Future-oriented Financial Statements

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 February 13, 2013 and reflect the plans described in the Report on Plans and Priorities. The future-oriented financial statements have been prepared by management in accordance with Government's accounting policies which are based on Canadian public sector accounting principles.

Daniel Schnob
Chief Financial Officer

William F. Pentney
Deputy Minister of Justice and
Deputy Attorney General of Canada

Ottawa, Canada
February 13, 2013

Future-oriented Statement of Financial Position
As at March 31
(in thousands of dollars)
  2013 2014
Liabilities
Accounts payable and accrued liabilities 65,214 63,834
Family Law account 3,173 3,173
Transfer payments payable 394,204 351,842
Vacation pay and compensatory leave 19,253 19,253
Employee severance benefits (Note 7) 85,278 40,278
Total liabilities 567,122 478,380
Financial assets
Due from the Consolidated Revenue Fund 437,628 392,285
Accounts receivable and advances 21,790 23,391
Total gross financial assets 459,418 415,676
Financial assets held on behalf of Government
Accounts receivable and advances (10,236) (10,236)
Total net financial assets 449,182 415,440
Departmental net debt 117,940 72,940
Non-financial assets
Prepaid expenses 78 78
Tangible capital assets (Note 8) 53,815 61,440
Total non-financial assets 53,893 61,518
Departmental net financial position (64,047) (11,422)

Information for the year ended March 31, 2013 includes actual amounts from April 1, 2012 to November 30, 2012.

The accompanying notes form an integral part of these future-oriented financial statements.

Future-oriented Statement if Operations and Departmental Net Financial Position
For the year ending March 31
(in thousands of dollars)
  2013 2014
Expenses (Note 6)
Legal Services to Government Program 475,014 501,428
Stewardship of the Canadian Legal Framework 468,198 425,940
The Office of the Federal Ombudsman for Victims of Crime 1,430 1,440
Internal Services 186,491 186,503
Total expenses 1,131,133 1,115,311
Revenues
Legal services 336,827 363,118
Family Law fees 7,653 7,653
Common Services 6,200 6,200
Revenues earned on behalf of Government (7,653) (7,653)
Total revenues 343,027 369,318
Net cost of operations before government funding 788,106 745,993
Government funding
Net cash provided by Government 725,734 748,134
Change in due from the Consolidated Revenue Fund (13,833) (45,343)
Services provided without charge from other government departments (Note 9) 97,568 95,827
Net cost (or revenue) of operations after government funding (21,363) (52,625)
Net financial position- Beginning of year (85,410) (64,047)
Net financial position- End of year (64,047) (11,422)

Information for the year ended March 31, 2013 includes actual amounts from April 1, 2012 to November 30, 2012.

The accompanying notes form an integral part of these future-oriented financial statements.

Future-oriented Statement of Change in Departmental Net Debt
For the year ending March 31
(in thousands of dollars)
  2013 2014
Net cost of operations after government funding (21,363) (52,625)
Change due to tangible capital assets
Amortization of tangible capital assets (Note 8) (14,016) (14,610)
Acquisitions of tangible capital assets (Note 7) 16,301 22,235
Total change due to tangible capital assets 2,285 7,625
Change due to prepaid expenses (46) -
Net decrease in departmental net debt (19,124) (45,000)
Departmental net debt - Beginning of year 137,064 117,940
Departmental net debt - End of year 117,940 72,940

Information for the year ended March 31, 2013 includes actual amounts from April 1, 2012 to November 30, 2012.

The accompanying notes form an integral part of these future-oriented financial statements.

Future-oriented Statement of Cash Flow
For the year ending March 31
(in thousands of dollars)
  2013 2014
Operating Activities
Net cost of operations before government funding 788,106 745,993
Non-cash items
Amortization of tangible capital assets (Note 8) (14,016) (14,610)
Services provided without charge by other government departments (Note 9) (97,568) (95,827)
Variations in Future-Oriented Statement of Financial Position
(Decrease) increase in accounts receivables (2,262) 1,601
(Decrease) in prepaid expenses (46) -
Decrease in liabilities 35,219 88,742
Cash used in operating activities 709,433 725,899
Capital Investing Activities
Acquisitions of tangible capital assets (Note 8) 16,301 22,235
Cash used in capital investing activities 16,301 22,235
Net Cash Provided By Government 725,734 748,134

Information for the year ended March 31, 2013 includes actual amounts from April 1, 2012 to November 30, 2012.

The accompanying notes form an integral part of these future-oriented financial statements.

Notes to the Future-oriented Financial Statements

1. Authority and objectives

The Department of Justice was created by an Act of Parliament in 1868 to be responsible for the legal affairs of the Government of Canada and to provide legal services to individual departments and agencies. The Department’s work reflects the duties of its Minister’s dual role as Attorney General of Canada and as Minister of Justice. The Department is established under the authority of Schedule I to the Financial Administration Act and is funded through annual appropriations.

The department conducts its two priorities along four program activities:

(a) A fair, relevant and accessible Canadian justice system

Stewardship of the Canadian Legal Framework

Under Canada’s federal system, the administration of justice is an area of shared jurisdiction between the federal government and the provinces. Through this program activity, the Department fulfils its responsibility to ensure a bilingual and bijural national legal framework for the administration of justice by developing policies and laws and testing innovative approaches to strengthen the framework within the following domains: criminal law, youth criminal justice, sentencing, marriage and divorce, access to justice and Aboriginal justice. This program also includes significant ongoing funding to provinces and territories in support of their responsibility for the day-to-day administration of justice.

Office of the Federal Ombudsman for Victims of Crime

This program activity raises awareness of the needs and concerns of victims in areas of federal responsibility, provides an independent resource that addresses complaints of victims about compliance with the provisions of the Corrections and Conditional Release Act that apply to victims of offenders under federal supervision, and assists victims in accessing existing federal programs and services.

(b) A federal government that is supported by high quality legal services

Legal Services to Government Program

The Department of Justice provides an integrated suite of high quality legal advisory, litigation and legislative services to the Minister of Justice and to all federal departments and agencies to support them in meeting the Government’s policy and programming priorities and to advance the overall objectives of the government. Services are provided through: a network of departmental legal services units co-located with client departments and agencies; specialized legal capacities within national headquarters; and, a network of regional offices and sub-offices providing legal advisory and litigation services to federal departments and agencies across the country.

(c) The following program activity supports all strategic outcomes within this organization

Internal Services

Internal Services are groups of related activities and resources that are administered to support the needs of programs and other corporate obligations of an organization. These groups are: Management and Oversight Services; Communications Services; Legal Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Services; Materiel Services; Acquisition Services; and Travel and Other Administrative Services. Internal Services include only those activities and resources that apply across an organization and not to those provided specifically to a program.

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 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 2012-13 is used as the opening position for the 2013-14 planned results.

These assumptions are adopted as at February 13, 2013.

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 Justice Canada 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 tangible capital assets may affect gains/losses and amortization expense.
  2. Implementation of new collective agreements and severance payments.
  3. Economic conditions may affect both the amount of revenue earned and the collectability of receivables.
  4. 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, Justice Canada 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.

4. Summary of significant accounting policies

The future-oriented financial statements have been prepared in accordance with the Government's accounting policies in effect for the 2012-13 fiscal year. These accounting policies, stated below, are based on Canadian public sector accounting principles. 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:

(a) Parliamentary authorities

The Department is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Department 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, 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.

(b) Net Cash Provided by Government

The Department operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the Department is deposited to the CRF, and all cash disbursements made by the Department 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.

(c) Amounts due from the Consolidated Revenue Fund (CRF)

The amounts 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 the Department is entitled to draw from the CRF without further authorities to discharge its liabilities.

(d) Revenues

  • Revenues are derived from the provision of advisory, litigation and legislative services provided by Department of Justice's law practitioners and they are recognized in the year the services are rendered. These revenues are based on legal services rates approved annually by Treasury Board in accordance with the Common Services Policy, for non-appropriated mandatory legal services to Government departments and agencies as well as legal services to Crown corporations and non-federal and international organizations.
  • Service and administration fees revenues under the Family Law programs are recognized based upon the services provided in the year, such as upon validation of the garnishment application or upon issuance of the divorce clearance certificate. The fees prescribed by Family Orders and Agreements Enforcement Assistance Act are to cover the administrative costs of processing each garnishee summons served on the Minister.
  • Fines, forfeitures and awarded court costs are recognized upon receipt of payment by the Department. Fines and forfeitures include two groups of payments: those provided for under the Criminal Code (s.734 through s.737) and those provided for under the Contraventions Act. Fines and forfeitures are in effect penalties for illegal actions, rather than fees.
  • Revenues that are non-respendable are not available to discharge the Department'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.
  • Common Services revenues are derived in accordance with the Common Services Policy, for specific internal services provided to Public Prosecution Service of Canada (PPSC).

(e) 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.
  • Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment.
  • Expenses related to the provision of legal services are limited to those costs borne and settled directly by the Department. The cost of legal services which are paid directly by client departments to outside suppliers such as legal agents, are not included in the expenses of the Department.
  • Services provided without charge by other government departments for accommodation, the employer's contribution to the health and dental insurance plans and workers'compensation coverage are reported as operating expenses at their estimated cost.

(f) Employee future benefits

(i) Pension benefits

Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. The Department'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 the Department to make contributions for any actuarial deficiencies of the Plan.

(ii) Severance benefits

Employees entitled to severance benefits under labour contracts or conditions of employment earn these benefits 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.

(g) Receivables

Receivables are stated at the lower of cost and net recoverable value; an allowance for doubtful accounts is made for receivables where recovery is considered uncertain. The allowance for doubtful accounts represents management's best estimate of probable losses in receivables. The allowance is determined based on an analysis of historic loss experience and an assessment of current conditions. The allowance is increased for losses and reduced by amounts written-off.

Under the Family Orders and Agreements Enforcement Assistance Act, remission order PC 1994-269, outstanding receivables are written-off once the garnishee application has terminated. The application terminates when the five-year life of the garnishment summons has expired or when the province or territory has requested that the application be cancelled.

(h) Contingent liabilities

Contingent liabilities are potential liabilities which may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the future-oriented financial statements. No estimate is made for the contingent liability for these future-oriented financial statements.

(i) Tangible capital assets

All tangible capital assets and leasehold improvements are recorded at their cost and amortized over their estimated useful life on a straight-line basis as follows:

Asset class Acquisition cost equal or greater than Amortization period
Office and other equipment $10,000 5 to 8 years
Telecommunications equipment $10,000 4 to 5 years
Informatics hardware $1,000 3 to 5 years
Informatics software $10,000 3 to 5 years
Furniture and furnishings $1,000 10 years
Motor vehicles $10,000 5 years
Leasehold improvements $10,000 Lesser of useful life or remaining term of the lease
Work in progress In accordance with asset class Once in service, in accordance with asset class

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.

(j) 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. 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 authorities

The Department 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, the Department 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 table:

Reconciliation of net cost of operations to requested authorities
(in thousands of dollars)
  2013 2014
Net cost of operations before government funding 788,106 745,993
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets (Note 7) (14,016) (14,610)
Employee future benefits 6,240 45,000
Employee benefits recovered 45,500 50,390
Bad debt expense (4,640) (4,640)
Services provided without charge by other government departments (Note 9) (97,568) (95,827)
Total items affecting net cost of operations but not affecting authorities (64,484) (19,687)
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisitions of tangible capital assets (Note 8) 16,301 22,235
Total items affecting net cost of operations but affecting authorities 16,301 22,235
Forecasted authorities available 739,923 748,541

6. Expenses

Expenses
(in thousands of dollars)
  2013 2014
Operating
Salaries and employee benefits 622,438 632,616
Accommodation 51,153 52,329
Professional and special services 31,418 42,408
Amortization of tangible capital assets 14,016 14,610
Other expenses 9,575 9,819
Travel and relocation 9,278 9,233
Bad debts 4,640 4,640
Utilities, materials and supplies 4,121 5,597
Communications 1,726 2,424
Total operating expenses 748,365 773,676
Transfer payments 382,768 341,635
Total expenses 1,131,133 1,115,311

7. Employee future benefit

(a) Pension benefits

The Department'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.

The Department'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

The Department 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 appropriations.

As part of 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 these 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 obligation.

8. Tangible capital assets

(in thousands of dollars)
  2013 2014
Opening balance 51,530 53,815
Acquisition of tangible capital assets 16,301 22,235
less: Current year amortization (14,016) (14,610)
Net book value 53,815 61,440

9. Related party transactions

The Department is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations. The department enters into transactions with these entities in the normal course of business and on normal trade terms.

Also, during the year, the Department received services without charge from other departments, accommodation, the employer's contribution to the health and dental insurance plans, and workers' compensation coverage. These services without charge have been recognized in the Department's Future-Oriented Statement of Operations and Departmental Net Financial Position as follows:

(in thousands of dollars)
  2013 2014
Accommodation provided by Public Works and Government Services Canada 48,153 49,329
Employer's contributions to the health and dental insurance plans paid by Treasury Board Secretariat 49,337 46,420
Workers’ compensation coverage provided by Human Resources and Skills Development Canada 78 78
Total 97,568 95,827

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 cost of these services, which include payroll and cheque issuance services provided by Public Works and Government Services Canada, are not included as an expense in the Future-Oriented Statement of Operations and Departmental Net Financial Position.

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