Future-Oriented Statement of Operations For the Year Ending March 31, 2012

Statement of Management Responsibility

Responsibility for the compilation, content, and presentation of the accompanying future-oriented Statement of Operations for the year ending March 31, 2012 and the accompanying notes rests with the management of the Federal Economic Development Agency for Southern Ontario (FedDev Ontario). The future-oriented Statement of Operations has been prepared by management in accordance with Treasury Board accounting policies, which are based on Canadian generally accepted accounting principles for the public sector. The future-oriented financial information is submitted in Part III of the Estimates (Report on Plans and Priorities) and will be used in the Departmental Performance Report to compare with actual results.

Management is responsible for the integrity and objectivity of the future-oriented financial information and for the underlying assumptions and estimates which are based on information available and known to management as at January 14, 2011, and assumes a continuation of current governmental priorities and consistency in FedDev Ontario's mandate and strategic objectives. This future-oriented financial information is based on these assumptions, best estimates, and judgment and gives due consideration to materiality. At the time of preparation of this statement, management believes the estimates and assumptions to be fair and reasonable. However, as with all such estimates and assumptions, there is a measure of uncertainty.

Actual results for the fiscal years covered in the accompanying future-oriented financial information will vary from the information presented and these variations may be material.

Future-Oriented Statement of Operations
For the year ending March 31 (in thousands of dollars)

	Estimated 2011	Forecast 2012
Expenses
Business & Innovation Development	141,000	134,470
Economic Regional Development & Infrastructure	429,700	68,803
Policy, Advocacy and Coordination	2,600	2,056
Internal Services	24,300	18,971
Total Expenses	597,600	224,300
Revenues
Business & Innovation Development	-	-
Economic Regional Development & Infrastructure	-	-
Policy, Advocacy and Coordination	-	-
Internal Services	-	-
Total Revenues	-	-
Net Cost of Operations	597,600	224,300

The accompanying notes form an integral part of the future-oriented Statement of Operations.

Notes to the Future-Oriented Statement of Operations

1. Authority and Objectives

The Federal Economic Development Agency for Southern Ontario (FedDev Ontario) was established on August 13, 2009. Pursuant to Order-in-Council P.C 2009–1410 amending the Schedule I.1 of the Financial Administration Act the Federal Economic Development Agency for Southern Ontario was designated as a department.

Additional information is provided in Section I of FedDev Ontario's 2011–2012 Report on Plans and Priorities (RPP).

2. Significant Assumptions

The future-oriented Statement of Operations has been prepared on the basis of the government priorities and the plans of the agency as described in the RPP.

The main assumptions are as follows:

1. The agency's activities will remain substantially the same as the previous year.
2. Expenses and revenues, including the determination of amounts internal and external to the government, are based on 16 months of historical experience. The general historical pattern is expected to continue.
3. Estimated year-end information for 2010–11 is used as the opening position for the 2011–12 forecasts.

These assumptions are adopted as of January 14, 2011.

3. Variations and Changes to the Forecasted Financial Information

While every attempt has been made to accurately forecast final results for the remainder of 2010–11 and for 2011–12, actual results achieved for both years will vary from the forecast information presented, and this variation may be material.

In preparing the future-oriented Statement of Operations, FedDev Ontario has made estimates and assumptions concerning the future. These estimates and judgements may differ from the subsequent actual results. Estimates and judgements 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 Statement of Operations and the historical Statement of Operations include:

1. Further changes to the operating budget through additional new initiatives or technical adjustments later in the year.
2. The timing and amounts of acquisitions and disposals of tangible capital assets may affect gains/losses and amortization expense.

Once the RPP is presented, FedDev Ontario will not be updating its forecast 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 Statement of Operations has been prepared in accordance with the Treasury Board accounting policies stated below, which are based on Canadian generally accepted accounting principles for the public sector. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian generally accepted accounting principles.

Significant accounting policies are as follows:

1. Parliamentary appropriations – FedDev Ontario is financed by the Government of Canada through Parliamentary appropriations. The cash accounting basis is used to recognize transactions affecting parliamentary appropriations. The future-oriented Statement of Operations is based on accrual accounting. Consequently, items presented in the future-oriented Statement of Operations are not necessarily the same as those provided through appropriations from Parliament. Note 5 provides a reconciliation between the bases of reporting.
2. 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 occurred that gave rise to the revenues.
3. Expenses – Expenses are presented on an accrual basis:

   Grants are recognized in the year in which the conditions for 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 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, provided that the transfer is authorized and a reasonable estimate can be made.

   Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment.

   Services provided without charge by other government departments for accommodation, the employer's contribution to the health and dental insurance plans and legal services are reported as operating expenses at their estimated cost.

4. Employee future benefits

   Pension benefits - Eligible employees participate in the Public Service Pension Plan, a multiemployer plan administered by the Government of Canada. FedDev Ontario'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 FedDev Ontario to make contributions for any actuarial deficiencies of the Plan.

   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 using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

5. Tangible capital assets – All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. FedDev Ontario does not capitalize intangibles.

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

   Amortization of tangible capital assets

   Asset Class	Amortization Period
   Informatics hardware and software	3 years
   Motor vehicles Passenger vehicles and light trucks (less than 1 tonne)	5 years
   Leasehold improvements	Lesser of useful life or remaining term of lease

5. Parliamentary Appropriations

FedDev Ontario receives its funding through annual Parliamentary appropriations. Items recognized in the Statement of Operations in one year may be funded through Parliamentary appropriations in prior, current or future years.

Accordingly, FedDev Ontario 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 (in thousands of dollars)

	Estimated 2011	Forecast 2012
Authorities requested
Vote 50 – Operating expenditures	37,665	25,539
Vote 55 – Grants and Contributions	510,610	191,671
Statutory amounts – Contributions to employee benefit plan	3,431	3,113
Statutory amounts – Community Adjustment Fund	42,500	0
Forecasted authorities available	594,206	220,323

Forecasted authorities requested for the year ending March 31, 2012 are the planned spending amounts presented in the 2011–12 RPP. They do not include the Recreational Infrastructure Canada Program (RInC) nor infrastructure programs administered by FedDev Ontario on behalf of other government departments. Estimated authorities requested for the year ending March 31, 2011 include amounts presented in the 2010–11 Main Estimates and Supplementary Estimates (A) and (B),and estimates of amounts to be allocated at year-end from Treasury Board central votes.

b) Reconciliation of net cost of operations to requested authorities
(in thousands of dollars)

	Estimated 2011	Forecast 2012
Net cost of operations	597,600	224,300
Adjustments for items affecting net cost of operations but not affecting authorities:
Services provided without charge by other government departments	(3,030)	(3,561)
Amortization of tangible capital assets	(43)	(43)
Decrease (Increase) in employee severance benefits	(401)	(383)
Decrease (Increase) in vacation pay and compensatory leave	5	10
	(3,469)	(3,977)
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisition of tangible capital assets	75	0
Forecasted authorities available	594,206	220,323

FedDev Ontario's severance benefit liability has been adjusted to reflect the demographics of its workforce.

6. Employee Benefits

a) Pension benefits

FedDev Ontario'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 thirty-five years at a rate of two 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 Plan benefits and are indexed to inflation.

Both the employees and the Federal Economic Development Agency for Southern Ontario contribute to the cost of the Plan. The forecast expenses are $699,000 in 2010–11 and $657,000 in 2011–12 representing approximately 1.9 times the contributions by employees.

FedDev Ontario'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

FedDev Ontario 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. Information about severance benefits, estimated as at the date of the future-oriented Statement of Operations, is as follows:

Severance benefits, estimated as at the date of the future-oriented Statement of Operations (in thousands of dollars)

	Estimated 2011	Forecast 2012
Accrued benefit obligation, beginning of year	142	543
Expense for the year	401	383
Benefits paid during the year	-	-
Accrued benefit obligation, end of year	543	926

7. Related Party Transactions

FedDev Ontario is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations. FedDev Ontario enters into transactions with these entities in the normal course of business and on normal trade terms. Also, during the year, FedDev Ontario receives services which are obtained without charge from other Government departments as presented below.

Services provided without charge

During the year FedDev Ontario received services without charge from certain common service organizations related to accommodation and the employer's contribution to the health and dental insurance plans. These services without charge are recognized in FedDev Ontario's future-oriented Statement of Operations as follows:

Services provided without charge (in thousands of dollars)

	Estimated 2011	Forecast 2012
Contributions covering employer's share of employees' insurance premiums and expenditures paid by TBS (excluding revolving funds)	1,081	1,574
Accommodation provided by Public Works and Government Services Canada (PWGSC)	1,949	1,987
Total	3,030	3,561

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 costs of these services, which include 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 as an expense in FedDev Ontario's future-oriented Statement of Operations.

8. Segmented Information

Presentation by segment is based on FedDev Ontario's program activity 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 revenues generated for the main program activities, by major object of expenses and by major type of revenues. The forecasted segmented results for the period are as follows:

Forecasted expenses incurred and revenues generated for the main program activities
(in thousands of dollars)

	Estimated 2011	Forecast 2012
		Business and Innovation Development	Economic Regional Development and Infrastructure	Policy, Advocacy and Coordination	Internal Services	2012 Total
Transfer Payments
Grants	32,900		1,200			1,200
Contributions	520,130	127,200	63,271			190,471
Total Transfer Payments	553,030	127,200	64,471	-	-	191,671
Operating Expenses
Employee Benefits	5,100	886	538	247	3,409	5,080
Salaries and Wages	17,700	5,214	3,162	1,453	7,467	17,296
Transportation and Communications	2,249				1,225	1,225
Information	273				174	174
Professional and Special Services (including expenditures internal to government $3,614K)	14,133	1,170	632	356	3,801	5,959
Rentals	391				12	12
Purchased Repair and Maintenance	1,404				180	180
Utilities, Materials and Supplies	196				160	160
Acquisition of Land, Buildings and Works	-				-	-
Acquisition of Machinery and Equipment	861				332	332
Amortization	43				43	43
Other Services and Non-Cash Items (PWGSC accommodations at no charge)	1,949				1,987	1,987
Capital	75				-	-
Other Subsidies and Payments	196				200	200
Total Operating Expenses	44,570	7,270	4,332	2,056	18,991	32,649
Total Expenses	597,600	134,470	68,803	2,056	18,991	224,320
Total Revenues	-	-	-	-	-	-
Net Cost From Continuing Operations	597,600	134,470	68,803	2,056	18,991	224,320