2006-2007 Consolidated Departmental Financial Statements

Table of Contents

• Statement of Management Responsibility
• Consolidated Statement of Operations (Unaudited)
• Consolidated Statement of Financial Position (Unaudited)
• Consolidated Statement of Equity of Canada (Unaudited)
• Consolidated Statement of Cash Flow (Unaudited)
• Notes to the Consolidated Financial Statements (Unaudited)
  1. Authority and objectives
  2. Summary of significant accounting policies
  3. Parliamentary appropriations
  4. Expenses
  5. Revenues
  6. Accounts receivable and advances
  7. Tangible capital assets
  8. Accounts payable and accrued liabilities
  9. Other liabilities
  10. Lease obligation for tangible capital assets
  11. Employee benefits
  12. Contingent liabilities
  13. Contractual obligations
  14. Related party transactions
  15. Seized Property Proceeds Account
  16. Transfer of activities
  17. Subsequent event
  18. Restatement of comparative information
  19. Comparative information

Statement of Management Responsibility

Responsibility for the integrity and objectivity of the accompanying consolidated financial statements for the year ended March 31, 2007 and all information contained in these statements rests with Public Works and Government Services Canada (PWGSC) management. These consolidated financial statements have been prepared by management in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.

Management is responsible for the integrity and objectivity of the information in these consolidated financial statements. Some of the information in the consolidated financial statements is based on management's best estimates and judgement 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 PWGSC financial transactions. Financial information submitted to the Public Accounts of Canada and included in PWGSC's Departmental Performance Report is consistent with these consolidated financial statements.

Management maintains a system of financial management and internal control designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are in accordance with the Financial Administration Act, are executed in accordance with prescribed regulations, within Parliamentary authorities, and are properly recorded to maintain accountability of government funds. Management also seeks to ensure the objectivity and integrity of data in its consolidated financial statements by careful selection, training and development of qualified staff, by organizational arrangements that provide appropriate divisions of responsibility, and by communication programs aimed at ensuring that regulations, policies, standards and managerial authorities are understood throughout PWGSC.

The consolidated financial statements of PWGSC have not been audited.

François Guimont, Deputy Minister
Public Works and Government Services Canada

Gatineau, Canada

Date

Mike Hawkes, Chief Financial Officer
Public Works and Government Services Canada

Gatineau, Canada

Date

Consolidated Statement of Operations (Unaudited)
For the year ended March 31

(in thousands of dollars)

	2007	2006 Restated (Note 18)
Expenses (Note 4)
Real Property	3,188,812	2,971,892
Information Technology	536,027	498,942
Acquisitions	391,187	351,143
Receiver General and Public Service Compensation	281,101	245,885
Translation Bureau	203,561	189,289
Business Integration	80,055	70,180
Government Information and Consulting	68,156	77,213
Consulting and Audit Canada	58,177	91,597
Greening Government Operations	2,023	-
Total expenses	4,809,099	4,496,141
Revenues (Note 5)
Real Property	1,417,344	1,376,894
Information Technology	232,875	182,153
Acquisitions	166,837	153,822
Translation Bureau	132,456	140,445
Receiver General and Public Service Compensation	86,101	64,999
Consulting and Audit Canada	60,054	92,301
Business Integration	53,501	51,772
Government Information and Consulting	9,390	11,294
Greening Government Operations	712	-
Total revenues	2,159,270	2,073,680
Net cost of operations	2,649,829	2,422,461

The accompanying notes form an integral part of these consolidated financial statements.

Consolidated Statement of Financial Position (Unaudited)
At March 31

(in thousands of dollars)

Assets	2007	2006
Financial assets
Accounts receivable and advances (Note 6)	407,655	327,927
Inventory held for resale	5,304	4,696
Seized Property Working Capital Account	17,461	15,546
	430,420	348,169
Non-financial assets
Prepaid expenses	7,537	6,236
Tangible capital assets (Note 7)	4,344,749	4,072,549
	4,352,286	4,078,785
Total assets	4,782,706	4,426,954
Liabilities and Equity of Canada
Liabilities
Accounts payable and accrued liabilities (Note 8)	619,804	595,407
Other liabilities (Note 9)	80,337	73,181
Lease obligation for tangible capital assets (Note 10)	1,258,966	990,284
Vacation pay and compensatory leave	46,420	50,091
Employee severance benefits (Note 11)	220,739	181,235
Environmental liabilities - contaminated sites (Note 12)	320,155	318,598
Lease inducements	27,391	28,168
	2,573,812	2,236,964
Equity of Canada (Note 15)	2,208,894	2,189,990
Total liabilities and equity of Canada	4,782,706	4,426,954

Contingent liabilities (Note 12)

Contractual obligations (Note 13)

The accompanying notes form an integral part of these consolidated financial statements.

Consolidated Statement of Equity of Canada (Unaudited)
For the year ended March 31

(in thousands of dollars)

	2007	2006 Restated (Note 18)
Equity of Canada, beginning of year	2,189,990	2,169,538
Net cost of operations	(2,649,829)	(2,422,461)
Current year appropriations used (Note 3)	2,605,650	2,530,779
Revenue not available for spending (Note 3)	(57,160)	(81,701)
Transfer of activities (Note 16)	3,132	-
Change in net position in the Consolidated Revenue Fund (Note 3)	56,823	(59,783)
Services received without charge from other government departments (Note 14)	60,288	53,618
Equity of Canada, end of year (Note 15)	2,208,894	2,189,990

The accompanying notes form an integral part of these consolidated financial statements.

Consolidated Statement of Cash Flow (Unaudited)
For the year ended March 31

(in thousands of dollars)

Operating activities	2007	2006 Restated (Note 18)
Net cost of operations	2,649,829	2,422,461
Non cash items:
Amortization of tangible capital assets (Note 7)	(370,989)	(355,829)
Gain or loss on disposals / Adjustments of tangible capital assets	(69,437)	(9,764)
Services received without charge from other government departments (Note 14)	(60,288)	(53,618)
Transfer of activities (Note 16)	(3,132)	-
Variations in Consolidated Statement of Financial Position:
Increase (decrease) in financial assets	82,251	(13,852)
Increase (decrease) in prepaid expenses	1,301	323
Increase (decrease) in liabilities other than lease obligation for tangible capital assets	(68,166)	(33,110)
Cash used by operating activities	2,161,369	1,956,611
Capital investment activities
Acquisitions of tangible capital assets (Note 7)	361,665	374,046
Payments on lease obligation for tangible capital assets	86,201	70,132
Proceeds on disposal of tangible capital assets	(3,922)	(11,494)
Cash used by capital investment activities	443,944	432,684
Financing activities
Net cash provided by Government of Canada	(2,605,313)	(2,389,295)

The accompanying notes form an integral part of these consolidated financial statements.

Notes to the Consolidated Financial Statements (Unaudited)

For the year ended March 31

1. Authority and objectives

The department of Public Works and Government Services Canada (PWGSC) was established effective June 20, 1996, under the Department of Public Works and Government Services Act. This legislation specifies that PWGSC shall provide common, central and shared services to other government departments and agencies, thereby enabling them to provide programs and services to Canadians. These services are grouped into the following key areas:

• Real Property provides accommodation to federal departments and agencies in addition to providing them with strategic and expert advice for the acquisition, development, construction, management, operation, maintenance, repair and disposal of real property;
• Acquisitions offers client departments and agencies a broad base of procurement solutions such as specialized contracts, standing offers, supply arrangements and electronic marketplaces as well as specialized services such as the management of seized property;
• Information Technology provides a wide range of services to departments and agencies in the areas of informatics and telecommunications services; professional training and development services in information and communications technologies; and electronic access to government information and services for Canadians;
• Receiver General and Public Service Compensation manages the operations of the federal treasury, including payment issue and revenue collection for all government departments, provides payroll, benefits and pension plan administration services for the Public Service of Canada, prepares the Public Accounts of Canada, and produces the government's Monthly Statements of Financial Operations. The authority for Receiver General functions is the Financial Administration Act;
• Government Information and Consulting's programs and services aim to enhance government communications and public sector management of key communications activities such as advertising and public opinion research. Consulting Services provides quality services to improve management in the Canadian government and abroad;
• Greening Government Operations establishes government-wide priorities, accountabilities, targets, timelines and reporting requirements to assist the government in becoming a model of environmental excellence in its own operations;
• Business Integration manages the customer relationship by determining the strategic business needs of client departments, informing them of PWGSC's services, and measuring customer satisfaction in order to improve service delivery. It also provides centralized support to federal government corporate administrative systems, and delivers security programs for protecting government information, assets and controlled goods;
• Special Operating Agencies, of which there are two: Consulting and Audit Canada, and the Translation Bureau. Consulting and Audit Canada's services were realigned in 2005-2006. The agency now exclusively provides audit and assurance services, while government consulting and corporate services were transferred to the Government Information Services Branch. The Translation Bureau helps the government serve Canadians and communicate with them in the official language of their choice by: using standardized terminology within the public service; and providing translation, editing, interpretation, terminology and technolinguistic services for Parliament, the judiciary, and federal departments and agencies.

2. Summary of significant accounting policies

The consolidated financial statements have been prepared in accordance with Treasury Board accounting policies, which are consistent with Canadian generally accepted accounting principles for the public sector.

Significant accounting policies are as follows:

1. Parliamentary appropriations
   PWGSC is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to PWGSC do not parallel financial reporting according to generally accepted accounting principles since appropriations are primarily based on cash flow requirements. Consequently, items recognized in the Consolidated Statement of Operations and the Consolidated Statement of Financial Position are not necessarily the same as those provided through appropriations from Parliament. Note 3 provides a high-level reconciliation between the bases of reporting.
2. Consolidation
   These consolidated financial statements include the accounts of seven revolving funds as listed below. Each revolving fund prepares a complete set of financial statements annually that are audited and published in the Public Accounts of Canada. The accounts of these revolving funds have been consolidated with those of PWGSC and all inter-organizational balances and transactions have been eliminated.

   The PWGSC revolving funds are as follows:

   • Consulting and Audit Canada Revolving Fund
   • Defence Production Revolving Fund
   • Optional Services Revolving Fund
   • Real Property Disposition Revolving Fund
   • Real Property Services Revolving Fund
   • Telecommunications and Informatics Common Services Revolving Fund
   • Translation Bureau Revolving Fund
3. Net cash provided by Government
   PWGSC operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by PWGSC is deposited to the CRF and all cash disbursements made by PWGSC 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 federal government.
4. Change in net position in the Consolidated Revenue Fund
   This is the difference between the net cash provided by Government and appropriations used in a year, excluding the amount of non respendable revenue recorded by PWGSC. It results from timing differences between when a transaction affects appropriations and when it is processed through the CRF.
5. Revenues
   • Revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenue.
   • Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.
6. Expenses
   Expenses are recorded on the accrual basis of accounting:
   • Services provided without charge by other government departments for the employer's contribution to the health and dental insurance plans, worker's compensation and legal services are recorded as operating expenses at their estimated cost.
   • Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment.
   • Grants are recognized in the year in which the conditions of payment are met. In the case of grants which do not form part of an existing program, the expense is recognized 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 consolidated financial statements.
   • Contributions are recognized in the year in which the recipient has met the eligibility criteria or fulfilled the terms of a contractual transfer agreement.
7. Employee future benefits
   1. Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multi-employer plan administered by the Government of Canada. 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 actuarial deficiencies of the Plan.
   2. Severance benefits: Employees are entitled to severance benefits under labour contracts or conditions of employment. These benefits are accrued as employees render the services necessary to earn them. The obligation relating to the benefits earned by employees is calculated based on the number of years of service and the salary level for each employee.
8. Accounts receivable and advances
   Accounts receivable and advances are stated at amounts expected to be ultimately realized; a provision is made for receivables where recovery is considered uncertain.
9. Lease inducements
   Lease inducements represent incentives received by PWGSC to enter into a lease. Lease inducements include incentives such as: free rent, cash received to be applied to rent, lump sum cash, leasehold improvements and moving costs paid by lessor. The lease inducements are accounted for as follows:
   • Rent free periods or periods of significantly reduced rent are allocated over the term of the lease on a straight-line basis;
   • Cash payments from the lessor to the lessee are accounted for as reductions in rental expense over the term of the lease;
   • Leasehold improvements are amortized over the remaining life of the lease or the useful life of the improvement, whichever is shorter;
   • Moving costs absorbed by the lessor are amortized over the term of the lease.
10. 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 consolidated financial statements.
11. Environmental liabilities
    Environmental liabilities reflect the estimated costs related to the management and remediation of environmentally contaminated sites. Based on management's best estimates, a liability is accrued and an expense recorded when the contamination occurs or when the department becomes aware of the contamination and is obligated, or is likely to be obligated to incur such costs. If the likelihood of the department's obligation to incur these costs is not determinable, or if an amount cannot be reasonably estimated, the costs are disclosed as contingent liabilities in the notes to the consolidated financial statements.
12. Inventories
    Inventories held for resale are physical items that will be sold in the future in the ordinary course of business to parties outside of the government reporting entity.
13. Tangible capital assets
    Betterments and leasehold improvements carried out on buildings and works and infrastructure having an initial cost of $25,000 or more are recorded at their acquisition cost. All other tangible capital assets having an initial cost of $10,000 or more are recorded at their acquisition cost.

    Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of each asset as follows:

    Asset class	Amortization period
    Buildings	25 years
    Works and infrastructure	40 years
    Machinery and equipment	3 to 20 years
    Informatics hardware and software	3 to 5 years
    Vehicles	7 to 8 years
    Leasehold improvements	Lesser of the remaining term of the lease or useful life of the improvement
    Assets under construction	Once in service, in accordance with asset class
    Leased tangible capital assets	In accordance with asset class if ownership is likely to transfer to PWGSC; otherwise, over the lease term

14. Measurement uncertainty
    The preparation of these consolidated financial statements in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the consolidated 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 contingent liabilities, environmental liabilities, the liability for employee severance benefits and the useful life of tangible capital assets. Actual results could significantly differ from those estimated. Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the consolidated financial statements in the year they become known.
15. Seized Property Working Capital Account
    This account was established by section 12 of the Seized Property Management Act. Expenses incurred, and advances made, to maintain and manage any seized or restrained property and other properties subject to a management order or forfeited to Her Majesty, are charged to this account. This account is credited when expenses and advances to third parties are repaid or recovered and when revenues from these properties or proceeds of their disposal are received and credited with seized cash upon forfeiture.

    The total amount authorized to be outstanding in the Seized Property Working Capital Account at any time is $50,000,000.

    Any shortfall between the proceeds from the disposition of any property forfeited to Her Majesty and the amounts that were charged to this account and that are still outstanding, is charged to a Seized Property Proceeds Account and credited to this account.

16. Payment in lieu of taxes to municipalities and other taxing authorities
    PWGSC administers the Payments in Lieu of Taxes Program on behalf of all federal departments and agencies under the authority of the Payments in Lieu of Taxes Act.

    In accordance with the constitution act, the Government of Canada is exempt from property taxes. The Government of Canada voluntarily pays an appropriate share of the costs of local government to municipalities and other taxation authorities having jurisdiction to levy and collect real property tax in locations where federal lands and buildings are situated.

    The payments are made to the taxing authorities by PWGSC and are then recovered from each participating federal department.

3. Parliamentary appropriations

PWGSC receives most of its funding through annual Parliamentary appropriations. Items recognized in the Consolidated Statement of Operations and the Consolidated Statement of Financial Position in one year may be funded through Parliamentary appropriations in prior, current or future years.

Accordingly, PWGSC 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 appropriations used

(in thousands of dollars)

	2007	2006 Restated (Note 18)
Net cost of operations	2,649,829	2,422,461
Adjustments for items affecting net cost of operations but not affecting appropriations:
Add (less):
Amortization of tangible capital assets (Note 7)	(370,989)	(355,829)
Reclassification of assets under construction	(73,786)	(56,624)
Services received without charge from other government departments (Note 14)	(60,288)	(53,618)
Justice Canada legal services	(5,286)	(5,634)
Decrease (increase) in lease inducements	(2,306)	(1,045)
Revenue (expenses) from Seized Property Proceeds Account (Note 15)	(4,375)	17,249
Vacation pay and compensatory leave	3,726	(1,497)
Employee severance benefits	(42,550)	(12,229)
Revenue not available for spending	57,160	81,701
Decrease (Increase) in environmental liabilities for contaminated sites	(1,556)	4,771
Adjustments to tangible capital assets	4,706	46,860
Other	(8,182)	152
	(503,726)	(335,743)
Adjustments for items not affecting net cost of operations but affecting appropriations:
Add:
Acquisitions and adjustments of tangible capital assets	361,665	364,279
Payments on lease obligations for tangible capital assets	86,201	70,132
Reduction of assets and others	11,681	9,650
	459,547	444,061
Current year appropriations used	2,605,650	2,530,779

B. Appropriations provided and used

(in thousands of dollars)

	2007	2006
Vote 1 – Operating expenditures	2,365,357	2,262,720
Vote 5 – Capital expenditures	297,954	327,924
Vote 10 – Grants and contributions	45,402	10,085
Statutory items:
Revolving funds	378,543	408,745
Other	110,090	115,648
Appropriations provided	3,197,346	3,125,122
Less:
Appropriations available for future years	(381,751)	(415,553)
Lapsed appropriations	(212,152)	(181,411)
Current year budgetary appropriations used	2,603,443	2,528,158
Seized Property Management Act	2,207	2,621
Current year appropriations used	2,605,650	2,530,779

C. Reconciliation of net cash provided by Government to current year appropriations used

(in thousands of dollars)

	2007	2006
Net cash provided by Government	2,605,313	2,389,295
Revenue not available for spending	57,160	81,701
Change in net position in the Consolidated Revenue Fund
Change in financial assets	(82,251)	13,852
Change in prepaid expenses	(1,301)	(323)
Change in liabilities other than lease obligation for tangible capital assets	68,166	(33,110)
Other adjustments	(41,437)	79,364
	(56,823)	59,783
Current year appropriations used	2,605,650	2,530,779

4. Expenses

The following table presents details of expenses by category:

(in thousands of dollars)

Expenses	2007	2006 Restated (Note 18)
Payment in lieu of taxes to municipalities and other taxing authorities	468,132	465,574
Recovery of Payment in lieu of taxes to municipalities and other taxing authorities	(468,073)	(466,001)
Other grants and contributions	45,385	9,073
Total grants and contributions	45,444	8,646
Salaries and employee benefits	1,133,685	1,103,697
Cost of goods sold for inventories	1,080,155	1,002,563
Rentals	695,700	678,750
Professional and special services	435,380	458,628
Repair and maintenance	413,151	361,572
Amortization of tangible capital assets	370,989	355,829
Other expenses	253,989	186,265
Interest on capital lease payments and other	99,665	94,935
Utilities, material and supplies	96,942	100,779
Transportation and communications	78,522	75,380
Reclassification of assets under construction	73,786	56,624
Expenses from Seized Property Proceeds Account (Note 15)	26,382	9,226
Legal services	5,309	3,247
Total operating expenses	4,763,655	4,487,495
Total expenses	4,809,099	4,496,141

5. Revenues

The following table presents details of revenues by category:

(in thousands of dollars)

Revenues	2007	2006
Sales of goods and information products	818,287	740,318
Services of a non-regulatory nature	801,089	774,391
Rentals	390,111	367,989
Services of a regulatory nature	80,647	74,126
Other revenues	46,601	32,816
Revenue from Seized Property Proceeds Account (Note 15)	22,007	26,475
Other fees and charges	528	10,705
Adjustments to tangible capital assets	-	46,860
Total revenues	2,159,270	2,073,680

Services of a non-regulatory nature are mainly comprised of translation services, consulting services, telecommunications services, traffic management and central freight, classroom rentals and educational services, IT design engineering, project fees and payroll recoveries.

Services of a regulatory nature are mainly comprised of cost recovery from the Public Service Superannuation Act (PSSA) for administrative services provided and payment services for Receiver General functions.

6. Accounts receivable and advances

The following table presents details of accounts receivable and advances:

(in thousands of dollars)

Accounts receivable and advances	2007	2006
Accounts receivable from other government departments and agencies	324,506	251,636
Accounts receivable from external parties	83,184	76,362
Employee advances	617	572
	408,307	328,570
Less: allowance for doubtful accounts on external receivables	(652)	(643)
Total	407,655	327,927

7. Tangible capital assets

(in thousands of dollars)

	Cost
	Opening balance	Acquisitions	Disposals, write-offs and other adjustments	Closing balance
Tangible capital assets
Land	265,004	-	(273)	264,731
Buildings	3,351,303	-	88,769	3,440,072
Works and infrastructure	842,312	-	(2,471)	839,841
Machinery and equipment	10,081	431	(4,556)	5,956
Informatics hardware and software	190,009	7,479	(7,241)	190,247
Vehicles	9,742	1,131	(1,268)	9,605
Leasehold improvements	295,541	48	47,061	342,650
Assets under construction	826,462	352,576	(222,803)	956,235
	5,790,454	361,665	(102,782)	6,049,337
Leased tangible capital assets
Land	48,216	-	(3,274)	44,942
Buildings	1,264,595	268,521	97,786	1,630,902
Informatics equipment	10,666	4,289	(1,862)	13,093
	1,323,477	272,810	92,650	1,688,937
	7,113,931	634,475	(10,132)	7,738,274

7. Tangible capital assets (continued)

(in thousands of dollars)

	Accumulated amortization				Net Book Value
	Opening balance	Amortization	Disposals, write-offs and other adjustments	Closing balance	2007	2006
Tangible capital assets
Land	-	-	-	-	264,731	265,004
Buildings	1,966,567	163,030	(3,164)	2,126,433	1,313,639	1,384,736
Works and infrastructure	304,228	23,322	(2,046)	325,504	514,337	538,084
Machinery and equipment	7,645	444	(4,574)	3,515	2,441	2,436
Informatics hardware and software	127,150	24,191	(10,622)	140,719	49,528	62,859
Vehicles	5,211	910	(1,130)	4,991	4,614	4,531
Leasehold improvements	110,118	52,202	366	162,686	179,964	185,423
Assets under construction	-	-	-	-	956,235	826,462
	2,520,919	264,099	(21,170)	2,763,848	3,285,489	3,269,535
Leased tangible capital assets
Land	-	-	-	-	44,942	48,216
Buildings	515,923	104,584	3,906	624,413	1,006,489	748,672
Informatics equipment	4,540	2,306	(1,582)	5,264	7,829	6,126
	520,463	106,890	2,324	629,677	1,059,260	803,014
	3,041,382	370,989	(18,846)	3,393,525	4,344,749	4,072,549

Amortization expense for the year ended March 31, 2007 is $370,989,086 (2005-2006 - $355,829,237).

8. Accounts payable and accrued liabilities

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

(in thousands of dollars)

Accounts payable and accrued liabilities	2007	2006
Accounts payable and accrued liabilities	505,752	499,148
Accrued salaries and wages	38,033	34,510
Contractors' holdbacks and others	39,515	32,545
Accounts payable to other government departments and agencies	36,504	29,204
	619,804	595,407

9. Other liabilities

The following table presents details of other liabilities:

(in thousands of dollars)

Liabilities	2006	Receipts and credits	Payments and charges	2007
Seized property - cash	66,335	12,877	(5,567)	73,645
Deposits on disposals	437	5,851	(6,026)	262
Contractors' security deposits	5,398	4,046	(4,044)	5,400
Francophone summits	11	21	(2)	30
Credit card special project fund	1,000	-	-	1,000
	73,181	22,795	(15,639)	80,337

Seized property - cash
This account was established pursuant to the Seized Property Management Act, to record seized cash and proceeds from the interlocutory sale of seized assets. These funds will be deposited to the Consolidated Revenue Fund and credited to the account until returned to the owner or forfeited.

Deposits on disposals
This account was established in accordance with the terms and conditions of the Real Property Disposition Revolving Fund to record receipts on future disposals of properties that are not closed at the end of the year.

Contractors' security deposits
This account was established to record contractors' securities that are required for the satisfactory performance of work in accordance with the Government Contracts Regulations.

Francophone summits
This account was established to record funding granted since 1994 by the Agence intergouvernementale de la Francophonie (Paris), which changed its name in 2006 to the Organisation internationale de la Francophonie, for projects involving the development of French and partner languages in order to express scientific and technical modernity.

Credit card – Special project fund
This account was established to record funds received from American Express (AMEX) to improve the Travel Card Program.

10. Lease obligation for tangible capital assets

PWGSC has entered into agreements to rent buildings, land and information technology equipment under capital leases with a cost of $1,688,937,677 and accumulated amortization of $629,677,336 as at March 31, 2007 ($1,323,476,065 and $520,462,742 respectively as at March 31, 2006) (Note 7). The obligations for the upcoming years include the following:

(in thousands of dollars)

	2007	2006
2007	-	170,453
2008	201,698	173,674
2009	189,135	161,262
2010	184,252	156,247
2011	193,470	165,286
2012 and thereafter	1,153,567	772,032
Total future minimum lease payments	1,922,122	1,598,954
Less: Imputed interest (weighted average implicit rate 8.196% (9.7% in 2006))	(663,156)	(608,670)
Balance of obligations under leased tangible capital assets	1,258,966	990,284

11. Employee benefits

(a) Pension benefits
PWGSC 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/Quebec Pension Plan benefits and they are indexed to inflation.

Both the employees and the department contribute to the cost of the Plan. The 2006-2007 expense amounts to $109,043,987 ($116,940,943 in 2005-2006), which represents approximately 2.2 times (2.6 in 2006) the contributions by employees.

PWGSC's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the consolidated 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 final salary. These severance benefits are not pre-funded. Benefits will be paid from future appropriations and revolving funds. Information about the severance benefits, measured as at March 31 is as follows:

(in thousands of dollars)

Severance benefits	2007	2006
Accrued benefit obligation, beginning of year	181,235	171,726
Transfer of activities (Note 16)	(942)	-
Expense for the year	60,815	27,884
Benefits paid during the year	(20,369)	(18,375)
Accrued benefit obligation, end of year	220,739	181,235

12. Contingent liabilities

(a) Environmental liabilities - Contaminated sites

Liabilities are accrued to record the estimated costs related to the management and remediation of contaminated sites where PWGSC is obligated or likely to be obligated to incur such costs. The department has identified approximately 209 sites (236 sites in 2006) where such action is possible and for which a liability of $320,154,947 ($318,598,675 in 2006) has been recorded. Out of this amount, an amount of $280,817,000 ($272,202,263 in 2006) is related to environmental remediation activity for the Sydney Tar Ponds and Coke Ovens remediation project. PWGSC has estimated additional clean-up costs of $141,215,487 ($137,754,266 in 2006) that are not accrued, as these are not considered likely to be incurred at this time. PWGSC's ongoing efforts to assess contaminated sites may result in additional environmental liabilities related to newly identified sites, or changes in the assessments or intended use of existing sites. These liabilities will be accrued by PWGSC in the year in which they become known.

(b) Claims and litigation

Claims have been made against PWGSC in the normal course of operations. Legal proceedings for claims totalling approximately $342,989,424 ($781,707,503 in 2006) were still pending at March 31, 2007. Some of these potential liabilities 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 in the consolidated financial statements.

13. Contractual obligations

The nature of PWGSC's activities can result in some large multi-year contracts and obligations whereby the department will be obligated to make future payments when the services/goods are received. Significant contractual obligations ($10 million or more) that can be reasonably estimated are summarized as follows:

(in thousands of dollars)

Contractual obligations	2008	2009	2010	2011	2012 and thereafter	Total
Capital assets	30,000	9,000	1,000	-	-	40,000
Operating leases	165,000	147,000	141,000	124,000	310,000	887,000
Purchases	517,000	725,000	1,000	-	-	1,243,000
	712,000	881,000	143,000	124,000	310,000	2,170,000

14. Related party transactions

PWGSC is related as a result of common ownership to all Government of Canada departments, agencies and Crown corporations. PWGSC enters into transactions with these entities in the normal course of business and on normal trade terms. Also, during the year PWGSC received services which were obtained without charge from other departments. These services without charge have been recognized in PWGSC's Consolidated Statement of Operations as follows:

(in thousands of dollars)

Related party transactions	2007	2006 Restated (Note 18)
Employer's contribution to the health and dental insurance plans (excluding revolving funds) paid by Treasury Board Secretariat	52,330	47,432
Legal services provided by Justice Canada	5,309	3,247
Workers' compensation coverage provided by Human Resources and Social Development Canada	2,649	2,939
	60,288	53,618

PWGSC has provided accommodation without charge to other government departments throughout the fiscal year for a total amount of $1,280,989,672 ($1,233,534,500 in 2006). These are not included in the Consolidated Statement of Operations.

15. Seized Property Proceeds Account

This account was established pursuant to section 13 of the Seized Property Management Act, the net proceeds received from the disposition of seized and forfeited properties to Her Majesty or fines imposed and also monies received from the government of foreign states pursuant to agreements for the purpose of the Act are to be earmarked for specified purposes. Under the Act , expenses to be charged against the revenues include: operating expenses incurred in carrying out the purpose of the Act, amounts paid as a result of claims and repayments of advances from the Minister of Finance, interest on drawdown from Seized Property Working Capital Account and distribution of the proceeds to other government departments and the Consolidated Revenue Fund.

(in thousands of dollars)

	2007	2006
Seized Property Proceeds Account – restricted Balance, beginning of year	32,845	15,596
Revenues	22,007	26,475
Expenses	(26,382)	(9,226)
	(4,375)	17,249
Balance, end of year	28,470	32,845
Unrestricted Equity of Canada, end of year	2,180,424	2,157,145
Total Equity of Canada, end of year	2,208,894	2,189,990

16. Transfer of activities

On September 12, 2005 the Prime Minister announced a significant reorganization of government. Effective April 1, 2006 PWGSC transferred the Public Access Programs Sector to Service Canada. The prior year's figures have not been restated to reflect this transfer. The impact on the 2007 Consolidated Statement of Financial Position is as follows:

(in thousands of dollars)

Assets	2007
Financial assets
Accounts receivable and advances	901
Non-financial assets
Tangible capital assets	317
	1,218
Liabilities and equity
Liabilities
Accounts payable and accrued liabilities	3,174
Vacation pay and compensatory leave	234
Employee severance benefits	942
	4,350
Equity of Canada	(3,132)
	1,218

The budget for the Public Access Programs Sector will only be transferred to Service Canada in fiscal year 2007-2008, therefore revenues and expenses for this Sector are included in the PWGSC Consolidated Statement of Operations for 2006-2007.

17. Subsequent event

On August 20, 2007, the Government of Canada announced that it has entered into an agreement for the sale of nine office buildings and their subsequent lease-back for a period of twenty-five years. The office complexes and land that are located in six major cities across Canada will be sold for an amount approximating $1,600 million. The impact of this agreement, once finalized, will be reflected in the 2007-2008 financial statements.

18. Restatement of comparative information

In 2006-2007, PWGSC reviewed the amount presented as services received without charge from other government departments for 2005-2006. Consequently, the comparative consolidated financial statements presented for the year ended March 31, 2006 have been restated. The effect of this adjustment is presented in the table below.

Consolidated Statement of Operations

(in thousands of dollars)

	As previously stated	Effect of the adjustment	Revised amount
Expenses
Real Property	2,971,771	121	2,971,892
Information Technology	491,182	7,760	498,942
Acquisitions	349,241	1,902	351,143
Receiver General and Public Service Compensation	243,061	2,824	245,885
Translation Bureau	188,082	1,207	189,289
Business Integration	69,847	333	70,180
Government Information and Consulting	76,262	951	77,213
Consulting and Audit Canada	91,597	-	91,597
Total expenses	4,481,043	15,098	4,496,141
Net cost of operations	2,407,363	15,098	2,422,461
Consolidated Statement of Equity of Canada
Net cost of operations	(2,407,363)	(15,098)	(2,422,461)
Services received without charge from other government departments	38,520	15,098	53,618
Consolidated Statement of Cash Flow
Net cost of operations	2,407,363	15,098	2,422,461
Services received without charge from other government departments	38,520	15,098	53,618
Note 3(a) Reconciliation of net cost of operations to current year appropriations used
Net cost of operations	2,407,363	15,098	2,422,461
Services received without charge from other government departments	(38,520)	(15,098)	(53,618)
Note 4 Expenses
Salaries and employee benefits	1,087,323	16,374	1,103,697
Legal services	4,523	(1,276)	3,247
Total operating expenses	4,472,397	15,098	4,487,495
Total expenses	4,481,043	15,098	4,496,141
Note 14 Related party transactions
Employer's contribution to the health and dental insurance plans (excluding revolving funds) paid by Treasury Board Secretariat	31,628	15,804	47,432
Legal services provided by Justice Canada	4,523	(1,276)	3,247
Workers' compensation coverage provided by Human Resources and Social Development Canada	2,369	570	2,939
	38,520	15,098	53,618

19. Comparative information

Comparative figures have been reclassified to conform to the current year's presentation.