National Defence Consolidated Future-oriented Statement of Operations 2018–19 Departmental Plan (unaudited)

Consolidated Future-oriented Statement of Operations (unaudited)

 

For the year ending March 31

(in thousands of dollars)

 

Forecast results 2017–18

Planned results 2018–191

Expenses    
Operations 1,084,044 790,197
Ready forces  9,155,064 9,295,211
Defence team  2,959,153 2,982,098
Future force design  768,843 827,484
Procurement of capabilities  3,238,029 3,292,022
Sustainable bases and information technology systems and platforms  3,636,909 3,541,281
Internal services  635,959 663,770
Total expenses 21,478,001 21,392,063
   
Revenues    
Sale of goods and services   348,939 392,759
Other  36,836 41,461
Gains on disposals of assets  51,114 57,533
Interest and gains on foreign exchange  13,254 14,918
Revenues earned on behalf of government  (18,156) (20,436)
Total revenues 431,987 486,235
   
Net cost of operations 21,046,014 20,905,828

1 The overall planned results for 2018–19 were derived from the Draft Main Estimates only and do not include the additional supplementary funding where the department has the ability to access funds for military operations (up to $520 million) and Operating Budget Carry Forward (up to $392 million).

The accompanying notes form an integral part of the Future-oriented Statement of Operations.

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

1. Methodology and significant assumptions

The Consolidated 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 forecast results for fiscal year 2017–18 is based on actual results as at December 31, 2017 and on forecasts for the remainder of the fiscal year. Forecasts have been made for the planned results for fiscal year 2018–19.

The main assumptions underlying the forecasts are as follows:

  • Forecast and planned spending correspond to the department’s activities in the final 2017–18 authorities and the 2018–19 Main Estimates.
  • Expenses and revenues, including the determination of amounts internal and external to the government, are based on past experience. The general historical pattern is expected to continue.

These assumptions are made as at December 31, 2017.

2. Variations between actual and forecast financial results

Although every attempt has been made to forecast final results for the remainder of 2017–18 and for 2018–19, actual results achieved for both years are likely to differ from the forecast information presented, and this variation could be material.

In preparing this Consolidated Future-oriented Statement of Operations, the department has made estimates and assumptions about the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions are continually evaluated and are based on past 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 timing and the amount of acquisitions and disposals of property, plant and equipment, which may affect gains, losses and amortization expense
  • the implementation of new collective agreements
  • economic conditions, which may affect both the amount of revenue earned and the collectability of receivables
  • the interest rates in effect at the time of issue, which will affect the net present value of non-interest-bearing loans
  • other changes to the operating budget, such as new initiatives or technical adjustments later in the fiscal year

After the Departmental Plan is tabled in Parliament, 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 Results Report.

3. Summary of significant accounting policies

The Consolidated Future-oriented Statement of Operations has been prepared using the Government of Canada's accounting policies in effect for fiscal year 2017–18 and is 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:

a) Consolidation

This Consolidated Future-oriented Statement of Operations includes the accounts of the sub-entities that the deputy head 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 Consolidated Future-oriented Statement of Operations therefore includes the accounts 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 Programme.

Organizations and agencies that are part of the Consolidated Future-oriented Statement of Operations include the following:

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

The organizations below are excluded from the consolidation because these organizations are not part of the Defence Services Programme, although they fall under the responsibility of the Minister of National Defence.

  • Military Grievance External Review Committee
  • Military Police Complaints Commission
  • Communications Security Establishment
  • Office of the Communications Security Establishment Commissioner

b) Expenses

The department records expenses 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 that 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 fiscal 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 revenues are recognized 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 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 as a reduction of the department'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 differs from financial reporting according to generally accepted accounting principles since authorities are based mainly on cash flow requirements. Items recognized in the Consolidated 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

 (in thousands of dollars)

 

 

Forecast results

2017–18

Planned results

2018–19

Net cost of operations 21,046,014 20,905,828
   
Adjustments for items affecting net cost of operations but not affecting authorities

 

 
Amortization of tangible capital assets  (2,658,820)  (2,742,426)
Services provided without charge by other government departments  (820,593)  (815,127)
Decrease (increase) in employee future benefits 86,911   86,332
Refund of previous years' expenses 87,837   87,252
Loss on disposals of capital assets  (257,020)  (255,308)
Adjustments of tangible capital assets  238,110  236,524
Refund of program expenses 30,636  3,295 
Decrease (increase) in accrued liabilities not charged to authorities  (82,914)  (3,331)
Bad debt expense  (34,858)  (3,361)
Decrease (increase) in remediation and future asset restoration liabilities  (86,448)  (85,872)
Miscellaneous  (71,858)  (57,615)
Total items affecting net cost of operations but not affecting authorities (3,569,017) (3,549,637)
   
Adjustments for items not affecting net cost of operations but affecting authorities    
Acquisition of tangible capital assets     3,082,906  3,062,371
Decrease (increase) in lease obligations for capital assets  69,209  73,141
Increase (decrease) in inventory purchases net of usage and adjustments  (170,929)  (169,790)
Increase (decrease) in prepaid expenses  39,051  38,790
Revenues collected from prior years' receivables  16,990  16,877
Total for items not affecting net cost of operations but affecting authorities 3,037,227 3,021,389
   
Requested authorities  20,514,224 20,377,580

 
b) Authorities requested

 (in thousands of dollars)

 

 

Forecast results

2017–18

 Planned results

2018–19

Vote 1: Operating expenditures  15,249,960  15,237,554
Vote 5: Capital expenditures  3,782,282  3,761,024
Vote 10: Grants and contributions  177,003  176,719
Statutory amounts   1,304,979  1,202,283
   
Requested authorities  20,514,224 20,377,580
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