Financial Statements for the year ended March 31, 2010

Statement of Management Responsibility

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2010 and all information contained in this report rests with Western Economic Diversification Canada (WD) management. These financial statements have been prepared by management in accordance with accounting standards issued by the Treasury Board of Canada Secretariat 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 financial statements. Some of the information in the financial statements is based on management's best estimates and judgement and gives due consideration to materiality. To fulfil its accounting and reporting responsibilities, management maintains a set of accounts that provide a centralized record of the Department's financial transactions. Financial information submitted to the Public Accounts of Canada and included in the WD's Departmental Performance Report is consistent with these 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 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 the Department.

The Departmental Audit Committee is advisory to the Deputy Minister. Based on recommendations from the Departmental Audit Committee, the Deputy Minister approves the departmental risk-based audit plan, internal audit reports, as well as management action plans developed to address audit recommendations. The Departmental Audit Committee exercises oversight of core areas of departmental management, control and accountability, including reporting.

The financial statements of Western Economic Diversification Canada have not been audited.

____________________________
Daniel Watson
Deputy Minister
Edmonton, Alberta Canada

____________________________
Date

 

_____________________________
Jim Saunderson
Chief Financial Officer

_____________________________
Date

 

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Statement of Operations (unaudited)
For the Year Ended March 31, 2010

(in thousands of dollars)

	2010	2009
Transfer Payments (note 4)
Policy, Advocacy and Coordination	369	923
Community Economic Development	218,883	69,828
Entrepreneurship and Innovation	121,998	112,068
Total Transfer Payments	341,250	182,819
Operating Expenses (note 4)
Policy, Advocacy and Coordination	19,303	13,497
Community Economic Development	22,125	17,737
Entrepreneurship and Innovation	33,500	28,486
Total Operating Expenses	74,928	59,720
Total Expenses	416,178	242,539
Revenues (note 5)
Policy, Advocacy and Coordination	-	-
Community Economic Development	1	16
Entrepreneurship and Innovation	3,823	1,553
Total Revenues	3,824	1,569
Net Cost of Operations	412,354	240,970

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Statement of Financial Position (unaudited)
At March 31, 2010

(in thousands of dollars)

	2010	2009
Obligations contractuelles (note 12) Passif éventuel (note 14)
Assets
Financial Assets
Receivables (note 6)	905	886
Repayable Contributions (note 7)	21,056	8,284
Total Financial Assets	21,961	9,170
Non Financial Assets
Prepayments (note 8)	10,716	10,642
Tangible Capital Assets (note 9)	2,405	2,325
Total Non-Financial Assets	13,121	12,967
Total Assets	35,082	22,137
Liabilities
Accounts Payable and Accrued Liabilities (note 10)	184,759	106,478
Vacation pay and compensatory leave	2,062	1,709
Employee severance benefits (note 11)	8,701	6,496
Total Liabilities	195,522	114,683
Equity of Canada	(160,440)	(92,546)
Total Liabilities and Equity of Canada	35,082	22,137

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Statement of Equity of Canada (unaudited)
At March 31, 2010

(in thousands of dollars)

	2010	2009
Equity of Canada, beginning of year	(92,546)	(119,528)
Net cost of operations	(412,354)	(240,970)
Current year appropriations used (note 3)	421,303	242,173
Revenue not available for spending	(3,947)	(1,843)
Refund of prior years expenditures (note 3-c)	(1,565)	(3,305)
Change in net position in the Consolidated Revenue Fund (note 3-c)	(78,600)	24,944
Services provided without charge by other government departments (note 13-a)	7,269	5,983
Equity of Canada	(160,440)	(92,546)

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Statement of Cash Flow (unaudited)
For the Year Ended March 31, 2010

(in thousands of dollars)

	2010	2009
Operating transactions
Net cost of operations	412,354	240,970
Non-Cash Items:
Amortization of tangible capital assets	(525)	(429)
(Loss) gain on disposal of tangible capital assets	-	(3)
Services provided without charge by other government departments (note 13 (a))	(7,269)	(5,983)
Variations in Statement of Financial Position:
Increase (decrease) in receivables	19	(2,020)
Increase in repayable contributions	12,772	57
Increase (Decrease) in prepayments	74	(397)
(Increase) decrease in accounts payable and accrued liabilities	(78,281)	28,947
(Increase) in vacation pay and employee severance benefits	(2,558)	(88)
Cash used by operating activities	336,586	261,054
Capital investment activities
Acquisitions of tangible capital assets (note 9)	605	915
Cash used by capital investment activities	605	915
Financing Activities
Net Cash Provided by Government of Canada	(337,191)	(261,969)

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Notes to the Financial Statements (Unaudited)
For the Year Ended March 31, 2010

1. Authority and Objectives

Western Economic Diversification Canada (WD), a department of the Government of Canada operates under the authority of the Western Economic Diversification Act of 1988 that works to strengthen Western Canada's economy and advance its interests in national economic policy.

Through the Act, WD is mandated to:

• promote the development and diversification of the western Canadian economy;
• coordinate federal economic activities in the West; and
• reflect western Canadian interests in the formation of national economic policy.

Working in partnership with provincial and municipal governments, as well as other organizations, WD's programs and initiatives contribute to the Government of Canada's agenda for building a 21st Century economy in the West.

WD's headquarters and Deputy Minister are located in Edmonton, Alberta. In close cooperation with western stakeholders, WD's objective is to more effectively guide federal government policies, regulations and resources so that they become more constructive instruments of western economic growth and diversification. WD's efforts are concentrated in three distinct but interrelated areas leading to the following strategic outcomes:

• the western Canadian economy is competitive, expanded and diversified (Entrepreneurship and Innovation);
• communities in Western Canada are economically viable (Community Economic Development); and
• policies and programs that strengthen the western Canadian economy (Policy, Advocacy & Coordination).

As part of WD’s mandate to co-ordinate federal economic activities in the West, WD implements some programs on behalf of other federal departments and agencies. These programs are implemented under arrangements where the other federal department provides the authorities and funding from Parliament. Related grant and contribution costs are reported in the accounts of other federal departments; they are not reflected as expenses in these Financial Statements.

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2. Summary of Significant Accounting Policies

The financial statements have been prepared in accordance with accounting standards issued by the Treasury Board of Canada Secretariat which are consistent with Canadian generally accepted accounting principles for the public sector. The presentation and results using the stated accounting policies do not result in any differences from Canadian generally accepted accounting principles.

Significant accounting policies are as follows:

(a) Parliamentary appropriations – WD is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to WD do not parallel financial reporting according to Canadian generally accepted accounting principles since appropriations are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and the 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 two bases of reporting.

(b) Net Cash Provided by Government – WD operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by WD is deposited to the CRF and all cash disbursements made by WD are paid from the CRF. Net cash provided by Government is the difference between all cash receipts and all cash disbursements including transactions between departments of the federal government.

(c) Change in net position in the CRF is the difference between the net cash provided by government and appropriations used in a year, excluding the amount of non-respendable revenues recorded by WD. It results from timing differences between when a transaction affects appropriations and when it is processed through the CRF.

(d) Revenues

1. Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.
    
2. Other revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues.
    
   • Sources of revenues include:
      
     • Interest charges on repayment of contributions.
        

(e) Expenses are recorded on the accrual basis:

1. Transfer Payments:
    
   • Grants are recognized in the year in which the conditions for payment are met.
      
   • 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.
      
2. Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment.
    
3. Services provided without charge by other government departments for accommodation, employer’s contribution to the health and dental insurance plans, workers’ compensation and legal services are recorded as operating expenses at their estimated cost.

(f) Employee future benefits

1. Pension benefits: Eligible employees participate in the Public Service Pension Plan (The Public Service Superannuation Act), a multi-employer plan administered by the Government of Canada. WD's contributions to the plan are charged to expenses in the year incurred and represent the total departmental obligations to the plan. Current legislation does not require WD to make contributions for any 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 using information derived from the results of the actuarially determined liability for employee severance benefits for the government as a whole.

(g) Accounts receivables and advances are stated at amounts expected to be ultimately realized; a provision is made for receivables where recovery is considered uncertain.

(h) Loan and Investment Program – are agreements with financial institutions under which the financial institutions authorize and issue loans or make investments using their own capital, and WD provides a loss support contribution, equal to between 10 and 20% of the value of the loans or investments issued. This contribution is used to offset a portion (up to 80%) of net losses on defaulted loans and investments up to a maximum not exceeding WD’s total contribution.

(i) Transfer Payments are payments that are made on the basis of an appropriation for which no goods or services are directly received (but may require the recipient to provide a report or other information subsequent to receiving payments). WD administers two types of transfer payments:

• Grants: transfer payments made to an individual or organization that is not subject to being accounted for or audited, but for which eligibility and entitlement may be verified or the recipient may need to meet pre-conditions.
   
• Contributions: conditional transfer payments made to an individual or organization for a specified purpose pursuant to a contribution agreement that is subject to being accounted for and audited.

Within the Contributions category, WD is authorized to make both non-repayable and repayable contributions. Repayable contributions are contributions whereby the recipient is expected to repay the amount advanced. Depending on their nature, they are classified as either unconditionally repayable or conditionally repayable and are accounted for differently. Normally, these contributions are provided at no interest.

1. Unconditionally repayable contributions are contributions that must be repaid without qualification. Due to their concessionary nature, they are recorded on the Statement of Financial Position as loans at their estimated present value. 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. Interest revenue on outstanding receivables is recognized in the year that they are earned.
    
2. Conditionally repayable contributions are contributions that all or part of which becomes repayable if conditions specified in the contribution agreement come into effect. Accordingly, they are not recorded on the Statement of Financial Position until such time as the conditions specified in the agreement are satisfied at which time they are then recorded as a receivable and a reduction in transfer payment expenses. Appropriate allowances for uncollectible amounts are also established based on an individual appraisal of accounts.
   
   Prior to 1995 repayable contributions were regularly used to assist in the delivery of WD's mandate. Since 1995 they have only been used in limited circumstances. However, these repayable contributions will continue to be recorded on the financial statement and will continue to be until they are repaid or all reasonable attempts to collect have been taken and the accounts written-off.
    
3. Non-Repayable contributions are contributions that are not repayable unless default conditions in the agreement are exercised.

(j) Contingent liabilities (note 14) are potential liabilities, which may become actual liabilities when one or more future event(s) occurs or fails 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 contingent liability is disclosed in the notes to the financial statements.

(k) Tangible capital assets (note 9) - All tangible assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. WD does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value.

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

Asset class	Sub-asset class	Amortization period
Machinery and equipment	Computer equipment	3 years
	Computer software	3 - 7 years
	Other equipment	10 years
Vehicles		5 years
Leasehold improvements		Term of the lease

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(l) Measurement uncertainty - The preparation of these financial statements in accordance with accounting standards issued by the Treasury Board of Canada Secretariat 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 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 allowance for doubtful accounts, the liability for employee severance benefits, the useful life of tangible capital assets and unamortized discount related to unconditionally repayable contributions. Actual results could differ from those estimated. Management’s estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.

3. Parliamentary Appropriations

WD receives most of its funding through annual Parliamentary appropriations. Items recognized in the Statement of Operations and the Statement of Financial Position in one year may be funded through Parliamentary appropriations in prior, current or future years. Accordingly, WD has different net cost of operations for the year on a government-funding basis than on an accrual accounting basis. The differences between net cost of operations and appropriations are reconciled in the following tables.

(a) Reconciliation of net cost of operations to current year appropriations used:

	2010	2009
	( in thousands of dollars )
Net cost of operations	412,354	240,970
Adjustments for items affecting net cost of operations but not affecting appropriations:
Add (Less):
Amortization of tangible capital assets	(525)	(429)
Services provided without charge by other government departments - note 13(a)	(7,269)	(5,983)
Revenue not available for spending	3,947	1,843
Refund of prior years expenditures	1,565	3,305
(Loss) gain on disposal of tangible capital assets	-	(3)
(Increase) in vacation and compensatory leave	(353)	(81)
(Increase) decrease in employee severance benefits	(2,205)	(7)
Other:	13,110	2,040
	8,270	685
Adjustments for items not affecting net cost of operations, but affecting appropriations:
Add (less):
Increase (Decrease) in prepayments	74	(397)
Acquisitions of tangible capital assets	605	915
	679	518
Current year appropriations used	421,303	242,173

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(b) Appropriations provided and used:

	2010	2009
	( in thousands of dollars )
* WD received approval from TB to re-profile 25,200 K of unused appropriations from 2009-10 to future years through the 2010/2011 ARLU process.
Vote 1 - Operations	59,483	53,102
Vote 5 - Transfer Payments	277,461	232,594
Statutory amounts	140,166	5,518
Total Appropriations	477,110	291,214
Less:
Lapsed / Unused appropriations: - Operating Expenditures incl EBP	(4,493)	(3,456)
Lapsed / Unused appropriations: - Transfer Payments *	(51,314)	(45,585)
	(55,807)	(49,041)
Total Appropriations Used	421,303	242,173

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(c) Reconciliation of net cash provided by Government of Canada to current year appropriations used:

	2010	2009
	( in thousands of dollars )
Net Cash provided by government	337,191	261,969
Revenue not available for spending	3,947	1,843
Refund of prior years expenditures	1,565	3,305
Change in net position in the Consolidated Revenue Fund:
(Increase) decrease in accounts receivable	(19)	2,020
(Increase) decrease in repayable contributions	(12,772)	(57)
Increase (Decrease) in accounts payable and accrued liabilities	78,281	(28,947)
Other adjustments:	13,110	2,040
Total Change in net position	(78,600)	(24,944)
Current year appropriations used	421,303	242,173

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4. Expenses

The following table presents details of expenses by category:

	2010	2009
	( in thousands of dollars )
*The adjustment of 1,215 K, for 2008-9, is attributed to a reduction to the Allowance for Doubtful Accounts under repayable contributions.
Transfer Payments
Transfer Payments	341,250	182,819
Total Transfer Payments	341,250	182,819
Operating Expenses
Salaries	39,445	33,587
Employee benefits	12,247	8,351
Professional and special services	7,434	8,316
Transportation & Communications	3,962	3,877
Accommodation	3,745	3,079
Bad Debts (adjustments) *	3,557	(1,215)
Acquisition of machinery and equipment	1,398	1,325
Repairs, utilities, materials and supplies	1,034	901
Rentals	764	931
Information	693	373
Amortization of tangible capital assets	525	429
Other	124	(234)
Total Operating Expenses	74,928	59,720
Total Expenses	416,178	242,539

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5. Revenues

The following table presents details of revenues by category:

	2010	2009
	( in thousands of dollars )
Interest	2,276	822
Amortization of discount on repayable contributions	-	418
Revenues from Conditionally repayable contributions	1,104	279
Compensatory Repayments	57	-
Other	387	50
Total Revenues	3,824	1,569

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6. Receivables

	2010	2009
	( in thousands of dollars )
External Parties
Accrued Interest	667	568
Receivable from the Province of British Columbia	-	298
Non-Repayable Contributions	-	126
Other Receivables	5,970	5,692
Employee Advances	8	5
Gross External Parties Account Receivable	6,645	6,689
Allowance for Doubtful Accounts	(6,332)	(5,924)
Subtotal - External Parties	313	765
Other Government Departments	592	121
Total Receivables	905	886

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7. Repayable Contributions

	2010	2009
	( in thousands of dollars )
Unconditionally Repayable Contributions	33,527	19,699
Unamortized Discount on Unconditionally Repayable Contributions	(2,527)	(194)
Allowance for Doubtful - Repayable Contributions	(10,078)	(11,221)
Net Unconditionally Repayable Contributions	20,922	8,284
Accrued Interest -Unconditionally Repayable Contributions	7,435	5,927
Allowance for Doubtful Accounts - Accrued Interest Receivable	(7,301)	(5,927)
Total Repayable Contributions	21,056	8,284

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8. Prepayments

	2010	2009
	( in thousands of dollars )
Loss Support Contributions	13,993	12,995
Allowance for Losses on Loss Support Contributions	(3,521)	(3,263)
Net Loss Support Contributions	10,472	9,732
Non-Repayable and Conditionally Repayable Contributions	226	910
Prepaid expenses	18	-
Total Prepayments	10,716	10,642

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9. Tangible Capital Assets

(in thousands of dollars)

	Machinery & Equipment	Vehicles	Leasehold Improvements	Total
* Amortization expense for the year ending March 31, 2010 is $524,795 ($428,565 for the year ending March 31, 2009)
Cost
Opening balance	3,222	112	696	4,030
Acquisitions	428	-	164	592
Work in Progress	-	-	13	13
Disposals	(349)	-	-	(349)
Adjustments	-	-	-	-
Closing balance	3,301	112	873	4,286
Accumulated amortization
Opening balance	(1,205)	(56)	(444)	(1,705)
Amortization *	(448)	(14)	(63)	(525)
Disposals	349	-	-	349
Closing balance	(1,304)	(70)	(507)	(1,881)
2010 Net book value	1,997	42	366	2,405
2009 Net book value	2,017	56	252	2,325

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10. Accounts Payable and Accrued Liabilities

	2010	2009
	( in thousands of dollars )
External Parties
Transfer Payments	179,954	100,786
Operating	1,265	2,626
Accrued Salaries and Wages	1,185	1,098
Subtotal - External Parties	182,404	104,510
Other Government Departments	2,355	1,968
Total Accounts Payable and Accrued Liabilities	184,759	106,478

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11. Employee Benefits

1. Pension benefits: WD’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 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 WD contribute to the cost of the Plan. The 2009-10 expense amounts to $4,846,185 ($3,957,494 in fiscal year 2008-09), which represents approximately 1.9 (2.0 - 2008-09) times the contributions by employees.
   
   WD’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: WD 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 the severance benefits, measured as at March 31, is as follows:

	2010	2009
	( in thousands of dollars )
Accrued benefit obligation, beginning of year	6,496	6,489
Expense for the year	2,808	741
Benefits paid during the year	(603)	(734)
Accrued Benefit Obligations, end of year	8,701	6,496

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12. Contractual Obligations

The nature of the WD’s activities can result in some large multi-year contracts and obligations, whereby WD will be obligated to make future payments when the conditions under the agreement are met. Significant commitments that can be reasonably estimated are summarized as follows:

	2011	2012	2013	2014	2015 and thereafter	Total
	(in thousands of dollars)
Transfer Payment
Alberta & Saskatchewan Centenaries	6,748	16,000	4,000	-	-	26,748
Community Adjustment Fund	156,576	-	-	-	-	156,576
Mountain Pine Beetle	7,721	-	-	-	-	7,721
Recreational Infrastructure Canada	105,459	-	-	-	-	105,459
VIDO/InterVac - U of Sask	10,242	-	-	-	-	10,242
Core Programming	99,448	35,477	20,937	4,360	400	160,622
Total Estimated Future Commitments	386,194	51,477	24,937	4,360	400	467,368

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13. Related party transactions

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

1. Services provided without charge:
   
   During the 2009-10 fiscal year, WD received without charge from other departments, accommodation services, legal fees, workers’ compensation and the employer’s contribution to the health and dental insurance plans. These services without charge have been recognized in WD’s Statement of Operations as follows:
   
   

   	2010	2009
   	( in thousands of dollars )
   Services provided without charge
   Accommodation	3,745	3,079
   Employer's contribution to the health insurance plan and employee benefits plans	3,330	2,862
   Legal Services	153	1
   Worker's compensation	41	41
   Total services provided without charge	7,269	5,983

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   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, are not included as an expense in the WD’s Statement of Operations.
    
2. Administration of programs on behalf of other government departments.
   
   Part of WD’s mandate is to coordinate federal economic activities in the West. In this regard, WD implements programs on behalf of other federal departments and agencies. The following is a list of programs valued at greater than one million dollars in federal contributions administered by WD over the last two fiscal years. These grant and contribution expenses are reflected in the financial statements of the other government departments and not those of WD.
   
   

   	2010	2009
   	( in thousands of dollars )
   Canada Strategic Infrastructure Fund - Infrastructure Canada	51,457	72,685
   Municipal Rural Infrastructure Fund - Infrastructure Canada	81,932	54,619
   Total	133,389	127,304

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14. Contingent liabilities

Claims have been made against WD in the normal course of operations. 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 financial statement.

WD is named as a co-defendant in a suit. The outcome of this claim is not determinable at this time. The potential financial impact of this case cannot be estimated but could be significant. No accrual for this contingency has been made in the financial statements.

15. Comparitive Information

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