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Statement of Management Responsibility

Responsibility for the compilation, content, and presentation of the accompanying future-oriented statement of operations for the year ending March 31, 2012 and the accompanying notes rests with the management of Indian and Northern Affairs Canada (INAC). The future-oriented statement of operations has been prepared by management in accordance with Treasury Board accounting policies, which are based on Canadian generally accepted accounting principles for the public sector. The future-oriented financial information is submitted in Part III of the Estimates (Report on Plans and Priorities) and will be used in the Departmental Performance Report to compare with actual results.

Management is responsible for the integrity and objectivity of the future-oriented financial information and for the underlying assumptions and estimates which are based on information available and known to management as at January 14, 2011, and assumes a continuation of current governmental priorities and consistency in INAC's mandate and strategic objectives. This future-oriented financial information is based on these assumptions, best estimates, and judgment and gives due consideration to materiality. At the time of preparation of this statement, management believes the estimates and assumptions to be fair and reasonable. However, as with all such estimates and assumptions, there is a measure of uncertainty.

Actual results for the fiscal years covered in the accompanying future-oriented financial information will vary from the information presented and these variations may be material.

Original signed by Michael Wernick

___________________________
Michael Wernick
Deputy Minister
Original signed by Susan MacGowan

___________________________
Susan MacGowan, CMA
Chief Financial Officer

Gatineau, Canada
January 14, 2011

Future-Oriented Statement of Operations

For the year ending March 31, 2012

(in thousands of dollars)

  Estimated 2011 Forecast 2012
Expenses    
The People 3,721,956 3,696,684
The Government 1,747,093 1,627,693
The Land and Economy 1,646,301 1,511,835
The North 757,692 106,312
Internal Services 414,113 370,740
Office of the Federal Interlocutor 40,969 42,232
Total Expenses 8,328,124 7,355,496

Revenues    
The Government 7,320 7,320
The Land and Economy 2,009 2,009
Tha North 211,085 210,219
Internal Services 309 309
Total Revenues 220,723 219,857
     
Net Cost of Operations 8,107,401 7,135,639

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

Notes to the Future-Oriented Statement of Operations

1. Authority and objectives

Indian and Northern Affairs Canada (INAC) was established by the Government Organization Act, 1966 and has been continued in its current form by the Department of Indian Affairs and Northern Development Act (R.S., 1985, c. I-6). Effective June 1, 2008, pursuant to Order-in-Council P.C. 2008-805, Indian Residential Schools Resolution Canada was amalgamated and combined with INAC under the Minister of INAC. INAC is named as a department in Schedule I of the Financial Administration Act.

Additional information is provided in Section I of INAC's 2011-2012 Report on Plans and Priorities (RPP).

2 . Significant assumptions

The future-oriented statement of operations has been prepared on the basis of the government priorities and the plans of the department as described in the RPP.

The main assumptions are as follows:

  1. The department's activities will remain substantially the same as the previous year.
  2. 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.
  3. INAC's new directive on funding approaches comes into force on April 1, 2011, the effects of which cannot be reasonably estimated and have therefore been excluded from the forecast.
  4. Accruals for new contingent liabilities and new environmental liabilities cannot be reasonably foreseen or quantified and have therefore been excluded from the forecast.
  5. Allowances for uncollectibility are based on historical experience. The general historical pattern is expected to continue.
  6. Estimated year end information for 2010–11 is used as the opening position for the 2011–12 forecast.

These assumptions are adopted as of January 14, 2011.

3. Variations and changes to the forecast financial information

While every attempt has been made to accurately forecast final results for the remainder of 2010–11 and for 2011–12, actual results achieved for both years will vary from the forecast information presented, and this variation may be material.

In preparing the statement of operations INAC has made estimates and assumptions concerning the future. These estimates and judgements may differ from the subsequent actual results. Estimates and judgements 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:

  1. Further changes to the operating budget through additional new initiatives or technical adjustments later in the year.
  2. Economic conditions may affect the amount of revenue earned and the collectibility of loans receivable.
  3. Interest rates in effect at the time of issue will affect the net present value of settled claims.
  4. The timing and amounts of acquisitions and disposals of tangible capital assets may affect gains/losses and amortization expense.

Once the RPP is presented, INAC will not be updating its forecast for any changes to appropriations or forecast financial information made in ensuing supplementary estimates. Variances will be explained in the Departmental Performance Report.

4. Summary of significant accounting policies

The future-oriented statement of operations has been prepared in accordance with the 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.

Significant accounting policies are as follows:

(a) Parliamentary appropriationsINAC is financed by the Government of Canada through Parliamentary appropriations. The cash accounting basis is used to recognize transactions affecting parliamentary appropriations. The future-oriented statement of operations is based on accrual accounting. Consequently, items presented in the future-oriented statement of operations are not necessarily the same as those provided through appropriations from Parliament. Note 5 provides a reconciliation between the bases of reporting.

(b) Revenues – Revenues from regulatory fees are recognized in the accounts based on the services provided in the year. Other revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues.

(c) Expenses – Expenses are presented on an accrual basis:

(d) Employee future benefits

(e) Tangible capital assets – All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. The department does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, or assets located on Indian Reserves.

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

Amortization of tangible capital assets
Asset Class Amortization period
Buildings  
Residential mobile 10 years
Administrative, institutional, recreational and residential 40 years
Works and Infrastructure 30 years
Machinery and equipment  
Communication equipment 5 years
Lab, scientific and testing equipment 10 years
Construction, excavating and clearing equipment 15 years
Generating equipment 20 years
Informatics hardware and software 3 years
Ships and boats 10 years
Motor vehicles  
Passenger vehicles and light trucks
less than 1 ton
5 years
Heavy trucks greater than 1 ton 10 years
Other vehicles 5 years
Leasehold improvements Lesser of useful life or term of lease
Assets under construction Once in service, in accordance with asset type

5. Parliamentary appropriations

INAC receives most of its funding through expenditure authorities provided by Parliament. Items recognized in the statement of operations in one year may be funded through Parliamentary authorities in prior, current or future years.

Accordingly, INAC 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) Authorities requested:

(in thousands of dollars)
  Estimated 2011 Forecast 2012
Authorities requested    
Vote 1 – Operating expenditures 1,394,798 1,065,718
Vote 5 – Capital expenditures 1,840 12,194
Vote 10 – Grants and Contributions 6,592,438 6,075,334
Vote 15 – Payments to Canada Post Corporation 60,820
Vote 20 – Office of the Federal Interlocutor - Operating 9,700
Vote 25 – Office of the Federal Interlocutor - Contributions 29,939
Statutory Amounts 165,393 187,304
Forecast authorities available 8,254,928 7,340,550

Forecast authorities requested for the year ending March 31, 2012 are the planned spending amounts presented in the 2011–12 RPP. Estimated authorities requested for the year ending March 31, 2011 include amounts presented in the 2010–11 Main Estimates and Supplementary Estimates (A) and (B), planned for presentation in Supplementary Estimates (C) and estimates of amounts to be allocated at year-end from Treasury Board central votes.

(b) Reconciliation of net cost of operations to requested authorities:

(in thousands of dollars)
  Estimated 2011 Forecast 2012
Net cost of operations 8,107,401 7,135,639
Adjustments for items affecting net cost of operations but not affecting appropriations:    
Revenue not available for spending 220,723 219,857
Services provided without charge by OGD (118,812) (144,427)
Decrease (increase) in environmental liabilities (342,550) 118,254
Refunds of previous years' expenditures 56,139 56,139
Decrease (increase) in liability for settled claims 79,751 (49,648)
Amortization of tangible capital assets (8,509) (7,420)
Decrease (increase) in liability for vacation pay and compensatory leave (1,535) (2,652)
Decrease (increase) in employee future benefits (2,325) (4,922)
Decrease (increase) in liability for claims and litigations 235,858
Other (17,242)
  8,208,899 7,320,820
Adjustments for items not affecting net cost of operations but affecting authorities:    
Acquisitions of tangible capital assets 42,189 17,730
Loan guarantee defaults 2,000 2,000
Land held for future claim settlements 1,840  
  46,029 19,730
Forecast authorities available 8,254,928 7,340,550

6. Employee benefits

Pension benefits

INAC'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 Plan benefits and are indexed to inflation.

Both the employees and the department contribute to the cost of the Plan. The forecast expenses are $51,818,000 in 2010–11 and $55,146,000 in 2011–12, representing approximately 1.9 times the contributions of employees.

INAC'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.

Severance benefits

INAC 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:

(in thousands of dollars)
  Estimated 2011 Forecast 2012
Accrued benefit obligation, beginning of year 74,320 76,645
Expense for the year 9,112 12,145
Benefits paid during the year (6,787) (7,223)
Accrued benefit obligation, end of year 76,645 81,567

7. Related party transactions

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

Services provided without charge

INAC receives without charge from other departments, accommodation, the employer's contribution to the health and dental insurance plans, workman's compensation coverage, and legal services. These services without charge are recognized in INAC's statement of operations as follows:

(in thousands of dollars)
  Estimated 2011 Forecast 2012
Salary and associated expenditures for legal services provided by Justice Canada 41,895 60,409
Contributions covering employer's share of employees' insurance premiums and expenditures paid by TBS (excluding revolving funds) 39,730 45,012
Accommodation provided by Public Works and Government Services Canada (PWGSC) 36,721 38,566
Workers' compensation coverage provided by Human Resources Canada 466 440
Total 118,812 144,427

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 and audit services provided by the Office of the Auditor General, are not included as an expense in INAC's Statement of Operations.

8. Segmented Information

Presentation by segment is based on INAC'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 4. The following table presents the expenses incurred and revenues generated for each of INAC's strategic outcomes, by major object of expenses and by major type of revenues. The segment results for the period are as follows:

(in thousands of dollars)

  Estimated 2011 Total The Government The People The Land and Economy The North The Office of the Federal Interlocutor Internal Services Forecast 2012 Total
Transfer Payments                
First Nations 5,681,934 1,383,437 2,621,607 1,280,319 18,148 25,227 5,328,738
Provincial/Territorial governments and institutions 830,339 107,021 508,912 52,049 65,211 1,243 734,436
Industry 89,957 102 36,770 30,331 44,625 210 112,038
Non-Profit organizations 50,364 430 21,686 7,409 8,652 3,058 41,235
Other   2,552 2,552
Total Transfer Payments 6,652,594 1,490,990 3,188,975 1,370,108 139,188 29,738 6,218,999
                 
Operating Expenses                
Salaries and Employee Benefits 506,924 63,542 101,507 79,361 33,674 7,711 243,842 529,637
Professional and Special Services 408,497 42,838 131,181 36,250 41,866 3,129 56,642 311,906
Court Awards and other Settlements 452,013 21 198,119 1 38,209 236,350
Travel and Relocation 42,304 8,616 18,820 5,604 2,000 946 6,318 42,304
Accommodations 36,721 8,837 19,169 7,869 551 219 1,921 38,566
Information Services 28,803 592 16,434 411 253 83 1,031 18,804
Bad Debt Expense 17,242 10,038 7,742 217 17,997
Utilities, materials and supplies 17,238 273 6,894 1,355 657 81 1,975 11,235
Machinery & Equipment 16,401 434 3,601 956 438 123 5,446 10,998
Rentals of Buildings and Machinery 11,462 268 2,465 518 1,981 28 2,311 7,571
Amortization Expense 8,509 154 189 305 328 6,444 7,420
Transportation and Telecommunications 10,703 208 2,041 503 268 147 4,064 7,231
Other 6,874 672 285 348 3,213 8 147 4,673
Repair & Maintenance 5,147 210 7,004 504 149 19 2,173 10,059
Claims and Litigation (235,858)
Environmental Liabilities 342,550 (118,254) (118,254)
Total Operating Expenses 1,675,530 136,703 507,709 141,727 (32,876) 12,494 370,740 1,136,497
                 
Total Expenses 8,328,124 1,627,693 3,696,684 1,511,835 106,312 42,232 370,740 7,355,496
                 
Revenues                
Resource royalties 121,515 116,354 116,354
Norman Wells project profits 83,487 87,782 87,782
Interest on loans 9,229 7,274 1,955 9,229
Leases and rentals 5,279 24 5,255 5,279
Miscellaneous 1,213 22 54 828 309 1,213
Total Revenues 220,723 7,320 2,009 210,219   309 219,857
                 
Net Cost of Operations 8,107,401 1,620,373 3,696,684 1,509,826 (103,907) 42,232 370,431 7,135,639
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