Future-Oriented Financial Statements for the Year Ending March 31

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 November 30, 2012 and reflect the plans described in the Report on Plans and Priorities.

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.

Future-oriented Statement of Financial Position (Unaudited)
As at March 31

(in thousands of dollars)

Future-oriented Statement of Operations and Departmental Net Financial Position (Unaudited)
For the Year Ending March 31

(in thousands of dollars)

top of page

Future-oriented Statement of Change in Departmental Net Debt (Unaudited)
For the Year Ending March 31

(in thousands of dollars)

Future-oriented Statement of Cash Flows (Unaudited)
For the Year Ending March 31

(in thousands of dollars)

top of page

Notes to the Future-oriented Financial Statements (Unaudited)
For the Year Ending 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:

1. Business Development and Innovation: Western Canada small-and medium-sized enterprises (SMEs) are engaged in international business, are competitive and are innovative.
    
2. Community Economic Growth: Western Canadian communities have strong businesses, the capacity for socio-economic development, and the necessary public infrastructure to support economic growth.
    
3. Policy, Advocacy and Coordination: policies and programs that strengthen the western Canadian economy.
    
4. Internal Services: effective and efficient support for the delivery of the organizational strategic outcome.

2. Methodology and 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 information in the estimated results for fiscal year 2012–13 is based on actual results as at November 30, 2012 and forecasts for the remainder of the year. Estimated year end information for 2012–13 is used as the opening position for 2013–14 planned results, and forecasts have been made for the planned results for the 2013–14 fiscal year.

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 uncollectible accounts are based on historical experience. The general historical pattern is expected to continue.

These assumptions are adopted as at November 30, 2012.

3. Variations and Changes to the Forecast Financial Information

While every attempt has been made to forecast final results for the remainder of 2012–13 and for 2013–14, actual results achieved for both years are likely to vary from the forecast information presented, and this variation could be material.

In preparing these future-oriented financial statements, WD has made estimates and assumptions concerning the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions 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. Implementation of new collective agreements.
    
3. Economic conditions may affect both the amount of revenue earned and the collectability of loan receivables.
    
4. Interest rates in effect at the time of issue will affect the net present value of non-interest bearing loans.
    
5. Further changes to the operating budget through additional new initiatives or technical adjustments later in the year.

Once the Report on Plans and Priorities is presented, WD will not be updating the forecasts for any changes to appropriations or forecast financial information made in ensuing supplementary estimates. Variances will be explained in the Departmental Performance Report.

top of page

4. Summary of significant accounting policies

These future-oriented 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.

A revised Treasury Board Accounting Standard 1.2 - Departmental and Agency Financial Statements was brought into force after the preparation of WD’s 2012–13 future-oriented financial statements. The revised standard resulted in the following changes to the WD's financial statements; (1) 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, (2) Revenue, loans receivable 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 and,  (3) 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.

Significant accounting policies are as follows:

1. 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 Future-oriented Statement of Operations and Departmental Net Financial Position and in the Future-oriented Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 5 provides a reconciliation between the bases of reporting.
    
2. 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.
    
3. 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.
    
4. 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 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.
      
5. Expenses - Expenses are recorded on an 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 future-oriented 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.
      
6. 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. 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 future-oriented financial statements of the Government of Canada, as the Plan’s sponsor.
       
   2. 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.
       
7. 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.
    
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.
    
9. Measurement uncertainty – The preparation of these future-oriented financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the future-oriented 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.

top of page

5. Parliamentary Authorities

WD receives most of its funding through annual parliamentary authorities. Items recognized in the Future-oriented Statement of Operations and Departmental Net Financial Position and the Future-oriented 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) Authorities requested:

Authorities presented reflect current forecasts of statutory items, approved initiatives included and expected to be included in Estimates documents and, when reasonable estimates can be made, estimates of amounts to be allocated from Treasury Board central votes.

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

6. Accounts payable and accrued liabilities

The following table presents details of WD's accounts payable and accrued liabilities:

top of page

7. 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 pension plan. The forecast expenses for the employer's share are $3,631,236 in 2012–13 and $3,493,000 in 2013–14.

WD's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the future-oriented 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, estimated as at the date of these statements, 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.

8. Accounts receivable and advances

The following table presents details of WD's accounts receivable and advances balances:

9. Loans receivable

The following table presents details of WD's loans and transfer payments recoverable balances:

(a) Unconditionally repayable transfer payments

The unconditionally repayable transfer payment portfolio consists of 28 non-interest bearing loans issued in the years from 1992 to 2013, with prescribed repayment terms. The loans are recorded at their discounted net present values using market interest rates at the time of the loans. An allowance of $10,375,000 ($15,225,000 in 2012–13) has been recorded.

top of page

10. Tangible capital assets

11. 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:

top of page

12. 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 Future-oriented Statement of Operations and Departmental Net Financial Position as follows:

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 Future-oriented 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 Infrastructure Canada. The following is a list of programs valued at greater than one million dollars in federal transfer payments to be administered by WD over the next two fiscal years. These transfer payment expenses are reflected in the future-oriented financial statements of the other government departments and not those of WD.

(c) Other transactions with related parties

top of page

13. Transfers from/to other government departments

During fiscal year 2012–13, WD transferred to Canada Border Services Agency assets with a book value of $4 thousand. WD also transferred to Shared Services Canada (SSC) liabilities with a book value of $56 thousand for payables at the end of 2011–12 fiscal year that WD paid on behalf of SSC.

14. Segmented information

Presentation by segment is based on WD's program alignment architecture. The presentation by segment is based on the same accounting policies as described in the Summary of significant accounting policies in note 4. The following table presents the forecasted expenses incurred and forecasted 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: