Report of the Auditor General on the Condensed Financial Statements of the Government of Canada

To 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, 2004, and for the year then ended on which I expressed an opinion without reservation in my Report to the House of Commons dated September 7, 2004.

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 Public Accounts of Canada 2004, 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 Public Accounts of Canada 2004.



Sheila Fraser, FCA
Auditor General of Canada

Ottawa, Canada
September 7, 2004

Condensed Financial Statements of the Government of Canada

The 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 Public Accounts of Canada 2004, 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 10
Government of Canada
Condensed Statement of Operations and Accumulated Deficit for the Year Ended March 31, 2004

Table 11
Government of Canada
Condensed Statement of Financial Position as at March 31, 2004

Table 12
Government of Canada
Condensed Statement of Change in Net Debt 
for the Year Ended March 31, 2004

Notes to the Condensed Financial Statements

1. Significant Accounting Policies

The 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 pension and other similar 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 2003 have been reclassified to conform to the current year’s presentation.

2. Contractual Commitments

Contractual 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, 2004, contractual commitments amounted to approximately $56 billion ($57 billion in 2003).

3. Contingent Liabilities

Guarantees by the Government amount to $71 billion ($75 billion in 2003) net of any recorded allowance. In addition, there are a number of contaminated sites where the Government could be obligated to incur costs. 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. Where cases are likely to be lost and an estimate of loss can be made, an amount is recorded in the financial statements. Insurance in force relating to self-sustaining insurance programs operated by three enterprise Crown corporations amounted to approximately $688 billion ($646 billion in 2003). The Government expects that it will not incur any costs to cover insurance claims under these programs.

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