Western Economic Diversification Canada
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Future-oriented Financial Statements for the period ending March 31, 2012

Statement of Management Responsibility

Departmental management is responsible for these future-oriented financial statements, including responsibility for the appropriateness of the assumptions on which these statements are prepared. These statements are based on the best information available and assumptions adopted as at December 31, 2010 and reflect the plans described in the Report on Plans and Priorities.

Much of the future-oriented financial information is based on these assumptions, best estimates, and judgment and gives due consideration to materiality. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. However, as with all such assumptions, there is a measure of uncertainty surrounding them. This uncertainty increases as the forecast horizon extends.

The actual results achieved for the fiscal years covered in the accompanying future-oriented financial statements will vary from the information presented and the variations may be material.

The future-oriented Financial Statements for Western Economic Diversification Canada have not been audited. These partial statements include the statement of operations and accompanying notes. Full statements will be provided in future years.

 

 

Daniel Watson
Deputy Minister
Edmonton, Canada


Date



Jim Saunderson
Chief Financial Officer


Date

 


 

Future-oriented Statement of Operations
For the Year Ending March 31

(in thousands of dollars)

  Estimated Results 2011 Forecast 2012
Information for the year ending March 31, 2011 includes actual amounts from April 1, 2010 to December 31, 2010.

Segmented information (note 08)

The accompanying notes form an integral part of these future oriented financial statements.
Expenses
Transfer payments
Business Development $ 41,559 $ 44,121
Innovation 66,889 63,188
Community Economic Development 268,003 34,312
Policy, Advocacy and Coordination 356 1,302
Total transfer payments 376,807 142,923
 
Operating expenses
Business Development 11,166 8,481
Innovation 5,354 6,392
Community Economic Development 12,013 8,252
Policy, Advocacy and Coordination 9,506 8,593
Internal Services 32,688 28,087
Total operating expenses 70,727 59,805
 
Total expenses 447,534 202,728
 
Revenues
Business Development 1,564 1,877
Innovation 875 771
Community Economic Development 108 769
Policy, Advocacy and Coordination - -
Internal Services 22 17
Total revenues 2,569 3,434
 
Net cost of operations $ 444,965 $ 199,294

 


 

Notes to Future-oriented Financial Statements

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.

The strategic outcome of WD is: “The western Canadian economy is developed and diversified.” The department’s four program activities and management related program activity (Internal Services) support the achievement of its strategic outcome. Specifically, they are:

  1. Business Development: strong SMEs in Western Canada with improved capacity to remain competitive in the global marketplace.
     
  2. Innovation: a stronger knowledge-based economy.
     
  3. Community Economic Development: communities have increased economic opportunities and capacity to respond to challenges, as well as the necessary investments in public infrastructure.
     
  4. Policy, Advocacy and Coordination: policies and programs that strengthen the western Canadian economy.
     
  5. Internal Services: effective and efficient support for the delivery of the organizational strategic outcome.

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 future-oriented Financial Statements.

2. Significant Assumptions

The future-oriented financial statements have been prepared on the basis of the government priorities and the plans of the department as described in the Report on Plans and Priorities.

The main assumptions are as follows:

  1. The department's activities will remain substantially the same as for the previous year.
     
  2. Expenses and revenues, including the determination of amounts internal and external to the government, are based on historical experience. The general historical pattern is expected to continue.
     
  3. Allowances for uncollectibility are based on historical experience. The general historical pattern is expected to continue.
     
  4. Estimated year end information for 2010-11 is used as the opening position for the 2011-2012 forecasts.
     

These assumptions are adopted as at December 31, 2010.

3. Variations and Changes to the Forecast Financial Information

While every attempt has been made to accurately forecast final results for the remainder of 2010-11 and for 2011-12, actual results achieved for both years are likely to vary from the forecast information presented, and this variation could be material.

In preparing these financial statements, WD has made estimates and assumptions concerning the future. These estimates and judgements may differ from the subsequent actual results. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Factors that could lead to material differences between the future-oriented financial statements and the historical financial statements include:

  1. The timing and amounts of acquisitions and disposals of property, plant and equipment may affect gains/losses and amortization expense.
     
  2. Economic conditions may affect both the amount of revenue earned and the collectability of loan receivables.
     
  3. Interest rates in effect at the time of issue will affect the net present value of non-interest bearing loans.
     
  4. Further changes to the operating budget through additional new initiatives or technical adjustments later in the year.
     

The information provided is based on a forecast as at December 31, 2010. Variances will be explained in the Departmental Performance Report.

4. Summary of Significant Accounting Policies

The future-oriented financial statements have been prepared in accordance with the Treasury Board accounting policies stated below, which are based on Canadian generally accepted accounting principles for the public sector. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian generally accepted accounting principles.

Significant accounting policies are as follows:

  1. Parliamentary appropriations – WD is financed by the Government of Canada through Parliamentary appropriations. The cash accounting basis is used to recognize transactions affecting parliamentary appropriations. The future-oriented financial statements are based on accrual accounting. Consequently, items presented in the Future-oriented Statement of Operations are not necessarily the same as those provided through appropriations from Parliament. Note 5 provides a reconciliation between the bases of reporting.
     
  2. Revenues – are presented on an accrual basis:
     
    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 that gave rise to the revenue takes place.
       
      • Sources of revenues include:
         
        • Interest charges on repayment of contributions.
           
  3. Expenses - Expenses are presented on an 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 are earned by employees under their respective terms of employment.
       
    3. Services provided without charge by other government departments for accommodation, employer contributions to the health and dental insurance plans, legal services and workers’ compensation are recorded as operating expenses at their estimated cost.
       
  4. Employee future benefits
     
    1. Pension benefits: Eligible employees participate in the Public Service Pension Plan (The Public Service Superannuation Act), a multiemployer plan administered by the Government. WD’s contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. Current legislation does not require 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.
       
  5. Accounts receivables and advances are stated at the lower of cost and net recoverable value; a valuation allowance is recorded for receivables where recovery is considered uncertain.
     
  6. 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.
     
  7. 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 where 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 accordingly.
     
    1. Unconditionally repayable contributions are contributions that must be repaid without qualification. Normally, these contributions are provided with a low or no interest clause. 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 recorded as revenue each year to reflect the change in the present value of the contributions outstanding. An estimated allowance for uncollectibility is recorded where appropriate.
       
    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 come into effect, at which time, they are recorded as a receivable and a reduction in transfer payment expenses. An estimated allowance for uncollectibility is recorded where appropriate.

      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 are 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.
       
  8. Tangible capital assets – 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, assets located on Indian Reserves and museum collections.

    Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:
Asset Class Amortization Period
Machinery and equipment 10 years
Vehicles 5 years
Computer Hardware 3 years
Computer Software 3-7 years
Leasehold improvements Lesser of the remaining term of lease or useful life of the improvement

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

  1. Measurement uncertainty – The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. Actual results could significantly differ from those estimated.

5. Parliamentary Appropriations

WD receives most of its funding through expenditure authorities provided by Parliament. Items recognized in the statement of operations in one year may be funded through Parliamentary authorities in prior, current or future years. Accordingly, WD has different net results of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled in the following tables:

(a) Authorities Requested

Authorities Requested: Estimated
2011
Forecast
2012
(in thousands of dollars)
Vote 1 - Operating expenditures $ 60,297 $ 44,995
Vote 5 - Transfer payments 405,316 140,862
Statutory amounts 23,875 9,673
Forecast Authorities available 489,488 195,530

Forecast authorities requested for the year ending March 31, 2012 are the planned spending amounts presented in the 2011-2012 Report on Plan and Priorities. Estimated authorities requested for the year ending March 31, 2011 include amounts presented in the 2010-2011 Main and Supplementary Estimates and estimated amounts to be allocated at year-end from Treasury Board central votes.

(b) Reconciliation of net cost of operations to requested authorities:

  Estimated
2011
Forecast
2012
(in thousands of dollars)
Net cost of operations $ 444,965 $ 199,294
 
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets (516) (510)
Services provided without charge by other government departments (7,729) (7,037)
Increase (decrease) in vacation pay and compensatory leave (447) 567
Decrease in employee future benefits 1,356 660
Refund of prior years' expenditures 2,513 2,031
Revenue not available for spending 2,815 3,647
Other: (2,646) (4,576)
  (4,654) (5,218)
 
Adjustments for items not affecting net cost of operations, but affecting authorities:
Unconditionally repayable contributions 20,000 -
Increase (decrease) in prepayments 1,164 1,454
Acquisitions of tangible capital assets 13 -
  21,177 1,454
Forecast current year lapse 28,000 -
 
Total Authorities $ 489,488 $ 195,530

Forecast spending in 2012 does not include $ 23 M in planned spending for Recreational Infrastructure Canada Program (RInC) extended to October 31, 2011 under Canada’s Economic Action Plan.

6. Employee benefits

a) 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 forecast expenses are $ 4,864,950 in 2010-11 and $ 4,282,620 in 2011-12 representing approximately 1.9 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.

b) 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, estimated as at the date of these statements, is as follows:

  2011 2012
(in thousands of dollars)
Accrued benefit obligation, beginning of year $ 8,701 $ 7,345
Expense for the year (546) 31
Benefits paid during the year (810) (691)
Accrued benefit obligation, end of year $ 7,345 $ 6,685

7. 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. During the year, WD receives common services, which are obtained without charge from other Government departments as disclosed below.

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

During the year, WD is forecasted to receive without charge from other departments, accommodation, legal services, the employer’s contribution to the health and dental insurance plans and workers’ compensation coverage. These services without charge have been recognized in WD’s future-oriented Statement of Operations as follows:

  Estimated Results
2011
Forecast
2012
(in thousands of dollars)
Employer's contribution to the health insurance plan and employee benefits plans $ 3,333 $ 2,646
Accommodation 4,286 4,258
Legal services 69 96
Worker's compensation 41 37
Total $ 7,729 $ 7,037

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 and audit services provided by the Office of the Auditor General, are not included as expense in the WD’s Statement of Operations.

(b) 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 to be administered by WD over the next fiscal years. These grant and contribution expenses will be reflected in the financial statements of the other government departments and not those of WD.

  Estimated Results
2011
Forecast
2012
(in thousands of dollars)
Building Canada Fund Community Component $ 189,300 $ 139,500
Canada Strategic Infrastructure Fund - Infrastructure Canada 81,600 20,000
Municipal Rural Infrastructure Fund - Infrastructure Canada 58,700 29,700
Total $ 329,600 $ 189,200

WD provides project and administration service for the Building Canada Fund (BCF) Program for Infrastructure Canada. The arrangement between Western Economic Diversification and Infrastructure Canada is such that all claims and expenditures are processed and reported by Infrastructure Canada.

(c) Other transactions with related parties

  Estimated Results
2011
Forecast
2012
(in thousands of dollars)
Expenses - Other Government departments and agencies $ 3,107 $ 2,760
Total 3,107 2,760


Notes to Future-oriented Financial Statements (Unaudited)

(in thousands of dollars)

8. Segmented information

  2011 Total Business Development Innovation Community Economic Development Policy, Advocacy and Coordination Internal Services Year Ended March 31, 2012
Transfer payments
Transfer payments $376,807 $ 44,121 $ 63,188 $ 34,312 $ 1,302 $  - $142,923
Total transfer payments 376,807 44,121 63,188 34,312 1,302 - 142,923
Operating expenses
Salaries and employee benefits 47,372 5,298 3,499 3,657 5,427 17,439 35,320
Professional and special services 8,829 1,290 851 886 1,324 4,248 8,599
Accommodation 4,286 639 426 468 639 2,086 4,258
Transportation & Communication 6,242 584 386 402 601 1,927 3,900
Bad debts 2,233 85 820 2,412 - - 3,317
Acquisition of machinery and equipment 400 194 153 158 202 593 1,300
Rentals 261 149 $98 102 153 490 992
Utilities, materials and supplies 239 98 64 67 100 321 650
Amortization of tangible capital assets 516 - - - - 510 510
Repairs & Maintenance 109 75 50 52 77 247 501
Information 130 49 32 33 50 161 325
Other 110 20 13 15 20 65 133
Total operating expenses 70,727 8,481 6,392 8,252 8,593 28,087 59,805
Total expenses 447,534 52,602 69,580 42,564 9,895 28,087 202,728
Revenues
Interest 938 664 267 - - - 931
Revenues from conditionally repayable contributions 1,247 1,168 350 54 - - 1,572
Compensatory repayments 343 28 141 - - - 169
Other 41 17 13 715 - 17 762
Total revenues 2,569 1,877 771 769 - 17 3,434
Net cost of operations $ 444,965 $ 50,725 $ 68,809 $ 41,795 $ 9,895 $ 28,070 $ 199,294