Future-oriented statement of operations for the years ending March 31, 2016 and March 31, 2017

Statement of Management Responsibility

Departmental management is responsible for this future-oriented statement of operations, including responsibility for the appropriateness of the assumptions on which this statement is prepared. This statement is based on the best information available and assumptions adopted as at January 8, 2016 and reflect the plans described in the Report on Plans and Priorities.

Original Signed by,

Graham Flack
Deputy Minister

Andrew Francis
Chief Financial Officer

February 5, 2016
Gatineau, Canada

Canadian Heritage Future-oriented Statement of Operations (Unaudited) for the year ended March 31 (in thousands of dollars)
 

Forecast Results 2016 (in thousands of dollars)

Planned Results 2017 (in thousands of dollars)

Expenses

Official Languages

356,107

353,759

Cultural Industries

308,724

307,715

Sport

242,312

206,432

Arts

115,279

117,536

Engagement and Community Participation

47,640

69,750

Attachment to Canada

101,321

155,449

Heritage

32,534

33,165

Internal Services

87,460

81,036

Total expenses

1,291,377

1,324,842

Revenues

Revenue from the 1979 Federal-provincial Lottery-agreement

71,904

73,270

Miscellaneous revenues

4,110

6,045

Sale of goods and services

4,333

5,617

Revenues earned on behalf of Government

(71,965)

(73,332)

Total revenues

8,382

11,600

Net cost of operations before funding and transfers

1,282,995

1,313,242

Information for the year ending March 31, 2016 includes actual amounts from April 1, 2015 to November 30, 2015.

Segmented information (note 9).

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

Original Signed by,

Graham Flack
Deputy Minister

Andrew Francis
Chief Financial Officer

Gatineau, Canada
Date:  February 5, 2016

1. Authority and Objectives

The Department of Canadian Heritage was established in 1995 under the Department of Canadian Heritage Act.

The Department of Canadian Heritage is responsible for formulating policies and delivering programs that help all Canadians participate in their shared cultural and civic life.

The Department of Canadian Heritage’s work is structured around the following three strategic outcomes:

  • Canadian artistic expressions and cultural content are created and accessible at home and abroad;
  • Canadians share, express and appreciate their Canadian identity; and
  • Canadians participate and excel in sport.

The Department of Canadian Heritage is specifically responsible for formulating and implementing cultural policies related to copyright, foreign investment and broadcasting, as well as policies related to arts, heritage, official languages, sports, state ceremonial and protocol, and Canadian symbols.

The programs include:

  • Arts: This program improves Canadians’ opportunities to engage with the arts, contributes to the resilience of the arts sector and deepens the connections between cultural organizations and their communities. This program encourages access and participation, resilience and excellence in the arts for all Canadians by supporting institutions that offer artists and performers training of the highest calibre in preparation for professional careers, the presentation of professional arts festivals or performing arts series, the improvement of arts and heritage infrastructure, the improvement of business practices of arts and heritage organizations, and the development of partnerships in the sector. Policy, legislative and regulatory measures targeting the Canadian arts sector also further this program’s objectives.
  • Cultural Industries: This Program supports Canadian cultural industries in adapting to a changing and challenging global marketplace. This is achieved through the delivery of grants, contributions and tax credits as well as policy, regulatory and legislative measures. Fostering the competitiveness and creative output of these industries ensures that Canadian and international audiences access a range of Canadian content across a variety of formats and platforms and contributes to the Canadian economy.
  • Heritage: The Heritage Program ensures that Canada's cultural heritage is preserved and accessible to Canadians today and in the future. It enables the heritage sector to improve professional knowledge, skills and practices, to preserve and present heritage collections and objects, and to create and circulate exhibitions and other forms of heritage content. This is accomplished by providing funding such as grants, contributions and tax incentives; information, expertise, training and other services; and regulatory and legislative measures. The primary goal of this Program is to promote the preservation and presentation of Canada’s cultural heritage.
  • Attachment to Canada: This Program strengthens Canadian identity by promoting pride and a sense of national purpose in Canadians. It celebrates and commemorates Canada and enhances understanding of shared values, cultural diversity and knowledge of Canada. Also, it promotes civic education and participation among Canadians, including youth, as well as provides them with the opportunity to learn about and understand Canada’s society, diversity, history and institutions. This is achieved through delivering programs and services in the form of grants and contributions. The core concept of this program is to promote knowledge and experiences of Canada among Canadians.
  • Engagement and Community Participation: This Program aims to engage Canadians and provide them with opportunities to participate in the civil, social and cultural aspects of life in Canada and in their communities. This is accomplished through funding programs and initiatives that support the efforts of communities to: build stronger citizen engagement, social inclusion and collaboration through a variety of activities marking the 150th anniversary of Confederation; or through local arts and heritage; contribute to increasing the respect for and awareness of human rights in Canada; and develop innovative and culturally appropriate initiatives to support the efforts of Aboriginal communities in the revitalization and preservation of their languages and cultures. This Program has strong social benefits, as it contributes to the preservation of the history and identity of Canada’s diverse communities, while offering a way for traditions and identities to evolve over time. The Program supports the Department’s mandate to strengthen Canadian identity and values, and build attachment to Canada.
  • Official Languages: Canadian Heritage plays an important role in the horizontal coordination of official languages within the federal government and especially with respect to coordination and support to federal institutions in the implementation of the government’s commitment towards the development of official-language minority communities and the promotion of linguistic duality, pursuant to section 42 of the Official Languages Act (OLA). Canadian Heritage is also responsible for the planning, implementation and management of the Official Languages Support Programs pertaining to the promotion of linguistic duality within Canada and the development of official-language minority communities, in accordance with section 43 of the OLA. These activities contribute to achieving the following Government Outcome: “A diverse society that promotes linguistic duality and social inclusion”.
  • Sport: This Program promotes development and excellence in sport among Canadians and Canadian communities through initiatives that provide direct support to Canadian high-performance athletes; enhance Canada’s ability to host the Canada Games and international sport events in Canada; support the development of excellence in the Canadian sport system; and contribute to increasing participation in sport by Canadians of all ages and abilities. The core concept of this Program is to enhance and promote Canadian participation and excellence in sport, by providing funding, expertise and other services to Canadian athletes, sport organizations, stakeholders and event organizers.
  • 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 Management 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. Methodology and 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 Report on Plans and Priorities.

The information in the forecast results for fiscal year 2015-2016 is based on actual results as at November 30, 2015 and on forecasts for the remainder of the fiscal year. Forecasts have been made for the planned results for the 2016-2017 fiscal year.

The main assumptions underlying the forecasts are as follows:

  1. The Department of Canadian Heritage’s activities will remain substantially the same as in the previous year.
  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 were adopted as at January 8, 2016.

3. Variations and Changes to the Forecast Financial Information

While every attempt has been made to forecast final results for the remainder of 2015-2016 and for 2016-2017, actual results achieved for both years are likely to vary from the forecast information presented, and this variation could be material.

In preparing this financial statement, the Department of Canadian Heritage 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 financial statements include:

  1. The timing and amounts of acquisitions and disposals of tangible capital assets may affect gains/losses and amortization expense.
  2. Implementation of new collective agreements.
  3. Economic conditions may affect both the amount of revenue earned and the collectability of accounts receivable.
  4. Further changes to the operating budget through additional new or modified initiatives or technical adjustments later in the year.

Once the Report on Plans and Priorities is presented, the Department of Canadian Heritage will not be updating the forecasts for any changes to appropriations of forecast financial information made in ensuing supplementary estimates.

4. Summary of Significant Accounting Policies

This future-oriented statement of operations has been prepared using the Government of Canada’s accounting policies in effect for the 2015-2016 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:

  1. Consolidation

    This consolidated future-oriented statement includes the accounts of the following sub-entities that the Deputy Minister is accountable for: Canadian Conservation Institute and Canadian Heritage Information Network. The accounts of these sub-entities have been consolidated with those of the Department of Canadian Heritage, and all inter-organizational balances and transactions have been eliminated.

  2. 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, legal services and workers’ 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.  Expenses also include a provision for bad debt on accounts receivable and amortization of tangible capital assets.

    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 future-oriented 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.

  3. Revenues

    Revenues from sale of goods and services are recognized in the accounts based on the goods and services provided in the year.

    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 of Canadian Heritage’s liabilities. While the Deputy Minister is expected to maintain accounting control, he 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 Department of Canadian Heritage’s gross revenues.

  4. Employee future benefits

    • Pension benefits:  Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. The Department of Canadian Heritage’s contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. The Department of Canadian Heritage’s responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the future-oriented financial statement of the Government of Canada, as the Plan’s sponsor.
    • Severance benefits: Employees entitled to severance benefits under labour contracts or conditions of employment earn these benefits as services necessary to earn them are rendered. 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.

5. Parliamentary authorities

The Department of Canadian Heritage is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Department of Canadian Heritage 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 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
 

Forecast Results 2016 (in thousands of dollars)

Planned Results 2017 (in thousands of dollars)

Net cost of operations before government funding and transfers

1,282,995

1,313,242

Adjustment for items affecting net cost of operations but not affecting authorities:

Amortization of tangible capital assets

(1,786)

(2,098)

Services provided without charge by other government departments

(26,329)

(25,713)

Decrease (increase) in vacation pay

75

178

Decrease (increase) in employee future benefits

204

315

Bad debt expense

(31)

(76)

Refund of prior years' expenditures

6,037

5,083

Outstanding respendable revenue

33

46

Total items affecting net cost of operations but not affecting authorities

(21,797)

(22,265)

Adjustment for items not affecting net cost of operations but affecting authorities:

Acquisitions of tangible capital assets

3,061

3,526

Total items not affecting net cost of operations but affecting authorities

3,061

3,526

Requested authorities

1,264,259

1,294,503

b. Authorities requested
 

Forecast Results 2016 (in thousands of dollars)

Planned Results 2017 (in thousands of dollars)

Authorities requested:

Vote 1 - Operating expenditures

184,198

183,944

Vote 5 - Grants and contributions

1,063,291

1,084,962

Statutory amounts

25,563

25,597

Less:

Lapsed: Operating expenditures

(296)

-

Lapsed: Grants and contributionsFootnote 1

(8,497)

-

Requested authorities

1,264,259

1,294,503

Authorities requested for the year ending March 31, 2017 are the planned spending amounts presented in the 2016-2017 Report on Plans and Priorities. Authorities requested for the year ending March 31, 2016 include amounts presented in the 2015-2016 Main Estimates and Supplementary Estimates (A) and (B), planned for presentations in Supplementary Estimates (C) and estimates of amounts to be allocated at year-end from Treasury Board central votes.

6. Employee future benefits

  1. Pension benefits

    The Department of Canadian Heritage’s employees participate in the Public Service Pension Plan, which is sponsored and administered by the Government. 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 Plans benefits and they are indexed to inflation.

    Both the employees and the Department contribute to the cost of the Public Service Pension Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to Economic Action Plan 2012 (EAP 2012), employee contributors have been divided into two groups – Group 1 relates to existing plan members as of December 31, 2012 and Group 2 relates to members joining the Plan as of January 1, 2013. Each group has a distinct contribution rate.

    The 2015-2016 forecast expense and the 2016-2017 planned expense each amount to $23.5 million. For Group 1 members, the expense represents approximately 1.41 times the employee contributions and, for Group 2 members, approximately 1.39 times the employee contributions.

    The Department of Canadian Heritage’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.

  2. Severance benefits

    The Department of Canadian Heritage 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, estimated as at the date of these statements, is as follows:
     

    Forecast Results 2016 (in thousands of dollars)

    Planned Results 2017 (in thousands of dollars)

    Accrued benefit obligation - Beginning of year

    10,292

    10,088

    Expense for the year

    689

    578

    Benefits paid during the year

    (893)

    (893)

    Accrued benefit obligation - End of year

    10,088

    9,773

7. Related Party Transactions

The Department of Canadian Heritage is related as a result of common ownership to all government departments, agencies, and Crown corporations. The Department of Canadian Heritage enters into transactions with these entities in the normal course of business and on normal trade terms.  In addition, the Department of Canadian Heritage has an agreement with Parks Canada for the provision of functional services related to the financial system.

  1. Common services provided without charge by other government departments

    Forecasted and planned common services to be provided without charge from certain common service organizations for accommodation, legal services, the employer’s contribution to the health and dental insurance plans and workers’ compensation coverage included in the Department of Canadian Heritage’s Statement of Operations are as follows:

     

    Forecast Results 2016 (in thousands of dollars)

    Planned Results 2017 (in thousands of dollars)

    Employer’s contribution to the health and dental insurance plans

    11,909

    11,340

    Accommodation

    13,442

    13,407

    Legal services

    961

    950

    Workers’ compensation

    17

    16

    Total

    26,329

    25,713

  2. Other transactions with related parties

     

    Forecast Results 2016 (in thousands of dollars)

    Planned Results 2017 (in thousands of dollars)

    Expenses – Other government departments and agencies

    31,281

    32,052

    Revenues – Other government departments and agencies

    2,335

    2,468

8. Transfer to / from other government departments and agencies

On November 4, 2015, the responsibility for the Multiculturalism program was transferred from Citizenship and Immigration to the Department of Canadian Heritage in accordance with Orders in Council (2015-1248 and 2015-1247), including stewardship responsibility for the assets and liabilities related to the program.  The Department will transfer the budgets, assets, and liabilities for the program in the fiscal year ending March 31, 2016.  This transfer is not reflected in the future-oriented financial statements since amounts were not available or estimable at the time the financial statements were produced.

9. Segmented information

Presentation by segment is based on the Department of Canadian Heritage’s program alignment 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 the main programs, by major object of expenses and by major type of revenues.  The segment results for the period are as follows:

Expenses incurred and revenues generated for main programs, major object of expenses and major type of revenues

(in thousands of dollars)

Official Languages

Cultural Industries

Sport

Arts

Engagement and Community Participation

Attachment to Canada

Heritage

Internal Services

Unallocated

Planned Results 2017

Forecast Results 2016

Transfer payments

Non-profit organizations

81,346

156,283

176,260

100,036

30,216

108,996

15,622

-

-

668,759

644,760

Other levels of government within Canada

253,372

115

-

1,573

220

8,493

46

-

-

263,819

257,795

Industry

314

113,755

-

13

-

2,965

-

-

-

117,047

115,142

Individuals

-

-

16,623

-

-

3,300

-

-

-

19,923

21,536

Other countries and international organizations

627

9,412

412

-

-

17

-

-

-

10,468

10,500

Total transfer payments

335,659

279,565

193,295

101,622

30,436

123,771

15,668

-

-

1,080,016

1,049,733

Operating expenses

Salaries and employee benefits

15,196

24,001

11,508

13,472

11,535

18,585

13,431

65,307

-

173,035

179,831

Professional services

1,069

2,032

611

973

11,534

4,665

403

6,325

-

27,612

21,660

Accommodation

554

791

310

468

5,341

2,515

491

2,937

-

13,407

13,442

Information

55

35

21

62

620

1,824

412

2,190

-

5,219

9,606

Utilities, materials and supplies

228

266

122

194

2,055

2,059

345

2,125

-

7,394

5,949

Travel and relocation

294

382

282

330

3,407

433

258

429

-

5,815

2,944

Rentals

178

145

88

102

1,488

708

319

551

-

3,579

3,505

Freight and communications

66

75

33

84

445

116

36

397

-

1,252

406

Amortization

8

8

8

3

19

43

1,540

469

-

2,098

1,786

Repairs and maintenance

63

49

27

58

375

191

261

306

-

1,330

1,112

Other operating expenses

389

366

127

168

2,495

539

1

-

-

4,085

1,403

Loss on disposal of capital assets

-

-

-

-

-

-

-

-

-

-

-

Total operating expenses

18,100

28,150

13,137

15,914

39,314

31,678

17,497

81,036

-

244,826

241,644

Total expenses

353,759

307,715

206,432

117,536

69,750

155,449

33,165

81,036

-

1,324,842

1,291,377

Revenues

Revenue from the 1979 Federal-provincial Lottery agreement

-

-

-

-

-

-

-

-

73,270

73,270

71,904

Miscellaneous revenues

-

4,140

-

-

1,843

-

-

-

62

6,045

4,110

Sale of goods and services

-

-

-

-

1,214

1,973

690

1,740

-

5,617

4,333

Revenues earned on behalf of Government

-

-

-

-

-

-

-

-

(73,332)

(73,332)

(71,965)

Total revenues

-

4,140

-

-

3,057

1,973

690

1,740

-

11,600

8,382

Net cost of operations before government funding and transfers

353,759

303,575

206,432

117,536

66,693

153,476

32,475

79,296

-

1,313,242

1,282,995

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