Financial Statements (Unaudited) for the year ended March 31, 2012
Statement of Management Responsibility Including Internal Control Over Financial Reporting
Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2012, and all information contained in these statements rests with the management of Western Economic Diversification Canada (WD). These financial statements have been prepared by management using the Government’s accounting policies, which are based on Canadian public sector accounting standards.
Management is responsible for the integrity and objectivity of the information in these financial statements. Some of the information in the financial statements is based on management's best estimates and judgment, and gives due consideration to materiality. To fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of WD’s financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the WD’s Departmental Performance Report, is consistent with these financial statements.
Management is also responsible for maintaining an effective system of internal control over financial reporting (ICFR) designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are properly authorized and recorded in accordance with the Financial Administration Act and other applicable legislation, regulations, authorities and policies.
Management seeks to ensure the objectivity and integrity of data in its financial statements through careful selection, training, and development of qualified staff; through organizational arrangements that provide appropriate divisions of responsibility; through communication programs aimed at ensuring that regulations, policies, standards, and managerial authorities are understood throughout WD and through conducting an annual risk based assessment of the effectiveness of the system of ICFR.
The system of ICFR is designed to mitigate risks to a reasonable level based on an ongoing process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.
A risk-based assessment of the system of ICFR for the year ended March 31, 2012 was completed in accordance with the Treasury Board Policy on Internal Control and the results and action plans are summarized in the annex.
The effectiveness and adequacy of WD’s system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of WD’s operations, and by the Departmental Audit Committee, which oversees management's responsibilities for maintaining adequate control systems and the quality of financial reporting, and which recommends the financial statements to the Deputy Minister of WD.
The financial statements of Western Economic Diversification Canada have not been audited.
Deputy Minister
Edmonton, Canada
Chief Financial Officer
Statement of Financial Position (Unaudited)
As at March 31
(in thousands of dollars)
2012 | 2011 Restated (Note 14) |
|
---|---|---|
Liabilities | ||
Accounts payable and accrued liabilities (note 4) | $ 80,249 | $ 237,619 |
Vacation pay and compensatory leave | 1,684 | 1,868 |
Employee future benefits (note 5) | 4,985 | 7,470 |
Total gross liabilities | 86,918 | 246,957 |
Total net liabilities | 86,918 | 246,957 |
Financial assets | ||
Due from Consolidated Revenue Fund | 80,187 | 237,499 |
Accounts receivable and advances (note 6) | 166 | 157 |
Loans receivable (note 7) | 23,808 | 30,245 |
Total gross financial assets | 104,161 | 267,901 |
Financial assets held on behalf of Government | ||
Accounts receivable and advances (note 6) | (7) | 0 |
Loans receivable (note 7) | (23,808) | (30,245) |
Total financial assets held on behalf of Government | (23,815) | (30,245) |
Total net financial assets | 80,346 | 237,656 |
Departmental net debt | 6,572 | 9,301 |
Non-financial assets | ||
Prepayments (note 8) | 0 | 978 |
Tangible capital assets (note 9) | 1,199 | 2,407 |
Total non-financial assets | 1,199 | 3,385 |
Departmental net financial position | $ (5,373) | $ (5,916) |
Contractual obligations (note 10) The accompanying notes form an integral part of these financial statements. |
Deputy Minister
Edmonton, Canada
Chief Financial Officer
Statement of Operations and Departmental Net Financial Position (Unaudited)
For the Year Ended March 31
(in thousands of dollars)
2012 Planned Results Restated |
2012 | 2011 Restated (Note 14) |
|
---|---|---|---|
Expenses | |||
Business Development | $ 51,217 | $ 53,561 | $ 49,220 |
Innovation | 69,204 | 66,502 | 78,426 |
Community Economic Development | 42,447 | 40,321 | 296,630 |
Policy, Advocacy and Coordination | 9,807 | 8,166 | 9,738 |
Internal Services | 26,058 | 28,774 | 27,831 |
Expenses incurred on behalf of Government | (3,317) | (4,766) | (12,210) |
Total expenses | 195,416 | 192,558 | 449,635 |
Revenues | |||
Amortization of discount | 762 | 2,222 | 0 |
Interest | 931 | 67 | 507 |
Other | 0 | 48 | 44 |
Other fees and charges (compensatory repayments) | 169 | 3 | 161 |
Revenues earned on behalf of Government | (1,862) | (2,327) | (712) |
Total revenues | 0 | 13 | 0 |
Net cost from continuing operations | 195,416 | 192,545 | 449,635 |
Transferred operations (note 12) | |||
Expenses | 2,423 | 1,513 | 2,664 |
Net cost of transferred operations | 2,423 | 1,513 | 2,664 |
Net cost of operations before government funding and transfers | $ 197,839 | 194,058 | 452,299 |
Government funding and transfers | |||
Net cash provided by Government | 345,612 | 393,844 | |
Change in due from Consolidated Revenue Fund | (157,312) | 53,339 | |
Services provided without charge by other government departments (note 11) |
6,854 | 7,310 | |
Transfer of assets and liabilities from (to) other government departments (note 12) |
(553) | 0 | |
Total government funding and transfers | 194,601 | 454,493 | |
Net cost of operations after government funding and transfers | (543) | (2,194) | |
Departmental net financial position — Beginning of year | (5,916) | (8,110) | |
Departmental net financial position — End of year | $ (5,373) | $ (5,916) | |
Segmented information (note 13) The accompanying notes form an integral part of these financial statements. |
Statement of Change in Departmental Net Debt (Unaudited)
For the Year Ended March 31
(in thousands of dollars)
2012 | 2011 | |
---|---|---|
Net cost of operations after government funding and transfers | $ (543) | $ (2,194) |
Change due to tangible capital assets | ||
Acquisition of tangible capital assets | 83 | 518 |
Amortization of tangible capital assets | (531) | (516) |
Transfer to other government departments (note 12) | (750) | 0 |
Prior year adjustment to tangible capital assets | (10) | 0 |
Total change due to tangible capital assets | (1,208) | 2 |
Change due to prepayments | (978) | 734 |
Net increase (decrease) in departmental net debt | (2,729) | (1,458) |
Departmental net debt - Beginning of year | 9,301 | 10,759 |
Departmental net debt - End of year | $ 6,572 | $ 9,301 |
The accompanying notes form an integral part of these financial statements. |
Statement of Cash Flows (Unaudited)
For the Year Ended March 31
(in thousands of dollars)
2012 | 2011 Restated (Note 14) |
|
---|---|---|
Operating activities | ||
Net cost of operations before government funding and transfers | $ 194,058 | $ 452,299 |
Non-cash items: | ||
Amortization of tangible capital assets | (531) | (516) |
Prior year adjustment to tangible capital assets | (10) | (0) |
Services provided without charge by other government departments (note 11) |
(6,854) | (7,310) |
Variations in Statement of Financial Position: | ||
Increase (decrease) in accounts receivable and advances | 2 | (446) |
Increase (decrease) in prepayments | (978) | 734 |
Decrease (increase) in accounts payable and accrued liabilities | 157,370 | (52,860) |
Decrease (increase) in vacation pay and compensatory leave | 184 | 194 |
Decrease (increase) in future employee benefits | 2,485 | 1,231 |
Transfer of liabilities to other government departments (note 12) | (197) | 0 |
Cash used in operating activities | 345,529 | 393,326 |
Capital investing activities | ||
Acquisition of tangible capital assets | 83 | 518 |
Cash used in capital investing activities | 83 | 518 |
Net cash provided by Government of Canada | $ 345,612 | $ 393,844 |
The accompanying notes form an integral part of these financial statements. |
Notes to the Financial Statements (Unaudited)
For the Year Ended March 31
1. Authority and objectives
Western Economic Diversification Canada (WD) is the federal government’s regional development agency in the West. Established in 1987, WD is responsible for strengthening, diversifying and expanding the economy of Western Canada. Today, with the challenges of a shifting global economy, WD’s contributions have become more important than ever.
Our vision is to be leaders in creating a more diversified western Canadian economy that has strong, competitive and innovative businesses and communities.
WD’s presence in each western province has enabled it to work with key partners- other orders of government, community and business leaders, research and academic institutions as well as non profit organizations- to leverage its investments and actions to benefit the western economy.
WD works to develop and diversify the economy, contributing to productivity and Gross Domestic Product (GDP) growth in the West, helping to build companies that are innovative and competitive in the global marketplace and reducing the region’s dependence on primary industries.
WD’s strategic outcome is advanced through the following program activities:
- Business Development: Strong small-and medium-sized enterprises (SMEs) in Western Canada with improved capacity to remain competitive in the global marketplace.
- Innovation: A stronger knowledge-based economy.
- Community Economic Development: Communities have increased economic opportunities and capacity to respond to challenges, as well as the necessary investments in public infrastructure.
- Policy, Advocacy and Coordination: policies and programs that strengthen the western Canadian economy.
-
Internal Services: effective and efficient support for the delivery of the organizational strategic outcome.
2. Summary of significant accounting policies
These financial statements have been prepared using the Government’s accounting policies stated below, which are based on Canadian public sector accounting standards. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.
Significant accounting policies are as follows:
- Parliamentary authorities – WD is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to WD do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and Departmental Net Financial Position and in the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting. The planned results amounts in the Statement of Operations and Departmental Net Financial Position are the amounts reported in the future-oriented financial statements included in the 2011-2012 Report on Plans and Priorities. The future-oriented financial statements for 2011-2012 have been restated to reflect the revenue net of non-respendable amounts. This restatement resulted in a $1.5M decrease in net costs of operations before government funding and transfers. In addition, the future-oriented financial statements have also been reclassified to conform to the current year presentation.
- 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. The net cash provided by Government is the difference between all cash receipts and all cash disbursements, including transactions between departments of the Government.
- Amounts due from or to the CRF are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the net amount of cash that WD is entitled to draw from the CRF without further authorities to discharge its liabilities.
- Revenues:
- Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.
- Other revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenue takes place.
- Revenues that are non-respendable are not available to discharge WD’s liabilities. While the Deputy Head is expected to maintain accounting control, he or she has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the entity’s gross revenues.
- Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.
- Expenses - Expenses are recorded on the accrual basis:
- Transfer payments are recorded as expenses when authorization for the payment exists and the recipient has met the eligibility criteria or the entitlements established for the transfer payment program. In situations where payments do not form part of an existing program, transfer payments are recorded as expenses when the Government announces a decision to make a non-recurring transfer, provided the enabling legislation or authorization for payment receives parliamentary approval prior to the completion of the financial statements. Transfer payments that become repayable as a result of conditions specified in the contribution agreement that have come into being are recorded as a reduction to transfer payment expense and as a receivable.
- Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
- 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.
- Transfer payments are recorded as expenses when authorization for the payment exists and the recipient has met the eligibility criteria or the entitlements established for the transfer payment program. In situations where payments do not form part of an existing program, transfer payments are recorded as expenses when the Government announces a decision to make a non-recurring transfer, provided the enabling legislation or authorization for payment receives parliamentary approval prior to the completion of the financial statements. Transfer payments that become repayable as a result of conditions specified in the contribution agreement that have come into being are recorded as a reduction to transfer payment expense and as a receivable.
- Employee future benefits
- 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. 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.
- Severance benefits: Employees entitled to severance benefits under labour contracts or conditions of employment earn these as services necessary to earn them are rendered. 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.
- 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. 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.
- Accounts and loans receivable are stated at the lower of cost and net recoverable value. However, when the terms of the loans are concessionary, such as those provided with a low or no interest clause, they are recorded 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 loans outstanding. Transfer payments that are unconditionally repayable are recognized as loans receivable. A valuation allowance is recorded for accounts and loans receivable where recovery is considered uncertain.
- 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.
- 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. The most significant items where estimates are used are allowance for doubtful accounts, the liability for employee future benefits, the useful life of tangible capital assets and unamortized discount related to unconditionally repayable transfer payments. Actual results could significantly differ from those estimated. Management’s estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.
3. Parliamentary authorities
WD receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Departmental Net Financial Position and the Statement of Financial Position 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) Reconciliation of net cost of operations to current year authorities used
2012 | 2011 Restated |
|
---|---|---|
(in thousands of dollars) | ||
Net cost of operations before government funding and transfers | $ 194,058 | $ 452,299 |
Adjustments for items affecting net cost of operations but not affecting authorities: | ||
Amortization of tangible capital assets | (531) | (516) |
Services provided without charge by other government departments | (6,854) | (7,310) |
Transfer payment conditions met | 3,703 | 778 |
Decrease in vacation pay and compensatory leave | 154 | 194 |
Decrease in employee future benefits | 2,327 | 1,231 |
Decrease in accrued liabilities not charged to authorities | 1,281 | 1,984 |
Refund of prior years expenditures | 531 | 519 |
Other | (6) | (123) |
Total items affecting net cost of operations but not affecting authorities | 605 | (3,243) |
Adjustments for items not affecting net cost of operations, but affecting authorities: | ||
Acquisitions of tangible capital assets | 83 | 518 |
Unconditionally repayable transfer payments | 0 | 15,024 |
Loss support transfer payments | 1,515 | 1,159 |
(Decrease) in prepayments | (978) | 734 |
Total items not affecting net cost of operations but affecting authorities | 620 | 17,435 |
Current year authorities used | $ 195,283 | $ 466,491 |
(b) Authorities provided and used
2012 | 2011 | |
---|---|---|
(in thousands of dollars) | ||
Authorities provided: | ||
Vote 1 - Operating expenditures | $ 52,283 | $ 60,298 |
Vote 5 - Transfer payments | 155,098 | 405,316 |
Statutory amounts | 10,697 | 24,659 |
Less: | ||
Authorities available for future years | (11) | 0 |
Lapsed: Operating | (3,532) | (5,823) |
Lapsed: Transfer payments | (19,252) | (17,959) |
Current year authorities used | $ 195,283 | $ 466,491 |
4. Accounts payable and accrued liabilities
The following table presents details of WD’s accounts payable and accrued liabilities:
2012 | 2011 | |
---|---|---|
(in thousands of dollars) | ||
Accounts payable - Other government departments and agencies | $ 4,293 | $ 19,909 |
Accounts payable - External parties | 74,198 | 216,547 |
Total accounts payable | 78,491 | 236,456 |
Accrued liabilities | 1,758 | 1,163 |
Total accounts payable and accrued liabilities | $ 80,249 | $ 237,619 |
5. Employee future benefits
(a) Pension benefits
WD’s employees participate in the Public Service Pension Plan, which is sponsored and administered by the Government. 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 2011-2012 expense amounts to $4,445,163 ($4,672,799 in 2010-2011), which represents approximately 1.8 times (1.9 times in 2010-2011) 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 salary at termination of employment. These severance benefits are not pre-funded. Benefits will be paid from future authorities. Information about the severance benefits, measured as at March 31, is as follows:
As part of the collective agreement negotiations with certain employee groups, and changes to conditions of employment for executives and certain non-represented employees, the accumulation of severance benefits under the employee severance pay program ceased for the employees commencing in 2012. Employees subject to these changes have been given the option to be immediately paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits on termination from the public service. These changes have been reflected in the calculation of the outstanding severance benefit calculation.
2012 | 2011 | |
---|---|---|
(in thousands of dollars) | ||
Accrued benefit obligation - Beginning of year | $ 7,470 | $ 8,701 |
Transferred to other government department, effective November 15, 2011 (note 12) |
(174) | 0 |
Subtotal | 7,296 | 8,701 |
Expense for the year | 652 | (375) |
Benefits paid during the year | (2,963) | (856) |
Accrued benefit obligation - End of year | $ 4,985 | $ 7,470 |
6. Accounts receivable and advances
The following table presents details of WD’s accounts receivable and advances balances:
2012 | 2011 Restated (note 14) |
|
---|---|---|
(in thousands of dollars) | ||
Receivables - Other government departments and agencies | $ 58 | $ 116 |
Receivables - External parties | 104 | 37 |
Employee advances | 4 | 4 |
Subtotal | 166 | 157 |
Gross accounts receivable | 166 | 157 |
Accounts receivable held on behalf of Government | (7) | 0 |
Net accounts receivable | $ 159 | $ 157 |
Comparative information (note 15) |
7. Loans receivable
The following table presents details of WD’s loans and transfer payments recoverable balances:
2012 | 2011 Restated (note 14) |
|
---|---|---|
(in thousands of dollars) | ||
Loans receivable | ||
Unconditionally repayable transfer payments | $ 38,361 | $ 50,551 |
Accrued interest - unconditionally repayable transfer payments | 4,720 | 5,158 |
Less: Unamortized discount | (1,715) | (3,937) |
Subtotal | 41,366 | 51,772 |
Transfer payments recoverable | 139 | 2,905 |
Subtotal | 41,505 | 54,677 |
Less: Allowance for uncollectivity | (17,697) | (24,432) |
Gross loans receivable | 23,808 | 30,245 |
Loans receivable held on behalf of Government | (23,808) | (30,245) |
Net loans receivable | $ 0 | $ 0 |
Comparative information (note 15) |
(a) Unconditionally repayable transfer payments
The unconditionally repayable transfer payment portfolio consists of 38 non-interest bearing loans issued in the years from 1992 to 2012, with prescribed repayment terms. The loans are recorded at their discounted net present values using market interest rates at the time of the loans. This portfolio includes loss support transfer payments which were previously recorded under prepayments (note 15). An allowance of $12,846,000 ($16,373,000 in 2010-2011) has been recorded.
With respect to interest charged on overdue unconditionally repayable transfer payments, an allowance of $4,720,000 ($5,158,000 in 2010-2011) has been recorded.
(b) Transfer payments recoverable
Transfer payments recoverable related to payments made to outside parties which are repayable based on conditions specified in the contribution agreement that have come into being. An allowance of $131,000 ($2,901,000 in 2010-2011) has been recorded.
8. Prepayments
2012 | 2011 | |
---|---|---|
(in thousands of dollars) | ||
Non-repayable transfer payments | $ 0 | $ 978 |
Total prepayments | $ 0 | $ 978 |
Comparative information (note 15) |
9. Tangible capital assets
Capital asset class | Cost | Accumulated Amortization | Net Book Value | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Opening balance | Acquisitions |
Adjustments (1) |
Disposals and write-offs | Closing balance | Opening balance | Amortization |
Adjustments (1) |
Disposals and write-offs | Closing balance | 2012 | 2011 | |
Machinery and equipment | $ 603 | $ 11 | $ (458) | $ 0 | $ 156 | $ 214 | $ 41 | $ (174) | $ 0 | $ 81 | $ 75 | $ 389 |
Computer Hardware | 333 | 0 | (333) | 0 | 0 | 223 | 43 | (266) | 0 | 0 | 0 | 110 |
Computer Software | 2,365 | 0 | (99) | 23 | 2,243 | 1,239 | 306 | (69) | 23 | 1,453 | 790 | 1,126 |
Vehicles | 112 | 32 | 0 | 31 | 113 | 85 | 15 | 0 | 31 | 69 | 44 | 27 |
Leasehold improvements | 958 | 40 | 6 | 0 | 1,004 | 588 | 126 | 0 | 0 | 714 | 290 | 370 |
Assets under construction | 385 | 0 | (385) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 385 |
Total | $ 4,756 | $ 83 | $ (1,269) | $ 54 | $ 3,516 | $ 2,349 | $ 531 | $ (509) | $ 54 | $ 2,317 | $ 1,199 | $ 2,407 |
(1) Adjustments include assets under construction of $385,000 that were transferred to the other categories upon completion of the assets.
Net adjustments of $760,156 are related to the following items:
Effective November 15, 2011, WD transferred computer hardware, computer software, and machinery and equipment with a net book value of $720,588 to Shared Services Canada. This transfer is included in the adjustment columns (refer to note 12 for further detail on the transfer).
Effective January 17, 2012, WD transferred machinery and equipment with a net book value of $29,669 to Canadian Environmental Assessment Agency. This transfer is included in the adjustment columns (refer to note 12 for further detail on the transfer).
A prior year adjustment made to leasehold improvements in the amount of $9,899.
10. Contractual obligations
The nature of WD’s activities can result in some large multi-year contracts and obligations whereby WD will be obligated to make future payments in order to carry out its transfer payment programs or when the services/goods are received. Significant contractual obligations that can be reasonably estimated are summarized as follows:
2013 | 2014 | 2015 | 2016 | 2017 and thereafter |
Total | |
---|---|---|---|---|---|---|
(in thousands of dollars) | ||||||
Transfer Payments | ||||||
Alberta & Saskatchewan centenaries | $ 20,000 | $ 0 | $ 0 | $ 0 | $ 0 | $ 20,000 |
Core programming | 92,539 | 25,293 | 1,825 | 230 | 250 | 120,137 |
Rick Hansen Foundation | 4,500 | 0 | 0 | 0 | 0 | 4,500 |
Total | $ 117,039 | $ 25,293 | $ 1,825 | $ 230 | $ 250 | $ 144,637 |
11. Related party transactions
WD is related as a result of common ownership to all government 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 received common services which were obtained without charge from other government departments as disclosed below.
(a) Common services provided without charge by other government departments
During the year, WD received services without charge from certain common service organizations, related to accommodation, legal services, the employer’s contribution to the health and dental insurance plans and workers’ compensation coverage. These services provided without charge have been recorded in WD’s Statement of Operations and Departmental Net Financial Position as follows:
2012 | 2011 | |
---|---|---|
(in thousands of dollars) | ||
Employer's contribution to the health and dental insurance plans | $ 3,273 | $ 3,375 |
Accommodation | 3,540 | 3,823 |
Legal services | 0 | 71 |
Workers' Compensation | 41 | 41 |
Total | $ 6,854 | $ 7,310 |
The Government has centralized some of its administrative activities for efficiency, cost-effectiveness purposes and economic delivery of programs to the public. As a result, the Government uses central agencies and common service organizations so that one department performs services for all other departments and agencies without charge. The costs of these services, such as the 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 in the WD’s Statement of Operations and Departmental Net Financial Position.
(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 transfer payments administered by WD over the last two fiscal years. These transfer payment expenses are reflected in the financial statements of the other government departments and not those of WD.
2012 | 2011 | |
---|---|---|
(in thousands of dollars) | ||
Building Canada Fund (Communities) – Infrastructure Canada | $ 122,639 | $ 144,886 |
Canada Strategic Infrastructure Fund – Infrastructure Canada | 14,162 | 24,883 |
Municipal Rural Infrastructure Fund – Infrastructure Canada | 26,717 | 47,881 |
Total | $ 163,518 | $ 217,650 |
(c) Other transactions with related parties
2012 | 2011 | |
---|---|---|
(in thousands of dollars) | ||
Expenses - Other government departments and agencies | $ 2,198 | $ 2,644 |
12. Transfers from/to other government departments
Effective November 15, 2011 WD transferred responsibility for providing email, data centre, and network services to Shared Services Canada in accordance with Order-in-Council 2011-1297, including the stewardship responsibility for the assets and liabilities related to those services. Accordingly, WD transferred the following assets and liabilities related to providing email, data centre, and network services to Shared Services Canada on November 15, 2011:
2012 | |
---|---|
(in thousands of dollars) | |
Assets: | |
Tangible capital assets (net book value) (note 9) | |
Transferred to Shared Services Canada | 720 |
Transferred to Canadian Environmental Assessment Agency |
30 |
Total assets transferred | 750 |
Liabilities: | |
Vacation pay and compensatory leave | 23 |
Employee future benefits (note 5) | 174 |
Total liabilities transferred | 197 |
Adjustment to the departmental net financial position | $ 553 |
In addition, the 2011 comparative figures have been reclassified on the Statement of Operations and Departmental Net Financial Position to present the revenues and expenses of the transferred operations.
During the transition period, WD continued to administer the transferred activities on behalf of Shared Services Canada. The administered expenses amounted to $1 million for the year. These expenses are not recorded in the financial statements.
13. Segmented information
Presentation by segment is based on WD’s program activity architecture. The presentation by segment is based on the same accounting policies as described in the Summary of significant accounting policies in note 2. The following table presents the expenses incurred and revenues generated for the main program activities, by major object of expense and by major type of revenue. The segment results for the period are as follows:
Business Development | Innovation | Community Economic Development | Policy, Advocacy and Coordination | Internal Services | 2012 Total |
2011 Total Restated (note 14) |
|
---|---|---|---|---|---|---|---|
(in thousands of dollars ) | |||||||
Transfer payments | |||||||
Non-profit organizations | $ 43,322 | $ 61,700 | $ 28,726 | $ 35 | $ 0 | $ 133,783 | $ 330,358 |
Other levels of governments within Canada | 0 | 0 | 3,489 | 0 | 0 | 3,489 | 39,895 |
Industry | 1,631 | 0 | (140) | 0 | 0 | 1,491 | 19,588 |
Transfer payment conditions met | 0 | (5) | (3,698) | 0 | 0 | (3,703) | (778) |
Total transfer payments | 44,953 | 61,695 | 28,377 | 35 | 0 | 135,060 | 389,063 |
Operating expenses | |||||||
Salaries and employee benefits | 5,396 | 4,360 | 6,712 | 6,820 | 21,641 | 44,929 | 47,421 |
Professional and special services | 2,393 | 23 | 259 | 338 | 2,079 | 5,092 | 6,737 |
Bad debt expense | 0 | 5 | 4,049 | 0 | 0 | 4,054 | 8,523 |
Accommodation | 388 | 296 | 651 | 481 | 1,724 | 3,540 | 3,823 |
Transportation and communication | 67 | 98 | 198 | 367 | 1,297 | 2,027 | 2,655 |
Rentals | 107 | 3 | 28 | 51 | 651 | 840 | 640 |
Acquisition of machinery and equipment | 17 | 4 | 9 | 16 | 497 | 543 | 1,491 |
Amortization of tangible capital assets | 12 | 0 | 0 | 0 | 435 | 447 | 394 |
Utilities, materials and supplies | 167 | 7 | 15 | 20 | 237 | 446 | 573 |
Information | 30 | 3 | 9 | 28 | 166 | 236 | 361 |
Repairs and maintenance | 28 | 5 | 11 | 8 | 53 | 105 | 98 |
Other | 3 | 3 | 3 | 2 | (6) | 5 | 66 |
Expenses incurred on behalf of the government | (712) | (5) | (4,049) | 0 | 0 | (4,766) | (12,210) |
Total operating expenses | 7,896 | 4,802 | 7,895 | 8,131 | 28,744 | 57,498 | 60,572 |
Total expenses | 52,849 | 66,497 | 36,272 | 8,166 | 28,774 | 192,558 | 449,635 |
Revenues | |||||||
Amortization of discount | 0 | 35 | 2,187 | 0 | 0 | 2,222 | 0 |
Interest | 17 | 3 | 47 | 0 | 0 | 67 | 507 |
Other | 8 | 0 | 0 | 0 | 40 | 48 | 44 |
Other fees and charges (compensatory repayments) | 0 | 3 | 0 | 0 | 0 | 3 | 161 |
Revenues earned on behalf of government | (25) | (41) | (2,233) | 0 | (28) | (2,327) | (712) |
Total revenues | 0 | 0 | 1 | 0 | 12 | 13 | 0 |
Net cost from continuing operations | $ 52,849 | $ 66,497 | $ 36,271 | $ 8,166 | $ 28,762 | $ 192,545 | $ 449,635 |
14. Accounting changes
During 2011, amendments were made to Treasury Board Accounting Standard 1.2 - Departmental and Agency Financial Statements to improve financial reporting by government departments and agencies. The amendments are effective for financial reporting of fiscal years ending March 31, 2012, and later. The significant changes to WD’s financial statements are described below. These changes have been applied retroactively, and comparative information for 2010-2011 has been restated.
Net debt (calculated as liabilities less financial assets) is now presented in the Statement of Financial Position. Accompanying this change, WD now presents a Statement of Change in Net Debt and no longer presents a Statement of Equity.
Revenue and related accounts receivable are now presented net of non-respendable amounts in the Statement of Operations and Departmental Net Financial Position and Statement of Financial Position. The effect of this change was to increase the net cost of operations before government funding and transfers by $2.3 million for 2012 ($712 thousand for 2011) and decrease total financial assets by $23.8 million for 2012 ($30.2 million for 2011).
Government funding and transfers, as well as the credit related to services provided without charge by other government departments, are now recognized in the Statement of Operations and Departmental Net Financial Position below “Net cost of operations before government funding and transfers.” In previous years, WD recognized these transactions directly in the Statement of Equity of Canada. The effect of this change was to decrease the net cost of operations after government funding and transfers by $194.6 million for 2012 ($454.5 million for 2011).
2011 As previously stated |
Effect of Change | 2011 Restated |
|
---|---|---|---|
(in thousands of dollars) | |||
Statement of Financial Position | |||
Assets held on behalf of Government | $ 0 | $ (30,245) | $ (30,245) |
Departmental financial position | 24,329 | (30,245) | (5,916) |
Statement of Operations and Departmental Net Financial Position: | |||
Revenues | 712 | (712) | 0 |
Expenses | |||
Expenses excluding transferred operations | 461,845 | (12,210) | 449,635 |
Expenses related to transferred operations | 2,664 | 0 | 2,664 |
Total Expenses | 464,509 | (12,210) | 452,299 |
Government funding and transfers | |||
Net cash provided by Government | 0 | 393,844 | 393,844 |
Change in due from Consolidated Revenue Fund | 0 | 53,339 | 53,339 |
Services provided without charge by other government departments |
0 | 7,310 | 7,310 |
Transfer of assets and liabilities from (to) other government departments |
$ 0 | $ 0 | $ 0 |
15. Comparative information
Comparative figures have been reclassified to conform to the current year’s presentation.
During the current year, loss support contributions and related interest were reclassified from prepayments and accounts receivable and advances to loans receivable. The reclassification resulted in no change to total assets. Prior year’s figures have been restated as follows:
2011 As previously stated |
Adjustment | 2011 Restated |
|
---|---|---|---|
(in thousands of dollars) | |||
Financial assets | |||
Accounts receivable and advances | $ 161 | ($ 4) | $ 157 |
Loans receivable | 21,702 | 8,543 | 30,245 |
Total financial assets | 21,863 | 8,539 | 30,402 |
Non-financial assets | |||
Prepayments | 9,517 | (8,539) | 978 |
Total non-financial assets | 9,517 | (8,539) | 978 |
Total | $ 31,380 | $ 0 | $ 31,380 |
Summary of the assessment of effectiveness of the systems of internal control over financial reporting and the action plan of Western Economic Diversification Canada for fiscal year 2011-2012 (unaudited)
Annex to the Statement of Management Responsibility Including Internal Control Over Financial Reporting (unaudited)
Note to the reader
With the Treasury Board Policy on Internal Control, that became effective April 1, 2009, departments are now required to demonstrate the measures they are taking to maintain an effective system of internal control over financial reporting (ICFR).
As part of this policy departments are expected to conduct annual assessments of their system of ICFR, establish an action plan to address any necessary adjustments, and to attach to their Statements of Management Responsibility a summary of their assessment results and action plan.
Effective systems of ICFR aim to achieve reliable financial statements and to provide assurances that:
- Transactions are appropriately authorized;
- Financial records are properly maintained;
- Assets are safeguarded from risks such as waste, abuse, loss, fraud and mismanagement;
- Applicable laws, regulations and policies are followed.
It is important to note that the system of ICFR is not designed to eliminate all risks, rather to mitigate risk to a reasonable level with controls that are balanced with and proportionate to the risks they aim to mitigate.
The system of ICFR is designed to mitigate risks to a reasonable level based on an on-going process to identify key risks, to assess the effectiveness of associated key controls and adjust as required, as well as to monitor the system in support of continuous improvement. As a result, the scope, pace and status of those departmental assessments of the effectiveness of their system of ICFR will vary from one organization to another based on risks and taking into account their unique circumstances.
This annex has not been audited.
1. Introduction
This document is attached to the Western Economic Diversification Canada (WD) Statement of Management Responsibility Including Internal Control Over Financial Reporting for the fiscal-year 2011-2012. As required by the Treasury Board Policy on Internal Control, effective April 1st 2009, for the first time, this document provides summary information on the measures taken by WD to maintain an effective system of internal control over financial reporting (ICFR). In particular, it provides summary information on the assessments conducted by WD as at March 31, 2012, including progress, results and related action plans along with some financial highlights pertinent to understanding the control environment unique to the department.
1.1 Authority, Mandate and Program Activities
Western Economic Diversification Canada (WD) was established in 1987 and mandated to promote the development and diversification of the economy of Western Canada and to advance the interests of the West in national economic policy, program and project development and implementation. This broad mandate allows the department to implement diverse programs and initiatives across the West to help western Canadians create strong, competitive and innovative businesses and communities.
To ensure that its programs have the greatest impact on the West, WD focuses its investments in priority areas which are business productivity and growth, trade and investment and technology commercialization. In addition, the department continues to advance western interests in national economic policy, program and project development and implementation.
Detailed information on WD’s authority, mandate and program activities can be found in the Departmental Performance Report and Report on Plans and Priorities.
1.2 Financial highlights
The financial statements (unaudited) of WD for fiscal-year 2011-2012 can be found in the Departmental Performance Report. Information can also be found in the Public Accounts of Canada.
- Total expenses were $192.6 million which excludes $1.5 million in transferred operation expenses. Transfer payments comprise the majority at $135.0 million (70%) followed by salaries $44.9 million (23%).
- Total revenues were $2.3 million. This is comprised of $2.3 million earned on behalf of government of which $67 thousand relates to interest earned on repayable transfer payment.
- Tangible capital assets comprise 1% of departmental total gross assets $105.3 million. Accounts payable and accrued liabilities comprise over 92% of total liabilities $86.9 million.
- WD’s headquarters is in Edmonton, Alberta and there are regional offices in each western province. There is a decentralized finance and accounting function in each of the regional offices that initiate, approve, process and/or record a significant portion of operating expenses.
- WD has a significant number of information systems that are critical to its operations and financial reporting.
1.3 Service arrangements relevant to financial statements
The Department relies on other organizations for the processing of certain transactions that are recorded in its financial statements:
Key Common Arrangements:
- Public Works and Government Services Canada (PWGSC) centrally administers the payments of salaries, the procurement of goods and services as per the Department’s Delegation of Authority and provides accommodation services.
- Treasury Board Secretariat provides the department with information used to calculate various accruals and allowances, such as the accrued severance liability.
- Human Resources and Skills Development Canada provides WD with coverage for workers’ compensation.
- The Department of Justice provides general legal services to WD along with information necessary for the contingent liability note to the financial statements for inclusion in the Public Accounts.
- Shared Services Canada (SSC) was created on August 4, 2011 to consolidate, streamline and improve the government’s information technology (IT) infrastructure services, specifically email, data centre and network services for forty three federal departments and agencies. Effective November 15, 2011 the responsibility for email, data centre and network services, including associated resources, was transferred from WD to SSC. The administration and delivery of these services were shared during the 2011–2012 transition period while SSC was being established.
1.4 Material changes in fiscal–year 2011–2012
- WD was responsible for the delivery of programs related to Canada Economic Action Plan for which the department spent $262.4 million in 2010–2011. The Recreational Infrastructure Canada (RInC) program concluded in March 31, 2012 for which $14.1 million was spent.
- WD participated in the 2011 Strategic and Operating Review exercise that was conducted across government to identify areas for savings to contribute to Canada’s deficit reduction action plan. In Budget 2012, the Government of Canada confirmed reductions in WD’s overall budget that total $16.3 million when fully implemented by fiscal year 2014–2015.
2. Control environment of WD relevant to ICFR
Entity level controls set the tone from the top to help ensure that staff at all levels understand their roles in maintaining effective systems of ICFR and are well equipped to exercise these responsibilities effectively in support of sound stewardship of public resources and reliable financial reporting.
The purpose of the key components of entity level controls at WD is to ensure solid governance and effective risk management at the corporate level, as well as the maintenance of other entity level controls to provide effective support to staff by raising awareness and providing appropriate knowledge, skills and tools. The ultimate objective is to manage risks while maintaining a responsive control environment for people at all levels that supports innovation and continuous improvement. WD’s main entity level controls currently in place and relevant to ICFR are set out below.
2.1 Key positions, roles and responsibilities
For the fiscal year 2011–2012 the key positions and committees with responsibilities for maintaining and reviewing the effectiveness of its system of ICFR are as follows:
Deputy Minister — WD’s Deputy Minister, as Accounting Officer, assumes overall responsibility and leadership for the measures taken to maintain an effective system of internal control. In this role, the Deputy Head chairs the Departmental Audit Committee and the Executive Committee.
Chief Financial Officer (CFO) — WD’s CFO reports directly to the Deputy Minister and provides leadership for the coordination, coherence and focus on the design and maintenance of an effective and integrated system of ICFR, including its annual assessment.
Assistant Deputy Ministers (ADM) — WD’s ADMs report directly to the Deputy Minister and are responsible for maintaining effectiveness of their system of ICFR within their scope of responsibility.
Chief Audit Executive (CAE) – WD’s CAE reports directly to the Deputy Minister and provides assurance through periodic internal audits which are instrumental to the maintenance of an effective system of ICFR. Beginning in 2012–2013 the Office of the Controller General will assume responsibility for WD’s Internal Audit function.
Departmental Audit Committee (DAC) – The DAC is an advisory committee that provides objective views on the departments risk management, control and governance frameworks. It is comprised of three external members and was established in 2009. As such, it reviews the Department’s Corporate Risk Profile and its system of internal control, including the assessment and action plans relating to the system of ICFR. Beginning in 2012–2013 WD will have access to the Small Department and Agency Audit Committee (SDAAC) in addition to the WD DAC.
Executive Committee – As WD’s central decision–making body, the Executive Committee reviews, approves and monitors the Corporate Risks Profile and the departmental system of internal control, including the assessment and action plans relating to the system of ICFR.
2.2 Key measures taken by WD
WD's control environment also includes a series of measures to equip its staff to manage risk through raising awareness, providing appropriate knowledge and tools as well as developing skills. Key measures include:
- A Senior Official responsible for the application of WD’s Code of Conduct and for providing the Deputy Minister advice on the application of WD’s Conflict of Interest and Post Employment Policy;
- A Senior Officer responsible for WD’s obligations under the Public Servants Disclosure Protection Act;
- A dedicated division under the CFO on internal control;
- Annual performance agreements with clearly set out financial management responsibilities;
- Rigorous Executive Committee oversight and review of ongoing resource utilization through regular financial status reports;
- Training program and communications in core areas of financial management;
- Departmental policies tailored to WD’s control environment;
- Regularly updated delegated authorities matrix;
- A project management system that guides and documents due diligence in transfer payment management;
- Documentation and testing of main business processes and related key risk and control points that supports the management and oversight of its system of ICFR;
- IT processing systems that achieve greater security, integrity, efficiency and effectiveness.
3. Assessment of WD’s system of ICFR
3.1 Assessment Approach
To satisfy the requirements of the Policy on Internal Control, the department must be able to maintain an effective system of ICFR with the objective to provide reasonable assurance that:
- Transactions are appropriately authorized;
- Financial records are properly maintained;
- Assets are safeguarded; and
- Applicable laws, regulations and policies are followed.
This includes assessment of design and operating effectiveness of the system of ICFR leading to ensuring the on–going monitoring and continuous improvement of the departmental system of ICFR.
Design effectiveness means to ensure that key control points are identified, documented, in place and that they are aligned with the risks (i.e. controls are balanced with and proportionate to the risks they aim to mitigate) and that any remediation is addressed.
Operating effectiveness means that the application of key controls has been tested over a defined period and that any required remediation is addressed.
On–going monitoring is an on–going process to periodically assess and sustain the management of internal controls in support of continuous improvement. It involves a systematic risk–based approach where the department has in place a rotational schedule through which operating effectiveness of key controls is assessed and reassessed including design, as required, including making any necessary adjustments.
3.2 Scope of departmental assessment during fiscal year 2011–2012
In previous years the department took measures to assess its system of ICFR by:
- Documenting and testing the design and operating effectiveness of its key entity level controls, general computer controls and business process controls with any remedial actions taken as required.
- Developing a formalized rotational on–going monitoring plan which identifies key controls to be tested on a cyclical basis including geographic locations, test period, and frequency of testing.
In the current fiscal year, the department has taken measures to assess its system of ICFR by:
- Identifying any new or significantly amended key control areas which required assessment;
- Completing the reassessment of entity level controls, general computer controls, transfer payments, operating expenses (non–payroll), financial closing and reporting processes (tested by internal audit); and
- Monitoring remedial actions taken in response to the findings of prior year monitoring and considering the results of recent internal audits, including an Audit of Financial Reporting Controls.
4. Departmental assessment results during fiscal year 2011–2012
The significant findings from the current year assessment are summarized below.
4.1 New or significantly amended key controls
In the current year there were no significantly amended key controls which required a reassessment.
4.2 On–going monitoring program
The department completed its reassessment of general computer controls, operating expenses (non–payroll), and revenue and receivables. The results from the reassessments were as follows:
- Any deficiencies were identified and communicated in a timely manner to the responsible parties,
- Minor control exceptions completed as planned – Revenue and receivables, and Operating – capital assets, and
- Minor control exceptions remain in General computer controls (GCC) and action plans will be completed by September 30, 2012.
5. Departmental action plan
5.1 Progress during fiscal year 2011–2012
The Department conducted its on–going monitoring as per its plan as follows:
- Completed as planned and no remedial actions required – Entity level controls, and
- Completed as planned and remedial actions partially commenced – Operating – operating expenses, Transfer payments, and Financial closing and reporting processes (tested by internal audit).
5.2 Action plan for 2012–2013 and subsequent years
The department’s focus is on–going monitoring, having gone through the full assessment cycle in previous years.
Only operating effectiveness testing is conducted in those areas subject to reassessment unless significant amendments have been made to key controls and design effectiveness testing may be necessary.
The table below shows the department’s rotational on–going monitoring plan over three years. An annual risk–assessment is conducted each year to validate the high risk controls and to adjust the on–going monitoring plan as required.
Internal Control over Financial Reporting | Operating Effectiveness Testing Rotation | |||
---|---|---|---|---|
Fiscal Year 2012–2013 |
Fiscal Year 2013–2014 |
Fiscal Year 2014–2015 |
||
Entity level controls (tested each fiscal year) | Entity–level controls | X | X | X |
General computer controls (tested every other year) | General computer controls (GCC) | X | ||
Business Processes | ||||
Transfer payments (tested each fiscal year) | Transfer payments | X | X | X |
Operating | Operating expenses | X | ||
Capital assets | X | |||
Financial close | X | |||
Payroll | X | X | ||
Revenue and receivables | X | X |
5.3 Future Considerations
Several events occurred subsequent to March 31, 2012 which will have an impact on future monitoring activities and the risk profile of many WD internal controls. These include the transfer of internal audit services to the Office of the Comptroller General, the transformation of Accounting Operations and Procurement to centralized units and the implementation of a Lifecycle Project Management system for transfer payment monitoring and payment activities. In addition to documenting and testing the design effectiveness of any new or modified internal controls as a result of these events, additional testing will be required to ensure that any increase in risk has been effectively mitigated.
- Date modified: