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Part 2 - Schedules to the Consolidated Financial Statements
Introduction
The financial statements in this annual report of the Government
of Alberta are consolidation of the financial statements of government
sector entities and Crown-controlled SUCH sector organizations which
are presented in ministry annual reports.
Government sector entity financial statements include the financial
statements of the Offices of the Legislative Assembly and ministry
consolidated financial statements, which themselves are consolidation
of the financial statements of departments, regulated funds, Provincial
agencies and Crown-controlled corporations.
Financial statements of Crown-controlled SUCH sector organizations
comprise the financial statements of school boards, universities,
colleges, technical institutes and regional health authorities that
are controlled by the government.
A listing of these organizations is provided in Schedule 18 to
the financial statements.
The method of consolidation is described in the Accounting Policies
note that forms part of the financial statements.
Management's
Responsibility for the Consolidated Financial Statements
Responsibility for the integrity and objectivity of the consolidated
financial statements of the Province of Alberta rests with the government.
The consolidated financial statements are prepared by the Controller
under the general direction of the Deputy Minister of Finance, as
authorized by the Minister of Finance pursuant to the Financial
Administration Act. The consolidated financial statements are prepared
in accordance with Canadian generally accepted accounting principles
for the public sector, and of necessity include some amounts that
are based on estimates and judgements. As required by the Government
Accountability Act, the consolidated financial statements are
included in the consolidated annual report of the Government of
Alberta that forms part of the Public Accounts.
To fulfill its accounting and reporting responsibilities, the government
maintains systems of financial management and internal control which
give consideration to costs, benefits and risks, and which are designed
to:
- provide reasonable assurance that transactions are properly
authorized, executed in accordance with prescribed legislation
and regulations, and properly recorded so as to maintain accountability
for public money, and
- safeguard the assets and properties of the Province of Alberta
under government administration.
Under the Financial Administration Act, deputy heads are
responsible for the collection of revenue payable to the Crown,
and for making and controlling disbursements with respect to their
departments. They are also responsible for prescribing the accounting
systems to be used in their departments. In order to meet government
accounting and reporting requirements, the Controller obtains information
relating to departments, regulated funds, Provincial agencies, Crown-controlled
corporations, school boards, universities, colleges, technical institutes
and regional health authorities that are controlled by the government
from ministries as necessary.
The consolidated financial statements are reviewed by the Audit
Committee established under the Auditor General Act. Under
the Fiscal Responsibility Act, the Audit Committee must
report publicly to the Executive Council on the progress made in
eliminating the accumulated debt. The Audit Committee advises the
Lieutenant Governor in Council on the scope and results of the Auditor
General’s audit of the consolidated financial statements of
the Province.
The Auditor General of Alberta provides an independent opinion
on the consolidated financial statements prepared by the government.
The duties of the Auditor General in that respect are contained
in the Auditor General Act.
Annually, the consolidated annual report is tabled in the Legislature
as a part of the Public Accounts and is referred to the Standing
Committee on Public Accounts of the Legislative Assembly.
Approved by:
Brian Manning
Deputy Minister of Finance
Nancy Cuelenaere
Acting Controller
Edmonton, Alberta
June 20, 2006
Auditor's
Report
To the Members of
the Legislative Assembly
I have audited the consolidated statement
of financial position of the Province of Alberta as at March 31,
2006 and the consolidated statements of operations, change in net
financial assets and cash flows for the year then ended. These financial
statements are the responsibility of the Government of Alberta and
are prepared on its behalf by Finance Department management. My
responsibility is to express an opinion on these financial statements
based on my audit.
I conducted my audit in accordance
with Canadian generally accepted auditing standards. Those standards
require that I plan and perform an audit to obtain reasonable assurance
whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation.
In my opinion, these consolidated financial
statements present fairly, in all material respects, the financial
position of the Province of Alberta as at March 31, 2006 and the
results of its operations, change in its net financial assets and
its cash flows for the year then ended in accordance with Canadian
generally accepted accounting principles for the public sector.
[Original Signed]
Fred J. Dunn, FCA
Auditor General
Edmonton, Alberta
June 13, 2006
The official version of this report
of the Auditor General, and the information the report covers, is
in printed form.
Consolidated
Statement of Operations
Consolidated
Statement of Financial Position
Consolidated
Statement of Change in Net Financial Assets
Consolidated
Statement of
Cash Flows
Notes
to the 2005-06 Consolidated Financial Statements
Note 1 - Summary of
Significant Accounting Policies and Reporting Practices
These financial statements are prepared
in accordance with Canadian generally accepted accounting principles
for the public sector as recommended by the Public Sector Accounting
Board of the Canadian Institute of Chartered Accountants.
A) Reporting
Entity
These financial statements include the accounts of all government
sector entities and Crown-controlled SUCH sector organizations.
Government sector entities include the Offices of the Legislative
Assembly, departments, the Alberta Heritage Savings Trust Fund,
and other regulated funds, Provincial agencies and Crown-controlled
corporations.
Crown-controlled SUCH sector organizations comprise school boards,
universities, colleges, technical institutes and regional health
authorities that are controlled by the government.
A listing of these organizations is provided in Schedule 18.
B) Method
of Consolidation
The accounts of government sector entities, except those designated
as commercial enterprises, are consolidated using the full consolidation
method. Revenue and expense transactions, capital, investing and
financing transactions, and related asset and liability accounts
between consolidated government sector entities have been eliminated.
The accounts of Crown-controlled corporations, Provincial agencies
designated as commercial enterprises and Crown-controlled SUCH sector
organizations are consolidated on the modified equity basis, the
equity being computed in accordance with Canadian generally accepted
accounting principles applicable to these entities. Under the modified
equity method of consolidation, the accounting polices of consolidated
entities are not adjusted to conform with those of the government
sector entities which are consolidated using the full consolidation
method. Inter-sector revenue and expense transactions and related
asset and liability balances are not eliminated.
The Public Sector Accounting Board has issued new standards that
require Crown-controlled entities to be consolidated using the full
consolidation method commencing on or before the 2008-09 fiscal
year. In a transition period to March 31, 2008, these Crown-controlled
entities are allowed to be consolidated using the modified equity
basis of accounting.
The year end of school boards, colleges, technical institutes and
some Provincial agencies is other than March 31. Transactions of
these organizations that have occurred during the period to March
31, 2006 and that significantly affect the consolidation have been
recorded.
C) Basis
of Financial Reporting
Revenues
All revenues are reported on the accrual basis of accounting.
Cash received for which goods or services have not been provided
by year end is recorded as unearned revenue and included in accounts
payable.
Non-renewable
resource revenue is reported based on royalties on oil and gas
produced during the year.
Transfers
from Government of Canada are recognized as revenues when authorized
by federal legislation or federal/provincial agreements, eligibility
criteria, if any, are met, and a reasonable estimate of the amounts
can be made. Payments received in excess of the estimated amounts
applicable to the fiscal year are included in accounts payable.
Expenses
Expenses represent the cost of resources consumed during the year
on government operations. Expenses
include provisions for amortization of acquired tangible capital
assets and expenses incurred in accordance with the terms of approved
grant programs, including grants for capital purposes and grants
to Crown-controlled SUCH sector organizations from government
sector entities.
Grants are recognized as expenses
when authorized, eligibility criteria, if any, are met, and a
reasonable estimate of the amounts can be made.
Pension costs comprise the cost of
pension benefits earned by employees during the year, interest
on the Province’s share of the unfunded pension liability,
and the amortization over the expected average remaining service
life of employees of deferred adjustments arising from experience
gains and losses and changes in actuarial assumptions. Schedule
14 provides additional information on the net unamortized deferred
losses relating to pensions.
In the Consolidated Statement of
Operations, pension costs of government sector entities which
are funded are included in expenses by function and costs which
have not been funded are recorded as pension provisions. Pension
costs of Crown-controlled SUCH sector organizations which are
funded are included in net income or loss attributable to Crown-controlled
SUCH sector organizations.
Costs arising from obligations under
guarantees and indemnities are recorded as expenses when management
determines that the Province will likely be called upon to make
payment. The expense represents management’s estimate of
future payments less recoveries.
The estimated increase or decrease
for the year in accrued employee vacation entitlements is also
recorded in the appropriate expense function.
Financial Assets
Financial assets are limited to financial claims on external organizations
and individuals, loans to and receivable from Crown-controlled
SUCH sector organizations by government sector entities and inventories
for resale at the year end.
Temporary investments are valued
at cost or fair value, whichever is lower, on an aggregate basis.
Portfolio investments, which are
investments authorized by legislation to provide income for the
long term or for other special purposes, are carried at cost.
Realized gains and losses on disposals of these investments are
included in the determination of excess of revenues over expenses
for the year. Where there has been a loss in value of an investment
that is other than a temporary decline, the investment is written
down to recognize the loss. The written down value is deemed to
be the new cost.
Equity in Crown-controlled SUCH sector
organizations represents the combined assets, net of the liabilities
of these organizations, including pension obligations, if any,
deferred capital contributions from government sector entities
and related unamortized deferred capital contributions (see Schedule
9, Note (a)).
Loans are recorded at cost less any
discounts and allowance for credit loss.
Inventories for resale representing
the Province’s share of royalty oil in feeder and trunk
pipelines are stated at net realizable value. Other inventories
for resale are valued at the lower of cost, determined on a first-in,
first-out basis, and estimated net realizable value.
Liabilities
Liabilities, representing present obligations of the government
to external organizations and individuals arising from transactions
or events occurring prior to the year end, are recorded to the
extent when there is an appropriate basis of measurement and a
reasonable estimate of the amount can be made.
Liabilities also include the following:
- all financial claims payable by
the government at the year end, including payables to Crown- controlled
SUCH sector organizations,
- estimates of the present value of
the government’s obligations for future pension contributions
and/or benefits under defined benefit pension plans for current
and former provincial and other public sector employees, and certain
current and former Members of the Legislative Assembly, including
deferred adjustments,
- the government’s obligation
to provide future funding to school boards to enable them to repay
the principal portion of their debentures to the Alberta Capital
Finance Authority, and
- accrued employee vacation entitlements.
Debentures included in unmatured
debt are recorded at the face amount of the issue less net unamortized
discount, which includes issue expenses and hedging costs.
Income or expense on interest rate
swaps and forward interest rate agreements used to manage interest
rate exposure is recorded as an adjustment to debt servicing costs.
The exchange gain or loss on the foreign exchange contracts used
to manage currency exposure is deferred and amortized over the
life of the contract.
Non-financial Assets
Non-financial assets are limited to tangible capital assets and
inventories of supplies.
Tangible capital assets on the Consolidated
Statement of Financial Position are restricted to tangible capital
assets the Province acquired for cash or for other assets, and
donated assets. Tangible capital assets acquired by right, such
as Crown lands, forests, water and mineral resources, are not
included.
Tangible capital assets of commercial
enterprises and Crown-controlled SUCH sector organizations are
included in the Consolidated Statement of Financial Position within
equity in commercial enterprises and equity in Crown-controlled
SUCH sector organizations respectively. Tangible capital assets
of government sector entities are included in non-financial assets
on the Consolidated Statement of Financial Position.
Amortization of tangible capital
assets is calculated on a straight line basis over the periods
expected to benefit from their use (see Schedule 16), and the
annual amortization is included in the expenses reported in the
Consolidated Statement of Operations. The annual amortization
of the costs of tangible capital assets is allocated to the functions
of the government that employ those assets.
Inventories of supplies are valued
at the lower of cost, determined on a first-in, first-out basis,
and replacement cost.
Derivative Contracts
Income and expense from derivative contracts are included in investment
income or expenses by function. Certain derivative contracts,
which are primarily interest rate swaps and cross-currency interest
rate swaps, are designated as hedges of market risks for purposes
of hedge accounting. Hedge accounting recognizes gains and losses
from derivatives in the same period as the gains and losses of
the specific assets and liabilities being hedged.
Where a hedge relationship is designated,
the hedge is documented at inception. The documentation identifies
the specific asset or liability being hedged, the risk that is
being hedged, type of derivative used and the matching of critical
terms of both the hedged asset or liability and the hedging derivative
for purposes of measuring effectiveness. The derivative must be
highly effective in accomplishing the objective of offsetting
either changes in the fair value or cash flows attributable to
the risk being hedged both at inception and over the life of the
hedge.
Derivative contracts not designated
as hedges for purposes of hedge accounting, which are primarily
bond index swaps, equity index swaps, equity index futures contracts,
forward foreign exchange contracts and credit default swap contracts,
are recorded at fair value.
The estimated amount receivable and
payable from derivative contracts are included in accrued interest
receivable and payable respectively.
Foreign Currency
Assets and liabilities denominated in foreign currency are translated
at the year end rate of exchange.
Foreign currency transactions are
translated into Canadian dollars using average rates of exchange,
except for hedged foreign currency transactions which are translated
at rates of exchange established by the terms of the forward exchange
contracts.
Amortization of deferred exchange
gains and losses and other exchange differences on unhedged transactions
are included in the determination of excess of revenues over expenses
for the year.
Measurement Uncertainty
Estimates are used in accruing revenues and expenses in circumstances
where the actual accrued revenues and expenses are unknown at
the time the financial statements are prepared. Uncertainty in
the determination of the amount at which an item is recognized
in financial statements is known as measurement uncertainty. Such
uncertainty exists when there is a variance between the recognized
amount and another reasonably possible amount, as there is whenever
estimates are used.
Measurement uncertainty that is material
to these financial statements exists in the accrual of personal
and corporate income taxes, health transfers and Canada social
transfer entitlements, royalties derived from non-renewable resources
and provisions for pensions. The nature of the uncertainty in
these items arises from several factors such as the effect on
accrued income taxes of the verification of taxable income, the
effect on accrued entitlements of health transfers and Canada
social transfer being separate new entitlements with little historical
experience, the effect on accrued royalties of the receipt of
revised production data and reassessments, and the effect on accrued
pension obligations of actual experience compared to assumptions.
Personal income tax, recorded as $6,000 million (2005 $4,649
million) in these consolidated financial statements, is subject
to measurement uncertainty due primarily to the use of economic
estimates of personal income growth. Personal income has been
assumed to increase by 8.2% in 2005-06. For every percentage change
in the assumed personal income growth rate, personal income tax
revenue will increase or decrease by $96 million. Use of this
information in the past has resulted in a number that differs,
on average, from final results by plus or minus $200 million.
Corporate income tax, recorded as $2,917 million (2005 $2,364
million) in these consolidated financial statements, is subject
to measurement uncertainty due primarily to the use of five year
moving average of historical corporate income tax refund ratios
in the estimation of corporate income tax revenue balance. Use
of this information in the past has resulted in a number that
differs, on average, from final results by plus or minus $160
million.
Natural gas and by-products royalty recorded as $8,388 million
(2005 $6,439 million) in these consolidated financial statements,
is also subject to measurement uncertainty due to statistical
analysis of industry data such as allowable costs incurred by
royalty payers, production volumes and royalty rates in the estimation
of natural gas and by-products royalty revenue balance. Use of
this information in the past has resulted in a number that differs
from final results by plus or minus $130 million.
While best estimates have been used for reporting items subject
to measurement uncertainty, management considers that it is possible,
based on existing knowledge, that changes in future conditions
in the near term could require a material change in the recognized
amounts. Near term is defined as a period of time not to exceed
one year from the date of the financial statements.
Note 2 - Reporting
Change
Effective for the 2005-06 fiscal year, the Province expanded its
reporting entity to include the accounts of Crown-controlled SUCH
sector organizations and Safety Codes Council in its consolidated
financial statements on a modified equity basis (see Note 1(B) and
Schedule 18). Previously, the financial statements of these Crown-controlled
entities were not included in the
Province’s accounts.
This change has been applied retroactively and as a result of the
change, net assets as at April 1, 2004 have been increased by $2,558
million and the excess of revenues over expenses for the year ended
March 31, 2005 increased by $239 million. The following is a summary
of the effect of the reporting change on the 2004-05 consolidated
financial statements.
If
the change had not been made, net assets as at March 31, 2006 would
have been $34,431 million and the excess of revenues over expenses
for the year ended March 31, 2006 would amount to $8,350 million.
Note
3 - Valuation of Financial Assets and Liabilities
Fair value is the amount of consideration
agreed upon in an arm’s length transaction between knowledgeable,
willing parties who are under no compulsion to act.
Due to their short term nature, the
fair values of cash and cash equivalents, accrued interest, receivables,
payables and accrued liabilities are estimated to approximate
their book values.
The fair value of loans and advances
made under the authority of the Alberta Capital Finance Authority
Act is based on the net present value of future cash flows
discounted using the Authority’s current cost of borrowing.
The fair value of loans and advances made under the authority
of the Agriculture Financial Services Act is based on
future cash flows discounted using rates equivalent to the market
rates on loans with similar terms and credit risk. Fair values
of some of the other loans and advances are not reported due to
there being no organized financial market for the instruments
and it is not practicable within constraints of timeliness or
cost to estimate the fair values with sufficient reliability.
The fair value of unmatured debt
and debt of Alberta Capital Finance Authority is an approximation
of its fair value to the holder.
The methods used to determine the
fair values of temporary investments and portfolio investments
are as follows:
Public fixed-income securities
and equities are valued at the year-end closing sale price,
or the average of the latest bid and ask prices quoted by an
independent securities valuation company.
Mortgages and certain non-public
provincial debentures are valued based on the net present value
of future cash flows. These cash flows are discounted using
appropriate interest rate premiums over similar Government of
Canada benchmark bonds trading in the market.
The fair value of alternative investments
including absolute return strategy investments, investments
in partnership interests, private investment funds, private
equities and securities with limited marketability is estimated
using methods such as cost, discounted cash flows, earnings
multiples, prevailing market values for instruments with similar
characteristics and other pricing models as appropriate. Real
estate investments are reported at their most recent appraised
value, net of any liabilities against the real property. Real
estate properties are appraised annually by qualified external
real estate appraisers using methods such as cost, discounted
cash flows, earnings multiples, prevailing market values for
properties with similar characteristics and other pricing models
as appropriate. As quoted market prices are not readily available
for these investments, estimated fair values may not reflect
amounts that could be realized upon immediate sale, nor amounts
that may ultimately be realized. Accordingly, the estimated
fair values may differ significantly from the values that would
have been used had a ready market existed for these investments.
The value of derivative contracts
is determined by the following methods. Equity and bond index
swaps are valued based on changes in the appropriate market based
index net of accrued floating rate interest. Interest rate swaps
and cross-currency interest rate swaps are valued based on discounted
cash flows using current market yields and exchange rates. Credit
default swaps are valued based on discounted cash flows using
current market yields and calculated default probabilities. Forward
foreign exchange contracts and equity index futures contracts
are valued based on quoted market prices.
At the year end, the fair value of
investments and any other assets and liabilities denominated in
a foreign currency are translated to Canadian dollars at the year
end exchange rate.
Note
4 - Financial Risk Management
A)
Liability Management
The objective of the Province's liability management program
is to achieve the lowest cost on debt within an acceptable degree
of variability of debt servicing costs. In order to achieve this
objective, the Province manages four financial risks: interest
rate risk, currency exchange risk, credit risk, and refinancing
risk. The Province manages these four risks within approved policy
guidelines. The management of these risks and the policy guidelines
apply to the Province’s direct debt, excluding debt raised
to fund requirements of provincial corporations and regulated
funds. Debt of provincial corporations and regulated funds is
managed separately in relation to their assets.
The Province has decided, in light of the current debt reduction
environment, that the most effective liability risk management
strategy is to allow existing debt instruments to mature in accordance
with their terms.
B) Asset Management
The majority of the Province’s portfolio investments are
in the Alberta Heritage Savings Trust Fund (Heritage Fund). The
investment objective is to invest in a diversified portfolio to
maximize long-term returns at an acceptable level of risk. The
policy asset mix for fixed income securities is 35%. The policy
mix for public equity investment is 45%. The remainder of the
portfolio is invested in real estate, private equities and absolute
return strategies.
The General Revenue Fund also holds substantial amounts of the
Province’s portfolio investments. General Revenue Fund portfolio
investments are used to repay debt as it matures, to provide funding
for the capital plan, and to help protect operating and capital
spending from short term declines in revenue and the costs of
emergencies, disasters, natural gas rebates and settlements with
First Nations. The investment objective is to preserve the value
of the investments while maintaining appropriate liquidity and
earning a fair or reasonable rate of return.
The investments in the Alberta Heritage Foundation for Medical
Research Endowment Fund, the Alberta Heritage Science and Engineering
Research Endowment Fund, the Alberta Heritage Scholarship Fund
and the money allocated to the Heritage Fund under the Access
to the Future Act are managed to preserve the capital of
the funds over the long term and to provide an annual level of
income to intermediary boards responsible for making grants to
researchers in the fields of medicine, science, engineering, innovation
and excellence, and to students.
Note 5 - Budget
The budget amounts were derived from
Budget 2005 tabled in the Legislature on April 13, 2005.
The following table compares the net
financial position of all government sector entities with the March
31, 2006 estimate provided in Budget 2005. The table uses the same
grouping of financial assets and liabilities as the budget.
The
following table compares the results of operations of all government
sector entities with the March 31, 2006 estimate provided in Budget
2005.
Note 6 - Fiscal Responsibility
Legislation
Since 1999, the Fiscal Responsibility
Act (the Act) has required that the Province not incur a deficit,
as defined under the Act, in any fiscal year. Effective April 1,
2005, the Act also requires that the financial assets in the Debt
Retirement Account must be equal to or greater than the amount of
the accumulated debt at the fiscal year end. During 2005-06, the
Province complied with the Act.
Accumulated Debt
The table below shows the balance of accumulated debt at March
31, 2006.
In addition, Note 5 shows
that funds amounting to $2,197 million (2005 $3,479 million), at
cost, have been set aside in the Debt Retirement Account to retire
accumulated debt that has not yet matured.
Note
7- Contractual Obligations
Estimated payment requirements
for each of the next five years and thereafter are as follows:
The government has various commitments
relating to the devolution of services or disposition of assets
to the private sector. Those commitments include the performance
of duties and obligations if the private sector organization fails
to meet them.
Note 8- Contingent
Liabilities
Set out below are details of contingent
liabilities resulting from guarantees, indemnities and litigation,
other than those reported as liabilities and shown in Schedule 15.
Any losses arising from the settlement of contingent liabilities
are treated as current year expenses.
A)
Indemnities and Guarantees
Guarantees amounting to $129 million (2005 $151
million) are analyzed in Schedule 17.
B) Contingent
Liabilities of Commercial Enterprises
The Credit Union Deposit Guarantee Corporation has a potential
liability under guarantees relating to deposits of credit unions.
At December 31, 2005 credit unions in Alberta held deposits totalling
$10.0 billion (2004 $9.0 billion) and had assets in excess of
deposits.
At March 31, 2006, Alberta Treasury Branches had a potential
liability under guarantees and letters of credit amounting to
$145 million (2005 $133 million).
C) Legal Actions
At March 31, 2006, the Province was involved in various legal
actions, the outcome of which is not determinable. Accruals have
been made in specific instances where it is probable that losses
will be incurred which can be reasonably estimated. The resulting
loss, if any, from claims in excess of the amounts accrued cannot
be determined.
The Province has a contingent liability in respect of 32 claims
(2005 34) concerning aboriginal rights, Indian title and treaty
rights. In most cases, these claims have been filed jointly and
severally against the Province of Alberta and the Government of
Canada, and in some cases involve third parties. Of these claims,
19 (2005 21) have specified amounts totalling $124.9 billion (2005
$125.2 billion) plus a provision for interest and other costs
that is not calculable. The other 13 claims (2005 13) have not
specified any amounts.
The Province was named as a defendant
in a legal action concerning the methodology used to calculate
pension benefit payments under three public sector pension plans.
The claim has been filed jointly and severally against the Province
of Alberta and the employers participating in these pension plans.
The claim specified an amount of $3.75 billion (2005 $3.75 billion)
plus a provision for interest and other costs that is not calculable.
Further, the Province was named as
defendant in various other legal actions in addition to those
noted above. The total claimed in specific legal actions amounts
to approximately $4.1 billion (2005 $3.6 billion).
Note
9- Derivative Contracts
Derivative contracts are financial
contracts, the value of which is derived from the value of underlying
assets, liabilities, indices, interest rates or currency rates.
The government uses derivative contracts to enhance investment return,
manage exposure to interest and foreign currency risks, and for
asset mix management purposes. Associated with these instruments
are credit risks that could expose the government to potential losses.
Credit risk relates to the possibility that a loss may occur from
the failure of another party to perform according to the terms of
a contract. Credit exposure to counterparties is insignificant in
relation to the notional principal amount. The notional value of
a derivative contract represents the amount to which a rate or price
is applied in order to calculate the exchange of cash flows. The
notional amounts, upon which payments are based, are not indicative
of the credit risk associated with derivative contracts. Current
credit exposure is represented by the current replacement cost of
all outstanding contracts in a favourable position (positive fair
value). The government attempts to limit its credit exposure by
dealing with counter-parties believed to have good credit standing.
As at March 31, 2006, the notional
amount of all derivative contracts issued by the government amounted
to $15.8 billion (2005 $9.3 billion). All derivative contracts taken
together had a net positive fair value of $244 million (2005 $117
million).
Note
10 - Trust Funds Under Administration
Trust funds under administration are regulated and other funds
consisting of public money over which the Legislature has no power
of appropriation. Because the Province has no equity in the funds
and administers them for the purposes of various trusts, they are
not included in the consolidated financial statements. As at March
31, 2006, trust funds under administration were as follows:
Note 11 - Defined
Benefit Plans
A) Pension
Plans
The government administers three contributory defined benefit
pension plans for the current employees of government entities:
the Public Service Pension Plan, Management Employees Pension
Plan and Supplementary Retirement Plan for Public Service Managers.
Pension costs for these plans, which were funded by government
sector entities during 2005-06 and included in expenses by function
in these financial statements, amounted to $146 million (2005
$123 million).
Benefits paid from these plans are based on length of service
and pensionable earnings. The average age of the approximately
45,400 active employees is 44. In addition, there are approximately
10,800 former employees who are entitled to refunds of contributions
with interest or pension benefits when all of the eligibility
requirements are met. At present, these plans provide benefits
for approximately 20,000 retirees. Benefit payments were $261
million in 2005-06 (2005 $243 million). Total contributions were
$334 million in 2005-06 (2005 $287 million), of which employee
contributions amounted to $158 million (2005 $139 million).
The government guarantees payment of all benefits under the Management
Employees Pension Plan arising from service before 1994.
A separate pension plan fund administered by the government is
maintained for each pension plan. Pension plan fund assets are
invested in both marketable investments of organizations external
to the government and in Province of Alberta bonds and promissory
notes.
At December 31, 2005, the Supplementary Retirement Plan for Public
Service Managers reported a surplus of $10 million (2004 $9 million)
when the Management Employees and the Public Service Pension Plans
reported deficiencies. The deficiencies were extrapolated to March
31, 2006 and the government’s share of the employer’s
estimated accrued benefit liability with respect to the Management
Employees and the Public Service Pension Plans is analyzed in
Schedule 14.
B)
Long Term Disability Income Continuance Plans
The government also administers two
long term disability income continuance plans. As at March 31,
2006, these plans taken together reported an actuarial deficiency
of $0.4 million (2005 $9 million). At March 31, 2006, the government’s
share of the estimated accrued benefit liability for these plans
has been recognized in these financial statements.
Note 12 - Comparative
Figures
Certain 2005 figures have been restated,
where necessary, to conform to 2006 presentation.
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