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

Province of Manitoba

2012/13 Quarterly Financial Report

April to June 2012

CONTENTS

Introduction

Quarterly Financial Results

Economic Performance and Outlook

INTRODUCTION   Budget 2012 provided the financial overview of the Government Reporting Entity (GRE), which includes core government and Crown organizations, government business entities and public sector organizations such as regional health authorities, school divisions, universities and colleges. Manitoba’s summary budget aligns with the accounting standards set by the Public Sector Accounting Board (PSAB) and fully reflects Generally Accepted Accounting Principles (GAAP). A summary budget presents a more complete picture of how the provincial government and the other related entities operate as a whole and what the total cost is of providing services and programs to people in Manitoba.     The financial information in this quarterly financial report is presented in the same format as the budget. The first quarter financial report presents information on the GRE for the three months ending June 30, 2012. The report also contains an economic performance and outlook. Consistent with prior years, an updated projection for the year end will be provided in the second quarter report.

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PROVINCE OF MANITOBA APRIL TO JUNE 2012

GOVERNMENT REPORTING ENTITY (GRE)   Budget 2012 put forward a plan to keep Manitoba moving forward, through uncertain times, by focusing on the things that matter most to Manitobans, and by finding responsible ways to reduce unnecessary spending. Despite fragility in the global economy, Manitoba has continued to enjoy stable economic growth, low unemployment and a growing population.   With a balanced approach, steady progress is being made to reduce growth in spending wherever possible by streamlining and reducing duplication, trimming administrative budgets and stopping or pausing some grants and programs.     There are, however, significant pressures in supports for vulnerable children and adults and corrections. Hot, dry conditions in northeastern and eastern Manitoba this year have led to additional expenditures for forest fire suppression and the costs of health care delivery continue to be assessed.   The impact of these pressures will continue to be closely monitored and more complete information on expenditure and revenue projections will provide the basis for a revised year end result in the second quarter report.

Projection of Summary Net Income/(Loss)

For the Fiscal Year Ending March 31, 2013

UNAUDITED

	2012/13 Budget
(Millions of Dollars)	Core Government			Consolidation Impacts and Other Reporting Entities			Summary
Revenue		11,159			2,693			13,852
Expenditure		11,696			2,729			14,425
In-Year Adjustment/Lapse		(33	)		(80	)		(113	)
NET RESULT FOR THE YEAR		(504	)		44			(460	)
Transfer from Fiscal Stabilization Account		56			(56	)		-
NET INCOME (LOSS)		(448	)		(12	)		(460	)

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PROVINCE OF MANITOBA APRIL TO JUNE 2012

QUARTERLY FINANCIAL RESULTS

The unaudited net result of the Government Reporting Entity for the first three months of the fiscal year is a loss of $428 million.

The three-month positive revenue variance of $12 million is primarily due to the net result of higher than estimated results for the GBEs and timing of fees and other revenue.

The expenditure variance of $(197) million is primarily the result of timing.

Government Reporting Entity Operating Statement

UNAUDITED

	Year-to-Date to June 30
	2012/13						2011/12
($000s)	Actual		Estimated		Variance		Actual
Revenue
Income Taxes		792,656		792,656		-		756,183
Other Taxes		723,236		721,343		1,893		696,067
Fees and Other Revenue		353,712		361,833		(8,121)		402,231
Federal Transfers		945,839		947,883		(2,044)		891,052
Net Income of Government
Business Enterprises		139,948		112,109		27,839		167,362
Sinking Funds and Other Earnings		50,900		58,060		(7,160)		68,084
Total Revenue		3,006,291		2,993,884		12,407		2,980,979
Expenditure
Health and Healthy Living		1,301,145		1,356,962		(55,817)		1,298,271
Education		1,052,010		1,092,339		(40,329)		1,075,906
Family Services		257,743		279,082		(21,339)		247,097
Community, Economic and
Resource Development		467,343		548,252		(80,909)		509,548
Justice and Other Expenditures		205,799		204,369		1,430		187,314
Debt Servicing Costs		149,896		149,896		-		165,377
Total Expenditure		3,433,936		3,630,900		(196,964)		3,483,513
NET INCOME (LOSS)		(427,645)		(637,016)		209,371		(502,534)

Core government revenue and expenditure details are provided in Appendix I and II on pages 9 and 10.

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PROVINCE OF MANITOBA APRIL TO JUNE 2012

INFRASTRUCTURE AND CAPITAL ASSET RENEWAL

Expenditures for infrastructure and capital asset renewal in 2012/13 are budgeted to be $1.7 billion to support continued economic growth, reduce the maintenance burden and provide for the services Manitobans need in the future. The projects are supported by $29 million in federal recoveries.

Based on principles of sound financial management, Manitoba has been able to increase the assets of the province while maintaining a manageable level of debt. Budget 2012 provides the resources to continue upgrading Manitoba’s roads and highways, wastewater treatment plants, health facilities across the province, building and restoring much needed social housing and modernizing our schools and post-secondary institutions.

As borrowings may be used to finance capital related projects, net debt may grow in absolute terms from time to time as needed investments in capital assets – like the Red River Floodway, highway infrastructure and economic stimulus investments – are made. It is therefore important to measure change in net debt against the growth of the economy. As a result of the decision to continue to invest in infrastructure projects, Budget 2012 projects an increase in the net debt to GDP ratio to 27.4%.

Core government capital investment details are provided in Appendix III on page 11.

SPECIAL ACCOUNTS

Fiscal Stabilization

The budgeted draw for 2012/13 includes health-related programming of $8 million and $4 million for requirements related to ecoTrust funds.

Manitoba’s five-year economic plan incorporated a legislated requirement to dedicate at least $600 million of the funds set aside in this Account to retire a portion of the debt and interest expense associated with the core government operating shortfalls incurred during the economic recovery period. In 2012/13, $140 million will be withdrawn for debt repayment, as well as $44 million for the interest expense associated with the core government operating shortfall.

Pension Assets

The trust conditions of the funds held in the Pension Asset Fund are irrevocably restricted for pension purposes only. As a result of this restriction, these funds are classified as pension assets and will be accounted for and reported in keeping with GAAP for senior governments.

The fund balance is projected to increase in 2012/13 for net investment earnings.

Net investment earnings include the expected rate of return during the year and adjustments to market related value. Under GAAP, market fluctuations of pension assets are not recorded in the year in which they occur, but are recognized over the employee average remaining service life (EARSL).

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PROVINCE OF MANITOBA APRIL TO JUNE 2012

PROVINCIAL BORROWINGS, GUARANTEES AND OBLIGATIONS

Manitoba’s borrowing requirement identified in Budget 2012 was $3.7 billion including refinancing of $2.0 billion and new cash requirements of $2.5 billion, offset by estimated repayments of $812 million.

New cash requirements are necessary for general government purposes, capital investments by departments, health facilities, post-secondary institutions and Manitoba Hydro. Estimated repayments are primarily for departmental capital investment and general purpose borrowings.

The total of outstanding borrowings, guarantees and obligations reflect the province’s gross borrowing obligations, but it does not take into consideration liquid assets available to pay down those obligations. While the total of outstanding provincial borrowings fluctuates during the fiscal year as a result of the timing of borrowing activities of the province, the year-end forecast remains unchanged from that stated in the budget, as shown in the table on the following page.

An updated forecast for 2012/13 with comparative data for 2011/12 actual results will be provided in the second quarter report.

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PROVINCE OF MANITOBA APRIL TO JUNE 2012

Provincial Borrowings, Guarantees and Obligations

	2012/13 Budget
Provincial Borrowings, Guarantees and Obligations1	$ millions		$ Per Capita*
General Government Programs		8,041		6,430
General Government Programs – Pension Liability		2,595		2,075
Manitoba Hydro		9,832		7,862
Other Crown Organizations		2,128		1,702
Health Facilities		1,283		1,026
Other		27		22
Capital Investments		3,750		2,999
Subtotal2		27,656		22,116
Other Obligations
Pension Liability		7,051
Pension Asset Fund		(5,166)
Net Pension Liability		1,885
Debt incurred for and repayable by the Manitoba Hydro Electric Board		(9,608)
Education and Health Debt held by Government Enterprises		499
Other Debt of Crown Organizations		255
Subtotal		(6,969)
Total Provincial Borrowings, Guarantees and Obligations		20,687
Adjustments to arrive at Summary Net Debt
Guarantees		(227)
Net Financial Assets		(4,137)
Summary Net Debt		16,323		13,052
Summary Net Debt as a percentage of GDP		27.4%

Notes: Provincial Borrowings, Guarantees and Obligations

1. Provincial borrowings, guarantees and obligations are net of sinking funds.

2. Provincial Borrowings and Guarantees are payable in Canadian and U.S. dollars. As at June 30, 2012, total provincial borrowings and guarantees were payable 93% in Canadian dollars and 7% in U.S. dollars. Of this total, General Government Program borrowing and Other Crown organizations borrowings was 100% payable in Canadian dollars. Manitoba Hydro borrowings were payable 78% in Canadian dollars (78% at March 31, 2012) and 22% in U.S. dollars (22% at March 31, 2012).

* The per capita data for 2012/13 is based upon population figures at July 1, 2012, as reported by Statistics Canada.

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PROVINCE OF MANITOBA APRIL TO JUNE 2012

ECONOMIC PERFORMANCE AND OUTLOOK

Economic growth in Manitoba is stable and progressing at or near the historical average annual rate. Over the near term, economic growth in the province is expected to moderate as global economic conditions remain fragile.

The Manitoba Finance survey of economic forecasters, conducted July 30, 2012, projects that Manitoba`s real GDP will expand 2.4% this year, slightly above the projected national increase of 2.1%. In 2013, Manitoba’s real GDP is expected to slow to 2.2%, also marginally above the projected national increase of 2.1%. For 2011, Manitoba Bureau of Statistics estimates Manitoba’s real GDP increased 2.2%.

The current economic outlook is weighed down by several international factors including European sovereign debt and financial crisis, slower than anticipated growth in the Chinese economy, slow recovery in the U.S. economy, exchange rate volatility and potential dampening impact from fiscal austerity measures in a number of G7 nations.

On the upside, the consistent improvement in U.S. employment could boost U.S. growth more than anticipated and easier credit conditions in China could stimulate Chinese domestic spending.

In Manitoba, preliminary estimates of the 2012 crop harvest indicate a solid recovery in agriculture following two challenging years. A strong bounce back in agriculture could lift real GDP growth above the anticipated 2.4% increase in 2012.

A review of major economic indicators shows modest improvements in economic developments in Manitoba through the first half of 2012.

Manitoba`s employment has increased by 0.7%, through July of this year, following 0.8% growth in 2011. The national increase in 2012 is 1.6%. Manitoba’s full-time employment is up 0.3% while part-time employment is up 2.1%. The unemployment rate has averaged 5.4% in 2012, third-lowest among provinces and below the national rate of 7.3%. Manitoba’s youth unemployment rate is 11.6%, third lowest in Canada.

Average weekly earnings have increased by 2.0% on a year-to-date basis in 2012, matching the national increase. Reflecting the modest growth in employment and in earnings, labour income has increased by 3.5%, so far in 2012, down from 4.8% in 2011.

Manitoba’s retail sales rose 2.7% in the first half of 2012. National retail sales increased 4.0% over the same period. Manitoba’s increase is seventh-highest among provinces.

After setting a 23-year record in total housing starts in 2011, the number of new units being constructed so far in 2012 have further increased by 38%. A 73.1% increase in construction of multiple units (apartments and semi-detached homes) is supplemented by an 18.5% increase in single detached family unit starts. Canada’s housing starts are up by 18.3% on a year-to-date basis in 2012.

Total capital investment growth in Manitoba moderated, from 15.7% growth in 2010, to 1.5% in 2011. Capital investment is expected to increase by 4.7% in 2012 with private spending up 8.3%. Due to completion of infrastructure stimulus spending, public investment is expected to fall by 3.1% this year.

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PROVINCE OF MANITOBA APRIL TO JUNE 2012

Manitoba has posted the steadiest growth in private capital investment among provinces, posting only one annual decline in private investment over a twenty-one year period. Since 2006, total capital investment growth has averaged 8.0% annually, third best among provinces and above Canada’s growth of 4.4%. Over the same period, private capital investment grew by an average 6.3% per year, third-best among provinces. Public sector investment grew 12.6%, also third-best among provinces.

In the first half of 2012, Manitoba manufacturing sales are up 2.2%, following a 6.2% increase in 2011. The increase in sales is broad based with wood products, non-metallic minerals, machinery and aerospace parts leading growth while printing, food, and plastics and rubber product sales continue to lag growth.

Similar to manufacturing sales, exports from Manitoba has slowed somewhat in 2012. Through the first half of 2012, Manitoba exports increased 8.5% compared to 14.1% in 2011. Canadian exports are up 7.8% in 2012. Manitoba’s U.S. exports increased 13.2% while non-U.S. exports were up 0.9%.

In the first quarter of 2012, Manitoba farm cash receipts are up 14.8%. Crop receipts increased by 8.8% partially driven by oilseed and deferred payments. Livestock receipts were up 15.4% with strength across both cattle and hog sales. Direct payments, which include crop insurance, increased 54.4% in the first quarter of 2012.

The Consumer Price Index has increased by 1.6% on a year-to-date basis in 2012, below the national increase of 1.9%. For 2012, Manitoba Finance’s survey of economic forecasts indicates CPI inflation will average about 1.6% in Manitoba and 1.9% in Canada, matching the year-to-date estimates.

As of April 1, 2012, Manitoba’s population stood at 1,261,498, a one-year increase of 16,045 persons, for an annual growth of 1.3%. This is the third consecutive 12 month period of population growth ahead of the national rate. Manitoba’s population grew 1.3%, from the previous year, ahead of Canada’s increase of 1.1% and third among provinces.

For monthly updates and more details please see the Manitoba Economic Highlights and Statistics at:

http://www.gov.mb.ca/finance/pdf/highlights.pdf &

http://www.gov.mb.ca/finance/pdf/statistics.pdf

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PROVINCE OF MANITOBA APRIL TO JUNE 2012

2012/13 Core Government Revenue by Source UNAUDITED Appendix I

	Year-to-Date to June 30									Full Year
	2012/13							2011/12		2012/13
($000s)	Actual		Estimated		Variance			Actual		Budget
Income taxes
Individual Income Tax		691,862		691,862		-			661,797		2,796,300
Corporation Income Tax		100,794		100,794		-			94,386		405,500
Subtotal: Income Taxes		792,656		792,656		-			756,183		3,201,800
Other Taxes
Corporations Taxes		47,140		47,140		-			40,935		433,200
Fuel Taxes		71,863		71,863		-			59,403		81,100
Land Transfer Tax		18,339		18,339		-			15,721		66,200
Levy for Health and Education		99,714		99,714		-			92,772		410,000
Mining Tax		13,616		13,616		-			14,068		35,000
Retail Sales Tax		428,896		428,896		-			425,235		1,834,100
Tobacco Tax		62,459		62,459		-			60,661		800
Other Taxes		2,509		616		1,893			7,611		267,905
Subtotal: Other Taxes		744,536		742,643		1,893			716,406		3,128,305
Fees and Other Revenue
Fines and Costs and Other Legal		12,091		12,091		-			11,510		51,538
Minerals and Petroleum		7,676		7,676		-			11,916		28,820
Automobile and Motor Carrier Licences and Fees		38,248		38,248		-			39,204		147,026
Parks: Forestry and Other Conservation		3,681		3,681		-			2,898		33,088
Water Power Rentals		16,913		25,470		(8,557	)		29,006		117,800
Service Fees and Other Miscellaneous Charges		21,520		23,284		(1,764	)		17,684		218,624
Revenue Sharing from SOAs		6,358		6,358		-			6,358		26,180
Subtotal: Fees and Other Revenue		106,487		116,808		(10,321	)		118,576		623,076
Federal Transfers
Equalization		417,667		417,667		-			416,480		1,872,000
Canada Health Transfer (CHT)		265,614		265,614		-			250,540		1,062,500
Canada Social Transfer (CST)		107,298		107,298		-			104,002		429,200
Health Funds		2,262		2,244		18			2,258		9,000
Infrastructure Renewal		-		-		-			-		28,800
Manitoba Floodway Expansion		-		-		-			-		10,000
Shared Cost and Other Transfers		33,127		31,842		1,285			48,311		187,745
Subtotal: Federal Transfers		825,968		824,665		1,303			821,591		3,599,245
Net Income of Government
Business Enterprises (GBEs)
Manitoba Liquor Control Commission		26,000		26,000		-			18,057		260,452
Manitoba Lotteries Corporation		70,000		70,000		-			84,000		346,000
Subtotal: Net Income of GBEs		96,000		96,000		-			102,057		606,452
Total Revenue		2,565,647		2,572,772		(7,125	)		2,514,813		11,158,878

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PROVINCE OF MANITOBA APRIL TO JUNE 2012

2012/13 Core Government Expenditure by Sector/Department UNAUDITED Appendix II

	Year-to-Date to June 30								Full Year
	2012/13						2011/12		2012/13
($000s)	Actual		Estimated		Variance		Actual1		Budget2
Health and Healthy Living
Health		1,320,101		1,361,341		(41,240)		1,179,083		5,094,313
Healthy Living, Seniors and Consumer Affairs		15,768		17,518		(1,750)		15,395		59,881
Total Health and Healthy Living		1,335,869		1,378,859		(42,990)		1,194,478		5,154,194
Education
Advanced Education and Literacy		133,297		143,392		(10,095)		131,741		689,505
Education		533,839		582,998		(49,159)		552,842		1,632,689
Total Education		667,136		726,390		(59,254)		684,583		2,322,194
Family Services
Children and Youth Opportunities		12,987		13,817		(830)		13,815		44,611
Family Services and Labour		248,128		268,508		(20,380)		229,822		1,033,503
Total Family Services		261,115		282,325		(21,210)		243,637		1,078,114
Community, Economic and Resource Development
Aboriginal and Northern Affairs		10,514		9,849		665		10,430		35,766
Agriculture, Food and Rural Initiatives		16,816		20,025		(3,209)		26,282		226,988
Conservation and Water Stewardship		39,319		46,276		(6,957)		39,043		162,246
Entrepreneurship, Training and Trade		136,297		155,811		(19,514)		137,898		580,870
Housing and Community Development		24,627		27,930		(3,303)		24,272		80,611
Infrastructure and Transportation		156,197		169,684		(13,487)		155,321		653,762
Innovation, Energy and Mines		25,915		28,747		(2,832)		23,614		88,222
Local Government		53,802		72,591		(18,789)		42,216		363,923
Total Community, Economic and Resource Development		463,487		530,913		(67,426)		459,076		2,192,388
Justice and Other Expenditures
Legislative Assembly		8,968		10,767		(1,799)		10,141		40,181
Executive Council		1,622		1,731		(109)		1,728		3,827
Civil Service Commission		5,182		6,061		(879)		4,875		21,643
Culture, Heritage and Tourism		17,218		20,624		(3,406)		20,873		61,399
Employee Pensions and Other Costs		(1,861)		(3,050)		1,189		(2,093)		16,933
Finance		15,683		11,925		3,758		31,586		68,931
Immigration and Multiculturalism		7,012		11,414		(4,402)		6,432		42,960
Justice		89,591		91,270		(1,679)		81,572		464,440
Sport		3,009		3,037		(28)		2,684		11,970
Enabling Appropriations		1,504		2,484		(980)		708		14,157
Other Appropriations		39,504		29,000		10,504		11,861		72,175
Total Justice and Other Expenditures		187,432		185,263		2,169		170,367		818,616
Debt Servicing Costs		26,800		26,800		-		28,170		258,000
Program Portfolio Management Reviews		-		-		-		-		(128,000)
Total Expenditure		2,941,839		3,130,550		(188,711)		2,780,311		11,695,506
Subtract: Total Revenue Estimate (Appendix I)		2,565,647		2,572,772		(7,125)		2,514,813		11,158,878
In-Year Adjustment/Lapse		-		-		-		-		(32,500)
Net Result for the Year		(376,192)		(557,778)		181,586		(265,498)		(504,128)
Transfer from Fiscal Stabilization Account		-		-		-		-		56,065
NET INCOME (LOSS)		(376,192)		(557,778)		181,586		(265,498)		(448,063)

1. For comparative purposes the 2011/12 Actual has been re-stated to reflect the 2012/13 appropriation structure.

2. Budget figures are adjusted to include Enabling Appropriations.

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PROVINCE OF MANITOBA APRIL TO JUNE 2012

2012/13 Core Government Capital Investment UNAUDITED Appendix III

	Year-to-Date to June 30								Full Year
	2012/13						2011/12 Actual		2012/13
($000s)	Actual		Estimated		Variance				Budget1
General Assets
Government Services Capital Projects		15,581		20,957		(5,376)		23,178		128,346
Transportation Equipment and Aircraft		1,267		2,100		(833)		7,266		42,164
Information Technology Projects		354		1,616		(1,262)		756		23,899
Other Equipment and Buildings		15		4,505		(4,490)		218		51,056
		17,217		29,178		(11,961)		31,418		245,465
Infrastructure Assets
Provincial Roads, Highways and Airport Infrastructure		32,482		54,575		(22,093)		21,242		352,045
Manitoba Floodway Expansion		10,000		25,000		(15,000)		25,000		100,000
Water Related Infrastructure		447		4,300		(3,853)		4,625		27,800
Parks, Cottage and Camping Projects		1,107		3,325		(2,218)		2,903		25,600
		44,036		87,200		(43,164)		53,770		505,445
Total Capital Investment		61,253		116,378		(55,125)		85,188		750,910

1. Budget figures are adjusted to include Enabling Appropriations.

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