Financial Statements of the
Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)

Unaudited

For the Year Ended March 31, 2010

MANAGEMENT RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2010 and all information contained in these statements rests with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) 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 FINTRAC's financial transactions. Financial information submitted to the Public Accounts of Canada and included in the FINTRAC's Departmental Performance Report is consistent with these financial statements.

Management maintains a system of financial management and internal control designed 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 FINTRAC. 

The transactions and financial statements of FINTRAC have not been audited.

___________________
___________________
Jeanne M. Flemming
Margaret Baxter
Director
Chief Financial Officer
FINTRAC
FINTRAC
Ottawa, Canada
Ottawa, Canada
Date
Date


STATEMENT OF OPERATIONS (Unaudited)
For the year ended March 31, 2010

(In dollars)

2010

2009

TRANSFER PAYMENTS

Egmont Group Secretariat

$1,400,000

$1,200,000

Total Transfer Payments

$1,400,000

$1,200,000
 

OPERATING EXPENSES

Salaries and employee benefits

$34,309,684

$34,447,306

Amortization of tangible capital assets

5,349,061

4,768,930

Repairs and maintenance

3,595,877

3,356,415

Professional and special services

3,484,098

3,798,980

Accommodations

3,424,645

3,538,054

Travel and relocation

952,291

1,003,351

Telecommunication services

829,559

900,318

Utilities, materials and supplies

377,225

335,640

Machinery and equipment

276,581

148,585

Other expenditures

160,293

105,082

Communication services

160,048

435,878

Total Operating Expenses

$52,919,362

$52,838,539
 

REVENUES

Revenues not available for spending

$177,930

-

Total Revenues

$177,930

-
 

NET COST OF OPERATIONS

$54,141,432

$54,038,539

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

STATEMENT OF FINANCIAL POSITION (Unaudited)
At March 31, 2010

(In dollars)

2010

2009

ASSETS

Financial assets

Accounts receivable and advances (Note 4)

$310,574

$172,369
 

Non-financial assets

Prepaid expenses

$546,352

$881,448

Tangible capital assets (Note 5)

16,923,547

18,037,501

Total Non-financial assets

$17,469,899

$18,918,949
 

TOTAL ASSETS

$17,780,473

$19,091,318
 

LIABILITIES AND EQUITY OF CANADA

Liabilities

Accounts payable and accrued liabilities

$3,999,235

$5,886,287

Vacation pay and compensatory leave

995,055

1,019,015

Employee severance benefits (Note 6)

6,268,360

5,539,446
 

$11,262,650

$12,444,748
 

Equity of Canada

$ 6,517,823

$6,646,570
 

TOTAL LIABILITIES AND EQUITY OF CANADA

$17,780,473

$19,091,318

Contingent liabilities (Note 7)
Contractual obligations (Note 8)

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

STATEMENT OF EQUITY OF CANADA (Unaudited)
At March 31, 2010

(In dollars)

2010

2009

EQUITY OF CANADA, BEGINNING OF YEAR

$6,646,570

$6,785,619

Net cost of operations

(54,141,432)

(54,038,539)

Current year appropriations used (Note 3)

49,898,196

50,593,430

Refund of previous year expenditures

(2,584)

(78,668)

Change in net position in the Consolidated Revenue Fund (Note 3)

1,847,327

1,296,201

Services received without charge from other government departments (Note 9)

2,269,746

2,088,527
 

EQUITY OF CANADA, END OF YEAR

$6,517,823

$6,646,570

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

STATEMENT OF CASH FLOW (Unaudited)
For the year ended March 31, 2010

(In dollars)

2010

2009

OPERATING ACTIVITIES
 

Net cost of operations

$54,141,432

$54,038,539
 

Non-cash items:

Amortization of tangible capital assets (Note 5)

(5,349,061)

(4,768,930)

Loss on disposal and write-down of tangible assets

-

(3,512)

Services provided without charge by other government departments (Note 9)

(2,269,746)

(2,088,527)
 

Variations in Statement of Financial Position:

Increase (decrease) in accounts receivable and advances

138,205

(50,385)

Increase (decrease) in prepaid expenses

(335,096)

41,864

Increase (decrease) in accounts payable and accrued liabilities

1,887,052

1,346,586

Increase (decrease) in vacation pay and compensatory leave

23,960

83,332

Increase (decrease) in employee severance benefits

(728,914)

175,792
 

Cash used by operating activities

$47,507,832

$48,774,759
 

CAPITAL INVESTMENT ACTIVITIES
 

Acquisitions of tangible capital assets (Note 5)

$4,235,107

$3,036,204
 

FINANCING ACTIVITIES
 

Net cash provided by government

$51,742,939

$51,810,963

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

NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
For the year ended March 31, 2010

  1. Authority and Objectives

    The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) was established through the Proceeds of Crime (Money Laundering) Act in July 2000 as part of the National Initiative to Combat Money Laundering. This legislation established FINTRAC as a government agency and separate employer, named in Schedule 1.1 of the Financial Administration Act. Originally, the key objectives for FINTRAC were the detection and deterrence of laundering of proceeds of crime. However, with the enactment of the Anti-terrorism Act in December 2001, FINTRAC was given additional responsibilities and government funding to detect the financing of terrorist activities. With the Royal Assent of Bill C-25 – An Act to amend the PCMLTFA and the Income Tax Act and to make a consequential amendment to another Act, the Centre's mandate has been changed and enhanced, namely through the addition of a registry for money services businesses and the expansion of other compliance measures, as well as disclosure authorities. In 2007-08, FINTRAC's mandate was further enhanced to include the National Anti-Drug Strategy.

    FINTRAC fulfills its responsibilities by collecting, analyzing, assessing financial information and, where appropriate, disclosing information relevant to the investigation and prosecution of money laundering offences and the financing of terrorist activities.

    FINTRAC's strategic outcome is “Financial Intelligence that contributes to the detection and deterrence of money laundering and terrorist activity financing in Canada and abroad” with one program being “Collection, Analysis and Dissemination of Financial Information”.

  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

      FINTRAC is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to FINTRAC do not parallel financial reporting according to Canadian 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

      FINTRAC operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by FINTRAC is deposited to the CRF and all cash disbursements made by FINTRAC 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. Consolidated Revenue Fund

      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. It results from timing differences between when a transaction affects appropriations and when it is processed through the CRF.

    4. Revenues

      • All funds collected through the Administrative Monetary Penalties Program are recorded upon issuance of the Notice of Violation and are forwarded to the Consolidated Revenue Fund of the Government of Canada.

      • These revenues are not available for spending.

    5. Expenses

      Expenses are recorded on the accrual basis:

      • 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 employer's contributions to the health and dental insurance plans 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, a multi-employer plan administered by the Government of Canada. FINTRAC's contributions to the Plan are charged to expenses in the year incurred and represent the total FINTRAC's obligation to the Plan. Current legislation does not require the Centre 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 receivables and advances

      Accounts receivables are stated at amounts expected to be ultimately realized; a provision is made for receivables where recovery is considered uncertain.

    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 $5,000 or more are recorded at their acquisition cost. FINTRAC 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 tangible capital asset as follows:

      Asset Class Amortization Period

      Machinery and equipment

      5 years

      Informatics hardware

      3 to 5 years

      Informatics software

      3 to 5 years

      Other equipment, including furniture

      3 to 10 years

      Leasehold improvements

      Lesser of remaining lease term and 10 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 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

    FINTRAC 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, FINTRAC 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:

    1. Reconciliation of net cost of operations to current year appropriations used:

      (In dollars)

      2010

      2009

      Net cost of operations

      $54,141,432

      $54,038,539

      Adjustments for items affecting net cost of operations but not affecting appropriations:

      Add (Less):

      Services provided without charge by other government departments (Note 9)

      (2,269,746)

      (2,088,527)

      Amortization of tangible capital assets (Note 5)

      (5,349,061)

      (4,768,930)

      Loss on disposal and write-down of tangible assets

      -

      (3,512)

      Refund of previous year expenditures

      2,584

      78,668

      Refund of vacation pay and compensatory leave

      177,930

      -

      Increase (decrease) in vacation pay and compensatory leave liability

      23,960

      83,332

      Increase (decrease) in employee severance benefits liability

      (728,914)

      175,792
       

      ($8,143,247)

      ($6,523,177)

      Adjustments for items not affecting net cost of operations but affecting appropriations:

      Add (Less):

      Acquisitions of tangible capital assets (Note 5)

      4,235,107

      3,036,204

      Increase (Decrease) in prepaid expenses

      (335,096)

      41,864

      Current year appropriations used

      $49,898,196

      $50,593,430

    2. Appropriations provided and used:

      (In dollars)

      2010

      2009

      Appropriations provided:

      		  

      Vote 25 - Program expenditures

      $43,736,846

      $49,391,000

      Vote 25a - Transfer from Treasury Board

      		 2,379,550  

      Vote 25a - Supplementary

      		 2,021,391  

      Vote 25 - TBS adjustments

       

      1,830,052

      Vote 15 - Transfer from Treasury Board

      235,450

      347,148

      Vote 30 - Transfer from Treasury Board - Pay lists Requirements

      778,696

      689,438

      Statutory amounts

      4,511,354

      4,505,547

      Less: Lapsed appropriations - Operating

      (3,765,091)

      (6,169,755)

      Current year appropriations used

      $49,898,196

      $50,593,430

    3. Reconciliation of net cash provided by government to current year appropriations used:

      (In dollars)

      2010

      2009

      Net cash provided by government

      $51,742,939

      $51,810,963

      Refund of previous years expenditures

      2,584

      78,668

      Change in net position in the Consolidated Revenue Fund

      Variation in accounts receivable and advances

      (138,205)

      50,385

      Variation in accounts payable and accrued liabilities

      (1,887,052)

      (1,346,586)

      Revenues not available for spending

      177,930

       
       

      (1,847,327)

      (1,296,201)
       

      Current year appropriations used

      $49,898,196

      $50,593,430

  4. Accounts Receivable and Advances

    The following table presents details of accounts receivable and advances:

    (In dollars)

    2010

    2009

    Receivables from other federal government departments and agencies

    $134,384

    $75,470

    Receivables from external parties

    170,440

    91,149

    Employee advances

    5,750

    5,750
     

    $310,574

    $172,369

  5. Tangible Capital Assets

    (In dollars)

    Cost
     

    Opening balance

    Acquisitions

    Disposals and write-offs

    Closing balance

    Machinery and equipment

    $886,006

    $7,751

    -

    $893,757

    Informatics hardware

    22,419,002

    3,449,014

    -

    25,868,016

    Informatics software

    18,459,833

    687,536

    -

    19,147,369

    Other equipment, including furniture

    4,845,433

    90,806

    -

    4,936,239

    Leasehold improvements

    6,605,262

    -

    -

    6,605,262

    $53,215,536

    $4,235,107

    -

    $57,450,643

    (In dollars)

    Accumulated Amortization
     

    Opening balance

    Amortization

    Disposals and write-offs

    Closing balance

    Machinery and equipment

    ($730,701)

    ($50,812)

    -

    ($781,513)

    Informatics hardware

    (15,737,541)

    (2,026,835)

    -

    (17,764,376)

    Informatics software

    (12,189,030)

    (2,066,683)

    -

    (14,255,713)

    Other equipment, including furniture

    (2,828,495)

    (539,166)

    -

    (3,367,661)

    Leasehold improvements

    (3,692,268)

    (665,565)

    -

    (4,357,833)
     

    ($35,178,035)

    ($5,349,061)

    -

    ($40,527,096)

    (In dollars)

    Net book value
     

    2009

    2010

    Machinery and equipment

    $155,305

    $112,244

    Informatics hardware

    6,681,461

    8,103,640

    Informatics software

    6,270,803

    4,891,656

    Other equipment, including furniture

    2,016,938

    1,568,578

    Leasehold improvements

    2,912,994

    2,247,429
     

    $18,037,501

    $16,923,547

    Amortization expense for the year ended March 31, 2010 is $5,349,061 ($4,768,930 in 2009).

  6. Employee Benefits

    1. Pension benefits:

      Eligible FINTRAC 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 two per cent 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 2009‑10 expense amounts to $4,511,354 ($4,505,547 in 2008-09), which represents approximately 1.9 times (2.0 times in 2008-09) the contributions made by employees.

      FINTRAC'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:

      FINTRAC provides severance benefits to its employees based on eligibility, years of service and final salary as per Treasury Board policy. These severance benefits are not pre-funded. Benefits will be paid from future appropriations. Information about the severance benefits, measured as at March 31, 2009 is as follows:

      (In dollars)

      2010

      2009

      Employee severance benefit liability, beginning of year

      $5,539,446

      $5,715,238

      Expense for the year

      1,610,313

      389,331

      Benefits paid during the year

      (881,399)

      (565,123)

      Employee severance benefit liability, end of year

      $6,268,360

      $5,539,446

  7. Contingent Liabilities

    Claims have been made against FINTRAC in the normal course of operations. These claims include items with pleading amounts and other for which no amount is specified. Based on FINTRAC's assessment, no legal proceedings for claims were pending at March 31, 2010 (nil in 2008-2009). Some of these potential liabilities 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 in the financial statements.

  8. Contractual Obligations

    The nature of FINTRAC's activities can result in some large multi-year contracts and obligations whereby FINTRAC will be obligated to make future payments when the services are received. FINTRAC has entered into lease agreements with Public Works and Government Services Canada for office space in five locations across Canada. The minimum aggregate annual payments for future fiscal years are as follows:

    (In dollars)

    2010-11

    $3,809,805

    2011-12

    1,294,408

    2012-13

    551,928

    2013-14

    490,689

    2014-15 and there after

    180,460
     

    $6,327,290

  9. Related Party Transactions

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

    1. Services provided without charge:

      During the year FINTRAC received without charge from other departments the employer's contribution to the health and dental insurance plans in the amount of $2,269,746 ($2,088,527 in 2008‑09). 

      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 costs 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 FINTRAC's Statement of Operations.

    2. Payables and receivables outstanding at year-end with related parties

      (In dollars)

      2010

      2009

      Accounts receivable with other government departments and agencies

      $134,384

      $75,470

      Accounts payable to other government departments and agencies

      $544,007

      $357,699