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Department of Finance Canada

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Section II: Analysis of Program Activities by Strategic Outcome

Strategic Outcome

Section II provides detailed information on how each of the Department of Finance Canada's 10 program activities support the Department's strategic outcome and priorities over the reporting period.

The Department has one strategic outcome: To create a fiscal, economic, social, and global advantage for Canada by providing appropriate policies and sound advice with respect to economic, social, and financial conditions and to the government's overall agenda.

The Department continues to maintain a balanced approach that will ensure a sustainable fiscal structure, encourage a more productive, competitive, and dynamic Canada, and support and sustain Canadian society.

Figure 5 summarizes how each of the Department's 10 program activities is linked to its four priorities.

Figure 5

Support of Departmental Priorities, by Program Activity

Program Activities	Priority 1: Sound Fiscal Management	Priority 2: Sustainable Economic Growth	Priority 3: Sound Social Policy Framework	Priority 4: Effective International Presence
1. Tax Policy	√	√	√
2. Economic and Fiscal Policy	√	√		√
3. Financial Sector Policy	√	√	√	√
4. Economic Development and Corporate Finance	√	√
5. Federal-Provincial Relations and Social Policy			√
6. International Trade and Finance		√		√
7. Public Debt	√
8. Domestic Coinage	√
9. Transfer Payments to Provinces and Territories			√
10. International Financial Organizations				√

Program Activity 1: Tax Policy

The Tax Policy Branch is responsible for the development and evaluation of federal taxation policies and legislation regarding personal and business income tax, sales tax, and excise tax. The Branch provides advice and recommendations for changes to improve the personal, corporate, sales, and excise tax systems while raising the required amount of revenue to finance government priorities.

Initiatives include developing tax legislation and negotiating tax treaties, federal-provincial tax collection agreements, federal-Aboriginal tax administration agreements, and tax policy research and evaluation.

Financial Resources ($ thousands)

2006–07	2007–08	2008–09
31,742	31,537	31,784

Human Resources: FTEs

2006–07	2007–08	2008–09
269	275	278

Priorities

The work of the Branch contributes to three of the Department's priorities:

1. Sound fiscal management;

2. Sustainable economic growth; and

3. Sound social policy framework.

The tax system contributes to these priorities by raising sufficient revenues to pay for public services, including social programs (for example, universal health care and public safety and security) and strategic investments in areas that promote a more competitive and productive Canadian economy (for example, education and training, basic scientific research, and infrastructure). At the same time, however, revenues must be raised in a manner that keeps tax burdens and marginal tax rates low to provide incentives to work, save, and invest. Tax revenues must also be raised in a fair manner so that taxpayers in similar circumstances face similar tax treatment, ensuring that the tax burden is shared in accordance with the ability of taxpayers to pay. Where appropriate, the tax system may also be used to pursue specific economic and social objectives, such as savings for post-secondary education, promoting the physical fitness of children, encouraging research and development, and helping protect the environment.

In order to ensure that the tax system functions efficiently, the federal government works with provinces, Aboriginal governments, and other countries to improve tax policy coordination. It also undertakes ongoing analysis of the impact of both new and existing tax policy initiatives.

Recent tax policy initiatives that contribute to achieving the Department's priorities include:

• cutting the goods and services tax (GST) by one percentage point;
• reducing the general corporate income tax rate, eliminating the corporate surtax, and accelerating the elimination of the federal capital tax;
• reducing the lowest personal income tax rate to 15.5 per cent from 16 per cent and increasing the basic personal amount;
• introducing a new $1,000 Canada Employment Credit;
• implementing other targeted personal income tax measures, such as a new tax deduction for the cost of tools for tradespeople, a new tax credit for the cost of textbooks, a new children's fitness tax credit, and a tax credit for the cost of monthly public transit passes;
• negotiating new reciprocal taxation agreements with a number of provinces;
• signing a number of tax administration agreements with Aboriginal governments, including a new First Nations Goods and Services Tax Administration Agreement with the Tlicho First Nation and a new First Nations Personal Income Tax Agreement with the Nunatsiavut First Nation;
• negotiating and implementing a number of double taxation conventions with other countries; and
• publishing an evaluation report that helped to inform the government's strategy to create a meaningful marginal effective tax rate advantage for business investment, as announced in Budget 2006.

Looking ahead, the Department will continue to advise the government over the 2006–09 planning period on potential measures to further improve the competitiveness, efficiency, and fairness of the tax system in a fiscally sustainable manner, including cutting the GST by an additional percentage point and establishing a meaningful overall marginal effective tax rate advantage over the U.S. Among the other potential policy measures that will be assessed during the planning period are:

• improved incentives to work for low-income Canadians, including an earned income tax credit, such as a working income tax benefit; and
• ways to help parents save for the long-term financial security of a child with severe disabilities.

Expected results

1. Competitive, efficient, and fair personal, corporate, sales, and excise tax systems

The Tax Policy Branch plans to attain the expected result through the following ongoing activities and key commitments.

Ongoing activities

• Provide sound and timely advice, analysis, briefings, and recommendations to the Minister and senior officials on ways to improve the tax system, including proposals to make it more attractive for Canadians to work, save and invest, make the tax system fairer, improve the competitiveness of the tax system, and support other government priorities;
• Meet and consult with the Canada Revenue Agency, the Department of Justice Canada, and other government departments as well as external stakeholders, including tax professionals, business groups, non-governmental organizations, other jurisdictions, provincial governments and Aboriginal peoples, and international organizations to listen to their concerns and views, to discuss and explain the government's policies, and to ensure the effective functioning of Canada's tax system and implementation of policy changes;
• Conduct consultations with provinces and stakeholders on various taxation issues;
• Maintain and improve statistical models of the tax system and contribute to the publication of the annual tax expenditure report;
• Manage the Air Travellers' Security Charge, the Comprehensive Integrated Tax Coordination Agreement, and the harmonized sales tax provincial revenue payment mechanism; and
• Assess and manage risks associated with court challenges related to taxation matters and be prepared to take appropriate actions.

Key commitments

• Identify initiatives for budgets and provide thorough analysis of these initiatives, including estimates of costs and effects on affected taxpayers;
• Prepare and draft parts of the budget plan relating to taxation, the supplementary tax annexes, and other budget products within deadlines;
• Implement goods and services tax / harmonized sales tax measures for financial institutions announced in the fall of 2005; and
• Draft high-quality income and sales tax legislation and regulations to implement government initiatives on a sound and timely basis.

2. Improved coordination of the federal tax system with those of provinces, Aboriginal governments, and other countries

The Tax Policy Branch plans to attain the expected result through the following ongoing activities and key commitments.

Ongoing activities

• Review new provincial tax measures administered under the tax collection agreements;
• Review entities on Schedule A of the reciprocal taxation agreements;
• Review set-off arrangements with provinces;
• Make methodological improvements to payments under the tax collection agreements;
• Evaluate and develop options that promote federal-provincial tax harmonization;
• Manage the First Nation sales tax, the First Nation goods and services tax, and the First Nation personal income tax payment mechanism;
• Negotiate tax elements related to more than 20 agreements in principle and seven final comprehensive land claim agreements and self-governing agreements with Aboriginal peoples;
• Negotiate new First Nations goods and services taxand First Nations personal income tax agreements with Aboriginal governments;
• Maintain Canada's network of international tax treaties; and
• Seek to obtain tax information exchange agreements with non-treaty jurisdictions.

Key commitments

• Implement a Corporate Income Tax Collection Agreement with Ontario consistent with the agreement reached in May 2005;
• Develop long-term sustainable tax policies regarding Aboriginal self-government and comprehensive land claims;
• Develop negotiation strategies in respect of comprehensive land claim and self-government agreements;
• Implement a consultation strategy that will reflect the principles and objectives of the First Nations–Federal Crown Political Accord on the Recognition and Implementation of First Nation Governments; and
• Negotiate new and revised tax treaties with other countries, as appropriate.

3. High-quality research and evaluation

The Tax Policy Branch plans to attain the expected result through the following ongoing activities and key commitment.

Ongoing activities

• Evaluate various measures in the Canadian tax structure to ensure that they continue to be relevant, effective, and efficient;
• Improve databases, research tools, and research methodologies in order to enhance the quality of analysis in the Branch; and
• Increase the use of contract research to broaden scope and improve timelines.

Key commitment

• Undertake research to support future tax policy initiatives, including the expanded use of the marginal effective tax rate methodology.

Performance measurement

The Department plans to apply the following performance measurement approach in monitoring and measuring performance against the three expected results under this program activity.

Expected Results/ Performance Measurement	1. Competitive, efficient, and fair personal, corporate, sales, and excise tax systems	2. Improved coordination of the federal tax system with those of provinces, Aboriginal governments, and other countries	3. High-quality research and evaluation
Performance Indicators	1. Proposals to improve the competitiveness, efficiency, and fairness of the personal, corporate, sales, and excise tax systems	1. Active negotiation of additional tax administration agreements with provincial and Aboriginal governments	1. Number and effect of research studies and evaluation reports
	2. The amount of tax revenue raised	2. Effective network of tax treaties with other countries 3. Effective meetings of the Federal-Provincial Tax Committee
Data Sources	Federal budgets, legislation, regulations, press releases, tax treaties, the Department's Marginal Effective Tax Rate models, Public Accounts, tax evaluation, and tax expenditure reports	Federal-provincial agreements, federal-provincial meetings, federal-Aboriginal agreements, and federal-Aboriginal negotiations	Working papers, models developed, research papers
Frequency	Annual	Annual	Annual
Target	Proposals in the budget and throughout the year, as required, to implement the government's tax policy agenda and maintain a competitive, effective, and fair tax system	Increased number of tax agreements signed	Two published reports per year
Target Date	As required	Ongoing	Ongoing

Program Activity 2: Economic and Fiscal Policy

The Economic and Fiscal Policy Branch is responsible for monitoring and preparing forecasts of Canada's economic and fiscal position and plays a lead role in the management of the government's fiscal framework. The Branch provides ongoing analysis and advice regarding the government's economic policy framework, its budget planning framework and spending priorities, as well as the fiscal positions of other levels of government.

Financial Resources ($ thousands)

2006­–07	2007–08	2008–09
14,973	14,878	14,996

Human Resources: FTEs

2006–07	2007–08	2008–09
122	125	126

Priorities

Priority 1: Sound fiscal management

The Branch contributes to sound fiscal management by ensuring that budget planning is carried out in a transparent manner and supports long-term fiscal sustainability. In Budget 2006 the government introduced a new budget framework in order to improve fiscal transparency and financial management. This new framework includes:

• The presentation of economic and fiscal projections over a two-year time horizon. By focussing the planning period on the near term, where uncertainties are fewer, the government can reasonably be held to account for its fiscal plan.
• Restraining the rate of growth of spending to a more sustainable level and reviewing the Expenditure Management System to ensure that government programs focus on results and value for money and are consistent with government priorities and responsibilities.
• A proposal to allocate unplanned surpluses in recognition that better-than-expected fiscal results may arise. A formal arrangement for sharing a portion of unplanned surpluses at year-end will allow fiscal risks to be handled transparently and ensure that the benefits of better-than-expected fiscal results are shared broadly.
• Reforms to the government's financial reporting, including the consolidation of several foundations and the presentation of budgeted revenues and expenses on a gross basis. This will result in transparent presentation of financial information.

Expected result

1. Transparent fiscal planning and sustainable fiscal policy

The government's new framework will help ensure that fiscal planning is transparent and supports long-term fiscal sustainability.

The Department will undertake the following ongoing activities and key commitments in support of the government's expected result.

Ongoing activities

• Continue to monitor and assess fiscal developments, update fiscal projections, provide fiscal policy analysis and advice, and play a lead role in the management of the fiscal framework and coordination of the Economic and Fiscal Update and the annual budget process.
• Provide information on the government's financial position in the monthly Fiscal Monitor.
• As committed to in the Federal Accountability Action Plan, provide quarterly updates of fiscal outlook for the current fiscal year.
• Prepare the annual financial report on the government's fiscal performance for the previous fiscal year.
• Plan for annual debt reduction of $3 billion starting in 2006–07 and reduce the debt-to-GDP ratio to 25 per cent by 2013–14.

Key commitments

• Develop a new approach for allocating unplanned surpluses. In particular, discuss with provinces and territories the possibility of introducing legislation authorizing the allocation of a portion of unanticipated surpluses at fiscal year-end to the CPP and the Quebec Pension Plan.
• Provide support to the review of the government's Expenditure Management System, which will be led by Treasury Board of Canada Secretariat. To progress toward more sustainable spending, the President of the Treasury Board will identify savings of $1 billion for 2006–07 and 2007–08.

Priority 2: Sustainable economic growth

Effective economic policies that will enable the Canadian economy to perform well despite external economic shocks require an accurate assessment of current and future economic conditions both in Canada and abroad.

A focus for 2006–07 will be to monitor and assess the implications for future Canadian growth prospects of productivity growth, labour adjustment, and the challenges presented by an aging population.

An effective assessment of these issues will enable the government to appreciate potential fiscal constraints arising from future economic conditions and to develop effective policies to sustain long-term growth.

Expected results

2. Effective monitoring and forecasting of economic performance

It is critical that the government understand the strengths and weaknesses of the Canadian economy now and in the future in order to develop economic policies that lead to sustained economic growth. Given the constantly changing domestic and international economic environment, there is a need to continuously monitor and forecast the implications of these developments.

The Branch plans to attain the expected result through the following ongoing activity and key commitment.

Ongoing activity

• Provide regular briefings to the Minister on major macroeconomic developments in Canada and abroad as well as inform the public on key economic developments. This information includes chapters on economic developments and outlook in the Economic and Fiscal Update and the Budget Plan, briefing notes to the Minister, and regular documents such as the Economy in Brief; Canadian and U.S. monthly economic assessments; and periodical monitors on labour markets, housing markets, business investment, inventory changes, productivity developments, Canadian financial conditions, the Canada-U.S. corporate financial situation, interest rate expectations; and commodity price developments.

Key commitment

• Conduct four private-sector surveys of the Canadian economic outlook and assess the potential risks to these outlooks.

3. Effective briefing and advice on a wide selection of economic questions

The current economic environment is one characterized by issues that are both complex and far reaching. In-depth economic research is essential to understand and evaluate the interactions and effects of these issues.

The Branch plans to attain the expected result through the following ongoing activity and key commitments.

Ongoing activity

• Continue to provide regular briefings to the Minister on the main drivers of productivity growth, labour market developments, and the economic and fiscal effects of developments such as energy price changes, exchange rate movements, and population aging. This information includes briefing notes to the Minister and publications, such as working papers, analytical notes, and technical notes, and this could also include special chapters or annexes in the Economic and Fiscal Update or the Budget Plan.

Key commitments

• Update presentations on the determinants of human capital and productivity; and
• Analyze possible measures to improve Canada's productivity performance.

Priority 4: Effective international presence

International cooperation is necessary to understand and provide an accurate assessment of the economic and fiscal conditions around the world. By participating in international meetings, Canada can coordinate economic policies, when and where it is appropriate, to foster international economic growth and, given the openness of the Canadian economy, improve the growth potential of Canada.

Expected result

4. Understand and contribute to international economic policies and reforms

The government benefits from understanding past, ongoing, or proposed reforms in other countries and their implications on the economic and fiscal situation abroad. This understanding will enable the government to develop and implement economic policies that are best suited to promote sustained economic growth in Canada.

The Branch plans to attain the expected result through the following ongoing activity.

Ongoing activity

• Continue to represent Canada at OECD meetings and to provide analysis on economic policies proposed by the institution.

Performance measurement

The Department plans to apply the following performance measurement approach in monitoring and measuring performance against the expected results under this program activity.

Expected Results/Performance Measurement	1. Transparent fiscal planning and sustainable fiscal policy	2. Effective monitoring and forecasting of economic performance 3. Effective briefing and advice on a wide selection of economic questions	4. Understand and contribute to international economic policies and reforms
Performance Indicators	Federal debt as a share of the gross domestic product (GDP)	Canada's GDP growth relative to G6 (G7 less Canada)	Canada's GDP growth relative to G6 (G7 less Canada)
Data Sources	Annual Financial Report	IMF World Economic Outlook	IMF World Economic Outlook
Frequency	Annual	Semi-annual	Semi-annual
Target	Reduce the federal debt-to-GDP ratio to 25 per cent by 2013–14	Above-average annual growth rate	Above-average annual growth rate
Target Date	Ongoing	Ongoing	Ongoing

Program Activity 3: Financial Sector Policy

Under this program activity, the Financial Sector Policy Branch is responsible for providing analysis on Canada's financial services sector and financial markets as well as developing the legislative and regulatory framework governing federally chartered financial institutions (banks, trust companies, insurance companies, credit unions, and other financial institutions) and federally regulated defined benefit pension plans. The Branch also manages the government's borrowing program and its cash and official international reserves and provides support to the Minister regarding Crown corporation borrowing.

Financial Resources: ($ thousands)

2006–07	2007–08	2008–09
21,105	19,261	17,297

Human Resources: FTEs

2006–07	2007–08	2008–09
146	144	131

Priorities

Priority 1: Sound fiscal management

Debt service is the largest spending program of the federal government. The prudent and effective management of the government's debt is an important element of the Department's strategy for sound fiscal management. For more information on debt management, see the following link: http://www.fin.gc.ca/toce/2005/dmr05_e.html. The focus of Financial Sector Policy Branch activity for 2006–07 will be on continuing to review and evaluate the effectiveness of debt management and treasury management frameworks and programs while pursuing improvements to the borrowing framework for major government-backed entities.

Expected results

1. Stable, low-cost financing for the Government of Canada

The government's operational needs are met through borrowing from capital markets. The government's debt structure (the mix of fixed- and floating-rate debt) is managed to ensure that debt costs are kept low and stable over time.

For information on the initiatives under this result, see "Program Activity 7, Public Debt."

2. A well-functioning market in Government of Canada securities

A well-functioning wholesale market in Government of Canada securities benefits the government and a wide range of market participants. For the government as a debt issuer, a well-functioning market attracts investors and ensures that funding costs are kept low. For market participants, a liquid and active secondary market in government debt provides credit risk-free assets for investment portfolios, a pricing benchmark for other instruments, and a primary tool for hedging risk.

For more information on the initiatives under this result, see "Program Activity 7, Public Debt."

3. Management of Canada's official international reserves

In conjunction with the Bank of Canada, the Department manages Canada's official international reserves. This is a portfolio of diversified foreign currency assets, which is maintained to provide foreign currency liquidity for the Government of Canada and to provide the funds if required to help promote orderly conditions for the Canadian dollar in foreign exchange markets. See http://www.fin.gc.ca/toce/2005/oir05_e.html.

The Branch plans to attain the expected result through the following ongoing activity.

Ongoing activity

• Work with the Bank of Canada to maintain a target level of reserves and to pursue the portfolio objectives of maintaining a high standard of liquidity, preserving capital value, and optimizing return.

Risks and mitigation plans

Operational risks associated with reserves investment are addressed through the maintenance of effective governance and audit regimes and through business continuity planning.

4. A sound borrowing framework for Crown entities

Under the Financial Administration Act, the Minister is responsible for approving the borrowing done by government entities and ensuring prudent treasury management policies.

A 2005 study by an outside consulting firm of the current borrowing framework for major Crown borrowers identified improvements to the existing framework and advised on the potential benefits and costs of a consolidated borrowing framework. The study is available through the following link: http://www.fin.gc.ca/toce/2005/MFGBE-e.html.

The Branch plans to attain the expected result through the following ongoing activity and key commitment.

Ongoing activity

• Provide advice on borrowing plan approvals and on ministerial policies for prudent treasury management.

Key commitment

• Enhance the borrowing framework for major government-backed borrowers and conduct follow-up analysis of a consolidated borrowing framework, taking into account the interests of the entities and their stakeholders, market participants, and the government as shareholder.

Risks and mitigation plans

The Department will work with the borrowers to ensure that improvements to the borrowing framework are designed and implemented in such a manner as to achieve operational efficiencies while minimizing exposure to financial and operational risks for the Government of Canada and the borrower.

5. A supply of coinage at a reasonable cost

The Department of Finance Canada buys coinage from the Royal Canadian Mint and resells it to financial institutions. The overriding objective is to ensure the supply of circulating coinage meets the needs of the economy.

For information on the initiatives under this result, see "Program Activity 8, Domestic Coinage."

Priority 2: Sustainable economic growth

Ensuring the competitiveness, efficiency, safety, and soundness of Canada's financial sector and ensuring that domestic financial markets function well are necessary to achieving sustainable growth in the Canadian economy. For 2006–07, the focus will be on completing the 2006 review of the financial institutions statutes, implementing regulations associated with the new corporate governance legislation for financial institutions, preparing for a planned Financial Sector Assessment Program (FSAP) update by the IMF as a follow up to the assessment conducted in 1999, and contributing to an enhanced system of securities regulations in Canada.

Expected result

6. A regulatory framework that promotes the soundness, efficiency, and competitiveness of Canada's financial sector and serves the needs of individuals, businesses, and the economy

The Department advises and develops policy, legislation, and regulations to support a leading-edge financial services sector and domestic capital market to achieve a more productive, competitive, and dynamic economy.

The Branch plans to attain the expected result through the following ongoing activity and key commitments.

Ongoing activity

• Conducting policy analysis and providing advice on a broad range of financial sector issues, including systemic stability, prudential issues, efficiency and global competitiveness, responsiveness to needs of users (including consumers and small and medium enterprises (SME)) and financial services trade.

Key commitments

• Develop legislative proposals for review of financial sector statutes;
• Develop regulations associated with Bill C-57, An Act to Amend Certain Acts in Relation to Financial Institutions;
• Develop preparatory work for the IMF FSAP update; and
• Work with the provinces and territories toward a common securities regulator for Canada.

Risks and mitigation plans

Key commitments generally include legislative initiatives that are subject to consultations, (including intergovernmental discussion), ministerial and Cabinet decision making, as well as parliamentary approval. Priorities and plans, including timelines, are adjusted accordingly.

Priority 3: Sound social policy framework

A properly designed private pension system can contribute to the security of Canadian workers and retirees and support increases in living standards. The focus in 2006–07 will be on strengthening the framework for defined benefit pension plans and providing advice related to the Canada Pension Plan Investment Board (CPPIB).

Expected results

7. A sound legislative and regulatory framework for federally regulated defined benefit pension plans

Following up on the public consultation process that commenced in 2005 and commitments in the 2006 budget, the Department will move forward proposals to strengthen the legislative and regulatory framework for federally registered defined benefit pension plans in order to improve the security of pension benefits and ensure the viability of defined benefit pension plans.

The Branch plans to attain the expected result through the following ongoing activity and key commitment.

Ongoing activity

• Conduct analysis and research and study domestic and international trends in order to provide policy advice on pension issues.

Key commitment

• Move forward proposals to strengthen the legislative and regulatory framework for federally registered defined benefit pension plans in order to improve the security of pension benefits and ensure the viability of defined benefit pension plans.

8. Effective framework for investment of CPP funds

The CPPIB invests CPP funds on behalf of more than 16 million contributors and beneficiaries. The success of the CPPIB in achieving its investment objectives derives primarily from the soundness of its governance and the quality of its board. The Minister of Finance is responsible for the CPPIB legislative framework and for coordinating, on behalf of federal and provincial governments, the appointment of individuals to the Board.

The Branch plans to attain the expected result through the following ongoing activity and key commitment.

Ongoing activity

• Provide timely advice on the CPPIB governance, legislation, regulatory, and reporting issues.

Key commitment

• Contribute to the triennial review of the CPPIB governance and investment issues.

Risks and mitigation plans

The Chief Actuary, within the Office of the Superintendent of Financial Institutions Canada, has the statutory responsibility for ensuring the actuarial soundness of the CPP.

Priority 4: Effective international presence

The Department is responsible for issues related to AML and ATF. The Department's leading role in the global fight against money laundering and terrorist financing contributes to public safety in Canada and worldwide. In 2006–07, the focus will be on enhancing Canada's AML and ATF regime, undergoing a mutual evaluation, and presiding over the FATF.

Expected results

9. A world-class AML and ATF framework

The goal of Canada's AML and ATF regime is to combat money laundering and terrorist financing by conforming to international standards and providing appropriate tools to law enforcement while respecting the privacy of Canadians.

The Branch plans to attain the expected result through the following ongoing activities and key commitments.

Ongoing activities

• Conduct analysis and research and study domestic and international trends in order to provide policy advice on AML/ATF issues; and
• Coordinate the National Initiative to Combat Money Laundering.

Key commitments

• Support the five-year parliamentary review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act;
• Conduct consultations and develop legislation and regulations to enhance Canada's AML/ATF regime in line with revised international standards; and
• Prepare the next mutual evaluation of Canada's AML/ATF regime planned for 2007.

Risks and mitigation plans

Key commitments generally include legislative initiatives that are subject to consultations (including intergovernmental discussion), ministerial and Cabinet decision making, as well as parliamentary approval. Priorities and plans, including timelines, are adjusted accordingly on an ongoing basis.

10. Effective support for Canada's presidency of the FATF

Canada will hold the presidency of the FATF, the key international body established to address terrorist financing and money laundering, from
July 2006 to June 2007. As president of the FATF, Canada will set out the work program for the FATF for 2006–07, chair FATF meetings, host a plenary meeting in October 2006 in Vancouver, and represent the FATF at a number of other international meetings, including meetings of FATF-style regional bodies.

Presiding over the FATF will demonstrate internationally Canada's commitment to remain at the forefront of the global fight against terrorist financing and money laundering.

The Branch plans to provide effective support for Canada's presidency of the FATF through the following ongoing activity and key commitment.

Ongoing activity

• The Financial Sector Division will provide secretariat support for the Canadian president of the FATF during his tenure.

Key commitment

• Planning, organizing, and hosting a plenary meeting of the FATF for 300 to 400 delegates in Canada.

Risks and mitigation plan

International developments and pressures could force a realignment of FATF priorities, which could create operational challenges and alter planning assumptions for the Canadian presidency.

Performance measurement

The Department plans to apply the following performance measurement approach in monitoring and measuring performance against the 10 expected results under this program activity.

Expected Results/ Performance Measurement	1. Stable low-cost financing for the Government of Canada	2. A well-functioning market in Government of Canada securities	3. Management of Canada's official international reserves	4. Improved framework for major Crown-backed entities	5. A supply of coinage at a reasonable cost
Performance Indicators	Measures of operational performance (e.g. interest costs, fixed-floating shares of debt, average term to maturity)	Measures of market performance (e.g. turnover, trading spreads)	Measures of operational performance (e.g. investment returns, risk exposures)	Cost-effective borrowing activities and sound investment practices	Regular audit of payments to the Mint for domestic coinage supply and distribution
Data Sources	Fiscal Monitor; Debt Management Report	Debt Management Report	Annual Report on the Management of Canada's Official International Reserves	Annual Reports, Corporate Plans, quarterly reporting	Public Accounts
Frequency	Monthly and Annual	Annual	Annual	Quarterly and Annual	As required
Target	Stable, low-cost financing	Liquid markets for Government of Canada securities	Portfolio objectives attained	Minimize risk-adjusted borrowing costs and ensure prudent and effective treasury management	Efficient coinage system
Target Date	Ongoing	Ongoing	Ongoing	Ongoing	Ongoing

Performance measurement (continued)

Expected Results/ Performance Measurement	6. A regulatory framework that promotes the soundness, efficiency, and competitive-ness of Canada's financial sector	7. A sound legislative and regulatory framework for federally regulated defined benefit pension plans	8. Effective framework for investment of CPP funds	9. A world-class AML and ATF framework	10. Effective support for Canada's presidency of the FATF
Performance Indicators	Policy, legislative, or regulatory initiatives	Policy, legislative, or regulatory initiatives	The CPPIB investment performance	Policy, legislative, or regulatory initiatives	Support for Canada's FATF presidency
Data Sources	Legislation, regulations, and publications	Legislation or regulations	CPPIB reports	Legislation, regulations, FATF mutual evaluation report	Press releases or other communications for year of Canada's presidency
Frequency	Legislative and regulatory amendments, as needed	Legislative and regulatory amendments, as needed	Quarterly	Amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and regulations, as needed Mutual evaluation roughly every five years	As required

Program Activity 4: Economic Development and Corporate Finance

Under this program activity, the Economic Development and Corporate Finance Branch is responsible for the following:

• providing policy analysis and advice to the Minister on the financial implications of the government's microeconomic policy and programs;
• providing proposals for funding of programs;
• developing sectoral and regional policy analysis; and
• advising on corporate restructuring regarding Crown corporations and other corporate holdings.

To accomplish these tasks, the Branch is organized into the Microeconomic Policy Analysis Division and the Sectoral Policy Analysis Division.

This program activity involves providing policy advice and analysis in the areas of knowledge-based economy, defence, transportation, public infrastructure, environment, energy and resources, agriculture, fisheries, privatization, and Crown corporations.

At times, issues or files that do not fall directly under other Branch portfolios are dealt with under this program activity. Current examples include the New Deal for Cities and Communities and the Smart Regulation Initiative.

Financial Resources: ($ thousands)

2006–07	2007–08	2008–09
8,006	7,953	8,016

Human Resources: FTEs

2006–07	2007–08	2008–09
70	72	72

Priorities

Priority 1: Sound fiscal management

Expected result

1. Thorough assessment of operating and capital funding related to economic development and policy proposals

The Branch plans to attain the expected result through the following ongoing activities.

Ongoing activities

• Assess operating and capital funding for key federal assets and programs, including contributing to the annual climate change review, and the efficient allocation of government resources toward national security initiatives; outputs will include advice to the Minister to support his participation in Cabinet committees and subcommittees to assist with the preparation of the budget and economic updates; and
• Fulfill the central agency role of the Department by identifying major policy issues and proposals under development in the economic departments.

Priority 2: Sustainable economic growth

Expected results

2. Sound advice to the Minister on economic proposals

The Branch plans to attain the expected result through the following ongoing activity and key commitment.

Ongoing activity

• Provide weekly briefings to the Minister in preparation for meetings of Cabinet and its committees, the annual budget, and fiscal updates, as required.

Key commitment

• Provide advice on potential initiatives for budgets in 2006–07, 2007–08, and 2008–09 that implement the government's economic agenda in the following areas:
  • post-secondary education, research, and commercialization;
  • support for private sector research and development;
  • the Security and Prosperity Partnership of North America;
  • improving the regulatory framework;
  • world-class gateways;
  • promoting energy efficiency and environmental sustainability; and
  • strengthening the economic union through work under the Agreement on Internal Trade.

3. Enhanced productivity and economic growth through other governmental initiatives

Working in cooperation with central agencies and key line departments, the Branch will achieve this result through the following ongoing activities and key commitments.

Ongoing activities

• Consideration of government support for the Mackenzie Gas Project;
• Ongoing examination of policy and program options related to the renewal of key government infrastructure programs;
• Development of a made-in-Canada plan to address the issue of greenhouse gas emissions; and
• Helping to shape regional development policies, sectoral policies such as agriculture, fisheries, aerospace, and automotive, and policies related to the New Deal for Cities and Communities.

Outputs will include policy analysis and recommendations for consideration by the Minister before Cabinet committees and subcommittees and advice to the Minister to assist the preparation of the budget and fall update.

Key commitment

• Develop new departmental sustainable development strategy for 2007–10.

4. Improved awareness of the requirements and departmental process for conducting strategic environmental assessments

The Branch will continue to promote awareness throughout the Department of the need to undertake strategic environmental assessments in accordance with the 2004 Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals.

The Branch will achieve this result through the following key commitments.

Key commitments

• Request that the Canadian Environmental Assessment Agency provide a briefing on strategic environmental assessment to the Department's Sustainable Development Working Group, which would also be open to all officers;
• Provide a subsequent presentation to officials on the strategic environmental assessment process tailored to the specific role and activities of the Department; and
• Report to the Departmental Coordinating Committee on the state of strategic environmental assessment implementation within the Department.

Performance measurement

The Department plans to apply the following performance measurement approach in monitoring and measuring performance against the four expected results under this program activity.

Expected Results/Performance Measurement	1. Thorough assessment of operating and capital funding related to economic development and policy proposals	2. Sound advice to the Minister on economic proposals	3. Enhanced productivity and economic growth through other governmental initiatives	4. Improved awareness of the requirements and departmental process for conducting strategic environmental assessments
Performance Indicators	Measures of sector-specific cost-effectiveness (e.g. greenhouse gas reductions, profitability of the agriculture sector)	Implementation of microeconomic policy directions in the government's economic agenda	Fiscally responsible plans to implement the initiatives listed above	The number of strategic environmental assessments conducted by the Department will be tracked and monitored
Data Sources	Various	Budget and Economic Update	Budget and Economic Update	Departmental Inventory
Frequency	Annual	Annual	Annual	Annual
Target	Related to each sector	Announcement of measures that advance productivity and economic growth	Announcement of measures that advance productivity and economic growth	Maintain awareness of the departmental strategic environmental assessment process
Target Date	Budgets and economic updates in 2006–07, 2007–08, and 2008­–09	Budgets and economic updates in2006–07, 2007–08, and 2008–09	Ongoing, annual activities	Ongoing, annual activities

Program Activity 5: Federal-Provincial Relations and Social Policy

Under this program activity, the Federal-Provincial Relations and Social Policy Branch has primary responsibility for providing analysis and advice to the Minister of Finance on federal-provincial-territorial fiscal arrangements, fiscal and economic relations, and Canadian social policies and programs, such as health care, employment insurance, seniors' benefits, Aboriginal programs, education programs, and cultural programs.

Financial Resources: ($ thousands)

2006–07	2007–08	2008–09
17,229	12,222	12,319

Human Resources: FTEs

2006–07	2007–08	2008–09
115	102	103

Priorities

Priority 3: Sound social policy framework

The focus for the Branch for 2006–07 will be on the following:

• Restoring fiscal balance; and
• Contributing to the government's social policy priorities.

Expected results

1. Implementation of a new formula for Equalization and Territorial Formula Financing (TFF)

Equalization and TFF are closely related programs, with the former providing funding to certain provinces and the latter providing funding to the three territories.

Since 1957–58, Equalization has been Canada's most important program for reducing fiscal disparities among provincial governments. Equalization payments enable provincial governments to provide their residents with public services that are reasonably comparable to those in other provinces at reasonably comparable levels of taxation. In 2005–06, $10.9 billion was provided to recipient provinces and in 2006–07, more than $11.5 billion will be provided.

TFF is the main transfer program from the Government of Canada to the three territorial governments. Although territorial governments have the authority to raise revenues by taxation, rentals, and the sale of goods and services, a significant portion of their financial resources comes from the federal government through TFF. In 2005–06, $2 billion was provided to territories and in 2006–07 $2.07 billion will be provided.

Both Equalization and TFF are typically renewed every five years to ensure the integrity of the formulas upon which payments are based. Data sources and methodologies are reviewed and improvements made where necessary. The most recent renewal for Equalization, for the period from 2004–05 to 2008–09, took place in May 2004. The last renewal for TFF, for the period from 1999–2000 to 2003–04, was in October 1998.

Following these renewals, discussions between the federal, provincial, and territorial governments in 2004 led to the October 2004 announcement by the Government of Canada of a new framework for Equalization and TFF.

An important element of the October 2004 announcement was the establishment of an independent Expert Panel in March 2005 to review Equalization and TFF. The Panel's mandate was to provide advice on how the legislated levels of Equalization and TFF should be allocated annually among provinces and territories. As part of its review, the Panel was, among other things, to:

• evaluate the established methodology for measuring fiscal disparities among provinces and territories;
• examine alternative approaches (such as those based on aggregate macroeconomic indicators or expenditure needs);
• review the evolution of fiscal disparities among provinces, and the costs of providing services in the territories, to help governments and citizens evaluate the overall level of support for Equalization and TFF; and
• advise on whether the Government of Canada should establish a permanent independent body to advise it on the allocation of Equalization and TFF within the framework of legislated levels.

The Expert Panel provided a report to the Minister in June 2006. The report is available on the Panel's website at http://www.eqtff-pfft.ca/english/index.asp. The Branch plans to attain the expected result through the following ongoing activities and key commitments.

Ongoing activities

• Continue to update Equalization and TFF information; and
• Determine payment levels based on legislation.

Key commitments

• Review the recommendations of the Expert Panel;
• Develop advice on new allocation formulas for Equalization and TFF;
• Undertake consultations with provinces and territories; and
• Prepare legislation and regulatory changes and coordinate with provinces and territories.

2. Determination of the most appropriate arrangements for post-secondary education and training

The government made a commitment in the 2006 budget to determine the most appropriate arrangements for long-term funding commitments for post-secondary education and training.

Key commitment

• Work with other branches of the Department, central agencies, government departments, and external stakeholders to ensure timely decisions with respect to, and implementation of, the commitment to determine funding in the areas of post-secondary education and training.

3. Effective implementation of government social policy priorities

The Federal-Provincial Relations and Social Policy Branch is responsible forthe provision of analysis and advice to the Minister of Finance on social policy issues, including early learning and childcare, post-secondary education, income security, justice and safety, health and wellness, culture, and Aboriginal opportunities.

The Branch plans to attain the expected result through the following ongoing activity and key commitment.

Ongoing activity

• Continue to advise the Minister and senior management on social policy issues as they arise.

Key commitment

• Work with other branches of the Department, central agencies, government departments and external stakeholders to ensure timely decisions with respect to, and implementation of, initiatives and related funding in the areas of social policy identified by the government as priorities.

Performance measurement

The Department plans to apply the following performance measurement approach in monitoring and measuring performance against the three expected results under this program activity.

Expected Results/ Performance Measurement	1. Implementation of new formula for Equalization and TFF	2. Determine the most appropriate arrangements for post-secondary education and training	3. Effective implementation of government social policy priorities
Performance Indicators	Research, analysis, and advice with respect to Equalization and TFF Bring forward proposal on renewed programs	Bring forward proposal on renewed arrangements	Timely implementation of programs related to the government's social policy priorities
Data Sources	Various	Various	Main and Supplementary Estimates for other departments
Frequency	Ongoing	Ongoing	Annual
Target	Timely and accurate research, analysis, and advice	Timely decisions with respect to, and implementation of, the commitment to determine funding in the areas of post-secondary education and training	Timely rollout of initiatives and related funding of government social policy priorities
Target Date	Ongoing Proposals for renewal intended to be brought forward by the fall of 2006	Proposals for renewal intended to be brought forward by fall of 2006	Ongoing

Program Activity 6: International Trade and Finance

Under this program activity, the International Trade and Finance Branch:

• Supports the Minister's participation in the G7, G8, and G20 and in international financial institutions;
• Conducts work related to international development assistance, export finance, and international economic and financial relations;
• Maintains responsibility for the policy management of import legislation (tariffs and trade remedies); and
• Provides analytical support and policy advice on international trade and investment matters.

Financial Resources: ($ thousands)

2006–07	2007–08	2008–09
15,997	15,900	16,025

Human Resources: FTEs

2006–07	2007–08	2008–09
123	126	128

Priorities

Priority 2: Sustainable economic growth

As a highly open economy in an increasingly globalized marketplace, Canada's economic performance will continue to improve through more open trade and investment flows and high standard multilateral, regional, and bilateral trade and investment rules and agreements. Securing access for Canadian exports and investors to key markets will enhance the competitiveness of domestic industries and expand commercial opportunities for them.

Expected result

1. Stronger international trading system and more open markets

The Branch will work to improve Canada's overall economic performance through a stronger international trading system and open markets to enhance competitiveness of domestic industries and expand access for Canadian exports and investment in major foreign markets.

The Branch plans to attain the expected result through the following ongoing activities and key commitments.

Ongoing activities

• Enhance Canadian competitiveness through further progress on a range of trade facilitation and border efficiency issues with the U.S., particularly through the trilateral Security and Prosperity Partnership of North America;
• Provide support to improve international trade and investment rules through ongoing negotiations;
• Support Canada's trade and investment interests through the negotiation of bilateral and regional agreements, particularly in key emerging markets in the Asia-Pacific, Japan, and India; and
• Manage Canada's import policy regime, tariffs, and trade remedies with a view to enhancing the overall competitiveness of Canadian manufacturers to compete in domestic and international markets.

Key commitments

• Pursue ongoing trade and investment agreements in partnership with other government departments;
• Develop and implement initiatives, in partnership with other government departments, to enhance access to U.S. markets (under the Security and Prosperity Partnership initiative); and
• Use Canada's tariff regime as a vehicle to improve competitiveness.

Priority 4: Effective international presence

Expected result

2. Policy positions and proposals that improve prospects for global economic and financial stability and better financial governance

As an open economy that benefits from a strong multilateral system of global economic and financial governance, Canada has a strong interest in promoting initiatives to strengthen the leadership of forums such as the G7 and G20, as well as in ensuring the credibility and strength of organizations such as the IMF and World Bank. Canada also has an interest in greater prosperity and economic and social progress in developing economies.

The Branch plans to attain the expected result through the following ongoing activities and key commitments.

Ongoing activities

• Continue to support the participation of the Minister and G7 Deputy in the G7, G8, G20, and other international forums, as well as in the international financial institutions (IFI), by promoting Canadian policy positions and working to strengthen global economic and financial outcomes;
• Promote Canadian policy positions at the IMF, World Bank, and the EBRD to strengthen their effectiveness and ability to carry out their respective mandates; and
• Provide guidance on the funding demands of other government departments and agencies that are tasked primarily with an international mandate by providing policy analysis and advice consistent with the government's fiscal framework.

Key commitments

• Actively contribute to progress in the G7 and G20 finance ministers' forums on IMF reform issues (including quota reform);
• Organize, host, and promote an important G20 seminar to develop policy options for a G20 approach to natural resources issues of interest to G20 finance ministers and central banks;
• Maintain the network of finance counsellor positions abroad and expand it with a new finance counsellor position in Beijing; and
• Work toward more effective implementation of the International Assistance Envelope to ensure that resource allocation decisions reflect the government's priorities.

3. Effective international initiatives to strengthen developing economies

The Branch will contribute to international initiatives to improve outcomes in the developing economies through effective use of international assistance, debt relief, and other means and provide payments consistent with the Department's commitments.

The Branch plans to attain the expected result through the following ongoing activities and key commitments.

Ongoing activities

• Continue to represent Canada at the Paris Club and implement multilateral debt rescheduling agreements; and
• Continue to support and provide timely advice to the Minister in respecting Canadian financial assistance in response to international emergency relief issues.

Key commitments

• Develop initiatives for more effective use of international assistance and debt relief; and
• Develop and promote positions that will lead to effective international disciplines on government support for trade finance.

Performance measurement

The Department plans to apply the following performance measurement approach in monitoring and measuring performance against the three expected results under this program activity.

Expected Results/ Performance Measurement	1. Stronger international trading system and more open markets	2. Policy positions and proposals that improve prospects for global economic and financial stability and better financial governance	3. Effective international initiatives to strengthen developing economies
Performance Indicators	Progress will be measured through the results of various regional, multilateral, and bilateral trade and investment negotiations and initiatives	Policies adopted at the IFIs and promoted by the Finance Ministers' forums	Progress will be measured through the results of various bilateral and multilateral negotiations and initiatives
Data Sources	Policies and communiqués in international initiatives and negotiations	Communiqués and reports of Finance Ministers' forums and IFIs	Policies and communiqués in international initiatives and negotiations
Frequency	Ongoing	Periodic	Ongoing
Target	International meetings and negotiations	Multiple, depending on forum and issue	International meetings and negotiations
Target Date	Ongoing	Ongoing	Ongoing

Program Activity 7: Public Debt

Under this program activity, the Financial Sector Policy Branch is responsible for managing the Government of Canada's debt program, including the statutory funding of interest, the service costs of the public debt, and the issuing costs of new borrowings.

In addition, the Canada Investment and Savings Agency, a special operating agency of the Department, seeks to deliver a vibrant, creative, and cost-effective retail debt program (RDP) that provides value to Canadians, contributes to a diversified investor base, and ensures Canadians are aware of and have easy access to Government of Canada securities.

Financial Resources: ($ thousands)

2006–07	2007–08	2008–09
34,395,000	34,760,000	34,585,000

Human Resources: FTEs

2006–07	2007–08	2008–09
57	57	57

Priorities

Priority 1: Sound fiscal management

Debt service is the largest spending program of the federal government. The prudent and effective management of the government's debt continues to be an important element of the Department's strategy for sound fiscal management. The focus for 2006–07 will be on reviewing and evaluating the effectiveness of debt management and treasury management frameworks and programs. The Department also will work to implement changes to the retail debt program to enhance cost-effectiveness.

Expected results

1. Stable, low-cost financing for the Government of Canada

The government's operational needs are met through borrowing from capital markets. The government's debt structure (the mix of fixed- and floating-rate debt) is managed to ensure that debt costs are kept low and stable over time.

The Branch plans to attain the expected result through the following ongoing activities and key commitments.

Ongoing activities

• Plan and conduct, in collaboration with the Bank of Canada, debt and cash management operations to meet operational needs; and
• Periodically review funds management frameworks, targets, and programs to ensure the soundness of governance regimes and the effectiveness of the management of financial cost and risk.

Key commitment

• Adjust bond and bond buyback programs to continue progress toward the debt structure target of 60-per-cent fixed-rate debt announced in 2003.

Risks and mitigation plans

Changes to the government's fiscal needs pose strategic and operational challenges for debt and cash management, which are carried out through the maintenance of diversified, flexible borrowing programs. Operational risks are addressed through business continuity planning.

2. A well-functioning market in Government of Canada securities

A well-functioning wholesale market in Government of Canada securities benefits the government and a wide range of market participants. For the government as a debt issuer, a well-functioning market attracts investors and ensures that funding costs are kept low. For market participants, a liquid and active secondary market in government debt provides credit risk-free assets for investment portfolios, a pricing benchmark for other instruments, and a primary tool for hedging risk.

The Branch plans to attain the expected result through the following initiatives.

Ongoing activities

• Design and implement Government of Canada debt programs to provide liquidity, transparency, and regularity; and
• Consult regularly with market participants to identify adjustments to debt programs to maintain well-functioning markets in Government of Canada securities.

Risks and mitigation plans

Failure to maintain a well-functioning market can affect both the government and market participants. Risks are managed through the maintenance of strict auction participation rules, flexibility to adjust issuance, and active market surveillance.

3. A cost-effective retail debt program

The Canada Investment and Savings Agency plans to attain the expected result through the following ongoing activities and key commitment.

Ongoing activities

• Improve overall program efficiencies while reducing costs through careful investment and streamlined administration;
• Work to ensure that Canada Savings Bonds remain relevant to Canadians; and
• Balance efforts on sales and retention;

Key commitment

• In 2006–07, within the non-certificated payroll program, expand use of electronics, and leverage back-office system improvements.

Performance measurement

The Department plans to apply the following performance measurement approach in monitoring and measuring performance against the three expected results under this program activity.

Expected Results/Performance Measurement	1. Stable low-cost financing for the Government of Canada	2. A well-functioning market in Government of Canada securities	3. A cost-effective RDP
Performance Indicators	Measures of operational performance (e.g. interest costs, fixed-floating shares of debt, average term to maturity)	Measures of market performance (e.g. turnover, trading spreads)	RDP budget of $105,045K
Data Sources	Fiscal Monitor, Debt Management Report	Debt Management Report	RDP Expenditures
Frequency	Monthly and annual	Annual	Annual
Target	Stable low-cost financing	Liquid markets for Government of Canada Securities	Manage the RDP within the budget of $105,045K
Target Date	Ongoing	Ongoing	March 31, 2007

Program Activity 8: Domestic Coinage

Under this program activity, the Financial Sector Policy Branch is responsible for the payment of the production and distribution costs for domestic circulating coinage.

Financial Resources: ($ thousands)

2006–07	2007–08	2008–09
83,100	80,700	49,000

Priorities

Priority 1: Sound fiscal management

The Department of Finance Canada buys coinage from the Royal Canadian Mint and resells it to financial institutions. The overriding objective is to ensure that the supply of circulating coinage meets the needs of the economy.

Expected result

1. A supply of coinage at a reasonable cost

The Branch will work to achieve the expected result through the following ongoing activity and key commitment.

Ongoing activity

• The payment of Mint production and distribution costs for domestic circulating coinage.

Key commitment

• Implement a new coin production agreement with the Mint containing terms and business arrangements that promote efficiency and reduce costs to the government.

Risk and mitigation plans

Market prices of metals used in coinage production are subject to considerable variation. A new agreement with the Mint will transfer most of the risk involved in coinage production to the Mint.

Performance measurement

The Department plans to apply the following performance measurement approach in monitoring and measuring performance against the expected result under this program activity.

Expected Results/ Performance Measurement	1. A supply of coinage at a reasonable cost
Performance Indicators	Regular audit of payments to the Mint for domestic coinage supply and distribution
Data Sources	Public accounts
Frequency	As required
Target	Efficient coinage system
Target Date	Ongoing

Program Activity 9: Transfer Payments to Provinces and Territories

Under this program activity, the Federal-Provincial Relations and Social Policy Branch is primarily responsible for the administration of the major transfer payments to provinces and territories.

Financial Resources: ($ thousands)

2006–07	2007–08	2008–09
38,631,828	40,095,000	41,940,000

Priorities

Priority 3: Sound social policy framework

Payments made under the various transfer programs are an important source of revenue for provincial and territorial governments. In 2006–07, an estimated $38.8 billion in cash payments will be provided to the provinces and territories.

Transfer payments take the form of either cash transfers or tax transfers. Cash transfers are provided as either cash payments to provincial or territorial finance departments and treasuries or payments to trust funds on behalf of provinces and territories. As well, the value of the tax transfers provided to provinces and territories in lieu of cash payments in the 1960s and 1970s is measured annually since these transfers affect the allocation of cash transfers. Acts and regulations govern the programs, and the Office of the Auditor General of Canada audits the payments each year.

The Department administers the following programs: the Equalization program and the TFF, the CHT, the CST, Alternative Payments for Standing Programs, the Youth Allowances Recovery program, and statutory subsidies. In addition, prior-year payments or recoveries for the former Canada Health and Social Transfer (CHST) and the former Health Reform Transfer continue to be calculated. The February 2005 Arrangement between the Government of Canada and the Government of Newfoundland and Labrador on Offshore Revenues and the February 2005 Arrangement between the Government of Canada and the Government of Nova Scotia on Offshore Revenues are administered by the Department, while Natural Resources Canada continues to administer Offset Payments to Newfoundland and Labrador under the Canada-Newfoundland Atlantic Accord Implementation Act.

Expected result

1. Financial support for Canadian provinces and territories to assist them in providing public services, universally accessible health care services, post-secondary education, and social assistance

The Branch plans to attain the expected result through the following ongoing activities and key commitment.

Ongoing activities

• Administration of the transfer programs, including calculation of entitlements, provision of payments, provision of information for Government of Canada reports, and provision of information to federal auditors—information concerning entitlements is provided to provincial and territorial officials, including auditors;
• Administration of various trust funds, including the five trust funds totalling $3.3 billion that were established in March 2006 using the authority of Bill C-48 (pending: contingent on the surplus for 2005–06), the $4.25-billion Wait Times Reduction Transfer Trust announced in September 2004, and the $120-million Northern Strategy Trust Fund announced in Budget 2005; and
• Administration of several important loans and deferral arrangements currently in place, including the Equalization Repayable Floor loan, deferral of the effects of Census 2001 and 2002 taxation data (Equalization and CHST), and deferral of the effect of the new residential net capital stock data (Equalization) on Quebec.

Key commitment

• Implementation of new formulas for Equalization and TFF will be required. These formulas will be developed following consultations with provinces and territories. The report of the Expert Panel on Equalization and TFF, tabled in June 2006, and other recent reports on fiscal federalism, including the report of the Council of the Federation Advisory Panel on Fiscal Imbalance, will be important inputs for these consultations.

Performance measurement

The Department plans to apply the following performance measurement approach in monitoring and measuring performance against the expected result under this program activity.

Expected Result/Performance Measurement	1. Financial support for Canadian provinces and territories to assist them in providing public services, universally accessible health care services, post-secondary education, and social assistance
Performance Indicators	Timely and accurate administration of transfer payments
Data Sources	Public Accounts of Canada
Frequency	Annual
Target	Payments must be made according to levels and formulas set out in legislation
Target Date	Fiscal year-end

Program Activity 10: International Financial Organizations

Under this program activity, the International Trade and Finance Branch is responsible for the effective administration of Canada's international commitments associated with Paris Club debt rescheduling agreements and financial assistance to the International Development Association, the IMF, and the EBRD.

Financial Resources: ($ thousands)

2006–07	2007–08	2008–09
733,340	417,005	511,967

Priorities

Priority 4: Effective international presence

Expected result

1. Payments to international organizations and Canadian creditors consistent with the Department's commitments

The Branch will contribute to international initiatives to improve outcomes in the developing economies through effective use of international assistance, debt relief, and other means and provide payments consistent with the Department's commitments.

The Branch plans to attain the expected result through the following ongoing activity and key commitments.

Ongoing activity

• Provide timely payments, as required, to a wide range of international financial organizations and Canadian creditors, consistent with the Department's commitments. Such payments play an important role in mobilizing resources for poverty reduction in low-income and least-developed countries.

Key commitment

• Ensure timely payments, as required, to a wide range of international financial organizations.

Performance measurement

The Department plans to apply the following performance measurement approach in monitoring and measuring performance against the expected result under this program activity.

Expected Results/Performance Measurement	1. Payments to international organizations and Canadian creditors consistent with the Department's commitments
Performance Indicators	Timely payments
Data Sources	Department's financial reporting system
Frequency	Periodic payments
Target	Payments made according to a predetermined schedule or within 30 days of the invoice being received
Target Date	Ongoing

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