Financial Statements

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Notes to the Financial Statements (Unaudited)

For the year ended March 31

1. Authority and objectives

Established in 1868, the Department of Justice Canada (the Department) supports the dual roles of the Minister of Justice and the Attorney General of Canada. Under the Department of Justice Act, the Minister is the legal advisor to Cabinet and ensures that the administration of public affairs is in accordance with the law. The Minister of Justice is responsible for matters connected with the administration of justice that fall within federal jurisdiction and fulfils this responsibility by developing policies, laws, and programs to strengthen the national framework.

Under the Department of Justice Act, the Attorney General of Canada is the chief law officer of the Crown. The Attorney General provides legal services to the government and its departments and agencies. These services include the provision of legal advice, the conduct of litigation and the drafting of legislation and regulations. The Attorney General represents the Crown and not individual departments or agencies. Therefore, the Attorney General seeks to protect interests for the whole of government when providing legal advice and conducting litigation.

The Department's key priorities are delivered through the following core responsibilities:

(a) Legal Services

The Minister of Justice and Attorney General of Canada provides legal services to the federal government and its departments and agencies. The Minister is responsible for seeing that the administration of public affairs is in accordance with the law. The Minister is also responsible for examining all government bills and regulations for consistency with the Canadian Charter of Rights and Freedoms. Additionally, the Attorney General is responsible for advising the heads of federal government departments on all matters of law and for conducting all litigation for federal departments or agencies on subjects within the authority or jurisdiction of Canada.

(b) Justice System Support

The Department plays an essential role in ensuring a fair, relevant and accessible justice system. This responsibility is shared among a broad range of players, including Parliament; the judiciary; federal departments and agencies; partners in provincial, territorial and municipal governments; a broad range of non-governmental organizations and stakeholders; and, ultimately, all Canadians.

(c) Internal Services

Internal Services are those groups of related activities and resources that the federal government considers to be services in support of Programs and/or required to meet corporate obligations of an organization. Internal Services refers to the activities and resources of the 10 distinct services that support program delivery in the organization, regardless of the Internal Services delivery model in a department. These services are: Management and Oversight, Communications, Legal, Human Resources Management, Financial Management, Information Management, Information Technology, Real Property, Materiel, and Acquisition.

2. Summary of significant accounting policies

These financial statements are prepared using the department'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.

Significant accounting policies are as follows:

(a) Parliamentary authorities

The Department of Justice 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 Statement of Operations and Departmental Net Financial Position and in the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the basis of reporting. The planned results amounts in the “Expenses” and “Revenues” sections of the Statement of Operations and Departmental Net Financial Position are the amounts reported in the Future-Oriented Statement of Operations included in the 2019-2020 Departmental Plan. Planned results are not presented in the “Government funding and transfers” section of the Statement of Operations and Departmental Net Financial Position and in the Statement of Change in Departmental Net Debt because these amounts were not included in the 2019-2020 Departmental Plan.

(b) Net cash provided by Government of Canada

The Department operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the Department is deposited to the CRF, and all cash disbursements made by the Department are paid from the CRF. The net cash provided by Government is the difference between all cash receipts and all cash disbursements, including transactions between departments of the Government.

(c) Amounts due from or to the CRF

Amounts due from or to the CRF are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the net amount of cash that the Department is entitled to draw from the CRF without further authorities to discharge its liabilities.

(d) Revenues

Revenues are derived from the provision of advisory, litigation and legislative services provided by the Department of Justice's law practitioners and they are recognized in the year the services are rendered. These revenues are based on legal services rates approved by 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 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. As prescribed by the Family Orders and Agreements Enforcement Assistance Act, a fee is chargeable in respect of the processing of every garnishee summons served on the Minister.

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

Fines, forfeitures and awarded court costs provided 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 the Deputy Minister is expected to maintain accounting control, 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.

(e) Expenses

Expenses are recorded on the accrual basis.

Transfer payments are recorded as an expense in the year the transfer is authorized and all eligibility criteria have been met by the recipient.

Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.

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.

Services provided without charge by other government departments for accommodation, employer contributions to the health and dental insurance plans, and workers' compensation are recorded as operating expenses at their carrying value.

(f) Employee future benefits

1. Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. The Department’s contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. The Department’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 accumulation of severance benefits for voluntary departures ceased for applicable employee groups. The remaining obligation for employees who did not withdraw benefits is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

(g) Accounts receivable

Receivables are recorded at cost and an allowance for doubtful accounts is made for receivables where recovery is considered uncertain. The allowance for doubtful accounts represents management's best estimate of probable losses in receivables. The allowance is determined based on an analysis of historical loss experience and an assessment of current conditions. The allowance is increased for losses and reduced by amounts written-off.

Under the Family Orders and Agreements Enforcement Assistance Act and pursuant to Order in Council P.C. 2019-0136, outstanding receivables are written off once the garnishee application has terminated or when any amount remains unpaid at the end of a year during the five-year garnishee summons. The application terminates when the five-year life of the garnishee summons expires or when the province or territory requests that the application be cancelled.

Receivables that are not available to discharge the Department's liabilities are considered to be held on behalf of the Government of Canada.

(h) Non-financial assets

The costs of acquiring equipment and other capital property are capitalized as tangible capital assets and are amortized to expense over the estimated useful lives of the assets. All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost.

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

Assets under construction are recorded in the applicable asset class and amortized when they become available for use.

(i) Contingent liabilities

Contingent liabilities are potential liabilities which may become actual liabilities when one or more future events occur or fail to occur. If the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, a provision is accrued and an expense recorded to other expenses. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

(j) Measurement uncertainty

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported and disclosed amounts of assets, liabilities, revenues and expenses reported in the financial statements and accompanying notes at March 31. The estimates are based on facts and circumstances, historical experience, general economic conditions and reflect the Government's best estimate of the related amount at the end of the reporting period. The most significant items where estimates are used are contingent liabilities, the liability for employee future benefits, allowance for doubtful accounts, and the useful life of tangible capital assets. Actual results could significantly differ from those estimated. Management’s estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.

(k) Related party transactions

Related party transactions, other than inter-entity transactions, are recorded at the exchange amount.

Inter-entity transactions are transactions between commonly controlled entities. Inter-entity transactions, other than restructuring transactions, are recorded on a gross basis and are measured at the carrying amount, except for the following:

1. Services provided on a recovery basis are recognized as revenues and expenses on a gross basis and measured at the exchange amount.
2. Certain services received on a without charge basis are recorded for departmental financial statements purposes at the carrying amount.

3. Parliamentary authorities

The Department receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Departmental Net Financial Position and the Statement of Financial Position in one year may be funded through parliamentary authorities in prior, current or future years. Accordingly, the Department 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) Reconciliation of net cost of operations to current year authorities used

(b) Authorities provided and used

4. Accounts payable and accrued liabilities

The following table presents details of the Department's accounts payable and accrued liabilities:

5. Family Law account

Under the Family Orders and Agreements Enforcement Assistance Act, the Department assists provinces and territories in the enforcement of family support orders and agreements by providing garnishment assistance through the interception of designated federal moneys payable to individuals in order to satisfy family support debts. These intercepted moneys (consisting of garnisheed moneys such as income tax refunds, employment insurance benefits, etc.) are deposited into the Family Law account from which payments to the provinces and territories are then made. The provinces and territories distribute these payments to the beneficiaries:

6. Employee future benefits

(a) Pension benefits

The Department's employees participate in the public service pension plan (the "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 they are indexed to inflation.

Both the employees and the Department contribute to the cost of the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to Canada's Economic Action Plan 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 2019-2020 expenses amount to $53,457,218 ($54,051,594 in 2018-2019). For Group 1 members, the expense represents approximately 1.01 times, same as in 2018-2019, the employee contributions and, for Group 2 members, approximately 1.00 times, same as in 2018-2019, the employee contributions.

The Department'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.

(b) Severance benefits

Severance benefits provided to the Department’s employees were previously based on an employee’s eligibility, years of service and salary at termination of employment. However, since 2011 the accumulation of severance benefits for voluntary departures progressively ceased for substantially all employees. Employees subject to these changes were given the option to be paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits upon departure from the public service. By March 31, 2020, substantially all settlements for immediate cash out were completed. Severance benefits are unfunded and, consequently, the outstanding obligation will be paid from future authorities.

The changes in the obligations during the year were as follows:

7. Accounts receivable and advances

The following table presents details of the Department's accounts receivable and advances balances:

8. Tangible capital assets

The following table presents details of the tangible capital assets:

Disposals, Write-Offs and Adjustments include assets under construction of $3,073,676 that were transferred to the leasehold improvements category upon completion of the assets.

9. Contractual obligations

The nature of the Department's activities results in some large multi-year contracts and obligations whereby the Department will be obligated to make future payments in order to carry out its transfer payment programs or when the services and/or goods are received.

Significant contractual obligations that can be reasonably estimated are summarized as follows:

10. Contingent liabilities

Claims and litigation

Claims have been made against the Department in the normal course of operations. These claims include items with pleading amounts and others for which no amount is specified. While the total amount claimed in these actions is significant, their outcomes are not determinable. Claims and litigations for which the outcome is not determinable and a reasonable estimate can be made by management amount to approximately $3,050,000 at March 31, 2020, same as in 2018-2019.

11. Related party transactions

The Department is related as a result of common ownership to all government departments, agencies, and Crown corporations. Related parties also include individuals who are members of key management personnel or close family members of those individuals, and entities controlled by, or under shared control of, a member of key management personnel or a close family members of that individual.

The Department enters into transactions with these entities in the normal course of business and on normal trade terms.

(a) Common services provided without charge by other government departments

During the year, the Department received services without charge from certain common service organizations, related to accommodation, the employer's contribution to the health and dental insurance plans, and workers' compensation coverage. These services provided without charge have been recorded at the carrying value in the Department's Statement of Operations and Departmental Net Financial Position as follows:

The Government has centralized some of its administrative activities for efficiency, cost-effectiveness purposes and economic delivery of programs to the public. As a result, the Government uses central agencies and common service organizations so that one department performs services for all other departments and agencies without charge. The costs of these services, such as the payroll and cheque issuance services provided by Public Services and Procurement Canada and audit services provided by the Office of the Auditor General are not included in the Department’s Statement of Operations and Departmental Net Financial Position. The costs of information technology infrastructure services provided by Shared Services Canada, following the transfer of responsibilities in November 2011 and April 2013, are also not included in the Department’s Statement of Operations and Departmental Net Financial Position.

(b) Common services provided without charge to other government departments

In addition, the Department has provided legal services, such as advisory, litigation and legislative services, without charge to other government departments for a total amount of $109,738,930 ($102,852,647 in 2018-2019). The amount is determined based on actual salary and operating expenses attributed to non-recoverable services provided to other government departments.

(c) Other transactions with other government departments and agencies

Expenses and revenues disclosed in (c) exclude common services provided without charge, which are already disclosed in (a) and (b).

12. Segmented Information

Presentation by segment is based on the Department's core responsibility. The presentation by segment is based on the same accounting policies as described in the summary of significant accounting policies in note 2. The following table presents the expenses incurred and revenues generated for the main core responsibilities, by major object of expenses and by major type of revenues. The segment results for the period are as follows:

13. Comparative information

Comparative figures have been reclassified to conform to the current year’s presentation.

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