Western Economic Diversification Canada
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Financial Statements for the year ended March 31, 2010

Statement of Management Responsibility

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2010 and all information contained in this report rests with Western Economic Diversification Canada (WD) management. These financial statements have been prepared by management in accordance with accounting standards issued by the Treasury Board of Canada Secretariat 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 judgement and gives due consideration to materiality. To fulfil its accounting and reporting responsibilities, management maintains a set of accounts that provide a centralized record of the Department's financial transactions. Financial information submitted to the Public Accounts of Canada and included in the WD'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 Departmental Audit Committee is advisory to the Deputy Minister. Based on recommendations from the Departmental Audit Committee, the Deputy Minister approves the departmental risk-based audit plan, internal audit reports, as well as management action plans developed to address audit recommendations. The Departmental Audit Committee exercises oversight of core areas of departmental management, control and accountability, including reporting.

The financial statements of Western Economic Diversification Canada have not been audited.

____________________________
Daniel Watson
Deputy Minister
Edmonton, Alberta Canada

____________________________
Date

 

_____________________________
Jim Saunderson
Chief Financial Officer

_____________________________
Date

 


 

Statement of Operations (unaudited)
For the Year Ended March 31, 2010

(in thousands of dollars)

  2010 2009
Transfer Payments (note 4)
Policy, Advocacy and Coordination 369 923
Community Economic Development 218,883 69,828
Entrepreneurship and Innovation 121,998 112,068
Total Transfer Payments 341,250 182,819
 
Operating Expenses (note 4)
Policy, Advocacy and Coordination 19,303 13,497
Community Economic Development 22,125 17,737
Entrepreneurship and Innovation 33,500 28,486
Total Operating Expenses 74,928 59,720
 
Total Expenses 416,178 242,539
 
Revenues (note 5)
Policy, Advocacy and Coordination - -
Community Economic Development 1 16
Entrepreneurship and Innovation 3,823 1,553
Total Revenues 3,824 1,569
 
Net Cost of Operations 412,354 240,970

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Statement of Financial Position (unaudited)
At March 31, 2010

(in thousands of dollars)

  2010 2009
Obligations contractuelles (note 12)

Passif éventuel (note 14)
Assets
Financial Assets
Receivables (note 6) 905 886
Repayable Contributions (note 7) 21,056 8,284
Total Financial Assets 21,961 9,170
 
Non Financial Assets
Prepayments (note 8) 10,716 10,642
Tangible Capital Assets (note 9) 2,405 2,325
Total Non-Financial Assets 13,121 12,967
 
Total Assets 35,082 22,137
 
Liabilities
Accounts Payable and Accrued Liabilities (note 10) 184,759 106,478
Vacation pay and compensatory leave 2,062 1,709
Employee severance benefits (note 11) 8,701 6,496
Total Liabilities 195,522 114,683
 
Equity of Canada (160,440) (92,546)
 
Total Liabilities and Equity of Canada 35,082 22,137

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Statement of Equity of Canada (unaudited)
At March 31, 2010

(in thousands of dollars)

  2010 2009
Equity of Canada, beginning of year (92,546) (119,528)
Net cost of operations (412,354) (240,970)
Current year appropriations used (note 3) 421,303 242,173
Revenue not available for spending (3,947) (1,843)
Refund of prior years expenditures (note 3-c) (1,565) (3,305)
Change in net position in the Consolidated Revenue Fund (note 3-c) (78,600) 24,944
Services provided without charge by other government departments (note 13-a) 7,269 5,983
Equity of Canada (160,440) (92,546)

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Statement of Cash Flow (unaudited)
For the Year Ended March 31, 2010

(in thousands of dollars)

  2010 2009
Operating transactions
Net cost of operations 412,354 240,970
 
Non-Cash Items:
Amortization of tangible capital assets (525) (429)
(Loss) gain on disposal of tangible capital assets - (3)
Services provided without charge by other government departments (note 13 (a)) (7,269) (5,983)
 
Variations in Statement of Financial Position:
Increase (decrease) in receivables 19 (2,020)
Increase in repayable contributions 12,772 57
Increase (Decrease) in prepayments 74 (397)
(Increase) decrease in accounts payable and accrued liabilities (78,281) 28,947
(Increase) in vacation pay and employee severance benefits (2,558) (88)
Cash used by operating activities 336,586 261,054
 
Capital investment activities
Acquisitions of tangible capital assets (note 9) 605 915
Cash used by capital investment activities 605 915
 
Financing Activities
Net Cash Provided by Government of Canada (337,191) (261,969)

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Notes to the Financial Statements (Unaudited)
For the Year Ended March 31, 2010

1. Authority and Objectives

Western Economic Diversification Canada (WD), a department of the Government of Canada operates under the authority of the Western Economic Diversification Act of 1988 that works to strengthen Western Canada's economy and advance its interests in national economic policy.

Through the Act, WD is mandated to:

  • promote the development and diversification of the western Canadian economy;
  • coordinate federal economic activities in the West; and
  • reflect western Canadian interests in the formation of national economic policy.

Working in partnership with provincial and municipal governments, as well as other organizations, WD's programs and initiatives contribute to the Government of Canada's agenda for building a 21st Century economy in the West.

WD's headquarters and Deputy Minister are located in Edmonton, Alberta. In close cooperation with western stakeholders, WD's objective is to more effectively guide federal government policies, regulations and resources so that they become more constructive instruments of western economic growth and diversification. WD's efforts are concentrated in three distinct but interrelated areas leading to the following strategic outcomes:

  • the western Canadian economy is competitive, expanded and diversified (Entrepreneurship and Innovation);
  • communities in Western Canada are economically viable (Community Economic Development); and
  • policies and programs that strengthen the western Canadian economy (Policy, Advocacy & Coordination).

As part of WD’s mandate to co-ordinate federal economic activities in the West, WD implements some programs on behalf of other federal departments and agencies. These programs are implemented under arrangements where the other federal department provides the authorities and funding from Parliament. Related grant and contribution costs are reported in the accounts of other federal departments; they are not reflected as expenses in these Financial Statements.

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2. Summary of Significant Accounting Policies

The financial statements have been prepared in accordance with accounting standards issued by the Treasury Board of Canada Secretariat which are consistent with Canadian generally accepted accounting principles for the public sector. The presentation and results using the stated accounting policies do not result in any differences from Canadian generally accepted accounting principles.

Significant accounting policies are as follows:

(a) Parliamentary appropriations – WD is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to WD do not parallel financial reporting according to Canadian 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 two bases of reporting.

(b) Net Cash Provided by Government – WD operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by WD is deposited to the CRF and all cash disbursements made by WD are paid from the CRF. 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 CRF is the difference between the net cash provided by government and appropriations used in a year, excluding the amount of non-respendable revenues recorded by WD. It results from timing differences between when a transaction affects appropriations and when it is processed through the CRF.

(d) Revenues

  1. Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.
     
  2. Other revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues.
     
    • Sources of revenues include:
       
      • Interest charges on repayment of contributions.
         

(e) Expenses are recorded on the accrual basis:

  1. Transfer Payments:
     
    • Grants are recognized in the year in which the conditions for payment are met.
       
    • Contributions are recognized in the year in which the recipient has met the eligibility criteria or fulfilled the terms of a contractual transfer agreement, provided that the transfer is authorized and a reasonable estimate can be made.
       
  2. Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment.
     
  3. Services provided without charge by other government departments for accommodation, employer’s contribution to the health and dental insurance plans, workers’ compensation and legal services are recorded as operating expenses at their estimated cost.

(f) Employee future benefits

  1. Pension benefits: Eligible employees participate in the Public Service Pension Plan (The Public Service Superannuation Act), a multi-employer plan administered by the Government of Canada. WD's contributions to the plan are charged to expenses in the year incurred and represent the total departmental obligations to the plan. Current legislation does not require WD to make contributions for any actuarial deficiencies of the plan.
     
  2. Severance benefits: Employees are entitled to severance benefits under labour contracts or conditions of employment. These benefits are accrued as employees render the services necessary to earn them. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the government as a whole.

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

(h) Loan and Investment Program – are agreements with financial institutions under which the financial institutions authorize and issue loans or make investments using their own capital, and WD provides a loss support contribution, equal to between 10 and 20% of the value of the loans or investments issued. This contribution is used to offset a portion (up to 80%) of net losses on defaulted loans and investments up to a maximum not exceeding WD’s total contribution.

(i) Transfer Payments are payments that are made on the basis of an appropriation for which no goods or services are directly received (but may require the recipient to provide a report or other information subsequent to receiving payments). WD administers two types of transfer payments:

  • Grants: transfer payments made to an individual or organization that is not subject to being accounted for or audited, but for which eligibility and entitlement may be verified or the recipient may need to meet pre-conditions.
     
  • Contributions: conditional transfer payments made to an individual or organization for a specified purpose pursuant to a contribution agreement that is subject to being accounted for and audited.

Within the Contributions category, WD is authorized to make both non-repayable and repayable contributions. Repayable contributions are contributions whereby the recipient is expected to repay the amount advanced. Depending on their nature, they are classified as either unconditionally repayable or conditionally repayable and are accounted for differently. Normally, these contributions are provided at no interest.

  1. Unconditionally repayable contributions are contributions that must be repaid without qualification. Due to their concessionary nature, they are recorded on the Statement of Financial Position as loans at their estimated present value. A portion of the unamortized discount is brought into income each year to reflect the change in the present value of the contributions outstanding. Appropriate allowances for uncollectible amounts are also established based on an individual appraisal of accounts. Interest revenue on outstanding receivables is recognized in the year that they are earned.
     
  2. Conditionally repayable contributions are contributions that all or part of which becomes repayable if conditions specified in the contribution agreement come into effect. Accordingly, they are not recorded on the Statement of Financial Position until such time as the conditions specified in the agreement are satisfied at which time they are then recorded as a receivable and a reduction in transfer payment expenses. Appropriate allowances for uncollectible amounts are also established based on an individual appraisal of accounts.

    Prior to 1995 repayable contributions were regularly used to assist in the delivery of WD's mandate. Since 1995 they have only been used in limited circumstances. However, these repayable contributions will continue to be recorded on the financial statement and will continue to be until they are repaid or all reasonable attempts to collect have been taken and the accounts written-off.
     
  3. Non-Repayable contributions are contributions that are not repayable unless default conditions in the agreement are exercised.

(j) Contingent liabilities (note 14) are potential liabilities, which may become actual liabilities when one or more future event(s) occurs or fails 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 contingent liability is disclosed in the notes to the financial statements.

(k) Tangible capital assets (note 9) - All tangible assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. WD does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value.

Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:

Asset class Sub-asset class Amortization period
Machinery and equipment Computer equipment 3 years
  Computer software 3 - 7 years
  Other equipment 10 years
Vehicles   5 years
Leasehold improvements   Term of the lease

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(l) Measurement uncertainty - The preparation of these financial statements in accordance with accounting standards issued by the Treasury Board of Canada Secretariat 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 allowance for doubtful accounts, the liability for employee severance benefits, the useful life of tangible capital assets and unamortized discount related to unconditionally repayable contributions. Actual results could 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

WD 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, WD has different net cost of operations for the year on a government-funding basis than on an accrual accounting basis. The differences between net cost of operations and appropriations are reconciled in the following tables.

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

  2010 2009
( in thousands of dollars )
Net cost of operations 412,354 240,970
 
Adjustments for items affecting net cost of operations but not affecting appropriations:
Add (Less):
Amortization of tangible capital assets (525) (429)
Services provided without charge by other government departments - note 13(a) (7,269) (5,983)
Revenue not available for spending 3,947 1,843
Refund of prior years expenditures 1,565 3,305
(Loss) gain on disposal of tangible capital assets - (3)
(Increase) in vacation and compensatory leave (353) (81)
(Increase) decrease in employee severance benefits (2,205) (7)
Other: 13,110 2,040
  8,270 685
 
Adjustments for items not affecting net cost of operations, but affecting appropriations:
Add (less):
Increase (Decrease) in prepayments 74 (397)
Acquisitions of tangible capital assets 605 915
  679 518
 
Current year appropriations used 421,303 242,173

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(b) Appropriations provided and used:

  2010 2009
( in thousands of dollars )
* WD received approval from TB to re-profile 25,200 K of unused appropriations from 2009-10 to future years through the 2010/2011 ARLU process.
Vote 1 - Operations 59,483 53,102
Vote 5 - Transfer Payments 277,461 232,594
Statutory amounts 140,166 5,518
 
Total Appropriations 477,110 291,214
Less:
Lapsed / Unused appropriations: - Operating Expenditures incl EBP (4,493) (3,456)
Lapsed / Unused appropriations: - Transfer Payments * (51,314) (45,585)
  (55,807) (49,041)
 
Total Appropriations Used 421,303 242,173

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

  2010 2009
( in thousands of dollars )
Net Cash provided by government 337,191 261,969
Revenue not available for spending 3,947 1,843
Refund of prior years expenditures 1,565 3,305
 
Change in net position in the Consolidated Revenue Fund:
(Increase) decrease in accounts receivable (19) 2,020
(Increase) decrease in repayable contributions (12,772) (57)
Increase (Decrease) in accounts payable and accrued liabilities 78,281 (28,947)
Other adjustments: 13,110 2,040
Total Change in net position (78,600) (24,944)
 
Current year appropriations used 421,303 242,173

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4. Expenses

The following table presents details of expenses by category:

  2010 2009
( in thousands of dollars )
*The adjustment of 1,215 K, for 2008-9, is attributed to a reduction to the Allowance for Doubtful Accounts under repayable contributions.
Transfer Payments
Transfer Payments 341,250 182,819
Total Transfer Payments 341,250 182,819
 
Operating Expenses
Salaries 39,445 33,587
Employee benefits 12,247 8,351
Professional and special services 7,434 8,316
Transportation & Communications 3,962 3,877
Accommodation 3,745 3,079
Bad Debts (adjustments) * 3,557 (1,215)
Acquisition of machinery and equipment 1,398 1,325
Repairs, utilities, materials and supplies 1,034 901
Rentals 764 931
Information 693 373
Amortization of tangible capital assets 525 429
Other 124 (234)
Total Operating Expenses 74,928 59,720
Total Expenses 416,178 242,539

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5. Revenues

The following table presents details of revenues by category:

  2010 2009
( in thousands of dollars )
Interest 2,276 822
Amortization of discount on repayable contributions - 418
Revenues from Conditionally repayable contributions 1,104 279
Compensatory Repayments 57 -
Other 387 50
Total Revenues 3,824 1,569

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6. Receivables

  2010 2009
( in thousands of dollars )
External Parties
Accrued Interest 667 568
Receivable from the Province of British Columbia - 298
Non-Repayable Contributions - 126
Other Receivables 5,970 5,692
Employee Advances 8 5
Gross External Parties Account Receivable 6,645 6,689
Allowance for Doubtful Accounts (6,332) (5,924)
Subtotal - External Parties 313 765
Other Government Departments 592 121
Total Receivables 905 886

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7. Repayable Contributions

  2010 2009
( in thousands of dollars )
Unconditionally Repayable Contributions 33,527 19,699
Unamortized Discount on Unconditionally Repayable Contributions (2,527) (194)
Allowance for Doubtful - Repayable Contributions (10,078) (11,221)
Net Unconditionally Repayable Contributions 20,922 8,284
Accrued Interest -Unconditionally Repayable Contributions 7,435 5,927
Allowance for Doubtful Accounts - Accrued Interest Receivable (7,301) (5,927)
Total Repayable Contributions 21,056 8,284

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8. Prepayments

  2010 2009
( in thousands of dollars )
Loss Support Contributions 13,993 12,995
Allowance for Losses on Loss Support Contributions (3,521) (3,263)
Net Loss Support Contributions 10,472 9,732
Non-Repayable and Conditionally Repayable Contributions 226 910
Prepaid expenses 18 -
Total Prepayments 10,716 10,642

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9. Tangible Capital Assets

(in thousands of dollars)

  Machinery & Equipment Vehicles Leasehold Improvements Total
* Amortization expense for the year ending March 31, 2010 is $524,795 ($428,565 for the year ending March 31, 2009)
Cost
Opening balance 3,222 112 696 4,030
Acquisitions 428 - 164 592
Work in Progress - - 13 13
Disposals (349) - - (349)
Adjustments - - - -
Closing balance 3,301 112 873 4,286
 
Accumulated amortization
Opening balance (1,205) (56) (444) (1,705)
Amortization * (448) (14) (63) (525)
Disposals 349 - - 349
Closing balance (1,304) (70) (507) (1,881)
2010 Net book value 1,997 42 366 2,405
2009 Net book value 2,017 56 252 2,325

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10. Accounts Payable and Accrued Liabilities

  2010 2009
( in thousands of dollars )
External Parties
Transfer Payments 179,954 100,786
Operating 1,265 2,626
Accrued Salaries and Wages 1,185 1,098
Subtotal - External Parties 182,404 104,510
Other Government Departments 2,355 1,968
Total Accounts Payable and Accrued Liabilities 184,759 106,478

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11. Employee Benefits

  1. Pension benefits: WD’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/Québec Pension Plans benefits and they are indexed to inflation.

    Both the employees and WD contribute to the cost of the Plan. The 2009-10 expense amounts to $4,846,185 ($3,957,494 in fiscal year 2008-09), which represents approximately 1.9 (2.0 - 2008-09) times the contributions by employees.

    WD’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.
     
  2. Severance benefits: WD 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:
  2010 2009
( in thousands of dollars )
Accrued benefit obligation, beginning of year 6,496 6,489
Expense for the year 2,808 741
Benefits paid during the year (603) (734)
Accrued Benefit Obligations, end of year 8,701 6,496

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12. Contractual Obligations

The nature of the WD’s activities can result in some large multi-year contracts and obligations, whereby WD will be obligated to make future payments when the conditions under the agreement are met. Significant commitments that can be reasonably estimated are summarized as follows:

  2011 2012 2013 2014 2015 and
thereafter
Total
(in thousands of dollars)
Transfer Payment
Alberta & Saskatchewan Centenaries 6,748 16,000 4,000 - - 26,748
Community Adjustment Fund 156,576 - - - - 156,576
Mountain Pine Beetle 7,721 - - - - 7,721
Recreational Infrastructure Canada 105,459 - - - - 105,459
VIDO/InterVac - U of Sask 10,242 - - - - 10,242
Core Programming 99,448 35,477 20,937 4,360 400 160,622
Total Estimated Future Commitments 386,194 51,477 24,937 4,360 400 467,368

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13. Related party transactions

WD is related as a result of common ownership to all Government of Canada departments, agencies and Crown corporations. WD enters into transactions with these entities in the normal course of business and on normal trade terms. Also, during the year, WD received services, which were obtained without charge from other Government departments as presented in part (a).

  1. Services provided without charge:

    During the 2009-10 fiscal year, WD received without charge from other departments, accommodation services, legal fees, workers’ compensation and the employer’s contribution to the health and dental insurance plans. These services without charge have been recognized in WD’s Statement of Operations as follows:

      2010 2009
    ( in thousands of dollars )
    Services provided without charge
    Accommodation 3,745 3,079
    Employer's contribution to the health insurance plan and employee benefits plans 3,330 2,862
    Legal Services 153 1
    Worker's compensation 41 41
    Total services provided without charge 7,269 5,983

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    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 costs 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 WD’s Statement of Operations.
     
  2. Administration of programs on behalf of other government departments.

    Part of WD’s mandate is to coordinate federal economic activities in the West. In this regard, WD implements programs on behalf of other federal departments and agencies. The following is a list of programs valued at greater than one million dollars in federal contributions administered by WD over the last two fiscal years. These grant and contribution expenses are reflected in the financial statements of the other government departments and not those of WD.

      2010 2009
    ( in thousands of dollars )
    Canada Strategic Infrastructure Fund - Infrastructure Canada 51,457 72,685
    Municipal Rural Infrastructure Fund - Infrastructure Canada 81,932 54,619
    Total 133,389 127,304

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14. Contingent liabilities

Claims have been made against WD in the normal course of operations. 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 statement.

WD is named as a co-defendant in a suit. The outcome of this claim is not determinable at this time. The potential financial impact of this case cannot be estimated but could be significant. No accrual for this contingency has been made in the financial statements.

15. Comparitive Information

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