Public Accounts 2019-20: Consolidated financial statements

Independent auditor’s report

To the Members of the Legislative Assembly of the Province of Ontario

Opinion

I have audited the accompanying Consolidated Financial Statements of the Province of Ontario, which comprise the Consolidated Statement of Financial Position as at March 31, 2020, and the Consolidated Statements of Operations, Change in Net Debt, Change in Accumulated Deficit, and Cash Flow for the year then ended, and notes to the Consolidated Financial Statements, including a summary of significant accounting policies.

In my opinion, the accompanying Consolidated Financial Statements present fairly, in all material respects, the consolidated financial position of the Province of Ontario as at March 31, 2020, and the consolidated results of its operations, the consolidated changes in its net debt, the consolidated change in its accumulated deficit and its consolidated cash flows for the year then ended in accordance with Canadian public sector accounting standards.

Basis for Opinion

I conducted my audit in accordance with Canadian generally accepted auditing standards. My responsibilities under those standards are further described in the Auditor's Responsibility for the Audit of the Consolidated Financial Statements section of this report. I am independent of the Province of Ontario in accordance with the ethical requirements that are relevant to my audit of the Consolidated Financial Statements in Canada, and I have fulfilled my other ethical responsibilities in accordance with these requirements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

Other Accompanying Information

The Government of Ontario (Government) is responsible for the information in the 2019-20 Public Accounts of Ontario Annual Report.

My opinion on the Consolidated Financial Statements does not cover the other information accompanying the Consolidated Financial Statements and I do not express any form of assurance conclusion thereon.

In connection with my audit of the Consolidated Financial Statements, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Consolidated Financial Statements or my knowledge obtained during the audit, or otherwise appears to be materially misstated.

If, based on the work I have performed on this other information, I conclude that there is a material misstatement of this other information, I am required to report that fact in this auditor’s report. I have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these Consolidated Financial Statements in accordance with Canadian public sector accounting standards, and for such internal control as management determines is necessary to enable the preparation of Consolidated Financial Statements that are free from material misstatement, whether due to fraud or error.

In preparing the Consolidated Financial Statements, management is responsible for assessing the Province of Ontario’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the Government either intends to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Province of Ontario’s financial reporting process.

Auditor’s Responsibility for the Audit of the Consolidated Financial Statements

My objectives are to obtain reasonable assurance about whether the Consolidated Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Consolidated Financial Statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, I exercise professional judgment and maintain professional skepticism throughout the audit. I also:

• Identify and assess the risks of material misstatement of the Consolidated Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Province of Ontario’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Province of Ontario’s ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my auditor’s report. However, future events or conditions may cause the Province of Ontario to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the Consolidated Financial Statements, including the disclosures, and whether the Consolidated Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.

The audit of the Consolidated Financial Statements is a group audit engagement. As such, I also obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the Consolidated Financial Statements. I am responsible for the direction, supervision and performance of the group audit and I remain solely responsible for my audit opinion.

I communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control identified during the audit.

I also provide those charged with governance with a statement that I have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on my independence, and where applicable, related safeguards.

Bonnie Lysyk, MBA, FCPA, FCA, LPA
Auditor General
Toronto, Ontario
September 11, 2020

Province of Ontario Consolidated Statement of Operations

See accompanying Notes and Schedules to the Consolidated Financial Statements.

Province of Ontario Consolidated Statement of Financial Position

For additional information, see Contingent Liabilities, Contingent Assets (Note 11) and Contractual Obligations, Contractual Rights (Note 12).

See accompanying Notes and Schedules to the Consolidated Financial Statements.

Province of Ontario Consolidated Statement of Change in Net Debt

See accompanying Notes and Schedules to the Consolidated Financial Statements.

Province of Ontario Consolidated Statement of Change in Accumulated Deficit

See accompanying Notes and Schedules to the Consolidated Financial Statements.

Province of Ontario Consolidated Statement of Cash Flow

See accompanying Notes and Schedules to the Consolidated Financial Statements.

Notes to the Consolidated Financial Statements

1. Summary of Significant Accounting Policies

(a) Basis of Accounting

The Consolidated Financial Statements are prepared by the Government of Ontario in accordance with the accounting standards for governments recommended by the Public Sector Accounting Board (PSAB).

(b) Reporting Entity

These financial statements report the activities of the Consolidated Revenue Fund combined with those organizations that are controlled by the Province.

Government business enterprises (GBEs), broader public sector (BPS) organizations (i.e., hospitals, school boards and colleges) and other government organizations controlled by the Province are included in these financial statements. Controlled organizations are consolidated if the organizations are reasonably expected to meet and maintain one of the following criteria: i) their revenues, expenses, assets or liabilities are greater than $50 million; or ii) their outside sources of revenue, deficit or surplus are greater than $10 million. In accordance with public sector accounting standards, the Province also applies the “benefit versus cost constraint” in determining which organizations should be consolidated in Ontario’s financial statements. For those organizations that do not meet the PSAB benefit versus cost constraint standard, government transfer payments to these organizations are included as expenses in these financial statements through the accounts of the ministries responsible for them. A listing of consolidated government organizations is provided in Schedule 8.

Trusts administered by the Province on behalf of other parties are excluded from the reporting entity but are disclosed in Note 13.

(c) Principles of Consolidation

Government organizations, including hospitals, school boards and colleges (collectively known as BPS organizations) as well as other government organizations controlled by the Province are consolidated on a line-by-line basis with the assets, liabilities, revenues and expenses of the province based on the percentage of ownership the government held during the fiscal year. Where appropriate, adjustments are also made to present the accounts of these organizations on a basis consistent with the accounting policies of the Province and to eliminate significant inter-organizational accounts and transactions.

Government business enterprises are defined as those government organizations that: i) are separate legal entities with the power to contract in their own name and that can sue and be sued; ii) have the financial and operating authority to carry on a business; iii) have as their principal activity and source of revenue the selling of goods and services to individuals and non-government organizations; and iv) are able to maintain their operations and meet their obligations from revenues generated outside the government reporting entity.

The activities of GBEs are recorded in the financial statements based on their results prepared in accordance with International Financial Reporting Standards (IFRS) using the modified equity method. Their combined net assets are included in the financial statements as Investment in Government Business Enterprises on the Consolidated Statement of Financial Position, and their net income is shown as a separate item, Income from Investment in Government Business Enterprises (GBEs) on the Consolidated Statement of Operations. Less than wholly owned GBEs (e.g., Hydro One Limited) are reflected using the modified equity method based on the percentage of ownership the government held during the fiscal year.

(d) Measurement Uncertainty

The preparation of financial statements requires the Province to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses during the reporting period. Uncertainty in the determination of the amounts at which an item is recognized or disclosed in the financial statements is known as measurement uncertainty. The coronavirus (COVID-19) pandemic has added to the Province’s measurement uncertainty primarily due to a reduction of available information with which to make significant assumptions related to critical estimates as compared to those estimates reported at March 31, 2019.

Measurement uncertainty that is material to these financial statements exists in the valuation of pensions and other employee future benefits obligations; the value of tangible capital assets; the estimation of personal income tax (PIT), corporations income tax (CIT) and Harmonized Sales Tax (HST) revenue accruals; the valuation of the Canada Health Transfer, Canada Social Transfer and Equalization Payment entitlements; and the estimation of liabilities for contaminated sites, land claim settlements, and other liabilities.

Pension and other employee future benefits liability of $12.1 billion (2018–19, $11.6 billion), see Note 6, are subject to measurement uncertainty because actual results may differ significantly from the Province’s best long-term estimate of expected results — for example, the difference between actual results and actuarial assumptions regarding return on investment of pension fund assets and health care cost trend rates for retiree benefits may be significant. Due to the COVID-19 pandemic, additional measurement uncertainty exists in the valuation of pension investments in pension plans that the Province reports in its financial statements. The uncertainty is caused by unobservable valuation inputs for investments where there is no quoted market price available and the determination of discount rates used to value certain plan investments as at March 31, 2020.

The net book value of tangible capital assets of $126.5 billion (2018–19, $120.9 billion), see Note 9, is subject to uncertainty because of differences between estimated useful lives of the assets and their actual useful lives.

PIT revenue estimate of $37.7 billion (2018–19, $35.4 billion), may be subject to subsequent revisions based on information available in the future related to past year tax return processing. CIT revenues of $15.4 billion (2018–19, $16.6 billion), and HST revenues of $28.6 billion (2018–19, $27.8 billion) are also subject to uncertainty for similar reasons.

The estimation of the Canada Health Transfer of $15.6 billion (2018–19, $14.9 billion) and Canada Social Transfer of $5.7 billion (2018–19, $5.5 billion), see Schedule 1, are subject to uncertainty because of variances between the estimated and actual Ontario share of the Canada-wide personal income and corporations tax base and population.

The Canada Revenue Agency (CRA) administers Ontario’s PIT and CIT revenues and supplies the province with tax assessment data that serves as a basis for it’s accrual for these tax revenues. In response to the COVID-19 pandemic, the Government of Canada announced a series of tax measures which included the extension of personal and corporate tax filing deadlines for the 2019 taxation year. These relief measures, combined with the impact of COVID-19 on the CRA’s operations, caused a delay in CRA’s standard processing times and a reduction in the amount of available 2019 tax assessment data. As a result, there is greater measurement uncertainty in Ontario’s estimates for PIT and CIT accruals as well as the Equalization Payments entitlements that also rely on these tax base estimates.

There is measurement uncertainty surrounding the estimation of liabilities for contaminated sites of $1.7 billion (2018–19, $1.8 billion), see Note 7. The Province may be responsible for cleanup costs that cannot be reasonably estimated due to several factors including: insufficient information related to the nature and extent of contamination, timing of costs well into the future (e.g., unknown impacts of future technological advancements), the challenges of remote locations, and unique contaminations.

There is measurement uncertainty surrounding the estimate of liabilities for contingent liabilities, including estimates for land claim settlements. Estimates for these liabilities are recorded when the contingency is determined to be likely and measurable however the actual amount of any settlement may vary from the estimate recorded.

The Province’s investment in Ontario Power Generation (OPG) includes asset retirement obligations for fixed asset removal and nuclear waste management, discounted for the time value of money. These obligations are estimated based on the expected amount and timing of future cash expenditures based on plans for fixed asset removal and nuclear waste management. Such estimates are subject to uncertainty in the nature and extent of cost estimates, the timing of costs being incurred, changes in the discount rate applied to the cash flow estimates, and other unanticipated changes in fixed asset removal and nuclear waste management techniques.

Estimates are based on the best information available at the time of preparation of the financial statements and are reviewed annually to reflect new information as it becomes available. By their very nature, estimates are subject to measurement uncertainty. Therefore, actual results may differ materially from the Province’s estimates.

(e) Significant Accounting Policies

Revenue

Tax revenues are recognized in the period in which the taxable event occurs and when they are authorized by legislation, or the ability to assess and collect the tax has been provided through legislative convention. Reported tax revenues include estimated revenues for the current period, adjustments between the estimated revenues of previous years and actual amounts, and revenues from reassessments relating to prior years. Reported amounts do not include estimates of some unreported taxes or the impact of future reassessments.

PIT revenue for the period is accrued based on an estimate of current year tax assessments (plus late-arriving assessments/reassessments for prior years) prorated from the federal Department of Finance’s Tax Sharing Statements and an estimate for the following tax year based on the First Estimate of Payments.

The HST component of sales tax revenue is collected by the Government of Canada under a Comprehensive Integrated Tax Coordination Agreement and is remitted to the Province net of credits. The remittances are based on the federal Department of Finance’s best estimates, which are subject to periodic updates. The Province recognizes HST revenues based on these federal estimates.

Accrued CIT revenue for the period is based on estimated corporate taxpayers’ taxable income for the year. The estimate is based on an Ontario Ministry of Finance economic model projection which leverages the historical relationship between aggregate taxable income and corporate profits.

PS 3510 distinguishes between tax concessions (relief of taxes paid), which are accounted for as revenue offsets, and transfers made through the tax system (financial benefits independent of taxes paid) which are reported as expenses.

Refundable personal and corporate income tax credits constitute transfers made through the tax system that are reclassified as expenses to conform to public sector accounting standards. To ensure that the reclassification is fiscally neutral, a corresponding increase is made to PIT revenue and CIT revenue. Non-refundable PIT and CIT credits constitute tax concessions (relief of taxes paid), which are accounted for as revenue offsets by crediting the related tax revenue.

Transfers from the Government of Canada are recognized as revenues in the period during which the transfer is authorized by the federal government and all eligibility criteria are met, except if the stipulations related to federal government funding creates an obligation that meets the definition of a liability. Once a liability is recognized, the transfer is recorded in revenue as the obligations related to these stipulations are met.

Other revenues are recognized in the fiscal year that the events giving rise to the revenues occur and they are earned. Amounts received prior to the end of the year that will be earned in a subsequent fiscal year are deferred and reported as liabilities (see Liabilities).

Expense

Expenses are recognized in the fiscal year that the events giving rise to the expenses occur and resources are consumed.

Transfer payments are recognized in the year that the transfer is authorized, and all eligibility criteria have been met by the recipient. Any transfers paid in advance are deemed to have met all eligibility criteria.

Interest on debt includes: i) interest on outstanding debt (including BPS debt) net of interest income on investments and loans; ii) amortization of foreign exchange gains or losses; iii) amortization of debt discounts, premiums and commissions; iv) amortization of deferred hedging gains and losses; and v) debt servicing costs and other costs.

Employee future benefits such as pensions, other retirement benefits and entitlements upon termination are recognized as expenses over the years in which the benefits are earned by employees. These expenses are the government’s share of the current year’s cost of employee benefits, interest on the net benefits’ liability or asset, amortization of actuarial gains or losses, cost/gain on plan amendments and other adjustments.

Other employee future benefits are recognized in the period in which the event that obligates the government occurs or in the period in which the benefits are earned by employees.

The costs of buildings, transportation infrastructure, vehicles, aircraft, leased capital assets, machinery, equipment and information technology infrastructure and systems owned by the province and its consolidated organizations are amortized and recognized as expenses over their estimated useful lives on a straight-line basis.

Liabilities

Liabilities are recorded to the extent that they represent present obligations of the government to outside parties as a result of events and transactions occurring prior to the end of the fiscal year. The settlement of liabilities will result in the sacrifice of economic benefits in the future.

Liabilities include: obligations to make transfer payments to organizations and individuals; present obligations for environmental costs; probable losses on loan guarantees issued by the government; and contingencies when it is likely that a loss will be realized and the amount can be reasonably determined. Liabilities also include obligations to GBEs.

Deferred revenue represents unspent externally restricted receipts from the federal government or other third parties. Deferred revenues are recorded into revenue in the period in which the amounts received are used for the purposes specified or all external restrictions are satisfied. Deferred capital contributions represent the unamortized amount of contributions received from the federal government and other third parties to construct or acquire tangible capital assets. These contributions are recognized as deferred capital contributions and recorded into revenue over the useful life of the tangible capital assets based on the relevant stipulations of the contributions taken together with the actions and communications of the Province.

Public-Private Partnership (P3) refers to the province using private-sector partners to procure and finance infrastructure assets. Assets procured via P3s are recognized as tangible capital assets, and the related obligations are recognized as other long-term financing liabilities in these financial statements as the assets are constructed.

Debt

Debt consists of treasury bills, commercial paper, medium- and long-term notes, savings bonds, debentures and loans, excluding those held by the Province. Ontario purchases its own debt for a variety of reasons, including for cash management purposes as well for reducing stress to the Canadian payment system especially in fiscal years where there are large single-day maturities.

Debt denominated in foreign currencies that has been hedged is recorded at the Canadian dollar equivalent using the rates of exchange established by the terms of the hedge agreements. Other foreign currency-denominated debt is translated to Canadian dollars at year-end rates of exchange and any exchange gains or losses are amortized over the remaining term to maturity.

Derivatives are financial contracts, the value of which is derived from underlying instruments. The Province uses derivatives for the purpose of managing risk associated with interest cost. The Province does not use derivatives for speculative purposes. Gains or losses arising from derivative transactions are deferred and amortized over the remaining life of the related debt issue.

Pensions and Other Employee Future Benefits

The liabilities for pensions and other employee future benefits are calculated on an actuarial basis using the government’s best estimates of future inflation rates, investment returns, employee salary levels and other underlying assumptions, and where applicable, the government’s borrowing rate. When actual plan experience of pensions, other retirement benefits and termination pay differs from what’s expected, or when assumptions are revised, actuarial gains and losses arise. These gains and losses are amortized over the expected average remaining service life of plan members for each respective plan.

Liabilities for selected employee future benefits (such as pensions, other retirement benefits and termination pay) represent the government’s share of the actuarial present values of employee benefits attributed to services rendered by employees and former employees, less its share of the market-related value of plan assets. The market-related values are determined in a rational and systematic manner in order to recognize market value asset gains and losses over a period of up to five years. In addition, the liability includes the province’s share of the unamortized balance of actuarial gains or losses.

Assets

Assets are resources controlled by the government from which it has reasonable expectation of deriving future benefit. Assets are recognized in the year the transaction or event gives rise to the government’s control of the benefit.

Financial Assets

Financial assets are resources that can be used to discharge existing liabilities or finance future operations. They include cash and cash equivalents, investments, accounts receivable, loans receivable, net pension assets, advances and investments in GBEs.

Cash and cash equivalents include cash or other short-term, liquid, low-risk instruments that are readily convertible to cash, typically within three months or less.

Investments include temporary investments and portfolio investments. Temporary investments are recorded at the lower of cost or market value. Portfolio investments are recorded at the lower of cost or their estimated net realizable value.

Accounts receivables are recorded at cost. A valuation allowance is recorded when the collection of the receivable is considered doubtful.

Loans receivable are initially recorded at cost. A valuation allowance is recorded when collection of the loans receivable, or any part thereof, is considered doubtful. Loans receivable include loans to GBEs, municipalities and loans under the student loans program. Loans receivable with significant concessionary terms are considered in part to be grants and are recorded on the date of issuance at face value, discounted by the amount of the grant portion. The grant portion is recognized as an expense at the date of issuance of the loan or when the concession is provided. The amount of the loan discount is amortized to revenue over the term of the loan.

Investment in GBEs represents the net assets of GBEs recorded on the modified equity basis as described under Principles of Consolidation.

Tangible Capital Assets

Tangible capital assets are recorded at historical cost less accumulated amortization. Historical cost includes the costs directly related to the acquisition, design, construction, development, improvement or betterment of tangible capital assets. Cost includes overheads directly attributable to construction and development, as well as interest related to financing during construction. All tangible capital assets, except assets under construction, land and land improvements with an indefinite life, are amortized over the estimated useful lives of the assets on a straight-line basis. The useful lives of the province’s tangible capital assets have been estimated as:

Maintenance and repair costs are recognized as an expense when incurred. Betterments or improvements that significantly increase or prolong the service life or capacity of a tangible capital asset are capitalized.

Other Non-Financial Assets

Non-financial assets also include prepaid expenses and inventory of supplies.

Intangible assets, assets with historical or cultural value or works of art, and assets inherited by right of the Crown such as Crown lands, forests, water and mineral resources, are not recognized in the Consolidated Statement of Financial Position.

(f) Future Changes in Accounting Standards

PS 3280 – Asset Retirement Obligations

The new standard provides guidance on the accounting and reporting for legal obligations associated with the retirement of tangible capital assets. This standard is effective in fiscal year 2022–23. The Province is currently assessing the impact of this standard on its Consolidated Financial Statements.

PS 1201 – Financial Statement Presentation

The new standard replaces PS 1200 – Financial Statement Presentation, effective in fiscal year 2022–23. It introduces a statement of remeasurement gains and losses. Requirements in PS 2601 – Foreign Currency Translation and PS 3450 – Financial Instruments can give rise to the presentation of gains and losses as remeasurement gains and losses. This is explained below.

PS 3450 – Financial Instruments and PS 2601 – Foreign Currency Translation

PSAB has introduced new sections on Financial Instruments and Foreign Currency Translation that categorize items to be accounted for at either fair value, cost or amortized cost. Fair value measurement applies to derivatives and portfolio investments in equity instruments that are quoted in an active market. Other financial assets and financial liabilities will generally be measured at cost or amortized cost. Until an item is derecognized (for example, through disposition) any gains and losses arising due to changes in fair value or foreign currency (remeasurements) will be reported in the Statement of Remeasurement Gains and Losses. These standards are due to come into effect on April 1, 2022. In addition, PSAB has recently issued two exposure drafts related to these standards proposing to:

• Allow all public sector entities to make an accounting policy election to recognize exchange gains and losses, including the exchange gain or loss component of changes in fair value, directly in the statement of operations; and
• Clarify that the remeasurement impact of derivatives may be presented separately on the statement of change in net debt.

Adoption of these standards requires the adoption of the revised PS 1201 – Financial Statement Presentation and the PS 3041 – Portfolio Investments. The Province is currently assessing the impact of these standards on its Consolidated Financial Statements.

PS 3041 – Portfolio Investments

The new standard replaces PS 3040 – Portfolio Investments, with revised guidance on accounting for, and presentation and disclosure of, portfolio investments. This standard is effective in fiscal year 2022–23 with the adoption of PS 3450, PS 2601 and PS 1201. The Province is currently assessing the impact of this standard on its Consolidated Financial Statements.

PS 3400 – Revenue

The new standard provides a framework for recognizing revenue by distinguishing between revenue that arises from transactions that include performance obligations from transactions that do not have performance obligations. This standard is effective in fiscal year 2023–24. The Province is currently assessing the impact of this standard on its Consolidated Financial Statements.

2. Debt

The Province borrows in both domestic and international markets. Debt issued, less any investments in Ontario’s own bonds and treasury bills, of $372.8 billion as at March 31, 2020 (2018–19, $354.3 billion), is composed mainly of bonds and debentures issued in the short and long term domestic and international public capital markets and non-public debt held by certain federal pension funds. Debt presented in this note comprises Debt Issued for Provincial Purposes of $365.1 billion (2018–19, $349.1 billion) and Ontario Electricity Financial Corporation (OEFC) Debt of $17.6 billion (2018–19, $18.9 billion), less investments in Ontario bonds and treasury bills of $9.9 billion (2018–19, $13.7 billion). The following table presents the maturity schedule of the province’s outstanding debt, by currency of repayment, expressed in Canadian dollars, and reflects the effects of related derivative contracts. See Note 4 for debt of BPS organizations and obligations under P3 arrangements.

Debt As at March 31 ($ Millions)

Fair value of debt outstanding approximates the amounts at which debt instruments could be exchanged in a current transaction between willing parties. Most of the province’s debt is valued at fair value using public market quotations — where these are not available, fair value is estimated using discounted cash flows. These estimates are affected by the assumptions made concerning discount rates and the amount and timing of future cash flows.

The estimated fair value of debt as at March 31, 2020 was $420.8 billion (2018–19, $394.2 billion). The fair value of debt does not reflect the effect of related derivative contracts.

School Board Trust Debt

A School Board Trust was created in June 2003 to permanently refinance debt incurred by 55 school boards. The Trust issued 30-year sinking fund debentures amounting to $891 million, and provided $882 million of the proceeds to the 55 school boards in exchange for the irrevocable right to receive future transfer payments from the Province related to this debt. An annual transfer payment is made by the Ministry of Education to the Trust’s sinking fund under the School Board Operating Grant program to retire the debt over 30 years. This debt recorded net of the sinking fund of $307 million (2018–19, $284 million), is reflected in the province’s debt.

3. Risk Management and Derivative Financial Instruments

The Province employs various risk management strategies and operates within strict risk exposure limits to ensure that exposure to financial risk is managed in a prudent and cost-effective manner. A variety of strategies are used, including the use of derivative financial instruments (derivatives).

Derivatives are financial contracts, the value of which is derived from underlying instruments. The Province uses derivatives to hedge interest rate risk and foreign currency risk. The Province elects to use hedge accounting for its foreign currency hedges.

Hedges are created primarily through swaps, which are legal contracts under which the Province agrees with another party to exchange cash flows based on one or more notional amounts using stipulated reference interest rates for a specified period. Swaps allow Ontario to offset its existing obligations and thereby effectively convert them into obligations with more cost-effective characteristics. Other derivative instruments used by the Province include forward foreign exchange contracts, forward rate agreements, futures and options.

Foreign Currency Risk

Foreign exchange or currency risk is the risk that foreign currency debt principal and interest payments, as well as foreign currency transactions, will vary in Canadian dollar terms due to fluctuations in foreign exchange rates. To manage currency risk, the Province uses derivative contracts including forward foreign exchange contracts, futures, options and swaps to convert foreign currency cash flows into Canadian dollar cash flows. Most derivative contracts hedge the underlying debt by matching all the critical terms to achieve effectiveness. The term of forward foreign exchange contracts used for hedging is usually shorter than the term of the underlying debt, however hedge effectiveness is maintained by continuously rolling the forward foreign exchange contract over the remaining term of the underlying debt, or until replaced with a long-term derivative contract.

The current market risk policy allows the amount of unhedged foreign currency debt principal, net of foreign currency holdings, to reach a maximum of 3 per cent of Total Debt Issued for Provincial Purposes and OEFC. At March 31, 2020, the respective unhedged levels were 0.2 and 0.0 per cent (2018–19, 0.2 and 0.0 per cent). As of March 31, 2020, unhedged debt was limited to debt issued in Swiss francs. A one-Swiss rappen appreciation of the Swiss currency, relative to the Canadian dollar, would result in unhedged debt denominated in Swiss francs increasing by $8.7 million (2018–19, $7.3 million) and a corresponding increase in interest on debt of $1.0 million (2018–19, $0.7 million). Total foreign exchange losses recognized in the Statement of Operations for 2019–20 were $27.2 million (2018–19, losses of $17.0 million).

Interest Rate Risk

Interest on debt expense may also vary as a result of changes in interest rates. In respect of Debt Issued for Provincial Purposes and OEFC debt, the risk is measured as net interest rate resetting exposure, which is the floating rate exposure plus fixed rate debt maturing within the next 12-month period net of liquid reserves as a percentage of Debt Issued for Provincial Purposes and OEFC debt, respectively.

The current market risk policy limits net interest rate resetting exposure for Debt Issued for Provincial Purposes and OEFC debt to a maximum of 35 per cent. As at March 31, 2020, the net interest rate resetting exposure for Debt Issued for Provincial Purposes and OEFC debt was 10.0 per cent and 13.5 per cent, respectively (2018–19, 10.8 per cent and 15.7 per cent). The full-year impact to interest on debt of a 100 basis-point change in borrowing rates is forecast to be approximately $400 million for 2020–21 ($350 million for 2019–20).

Liquidity Risk

Liquidity risk is the risk that the Province will not be able to meet its current short-term financial obligations. To reduce liquidity risk, the Province maintains liquid reserves — that is, cash and temporary investments (Note 8) adjusted for collateral at levels that are expected to meet future cash requirements and give flexibility in the timing of issuing debt. Pledged assets are considered encumbered for liquidity purposes while collateral held, that can be sold or repledged, is a source of liquidity. In addition, the Province has short-term note programs as alternative sources of liquidity.

Collateral

Ontario has entered into securities repurchase agreements and collateralized swap agreements with certain counterparties. Under the terms of those agreements, the province may be required to pledge and/or receive assets relating to obligations to the counterparties. In the normal course of business, these pledged securities will be returned to the pledgor when there are no longer any outstanding obligations.

As at March 31, 2020, the Province pledged assets in the carrying amount of $313 million (2018–19, $253 million), which would be included in Investments and/or Cash and Cash Equivalents.

Credit Risk

The use of derivatives introduces credit risk, which is the risk of a counterparty defaulting on contractual derivative obligations in which the province has an unrealized gain. The table below presents the credit risk associated with the derivative financial instrument portfolio measured through the replacement value of derivative contracts, as at March 31, 2020.

The Province manages its credit risk exposure from derivatives by, among other things, dealing only with high-credit-quality counterparties and regularly monitoring compliance to credit limits. In addition, the Province enters into contractual agreements (master agreements) that provide for termination netting and, if applicable, payment netting with most of its counterparties. Gross Credit Risk Exposure represents the loss that the province would incur if every counterparty to which the province had credit risk exposure were to default at the same time, and the contracted netting provisions were not exercised or could not be enforced. Net Credit Risk Exposure is the loss after the mitigating impact of these netting provisions. Net Credit Risk Exposure (Net of Collateral) is the potential loss to the province after mitigation by the collateral received from counterparties.

Derivative Portfolio Notional Value

The table below presents a maturity schedule of the province’s derivatives, by type, outstanding as at March 31, 2020, based on the notional amounts of the contracts. Notional amounts represent the volume of outstanding derivative contracts and are not indicative of credit risk, market risk or actual cash flows.

Derivative Portfolio Notional Value and Fair Value of Derivatives As at March 31 ($ Millions)

4. Other Long-Term Financing

Other long-term financing comprises the total debt of the BPS organizations and obligations under P3 arrangements.

Other Long-Term Financing of $15.0 billion as at March 31, 2020 (2018–19, $15.4 billion), includes BPS debt of $5.4 billion (2018–19, $5.4 billion), BPS P3 obligations of $5.7 billion (2018–19, $6.0 billion) and other P3 obligations of $3.9 billion (2018–19, $4.0 billion). The following table presents the maturity schedule of other long-term financing by type of financing.

Other Long-Term Financing As at March 31, 2020 ($ Millions)

Interest expense on BPS debt of $301 million (2018–19, $311 million) is included in Interest on Debt.

5. Deferred Revenue and Capital Contributions

In 2010–11, the Province renewed its long-standing business partnership with Teranet Inc. (Teranet) by extending Teranet’s exclusive licences to provide electronic land registration and writs services in Ontario for an additional 50 years. The Province received approximately a $1.0 billion upfront payment for the transaction, which is amortized into revenue over the life of the contract.

6. Pensions and Other Employee Future Benefits

The Province sponsors several pension plans. It is the sole sponsor of the Public Service Pension Plan (PSPP), and a joint sponsor of the Ontario Public Service Employees Union Pension Plan (OPSEUPP) and the Ontario Teachers’ Pension Plan (OTPP). In addition to the provincially sponsored plans, the province also reports in its financial statements pension benefits for employees in the hospital and colleges sectors which are provided by the Healthcare of Ontario Pension Plan (HOOPP) and the Colleges of Applied Arts and Technology Pension Plan (CAATPP) respectively.

Due to the COVID-19 pandemic, additional measurement uncertainty exists in the valuation of pension investments in funded plans that Ontario reports in its financial statements (refer to Note 1d). The uncertainty is caused by unobservable valuation inputs for investments where there is no quoted market price available and the determination of discount rates used to value certain plan investments as at March 31, 2020.

As permitted under Canadian public sector accounting standards, the Province elects to use an earlier pension measurement date, December 31, for preparing the consolidated financial statements as at March 31. The Province applies this reporting practice consistently and, in the past, there were no significant changes in plan valuation between the measurement and reporting dates. However, between December 31, 2019 and March 31, 2020 significant changes did occur in investment returns. Adjustments have been made to plan assets at March 31, 2020 as a result and plan assets are reflective of the significant changes in asset values due to investment losses for the contributory defined benefit plans. The related impacts are also considered when determining the unamortized actuarial gains/losses as well as valuation allowance for certain contributory defined benefit plans. The 2018–19 plan assets and unamortized actuarial gains (losses) remain reflective of the asset values at December 31, 2018.

The average investment return for the province’s contributory defined benefit pension plans between December 31, 2019 and March 31, 2020 was (-7.27) per cent. These changes in assets values between December 31, 2019 and March 31, 2020 have been reflected in the market value of assets as well as market-related value of assets used to determine the accrued pension liability/asset before valuation allowance as at March 31, 2020.

Pensions and Other Employee Future Benefits

Pensions and Other Employee Future Benefits Liability (Asset)

Pensions and Other Employee Future Benefits Expense

Pensions and Other Employee Future Benefits Expense by Plan and by Type

Pensions

PSPP, OPSEUPP and OTPP are contributory defined benefit plans that provide Ontario government employees and elementary and secondary school teachers as well as administrators with a defined amount of retirement income based on a formula. The formula takes into account a member’s best five year average salary and length of service. The retirement benefits are indexed to changes in the Consumer Price Index to provide protection against inflation. The plan benefits are financed by contributions from plan members and the Province as well as investment earnings. Plan members normally contribute 8 to 12 per cent (2018–19, 8 to 12 per cent) of their salaries to these plans. The Province matches these contributions. The obligations for benefits and plan fund assets for OTPP and OPSEUPP exclude those employers not consolidated by the Province.

The Province is also responsible for sponsoring the Public Service Supplementary Benefits Plan and the Ontario Teachers’ Retirement Compensation Arrangement. Expenses and liabilities of these plans are included in the Pensions Expense and Pensions Liability reported in the above tables.

HOOPP is a multi-employer pension plan covering employees of Ontario’s health care community. CAATPP is a multi-employer pension plan covering employees of the Colleges of Applied Arts and Technology in Ontario, the Ontario College Application Services and the Ontario College Library Services. Both plans are accounted for as multi-employer defined benefit plans that provide eligible members with a retirement income based on a formula. Like the plans that are sponsored by the Province, the formula takes into account a member’s best five-year average salary and length of service in the plan. The plan benefits are financed by contributions from participating members and employers and by investment earnings. The Province records a percentage of the net obligations of HOOPP and CAATPP based on the ratio of employer to employee contributions.

The Province does not have unilateral control over the decisions regarding contribution levels or benefit changes for either the HOOPP or CAATPP multi-employer plans as it is not a member of the committees responsible for these decisions. Therefore, a valuation allowance is recorded to write-down the net asset position in these plans, if any. The province has applied a full valuation against the net pension assets of the OTPP and OPSEUPP.

The obligation for benefits and plan fund assets of the above plans is based on actuarial accounting valuations that are performed annually. Funding of these plans is based on statutory actuarial funding valuations undertaken at least once every three years.

The Province has provided pension benefits to judges through the Provincial Judges Pension Fund since 1984. Under the Fund, pension obligation is held within the Consolidated Revenue Fund (CRF) of the province and is included under other liabilities in its financial statements. As of January 1, 2020, Ontario Regulation 290/13 on Pensions and Survivor Allowances for Provincial Judges came into effect. The overall benefits provided to judges remain unchanged, but a portion of assets and pension benefits were transferred to the newly established Provincial Judges Pension Plan (PJPP). The PJPP is comprised of a funded registered defined benefit pension plan and a supplemental defined benefit pension plan for eligible judges whose pension benefits under the PJPP registered plan are limited by the Federal Income Tax Act or Federal Tax Regulations.

Consistent with the Province’s selected measurement date of December 31, 2019 for pension and benefit plans, the pension obligation for judges is reported under other liabilities for the year ended March 31, 2020. The pension obligation will be reclassified to pension liability in the province’s consolidated financial statements for the year ended March 31, 2021.

Information on contributory defined benefit plans is as follows:

Other Employee Future Benefits

Other Employee Future Benefits are non-pension retirement benefits, post-employment benefits, compensated absences and termination benefits.

Non-Pension Retirement Benefits

The Province provides dental, basic life insurance, supplementary health and hospital benefits to eligible retired employees through a group insured benefit plan. Certain PSPP members and OPSEUPP members who had not accrued the minimum eligibility requirement of ten years of pension service before January 1, 2017 are now required to have 20 years of pension service and retire to an immediate unreduced pension to be eligible to receive the post-retirement insured benefits. Further, such eligible members who commenced receipt of a pension on or after January 1, 2017, have the option to either participate in the current legacy post-retirement insured benefits plan and pay 50 per cent of the premium costs, or to participate in the new retiree-focused post-retirement benefits plan, at no cost to the member.

Optional enrolment in the retiree-focused plan, at full cost to the retiree, is also available to employees hired before January 1, 2017, and who later retire to an immediate unreduced pension based on a minimum ten years of pension service and employees hired on and after January 1, 2017, who later retire to an immediate unreduced pension based on a minimum 20 years of pension service.

The liability for non-pension retirement benefits of $7.9 billion as at March 31, 2020 (2018–19, $8.0 billion), is included in the Other Employee Future Benefits Liability. The expense for 2019–20 of $424 million (2018–19, $356 million) is included in the Other Employee Future Benefits Expense.

The discount rate used in the non-pension retirement benefits calculation for 2019–20 is 3.5 per cent (2018–19, 3.5 per cent). The discount rate used by BPS organizations in the non-pension retirement benefits calculation for 2019–20 ranges from 1.6 per cent to 5.0 per cent (2018–19, 2.0 per cent to 6.0 per cent).

Post-Employment Benefits, Compensated Absences and Termination Benefits

The Province provides, on a self-insured basis, workers’ compensation benefits, long term disability benefits and regular benefits to employees who are on long term disability.

For all other employees, subject to terms set out in collective agreements and in the Management Board of Cabinet Compensation Directive as applicable, the Province provides termination pay equal to one week’s salary for each year of service up to a maximum of 50 per cent of their annual salary. Employees who have completed one year of service, but less than five years, are also entitled to termination pay in the event of death, retirement or release from employment. All employees who resign are not eligible for any severance pay in respect to service after December 2011.

The total post-employment benefits liability of $2.8 billion as at March 31, 2020 (2018–19, $2.5 billion) is included in the Other Employee Future Benefits Liability. The total post-employment benefits expense of $1.1 billion in 2019–20 (2018–19, $813 million post-employment benefit expense) is included in the Other Employee Future Benefits Expense.

The discount rate used in the post-employment benefits, compensated absences and termination benefits calculations for 2019–20 is 3.3 per cent (2018–19, 2.9 per cent). The discount rate used by BPS organizations for the post-employment benefits in 2019–20 ranges from 1.6 per cent to 6.0 per cent (2018–19, 2.2 per cent to 6.0 per cent).

7. Other Liabilities

Liabilities for Contaminated Sites

The Province reports environmental liabilities related to the management and remediation of contaminated sites where it is obligated or likely obligated to incur such costs. A contaminated sites liability of $1.7 billion (2018–19, $1.8 billion) has been recorded based on environmental assessments or estimations for those sites where an assessment has not been conducted.

Ontario’s ongoing efforts to assess contaminated sites may result in additional environmental remediation liabilities related to newly identified sites, or changes in the assessments or intended use of existing sites, including mine sites. Any changes to the province’s liabilities for contaminated sites will be accrued in the year in which they are assessed as likely and measurable.

Other Pension Liabilities

Other pension liabilities include pension and benefit funds related to the Provincial Judges’ Pension Fund, the Public Service, the Justice of the Peace, the Deputy Ministers’, OPSEU and the Case Management Masters Supplementary Benefit Accounts, externally restricted funds and other long-term liabilities.

Fair Hydro Trust

The Fair Hydro Trust funded the cash shortfall from the Independent Electricity System Operator as part of the Global Adjustment Refinancing. As a result of the passing of the Fixing the Hydro Mess Act, 2019, the Province included the amount of outstanding debt issued by the Fair Hydro Trust as liabilities in 2019. Starting in 2020, Fair Hydro Trust became a government organization controlled by the Province. The financial results of Fair Hydro Trust are consolidated with the assets, liabilities, revenues and expenses of the Province on a line-by-line basis. Upon consolidation, the outstanding debt of Fair Hydro Trust is reflected as part of the total debt for the Province (see Note 2). The outstanding debt reflects financing issued in prior years and is a non-cash transaction in current year.

8. Investments

Temporary Investments

The fair value of temporary investments, including assets purchased and sold under resale and repurchase agreements at March 31, 2020, is $23.2 billion (2018–19, $23.3 billion). Temporary investments primarily consist of investments in government bonds. Fair value is determined using quoted market prices.

A resale agreement is an agreement between two parties where the Province purchases and subsequently resells a security at a specified price on a specified date. A repurchase agreement is an agreement between two parties where the Province sells and subsequently repurchases a security at a specified price on a specified date.

Other Investments

Other investments represent the investments held by BPS and other government organizations. These investments mainly consist of fixed-income securities, such as Guaranteed Investment Certificates, Government of Canada Bonds, other bonds and Pooled Portfolio Investments (i.e., Mutual Funds).

9. Tangible Capital Assets

Tangible Capital Assets As at March 31 ($ Millions)

Land includes land acquired for transportation infrastructure, parks, buildings and other program use, and land improvements that have an indefinite life and are not being amortized. Land excludes Crown lands acquired by right.

Buildings include administrative and service structures, dams and engineering structures.

Transportation Infrastructure includes provincial highways, railways, bridges and related structures and facilities, but excludes land and buildings.

Machinery and Equipment consists mostly of hospital equipment.

Information Technology consists of computer hardware and software.

Other includes leased assets, vehicles, aircraft and other miscellaneous tangible capital assets owned by the government and its consolidated organizations.

Works of art and historical treasures are excluded from tangible capital assets.

Assets under construction have been included within the various asset categories presented above. The total value of assets under construction as at March 31, 2020, is $21.3 billion (2018–19, $17.9 billion). Capitalized interest for the fiscal year 2019–20 is $245 million (2018–19, $175 million). The cost of tangible capital assets under capital leases is $884 million (2018–19, $852 million), and their accumulated amortization is $375 million (2018–19, $362 million).

Amortization expense for the fiscal year 2019–20 totalled $6.2 billion (2018–19, $6.0 billion).

10. Changes in the Fair Value of Ontario Nuclear Funds

The Ontario Nuclear Funds Agreement (ONFA) Funds were established by Ontario Power Generation Inc. (OPG) and the Province to ensure that sufficient funds will be available to pay for the costs of nuclear station decommissioning and nuclear used fuel waste management.

Since April 1, 2007, the fair value of ONFA Funds has been reflected in the Ontario’s Consolidated Financial Statements. Unrealized gains and losses of ONFA Funds are included in Investment in Government Business Enterprises and recorded as an Increase (Decrease) in Fair Value of Ontario Nuclear Funds in the Consolidated Statement of Change in Net Debt and the Consolidated Statement of Change in Accumulated Deficit. Realized gains and losses of ONFA Funds are included in Income from Investment in Government Business Enterprises. Inter-organizational balances related to ONFA Funds are eliminated.

ONFA Funds incurred unrealized losses in 2019–20 of $1,418 million (2018–19, unrealized losses $242 million) that resulted in a decrease in Investment in Government Business Enterprises and a corresponding increase in Net Debt and Accumulated Deficit.

11. a. Contingent Liabilities

Obligations Guaranteed by the Province

Loan guarantees include guarantees or indemnifications provided by the Province or government organizations. The authorized limit for loans guaranteed by the Province as at March 31, 2020, was $1.2 billion (2018–19, $1.2 billion). The outstanding loans guaranteed amounted to $0.5 billion as at March 31, 2020 (2018–19, $0.6 billion). A provision of $1.6 million (2018–19, $1.3 million), based on an estimate of the likely loss arising from guarantees mostly under the Student Support Programs, has been reflected in these financial statements.

Ontario Nuclear Funds Agreement

Under the Ontario Nuclear Funds Agreement (ONFA), the Province is liable to make payments should the cost estimate for nuclear used fuel waste management rise above specified thresholds for a fixed volume of used fuel. The likelihood and amount by which the cost estimate could rise above these thresholds cannot be determined at this time. The cost estimate will be updated periodically to reflect new developments in the management of nuclear used fuel waste.

In addition, under ONFA, the Province guarantees a return of 3.25 per cent over the Ontario Consumer Price Index for the portion of the nuclear used fuel waste management segregated fund related to the fixed volume of used fuel. If the earnings on assets in that fund related to the fixed volume exceed the guaranteed rate, the Province is entitled to the excess.

An agreement between the CNSC, the Province and OPG gives the CNSC access (in prescribed circumstances) to the segregated funds established under ONFA.

Claims Against the Crown

There are claims outstanding against the Crown, of which 75 (2018–19, 65) are for amounts over $50 million. These claims arise from legal action, either in progress or threatened, in respect of Aboriginal land claims, breach of contract, damages to persons and property, and like items. The cost to the Province, if any, cannot be determined because the financial outcome of these actions is uncertain. For a detailed listing of claims against the ministries, refer to the Ministry Statements and Schedules, “Claims Against the Crown.”

On April 20, 2016, the Ontario Superior Court determined that Bill 115, Putting Students First Act, 2012, was in contravention of the unions’ right to collective bargaining under the Charter of Rights and Freedoms. The Court did not impose a penalty on the Province and directed that the parties attempt to negotiate a remedy. The Province has included in its financial statement its best estimation of the remedy amount based on information available, the extent of which was not disclosed given that agreements had not been reached with all applicant parties. At March 31, 2020, not all the applicant parties have reached an agreement with the Crown. One of the applicant parties has subsequently returned to court to decide on the remedy amount.

Canadian Blood Services

The provincial and territorial governments of Canada have entered into a Canadian Blood Services Excess Insurance Captive Support Agreement (the “Captive Support Agreement”) with Canadian Blood Services (CBS) and Canadian Blood Services Insurance Company Limited (CBSI), a wholly owned subsidiary of CBS. Under the Captive Support Agreement, each government indemnifies CBSI for its pro rata share of any payments that CBSI becomes obliged to make under a comprehensive blood risks insurance policy it provides to CBS. The policy has an overall limit of $750 million which may cover settlements, judgments and defense costs. The policy is in excess of, and secondary to, a $250 million comprehensive insurance policy underwritten by CBS Insurance Company Limited, (CBSI). Given current populations, Ontario’s maximum potential liability under the Captive Support Agreement is approximately $350 million. The Province is not aware of any proceedings that could lead to a claim against it under the Captive Support Agreement.

Contaminated Sites

The Province has identified contingent liabilities related to 142 sites (2018–19, 141 sites) that may have potential liabilities of $400 million (2018–19, $398 million). A liability has not been recorded for these sites at the financial reporting date because either the likelihood of the government becoming responsible for the site is not determinable, or the amount of the liability cannot be estimated, or both.

Tax Assessments

The province signed a Memorandum of Agreement with the Government of Canada to transition to a single administration for corporate tax for tax years ending after December 31, 2008. As part of the agreement, for tax years prior to 2008 the Canada Revenue Agency (CRA) is responsible for the administration of audit activities, taxpayer objections and any appeals that may arise from objections administered by the CRA. The cost to the Province cannot be reasonably estimated as the outcome of these objections and appeals are uncertain.

Land and Land Related Claims

A land or land related claim is a formal allegation made by an Indigenous community that it is legally entitled to land, financial payment, or other compensation. Currently, 63 land claims are under negotiation, accepted for negotiation, or under review. A liability is recorded if the settlement of the claim is assessed as likely and the amount of the settlement can be reasonably estimated.

Other contingencies for this year are $0.1 billion (2018–19, $0.1 billion).

b. Contingent Assets

The Province has brought a claim against a number of companies in the tobacco industry pursuant to the Tobacco Damages and Health Care Costs Recovery Act, 2009. The action is in the pre-trial stage; however, it is currently stayed as a result of the Tobacco Companies’ insolvency proceedings under the Companies’ Creditors Arrangement Act. The amount of any potential payment to the province is not estimable at this time.

12. a. Contractual Obligations

The Province has entered into a number of multiple-year P3 contracts for the construction of assets and delivery of services. The contractual obligations represent the unperformed capital and operating portion of the contracts and will become liabilities in the future when the terms of the contracts are met.

b. Contractual Rights

In May 2010, the Province reached a deal with Teranet to provide a 50-year extension to its original agreement in exchange for $1.0 billion cash up front. As part of the new agreement, Teranet has agreed to pay Ontario annual royalty payments beginning in 2017 and ending in 2067. The royalty payments are contingent upon Teranet’s financial performance. The Province recognized $27 million in revenue relating to royalty payments pertaining to the contractual rights from Teranet in 2019–20 (2018–19, $24.5 million).

Contractual rights are certain in nature and they will become assets in the future when the terms of the contracts are met.

13. Trust Funds Under Administration

The following trust funds under administration are not included in the Consolidated Financial Statements of the province.

The Workplace Safety and Insurance Board (WSIB) is responsible for administering the Workplace Safety and Insurance Act 1997, which establishes a no-fault insurance scheme that provides benefits to workers who experience workplace injuries or illnesses.

The Public Guardian and Trustee for the Province of Ontario delivers a unique and diverse range of services that safeguard the legal, personal and financial interests of certain private individuals and estates. It also plays an important role in helping to protect charitable property in Ontario.

The Motor Vehicle Accident Claims Fund operates under the authority of the Motor Vehicle Accident Claims Act. The Act provides compensation for eligible losses occasioned by unidentified and uninsured motor vehicles.

The Pension Benefits Guarantee Fund (PBGF) provides protection, subject to specific maximums and specific exclusions, to Ontario members and beneficiaries of privately sponsored single-employer defined benefit pension plans in the event of plan sponsor insolvency. The PBGF is governed by the Pension Benefits Act and its Regulation and is administered by the Chief Executive Officer (CEO) of the Financial Services Regulatory Authority of Ontario (FSRA) as of June 8, 2019. Prior to June 8, 2019, the PBGF was administered by the Superintendent of Financial Services Commission of Ontario.

The Deposit Insurance Reserve Fund (DIRF) provides protection for depositors of Ontario credit unions and caisses populaires from the loss of their insurable deposits. The DIRF is governed by the the Credit Unions and Caisses Populaires Act, 1994 and its Regulation and is administered by FSRA as of June 8, 2019. Prior to June 8, 2019, the DIRF was administered by the Deposit Insurance Corporations of Ontario (DICO).

The net liabilities assumed by FSRA on June 8, 2019 have been recognized at book value and adjusted to comply with public sector accounting standards where required.

Summary financial information from the most recent financial statements of trust funds under administration is provided below. The financial statements of the WSIB and the Public Guardian and Trustee for the Province of Ontario have been prepared in accordance with IFRS.

Unfunded liabilities of trusts under administration are not included in Ontario’s Consolidated Financial Statements as it is intended that they will be discharged by external parties.

14. Related Party Disclosures and Inter-entity Transactions

The Province of Ontario enters into transactions with parties within the reporting entity, including provincial Crown corporations, agencies, boards, commissions and government not-for-profit organizations, in the normal course of operations. These inter-entity transactions are those conducted between related parties with common control or ownership, are recorded at the exchange value, and have been eliminated for purposes of consolidated reporting.

Related party transactions can also include transactions with entities outside the reporting entity where a member of the Ontario’s key management personnel, or their spouse or dependent, is key management personnel of the counterparty to a transaction with the province. As key management personnel, they govern or share the power to determine the ongoing financial and operating decisions of that counterparty. Key management personnel of the province are those individuals having authority and responsibility for planning, directing and controlling the activities of the government, and have been identified as ministers, associate ministers and deputy ministers for the purpose of this reporting.

The Province has a wide variety of controls in place to ensure that key management personnel do not enter into transactions with related parties. For 2019–20 there were no material transactions between related parties which occurred at a value different from that which would have been arrived at if the parties were unrelated.

15. Subsequent Events

Acquisition by Ontario Power Generation

On April 29, 2020, Ontario Power Generation (OPG), under a wholly-owned subsidiary operating as Atura Power, closed the acquisition of a portfolio of combined-cycle natural gas-fired plants in Ontario from TC Energy Corporation for approximately $2.8 billion, subject to customary closing adjustments. The portfolio includes the 900 megawatt-hour (MW) Napanee Generating Station (GS), the 683 MW Halton Hills GS, and the remaining 50 percent interest in the 550 MW Portlands Energy Centre.

Ontario Telehealth Network

Ontario Regulation 390/19 under the Connecting Care Act, 2019, gave the Minister of Health and Long-Term Care the authority to transfer the Ontario Telemedicine Network (OTN) into Ontario Health. On March 18, 2019, the Minister of Health and Long-Term Care issued a transfer order to OTN. Effective April 1, 2020, the employees, assets, liabilities, rights and obligations of OTN were fully transferred to Ontario Health.

Provincial Judges Pension Plan

The Province has provided pension benefits to judges through Provincial Judges Pension Fund since 1984. Under the Fund, pension obligation is held within the Consolidated Revenue Fund (CRF) of the Province and is included under other liabilities in its financial statements. As of January 1, 2020, Ontario Regulation 290/13 on Pensions and Survivor Allowances for Provincial Judges came into effect. The overall benefits provided to judges remain unchanged, but a portion of assets and pension benefits were transferred to the newly established Provincial Judges Pension Plan (PJPP). The PJPP is comprised of a fully funded registered pension plan and a supplemental pension plan for eligible judges whose pension benefits under the PJPP registered plan are limited by the Federal Income Tax Act or Federal Tax Regulations.

Consistent with the Province’s selected measurement date of December 31, 2019 for pension and benefit plans, the pension obligation for judges is reported under other liabilities for the year ended March 31, 2020. The pension obligation will be reclassified to pension liability in the Province’s consolidated financial statements for the year ended March 31, 2021.

16. Changes in Reporting and Classifications

A. Restatement of 2019 Budget

For comparative purposes, the 2019 Budget has been reclassified to aggregate all expenses incurred related to the Government Real Estate Portfolio (GREP) under the Ministry of Government and Consumer Services, projects supported through Infrastructure Ontario (IO) under the Ministry of Infrastructure, and programs supported through the Ontario Trillium Foundation (OTF) under the Ministry of Tourism, Culture and Sport. The actual results are presented on a similar basis for consistency.

A summary of change by ministry, is provided below:

B. Sector Reclassification

All presentations of results by sector for the 2019 Budget and the prior year comparatives have been reclassified to be reflected on the same basis as that used to report the actual current year expenses.

C. Adjustments to Prior-Year Net Debt and Accumulated Deficit

During 2019–20, an adjustment of $526 million was made to the opening accumulated deficit for receivable for Corporations Tax and other revenue adjustments.

D. Comparative Figures

Certain comparative figures have been reclassified as necessary to conform to the 2019–20 presentation.

Schedules to the Consolidated Financial Statements

Province of Ontario Schedule 1: Revenue by Source

Province of Ontario Schedule 1: Revenue by Source (cont’d)

Province of Ontario Schedule 2: Revenue by Sector

Province of Ontario Schedule 3: Expense by Sector^{footnote 37[37]}

Province of Ontario Schedule 4: Expense by Ministry

Province of Ontario Schedule 5: Accounts Payable and Accrued Liabilities

Province of Ontario Schedule 6: Accounts Receivable

Province of Ontario Schedule 7: Loans Receivable

Province of Ontario Schedule 8: Government Organizations^{footnote 61[61]}

Broader Public Sector Organizations

Public Hospitals — Ministry of Health and Long-Term Care

• Alexandra Hospital Ingersoll
• Alexandra Marine & General Hospital
• Almonte General Hospital
• Anson General Hospital
• Arnprior Regional Health
• Atikokan General Hospital
• Baycrest Centre for Geriatric Care
• Bingham Memorial Hospital
• Bluewater Health
• Brant Community Healthcare System
• Brockville General Hospital
• Bruyère Continuing Care Inc.
• Cambridge Memorial Hospital
• Campbellford Memorial Hospital
• Carleton Place & District Memorial Hospital
• Casey House Hospice
• Chatham-Kent Health Alliance
• Children’s Hospital of Eastern Ontario - Ottawa Children's Treatment Centre
• Clinton Public Hospital
• Collingwood General and Marine Hospital
• Cornwall Community Hospital
• Deep River & District Hospital Corporation
• Dryden Regional Health Centre
• Englehart and District Hospital Inc.
• Erie Shores HealthCare
• Espanola General Hospital
• Four Counties Health Services
• Georgian Bay General Hospital
• Geraldton District Hospital Grand River Hospital
• Grey Bruce Health Services
• Groves Memorial Community Hospital
• Guelph General Hospital
• Haldimand War Memorial Hospital
• Haliburton Highlands Health Services Corporation
• Halton Healthcare Services Corporation
• Hamilton Health Sciences Corporation
• Hanover & District Hospital
• Headwaters Health Care Centre
• Health Sciences North
• Holland Bloorview Kids Rehabilitation Hospital
• Hornepayne Community Hospital
• Hospital for Sick Children
• Humber River Regional Hospital
• Hôpital Glengarry Memorial Hospital
• Hôpital Général de Hawkesbury and District General Hospital Inc.
• Hôpital Montfort
• Hôpital Notre-Dame Hospital (Hearst)
• Hôtel-Dieu Grace Healthcare
• Hôtel-Dieu Hospital, Cornwall
• Joseph Brant Hospital
• Kemptville District Hospital
• Kingston Health Sciences Centre
• Kirkland and District Hospital
• Lady Dunn Health Centre
• Lady Minto Hospital, Cochrane
• Lake of the Woods District Hospital
• Lakeridge Health
• Lennox and Addington County General Hospital
• Listowel Memorial Hospital
• London Health Sciences Centre
• Mackenzie Health
• Manitoulin Health Centre
• Markham Stouffville Hospital
• Mattawa General Hospital
• Muskoka Algonquin Healthcare
• Niagara Health System
• Nipigon District Memorial Hospital
• Norfolk General Hospital
• North Bay Regional Health Centre
• North of Superior Healthcare Group
• North Shore Health Network
• North Wellington Health Care Corporation
• North York General Hospital
• Northumberland Hills Hospital
• Orillia Soldiers’ Memorial Hospital
• Ottawa Hospital
• Pembroke Regional Hospital Inc.
• Perth and Smiths Falls District Hospital
• Peterborough Regional Health Centre
• Providence Care Centre (Kingston)
• Queensway Carleton Hospital
• Quinte Healthcare Corporation
• Red Lake Margaret Cochenour Memorial Hospital Corporation
• Religious Hospitallers of St. Joseph of the Hotel Dieu of St. Catharines
• Renfrew Victoria Hospital
• Riverside Health Care Facilities Inc.
• Ross Memorial Hospital
• Royal Victoria Regional Health Centre
• Runnymede Healthcare Centre
• Salvation Army Toronto Grace Health Centre
• Salvation Army Toronto Grace Health Centre
• Sault Area Hospital
• Scarborough Health Network
• Seaforth Community Hospital
• Sensenbrenner Hospital
• Services de santé de Chapleau Health Services
• Sinai Health System
• Sioux Lookout Meno Ya Win Health Centre
• Smooth Rock Falls Hospital
• South Bruce Grey Health Centre
• South Huron Hospital Association
• Southlake Regional Health Centre
• St. Francis Memorial Hospital
• St. Joseph’s Care Group
• St. Joseph’s Continuing Care Centre, Centre of Sudbury
• St. Joseph’s General Hospital, Elliot Lake
• St. Joseph’s Health Care, London
• St. Joseph’s Health Centre Guelph
• St. Joseph’s Healthcare Hamilton
• St. Marys Memorial Hospital
• St. Mary’s General Hospital
• St. Thomas Elgin General Hospital
• Stevenson Memorial Hospital
• Stratford General Hospital
• Strathroy Middlesex General Hospital
• Sunnybrook Health Sciences Centre
• Temiskaming Hospital
• Thunder Bay Regional Health Sciences Centre
• Tillsonburg District Memorial Hospital
• Timmins and District Hospital
• Toronto East Health Network
• Trillium Health Partners
• Unity Health Toronto
• University Health Network
• University of Ottawa Heart Institute
• Weeneebayko Area Health Authority
• West Haldimand General Hospital
• West Nipissing General Hospital
• West Park Healthcare Centre
• West Parry Sound Health Centre
• William Osler Health System
• Winchester District Memorial Hospital
• Windsor Regional Hospital
• Wingham and District Hospital
• Women’s College Hospital
• Woodstock General Hospital Trust

Specialty Psychiatric Hospitals — Ministry of Health and Long-Term Care

• Centre for Addiction and Mental Health
• Ontario Shores Centre for Mental Health Sciences
• Royal Ottawa Health Care Group
• Waypoint Centre for Mental Health Care

Colleges — Ministry of Training, Colleges and Universities

• Algonquin College of Applied Arts and Technology
• Cambrian College of Applied Arts and Technology
• Canadore College of Applied Arts and Technology
• Centennial College of Applied Arts and Technology
• Collège Boréal d’arts appliqués et de technologie
• Collège d’arts appliqués et de technologie La Cité collégiale
• Conestoga College Institute of Technology and Advanced Learning
• Confederation College of Applied Arts and Technology
• Durham College of Applied Arts and Technology
• Fanshawe College of Applied Arts and Technology
• George Brown College of Applied Arts and Technology
• Georgian College of Applied Arts and Technology
• Humber College Institute of Technology and Advanced Learning
• Lambton College of Applied Arts and Technology
• Loyalist College of Applied Arts and Technology
• Mohawk College of Applied Arts and Technology
• Niagara College of Applied Arts and Technology
• Northern College of Applied Arts and Technology
• Sault College of Applied Arts and Technology
• Seneca College of Applied Arts and Technology
• Sheridan College Institute of Technology and Advanced Learning
• Sir Sandford Fleming College of Applied Arts and Technology
• St. Clair College of Applied Arts and Technology
• St. Lawrence College of Applied Arts and Technology

School Boards — Ministry of Education

• Algoma District School Board
• Algonquin & Lakeshore Catholic District School Board
• Avon Maitland District School Board
• Bloorview School Authority
• Bluewater District School Board
• Brant Haldimand Norfolk Catholic District School Board
• Bruce-Grey Catholic District School Board
• Campbell Children’s School Authority
• Catholic District School Board of Eastern Ontario
• Conseil des écoles publiques de l’Est de l’Ontario
• Conseil scolaire catholique MonAvenir
• Conseil scolaire catholique Providence
• Conseil scolaire de district catholique de l’Est ontarien
• Conseil scolaire de district catholique des Aurores boréales
• Conseil scolaire de district catholique des Grandes Rivières
• Conseil scolaire de district catholique du Centre-Est de l’Ontario
• Conseil scolaire de district catholique du Nouvel-Ontario
• Conseil scolaire de district catholique Franco-Nord
• Conseil scolaire de district du Nord-Est de l’Ontario
• Conseil scolaire public du Grand Nord de l'Ontario
• Conseil scolaire Viamonde
• District School Board of Niagara
• District School Board Ontario North East
• Dufferin-Peel Catholic District School Board
• Durham Catholic District School Board
• Durham District School Board
• Grand Erie District School Board
• Greater Essex County District School Board
• Halton Catholic District School Board
• Halton District School Board
• Hamilton-Wentworth Catholic District School Board
• Hamilton-Wentworth District School Board
• Hastings and Prince Edward District School Board
• Huron-Perth Catholic District School Board
• Huron-Superior Catholic District School Board
• James Bay Lowlands Secondary School Board
• John McGivney Children’s Centre School Authority
• Kawartha Pine Ridge District School Board
• Keewatin-Patricia District School Board
• Kenora Catholic District School Board
• KidsAbility School Authority
• Lakehead District School Board
• Lambton Kent District School Board
• Limestone District School Board
• London District Catholic School Board
• Moose Factory Island District School Area Board
• Moosonee District School Area Board
• Near North District School Board
• Niagara Catholic District School Board
• Niagara Peninsula Children’s Centre School Authority
• Nipissing-Parry Sound Catholic District School Board
• Northeastern Catholic District School Board
• Northwest Catholic District School Board
• Ottawa Catholic District School Board
• Ottawa-Carleton District School Board
• Peel District School Board
• Penetanguishene Protestant Separate School Board
• Peterborough Victoria Northumberland and Clarington Catholic District School Board
• Rainbow District School Board
• Rainy River District School Board
• Renfrew County Catholic District School Board
• Renfrew County District School Board
• Simcoe County District School Board
• Simcoe Muskoka Catholic District School Board
• St. Clair Catholic District School Board
• Sudbury Catholic District School Board
• Superior North Catholic District School Board
• Superior-Greenstone District School Board
• Thames Valley District School Board
• Thunder Bay Catholic District School Board
• Toronto Catholic District School Board
• Toronto District School Board
• Trillium Lakelands District School Board
• Upper Canada District School Board
• Upper Grand District School Board
• Waterloo Catholic District School Board
• Waterloo Region District School Board
• Wellington Catholic District School Board
• Windsor-Essex Catholic District School Board
• York Catholic District School Board
• York Region District School Board

Province of Ontario Schedule 9: Government Business Enterprises^{footnote 64[64]}

Summary financial information of Government Business Enterprises is provided below:

The following amounts included in the results of Ontario Power Generation are related to the activities of the Fair Hydro Trust.^{footnote 67[67]}

Ontario Cannabis Retail Corporation

The Ontario Cannabis Retail Corporation (OCRC) was established as a legal subsidiary of the Liquor Control Board of Ontario (LCBO) under the Ontario Cannabis Retail Corporation Act, 2017. As of October 17, 2018, the Cannabis Statute Law Amendment Act came into force, ending the OCRC's subsidiary relationship to the LCBO. From that date, the OCRC has been a Crown agency with direct accountability to the Ministry of Finance and controlled and consolidated by the Province. The principal business of OCRC is retail and distribution of non-medical cannabis.

Hydro One Limited

The principal business of Hydro One Limited is the transmission and distribution of electricity to customers within Ontario. It is regulated by the Ontario Energy Board.

Liquor Control Board of Ontario

The Liquor Control Board of Ontario (LCBO) regulates the purchase, sale and distribution of liquor for home consumption and liquor sales to licensed establishments through LCBO stores, Brewers Retail stores and winery retail stores throughout Ontario. The LCBO buys wine and liquor products for resale to the public, tests all products sold and establishes prices for beer, wine and spirits.

Ontario Lottery and Gaming Corporation

The Ontario Lottery and Gaming (OLG) Corporation conducts lottery games and operates commercial casinos, charity casinos and slot machines at Ontario racetracks.

Ontario Power Generation Inc.

The principal business of Ontario Power Generation Inc. (OPG) is the generation and sale of electricity in the Ontario wholesale market and in the interconnected markets of Quebec, Manitoba and the Northeast and Midwest United States.

Province of Ontario Schedule 10: Fees, Donations and Other Revenues from Hospitals, School Boards and Colleges

Guide to the public accounts

The Public Accounts of the Province of Ontario comprise this Annual Report and supplementary information.

The Annual Report includes a Financial Statement Discussion and Analysis, the Consolidated Financial Statements of the province and other supporting schedules and disclosures.

Financial Statement Discussion and Analysis

The first section of the Annual Report is the Financial Statement Discussion and Analysis section, which:

• Compares the province’s financial results to both the 2019 Budget and results for the previous year;
• Shows trends in key financial items and indicators of financial condition;
• Sets out key potential risks to financial results and strategies used to manage them;
• Includes descriptions of various assets and liabilities on the statement of financial position; and
• Presents non-financial activities results and discusses important initiatives related to enhancing transparency and accountability.

The Consolidated Financial Statements

The Consolidated Financial Statements show the province’s financial position at the end of the previous fiscal year, its financial activities during the reporting period and its financial position at the end of the reporting fiscal year. The statements are linked, and figures that appear in one statement may affect another.

The province’s financial statements are presented on a consolidated basis, meaning that the province’s statement of financial position and statement of operations reflect the combination of ministry results as well as financial results for entities that are controlled by the government (see Note 1 to the Consolidated Financial Statements for more details). Therefore, reported revenues and expenses of the province can be affected directly by the activities of ministries as well as the performance of controlled entities such as government business enterprises (GBEs) and broader public sector (BPS) organizations, i.e., hospitals, school boards and colleges. In addition, the province’s results are also affected by transfer payments made to non-consolidated entities, such as municipalities and universities.

The financial statements comprise:

• The Consolidated Statement of Operations, which provides a summary of the government’s revenue for the period less its expenses, and shows whether the government incurred an operating deficit or surplus for the year. The results for the current year are presented along with the Budget Plan, and the financial results for the prior fiscal period. The annual surplus/deficit has an impact on the province’s financial position.
• The Consolidated Statement of Financial Position, which reports the province’s assets and liabilities and is also known as the balance sheet. The province’s total liabilities include debt and other long-term financing. Financial assets include cash, short-term investments, amounts due from others and investment in GBEs. The difference between total liabilities and financial assets is the province’s net debt, which provides a measure of the future government revenues that will be required to pay for the government’s past transactions. Non-financial assets, mainly tangible capital assets such as highways, bridges and buildings, are subtracted from net debt to arrive at the accumulated deficit/surplus. A deficit/surplus in the year increases/decreases the accumulated deficit/surplus.
• The Consolidated Statement of Change in Net Debt, which shows how the province’s net debt position changed during the year. The main factors impacting net debt are the annual surplus/deficit and additions to tangible capital assets.
• The Consolidated Statement of Change in Accumulated Deficit/Surplus, which is a cumulative total of all the province’s annual deficits and surpluses to date. It is mainly affected by the annual surplus/deficit in a year.
• The Consolidated Statement of Cash Flow, which shows the sources and uses of cash and cash equivalents over the year. Two major sources of cash are revenues and borrowings. Uses of cash include funding for operating costs, investments in capital assets and debt repayment. The statement is presented in what is referred to as the indirect method, meaning that it starts with the annual surplus or deficit and reconciles that to the cash flow from operations by adding or subtracting non-cash items, such as amortization of tangible capital assets. It also shows cash used to acquire tangible capital assets and investments, as well as cash generated from financing activities.

When reading the Consolidated Financial Statements, it is essential to also read the accompanying notes and schedules, which summarize Ontario’s significant accounting policies and provide additional information on underlying financial activities, market value of investments, contractual obligations and risks.

Other elements of the Annual Report

• In the Statement of Responsibility, the government acknowledges its responsibility for the Consolidated Financial Statements and the Financial Statement Discussion and Analysis. The Statement, which appears on page 2, outlines the accounting policies and practices used in preparing the financial statements and acknowledges the government’s responsibility for financial management systems and controls.
• The Auditor General’s Report, which appears on page 43-45, expresses an opinion under the Auditor General Act as to whether the statements fairly present the annual financial results and financial position of the government in accordance with Canadian public sector accounting standards.

Supplementary information

The Ministry Statements and Schedules (formerly Volume 1) contains ministry statements and detailed schedules of debt and other items. Individual ministry statements compare actual expenses to the amounts appropriated by the Legislative Assembly. Appropriations are made through the Estimates, Supplementary Estimates and annual Supply Act, 2020 (as modified by Treasury Board Orders), other statutes and special warrants, if any. The ministry statements include amounts appropriated to fund certain provincial organizations, including hospitals, school boards and colleges. The financial results of all provincial organizations included in the government reporting entity in accordance with public sector accounting standards are consolidated with those of the Province to produce the Consolidated Financial Statements in accordance with the accounting policies as described in Note 1 to the statements.

The Detailed Schedules of Payments (formerly Volume 3) contains the details of payments made by ministries to vendors (including sales tax) and transfer payment recipients that exceed certain thresholds, including: payments to suppliers of temporary help services; payments made directly to a supplier by the ministry for employee benefits; travel payments for employees; total payments for grants, subsidies or assistance to persons, businesses, non-commercial institutions and other government bodies; other payments to suppliers of goods and services; and statutory payments.

Starting in 2018–19, the Financial Statements of Government Organizations and Business Enterprises (formerly Volume 2) no longer forms a part of the Public Accounts. Individual statements of significant provincial corporations, boards and commissions that are part of the government’s reporting entity, as well as other miscellaneous financial statements are available via web link to the organization’s website through ontario.ca/publicaccounts or upon request.

Glossary

Note: The definitions of the terms in the glossary are provided for clarification and assisting readers of the 2019–20 Annual Report. The descriptions do not affect or alter the meaning of any term under law. The glossary does not form part of the audited Consolidated Financial Statements.

Accumulated Amortization

The total amortization that has been recorded over the life of an asset to date. The asset’s total cost less the accumulated amortization gives the asset’s net book value.

Accumulated Deficit

The difference between liabilities and assets. It represents the total of all past annual deficits minus all past annual surpluses, including prior-period adjustments.

Amortization

Expensing a portion of an asset’s cost in an accounting period by allocating its cost over its estimated useful life. This is applicable to tangible capital assets and items such as expenses relating to a debt issue.

Appropriation

An authority of the Legislative Assembly to pay money out of the Consolidated Revenue Fund or to incur a non-cash expense.

Annual Report

The Consolidated Financial Statements of the Province along with supporting statements and schedules.

Broader Public Sector (BPS)

Public hospitals, specialty psychiatric hospitals, school boards and colleges. For financial statement purposes, universities and other organizations such as municipalities are excluded because they do not meet the criteria of government organizations as recommended by the Public Sector Accounting Board (PSAB) of the Chartered Professional Accountants of Canada (CPA Canada).

Canada Health Transfer (CHT)

A federal transfer provided to each province and territory in support of health care.

Canada Social Transfer (CST)

A federal transfer provided to each province and territory in support of postsecondary education, social assistance and social services, including early childhood development, early learning and child care.

Capital Gain

The profit arising from the sale or transfer of capital assets or investments. For accounting purposes, it is the proceeds or market value received less the net book value of the capital asset or investment.

Capital Lease

A lease that, from the point of view of the lessee, transfers substantially all the benefits and risks incident to ownership of property to the lessee.

Consolidated Revenue Fund (CRF)

The aggregate of all public monies on deposit to the credit of the Minister of Finance or in the name of any agency of the Crown approved by the Lieutenant Governor in Council. Payments made from the CRF must be appropriated by a statute. See Appropriation for further details.

Consolidation

The inclusion of the financial results of government-controlled organizations in the province’s Consolidated Financial Statements.

Consumer Price Index (CPI)

A broad measure of the cost of living. Through the monthly CPI, Statistics Canada tracks the retail price of a representative shopping basket of goods and services from an average household’s expenditure: food, housing, transportation, furniture, clothing and recreation. The percentage of the total basket that any item occupies is termed the “weight” and reflects typical consumer spending patterns. Since people tend to spend more on food than clothing, changes in the price of food have a bigger impact on the index than, for example, changes in the price of clothing and footwear.

Contingency Fund

An amount of expense that is approved by the Legislative Assembly at the beginning of the year to cover higher spending due to unforeseen events. This approved spending limit is allocated during the year to ministries for their programs and activities. The actual costs incurred are charged to the respective programs and activities and not to the contingency fund. Therefore, the contingency fund as at the end of the Province’s fiscal year is nil. See Reserve for further details.

Contingent Liabilities

Possible obligations that may result in the future sacrifice of economic benefits arising from existing conditions or situations involving uncertainty, which will ultimately be resolved when one or more future events not wholly within the government’s control occur or fail to occur. Resolution of the uncertainty will confirm the incurrence or non-incurrence of a liability.

Contractual Obligations

Obligations of a government to others that will become liabilities when the terms of any contract or agreement, which the government had entered into, are met.

Debenture

A debt instrument where the issuer promises to pay interest and repay the principal by the maturity date. It is unsecured, meaning there is no lien on any specific asset.

Debt

An obligation resulting from the borrowing of money.

Deferred Capital Contribution

The unamortized portion of tangible capital assets or liabilities to construct or acquire tangible capital assets from specific funding received from other levels of government or third parties. Deferred capital contribution is recorded in revenue over the estimated useful life of the underlying tangible capital assets once constructed or acquired by the province.

Deferred Revenue

Unspent externally restricted grants from other levels of government and third parties for operating activities. Deferred revenues are recorded into revenue in the period in which the amount received is used for the purposes specified.

Deficit

The amount by which government expenses exceed revenues in any given year. On a forecast basis, a reserve may be included.

Derivatives

Financial contracts that derive their value from other underlying instruments. The Province uses derivatives including swaps, forward foreign exchange contracts, forward rate agreements, futures and options to hedge and minimize interest costs.

Expected Average Remaining Service Life

Total number of years of future services expected to be rendered by that group of employees divided by the number of employees in the group.

Fair Value

The price that would be agreed upon in an arm’s-length transaction and in an open market between knowledgeable, willing parties who are under no compulsion to act. It is not the effect of a forced or liquidation sale.

Financial Assets

Assets that could be used to discharge existing liabilities or finance future operations and are not for consumption in the normal course of operations. Financial assets include cash; an asset that is convertible to cash; a contractual right to receive cash or another financial asset from another party; a temporary or portfolio investment; a financial claim on an outside organization or individual; and inventory.

Financial Instrument

Liquid asset, equity security in an entity or a contract that gives rise to a financial asset of one contracting party and a financial liability or equity instrument of the other contracting party.

Fiscal Plan

An outline of the government’s consolidated revenue and expense plan for the upcoming fiscal year and the medium term, including information on the projected surplus/deficit. The plan is formally presented in the Budget, which the government presents in the spring of each year and is updated, as required, during the year. The fiscal plan numbers can be different from the expenditures outlined in the Estimates.

Fiscal Year

The province of Ontario’s fiscal year runs from April 1 of a year to March 31 of the following year.

Floating Rate Notes (FRNs)

debt instruments that bear a variable rate of interest.

Forgivable Loan

Advances where the terms and conditions of the loan agreement allow for the non-repayment of the principal or accrued interest when certain conditions are met.

Forward Contract

A contract that obligates one party to buy, and another party to sell, a specified amount of a particular asset at a specified price, on a given date in the future.

Forward Rate Agreement

A forward contract that specifies the rate of interest, usually short term, to be paid or received on an obligation beginning at a future start date.

Fund

fiscal and accounting entity segregated for the purpose of carrying on specific activities, or attaining certain objectives in accordance with special regulations, restrictions or limitations.

Futures

An exchange-traded contract that confers an obligation to buy or sell a physical or financial commodity at a specified price and amount on a future date.

Gross Domestic Product (GDP)

The total unduplicated value of the goods and services produced in the economy of a country or region during a given period, such as a quarter or a year. Gross domestic product can be measured three ways: as total income earned in current production, as total final expenditures or as total net value added in current production.

Hedging

A strategy to minimize the risk of loss on an asset (or a liability) from market fluctuations such as interest rate or foreign exchange rate changes. This is accomplished by entering into offsetting commitments with the expectation that a future change in the value of the hedging instrument will offset the change in the value of the asset (or the liability).

Indemnity

An agreement whereby one party agrees to compensate another party for any loss suffered by that party. The Province can either seek or provide indemnification.

Infrastructure

The facilities, systems and equipment required to provide public services and support private-sector economic activity including network infrastructure (e.g., roads, bridges, water and wastewater systems, large information technology systems), buildings (e.g., hospitals, schools, courts) and machinery and equipment (e.g., medical equipment, research equipment).

Liquid Reserve

comprises cash and short-term investments managed before consolidation with other government entities. It includes cash in the province’s bank accounts, money market securities and long-term bonds which have not been lent out through a sale and re-purchase agreement, adjusted for net pledged collateral.

Loan Guarantee

An agreement to pay all or part of the amount due on a debt obligation in the event of default by the borrower.

Net Book Value of Tangible Capital Assets

historical cost of tangible capital assets less both the accumulated amortization and the amount of any write-downs.

Net Debt

The difference between the province’s total liabilities and financial assets. It represents the province’s future revenue requirements to pay for past transactions and events.

Nominal

 

An amount expressed in dollar terms without adjusting for changes in prices due to inflation or deflation. It is not a good basis for comparing values of GDP in different years, for which a “real” value expressed in constant dollars (i.e., adjusted for price changes) is needed. See Real GDP for further details.

Non-Financial Assets

Assets that normally do not generate cash capable of being used to repay existing debts. The non-financial assets of the province are tangible capital assets, prepaid expenses and inventories of supplies.

Non-Tax Revenue

Revenue received by the government from external sources. This also includes revenues from the sale of goods and services, fines and penalties associated with the enforcement of government regulations and laws; fees and licences; royalties; profits from a self-sustaining Crown agency; and asset sales.

Ontario Disability Support Program (ODSP)

A program designed to meet the unique needs of people with disabilities who are in financial need, or who want and are able to work and need support. Ontarians aged 65 years or older who are ineligible for Old Age Security may also qualify for ODSP supports if they are in financial need.

Option

A contract that confers the right, but not the obligation, to buy or sell a specific amount of a commodity, currency or security at a specific price, on a certain future date.

Pension Actuarial Accounting Valuation

A valuation performed by an actuary to measure the pension benefit obligations at the end of the period or a point in time. The valuation attributes the cost of the pension benefit obligations to the period the related services are rendered by the members.

Pension Statutory Actuarial Funding Valuation

A valuation performed by an actuary to determine whether a pension plan has sufficient money to pay for its obligations when they become due. The valuation determines the contributions required to meet the pension benefit obligations.

Present Value

The current worth of one or more future cash payments, determined by discounting the payments using a given rate of interest.

Program Expense

Total expense excluding interest on debt.

Public Accounts

The Consolidated Financial Statements of the province along with supporting statements and schedules as required by the Financial Administration Act.

Public-Private Partnership (P3)

Partnerships with the private sector to expand, modernize and replace Ontario's aging infrastructure. Under P3, provincial ministries and/or project owners establish the scope and purpose of a project, while design and construction work are financed and carried out by the private sector. Typically, only after a project is completed will the province complete payment to the private-sector company.

Real GDP

Gross domestic product measured to exclude the impact of changing prices.

Recognition

The process of including an item in the financial statements of an entity.

Reserve

An amount included in the fiscal plan to protect the plan against unforeseen adverse changes in the economic outlook, or in the provincial revenue and expense. Actual costs incurred by the ministry, which pertain to the reserve, are recorded as expenses of that ministry. See Contingency Fund for further details.

Segment

Distinguishable activity or group of activities of a government for which it is appropriate to separately report financial information to help users of the financial statements identify the resources allocated to support the major activities of the government.

Sinking Fund Debenture

A debenture that is secured by periodic payments into a fund established to retire long-term debt.

Straight-Line Basis of Amortization

A method whereby the annual amortization expense is computed by dividing i) the historical cost of the asset by ii) the number of years the asset is expected to be used.

Surplus

The amount by which revenues exceed government expenses in any given year. On a forecast basis, a reserve may be included.

Swaption

An option granting its owner the right but not the obligation to enter into an underlying swap. Although options can be traded on a variety of swaps, the term swaption typically refers to options on interest rate swaps.

Tangible Capital Assets

Physical assets including land, buildings, transportation infrastructure, vehicles, leased assets, machinery, furniture, equipment and information technology infrastructure and systems, and construction in progress.

Temporary Investments

Investments that are transitional or current in nature and generally capable of reasonably prompt liquidation.

Total Debt

The province’s total borrowings outstanding.

Total Expense

Sum of program expense and interest on debt expense.

Transfer Payments

Grants to individuals, organizations or other levels of government for which the government making the transfer does not:

• Receive any goods or services directly in return, as would occur in a purchase or sale transaction;
• Expect to be repaid, as would be expected in a loan; or
• Expect a financial return, as would be expected in an investment.

Treasury Bills

Short-term debt instrument issued by governments on a discount basis.

Unrealized Gain or Loss

An increase or decrease in the fair value of an asset accruing to the holder. Once the asset is disposed of or written off, the gain or loss is realized.

Sources of additional information

The Ontario Budget, the Ontario Economic Outlook and Fiscal Review and the Quarterly Finances

The Ontario government presents a Budget each year, usually in the early spring. This document outlines expected expense and revenue for the upcoming fiscal year.

The Ontario Economic Outlook and Fiscal Review is a mid-year fiscal update to the expense and revenue projections of the government.

The Quarterly Finances is a report on the performance of the government’s Budget for the fiscal year. It covers developments during a quarter and provides a revised outlook for the remainder of the year.

For an electronic copy of the Ontario Budget, the Ontario Economic Outlook and Fiscal Review or the Ontario Quarterly Finances, visit the Ministry of Finance website at https://www.ontario.ca/page/ministry-finance

The Estimates of the Province of Ontario

The government’s spending Estimates for the fiscal year commencing April 1 are presented to members of the Legislative Assembly following the presentation of the Ontario Budget by the Minister of Finance. The Estimates outline the spending plans of each ministry and are submitted for approval to the Legislative Assembly according to the Supply Act. For electronic access, go to: https://www.fin.gov.on.ca/en/budget/estimates/

Ontario Finances

For electronic access, go to: www.fin.gov.on.ca

Ontario Economic Accounts

This quarterly report contains data on Ontario’s economic activity. For electronic access, go to: https://www.fin.gov.on.ca/en/economy/ecaccts/