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Annual Financial Report of the Government of Canada Fiscal Year 2002–2003: 2 - Table of Contents - Previous - Comparison of Actual Budgetary Outcomes to Budget EstimatesThis section compares the actual outcome for the major components of the budgetary balance for 2002–03 to the estimates presented in the February 2003 budget. As the estimates contained in the December 2001 budget for 2002–03 were not presented on a full accrual basis, no attempt will be made to provide a reconciliation to those estimates. The Government targeted a balanced budget for 2002–03 in the February 2003 budget. Under the Debt Repayment Plan, the fiscal target for each year is based on:
After accounting for the fiscal impact of the new spending initiatives and tax cuts, the February 2003 budget estimated a balanced budget or better in 2002–03. This target was backed by the normal $3-billion Contingency Reserve. On a full accrual basis of accounting, the final audited budgetary surplus for 2002–03 was $7.0 billion. This improvement is primarily attributable to one-time factors affecting program expenses. Within program expenses, all other expenses were $2.5 billion lower than estimated in the February 2003 budget, primarily reflecting one-time adjustments to allowances for loans to foreign countries, and revisions to the accrual adjustments. Entitlements under the fiscal arrangements programs, primarily equalization entitlements, were also lower than estimated at the time of the 2003 budget. Data revisions since the budget indicated a narrowing of fiscal disparities between the equalization- and non-equalization-receiving provinces, which resulted in lower equalization entitlements for both 2001–02 and 2002–03. The downward adjustment in 2002–03, therefore, incorporates both the prior-year revisions as well as those in 2002–03. In addition, employment insurance benefits were $0.5 billion lower than expected, while elderly benefits were $0.1 billion lower. In contrast, budgetary revenues were $1.2 billion lower than estimated in the February 2003 budget, primarily attributable to lower-than-expected personal income tax revenues. Offsetting some of this decline were higher net gains from enterprise Crown corporations and exchange fund activities. Public debt charges were marginally lower than expected. Table 8
Report of the Auditor General on the Condensed Financial Statements of the Government of CanadaTo the Minister of Finance: The accompanying condensed statements of operations and accumulated deficit, financial position, change in net debt and cash flow are derived from the complete financial statements of the Government of Canada as at March 31, 2003, and for the year then ended on which I expressed an opinion without reservation in my Report to the House of Commons dated September 29, 2003. My Report drew two matters I have raised before to Parliament’s attention: a concern about the Employment Insurance Account, and the recording of transfers to Foundations. For more complete information, readers should refer to my Report, which will be included in Volume I of the 2003 Public Accounts of Canada, expected to be tabled in the House of Commons later this year. The fair summarization of the complete financial statements is the responsibility of the Government. My responsibility, in accordance with the applicable Assurance Guideline of The Canadian Institute of Chartered Accountants, is to report on the condensed financial statements. In my opinion, the accompanying condensed financial statements fairly summarize, in all material respects, the related complete financial statements in accordance with the criteria described in the Guideline referred to above. Since these are condensed financial statements, readers are cautioned that these statements may not be appropriate for their purposes. For more information on the Government’s financial position, results of operations and cash flow, reference should be made to the related complete financial statements, which will also be included in Volume I of the 2003 Public Accounts of Canada.
Sheila Fraser, FCA Ottawa, Canada Condensed Financial Statements of the Government of CanadaThe fundamental purpose of these condensed financial statements is to provide an overview of the financial affairs and resources for which the Government is responsible under authority granted by Parliament. Responsibility for the integrity and objectivity of these statements rests with the Government. These financial statements are extracted and condensed from the audited financial statements included in Section 2 of Volume I of the 2003 Public Accounts of Canada, which are expected to be tabled in Parliament later this year. As these condensed financial statements are, by their nature, summarized, they do not include all disclosure required for financial reporting by governments in Canada. Readers interested in the disclosure of more detailed data should refer to the audited financial statements in the Public Accounts. Table 9
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Notes to the Condensed Financial Statement1. Significant Accounting PoliciesThe Government of Canada reporting entity includes all departments, agencies, corporations and funds which are owned or controlled by the Government and which are accountable to Parliament. The financial activities of all these entities are consolidated in these statements, except for enterprise Crown corporations and other government business enterprises, which are not dependent on the Government for financing their activities. These corporations are reported under the modified equity basis of accounting. The Canada Pension Plan is excluded from the reporting entity as it is under the joint control of the Government and participating provinces. The Government accounts for transactions on an accrual basis. Financial assets recorded on the Condensed Statement of Financial Position can provide resources to discharge liabilities or finance future operations and are recorded at the lower of cost or net realizable value. Non-financial assets cannot normally be converted into cash to finance future operations without disrupting government operations; they are recorded at cost less accumulated amortization. Liabilities are recorded at the estimated amount ultimately payable, with public sector pension and other employee and veteran future benefits being determined on an actuarial basis. Valuation allowances are established for loan guarantees, concessionary and sovereign loans, and other obligations. Some amounts in these statements are based on estimates and assumptions made by the Government. By their nature, such estimates are subject to measurement uncertainty, although all of them are believed to be reasonable. Comparative figures for 2002 have been reclassified to conform to the current year’s presentation. 2. Changes in Accounting PoliciesIn 2003 the Government changed its basis of accounting from modified accrual to full accrual. These changes have been applied retroactively, with restatement of the 2002 financial statements. The nature of the changes and their effect on the 2002 opening accumulated deficit and net debt are as follows:
The Government also adopted a new financial statement format to reflect the full accrual basis of accounting and introduced a new Statement of Change in Net Debt. 3. Contractual CommitmentsContractual commitments that will materially affect the level of future expenses include transfer payment agreements, acquisitions of goods and services, operating leases and funding of international organizations. At March 31, 2003, contractual commitments amounted to approximately $33 billion ($30 billion in 2002). 4. Contingent LiabilitiesContingent liabilities related to guarantees by the Government and international organizations amount to $75 billion ($77 billion in 2002). There are thousands of claims and pending and threatened litigation cases against the Government; the total amount claimed in these instances is significant but the final outcome is not determinable. Insurance in force relating to self-sustaining insurance programs operated by three enterprise Crown corporations amounted to approximately $646 billion ($615 billion in 2002). The Government expects that it will not incur any costs to cover insurance claims under these programs.
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