Financial Statements

Notes to the Financial Statements (unaudited)

For the year ended March 31

1. Authority and objectives

The Department of Justice was created by an Act of Parliament in 1868 to be responsible for the legal affairs of the Government of Canada and to provide legal services to individual departments and agencies. The Department’s work reflects the duties of its Minister’s dual role as Attorney General of Canada and as Minister of Justice. The Department is established under the authority of Schedule I to the Financial Administration Act and is funded through annual appropriations.

The department conducts its two priorities along four program activities:

(a) A fair, relevant and accessible justice system that reflects Canadian values

Justice policies, laws and programs

Under Canada's federal system, the administration of justice is an area of shared jurisdiction between the federal government and the provinces. Through this program activity, the Department fulfils its constitutional responsibility to ensure a bilingual and bijural national legal framework for the administration of justice by developing policies and laws and testing innovative approaches to strengthen the framework within the following domains: criminal law, youth criminal justice, sentencing, marriage and divorce, access to justice and Aboriginal justice. Through this program activity, the Department also provides significant ongoing funding to provinces and territories in support of their constitutional responsibility for the day-to-day administration of justice.

The Office of the Federal Ombudsman for Victims of Crime

This program activity raises awareness of the needs and concerns of victims in areas of federal responsibility, provides an independent resource that addresses complaints of victims about compliance with the provisions of the Corrections and Conditional Release Act that apply to victims of offenders under federal supervision, and assists victims to access existing federal programs and services.

(b) A federal government that is supported by effective and responsive legal services

Services to government

As a common service provider, the Department of Justice provides an integrated suite of legal advisory, litigation and legislative services to departments and agencies to help them meet their policy and programming priorities and advance the overall objectives of the Government. Through this program activity, the Department also provides legal services to the Justice Portfolio and supports the Minister as legal advisor to the Cabinet on complex, whole-of-government issues.

(c) The following program activity supports all strategic outcomes within this organization

Internal Services

Internal Services are groups of related activities and resources that are administered to support the needs of programs and other corporate obligations of an organization. These groups are: Management and Oversight Services; Communications Services; Legal Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Services; Materiel Services; Acquisition Services; and Travel and Other Administrative Services. Internal Services include only those activities and resources that apply across an organization and not to those provided specifically to a program.

2. Summary of significant accounting policies

These financial statements have been prepared in accordance with 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.

The significant accounting policies are as follows:

(a) Parliamentary appropriations

The Department is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to the Department do not parallel financial reporting according to generally accepted accounting principles for the public sector 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 bases of reporting.

(b) Net cash provided by Government

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

(c) Due from the Consolidated Revenue Fund (CRF)

The amounts are the result of timing differences 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 Department is entitled to draw from the CRF without further appropriations.

(d) Revenues

  • Revenues are derived from the provision of advisory, litigation and legislative services provided by Department of Justice's law practitioners and they are recognized in the year the services are rendered. These revenues are based on legal services rates approved annually by Treasury Board in accordance with the Common Services Policy, for non-appropriated mandatory legal services to Government departments and agencies as well as legal services to Crown corporations and non-federal and international organizations.
  • Service and administration fees revenues under the Family Law programs are recognized based upon the services provided in the year, such as upon validation of the garnishment application or upon issuance of the divorce clearance certificate. The fees prescribed by Family Orders and Agreements Enforcement Assistance Act are to cover the administrative costs of processing each garnishee summons served on the Minister.
  • Fines, forfeitures and awarded court costs are recognized upon receipt of payment by the Department. Fines and forfeitures include two groups of payments: those provided for under the Criminal Code (s.734 through s.737) and those provided for under the Contraventions Act. Fines and forfeitures are in effect penalties for illegal actions, rather than fees. These revenues are reported in "Other revenues".

(e) Expenses - Recorded on the 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. The liability is calculated based on salary levels in effect at March 31 and the number of days remaining unpaid at the end of the fiscal year. Payments of these obligations are funded through future year appropriations.
  • Expenses related to the provision of legal services are limited to those costs borne and settled directly by the Department. The cost of legal services which are paid directly by client departments to outside suppliers such as legal agents, are not included in the expenses of the Department.
  • Services provided without charge by other government departments for accommodation, the employer’s contribution to the health and dental insurance plans, and workers' compensation coverage 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, a multiemployer plan administered by the Government. 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 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) Receivables

Receivables are stated at the lower of cost and net recoverable value; an allowance for doubtful accounts is made for receivables where recovery is considered uncertain. The allowance for doubtful accounts represents management's best estimate of probable losses in receivables. The allowance is determined based on an analysis of historic loss experience and an assessment of current conditions. The allowance is increased for losses and reduced by amounts written-off.

Under the Family Orders and Agreements Enforcement Assistance Act, remission order PC 1994-269, outstanding receivables are written-off once the garnishee application has terminated. The application terminates when the five-year life of the garnishment summons has expired or when the province or territory has requested that the application be cancelled.

(h) 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 financial statements.

(i) Tangible capital assets

All tangible capital assets and leasehold improvements are recorded at their cost and amortized over their estimated useful life on a straight-line basis as follows:

Asset class Acquisition cost equal or greater than Amortization Period
Office and other equipment $10,000 5 to 8 years
Telecommunications equipment $10,000 4 to 5 years
Informatics hardware $1,000 3 to 5 years
Informatics software $10,000 3 to 5 years
Furniture and furnishings $1,000 10 years
Motor vehicles $10,000 5 years
Leasehold improvements $10,000 Lesser of useful life or remaining term of the lease
Work in progress In accordance with asset class Once in service, in accordance with asset class

All tangible capital assets and leasehold improvements are recorded at their cost and amortized over their estimated useful life on a straight-line basis as follows:

Amortization of the tangible capital asset commences the month following the date the asset is put into service.

(j) Measurement uncertainty

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. 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, the liability for employee severance benefits, allowance for doubtful accounts, 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 financial statements in the year they become known.

3. Parliamentary appropriations

The Department 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, the Department has different net results of operations for the year on a government funding basis than on an accrual accounting basis. The following tables present the reconciliation between the current year appropriation used and the net cost of operations:

(a) Reconciliation of net cost of operations to current year appropriations used (in thousands of dollars)

  2011 2010
Net cost of operations 789,349 804,413
Adjustments for items affecting net cost of operations but not affecting appropriations
Amortization of tangible capital assets (Note 5) (11,389) (10,700)
Vacation pay and compensatory leave (1,075) (1,750)
Employee severance benefits (1,220) 5,952
Accrual for unratified collective agreements - 18,856
Adjustments to previous year's accounts payable 8,022 12,839
Bad debt expense (4,941) (4,499)
Revenue not available for spending 9,087 9,156
Employee benefits recovered 40,361 32,838
Services provided without charge by other government departments (Note 11) (85,396) (82,462)
Other (8,600) -
  (55,150) (19,770)
Adjustments for items not affecting net cost of operations but affecting appropriations
Reversal of accrual for LA collective agreement 12,176 -
Acquisitions of tangible capital assets (Note 5) 15,023 14,146
Change in prepaid expenses (15) 7
Other 100 (292)
  27,284 13,861
Current year appropriations used 761,483 798,504

(b) Appropriations provided and used

  2011 2010
Vote 1 - Operating expenditures 323,036 362,604
Vote 5 - Grants and contributions 397,956 394,142
Statutory amounts 79,429 79,076
Less
Appropriations available for future years (16) (8)
Voted appropriations lapsed (38,922) (37,310)
Current year appropriations used 761,483 798,504

4. Receivables and Advances

  2011 2010
Federal government departments and agencies 22,980 17,290
External parties
Family Law 12,058 12,657
Less: allowance for doubtful accounts (11,271) (11,474)
  787 1,183
Other receivables and advances 913 885
Less: allowance for doubtful accounts (192) (207)
  721 678
Total receivables and advances 24,488 19,151

(in thousands of dollars)

5. Tangible capital assets

Tangible capital assets Opening balance Acquisitions Disposals and transfers Closing balance
Office and other equipment 1,089 17 (94) 1,012
Telecommunications equipment 4,597 397 (860) 4,134
Informatics hardware 28,049 2,929 (6,933) 24,045
Informatics software 23,487 126 (453) 23,160
Furniture and furnishings 22,337 1,927 - 24,264
Motor vehicles 58 69 (64) 63
Leasehold improvements 20,331 18 4,222 24,571
Work in progress - software development 2,761 4,801 (3,770) 3,792
Work in progress - leasehold improvements 702 4,739 (4,222) 1,219
Total tangible capital assets 103,411 15,023 (12,174) 106,260

Accumulated amortization Opening balance Current year amortization Disposals and transfers Closing balance
Office and other equipment 471 156 (94) 533
Telecommunications equipment 2,364 772 (860) 2,276
Informatics hardware 20,887 2,980 (6,933) 16,934
Informatics software 17,955 2,504 (4,223) 16,236
Furniture and furnishings 10,005 2,356 - 12,361
Motor vehicles 53 18 (64) 7
Leasehold improvements 11,394 2,603 - 13,997
Total accumulated amortization 63,129 11,389 (12,174) 62,344

Net book value 2011 2010
Office and other equipment 479 618
Telecommunications equipment 1,858 2,233
Informatics hardware 7,111 7,162
Informatics software 6,924 5,532
Furniture and furnishings 11,903 12,332
Motor vehicles 56 5
Leasehold improvements 10,574 8,937
Work in progress - software development 3,792 2,761
Work in progress - leasehold improvements 1,219 702
Total net book value 43,916 40,282

(in thousands of dollars)

Amortization expense for the year ended March 31, 2011 is $11,389,000 ($10,700,000 in 2009-10).

Disposals of assets under construction represent assets that were put into use in the year and have been transferred to the other capital asset classes as applicable.

6. Accounts payable and accrued liabilities

  2011 2010
Federal government departments and agencies 15,030 20,721
External parties
Accounts payable 38,267 37,285
Accrued salaries 1,770 -
  40,037 37,285
Accrual for unratified collective agreements - 12,274
Other liabilities 8,600 4
  48,637 49,563
Total accounts payable and accrued liabilities 63,667 70,284

(in thousands of dollars)

7. Family Law account

Under the Family Orders and Agreements Enforcement Assistance Act, the Department assists provinces and territories in the enforcement of family support orders and agreements by providing garnishment assistance through the interception of designated federal moneys payable to individuals owing family financial support. These intercepted moneys (consisting of garnisheed moneys such as income tax refunds, employment insurance benefits, etc.) are deposited into the Family Law account from which payments to the provinces and territories are then made. The provinces and territories distribute these payments to the beneficiaries:

  2011 2010
Family Law account, beginning of year 6,578 6,626
Receipts 165,362 167,847
Payments (166,978) (167,895)
Family Law account, end of year 4,962 6,578

(in thousands of dollars)

8. Employee future benefits

(a) Pension benefits

The Department'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/Quebec Pension Plans benefits and they are indexed to inflation.

Both the employees and the Department contribute to the cost of the Plan. The expense presented below represents approximately 1.9 times (1.9 in 2009-10) the employees' contributions.

  2011 2010
Pension expense 55,631 56,847

(in thousands of dollars)

The Department'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

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. Information about the severance benefits, measured as at March 31, is as follows:

  2011 2010
Accrued future benefit obligation, beginning of year 90,297 96,249
Expense for the year 6,265 (1,488)
Benefits paid during the year (5,045) (4,464)
Accrued future benefit obligation, end of year 91,517 90,297

(in thousands of dollars)

9. Contingent liabilities

Claims and litigation

Claims have been made against the Department in the normal course of operations. These claims include items with pleading amounts and other for which no amount is specified. Based on Department's assessment, legal proceedings for claims estimated at approximately $63,937,000 were still pending at March 31, 2011 ($58,055,000 at March 31, 2010). 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 financial statements.

In this regard, it should be noted that due to a specific file, an amount of $8,600,000 has been recorded in 2010-11.

10. Contractual obligations

The nature of the Department's activities results in some large multi-year contracts and obligations whereby the Department will be obligated to make future payments when the services and/or goods are received.

Significant contractual obligations that can be reasonably estimated are summarized as follows:

  2011-12 2012-13 2013-14 2014-15 2015-16
and thereafter
Transfer payments 308,178 188,350 177,302 177,302 177,302

(in thousands of dollars)

11. Related party transactions

The Department is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations. The Department enters into transactions with these entities in the normal course of business and on normal trade terms.

Also, during the year, the Department received without charge from other departments, accommodation, the employer's contribution to the health and dental insurance plans, and workers' compensation coverage. These services without charge have been recognized in the Department's Statement of Operations as follows:

  2011 2010
Accommodation provided by Public Works and Government Services Canada 45,799 44,441
Employer's contributions to the health and dental insurance plans paid by Treasury Board Secretariat 39,520 37,943
Workers' compensation coverage provided by Human Resources and Skills Development Canada 77 78
Total 85,396 82,462

(in thousands of dollars)

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 cost 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 Department's Statement of Operations.

In addition, the Department of Justice has provided legal services, such as advisory, litigation and legislative services, without charge to other government departments for a total amount of $186,177,000 ($227,202,000 in 2009-10). The amount is determined based on actual salary and operating expenses attributed to non-recoverable services provided to other government departments.

12. Comparative information

Certain 2010 comparative figures are reclassified to conform to the current year's presentation.

13. Segmented information

Presentation by segment is based on the Department'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 2. The following table presents the expenses incurred and 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:

  The Office of the Federal Ombudsman for Victims of Crime Justice policies, laws and programs Services to government Internal Services 2011 2010
Operating expenses
Salaries and employee benefits 1,096 44,877 433,808 107,498 587,279 554,669
Accommodation 56 19,532 19,902 9,077 48,567 45,478
Professional and special services 98 5,897 26,023 12,346 44,364 47,226
Amortization of tangible capital assets 4 136 750 10,499 11,389 10,700
Claims and ex-gratia payments - - 101 10,775 10,876 541
Travel and relocation 38 2,060 7,097 1,650 10,845 11,791
Information 44 401 2,792 5,407 8,644 3,678
Utilities, materials and supplies 39 646 3,522 3,804 8,011 10,470
Communications 11 410 2,410 4,640 7,471 7,484
Bad debts - 4,941 - - 4,941 4,499
Repairs and maintenance 3 99 509 2,697 3,308 3,646
Other - 671 84 317 1,072 795
Rentals 5 169 370 397 941 980
Total operating expenses 1,394 79,839 497,368 169,107 747,708 701,957
Transfer payments
Provinces and territories - 342,642 - - 342,642 337,153
Non-profit institutions and organizations - 26,315 - - 26,315 22,440
Individuals - 9,664 - - 9,664 13,287
International organizations - 666 - - 666 524
Total transfer payments - 379,287 - - 379,287 373,404
Total expenses 1,394 459,126 497,368 169,107 1,126,995 1,075,361
Revenues
Legal services - - 297,759 30,882 328,641 261,973
Family Law fees - 8,091 - - 8,091 8,200
Total - 8,091 297,759 30,882 336,732 270,173
Other revenues - 373 541 - 914 775
Total revenues - 8,464 298,300 30,882 337,646 270,948
Net cost of operations 1,394 450,662 199,068 138,225 789,349 804,413

(in thousands of dollars)


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