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Section III: Supplementary Information

Departmental Link to Government of Canada Outcome Areas

Strategic Outcome: To advance reconciliation among former students of Indian Residential Schools and the Government of Canada
	Actual Spending 2007-08			Alignment to Government of Canada Outcome Area
	Budgetary	Non-budgetary	Total
Program Activity: Claims Resolution	$519.9	0	$519.9	Healthy Canadians

Table 1: Comparison of Planned to Actual Spending (including FTEs)

($ millions)	2005– 2006 Actual	2006– 2007 Actual	2007–2008
			Main Estimates	Planned Spending	Total Authorities	Actual
Claims Resolution	$159.2	$224.5	$596.7	$592.6	$623.1	$519.9
Total	$159.2	$224.5	$596.7	$592.6	$623.1	$519.9
Less: Non-respendable revenue	0	0	N/A	0	N/A	0
Plus: Cost of services received without charge	$5.3	$6.5	N/A	$8.8	N/A	$6.9
Total Departmental Spending	$164.5	$231.0	N/A	$601.4	N/A	$526.8
Full-time Equivalents	208	276	N/A	604	N/A	456

Table 2: Voted and Statutory Items

Vote or Statutory Item	Truncated Vote or Statutory Wording	2007–2008
		Main Estimates	Planned Spending	Total Authorities	Actual
55	Operating expenditures	$452.9	$448.8	$460.4	$385.1
60	Grants and contributions	$134.0	$134.0	$159.0	$131.1
(S)	Contributions to employee benefit plans	$9.8	$9.8	$3.7	$3.7
	Total	$596.7	$592.6	$623.1	$519.9

Explanatory Note:

The $519.9 million in actual spending includes $186.4 million of payments under the Settlement Agreement. Payments under the Common Experience Program are reported through Service Canada.

Financial Statements of Departments and Agencies (including Agents of Parliament) and Revolving Funds Financial Statements

Indian Residential Schools Resolution Canada

Statement of Management Responsibility

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2008 and all information contained in these statements rests with departmental management. These financial statements have been prepared by management in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.

Management is responsible for the integrity and objectivity of the information in these financial statements. Some of the information in the financial statements is based on management's best estimates and judgment and gives due consideration to materiality. To fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the department's financial transactions. Financial information submitted to the Public Accounts of Canada and included in the department's Departmental Performance Report is consistent with these financial statements.

Management maintains a system of financial management and internal control desired to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are in accordance with the Financial Administration Act, are executed in accordance with prescribed regulations, within Parliamentary authorities, and are properly recorded to maintain accountability of Government funds. Management also seeks to ensure the objectivity and integrity of data in its financial statements by careful selection, training and development of qualified staff, by organizational arrangements that provide appropriate divisions of responsibility, and by communication programs aimed at ensuring that regulations, policies, standards and managerial authorities are understood throughout the department.

The financial statements of the department have not been audited.

Statement of Operations (Unaudited )
For the Year Ended March 31
(in thousands of dollars )

	2008		2007
Transfer payments
Transfer payments to Aboriginal groups	317,479		160,599
Less: Change in allowance for claims and litigation (Note 6)	(1,835,088)		(148,783)
Net transfer payments	(1,517,609)		11,816
Operating expenses
Professional and special services (1)	146,770		52,120
Salaries and employee benefits	31,970		22,025
Communications professional Services	12,656		2,811
Other operating	9,898		3,908
Accommodation	4,754		3,027
Travel	4,740		3,502
Amortization of tangible capital assets	759		522
Total operating expenses	211,547		87,915
Total Expenses	(1,306,062)		99,731
Revenues
Miscellaneous revenues	6		5
Total Revenues	6		5
Net Cost of Operations	(1,306,068)		99,726

(1) Professional and special services for 2008 includes $84.6M in legal fees paid as a result of the implementation of the Settlement Agreement.

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

Statement of Financial Position (Unaudited )
At March 31
(in thousands of dollars )

	2008		2007
ASSETS
Financial assets
Cash	5,620		2,729
Accounts receivable (Note 4)	6,759		5,113
Advances	48		16
Total financial assets	12,427		7,858
Non-financial assets
Prepaid expenses	-		6
Tangible capital assets (Note 5)	1,417		1,838
Total non-financial assets	1,417		1,844
TOTAL	13,844		9,702
Liabilities
Accounts payable and accrued liabilities	110,408		25,055
Vacation pay and compensatory leave	478		478
Allowance for claims and litigation (Note 6)	967,307		2,802,395
Employee severance benefits (Note 7)	5,772		3,627
	1,083,965		2,831,555
Equity of Canada	(1,070,121)		(2,821,853)
TOTAL	13,844		9,702

Contingent liabilities (Note 6)

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

Statement of Equity of Canada (Unaudited )
For the Year Ended March 31
(in thousands of dollars )

	2008		2007
Equity of Canada, beginning of the year	(2,821,853)		(2,971,014)
Net cost of operations	1,306,068		(99,726)
Current year appropriations used (Note 3)	519,864		224,524
Refund of previous year's expenditures	256		120
Change in the net position in the Consolidated Revenue Fund (Note 3)	(81,332)		17,774
Services received without charge from other departments (Note 8)	6,876		6,469
Equity of Canada, end of the year	(1,070,121)		(2,821,853)

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

Statement of Cash Flow (Unaudited )
For the Year Ended March 31
(in thousands of dollars )

	2008		2007
Operating activities
Cash paid for:
Transfer payments to Aboriginal groups	(317,479)		(160,599)
Salaries and Employee benefits	(27,893)		(19,921)
Professional and special services	(146,581)		(33,277)
Travel	(4,740)		(3,502)
Communications professional Services	(12,656)		(2,811)
Other operating	(10,156)		(4,027)
Other Adjustments	81,075		(17,894)
Advances and prepaid expenses	(26)		(9)
Cash received from:
Miscellaneous revenues	6		5
Cash used by operating activities	(438,450)		(242,035)
Capital investment activities
Acquisitions of tangible capital assets	(338)		(383)
Cash used by capital investment activities	(338)		(383)
Financing activities
Net cash provided by Government of Canada	438,788		242,418

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

Notes to the Financial Statements (unaudited)

1. Authority and Objectives

Indian Residential Schools Resolution Canada (IRSRC) was established by Order–in-Council (P.C. 2001-994) on June 4, 2001 and is a department listed in Schedule IV of the Financial Administration Act.

IRSRC is dedicated to resolving the legacy for the estimated 80,000 individuals who attended Indian residential schools and meeting the needs of the more than 13,000 former students seeking compensation for abuses they suffered at these schools.

2. Summary of Significant Accounting Policies

The financial statements have been prepared in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.

Significant accounting policies are as follows:

1. Parliamentary appropriations – IRSRC is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to IRSRC do not parallel financial reporting according to generally accepted accounting principles since appropriations are primarily based on cash flow requirements. Consequently, items recognized in the statement of operations and the statement of financial position are not necessarily the same as those provided through appropriations from Parliament. Note 3 provides a high-level reconciliation between the bases of reporting.
   
2. Net Cash Provided by Government – IRSRC operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by IRSRC 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 federal government.
   
3. Change in net position in the Consolidated Revenue Fund is the difference between the net cash provided by Government and appropriations used in a year, excluding the amount of non-respendable revenue recorded by IRSRC. It results from timing differences between when a transaction affects appropriations and when it is processed through the CRF.
   
4. Revenues:
   
   
   • Other revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues.
     
5. Expenses – Expenses are recorded on the accrual basis:
   
   
   • Grants are recognized in the year in which the conditions for payment are met. In the case of grants which do not form part of an existing program, the expense is recognized 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;
     
   • Contributions are recognized in the year in which the recipient has met the eligibility criteria or fulfilled the terms of a contractual transfer agreement;
     
   • Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment.
     
   • Services provided without charge by other government departments for accommodation, the employer's contribution to the health and dental insurance plans and legal services are recorded as operating expenses at their estimated cost.
     
6. Employee future benefits
   
   
   1. Pension benefits: Eligible employees participate in the Public Service Pension Plan (Public Service Superannuation), a multiemployer program administered by the Government of Canada. The department's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. Current legislation does not require the department to make contributions for any actuarial deficiencies of the Plan.
      
   2. Severance benefits: Employees are entitled to severance benefits under labour contracts or conditions of employment. These benefits are accrued as employees render the services necessary to earn them. 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.
      
7. Accounts receivable are stated at amounts expected to be ultimately realized.
   
8. Contingent liabilities – Contingent liabilities are potential liabilities which may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.
   
9. Tangible capital assets – All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. The department does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian Reserves and museum collections.
   
   Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:
   
   
   

   Asset Class	Amortization period
   Machinery & equipment	5 to 15 years
   Informatics hardware	3 to 5 years
   Informatics software	3 to 5 years

   
   
   
10. Measurement uncertainty – The preparation of these financial statements in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are contingent liabilities, the liability for employee severance benefits 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.

3. Parliamentary Appropriations

IRSRC receives most of its funding through annual Parliamentary appropriations. Items recognized in the statement of operations and the statement of financial position in one year may be funded through Parliamentary appropriations in prior, current or future years. Accordingly, IRSRC has different net costs 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 appropriations used:

	2008		2007
	(in thousands of dollars)
Net cost of operations	(1,306,068)		99,726
Adjustments for items affecting net cost of operations but not affecting appropriations:
Add (Less):
Change in allowance for claims and litigation (Note 6)	1,835,088		148,783
Legal services from Justice Canada not charged to appropriations	-		(16,776)
Services provided without charge	(6,876)		(6,469)
Amortization of tangible capital assets	(759)		(522)
Refund of previous year's expenditures	256		120
Employee severance benefits	(2,145)		(729)
Other adjustment	(27)		(14)
	519,469		224,119
Adjustments for items not affecting net cost of operations but affecting appropriations:
Add (Less):
Capital Acquisitions of tangible assets	369		383
Prepaid expenses and advances	26		22
Current year appropriations used	519,864		224,524

(b) Appropriations provided and used  

	2008		2007
	(in thousands of dollars)
Vote 55 - Operating Expenditures	460,390		-
Vote 60 - Grants and Contributions	159,000		-
Vote 52 - Operating Expenditures	-		234,333
Vote 54 - Contributions	-		6,000
Statutory amounts	3,732		2,737
Less:
Lapse available for future years	(103,258)		(18,546)
Current year appropriations used	519,864		224,524

(c) Reconciliation of net cash provided by Government to current year appropriations used:

	2008		2007
	(in thousands of dollars)
Net cash provided by Government	438,788		242,418
Refund of previous year's expenditures	(256)		(120)
Change in the net position in the Consolidated Revenue Fund
Variation in accounts receivable and advances	(1,678)		(514)
Variation in accounts payable and accrued liabilities	85,353		1,513
Other adjustments	(2,343)		(18,773)
	81,332		(17,774)
Current year appropriations used	519,864		224,524

4. Accounts Receivable

The following table presents details of accounts receivable:

	2008		2007
	(in thousands of dollars)
Receivables from other Federal Government departments and agencies	6,828		5,113
Receivables from external parties	(69)		-
Total	6,759		5,113

The receivables from external parties were credited to FRA 11221 in error and, therefore, the actual balance should be a debit of $69,000.

5. Tangible Capital Assets

(in thousands of dollars)	Cost					Accumulated amortization
Capital asset class	Opening balance	Acquisi- tions	Disposals & write- offs	Closing balance		Opening balance	Amortiz- ation	Disposals & write- offs	Closing balance		2008 Net book value	2007 Net book value
Machinery and equipment	31	-	(31)	-		-	-	-	-		-	31
Informatics hardware	1,116	351	-	1,467		481	311	-	792		675	635
Informatics software	1,807	18	-	1,825		635	448	-	1,083		742	1,172
	2,954	369	(31)	3,292		1,116	759	-	1,875		1,417	1,838

Amortization expense for the year ended March 31, 2008 is $759,000 (2007 - $522,000).

6. Contingent Liabilities

Claims and litigation

IRSRC was established to resolve claims and to address issues arising from the legacy of Indian residential schools. There are 12,469 claims being managed by the department in this regard, including class action claims. In May 2006, the department reached an independent settlement agreement to resolve these claims. The settlement agreement was implemented in September 2007 by the courts. IRSRC has recorded a liability of $967 million in 2008 ($2,802 million in 2007) to reflect the estimated costs to settle claims. The adjustment to the liability of $1,835 million has been recorded against transfer payments to Aboriginal groups on the Statement of Operations.

7. Employee Benefits

(a) Pension benefits: IRSRC employees participate in the Public Service Pension 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 Plans benefits and they are indexed to inflation.

Both the employees and the department contribute to the cost of the Plan. The 2007-08 expense amounts to $2,720,745 ($2,017,300 in 2006-07) which represents approximately 2.2 times (2.2 in 2006-07) the contributions by employees.

IRSRC'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: The department provides severance benefits to its employees based on eligibility, year of service and final salary. These severance benefits are not pre-funded. Benefits will be paid from future appropriations. Information about the severance benefits, measured as at March 31, is as follows:

	2008		2007
	(in thousands of dollars)
Accrued benefit obligation, beginning of year	3,627		2,898
Expense for the year	2,229		924
Benefits paid during the year	(84)		(195)
Accrued benefit obligation, end of year	5,772		3,627

8. Related party transactions

IRSRC is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations. The department enters into transactions with these entities in the normal course of business and on normal trade terms. Also, during the year, the department received services which were obtained without charge from other Government departments as presented in part (a).

(a) Services provided without charge:

During the year the department received without charge from other departments, accommodation, legal fees and the employer's contribution to the health and dental insurance plans. These services without charge have been recognized in the department's Statement of Operations as follows:

	2008		2007
	(in thousands of dollars)
Accommodation	4,754		3,027
Employer's contribution to the health and dental insurance plan	1,933		1,375
Legal Services	189		2,067
Total	6,876		6,469

The Government has structured some of its administrative activities for efficiency and cost-effectiveness purposes so that one department performs these on behalf of all without charge. The cost of these services, which include payroll and cheque issuance services provided by Public Works and Government Services Canada and audit services provided by the Office of the Auditor General, are not included as an expense in the Department’s Statement of Operations.

(b) Payables and receivables outstanding at year-end with related parties:

	2008		2007
	(in thousands of dollars)
Accounts Receivable with other government and agencies (1) & (2)	6,828		5,113
Accounts Payable to other government and agencies	6,355		3,978

(1) A receivable of $6,037,840 in 2007-08 ($3,668,823 in 2006-07) is a credit adjustment made by Treasury Board Secretariat to the amount contributed by IRSRC to the Employee Benefit Plan.

(2) The receivable figure for 2007 has been adjusted from $3,969,000 to $5,113,000 to include the GST Refundable Advance Account.

9. Subsequent Events

Pursuant to Order in Council P.C. 2008-805 dated April 25, 2008, Indian Residential Schools Resolution Canada (IRSRC) was amalgamated with Indian and Northern Affairs Canada (INAC) under the Minister of INAC, effective June 1, 2008. This amalgamation will result in an equity adjustment in the 2008-2009 fiscal year. At March 31, 2008, the net assets of INAC included total assets of $909,619,000 and total liabilities of $14,688,518,000. INAC's assets are comprised mainly of accounts receivable and loans, while their liabilities are comprised mainly of allowance for claims and litigation, environmental liabilities, and trust accounts. For the year ended March 31, 2008, INAC's net cost of operations was $7,992,565,000, comprised mainly of transfer payments.

10. Comparative information

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

Electronic Tables

Details on Project Spending

Details on Transfer Payment Programs

Horizontal Initiatives

Response to Parliamentary Committees and External Audits

Internal Audits and Evaluations

Travel Policies

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