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Library and Archives Canada: Financial Statements for 2010-2011

Notes to the Financial Statements (Unaudited)
For the Year Ended March 31

1. Authority and objectives

(a) Description of the authority and objectives
Library and Archives Canada is an institution within the Government of Canada and was established on May 24, 2004 as a result of the amalgamation of the former National Library of Canada and National Archives of Canada. Library and Archives Canada's role was confirmed in the 2004 Library and Archives of Canada Act. The Act assigns discretionary power to the Librarian and Archivist of Canada in the attainment of Library and Archives Canada's objects. Under the Act, no record under the control of a government or ministerial institution may be destroyed prior to receiving consent from the Librarian and Archivist of Canada and those records considered to be of historic or archival importance to the Librarian and Archivist of Canada, shall be transferred to the care and control of the Librarian and Archivist of Canada.

Library and Archives Canada is considered a Schedule I.1 organization within the Financial Administration Act and reports to Parliament through the Minister of Canadian Heritage.

The mandate of Library and Archives Canada is to preserve the documentary heritage of Canada for the benefit of present and future generations; to serve as a source of enduring knowledge accessible to all, contributing to the cultural, social and economic advancement of Canada as a free and democratic society; to facilitate in Canada cooperation among the communities involved in the acquisition, preservation and diffusion of knowledge; and to serve as the continuing memory of the Government of Canada and its institutions.

(b) Description of the Program Activities
i) Managing the disposition of the Government of Canada records of continuing value: Through the issuance of Records Disposition Authorities, the development of record-keeping advice, tools and guidance, and the provision of Federal Records Centre services for departments of the Government of Canada, Library and Archives Canada enables and facilitates the management of information within federal agencies and ensures that government's archival and historical records are identified and appropriately preserved.

ii) Managing the documentary heritage of interest to Canada: The building of national documentary resource for all aspects of the study of Canada is fundamental to the mandate of Library and Archives Canada. The Library and Archives Canada collection consists of published and unpublished materials in a variety of formats acquired through legal deposit, agreements with government institutions and selected private materials purchased or received by donation. To access the contents of collections, they must be described. Description can take many forms and provide various layers of access but is governed by nationally and internationally accepted codes of practice. At the same time, holdings are also described to meet Canadians' expectations for timely and equitable access. Once materials enter the Library and Archives Canada collection they are managed to ensure their long-term preservation and accessibility through policies, procedures and various programs including storage, conservation, restoration and copying. To fulfill its role as a permanent repository of the government records and publications, the Library and Archives Canada enters into agreements with government institutions to ensure that documents of historical and archival value are eventually transferred to Library and Archives Canada. Library and Archives Canada also provides advice to assist government institutions in fulfilling their obligations under Sections 12 and 13 of the Library and Archives of Canada Act.

iii) Making the documentary heritage known and accessible for use: All materials that become part of the Library and Archives Canada collection are intended for use by those interested in Canada. Library and Archives Canada provides information and services including consultation, research and lending, across multiple channels to facilitate access to the documentary heritage to a wide variety of clients. It also establishes programs, such as the Portrait Gallery of Canada, and encourages or organizes programs such as exhibitions, publications and performances, to make known and interpret the documentary heritage. Library and Archives Canada also provides information resources and standards such as the national catalogue and supports the infrastructure necessary to ensure its accessibility to those interested in Canada.

iv) Internal Services: Internal Services are groups of related activities and resources that are administered to support the needs of programs and other corporate obligations of an organization. These groups are: Management and Oversight Services; Communications Services; Legal Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Services; Materiel Services; Acquisition Services; and Travel and Other Administrative Services. Internal Services include only those activities and resources that apply across an organization and not to those provided specifically to a program.

2. Summary of significant accounting policies

These financial statements have been prepared in accordance with Treasury Board accounting policies stated below, based on Canadian generally accepted accounting principles for the public sector. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian generally accepted accounting principles.

Significant accounting policies are as follows:

(a) Parliamentary authorities
Library and Archives Canada is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to Library and Archives Canada 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 the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting.

(b) Net Cash Provided by Government
Library and Archives Canada operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by Library and Archives Canada is deposited to the CRF and all cash disbursements made by Library and Archives Canada 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 /to the CRF
Amounts due from/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 Library and Archives Canada is entitled to draw from the CRF without further appropriations to discharge its liabilities.

(d) Revenues
i) Sales of goods and information products are revenues from regulatory fees and are recognized in the accounts based on the services provided in the year.
ii) Funds received from external parties for specified purposes are recorded upon receipt as deferred revenues. These revenues are recognized in the period in which the related expenses are incurred.
iii) Other revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenue takes place.

(e) Expenses – Expenses are recorded on the accrual basis:
i) 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.
ii) Contributions are recognized in the year in which the recipient has met the eligibility criteria or fulfilled the terms of a contractual transfer agreement, provided that the transfer is authorized and a reasonable estimate can be made.
iii) Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
iv) 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 estimated cost.

(f) Employee future benefits
i) Pension benefits:  Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. Library and Archives Canada's contributions to the Plan are charged to expenses in the year incurred and represent the total of Library and Archives Canada obligation to the Plan. Current legislation does not require Library and Archives Canada to make contributions for any actuarial deficiencies of the Plan.
ii) 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.

(g) Accounts receivables and advances
Accounts receivables and advances are stated at the lower of cost and net recoverable; a valuation allowance is recorded for receivables where recovery is considered uncertain.

(h) 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.

(i) Foreign currency transactions
Transactions involving foreign currencies are translated into Canadian dollar equivalents using rates of exchange in effect at the time of those transactions. Monetary assets and liabilities denominated in a foreign currency are translated into Canadian dollars using the rate of exchange in effect at year-end. Gains and losses resulting from foreign currency transactions are recorded under Other items within the Segmented information (note 11), with the exception of the foreign exchange gain or loss relating to a long-term foreign currency denominated monetary item which is recognized in the financial statements, deferred and amortized to revenue / expense over the remaining life of the monetary item.

(j) 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. Library and Archives Canada does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value.

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
Buildings 40 years
Machinery and equipment 5-15 years
Computer hardware 3-10 years
Computer software 2-7 years
Other equipment, including furniture 5-10 years
Vehicles 3-15 years
Leasehold improvements Lesser of the remaining term of lease or useful life of the improvement

Assets under construction and software under development are recorded in the applicable capital asset class in the year that they become available for use and are not amortized until they become available for use.

(k) Collections
The collections of Library and Archives Canada are presented on the Statement of Financial Position at a nominal value of $1,000. Items purchased for the collections are recorded as an expense in the year of acquisition. Items collected from the Federal government are not recorded on the Statement of Financial Position.

(l) Measurement uncertainty
The preparation of these financial statements 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

Library and Archives Canada receives most of its funding through annual Parliamentary authorities. Items recognized in the statement of operations and the statement of financial position in one year may be funded through Parliamentary authorities in prior, current or future years. Accordingly, Library and Archives Canada 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    
  2011 2010
  (in thousands of dollars)
Net cost of operations 169,795 150,845
Adjustments for items affecting net cost of operations but not affecting authorities:    
Services provided without charge by other government departments (48,161) (46,111)
Amortization of tangible capital assets (3,748) (3,745)
Decrease (increase) in employee future benefits (550) 1,339
Decrease (increase) in vacation pay and compensatory leave (153) 6,292
Refund of previous year' expenditures 183 227
Revenue not available for spending 114 248
Gain (loss) on disposal and write-down of tangible capital assets (13,912) (17)
Others - 26
  (66,227) (41,741)
Adjustments for items not affecting net cost of operations but affecting authorities:    
Acquisitions of tangible capital assets 8,298 15,364
  8,298 15,364
Current year authorities used 111,866 124,468
 
(b) Authorities provided and used    
  2011 2010
Authorities provided: (in thousands of dollars)
Vote 55 - Operating expenditures 104,603 114,995
Vote 60 - Capital expenditures 11,998 11,885
Statutory amounts 12,436 13,199
Authorities available for use 129,037 140,079
Less:    
Lapsed: Operating (4,071) (4,715)
Lapsed: Capital (2) -
Lapsed: Frozen allotments (13,009) (10,701)
Total lapsed (17,082) (15,416)
Authorities available for future years (89) (195)
Current year authorities used 111,866 124,468

4. Accounts receivable and advances

The following table presents details of Library and Archives Canada’s accounts receivable and advances balances:
  2011 2010
  (in thousands of dollars)
Receivables from other government departments and agencies 281 307
Receivables from external parties 109 238
Employee advances 7 8
Total 397 553

5. Tangible capital assets

Cost Opening
Balance
Acquisitions Reclassification and transfer of Assets Disposals and
write-offs
Closing
Balance
(in thousands of dollars)
Buildings - - 8,001 - 8,001
Machinery and equipment 836 - 185 - 1,021
Computer hardware 10,090 755 - - 10,845
Computer software 15,732 119 787 (900) 15,738
Other equipment 29,980 1,190 - (204) 30,966
Vehicles 532 19 - (20) 531
Leasehold improvements 967   1,091 - 2,058
Building in progress of construction 6,586 1,415 (8,001) - -
Leasehold improvements in progress of construction - 1,633 (1,091) - 542
Software under development 19,351 3,167 (787) (13,663) 8,068
  84,074 8,298 185 (14,787) 77,770
Accumulated amortization Opening
Balance
Amortization Reclassification and transfer of assets Disposals and
write-offs
Closing
Balance
(in thousands of dollars)
Buildings - 33 - - 33
Machinery and equipment 655 30 45 - 730
Computer hardware 7,265 1,081 - - 8,346
Computer software 8,627 1,597 - (655) 9,569
Other equipment 16,468 956 - (203) 17,221
Vehicles 374 51 - (15) 410
  33,389 3,748 45 (873) 36,309
Net book value 2011 2010      
(in thousands of dollars)
Buildings 7,968 -      
Machinery and equipment 291 181      
Computer hardware 2,499 2,825      
Computer software 6,169 7,105      
Other equipment 13,745 13,512      
Vehicles 121 158      
Leasehold improvements 2,058 967      
Building in progress of construction - 6,586      
Leasehold improvements in progress of construction 542 -      
Software under development 8,068 19,351      
  41,461 50,685      

In 2010-2011, the Canada Revenue Agency transferred equipment with a net book value of $140,000 to Library and Archives Canada.

6. Collections

Library and Archives Canada preserves the collective memory of the nation and of the Government of Canada and contributes to the protection of rights and the enhancement of a sense of national identity.

While the nominal valuation attributed to the collection in these Financial Statements is aligned with Canadian Public Sector reporting standards, this is not representative of the historical or market value of the collection. Although not capitalized like other assets such as buildings or equipment, these irreplaceable treasures have inestimable legal, evidentiary, cultural and, indeed, monetary value for Canadians now and for generations to come. These include documentary material transferred at no charge from government departments, publications received through Legal Deposit, materials purchased and donated materials for which receipts for tax purposes may have been issued.

7. Accounts payable and accrued liabilities

The following table presents details of Library and Archives Canada’s accounts payable and accrued liabilities:

  2011 2010
  (in thousands of dollars)
Accounts payable to other government departments and agencies 1,234 4,143
Accounts payable to external parties 6,072 6,475
 
  7,306 10,618
 
Accrued liabilities 110 826
Total 7,416 11,444

8. Deferred revenue

Deferred revenue represents the balance at year-end of unearned revenues stemming from donations. Some of these donations shall be used in accordance with any terms and conditions attached to them. Revenue is recognized in the period that the expenditures are incurred or services are rendered in line with the purposes for which the donations were received. Details of the transactions related to this account are as follows:

  2011 2010
  (in thousands of dollars)
Opening balance 427 484
Amounts received 1,547 971
Revenues recognized (1,028) (1,028)
Closing balance 946 427

9. Employee future benefits

a) Pension benefits: Library and Archives Canada's employees participate in the Public Service Pension Plan, which is sponsored and administered by the Government. 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 Library and Archives Canada contribute to the cost of the Plan. The 2010-11 expense amounts to $8,527,526 (2009-10 - $9,310,468), which represents approximately 1.9 (1.9 in 2009-10) times the contributions by employees.

Library and Archives Canada’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: Library and Archives Canada provides severance benefits to its employees based on eligibility, years of service and final salary. These severance benefits are not pre-funded. Benefits will be paid from future authorities. Information about the severance benefits, measured as at March 31, is as follows:

  2011 2010
  (in thousands of dollars)
Accrued benefit obligation, beginning of year 15,990 17,329
Expense for the year 1,619 867
Benefits paid during the year (1,069) (2,206)
Accrued benefit obligation, end of year 16,540 15,990

10. Related party transactions

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

(a) Common services provided without charge by other government departments:
During the year, Library and Archives Canada 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 in Library and Archives Canada’s Statement of Operations as follows:

  2011 2010
  (in thousands of dollars)
Accommodation 42,068 40,418
Employer's contribution to the health and dental insurance plans 6,057 5,650
Workers' compensation 36 43
  48,161 46,111

The Government has structured some of its administrative activities for efficiency and 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 Works and Government Services Canada and audit services provided by the Office of the Auditor General are not included in Library and Archives Canada's Statement of Operations so that one department performs these on behalf of others without charge. Similarly, Library and Archives Canada manages records in all media on behalf of more than 90 federal government organizations across the country.

(b) Other transactions with related parties:

  2011 2010
  (in thousands of dollars)
Expenses - Other Government departments and agencies 13,134 15,373
Revenues - Other Government departments and agencies 69 177

11. Segmented information

Presentation by segment is based on Library and Archives Canada program activity architecture. 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 program activities, by major object of expenses and by major type of revenues. The segment results for the period are as follows:

  2011 2010
  (in thousands of dollars)
  Managing Documentary Heritage Documentary Heritage Known and Accessible Managing Disposal of GOC Records Internal Services Total Total
 
Transfer payments to non profit organizations 34 1,710 - - 1,744 2,544
Operating expenses  
Salary and employee benefits 38,968 17,405 10,066 22,829 89,268 84,713
Accommodation 23,552 3,094 13,301 2,121 42,068 40,419
Professional and special services 1,619 912 662 4,707 7,900 8,098
Amortization of tangible capital assets (note 5) 1,671 1,179 116 782 3,748 3,745
Rental costs 105 1,074 55 1,496 2,730 2,757
Acquisition of machinery and equipment 686 439 54 1,437 2,616 1,687
Repair and maintenance 756 103 35 954 1,848 1,885
Utilities, materials and supplies 945 165 210 275 1,595 2,260
Communication services 304 298 116 873 1,591 1,929
Travel and relocation 191 97 139 377 804 852
Other 20 70 32 355 477 576
Loss on disposal and write-down of tangible assets 8,738 5,174 - - 13,912 17
Total operating expenses 77,555 30,010 24,786 36,206 168,557 148,938
 
Total expenses 77,589 31,720 24,786 36,206 170,301 151,482
 
Revenues  
Sales of goods and information products - 358 - - 358 348
Gain on disposal of non-capital assets - - - 88 88 195
Other - 31 - 29 60 94
 
Total revenues - 389 - 117 506 637
 
Net cost from continuing operations 77,589 31,331 24,786 36,089 169,795 150,845

12. Correction of error

In 2009-10, Library and Archives Canada adopted the revised Treasury Board accounting policy TBAS 1.2: Departmental and Agency Financial Statements which became mandatory for the 2010-11 fiscal year. The major change in the accounting policies of the Library and Archives Canada required by the adoption of the revised TBAS 1.2 was the recording of amounts due from the Consolidated Revenue Fund as an asset on the Statement of Financial Position. In 2010-11, the value of this asset was revised in line with the guidance provided by the Treasury Board Secretariat.

The revised amount has been accounted for retroactively with the following impact on comparative figures for 2009-2010:

  2010   2010
  As previously stated Effect of changes Restated
  (in thousands of dollars)
Statement of Financial Position:  
Assets 56,407 6,541 62,948
Equity of Canada 24,737 6,541 31,278

13. Comparative information

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

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