Please note that the Financial Information section is available in pdf format only. If you would prefer to download this annual report as a pdf file, click here.

Part 2:  Overview

• Ministry Vision, Mission, Core Businesses and Goals
• Relationship of Finance Department and Reporting Entities to Core Businesses
• Operational Overview
  • Office of Budget and Management
  • Tax and Revenue Administration
  • Investment, Treasury and Risk Management
  • Pensions, Insurance and Financial Institutions
  • Policy and Strategic Planning Division
  • Regulatory Agencies
• Summary of Key Activities in the Past Year
• Report of the Auditor General on the Results of Applying Specified Auditing Procedures to Performance Measures

Core Business: Fiscal Planning and Financial Management

Goal 1 A Financially Strong, Sustainable and Accountable Government
Goal 2 A Fair and Competitive Provincial Tax System
Goal 3 Revenue Programs are Administered Fairly, Efficiently and Effectively

Core Business: Investment, Treasury and Risk Management

Goal 4 Investment Policies that will Provide the Greatest Financial Returns, with an Acceptable Level of Risk, for Current and Future Generations of Albertans
Goal 5 Superior Investment Returns Subject to Client-defined Objectives and Policies
Goal 6 Effective Management of Financial Assets, Liabilities and Risk
Goal 7 Proactively Managed Risk

Core Business: Financial Sector and Pensions

Goal 8 Reliable and Competitive Financial and Insurance Products and Services
Goal 9 Quality and Competitive Financial Services Accessible to Albertans and Local Authorities
Goal 10 An Effective, Efficient and Streamlined Securities Regulatory System
Goal 11 Pensions that Deliver on Promises

Relationship of Finance Department and Reporting Entities to Core Businesses

MINISTRY OF FINANCE 

www.finance.gov.ab.ca

Terrace Building, 9515 - 107 Street Edmonton, Alberta T5K 2C3

Haultain Building, 9811 - 109 Street Edmonton, Alberta T5K 2L5

1100, 715-5th Avenue S.W. Calgary, Alberta T2P 2X6

Office of Budget and Management

OBM manages the provincial budget and business plan review and approval process, prepares economic and fiscal forecasts, and provides research, analysis and recommendations on the Province's fiscal, economic and taxation policies. OBM is responsible for intergovernmental fiscal relations and for providing statistical information about the Province. It also proposes and prepares accounting and financial control policies, budget documents, quarterly budget updates, annual financial statements and performance measurement reports.

OBM is divided into the following six areas: Budget Planning and Integration, Business Planning, Economics and Public Finance, Financial Accounting and Standards, Performance Measurement, and Tax Policy

Tax and Revenue Administration (TRA)

TRA administers Alberta Finance's tax and related programs, and contributes to the development of tax policy within the Province. The focus is a fair, competitive, simple and efficient provincial tax and revenue system.

Corporations, individuals and trusts are registered under the Corporate Income, Tourism Levy, Fuel Tax and Tobacco Tax Acts for the various programs TRA administers. The division maintains client accounts, processes tax payments, provides refunds, validates and processes tax returns and rebate claims, and initiates filing and collection activities for all TRA clients.

Desk and field audits of corporate and commodity taxpayers' books and records are performed to ensure compliance with provincial tax legislation. If tax or tax credit errors are noted, the necessary remedial action, including reassessment, is taken. TRA also partners with Government of Alberta ministries and other provincial/federal tax administrations on initiatives to develop policies, improve compliance and implement educational strategies for the efficient administration of tax and revenue programs.

TRA provides information and responses to general enquiries, technical opinion and ruling services to clients and staff, and administers dispute resolution mechanisms for TRA actions. TRA works with the Tax Policy group in Finance to develop tax policies and legislation and provides central services for the federal GST to other Alberta ministries and agencies. As part of its client relations function, TRA coordinates client group meetings to discuss common issues. To support and promote compliance, TRA produces and maintains a variety of hardcopy and online publications. These are designed to assist internal and external clients to understand tax legislation and requirements in Alberta. TRA has four branches: Revenue Operations, Audit, Tax Services, and Business Technology Management.

Alberta Investment Management (AIM) is comprised of three operating groups: the Investment Management Division (IMD), the Investment Administration Division (IAD), and the Internal Audit and Compliance Office (IACO).

IMD is the fifth largest public sector asset manager in Canada with $61.3 billion in assets under management as of March 31, 2006. IMD was established to act as the investment manager for pools of capital assigned by statute to the Minister of Finance and for the assets of other provincial public sector bodies, where specific agreements have been made.

IMD is organized into nine functional areas: Portfolio Analysis and Research, Active Canadian Equities, Fixed Income Operations, Structured Investments, Fund Management, External Fund Management, Real Estate, Mortgages and Private Placements.

IMD provides a comprehensive set of products, including such asset coverage as fixed income, public and private equities, infrastructure, timberlands, real estate, commercial mortgages and absolute return strategies. In some cases, specialized private sector investment managers are used to manage specific investment mandates.

IMD manages the assets of a broad range of client funds including six public sector pension funds, a number of endowment funds, and other special purpose funds. As of March 31, 2006, assets under management include:

• Pension Investments (totaling $24.2 billion) comprising of the Local Authorities Pension Plan, the Public Service Pension Plan, the Management Employees Pension Plan, the Universities Academic Pension Plan, the Special Forces Pension Plan, the Special Forces Indexing Plan, the Provincial Judges and Masters in Chambers Pension Fund, the Provincial Judges Supplementary Retirement Pension Plan, and the Supplementary Retirement Plan for Public Service Managers.
• Government Investments (totaling $33.6 billion) comprising of the General Revenue Fund, the Sustainability Fund, the Debt Retirement Account, the Capital Account, the Alberta Heritage Savings Trust Fund, the Alberta Heritage Foundation for Medical Research Endowment Fund, the Alberta Heritage Scholarship Fund, the Alberta Heritage Science and Engineering Research Endowment Fund, the Ultimate Heir Trust "B" Endowment Fund, Alberta Innovation and Science Prion Research Initiative Fund and other government portfolios.
• Other Investments (totaling $3.5 billion) comprising of funds managed on behalf of the Workers' Compensation Board, the Long Term Disability Fund Bargaining Unit, the Long Term Disability Fund Management, Opted Out and Excluded Employees, and other funds.

IAD has three internal groups: Securities Administration, Investment and Debt Information Systems, and Valuation and Fund Accounting. IAD provides support for investment operations including trade transaction monitoring and processing; fund and portfolio valuation and performance measurement; custodial bank interface and oversight; investment systems oversight and systems support; development and maintenance.

Securities Administration works with the Investment Management Division (IMD) to ensure investment data is captured appropriately in the systems and that the financial transactions are settled with the corresponding brokers and financial institutions. Investment and Debt Information Systems is responsible for all of the software development, systems development and support required within IAD, IMD, and the Treasury Management Division. Valuation and Fund Accounting prepares the weekly valuation of investment portfolios, measures investment performance, and processes pooled fund unit transactions.

IACO is responsible for a risk-based compliance and internal audit program for the investment operation. This group is headed by the Lead Internal Audit and Compliance Officer and is independent of any investment unit. IACO reviews the reliability and integrity of financial, administrative and operational information. This is accomplished by reviewing operations and programs to ascertain whether they are being carried out as planned, and whether the results of operations are consistent with the established goals and objectives.

Treasury Management (TM) is responsible for cash management of short-term borrowing and investments, banking and cash forecasting, and arranging financing for the government and provincial corporations. TM is also responsible for managing the investment of the assets of the General Revenue Fund set aside for specific purposes such as debt retirement, sustainability and capital projects and monitoring and managing loans and guarantees. The division provides financial and banking advice to other government departments including active involvement in the Province's P3 projects. TM is divided into the following three areas: Capital Markets, Loans and Guarantees, Banking and Cash Forecasting.

Risk Management and Insurance (RMI) collaborates with ministries and agencies throughout government to assist them with identifying, measuring, controlling and financing the risk of accidental loss. The program is responsible for all "participants" subject to the Financial Administration Act.

RMI is divided into two areas: Risk Management Operations and Claims Management. Risk Management Operations assists participants to identify, minimize and, where appropriate, finance adverse effects of accidental loss. Claims Management administers all claims covered under the Province's Risk Management Fund and makes recommendations aimed at reducing risk.

Regulatory Agencies

MINISTRY OF FINANCE

AUTOMOBILE INSURANCE RATE BOARD (AIRB) 200, 9515 - 107 Street Edmonton Alberta T5K 2C3 www.airb.gov.ab.ca	AIRB is responsible for setting premiums annually for compulsory automobile coverage and monitoring optional coverages. A copy of the AIRB’s annual report can be obtained from its internet site or by contacting the Edmonton office.
ALBERTA INSURANCE COUNCIL (AIC)  901 TD Tower 10088 - 102 Ave. Edmonton, Alberta T5J 2Z1 www.abcouncil.ab.ca	AIC is responsible for examining, licensing and disciplining insurance agents, brokers and adjusters in Alberta and for investigating consumer complaints against the industry. The Annual Report for AIC is available on its internet site.
CREDIT UNION DEPOSIT GUARANTEE CORPORATION 18th floor 10130 - 103 St. Edmonton, Alberta T5J 3N9 www.cudgc.ab.ca	CUDGC regulates and supervises the business practices of Alberta credit unions and guarantees deposits according to legislation. While CUDGC strives to maintain the Deposit Guarantee Fund at a level that will enable the Corporation to independently provide the 100% deposit guarantee, the Government of Alberta will ensure that CUDGC can fulfill its guarantee obligation. The Corporation provides advice to Alberta credit union boards and management to help improve their skills and help them avoid unsound business practices or other problems. The Annual Report for CUDGC is available on its internet site.
ALBERTA PENSIONS ADMINISTRATION CORPORATION (APA) 3rd Floor 10611 - 98 Ave. Edmonton, Alberta T5K 2P7 www.apaco.ab.ca	APA provides pension administration services to boards, employers, members and pensioners of Alberta public sector pension plans. Those pension services consist of the collection of pension contributions, maintenance of member accounts, payments of pension benefits and provision of information. Services are provided to 472 employers, approximately 187,000 active and deferred members, and 58,000 pensioners. APA's Annual Report is available on its internet site.
ALBERTA LOCAL AUTHORITIES PENSION PLAN CORP. P.O. Box 1315 Edmonton, Alberta T5J 2M8 www.lapp.ab.ca	Alberta Local Authorities Pension Plan Corp. (LAPP Corp.) was created in December of 2005 for the purpose of providing support to the Local Authorities Pension Plan Board of Trustees (LAPP Board) in the execution of their legislated objects set out in the Public Service Pension Plans Act. LAPP Corp. provides analysis and recommendations on matters related to the legislative obligations of the LAPP Board as well as high-level strategic guidance on broader issues that may impact the plan. In fulfilling these roles, LAPP Corp. works closely with the LAPP Board, APA, and other LAPP stakeholders.
ATB FINANCIAL (ATB) 9888 Jasper Ave. Edmonton, Alberta T5J 1P1 www.atb.com	ATB Financial (ATB) is a $17.6 billion, full-service financial institution based in Edmonton, Alberta. As a leading financial services provider to individuals, small business and the agri-industry in Alberta, it serves 600,000 Albertans in 242 communities through various branches and agencies, as well as through a Customer Contact Centre and the Internet. The repayment of all deposits held by ATB is guaranteed by the Province. ATB Financial’s Annual Report is available on its internet site.
ALBERTA CAPITAL FINANCE AUTHORITY (ACFA) 2450 Canadian Western Bank Place 10303 Jasper Avenue Edmonton, Alberta T5J 3N6 www.acfa.gov.ab.ca	ACFA is a non-profit authority established under the authority of the Alberta Capital Finance Authority Act. Its mission is to provide local authorities within the Province with flexible funding for capital projects at the lowest possible cost while still maintaining the viability of the ACFA. In order to deliver the lowest possible funding cost, ACFA debt obligations are guaranteed by the Province. ACFA's Annual Report is available on its internet site.

• Alberta marked its centennial year with the beginning of a new fiscal era for the province. Budget 2005 was the first budget in 12 years in which resources were not required for debt reduction after Alberta eliminated its accumulated debt in 2004-05.
• Alberta recorded a surplus for the twelfth consecutive year. As reported in the 2005-06 Government of Alberta Annual Report, revenue exceeded expense by $8.7 billion, about $7 billion higher than budgeted. The increase was primarily due to record resource revenue of $14.3 billion.
• Alberta's economy out-performed every other province for the second-straight year, growing by 4.5 per cent in 2005. Employment grew by almost 27,000, or 1.5 per cent, as Alberta recorded the lowest unemployment rate among provinces at 3.9 per cent. Albertans had the highest personal disposable income per capita in Canada, 19 per cent above the national average. High energy prices encouraged strong exploration and development activity in Alberta's energy sector, while retail sales increased by 12 per cent, almost double the Canadian average. Housing starts reached a 27-year high, manufacturing shipments increased by 12 per cent and the agriculture sector experienced some improvement with the opening of the U.S. border to live cattle under the age of 30 months. For the ninth consecutive year, Alberta attracted the highest net interprovincial migration in Canada.
• Of the $8.7 billion surplus allocated to the Sustainability Fund, $3.6 billion was transferred to the Capital Account to help pay for capital projects in future years. Another $2.7 billion was deposited in the Heritage Fund and other endowments. The remaining surplus was left in the Sustainability Fund. Including the cash to be transferred from better than forecast fourth quarter results, assets in the Sustainability Fund will be $5.2 billion, $2.7 billion higher than the minimum target of $2.5 billion.
• Over $1.3 billion was provided to Albertans through the Alberta 2005 Resource Rebate.
• In 2005-06, over $1 billion was withdrawn from the Alberta Sustainability Fund to pay for emergencies/disasters such as flooding in southern Alberta, forest fires, mountain pine beetle infestations, and BSE as well as natural gas rebates.
• During the 2005-06 fiscal period, all endowment funds exceeded target performance measures, including the Heritage Savings Trust Fund which posted an overall rate of return of 15.2 per cent. The positive performance reflects strong economic growth in domestic and international markets, prudent investment management and careful asset mix selection.
• Alberta maintained its triple A credit rating, the highest among all the provinces. Rating agencies cite Alberta's strong financial position, the government's commitment to debt repayment and its record of balancing budgets as the key reasons for the top rating.
• The government conducted a review of the tax system in 2005-06, examining a wide range of issues including competitiveness with other jurisdictions, ongoing revenue needs and priorities for future tax cuts. The review concluded Alberta's tax system serves the province well for the most part, with Albertans continuing to enjoy the lowest overall tax load in Canada. Two priorities identified for future tax cuts were further reductions to the general corporate income tax rate and personal tax relief for lower and middle income Albertans. The government acted on these priorities in Budget 2006, reducing the corporate income tax rate from 11.5 per cent to 10 per cent, increasing health care insurance premium thresholds, adjusting the personal income tax system to prevent inflation from increasing taxes, and raising basic and spousal credit amounts by an additional $100 above the indexation adjustment.
  

• The Alberta Family Employment Tax Credit was enhanced by increasing payment amounts, expanding it to include more children, and indexing benefits. Families are now able to receive up to $550 for the first child, $500 for the second, $300 for the third and $100 for the fourth. The government also began to provide assistance to senior homeowners to protect them from increases to school property taxes.

• The provincial uniform school property tax rates were reduced by 5 per cent in 2005, marking the twelfth straight year rates have been either reduced or frozen.

• The hotel room tax was reduced from 5 per cent to 4 per cent and converted into a tourism levy. Annual tourism funding is now based on the revenue received under the program.

• Through the revision of returns and claims, the Tax and Revenue Administration (TRA) Division of Finance collects overdue accounts to recover tax revenues that otherwise may be lost. TRA's efforts, which had associated costs of $24.9 million, obtained an additional $296.5 million of net revenue, essentially recovering $12 for every $1 spent. Approximately 93.7 per cent of tax revenue was obtained through voluntary compliance. This year's positive result was influenced by large voluntary revenue increases related to strong economic activity and expanded audit coverage resulting in better self-compliance.

• A new Fuel Tax Act was introduced and passed. The new act now awaits proclamation pending the development of the new Fuel Tax Regulations.
  

• A new act, the Unclaimed Personal Property and Vested Property Act, was introduced but not passed yet. The new act will establish a repository for unclaimed property and clear rights, obligations and procedures for managing vested property in Alberta.
  
• Premiums on mandatory auto insurance were reduced by 10 per cent in 2005. A 6 per cent reduction was introduced on July 1. An additional 4 per cent reduction came into effect November 1, following four days of public meetings with stakeholder groups and Alberta residents in June. The total premium reduction since reforms were introduced is 15 per cent.
  
• Changes to the Fiscal Responsibility Act established the Debt Retirement Account (DRA) within the General Revenue Fund. The amount of financial assets in the DRA at fiscal year-end must be equal or greater than the amount of accumulated debt and can only be used for debt repayment. As of March 31, 2006, Alberta's accumulated debt, less the cash set aside in the DRA, was zero.

• Alberta Finance has committed to review and rewrite the statutory provisions of the Insurance Act related to contracts by 2006-07. Stakeholders were consulted and the Government of Alberta is working in conjunction with the Government of British Columbia. The Pension, Insurance and Financial Institutions division will proceed with amendments to the Insurance Act based on these submissions and other relevant factors.

• The Alberta Government continued to work with other provinces and territories on the commitment to develop highly harmonized securities legislation. In September 2005, amendments to Canada's securities regulatory system came into effect, making it easier for businesses to access capital markets in most provinces and territories. The amendments formed the first step in implementing a passport system agreed to under a provincial/territorial Memorandum of Understanding signed in September 2004.

• Legislation was introduced to enhance protection of investors against false and misleading information issued by companies operating in Alberta's capital markets. Bill 25, an amendment to the Securities Act, grants secondary market investors the statutory right to sue public companies in Alberta that provide misleading disclosure or fail to make timely disclosure.

• ATB Financial had a net income of $199 million for the year. Total assets grew to $17.6 billion, up 14 per cent from the previous year. Retained earnings at March 31, 2006 were in excess of $1.3 billion.

• Expenses of the Ministry of Finance were $12 million, or 1.4 per cent under budget for 2005-06 due to such factors as lower manpower expenses, lower contracted services costs and lower interest costs.

Report of the Auditor General on the Results of Applying Specified Auditing Procedures to Performance Measures

To the Members of the Legislative Assembly:

Management is responsible for the integrity and objectivity of the performance results included in the Ministry of Finance's 2005-06 Annual Report. My responsibility is to carry out the following specified auditing procedures on performance measures in the annual report. I verified:

Completeness

1. Performance measures and targets matched those included in Budget 2005. Actual results are presented for all performance measures.

Reliability

2. Information in reports from external organizations, such as Statistics Canada, matched information that the Ministry used to calculate the actual results.
3. Information in reports that originated in the Ministry matched information that the Ministry used to calculate the actual results. In addition, I tested the processes the Ministry used to compile the results.

Comparability and Understandability

4. Actual results are presented clearly and consistently with the stated methodology and are presented on the same basis as targets and prior years' information.

I found no exceptions when I performed these procedures.

As my examination was limited to these procedures, I do not express an opinion on whether the set of measures is relevant and sufficient to assess the performance of the Ministry in achieving its goals.

[original signed]

Fred J. Dunn, FCA
Auditor General

• Go to Part 3:  Results Analysis
• Go to Part 1:  Preface