,824)	-
Accrued benefit obligation, end of year	73,365,829	83,850,340

11.Continent liabilities

Claims and litigation
Claims have been made against the department in the normal course of operations. Legal proceedings for claims totalling approximately $1,021,471,000 were still pending at March 31, 2008 ($20,318,000 in 2006-07). 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 in the financial statements.

12. Family Law account

Under the Family Orders and Agreements Enforcement Assistance Act, the department assists provinces and territories in the enforcement of family support orders and agreements by providing garnishment assistance through the interception of designated federal moneys payable to individuals owing family financial support.  These intercepted moneys are deposited into the Family Law account from which payments to the provinces and territories are then made.  The provinces and territories distribute these payments (consisting of garnisheed moneys such as income tax refunds, employment insurance benefits, etc.) to the beneficiaries.

(in dollars)	2008	2007
Family Law account, beginning of year	3,930,643	1,562,044
Receipts	125,115,051	122,126,685
Payments	(125,552,365)	(119,758,085)
Closing balance	3,493,329	3,930,643

13. Contractual obligations

The nature of the department's activities results in some large multi-year contracts and obligations whereby the department will be obligated to make future payments when the services and/or goods are received.

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

(in dollars)	2008-2009	2009-10	2010-11	2011-12	2012-13 and thereafter
Transfer payments	280,300,000	177,400,000	177,000,000	2,800,000	2,800,000

14. Departmental reorganization

On December 12, 2006, the Office of the Director of Public Prosecutions was created as part of the Federal Accountability Act. This Office takes over the duties of the former Federal Prosecution Services within the Department of Justice and will operate independently of the department effective April 1, 2007.

The condensed assets and liabilities transferred from the Department of Justice Canada to the Office of the Director of Public Prosecutions effective April 1, 2007 are as follows:

(in dollars)	2007
Statement of Financial Position
Assets	7,634,145
Liabilities	26,883,896
Net liabilities for transfer	19,249,751

The condensed operating results of the transferred operations for the year ended March 31, 2007 were as follows:

(in dollars)	2007
Statement of Operations
Revenues	7,105,336
Expenses	121,275,989
Net cost of operations	114,170,653

15. Related party transactions

The department is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations.  The department enters into transactions with these entities in the normal course of business and on normal trade terms. 

Also, during the year, the department received without charge from other departments, accomodation, the employer's contribution to the health and dental insurance plans, and workers' compensation coverage.  These services without charge have been recognized in the department's Statement of Operations as follows:

(in dollars)	2008	2007
Accommodation provided by Public Works and Government Services Canada	37,696,785	42,888,888
Employer's contributions to the health and dental insurance plans paid by
Treasury Board Secretariat	28,343,387	32,691,882
Workers’ compensation coverage provided by Human Resources and Social
Development Canada	74,576	77,242
Total	66,114,748	75,658,012

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

In addition, the Department of Justice has provided legal services without charge to other government departments throughout the fiscal year for a total amount of $187,595,419 ($188,672,338 in 2006-2007). 

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