Thank you, Mr. Speaker.
2. GNWT Consolidated Statement of Financial
Position as at March 31, 2012
The statement of financial position is the government’s “balance sheet.” Four key figures describe the financial position of the GNWT: cash resources, net debt position, non-financial assets, and the accumulated surplus.
a. Cash resources
The Standing Committee on Government Operations noted that for 2011-12, the total for cash and cash equivalents or short-term investments, as reported under financial assets, decreased to $68 million as at March 31, 2012, from $117 million in 2011. The committee learned during the review that the decrease is due to the repayment of $94 million of the NWT Opportunities Fund loans to the Government of Canada, offset by a $37 million increase in the bank overdraft. As well, $23 million of the Housing Corporation’s temporary debt was reclassified as cash and cash equivalents, because of a decline in days to maturity.
According to Note 3, the GNWT increased its short-term investment portfolio over the year from about $5.8 million to over $23 million, but has decreased its cash holdings to $44 million from nearly $112 million. The committee considers holding less cash and investing a greater proportion of the total in safe short-term instruments to be consistent with prudent financial management on the part of the GNWT.
Also under financial assets, loans receivable decreased by $32 million, from $95 million in 2011 to $63 million in 2012. This decrease was attributed mainly to the repayment of a loan from the NWT Opportunities Fund. According to Note 8, a $34 million loan to Discovery Air at 10 percent interest payable monthly was due February 1, 2013. It was fully repaid, instead, in 2011-12. The standing committee had many questions for both the Auditor General’s staff and the comptroller general about this loan repayment, as the early settlement represents a significant amount of lost interest to the GNWT.
The NWT Opportunities Fund was established by the GNWT to receive and invest the Northwest Territories’ share of immigrant investor funds received under the federal Immigrant Investor Program. Cash balances were pooled with the government’s surplus cash and invested in short-term securities, yielding 1.10 percent interest for the year ended March 31, 2012.
In December 2011 the fund was directed to transfer the maximum amount possible back to the federal government no later than March 31, 2012, three years earlier than originally anticipated. In January of 2012, the fund was also directed to negotiate a settlement of the fund’s loan to Discovery Air by the same date. This loan was the only one outstanding to the fund.
Under the settlement, Discovery Air repaid approximately $32 million, and the fund recorded a loss on the settlement of over $2 million. The fund repaid the long-term debt owing to the federal government of approximately $131 million and also wrote off loan origination fees of over $3 million. The fees were paid, even though the government no longer had the benefit of the loan fund. This left
a little over $8 million in the NWT Opportunities Fund, which was to be expended to support economic development initiatives in the NWT. As the Auditor General’s staff put it, the NWT Opportunities Fund is now basically a bank account, and it will not be audited separately for 2012-13.
The Minister of Finance has told the committee and the Legislative Assembly that the NWT Opportunities Fund is being wound down. The government’s rationale is that a new definition of long-term borrowing was negotiated between the federal and territorial governments as a condition of increasing the GNWT’s borrowing limit, and the Opportunities Fund counted towards the limit under the new definition.
The standing committee recognizes the importance of additional borrowing room to meet the Northwest Territories’ critical infrastructure needs. However, the committee considers that that the price of this higher credit limit was surprisingly high, at over $5 million in foregone interest and fees. Members do not think the government got a particularly good deal on the new borrowing cap. At this point, the transactions have been made, and the committee can only express a final note of regret that the borrowing limit increase came at such a heavy one-time cost.
b. Net debt
The net debt position of the government is calculated as the difference between its liabilities and its financial assets in the Statement of Change in Net Debt. Net debt was $458 million as at March 31, 2012. This amount is $36 million less than budgeted for the year, but represents an increase of $76 million over the 2011 actual of $382 million. The GNWT was in the black in 2011-2012, with a small surplus of $6 million. The increase in the debt is accounted for mainly by the acquisition of tangible capital assets.
c. Non-financial
assets
Schedule A of the public accounts lists the non-financial assets of the government. These are mainly tangible capital assets, valued at approximately $1.6 billion in 2011-2012. Nearly half of the value of the GNWT’s tangible capital assets is in buildings; works and work-in-progress account for most of the rest.
d. Accumulated surplus
The accumulated surplus is the net debt plus the value of non-financial assets, an indicator which represents the net assets of the government. The GNWT’s accumulated surplus for 2011-2012 was $1.15 billion. This amount was $6 million more than the previous year, as a result of the operating surplus of about $3 million and net income from the NWT Hydro Corporation, also $3 million.
3. GNWT Consolidated Statement of Operations
and Accumulated Surplus for the year ended March 31, 2012
The Public Accounts Statement of Operations and Accumulated Surplus is the GNWT’s “income statement.” It reports the surplus or deficit from operations for the year, showing the revenues for the year, the cost of services provided, and the difference between them.
Taxation and general revenues were about $60 million higher than forecast, though still $11 million lower than the previous year. Corporate and personal income taxes were down by approximately $25 million from 2010-11. Expenses, on the other hand, were almost $60 million more than forecast and $50 million more than the previous year. Revenues exceeded budget by 5 percent and expenses by 4 percent. The bulk of the additional expenses are accounted for by the compensation and benefits object, according to Note 22. The infrastructure departmental envelope was over budget by approximately $35 million, while the education envelope saw the greatest year over year increase in dollar amount, approximately $19 million.
The annual surplus for 2011-12 was $6.4 million, compared to a forecast deficit of $4.8 million and the prior year’s deficit of $2.4 million. The annual surplus plus the accumulated surplus from the previous year also produces the amount for the accumulated surplus at the end of the year, $1.15 billion. During the review, members noted a forecasting error on the part of the Department of Finance: revenues from sales of items such as petroleum products and liquor should have been higher. Actual sales were three times forecast. This erroneous forecast did not affect the bottom line.
Mr. Speaker, I would like to pass the floor over to Member Yakeleya for continuation of this report. Thank you, Mr. Speaker.