National Defence Consolidated Future-oriented Statement of Operations 2017-18 Departmental Plan (unaudited)

Consolidated Future-oriented Statement of Operations (Unaudited)

For the year ending March 31

(in thousands of dollars)

 Estimated Results 2016-17Planned Results
2017-18
Expenses    
Defence Combat & Support Operations 1,531,538 1,295,658
Defence Services & Contributions to Government 346,453 464,429
Defence Ready Force Element Production 3,791,643 3,621,102
Defence Capability Element Production 13,769,961 13,773,701
Defence Capability Development & Research 423,460 425,026
Internal Services 472,619 492,719
Total expenses 20,335,674 20,072,635
   
Revenues    
Sale of goods and services 451,125 397,774
Other 90,756 80,023
Gains on disposals of assets 23,889 21,064
Interest and gains on foreign exchange 11,242 9,913
Revenues earned on behalf of Government (29,318) (25,851)
Total revenues 547,694 482,923
   
Net cost of operations 19,787,980 19,589,712

The accompanying notes form an integral part of these financial statements.

 

Notes to the Consolidated Future-oriented Statement of Operations (unaudited)

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 Departmental Plan.

The information in the estimated results for the 2016-17 fiscal year is based on actual results as at 31 December 2016 and on forecasts for the remainder of the fiscal year. Forecasts have been made for the planned results of the 2017-18 fiscal year.

The main assumptions underlying the forecasts are as follows:

  • The Department’s activities will remain substantially the same as for the previous year.
  • 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.

These assumptions are adopted as at 31 December 2016.

2. Variations and changes to the forecasted financial information

While forecasted results for the remainder of 2016-17 and 2017-18 are based on the best and latest information available, actual results achieved for both years are likely to vary from the forecasted information presented, and this variation could be material.

In preparing this Future-oriented Statement of Operations, the Department 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 Statement of Operations include the following:

  • The timing and amount of acquisitions and disposals of property, plants, and equipment may affect gains/losses and amortization expense.
  • Implementation of new collective agreements
  • Economic conditions may affect both the amount of revenue earned and the collectability of loan receivables.
  • Changes in foreign exchange rates may affect the expenses related to major projects.
  • Interest rates in effect at the time of issue will affect the net present value of non-interest bearing loans.
  • Further changes to the operating budget through additional new initiatives or technical adjustments later in the year

Once the Departmental Plan is presented, the Department 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 that were in effect for the 2016-17 fiscal year which are based on Canadian public sector accounting standards. The presentation of results using these accounting policies does not result in any significant differences from Canadian public sector accounting standards.

Significant accounting policies are as follows:

a) Consolidation

These consolidated financial statements include the accounts of the sub-entities that the Deputy Head (DH) is accountable for. The accounts of these sub-entities have been consolidated with those of the Department and all inter-organizational balances and transactions have been eliminated. The Department is comprised of the Department of National Defence, the Canadian Armed Forces, and several related organizations and agencies in the Defence Portfolio, which carry out the Defence mission and are part of the Defence Services Program.

Organizations and agencies that are part of these consolidated financial statements include the following:

  • Canadian Cadet Program and the Junior Canadian Rangers
  • Canadian Forces Housing Agency
  • Defence Research and Development Canada
  • Office of the Ombudsman for the Department of National Defence and Canadian Forces
  • Office of the Judge Advocate General

The Military Grievance External Review Committee, the Military Police Complaints Commission, Communications Security Establishment Canada, and the Office of the Communications Security Establishment Commissioner are excluded from the consolidation because these organizations are not part of the Defence Services Program, although they fall under the responsibility of the Minister of National Defence.

b) Expenses

Expenses are recorded on an accrual basis:

  • Transfer payments are recorded as expenses when authorization for the payment exists and the recipient has met the eligibility (or the entitlements) criteria (for grants) or the performance conditions (for contributions) established for the transfer payment program. In situations where grant payments do not form part of an existing program, 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.
  • Services provided without charge by other government departments for accommodation, employee contributions to health and dental insurance plans, worker's compensation coverage, and legal services are recorded as operating expenses at their estimated cost.
  • Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.

c) Revenues

  • Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.
  • Funds received in advance from external parties for the provision of goods, services or the use of assets are recorded upon receipt as deferred revenue. These funds are recognized as revenues in the period in which the related expenses are incurred.
  • 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's liabilities. While the DH 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 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 does not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash-flow requirements. 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 a 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

 (in thousands of dollars)

 

Estimated

2016-17

Planned

2017-18

Net cost of operations 19,787,980 19,589,712
   
Adjustments for items affecting net cost of operations but not affecting authorities:

 

 
Amortization of tangible capital assets (2,630,325) (2,531,270)
Services provided without charge by other government departments (755,879) (761,180)
Decrease  in employee future benefits 53,966 64,336
Refund of previous year's expenses 97,405 84,222
Loss on disposals of capital assets (440,576) (426,179)
Adjustments of tangible capital assets 295,705 286,043
Refund of program expenses 53,217 51,478
Increase in remediation and future asset restoration liabilities (124,406) (234,858)
Increase in accrued liabilities not charged to authorities (35,388) (74,231)
Miscellaneous 61,125 107,043
Total items affecting net cost of operations but not affecting authorities: (3,425,156) (3,434,596)
   
Adjustments for items not affecting net cost of operations but affecting authorities:    
Acquisition of tangible capital assets    2,953,295 2,529,828
Decrease in lease obligations for capital assets 59,505 57,561
Increase in inventory purchases net of usage and adjustments (43,459) (42,039)
Decrease in prepaid expenses 12,345 11,942
Revenues collected from prior year's receivables (52,042) (50,341)
Total for items not affecting net cost of operations but affecting authorities: 2,929,644 2,506,951
   
Requested authorities  19,292,468 18,662,067


b) Authorities requested

 (in thousands of dollars)

 

 

Estimated

2016-17

 Planned

2017-18

Vote 1 – Operating expenditures    14,255,976 14,201,615
Vote 5 – Capital expenditures  3,543,238 3,102,711
Vote 10 – Grants and contributions  172,193 164,695
Statutory amounts  1,321,061 1,193,046
   
Requested authorities  19,292,468 18,662,067

 

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