Future-Oriented Statement of Operations for the Year Ending March 31, 2013

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, 2013 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 generally accepted Canadian 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. This includes the underlying assumptions and estimates which are based on information available and known to management as at March 5, 2012. Management 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 estimate, 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 may vary from the information presented and these variations could be material.

Dr. B.A. Archibald
President

Kitchener, ON
Linda Cousineau
Chief Financial Officer
Federal Economic Development Agency for Southern Ontario
Future-oriented Statement of Financial Position
As at March 31
(in thousands of dollars)
  Estimated Results
2012		 Planned Results
2013
ASSETS
Financial assets
Due from Consolidated Revenue Fund 48,989 7,742
Accounts receivable and advances (Note 5) 4 5
Loans Receivable (Note 6) 144,952 246,189
Total financial assets 193,945 253,936
Non-financial assets
Prepaid expenses - -
Inventory - -
Tangible capital assets (Note 7) 299 344
Total non-financial assets 299 344
Total of Non-financial assets 194,244 254,280
LIABILITIES AND EQUITY OF CANADA
Liabilities
Accounts payable and accrued liabilities (Note 8) 47,446 22,352
Vacation pay and compensatory leave 688 688
Deferred revenue - -
Employee future benefits (Note 9) 4,730 6,477
Total of Liabilities 52,864 29,517
Equity of Canada 141,380 224,763
Total 194,244 254,280

The accompanying notes form an integral part of the future-oriented financial statements. Contractual obligations (Note 10).

Federal Economic Development Agency for Southern Ontario
Future-oriented Statement of Operations
For the Year Ending March 31
(in thousands of dollars)
  Estimated Results
2012		 Planned Results
2013
Expenses
Technological innovation 18,169 18,727
Business development 55,483 53,043
Community economic development 69,116 33,244
Internal Services 18,870 19,280
Total expenses (Note 11) 161,638 124,294
Revenues - -
Net Cost of Operations 161,638 124,294

The accompanying notes form an integral part of these future-oriented statements. Segmented information (Note 12).

Federal Economic Development Agency for Southern Ontario
Future-oriented Statement of Equity of Canada
For the Year Ending March 31
(in thousands of dollars)
  Estimated Results
2012		 Planned Results
2013
Equity of Canada, beginning of year 78,965 141,380
Net cost of operations (161,638) (124,294)
Net cash provided by Government 358,782 245,523
Change in due to/from the Consolidated Revenue Fund (138,166) (41,247)
Services provided without charge by other government departments (Note 13) 3,437 3,401
Equity of Canada, end of year 141,380 224,763

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

Federal Economic Development Agency for Southern Ontario
Future-Oriented Statement of Cash Flow
For the Year Ending March 31
(in thousands of dollars)
  Estimated Results
2012		 Planned Results
2013
Operating activities
Net cost of operations 161,638 124,294
Non-cash items:
  • Amortization of tangible capital assets
 (38) (50)
  • Services provided without charge by other government departments
    (Note 13)
 (3,437) (3,401)
Variations in Future-oriented Statement of Financial Position:
  • Increase (decrease) in accounts receivable and advances
 (1,136) 1
  • Increase (decrease) in loans receivable
 63,688 101,237
  • Decrease (increase) in accounts payable and accrued liabilities
 139,783 25,094
  • Decrease (increase) in future-employee benefits
 (1,876) (1,747)
Cash used in operating activities 358,622 245,428
Capital investing activities:
  • Acquisitions of tangible capital assets
 160 110
  • Proceeds from disposal of tangible capital assets
 - (15)
Cash used in capital investing activities 160 95
Financing activities : - -
Net cash provided by Government of Canada 358,782 245,523

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

Federal Economic Development Agency for Southern Ontario

Notes to Future-oriented Financial Statements

1. Authority and Objectives

The Federal Economic Development Agency for Southern Ontario (FedDev Ontario or the Agency) was established in August 2009 as a separate organization under Schedule I.1 of the Financial Administration Act.

The global economic recession had a significant impact in every region of Canada, including southern Ontario. As Canada's most populous region, home to more than 12 million residents living in 288 communities, southern Ontario's economy is a key contributor to the health of the Canadian economy as a whole. As a result, the Government of Canada created FedDev Ontario in 2009 with a five-year mandate. To fulfill its mandate, FedDev Ontario supports the competitiveness, innovation and diversification of southern Ontario's economy by: delivering strategic investments to businesses, non-profit organizations and communities; establishing and strengthening collaborative partnerships with key economic stakeholders; and representing the region's interests at the federal and national level.

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 Agency as described in the Report on Plans and Priorities.

The main assumptions are as follows:

  1. The Agency'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 assumptions made by management.
  3. Estimated year end information for 2011-12 is used as the opening position for the 2012-13 planned results.

These assumptions are adopted as at March 5, 2012.

3. Variations and Changes to the Forecast Financial Information

While every attempt has been made to forecast final results for the remainder of 2011-12 and for 2012-13, 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, FedDev Ontario 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 property, plant and equipment may affect gains/losses and amortization expense.
  2. Implementation of new collective agreements, whether known or unknown at the time.
  3. Economic conditions may affect both the amount of revenue earned and the collectability of loan receivables.
  4. Interest rates in effect at the time of issue will affect the net present value of non-interest bearing loans.
  5. 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, FedDev Ontario 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 2012-13 Departmental Performance Report.

4. Summary of Significant Accounting Policies

The future-oriented financial statements have been prepared in accordance with the Treasury Board accounting policies in effect for the 2012-2013 fiscal year. These accounting policies, stated below, 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 authorities - The Agency is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Agency 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 the future-oriented Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 11(b) provides a reconciliation between the bases of reporting.
  2. Net Cash Provided by Government – The Agency operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the Agency is deposited to the CRF and all cash disbursements made by the Agency 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 and agencies of the government.
  3. Amounts due from/to the CRF 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 Agency is entitled to draw from the CRF without further parliamentary expenditure authorities to discharge its liabilities.
  4. Expenses – Are recorded 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 future-oriented 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 accrued as the benefits are earned under the respective terms of employment.
    • Services provided without charge by other government departments include accommodation and the employer's contribution to the health and dental insurance plans.
  5. Employee future benefits:
    • (i) Pension benefits: Eligible employees participate in the Public Service Pension Plan administered by the government. The Agency's contributions to the Plan are charged to expenses in the year incurred and represent the total Agency obligation to the Plan. Current legislation does not require the Agency to make contributions for any actuarial deficiencies of the Plan.
    • (ii) 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.
  6. Accounts and loans receivables are stated at the lower of cost and net recoverable value.
  7. Repayable contributions are contributions where the recipient is expected to repay the amount advanced without qualification. Normally, these contributions are provided with a low or no interest clause.
  8. 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.
  9. 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 Agency becomes aware of the contamination and is obligated, or is likely to be obligated to incur such costs. If the likelihood of the Agency's obligation to incur these costs is not determinable, or if an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the future-oriented financial statements.
  10. 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. The Agency does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian Reserves and museum collections.

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

    Amortization of tangible capital assets
    Asset Class Amortization Period
    Vehicles 3 to 7 years
    Computer hardware 4 years
    Computer software 3 to 10 years
    Leasehold improvements Lesser of over term of lease or useful life
    Furniture and Equipment 10 years
  11. 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 reported in the future-oriented financial statements. 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. Accounts Receivable and Advances

The following table presents details of the Agency's accounts receivable and advances balances:

Accounts Receivable and Advances (in thousands of dollars)
  Estimated Results
2012		 Planned Results
2013
Receivables from other government departments and agencies - -
Employee advances - -
Total 4 5
Allowance for doubtful accounts on receivables from external parties - -
Total 4 5

6. Loans Receivable

The following table presents details of the Agency's loans and repayable contributions receivable balances:

Loans Receivable (in thousands of dollars)
  Estimated Results
2012		 Planned Results
2013
Repayable contributions 144,952 246,189
Loans receivable - -
Total 144,952 246,189
Less: Allowance for uncollectables - -
Less: Unamortized discount - -
Total 144,952 246,189
  1. Repayable contributions

Management has deemed that there was no need for an allowance for doubtful repayable contributions.

7. Tangible Capital Assets

Tangible Capital Assets (In thousands of dollars)
  Cost Accumulated Amortization Net Book Value
Capital asset class Opening balance Acqui-sitions Disposals and write-offs Closing balance Opening balance Amortiza-tion Disposals and write-offs Closing balance 2012 2013
Vehicles 446 60 15 491 186 40 0 226 260 265
Furniture & equip 41 - - 41 4 4 - 8 37 33
Computer hardware 10 50 - 60 8 6 - 14 2 46
Total 497 110 15 592 198 50 0 248 299 344

8. Accounts Payable and Accrued Liabilities

The following table presents details of the Agency's accounts payable and accrued liabilities:

Accounts Receivable and Advances (in thousands of dollars)
  Estimated Results
2012		 Planned Results
2013
Accounts payable to other government departments and agencies - -
Accounts payable to external parties 47,445 22,352
Accrued liabilities - -
Total 47,445 22,352

9. Employee Future Benefits

  1. Pension benefits:

    The Agency's employees participate in the Public Service Pension Plan, which is sponsored and administered by the government. 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.

    Both the employees and the Agency contribute to the cost of the Plan. The forecast expenses are $2,012,000 in 2011-12 and $1,875,000 in 2012-13, representing approximately 1.9 times the contributions of employees.

    The Agency'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.

  2. Severance benefits:

    The Agency 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 authorities. Information about the severance benefits, estimated as at the date of these statements, is as follows:

    Severance benefits (in thousands of dollars)
      Estimated Results
    2012    		 Planned Results
    2013
    Accrued benefit obligation, beginning of year 2,854 4,730
    Expense for the year 2,012 1,875
    Expected benefits payments during the year (136) (128)
    Accrued benefit obligation, end of year 4,730 6,477

10. Contractual Obligations

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

Contractual Obligations (in thousands of dollars)
2012 2013 2014 2015 2016 and thereafter Total
Transfer payments 11,600 148,700 114,300 - - 274,600
Total 11,600 148,700 114,300 - - 274,600

11. Parliamentary Authorities

The Agency receives most of its funding through expenditure authorities provided by Parliament. Items recognized in the future-oriented Statements of Operations and Financial Position in one year may be funded through Parliamentary authorities in prior, current or future years. Accordingly, the Agency 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:

  1. Authorities requested
    Authorities requested (in thousands of dollars)
      Estimated
    2012    		 Planned
    2013
    Authorities requested
    • Vote 50
    		 31,606 26,588
    • Vote 55
    		 244,567 188,934
    • Statutory amounts
    		 3,114 3,289
    Forecast authorities available 279,287 218,811

    Authorities presented reflect current forecasts of statutory items, approved initiatives included and expected to be included in Estimates documents and, when reasonable estimates can be made, estimates of amounts to be allocated from Treasury Board central votes.

  2. Reconciliation of net cost of operations to requested authorities:
    Reconciliation of net cost of operations to requested authorities (in thousands of dollars)
      Estimated
    2012    		 Planned
    2013
    Net cost of operations 161,638 124,294
    Adjustments for items affecting net cost of operations but not affecting authorities:
    • Services provided without charge by other government departments
    		 (3,437) (3,401)
    • Amortization of tangible capital assets
    		 (38) (50)
    • Bad debt expense
    		- -
    • Increase in employee future benefits
    		 (1,617) (3,364)
    Total 156,546 117,479
    Adjustments for items not affecting net cost of operations but affecting authorities:
    • Acquisitions of tangible capital assets
    		 160 95
    • Increase in loan receivables
    		 63,688 101,237
    Total 220,394 218,811
    Forecast current year lapse 58,893 -
    Forecast authorities available 279,287 218,811

12. Segmented Information

Presentation by segment is based on the Agency'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 (i.e. items recognized in the future-oriented Statement of Operations and the future-oriented Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament). The following table presents the forecasted expenses incurred and forecasted revenues generated for the main program activities, by major object of expenses and by major type of revenues. The segment results for the period are as follows:

Segmented Information
2012 2013
Total Technological Innovation Business Development Community Economic Development Internal services Total
Transfer payments
FedDev Ontario 127,785 16,464 49,238 25,264 - 90,966
Total transfer payment 127,785 16,464 49,238 25,264 - 90,966
Operating Expenses
  • Salaries and employee benefits
 22,391 2,048 3,128 7,219 11,134 23,529
  • Professional and special services
 6,826 209 661 742 3,831 5,443
  • Amortization
 38 50 50
  • Utilities, materials and supplies
 168 121 121
  • Accommodation
 1,806 1,846 1,846
  • Travel
 1,352 1,150 1,150
  • Communication
 227 290 290
  • Other
 1,045 5 17 19 858 899
Total operating expenses 33,853 2,262 3,806 7,980 19,280 33,328
Total Expenses 161,638 18,726 53,044 33,244 19,280 124,294
Net Cost of Operations 161,638 18,726 53,044 33,244 19,280 124,294

13. Related Party Transactions

The Agency is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations. The Agency enters into transactions with these entities in the normal course of business and on normal trade terms. In addition, the Agency has an agreement with The Treasury Board related to the provision of finance and administration services. During the year, the Agency received (and provided if applicable) common services which were obtained without charge from other government departments as disclosed below:

  1. Common services provided without charge by other government departments

    During the year the Agency receives services without charge from certain common service organizations related to accommodation, legal services, the employer's contribution to the health and dental insurance plans and workers' compensation coverage. These services provided without charge have been recorded in the Agency's future-oriented Statement of Operations as follows:

    Common services provided without charge by other government departments in thousands of dollars)
      Estimated Results
    2012    		 Planned Results
    2013
    Employer's contribution to the health and dental insurance plans 1,631 1,555
    Accommodation 1,806 1,846
    Legal services - -
    Workers' Compensation - -
    Total 3,437 3,401

    The government has centralized some of its administrative activities for efficiency, cost-effectiveness purposes and economic delivery of programs to the public. As a result, the government uses central agencies and common service organizations so that one department performs services for all other departments and agencies without charge. The costs of these services, such as the 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 in the Agency's future-oriented Statement of Operations.

  2. Administration of programs on behalf of other government departments

    Under a memorandum of understanding signed with Infrastructure Canada on August 9, 2009, the Agency administers four programs. At the date of these future-oriented financial statements, the Agency plans to incur expenses of $194,001,792 in transfer payments on behalf of Infrastructure Canada. Forecast and incurred expenses are reflected in the future-oriented financial statements of Infrastructure Canada and not those of the Agency.

    Administration of programs on behalf of other government departments (in thousands of dollars)
      Estimated Results
    2012    		 Planned Results
    2013
    Canada Strategic Infrastructure Fund 34,262 -
    Canada Ontario Municipal Rural Infrastructure Fund 8,000 1,300
    Municipal Rural Infrastructure Fund 6,500 1,300
    Building Canada Fund - Communities Component 145,240 50,000
    Total 194,002 52,600

14. Adoption of New Accounting Policies

Management will evaluate and anticipates adopting the following enhancement to its Repayable Contribution accounting policy:

  • Repayable contributions - Repayable contributions are contributions the recipient is expected to repay without qualification. Normally, these contributions are provided with a low or no interest clause. They are recorded on the Statement of Financial Position as loans at their estimated present value, if they contain significant concessionary terms (defined to be when the grant portion is greater than 25% of the contribution). Otherwise, they are recorded at the face value of the loan. A portion of the unamortized discount is brought into income each year to reflect the change in the present value of the contributions outstanding. Appropriate allowances for uncollectible amounts are also established based on an individual appraisal of accounts.