Financial Statements

Notes to the Financial Statements (unaudited)

For the year ended March 31, 2013

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 Canadian justice system

Stewardship of the Canadian Legal Framework

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 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. This program activity also includes significant ongoing funding to the provinces and territories in support of their responsibility for the day-to-day administration of justice.

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 victim complaints about compliance with the provisions of the Corrections and Conditional Release Act that apply to victims of offenders under federal supervision, and assists victims in accessing existing federal programs and services.

(b) A federal government that is supported by high quality legal services

Legal Services to Government Program

The Department of Justice provides an integrated suite of high-quality legal advisory, litigation and legislative services to the Minister of Justice and to all federal departments and agencies to support them in meeting the Government’s policy and programming priorities and to advance the overall objectives of the Government. Services are provided through a network of departmental legal services units co- located with client departments and agencies, specialized legal capacities within national headquarters and a network of regional offices and sub-offices providing legal advisory and litigation services to federal departments and agencies across the country.

(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.

This program activity supports both strategic outcomes. The high-quality services and support provided by Internal Services allow the Department to minimize risks and support Government priorities.

2. Summary of significant accounting policies

These financial statements have been prepared using the Government's accounting policies stated below, 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.

The significant accounting policies are as follows:

(a) 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. Consequently, items recognized in the Statement of Operations and Departmental Net Financal Position and in the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting. The planned results amounts in the Statement of Operations are the amounts reported in the future-oriented financial statements included in the 2012-13 Report on Plans and Priorities.

(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 between departments of the Government.

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

Amounts due from or 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 Department is entitled to draw from the CRF without further authorities to discharge its liabilities.

(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.
  • Common Services revenues are derived in accordance with the Common Services Policy, for specific internal services provided to Public Prosecution Service of Canada (PPSC).
  • 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".
  • 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.

(e) Expenses - Recorded on the accrual basis:

  • Transfer payments are recorded as expenses when authorization for the payment exists and the recipient has met the eligibility criteria or the entitlements established for the transfer payment program. In situations where payments do not form part of an existing program, transfer payments are recorded as expenses 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.
  • 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

i. Pension benefits

Eligible employees participate in the Public Service Pension Plan, a multiemployer pension 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.

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.

(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:

Tangible capital assets
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

Assets under construction are recorded in the applicable capital asset class in the year that they become available for use and are not amortized until they become available for use.

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 authorities

The Department receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Departmental Net Financial Position and the Statement of Financial Position in one year may be funded through parliamentary authorities 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 differences are reconciled in the following tables:

(a) Reconciliation of net cost of operations to current year authorities used
(In thousands of dollars)
  2013 2012
Net cost of operations before government funding and transfers 768,584 772,751
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets (Note 8) (14,186) (12,386)
Vacation pay and compensatory leave (367) (96)
Employee future benefits 4,070 4,441
Adjustments to previous year's accounts payable 7,807 13,918
Bad debt expense (3,690) (4,640)
Employee benefits recovered 45,321 46,579
Services provided without charge by other government departments (Note 11) (92,551) (86,419)
Accrual for workforce adjustment (4,258) (5,707)
Accrual for unratified collective agreements (Note 14) (271) (4,706)
Contingent liabilites 60 (60)
Other 101 67
Total items affecting net cost of operations but not affecting authorities (57,963) (49,010)
Adjustments for items not affecting net cost of operations but affecting authorities:
Reversal of accrual for workforce adjustment 5,707 -
Reversal of accrual for unratified collective agreements (Note 14) 4,706 97
Acquisitions of tangible capital assets (Note 8) 12,954 20,935
Change in prepaid expenses (36) 54
Other 32 180
Total items not affecting net cost of operations but affecting authorities 23,363 21,266
Current year authorities used 733,983 745,008

(b) Authorities provided and used
(In thousands of dollars)
  2013 2012
Vote 1 - Operating expenditures 298,837 323,545
Vote 5 - Grants and contributions 391,677 395,699
Statutory amounts 78,289 78,447
Less
Appropriations available for future years (2) (3)
Voted appropriations lapsed (34,818) (52,680)
Current year authorities used 733,983 745,008

4. Accounts payable and accrued liabilities

Accounts payable and accrued liabilities
(In thousands of dollars)
  2013 2012
Federal government departments and agencies 849 2,008
External parties
Accounts payable 51,660 38,485
Accrued salaries 3,267 3,400
Total accounts payable to external parties 54,927 41,885
Accrual for workforce adjustment 4,258 5,707
Accrual for unratified collective agreements 271 4,706
Other liabilities 8,600 8,660
Total accrued liabilities 68,056 60,958
Total accounts payable and accrued liabilities 68,905 62,966

In Canada’s Economic Action Plan 2012, the Government announced savings measures to be implemented by departments over the next three fiscal years starting in 2012-2013. As a result, the Department has recorded at March 31, 2013 an obligation for termination benefits for an amount of $4,258,000 ($5,707,000 in 2011-2012) as part of accrued liabilities to reflect the estimated workforce adjustment costs.

5. 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:

Family Law account
(In thousands of dollars)
  2013 2012
Family Law account, beginning of year 3,173 4,962
Receipts 166,686 165,852
Payments (165,527) (167,641)
Family Law account, end of year 4,332 3,173

6. 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 1.7 times (1.8 in 2011-12) the employees' contributions.

Pension benefits
(In thousands of dollars)
  2013 2012
Pension expense 55,759 56,274

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 salary at termination of employment. These severance benefits are not pre-funded. Benefits will be paid from future authorities. Information about the severance benefits, measured as at March 31, is as follows:

As part of collective agreement negotiations with certain employee groups, and changes to conditions of employment for executives and certain non-represented employees, the accumulation of severance benefits under the employee severance pay program ceased for these employees commencing in 2012. Employees subject to these changes have been given the option to be immediately paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits on termination from the public service. These changes have been reflected in the calculation of the outstanding severance benefit obligation.

Severance benefits
(In thousands of dollars)
  2013 2012
Accrued future benefit obligation, beginning of year 87,076 91,517
Expense for the year 6,759 21,560
Benefits paid during the year (10,828) (26,001)
Accrued future benefit obligation, end of year 83,007 87,076

7. Accounts receivable and advances

Accounts receivable and advances
(In thousands of dollars)
  2013 2012
Federal government departments and agencies 35,896 22,304
External parties
Family Law 11,560 12,420
Less: allowance for doubtful accounts (10,839) (11,588)
Total accounts receivable from Family Law 721 832
Other receivables and advances 981 892
Allowance for doubtful accounts on receivables from external parties (76) (31)
Total other receivables and advances 1,626 1,693
Gross accounts receivable 37,522 23,997
Accounts receivable held on behalf of Government (11,432) (10,181)
Net accounts receivable and advances 26,090 13,816

8. Tangible capital assets

Tangible capital assets
(In thousands of dollars)
  Opening balance Acquisitions Disposals and transfers Closing balance
Office and other equipment 1,264 - (46) 1,218
Telecommunications equipment 4,058 98 (2,132) 2,024
Informatics hardware 25,811 3,900 (16,603) 13,108
Informatics software 19,959 1,857 4,506 26,322
Furniture and furnishings 26,482 1,060 (109) 27,433
Motor vehicles 63 - - 63
Leasehold improvements 28,878 - 972 29,850
Work in progress - software development 4,066 4,803 (7,778) 1,091
Work in progress - leasehold improvements - 1,236 (972) 264
Total tangible capital assets 110,581 12,954 (22,162) 101,373

Accumulated amortization
(In thousands of dollars)
  Opening balance Current year amortization Disposals and transfers Closing balance
Office and other equipment 686 208 (46) 848
Telecommunications equipment 2,481 562 (2,132) 911
Informatics hardware 18,879 2,916 (16,603) 5,192
Informatics software 7,972 3,884 (3,272) 8,584
Furniture and furnishings 14,748 2,643 (109) 17,282
Motor vehicles 20 12 - 32
Leasehold improvements 14,265 3,961 - 18,226
Total accumulated amortization 59,051 14,186 (22,162) 51,075

Net book value
(In thousands of dollars)
  2013 2012
Office and other equipment 370 578
Telecommunications equipment 1,113 1,577
Informatics hardware 7,916 6,932
Informatics software 17,738 11,987
Furniture and furnishings 10,151 11,734
Motor vehicles 31 43
Leasehold improvements 11,624 14,613
Work in progress - software development 1,091 4,066
Work in progress - leasehold improvements 264 -
Total net book value 50,298 51,530

Amortization expense for the year ended March 31, 2013 is $14,186,000 ($12,386,000 in 2011-12).

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.

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. While the total amount claimed in these actions is significant, their outcomes are not determinable. The Department has recorded an allowance for claims and litigations where it is likely that there will be a future payment and a reasonable estimate of the loss can be made. Claims and litigations for which the outcome is not determinable and a reasonable estimate can be made by management amount to approximately $250,000 ($270,000 2011-12) at March 31, 2013.

In this regard, it should be noted that due to a specific file, the allowance has been reduced by $60,000 in 2012-13 ($8,660,000 in 2011-12).

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 in order to carry out its transfer payment programs or when the services and/or goods are received.

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

Contractual obligations
(In thousands of dollars)
  2013-14 2014-15 2015-16 2016-17 2017-18
and thereafter
Transfer payments 133,477 119,578 119,037 115,984 -

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 and Departmental Net Financial Position as follows:

Related party transactions
(In thousands of dollars)
  2013 2014
Accommodation provided by Public Works and Government Services Canada 48,745 47,005
Employer's contributions to the health and dental insurance plans paid by Treasury Board Secretariat 43,728 39,336
Workers’ compensation coverage provided by Human Resources and Skills Development Canada 78 78
Total 92,551 86,419

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 $143,392,000 ($172,244,000 in 2011-12). The amount is determined based on actual salary and operating expenses attributed to non-recoverable services provided to other government departments.

12. Transfers to other government departments

Effective November 15, 2011, the Department transferred responsibility for the control and supervision over the Email, Data Centre and Network Services Unit to the Shared Services Canada in accordance with Order-in-Council 2011-1297, including the stewardship responsibility for the assets and liabilities related to the program. Accordingly, the Department transferred the following assets on November 15, 2011:

Assets
(In thousands of dollars)
Tangible capital assets (net book value) 799
Adjustment to the departmental net financial position 799

Prior to November 15, 2011, the Department incurred $7,447,000 of expenses which is reported separately in the Statement of operations and Departmental Net Financial Position.

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:

Segmented information
(In thousands of dollars)
  Office of the Federal Ombudsman for Victims of Crime Stewardship of the Canadian Legal Framework Legal Services to Government Program Internal Services 2013 2012
Operating expenses
Salaries and employee benefits 999 51,452 426,613 123,702 602,766 616,620
Accommodation 57 20,124 21,244 12,730 54,155 50,820
Professional and special services 92 4,514 17,114 11,940 33,660 37,752
Amortization of tangible capital assets 9 180 807 13,190 14,186 12,386
Travel and relocation 43 885 5,805 1,366 8,099 9,211
Utilities, materials and supplies 15 302 3,376 1,976 5,660 7,446
Bad debts - 3,664 - 26 3,690 4,640
Repairs and maintenance 1 12 328 2,804 3,145 4,422
Information 68 341 2,349 342 3,100 3,088
Communications 3 118 738 1,064 1,923 1,713
Rentals 7 166 476 252 901 783
Other - 542 44 134 720 1,123
Claims and ex-gratia payments - - 252 9 261 470
Total operating expenses 1,294 82,300 479,146 169,526 732,266 750,474
Transfer payments
Provinces and territories - 339,705 - - 339,705 335,084
Non-profit institutions and organizations - 33,361 - - 35,361 28,684
Individuals - 1,449 - - 1,449 6,249
International organizations - 618 - - 618 710
Total transfer payments - 377,133 - - 377,133 370,727
Total expenses 1,294 459,433 479,146 169,526 1,109,399 1,121,201
Revenues
Legal services - - 289,615 43,657 332,753 349,752
Common Services - - - 8,062 8,062 6,145
Family Law fees - 6,764 - - 6,764 7,653
Other revenues - 529 94 11 634 620
Revenues earned on behalf of Government - (7,293) (94) (7,398) (7,398) (8,273)
Total revenues - - 289,096 340,815 340,815 355,897
Net cost from continuing operations 1,294 459,433 190,050 117,807 768,584 765,304

14. Comparative information

Certain 2012 comparative figures are reclassified to conform to the current year's presentation.

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