MODULE 8 Financial Statements Lecturer: Peter Moreira, MBA, CGA

RESPONSIBILITY FOR FINANCIAL STATEMENTS f/s include statement of responsibility agency responsible for integrity and objectivity of f/s (Canadian GAAP) agency responsible for financial management and internal control systems and maintenance of government accounts (FAA) role of Auditor General in providing opinion on f/s (Auditor’s Report refers to government responsibility for f/s)

RESPONSIBILITY FOR FINANCIAL STATEMENTS parliamentary procedure for tabling and reviewing public accounts SORP-1 “Financial statement discussion and analysis should include a statement acknowledging the government’s responsibility for its preparation.”

FINANCIAL STATEMENTS CONCEPTS AND OBJECTIVES f/s concepts and objectives form foundation of financial accounting and reporting objective of accounting and reporting standards (PSAB, CICA) many concepts and objectives described in Public Sector Accounting Handbook similar to those contained in CICA Handbook - Accounting provide principles for measurement, recognition, presentation and disclosure of financial information promote accountability and be informative to users of f/s - public, legislators, analysts

f/s evaluate financial position full accounting of resources information about current and future ability to provide services information about changes in financial position over reporting period information useful in determining quality of government stewardship function information on whether government operated within legislative mandate

SUMMARY FINANCIAL STATEMENTS summary financial statements provide most complete information including GAAP, required disclosures and consolidation of required entities that make up GRE Consolidated Fund - Operating and Special Accounts Crown and Not-for-profit Organizations GBEs individual departments, crown organizations and GBEs prepare f/s summarized in the accounts of Canada maintained by the Receiver General Public Accounts of Canada (3 volumes) Volume I - Summary Report and Financial Statements Volume II - Details of Expenses and Revenues Volume III - Additional Information and Analyses

Public Accounts of Manitoba (4 Volumes) prepared annually by statutory requirement in accordance FAA and reflect financial position of government and operating results for fiscal year Volume 1 (published as part of Government Annual Report) audited Summary Financial Statements of government focusing on entire reporting entity

Table of Contents - Summary F/S 2009/10 Statement of Responsibility Auditor's Report Consolidated Statement of Financial Position Consolidated Statement of Revenue and Expense Consolidated Statement of Accumulated Deficit Consolidated Statement of Change in Net Debt Consolidated Statement of Cash Flow **Notes to Summary Financial Statements

Schedules to Summary Financial Statements Schedule 1 - Consolidated Statement of Amounts Receivable Schedule 2 - Consolidated Statement of Loans and Advances Schedule 3 - Government Business Enterprises Schedule of Consolidated Operating Results and Financial Position Schedule 4 - Consolidated Statement of Borrowings Schedule 5 - Consolidated Statement of A/P, Accrued Charges, Provisions and Unearned Revenue Schedule 6 - Consolidated Statement of Pension Liability Schedule 7 - Consolidated Statement of Tangible Capital Assets **Schedule 8 - Funds, Organizations, Business Enterprises Comprising GRE **Schedule 9 - Consolidated Statement of Operations by Sector Schedule 10 - Consolidated Details and Reconciliation to Core Government Results

STATEMENT OF RESPONSIBILITY The summary financial statements are prepared under the direction of the Minister of Finance in accordance with the stated accounting policies of the Government reporting entity and include summary statements of financial position, revenue and expense, accumulated deficit, change in net debt, cash flow, notes and schedules integral to the statements. Together, they present fairly, in all material respects, the financial condition of the Government reporting entity at the fiscal year end and the results of its operations for the year then ended in accordance with Canadian generally accepted accounting principles, applied on a basis consistent with that of the preceding year.

The Government is responsible for the integrity and objectivity of the summary financial statements. In the preparation of these statements, estimates are sometimes necessary because a precise determination of certain assets, liabilities, revenues and expenses is dependent on future events. The Government believes such estimates have been based on careful judgements and have been properly reflected in the summary financial statements. The Government fulfills its accounting and reporting responsibilities, through the Office of the Provincial Comptroller, by maintaining systems of financial management and internal control. The systems are continually enhanced and modified to provide timely and accurate information, to safeguard and control the Government’s assets, and to ensure all transactions are in accordance with The Financial Administration Act.

The Auditor General expresses an independent opinion on these financial statements. Her report, stating the scope of her audit and opinion, appears on the following page. These financial statements are tabled in the Legislature. They are referred to the Standing Committee on Public Accounts, which reports to the Legislature on the results of its examination together with any recommendations it may have with respect to the financial statements and accompanying audit opinion. On behalf of the Government of the Province of Manitoba. xxxxxxx Provincial Comptroller August 16, 2010

DISCLOSURE NOTES TO FINANCIAL STATEMENTS PS 2100 standards for disclosure notes of significant accounting policies and various financial statement items disclosure notes included with f/s to provide additional information to users but not to compensate for improper accounting treatment disclosure requirements for public sector similar to private sector to ensure fair disclosure of information

Disclosure Notes 1-14 of Public Accounts of Canada include disclosure of 1. Significant accounting policies 2. **Spending and borrowing authorities 3. **Expenses 4. Accumulated deficit 5. Unmatured debt and other financial instruments 6. Public sector pensions and other employee and veteran future benefits 7. Due to Canada Pension Plan 8. Tax and other accounts receivable 9. Foreign exchange accounts 10. Crown corporations and other government business enterprises 11. **Other loans, investments and advances 12. **Tangible capital assets 13. **Contractual obligations 14. Contingent liabilities

SCHEDULES TO THE FINANCIAL STATEMENTS schedules to f/s used to elaborate (explanatory) on f/s items and to present information necessary for fair presentation of government operations not be used as substitute for proper accounting treatment integral part of f/s (follow disclosure notes)

schedules include Consolidated Statement of A/R Consolidated Statement of Borrowings Consolidated Statement of Tangible Capital Assets Funds, organizations and business enterprises comprising the GRE

CONDENSED FINANCIAL STATEMENTS Government of Canada issues condensed f/s in Annual Financial Report condensed f/s extracted and summarized from audited f/s contained in Volume 1 of public accounts not contain all required disclosures contained in complete f/s Annual Financial Report more analytical than public accounts and contains economic analysis (economic and fiscal update) financial highlights on revenues and expenses information on o/s debt and budget surplus

Module Summary Review the statement of responsibility that usually accompanies government financial statements, and the PSAB requirements with respect to this statement. (Level 1) Identify the objectives of financial statements and the qualitative characteristics of financial statement information. (Level 1) Identify the main components of each of the four required financial statements, and evaluate how this information contributes to assessing a government’s financial condition at the end of the accounting period and its financial performance during the accounting period. (Level 1)

Identify the relationships among the statements of financial position, operations, remeasurement gains and losses, change in net debt, and cash flow. (Level 1) Explain the PSAB disclosure requirements and provide examples of disclosures typically found in public-sector financial reporting. (Level 2) Compare and contrast summary, condensed, and detailed financial statements. (Level 2) Explain the importance and purpose of financial statement schedules. (Level 2)