Province Of Manitoba 18-K/A Annual report (foreign governments) (amended)

PROVINCE OF MANITOBA
NOTES TO THE QUARTERLY FINANCIAL REPORT
FOR THE NINE MONTHS – APRIL TO DECEMBER 2004

This report presents the unaudited financial results of the Province of Manitoba for the third quarter of the 2004/05 fiscal year.

The report is based on the organizational structure of departments established in the 2004/05 Estimates, including a change in the capital accounting policy to allow for capitalization of infrastructure. The comparative data provided for the 2003/04 fiscal year has been restated to reflect the current organizational structure of departments as well as the change in accounting policy.

THIRD QUARTER – ACTUAL TO ESTIMATE

The third quarter result of a net expenditure (excess expenditure over revenue) of $145.0 million was a $96.2 million improvement from the projection of $241.2 million. The improvement reflects actual expenditures being $66.2 million less than estimated, primarily due to differences in the timing of payments, and revenue being $30.0 million higher than estimated. For the period actual program expenditures were $59.0 million less than estimated while public debt costs were $7.2 million lower.

THIRD QUARTER COMPARED TO PREVIOUS YEAR’S RESULTS

Total revenues were $274.9 million more than the same period last year, primarily due to higher own source revenue to date.

Total expenditures were $196.3 million higher than the previous year with the largest increases continuing to occur in the departments of Health, Family Services and Housing, Education, Citizenship and Youth and Advanced Education and Training.

In total, the third quarter net expenditure was $78.6 million lower than for the same period last year.

CAPITAL INVESTMENT

Departmental expenditures for tangible capital assets were $90.2 million, $15.1 million less than estimated primarily due to timing variances. Expenditures were $5.2 million higher than for the same period last year. As noted previously, the 2003/04 capital investment expenditures were restated to reflect capitalization of infrastructure in 2004/05.

DEBT/PENSION REPAYMENT

The 2004 Budget provides for a $96.4 million contribution to the Debt Retirement Fund. As required by the balanced budget legislation, an allocation committee determines the share of those funds directed to pension or general purpose debt. In the 2004 Budget plan, the 2004/05 allocation is $75.0 million to the pension liability and $21.4 for general purpose debt. The debt retirement provisions of the Act also require that at least once every five years the Fund be collapsed and all amounts be allocated to the Province of Manitoba Sinking Fund (debt) or to the Pension Asset Fund. Therefore, $202.0 million has been applied against general purpose debt, comprised of the existing Fund balance plus $21.4 million from the 2004/05 allocation.

More recently, and as a result of changes to the accounting policy at the end of 2003/04 that affected the province’s accumulated deficit, the 2004/05 contribution to the Debt Retirement Fund is now forecast to be $98.5 million, an increase of $2.1 million from the 2004 Budget.

Province of Manitoba — Financial Quarterly

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YEAR END PROJECTION

As indicated in the second quarter report, updated federal estimates for Equalization and the unanimous agreement of First Ministers for higher Canada Health and Social Transfers (CHST) have resulted in the 2004/05 forecast for transfer payments being significantly higher than budget. Equalization payments are forecast to be $184.0 million higher than budget as a result of changes included in the legislation that is currently before the House of Commons and $79.2 million higher due to changes to in-year entitlements. CHST payments will increase by $205.1 million, primarily as a result of Canada pre-funding the first five years of the federal commitment to reduce waiting times ($155.1 million) as well as other health related programs.

Own source revenue is currently forecast to be $80.6 million higher than budget, primarily due to an improvement in Corporation Income Tax and revenue from Manitoba Lotteries Corporation. These increases are partially offset by lower forecasts for Retail Sales Tax and Individual Income Tax. In total, revenues are projected to be $551.1 million higher than the budget level.

Expenditures are projected to be higher than budget levels, primarily as a result of continuing upward pressure in health care ($84.4 million), the impact of changes in accounting standards in the current year ($34.7 million), pressures in the Department of Family Services and Housing ($22.7 million), the on-going impact of the BSE crisis ($19.2 million) and the education tax reduction on farmland ($13.1 million). In total, expenditures are projected to be $237.7 million higher than budget.

The expenditure forecast includes all of the requirements that were approved in the special warrant in December, 2004 and the recently approved general special warrant.

The year end positive balance for 2004/05 is forecast to be $314.2 million reflecting the increases in transfer payments received from Canada that will be deposited into the Fiscal Stabilization Fund.

COMPLIANCE WITH BALANCED BUDGET LEGISLATION

The Balanced Budget, Debt Repayment and Taxpayer Accountability Act includes a requirement for the Minister of Finance to report on compliance with the Act in the government’s Third Quarter Financial Report (for the period ending December 31). Based on the year projection of a $314.2 million positive balance, the government will be in compliance with this Act.

FISCAL STABILIZATION FUND

No draw on the Fund is currently forecast, which is unchanged from the 2004 Budget. The Fund is projected to have a balance of $394.7 million at the end of the fiscal year. The year end balance is $289.2 million higher than the $105.5 million included in the Budget primarily as a result of increases in transfers from Canada, including the advance payments noted previously. The status of the Fiscal Stabilization Fund is provided on page 12.

BORROWING ACTIVITY

The original estimate of borrowing requirements identified in the 2004 Budget was $2,336.3 million including refinancing, funding for Manitoba Hydro, capital investments, Health’s capital programs and new self sustaining requirements. This requirement has increased to $2,582.4 million to accommodate debt for various programs called prior to maturity.

For the period April 1, 2004 to December 31, 2004, $223.6 million was raised through the issue of Builder Bonds and $2,009.4 million was raised in the public market.

Province of Manitoba — Financial Quarterly

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PROVINCE OF MANITOBA
OPERATING FUND
STATEMENT OF REVENUE AND EXPENDITURE
FOR THE NINE MONTHS ENDED DECEMBER 31, 2004
(with comparative figures for December 31, 2003)
(UNAUDITED)

2003/04			2004/05			INCREASE				2004/05
ACTUAL			ACTUAL			(DECREASE)				ACTUAL			ESTIMATE			VARIANCE
(thousands of dollars)										(thousands of dollars)
									Revenue
	3,365,706			3,634,419			268,713		Own Source Revenue		3,634,419			3,598,352			36,067
	1,852,347			1,858,516			6,169		Government of Canada		1,858,516			1,864,569			(6,053	)
	5,218,053			5,492,935			274,882		Total Revenue		5,492,935			5,462,921			30,014
									Expenditure
	5,211,224			5,424,785			213,561		Program Expenditure		5,424,785			5,483,804			(59,019	)
	230,465			213,174			(17,291	)	Debt Servicing		213,174			220,315			(7,141	)
	5,441,689			5,637,959			196,270		Total Expenditure		5,637,959			5,704,119			(66,160	)
	(223,636	)		(145,024	)		78,612		Net Revenue/(Expenditure)		(145,024	)		(241,198	)		96,174
									Interfund Transfers
	—			(96,357	)		(96,357	)	Debt/Pension Repayment		(96,357	)		(96,357	)		—
	—			—			—		Fiscal Stabilization Fund		—			—			—
	—			(96,357	)		(96,357	)	Total Interfund Transfers		(96,357	)		(96,357	)		—
									Balance Under Balanced
	(223,636	)		(241,381	)		(17,745	)	Budget Legislation		(241,381	)		(337,555	)		96,174

Province of Manitoba — Financial Quarterly

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PROVINCE OF MANITOBA
OPERATING FUND
STATEMENT OF REVENUE
FOR THE NINE MONTHS ENDED DECEMBER 31, 2004
(with comparative figures for December 31, 2003)
(UNAUDITED)

2003/04		2004/05		INCREASE				2004/05
ACTUAL		ACTUAL		(DECREASE)				ACTUAL		ESTIMATE		VARIANCE
(thousands of dollars)								(thousands of dollars)
							Taxation:
							Finance
	1,257,509		1,307,540		50,031		- Individual Income Tax		1,307,540		1,309,005		(1,465	)
	198,376		243,552		45,176		- Corporation Income Tax		243,552		242,940		612
	104,278		116,226		11,948		- Corporation Capital Tax		116,226		111,317		4,909
	109,325		103,727		(5,598	)	- Gasoline Tax		103,727		105,187		(1,460	)
	38,935		40,680		1,745		- Insurance Corporations Tax		40,680		39,896		784
	15,179		19,581		4,402		- Land Transfer Tax		19,581		17,152		2,429
	177,996		187,370		9,374		- Levy for Health and Education		187,370		184,945		2,425
	17,887		20,000		2,113		- Mining Tax		20,000		20,000		—
	46,962		53,573		6,611		- Motive Fuel Tax		53,573		53,662		(89	)
	725,616		764,857		39,241		- Retail Sales Tax		764,857		760,961		3,896
	39,987		40,845		858		- Revenue Act, 1964, Part 1		40,845		40,894		(49	)
	130,580		140,736		10,156		- Tobacco Tax		140,736		138,185		2,551
	2,191		2,191		—		- Environmental Protection Tax		2,191		2,169		22
	71		71		—		- Other		71		72		(1	)
	2,864,892		3,040,949		176,057				3,040,949		3,026,385		14,564
							Industry, Economic Development & Mines
	2,290		2,197		(93	)	- Oil and Natural Gas Tax		2,197		2,057		140
	2,867,182		3,043,146		175,964				3,043,146		3,028,442		14,704
							Other Revenue:
	17,918		23,606		5,688		Justice		23,606		24,005		(399	)
	69,004		83,897		14,893	��	Transportation and Government Services		83,897		81,921		1,976
	45,609		75,152		29,543		Water Stewardship - Water Power Rentals		75,152		70,055		5,097
	181,000		197,000		16,000		Manitoba Lotteries Corporation		197,000		187,000		10,000
	117,200		130,000		12,800		Manitoba Liquor Control Commission		130,000		118,100		11,900
	67,793		81,618		13,825		Other Departments		81,618		88,829		(7,211	)
	498,524		591,273		92,749				591,273		569,910		21,363
	3,365,706		3,634,419		268,713		Total Own Source Revenue		3,634,419		3,598,352		36,067

Province of Manitoba — Financial Quarterly

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PROVINCE OF MANITOBA
OPERATING FUND
STATEMENT OF REVENUE
FOR THE NINE MONTHS ENDED DECEMBER 31, 2004
(with comparative figures for December 31, 2003)
(UNAUDITED)

2003/04		2004/05		INCREASE				2004/05
ACTUAL		ACTUAL		(DECREASE)				ACTUAL		ESTIMATE		VARIANCE
(thousands of dollars)								(thousands of dollars)
							Government of Canada:
	1,085,356		1,136,317		50,961		Equalization		1,136,317		1,136,317		—
	576,088		600,407		24,319		Canada Health and Social Transfer (CHST)		600,407		601,524		(1,117	)
	90,679		—		(90,679	)	- CHST Supplement		—		—		—
	27,456		41,194		13,738		Health Reform Fund		41,194		41,238		(44	)
							Other Health Funds
	2,048		1,660		(388	)	- Primary Health Care Transition Fund		1,660		2,328		(668	)
	10,467		1,987		(8,480	)	- Medical Equipment Fund		1,987		2,304		(317	)
	1,108		3,231		2,123		- Diagnostic Medical Equipment Fund		3,231		7,230		(3,999	)
	—		14,618		14,618		- Public Health Immunization Fund		14,618		14,619		(1	)
	13,623		21,496		7,873		Total Other Health Funds		21,496		26,481		(4,985	)
	59,145		59,102		(43	)	Other Departments		59,102		59,009		93
	1,852,347		1,858,516		6,169		Total Government of Canada		1,858,516		1,864,569		(6,053	)
	5,218,053		5,492,935		274,882		Total Revenue		5,492,935		5,462,921		30,014

Province of Manitoba — Financial Quarterly

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PROVINCE OF MANITOBA
OPERATING FUND
STATEMENT OF PART A – OPERATING EXPENDITURE
FOR THE NINE MONTHS ENDED DECEMBER 31, 2004
(with comparative figures for December 31, 2003)

(UNAUDITED)

2003/04		2004/05		INCREASE				2004/05
ACTUAL		ACTUAL		(DECREASE)				ACTUAL		ESTIMATE		VARIANCE
(thousands of dollars)								(thousands of dollars)
	24,729		18,275		(6,454	)	Legislative Assembly		18,275		19,030		(755	)
	2,222		2,181		(41	)	Executive Council		2,181		2,246		(65	)
	20,968		21,530		562		Aboriginal and Northern Affairs		21,530		22,341		(811	)
	389,538		410,147		20,609		Advanced Education and Training		410,147		406,276		3,871
	72,816		61,247		(11,569	)	Agriculture, Food and Rural Initiatives		61,247		87,220		(25,973	)
	3,206		3,564		358		Civil Service Commission		3,564		3,643		(79	)
	77,511		79,415		1,904		Conservation		79,415		79,254		161
	49,349		52,123		2,774		Culture, Heritage and Tourism		52,123		53,173		(1,050	)
	794,841		844,869		50,028		Education, Citizenship and Youth		844,869		833,566		11,303
	43,618		42,136		(1,482	)	Employee Pensions and Other Costs		42,136		43,050		(914	)
	41,345		39,453		(1,892	)	Energy, Science and Technology		39,453		41,213		(1,760	)
	623,709		674,906		51,197		Family Services and Housing		674,906		682,891		(7,985	)
	81,310		82,642		1,332		Finance - Departmental Costs		82,642		83,490		(848	)
	230,465		213,174		(17,291	)	Finance - Debt Servicing Costs		213,174		220,315		(7,141	)
	2,284,402		2,432,823		148,421		Health		2,432,823		2,442,785		(9,962	)
	13,593		14,969		1,376		Healthy Child Manitoba		14,969		15,586		(617	)
	14,929		14,799		(130	)	Industry, Economic Development and Mines		14,799		15,503		(704	)
	82,689		72,565		(10,124	)	Intergovernmental Affairs and Trade		72,565		93,895		(21,330	)
	177,673		185,842		8,169		Justice		185,842		188,282		(2,440	)
	20,722		21,273		551		Labour and Immigration		21,273		21,475		(202	)
	523		563		40		Seniors Directorate		563		571		(8	)
	7,955		7,995		40		Sport		7,995		8,034		(39	)
	274,021		280,051		6,030		Transportation and Government Services		280,051		281,290		(1,239	)
	35,860		32,303		(3,557	)	Water Stewardship		32,303		33,739		(1,436	)
	1,717		1,502		(215	)	Enabling Appropriations		1,502		1,982		(480	)
	71,978		27,612		(44,366	)	Other Appropriations		27,612		23,269		4,343
	5,441,689		5,637,959		196,270		Total Expenditure		5,637,959		5,704,119		(66,160	)

Province of Manitoba — Financial Quarterly

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PROVINCE OF MANITOBA
OPERATING FUND
STATEMENT OF PART B – CAPITAL INVESTMENT
FOR THE NINE MONTHS ENDED DECEMBER 31, 2004
(with comparative figures for December 31, 2003)
(UNAUDITED)

2003/04		2004/05		INCREASE				2004/05
ACTUAL		ACTUAL		(DECREASE)				ACTUAL		ESTIMATE		VARIANCE
(thousands of dollars)								(thousands of dollars)
							General Assets
	81		36		(45	)	Legislative Assembly		36		61		(25	)
	—		423		423		Advanced Education and Training		423		815		(392	)
	28		27		(1	)	Agriculture, Food and Rural Initiatives		27		150		(123	)
	266		378		112		Conservation		378		588		(210	)
	—		—		—		Culture, Heritage and Tourism		—		150		(150	)
	488		5,392		4,904		Energy, Science and Technology		5,392		6,335		(943	)
	1,308		655		(653	)	Family Services and Housing		655		886		(231	)
	268		355		87		Finance		355		340		15
	1,020		1,159		139		Health		1,159		1,807		(648	)
	713		1,187		474		Justice		1,187		1,457		(270	)
	12,572		12,905		333		Transportation and Government Services		12,905		14,524		(1,619	)
	2,817		213		(2,604	)	Enabling Appropriations		213		411		(198	)
	19,561		22,730		3,169		Total General Assets		22,730		27,524		(4,794	)
							Infrastructure Assets
	437		1,437		1,000		Conservation		1,437		1,976		(539	)
	62,754		64,081		1,327		Transportation and Government Services		64,081		72,000		(7,919	)
	2,239		1,948		(291	)	Water Stewardship		1,948		3,800		(1,852	)
	65,430		67,466		2,036		Total Infrastucture Assets		67,466		77,776		(10,310	)
	84,991		90,196		5,205		Total Capital Assets		90,196		105,300		(15,104	)

Province of Manitoba — Financial Quarterly

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PROVINCE OF MANITOBA
OPERATING FUND
STATEMENT OF VALUATION AND PURPOSE OF
DIRECT AND GUARANTEED DEBT OUTSTANDING
DECEMBER 31, 2004
(with comparative figures for March 31, 2004)
(UNAUDITED)

	Canadian Dollar		Canadian Dollar		Increase/(Decrease)
	Valuation		Valuation		December 31/04
	(Note 1)		(Note 1)		over
	December 31/04		Mar 31/04		Mar 31/04
	(thousands of dollars)
Direct Debt Payable in:
Canadian Dollars		13,796,979		13,120,739		676,240
Issues Hedged to Canadian Dollars		2,982,191		3,210,936		(228,745	)
U.S. Dollars		2,046,120		2,227,850		(181,730	)
Issues Hedged to U.S. Dollars		879,774		957,913		(78,139	)
Total Direct Debt		19,705,064		19,517,438		187,626
Guaranteed Debt Payable in:
Canadian Dollars		713,589		910,083		(196,494	)
U.S. Dollars		—		12,450		(12,450	)
Total Guaranteed Debt		713,589		922,533		(208,944	)
Total Direct and Guaranteed Debt (note 2)		20,418,653		20,439,971		(21,318	)
Less: Sinking Fund Investments		4,511,308		4,580,312		(69,004	)
Less: Debt Retirement Fund		—		180,325		(180,325	)
Net Direct and Guaranteed Debt (note 3)		15,907,345		15,679,334		228,011

Province of Manitoba — Financial Quarterly

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PROVINCE OF MANITOBA
OPERATING FUND
STATEMENT OF VALUATION AND PURPOSE OF
DIRECT AND GUARANTEED DEBT OUTSTANDING
DECEMBER 31, 2004
(with comparative figures for March 31, 2004)

(UNAUDITED)

NOTES:

1.	The Canadian Dollar Valuation is calculated using the foreign currency exchange rates in effect at December 31, 2004 and at March 31, 2004. As at December 31, 2004, the US dollar exchange rate was $1.2036 ($1.3105 at March 31, 2004).
2.	Direct and Guaranteed Debt are payable in Canadian and U.S. dollars. As at December 31, 2004, total Gross Debt was payable 86% in Canadian dollars and 14% in U.S. dollars. Of this total, General Government Program Debt and Other Debt was 100% payable in Canadian dollars. Manitoba Hydro Debt was payable 60% in Canadian dollars (57% at March 31, 2004) and 40% in U.S. dollars (43% at March 31, 2004).
3.	The above debt was issued for the following purposes:

	December 31, 2004					March 31, 2004
	($ Thousands)			($ per capita)		($ Thousands)			($ per capita)
				(Note 4)					(Note 4)
General Government Programs		6,574,499			5,604		6,545,810			5,607
The Manitoba Hydro-Electric Board		6,678,631			5,693		6,648,603			5,695
Capital Investments		351,667			300		321,284			275
Manitoba Hospital Facilities		522,000			445		499,000			427
Government Enterprises and Other		484,359			413		477,642	(Note 5)		409
Other		1,296,189			1,105		1,186,995			1,017
Total		15,907,345	(Note 6)		13,560		15,679,334			13,430

4.

Per Capita data is based upon population figures as at October 1, 2004 and April 1, 2004 as reported by Statistics Canada.

5.

In 2003/04, the Province, in accordance with Canadian GAAP, changed its accounting treatment for certain amounts owed to the Federal Government and for debentures issued by certain school boards and hospitals, the debt service of which is paid with future grants from the Government. Amounts owed to the Federal Government over time, which were previously treated as accounts payable are now accounted for as loans payable. Debentures issued by school boards and hospitals, were previously recognized as an expense over the life of the debentures as grants for debt service were made and held by the Provincial Sinking Fund and Manitoba Public Insurance (MPI), (a Crown corporation). Now the obligation to fund debt principal repayments is expensed in full at the time the debenture is issued. Any of these debentures held by MPI are recorded as “Loans Payable to Government Enterprises”. The Government also recognized a loan payable in respect of the pension liability of the Manitoba Liquor Control Commission.

6.   General Government Program Debt increased by $28.7 million due to the funding of disaster related items offset by the annual contribution to the Debt Retirement Fund and matured debt not yet funded. All other debt increased $199.3 million due to the continued consolidation of Hospital Facilities debt on to the Province’s records, Provincial Part B Capital requirements, an increase in loans payable to MPI for School Division debentures purchased and Manitoba Hydro’s new capital requirements offset by a net increase in Manitoba Hydro’s sinking fund together with the impact of a stronger Canadian dollar. Manitoba Hydro’s U.S. dollar revenues are sufficient to pay the interest and principal on all outstanding U.S. dollar debt.

7.   Manitoba’s net general purpose debt to GDP ratio is projected to be 16.4% in 2004/05, down from 17.2% in 2003/04 and from 20.8% in 1999/2000. GDP data reflects the latest information available from the Manitoba Bureau of Statistics.

Province of Manitoba – Financial Quarterly

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PROVINCE OF MANITOBA
DEBT RETIREMENT FUND
PROJECTION FOR THE YEAR ENDING MARCH 31, 2005
(with comparative figures for March 31, 2004)

(UNAUDITED)

	2004/05			2003/04
	Projection			Actual (1)
	(thousands of dollars)
Fund Balance, Beginning of Year		180,325			151,850
Revenue:
Interest Earnings		1,861			7,118
Transfer from Operating Fund		98,500			96,357
		100,361			103,475
Expenditure:
Transfer to Operating Fund for:
- Pension Assets Fund (2)		(78,712	)		(75,000	)
- Sinking Fund Obligation (3)		(201,974	)		—
		(280,686	)		(75,000	)
Fund Balance, End of Year		—			180,325

Notes:
(1)	Based on 2003/04 Public Accounts
(2)	The actual allocation of funds for 2004/05 was determined by the Allocation Committee as per Balanced Budget, Debt Repayment and Taxpayer Accountability Act.
(3)	Based on debt retirement provision of the Act that at least once every five years, the Fund be collapsed and all amounts allocated to the Sinking Fund or Pension Assets Fund.

Province of Manitoba – Financial Quarterly

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PROVINCE OF MANITOBA
PENSION ASSETS FUND
PROJECTION FOR THE YEAR ENDING MARCH 31, 2005
(with comparative figures for March 31, 2004)

(UNAUDITED)

	2004/05		2003/04
	Projection		Actual (1)
	(thousands of dollars)
Fund Balance, Beginning of Year		267,157		150,707
Revenue:
Interest Earnings		31,250		38,451
Transfer from Debt Retirement Fund (2)		78,712		75,000
Transfer from Departments and Crown Corporations		5,963		2,999
		115,925		116,450
Fund Balance, End of Year		383,082		267,157

Notes:
(1)	Based on 2003/04 Public Accounts
(2)	The actual allocation of funds for 2004/05 was determined by the Allocation Committee as per the Balanced Budget, Debt Repayment and Taxpayer Accountability Act.

Province of Manitoba – Financial Quarterly

12

PROVINCE OF MANITOBA
FISCAL STABILIZATION FUND
PROJECTION FOR THE YEAR ENDING MARCH 31, 2005
(with comparative figures for March 31, 2004)

(UNAUDITED)

	2004/05		2003/04
	Projection		Actual (1)
	(thousands of dollars)
Fund Balance, Beginning of Year		78,881		235,514
Revenue
Interest Earnings		1,571		2,232
Interfund Transfers
Transfer to the Operating Fund		—		(171,500	)
Transfer from the Operating Fund		314,207		12,635
- Re: Year-End Positive Balance
		314,207		(158,865	)
Fund Balance, End of Year		394,659		78,881

Notes:
(1)	Based on 2003/04 Public Accounts

Province of Manitoba – Financial Quarterly

13

PROVINCE OF MANITOBA
OPERATING FUND
PROJECTION FOR THE YEAR ENDING MARCH 31, 2005

((UNAUDITED)

	Revised			Budget
	Projection			Projection
	(thousands of dollars)
Revenue		8,121,692			7,570,573
Expenditure		7,708,985			7,471,239
Net Revenue		412,707			99,334
Interfund Transfers
Debt/Pension Repayment		(98,500	)		(96,357	)
Fiscal Stabilization Fund		—			—
		(98,500	)		(96,357	)
Balance Under Balanced Budget Legislation		314,207			2,977

Province of Manitoba – Financial Quarterly