Future-oriented Statement of Operations

Future-oriented Statement of Operations
For the year ending March 31
(in thousands of dollars)

	Forecast Results 2015-16	Planned Results 2016-17
Expenses
Legal Services to Government Program	495,715	511,584
Stewardship of the Canadian Legal Framework	421,045	434,292
Office of the Federal Ombudsman for Victims of Crime	1,464	1,441
Internal Services	155,494	119,792
Total expenses	1,073,718	1,067,109
Revenues
Legal services	332,541	335,446
Family Law fees	7,721	7,721
Common Services	2,893	2,893
Other revenues	936	936
Revenues earned on behalf of Government	(52,116)	(50,796)
Total revenues	291,975	296,200
Net cost of operations before government funding and tranfers	781,743	770,909

The accompanying notes form an integral part of this future-oriented statement of operations.

Notes to the Future-oriented Statement of Operations

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 forecast results for fiscal year 2015-16 is based on actual results as at the 30th of November, 2015 and on forecasts for the remainder of the fiscal year. Forecasts have been made for the planned results for the 2016-17 fiscal year.

The main assumptions underlying the forecasts are as follows:

1. The Department's activities will remain substantially the same as in the previous year with the exception of the sunsetting Grants and Contributions Programs.
2. Expenses and revenues, including the determination of amounts internal and external to the government, are based on experience. The general historical pattern is expected to continue.
3. Allowances for uncollectibility are based on experience. The general historical pattern is expected to continue.

These assumptions are adopted as at February 19, 2016.

2. Variations and changes to the forecast financial information

While every attempt has been made to forecast final results for the remainder of 2015-16 and for 2016-17, 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, the Department of Justice 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 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 following:

1. The timing and amount of acquisitions and disposals of tangible capital assets may affect gains/losses and amortization expense.
2. Implementation of new collective agreements and severance payments.
3. Economic conditions may affect both the amount of revenue earned and the collectability of receivables.
4. 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, the Department of Justice 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 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) Expenses

Expenses are recorded on an accrual basis. Expenses for the Department’s operations are recorded when goods are received or services are rendered, including services provided without charge for accommodation, employer contributions to health and dental insurance plans 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 terms of employment.

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.

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.

Expenses also include provisions to reflect changes in the value of assets, including provisions for bad debt on accounts receivable. Under the Family Orders and Agreements Enforcement Assistance Act , the allowance for doubtful accounts represents management's best estimate of probable losses on receivables. The allowance is determined based on an analysis of historic loss experience and an assessment of current conditions.

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.

(b) Revenues

Revenues are derived from the provision of advisory, litigation and legislative services provided by the Department of Justice's law practitioners and are recognized in the year the services are rendered. These revenues are based on legal service rates approved annually by the 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 fee revenues under the Family Law programs are recognized based on services provided in the year, such as upon validation of the garnishment application or upon issuance of the divorce clearance certificate. Fees prescribed by the Family Orders and Agreements Enforcement Assistance Act are to cover the administrative costs of processing each garnishee summons served on the Minister.

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

Fines, forfeitures and awarded court costs provided for under the Contraventions Act are recognized upon receipt of payment by the Department. 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 expected to maintain accounting control, the Deputy Minister 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. Consequently, items recognized in the future- oriented statement of operations are not necessarily the same as those provided through authorities from parliament. Items recognized in the future-oriented statement of operations in one year may be funded through parliamentary authorities in prior, current, or future years. The differences are reconciled in the following tables:

(a) Reconciliation of net cost of operations to requested authorities
(in thousands of dollars)

	Forecast 2015-16	Planned 2016-17
Net cost of operations before government funding and transfers	781,743	770,909
Adjustment for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets	(12,770)	(13,090)
Employee future benefits	308	(43)
Bad debt expense	(4,651)	(4,651)
Refunds of previous years' expenditures	676	707
Adjustments to previous years' accounts payable	7,008	7,068
Services provided without charge by other government departments	(87,795)	(86,239)
Total items affecting net cost of operations but not affecting authorities	(97,224)	(96,248)
Adjustment for items not affecting net cost of operations but affecting authorities:
Acquisitions of tangible capital assets	4,200	4,200
Total items not affecting net cost of operations but affecting authorities	4,200	4,200
Requested authorities	688,719	678,861

(b) Authorities requested
(in thousands of dollars)

Authorities requested:	Forecast 2015-16	Planned 2016-17
Vote 1 – Operating expenditures	257,057	235,000
Vote 5 – Grants and contributions	350,835	365,234
Statutory amounts	80,827	78,627
Requested authorities	688,719	678,861