APPENDIX I - FINTRAC'S FINANCIAL STATEMENTS

MANAGEMENT RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2005 and all information contained in this report, rests with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) management.

These statements have been prepared in accordance with Treasury Board Accounting Standards based upon generally accepted accounting principles, using management’s best estimates and judgments where appropriate. Readers of these statements are cautioned that the financial statements are not necessarily complete; certain assets, liabilities and expenses are only recorded at a government-wide level at this time. These statements should be read within the context of the significant accounting policies set out in the accompanying Notes.

Management has developed and maintains books, records, internal controls and management practices, designed to provide reasonable assurance that the Government’s assets are safeguarded and controlled, resources are managed economically and efficiently in the attainment of corporate objectives, and that transactions are in accordance with the Financial Administration Act and regulations as well as FINTRAC’s policies and statutory requirements.

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

___________________	___________________
Horst Intscher	Lynn MacFarlane
Director	Deputy Director
FINTRAC	FINTRAC Corporate Management
Ottawa, Canada	and Senior Financial Officer
	FINTRAC
	Ottawa, Canada

STATEMENT OF FINANCIAL POSITION (UNAUDITED)

As at March 31, 2005

(in dollars)	2005	2004
ASSETS
FINANCIAL ASSETS
Receivable (note 5)	51,909	217,205
Advances (note 6)	395,996	64,488
	______________________
	447,905	281,693
NON-FINANCIAL ASSETS
Prepaids	89,558	-
Capital Assets (note 7)	12,476,498	17,079,302
	______________________
	12,566,056	17,079,302
_______________________________________________________________
TOTAL ASSETS	13,013,961	17,360,995
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES
Accounts payables and accrued liabilities (note 8)	4,378,590	4,118,490
Allowance for vacation pay	749,593	731,951
	______________________
	5,128,183	4,850,441
NET ASSETS
Net assets, beginning of year	12,510,554	21,140,956
Net results	(37,275,233)	(40,019,000)
Services provided without charge	1,338,600	1,120,657
Net cash provided by government	31,311,857	30,267,941
	______________________
	7,885,778	12,510,554
_______________________________________________________________
TOTAL LIABILITIES AND NET ASSETS	13,013,961	17,360,995

Contingent liabilities (note 9)
Contractual obligations (notes 11)

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

Approved by:

__________________

Horst Intscher Director FINTRAC

STATEMENT OF OPERATIONS (UNAUDITED)

For the year ended March 31, 2005

(in dollars)	2005	2004
OPERATING EXPENSES
Personnel	19,804,367	18,476,577
Amortization	7,830,047	8,978,728
Rental of buildings	2,590,430	2,504,368
Professional and special services	2,461,213	5,257,812
Repairs and maintenance	2,256,152	1,743,131
Telecommunication services	746,664	809,303
Travel and relocation	633,896	1,208,866
Utilities, materials and supplies	316,531	443,816
Machinery and equipment	256,127	223,969
Information	210,226	245,667
Other expenditures	169,580	126,763
_______________________________________________________________
NET COST OF OPERATIONS	37,275,233	40,019,000

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

STATEMENT OF CASH FLOW (UNAUDITED)

For the year ended March 31, 2005

(in dollars)	2005	2004
OPERATING ACTIVITIES
Net cost of operations	37,275,233	40,019,000
Non-cash items included in cost of operations
Amortization of capital assets	(7,830,047)	(8,978,728)
Services provided without charge	(1,338,600)	(1,120,657)
Adjustment to prior year financial statements	-	11,980
Statement of financial position adjustments
Decrease (increase) in liabilities	(277,742)	(1,132,052)
Increase (decrease) in receivables, advances and prepaids	255,772	(954,819)
	______________________
	28,084,616	27,844,724
INVESTING ACTIVITIES
Acquisitions of capital assets (note 7)	3,227,241	2,423,217
_______________________________________________________________
NET CASH PROVIDED BY GOVERNMENT	31,311,857	30,267,941

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)

For the year ended March 31, 2005

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Basis of Preparation

These financial statements have been prepared on an accrual basis of accounting in accordance with Treasury Board Accounting Standards.
These Standards are based on generally accepted accounting principles in Canada. The primary source of the accounting principles is from the recommendations of the Public Sector Accounting Board of the Canadian Institute of Chartered Accountants supplemented by the recommendations of the Accounting Standards Board of the Canadian Institute of Chartered Accountants for situations not covered by the Public Sector Accounting Board. Readers of these statements are cautioned that the introduction of accrual accounting at the department level is evolutionary. Not all assets, liabilities and expenses applicable to a department are recorded at the departmental level at this time. As such, the financial statements are not necessarily complete. The accompanying notes provide additional detail and should be read with care. All such assets, liabilities and expenses are recorded at a govern-ment-wide level in the financial statements of the Government of Canada.

b) Parliamentary Appropriations

FINTRAC is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to FINTRAC 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 12 to these financial statements provides information regarding the source and disposition of these authorities. Note 13 provides a high-level reconciliation between the two basis of reporting.

c) Reporting entity

The reporting entity is FINTRAC and does not comprise any sub-entities.

d) Consolidated Revenue Fund (CRF)

All departments and agencies operate within the CRF, which is administered by the Receiver General for Canada. All cash receipts are deposited to the CRF and all cash disbursements made by departments are paid from the CRF. Net cash provided by Government is the difference between all cash receipts and all cash disbursements including transactions between departments.

e) Expenses

• Employee termination benefits are expensed by FINTRAC when paid. Estimated accruals are not recorded by FINTRAC, rather they are recognized in the consolidated financial statements of the Government of Canada.
• Vacation pay and overtime are expensed in the year that the entitlement occurs.
• Contributions to superannuation plans are recognized in the period that the contributions are made. Actuarial surpluses or deficiencies are not recorded in FINTRAC's books but are recognized in the consolidated financial statements of the Government of Canada.
• Environmental liabilities are not recognized in the FINTRAC books of accounts but are recognized in the consolidated financial statements of the Government of Canada.
• Services provided without charge by other government departments and agencies are recorded as operating expenses by FINTRAC. Services without charge represent contributions covering employer's share of employees' insurance premiums paid by Treasury Board Secretariat. A corresponding amount is credited directly to Net Assets.
• Legal fees paid to Justice Canada are not to be charged against FINTRAC's appropriation from Parliament, as the related salaries for these legal services have already been charged against Justice Canada's Parliamentary appropriation. However, as these expenses reflect actual legal fees incurred and paid by FINTRAC to Justice Canada, they are reflected as operating expenses in these financial statements.

f) Receivables

Receivables are stated at amounts expected to be ultimately realized. A provision is made for receivables where recovery is considered uncertain.

g) Capital assets

All assets treated as capital assets under the Public Sector Accounting Board recommendations, and having an initial cost of $5,000 or more, are recorded at their acquisition cost. The capitalization of software and leasehold improvements has been done on a prospective basis from April 1, 2001. Amortization of capital assets is done on a straight-line basis over the estimated useful life of the capital asset as follows:

Asset Class	Amortization Period
Machinery and equipment	5 years
Informatics hardware	3 years
Informatics software	3 years
Other equipment, including furniture	10 years
Leasehold improvements	Lesser of remaining lease term and 10 years

h) Foreign currency transactions

Transactions involving foreign currencies are translated into Canadian dollar equivalent susing rates of exchange in effect at the time of those transactions.

3. COMPARATIVE FIGURES

Certain comparative figures have beenreclassified to conform with the presentation used in the current year.

An adjustment of $11,980 to prior figures is included in the financial position and the cash flow statements to reflect an adjustment that should have been recorded in 2003-04.

4. MEASUREMENT UNCERTAINTY

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue 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 item where estimates are used is amortization of capital assets.

5. RECEIVABLES

(in dollars)	2005	2004
ASSETS
Other government departments	23,203	208,097
External parties (net of allowance)	28,706	9,108
_______________________________________________________________
	51,909	217,205

6. ADVANCES

(in dollars)	2005	2004
Standing advances to employees	5,750	6,450
GST receivable	390,246	58,038
_______________________________________________________________
	395,996	64,488

7. CAPITAL ASSETS
 

(In dollars)				2005	2004
	BALANCE BEGINNING OF YEAR	NET ADDITIONS	ACCUMULATED AMORTIZATION	NET BOOK VALUE	NET BOOK VALUE
Machinery and equipment	852,059	-	563,882	288,177	458,589
Informatics hardware	16,640,893	655,588	15,540,472	1,756,009	4,920,179
Informatics software	9,716,510	559,135	8,143,805	2,131,840	4,485,806
Other equipment	3,226,912	36,074	1,271,216	1,991,770	2,328,518
Leasehold Improvements	5,628,714	55,404	1,296,456	4,387,662	4,886,210
Work in progress	-	1,921,040	-	1,921,040
	________________________________________________________________
	36,065,088	3,227,241	26,815,831	12,476,498	17,079,302

Amortization expense for the year ended March 31, 2005 is $7,830,047 ($8,978,728 in 2004)
 

8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

(in dollars)	2005	2004
External accounts payable and accrued liabilities	2,889,597	3,625,470
Other government departments	256,865	99,537
Accrued salaries and wages	1,232,128	393,483
_______________________________________________________________
	4,378,590	4,118,490

9. CONTINGENT LIABILITIES

In the normal course of its operations, FINTRAC becomes involved in various legal actions. 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 on the government’s consolidated financial statements. These estimated liabilities are not recognized in FINTRAC’s financial statements until the amount of the liability is firmly established.

10. RELATED PARTY TRANSACTIONS

FINTRAC is related in terms 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 applicable to all individuals and enterprises except that certain services, as defined previously, are provided without charge.

11. CONTRACTUAL OBLIGATIONS

FINTRAC has entered into lease agreements for office space in 4 locations across Canada. The minimum aggregate annual payments for future fiscal years are as follows:

(in dollars)	2005	2004
2005-2006	2,514,950	2,569,503
2006-2007	2,514,950	2,592,998
2007-2008	2,313,489	2,632,325
2008-2009	1,061,463	2,631,807
2009-2010	-	-
_______________________________________________________________
	8,404,852	10,426,633

12. PARLIAMENTARY APPROPRIATIONS

(in dollars)	2005	2004
Operating expenditures - Vote 30	29,032,000	28,976,000
Supplementary Vote 30a	69,237	-
Supplementary Vote 30b	-	1,575,383
Transfer from TB - Vote 10	-	165,882
Transfer from TB - Vote 15	813,000	8,000
	______________________
	29,914,237	30,725,265
Lapsed	(1,873,741)	(1,433,639)
	______________________
	28,040,496	29,291,626
Contributions to employee benefits plan	2,979,131	2,500,357
_______________________________________________________________
USE OF APPROPRIATIONS	31,019,627	31,791,983

13. RECONCILIATION OF NET RESULTS TO APPROPRIATIONS USED

(in dollars)	2005	2004
Net results	37,275,233	40,019,000
Adjustments for items not affecting appropriations:
Amortization	(7,830,047)	(8,978,728)
Services provided without charge	(1,338,600)	(1,120,657)
Legal fees paid to Justice	(485,243)	(482,189)
Change in allowances	(24,600)	(101,548)
Refund of previous year expenditures	106,085	20,908
	______________________
	(9,572,405)	(10,662,214)
Adjustments for items not affecting appropriations:
Capital acquisitions	3,227,241	2,423,217
Change in prepaid expenses	89,558	-
Adjustment to prior year financial statement	-	11,980
	______________________
	3,316,799	2,435,197
_______________________________________________________________
TOTAL APPROPRIATIONS USED	31,019,627	31,791,983

<< Previous page - Next page  >>