Future-Oriented Statement of Operations (Unaudited) As at March 31, 2014 and 2015

Natural Resources Canada
Future-Oriented Statement of Operations (Unaudited)
As at March 31
(In thousands of dollars)

	Estimated Results	Planned Results
	2013-14	2014-15
Expenses
Statutory Programs – Atlantic Offshore	$850,137	$1,282,761
Energy-efficient Practices and Lower-carbon Energy Sources	350,946	477,746
Responsible Natural Resource Management	209,448	71,298
Technology Innovation	167,431	178,382
Internal services	153,098	161,042
Innovation for New Products and Processes	105,335	71,986
Landmass Information	68,161	60,523
Protection for Canadians and Natural Resources	63,659	64,110
Investment in Natural Resource Sectors	59,966	57,892
Market Access and Diversification	48,410	49,789
Total expenses	2,076,591	2,475,529
Revenues
Rights and Privileges	1,223,301	1,660,822
Miscellaneous Revenues	763	888
Revenue from services of a non-regulatory nature	22,590	24,896
Proceeds from sales of goods and information products	2,593	2,892
Revenue from services of a regulatory nature	1,968	1,952
Revenues earned on behalf of Government	(1,219,412)	(1,656,399)
Total revenues	31,803	35,051
Net cost of operations	$2,044,788	$2,440,478

The accompanying notes form an integral part of these financial statements

Natural Resources Canada
Notes to the Future-Oriented Statements of Operations (Unaudited)

1. Methodology and Significant Assumptions

The future-oriented statement of operations has been prepared on the basis of government priorities and departmental plans as described in the Report on Plans and Priorities.

The information in the estimated results for fiscal year 2013-14 is based on actual results as at October 31st, 2013 and on forecasts for the remainder of the fiscal year. Updated forecasts were used as of mid-January 2014 for environmental expenses under Responsible Natural Resource Management and for expenses under Statutory Programs – Atlantic Offshore.  Forecasts have been made for the planned results for the 2014-15 fiscal year.

The main assumptions underlying the forecasts are as follows:

• The department’s activities are as reflected in the final 2013-2014 authorities and 2014-2015 Main Estimates;
• Expenses and revenues, including the determination of amounts internal and external to the government, are based on historical experience. The general historical pattern is expected to continue;
• Allowances for uncollectibility are based on historical experience.  The general historical pattern is expected to continue.

These assumptions are adopted as at October 31st, 2013.

2. Variations and Changes to the Forecast Financial Information

While every attempt has been made to forecast final results for the remainder of 2013-14 and for 2014-15, actual results achieved for both years are likely to vary from the forecast information presented, and this variation could be material.

In preparing this future-oriented statement of operations Natural Resources Canada 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 statement of operations and the historical statement of operations include:

• The timing and amount of acquisitions and disposals of property, plant and equipment may affect gains/losses and amortization expense.
• Implementation of new collective agreements.
• Economic conditions may affect both the amount of revenue earned and the collectability of loan receivables.
• Interest rates in effect at the time of issue will affect the net present value of non-interest bearing loans.
• 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, Natural Resources Canada will not be updating the forecasts for any changes in financial resources made in ensuing supplementary estimates. Variances will be explained in the Departmental Performance Report.

3. Summary of Significant Accounting Policies

The future-oriented statement of operations has been prepared using Government’s accounting policies that came into effect for the 2013-14 fiscal year which are based on Canadian public sector accounting standards.  The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.

Significant accounting policies are as follows:

a) Consolidation

These consolidated financial statements include the accounts of the Geomatics Canada Revolving Fund  that the deputy head (DH) is accountable for.  The accounts of these sub-entities have been consolidated with those of the Department, and all inter-organizational balances and transactions have been eliminated. 

b) Expenses

Expenses are recorded on an accrual basis. Expenses for the Department operations are recorded when goods are received or services are rendered including services provided without charges for accommodation, employee contributions to health and dental insurance plans, legal services and worker’s compensation which are recorded as expenses at their estimated cost.  Vacation pay and compensatory leave as well as severance benefits are accrued and expenses are recorded as the benefits are earned by employees under their respective terms of employment.

Transfer payments are recorded as expenses when the recipient has met the eligibility criteria or fulfilled the terms of a contractual transfer agreement or, in the case of transactions which do not form part of an existing program, 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 statement.  Transfer payments that become repayable as a result of conditions specified in the contribution agreement that have come into being are recorded as a reduction to transfer payment expense and as a receivable.

Expenses also include provisions to reflect changes in the value of assets, including provisions for bad debt on accounts receivable, provision for valuation on loans, investments and advances and inventory obsolescence or liabilities, including contingent liabilities and environmental liabilities to the extent the future event is likely to occur and a reasonable estimate can be made.

Expenses also include amortization of tangible capital assets which are capitalized at their acquisition cost.  Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset. 

c) Revenues

Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.

Funds received from external parties for specified purposes are recorded upon receipt as deferred revenue. These revenues are recognized in the period in which the related expenses are incurred.

Funds that have been received are recorded as deferred revenue, provided the Department has an obligation to other parties for the provision of goods, services or the use of assets in the future.

Other revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenue takes place.

Revenues that are non-respendable are not available to discharge the Department's liabilities. While the Deputy Head is expected to maintain accounting control, he or she has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the entity's gross revenues.

4. Parliamentary Authorities

The Department is financed by the Government of Canada through parliamentary authorities. Financial reporting of authorities provided to the Department do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Items recognized in the Future-Oriented Statement of Operations in one year may be funded through parliamentary authorities in prior, current, or future years. Accordingly, the Department has different net cost 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 requested authorities
(In thousands of dollars)

	Estimated	Planned
	2013-14	2014-15
Net cost of operations	$2,044,789	$2,440,478
Adjustment for items affecting net cost of operations but not affecting authorities:
Decrease in allowance for environmental liabilities	81,087	117,328
Amortization of tangible capitals assets	(17,692)	(18,871)
Gain on disposal of tangible capital assets	785	761
Services provided without charge by other government departments	(50,716)	(48,147)
Decrease (Increase) in vacation pay and compensatory leave	(2,364)	2,513
Decrease in prepaid accounts	(759)	(2,192)
Decrease in employee future benefits	31,898	3,724
Decrease in accrued  liabilities not charged to authorities	530	10,664
Increase  (decrease) in adjustments of previous year’s inventory	338	(467)
Adjustments of prior year accounts payable	6,284	6,428
Refunds of previous years' expenditures	12,042	11,633
Non cash changes of tangible capital assets	21,234	10,047
Total items affecting net cost of operations but not affecting authorities	82,665	93,421
Adjustment for items not affecting net cost of operations but affecting appropriations:
Acquisition of tangible assets	26,585	16,236
Decrease in lease obligations for tangible capital assets	2,199	2,276
Total items not affecting net cost of operations but affecting authorities	28,784	18,512
Requested authorities	$2,156,238	$2,552,411

 

b) Authorities requested
(In thousands of dollars)

	Estimated	Planned
	2013-14	2014-15
Authorities requested:
Vote 1 – Operating expenditures	$905,112	$664,516
Vote 5 – Capital expenditures	28,795	15,603
Vote 10 – Transfer payments	572,437	523,377
Statutory amounts	910,452	1,348,915
Less:
Lapsed – Operating (incl. frozen allotments)	74,455
Lapsed – Capital	2,826
Lapsed – Transfer payments (incl. frozen allotments)	183,277
Requested authorities	$2,156,238	$2,552,411