Fifth Consecutive 
Deficit


2.1 	    The Province’s 31 March 2013 audited 
consolidated financial statements reported a deficit 
of $507.7 million and an increase in Net Debt for the 
fiscal year of $931.8 million.  The Province now has 
a Net Debt of over $11 billion. 
2.2 	    The $507.7 million annual deficit was higher than 
the budgeted deficit of $182.9 million and was more 
than double that of the prior year deficit of $245.3 
million. 
Significant Changes 
Required
2.3 	    This represents the fifth consecutive annual 
deficit.  To assist in financing these deficits, the 
Province has incurred additional debt.  This trend is 
very concerning. Significant changes are required to 
improve the financial health of the Province.
Exhibit 2.1 -	Annual Surpluses (Deficits)

 
                         As restated
Exhibit 2.2 -	Annual Surpluses (Deficits) Data
       
Annual Surpluses (Deficits)
($ millions)
 
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
As restated

(245.3)
(617.7)
(695.8)
(152.7)
240.3
275.2
226.3
220.5
(196.7)
As originally 
recorded
(507.7)
(260.6)
(633.0)
(737.9)
(192.3)
86.7
236.8
243.6
242.2
(103.2)


2.4 	   Exhibits 2.1 and 2.2 show the surplus or deficit for 
the past ten years. The preceding years’ amounts 
have been restated as per Note 18 of the Province’s 
31 March 2013 consolidated financial statements. 
Continued Growth in 
Net Debt
2.5 	    Net Debt is one of the most important measures of 
the financial position of the Province. Exhibits 2.3 
and 2.4 show Net Debt for the past ten years.
Exhibit 2.3 -	Net Debt

 
          As restated

Exhibit 2.4 -	Net Debt Data

Net Debt
($ millions)

2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
As restated

10,122.2
9,697.5
8,636.7
7,615.9
7,158.8
6,767.7
6,904.9
6,948.2
7,067.2
As originally 
recorded
11,054.0
10,045.8
9,480.4
8,353.0
7,387.8
6,942.9
6,577.9
6,655.7
6,836.0
6,816.1


2.6 	    We would like to draw attention to the 
following facts:
*	For the year ended 31 March 2013, Net Debt 
increased by $931.8 million to $11.1 billion.  
*	Net Debt has increased $4.3 billion since 2007.  
*	The 2013-2014 Main Estimates budgets for an 
increase in Net Debt of $594.4 million for the year 
ended 31 March 2014. 
*	Based on 2013-2014 Main Estimates, Net Debt of 
the Province could be in excess of $11.6 billion 
for the year ended 31 March 2014.

2.7 	    This continued increase in Net Debt represents 
a very disturbing trend. An even higher demand 
will exist on future revenue to pay past expenses. 
Such continued negative trends impacted the 
Standard & Poor’s decision to downgrade the 
Province’s bond rating from AA- to A+ in 2012. 
This rating change will ultimately result in more 
expensive borrowing costs. As well, New 
Brunswick’s increased borrowing may constrain 
future borrowing capacity and affect future 
provincial operations and delivery of services.  
The A+ rating remained unchanged in 2013.
Comparison to Other 
Similar Sized 
Provinces
2.8 	    Another way to assess the significance of the 
size of the Province’s Net Debt is to compare it to 
the Net Debt of provinces with similar populations 
as New Brunswick in absolute amount, per capita 
and as a percentage of GDP.  Comparable 
provinces include Nova Scotia, Manitoba and 
Saskatchewan.
2.9 	   In the next six exhibits data is taken from: 
*	the audited summary financial statements of the 
individual provinces, 
*	information about population is taken from the 
Statistics Canada website, and 
*	GDP figures are from the financial statement 
discussion and analysis attached to the individual 
provinces’ audited summary financial statements.




Exhibit 2.5 -	Net Debt Comparison to Provinces of Similar Size

 

Exhibit 2.6 -	Net Debt Comparison to Provinces of Similar Size (data)

Net Debt
($ millions)
Province
Increase 
2009 to 
2013
Increase 
2012 to 
2013
2013
2012
2011
2010
2009
New Brunswick
45%
9%
11,054
10,122
9,698
8,637
7,616
Saskatchewan
45%
12%
5,109
4,543
3,783
3,560
3,524
Manitoba
39%
9%
15,893
14,550
12,562
11,643
11,413
Nova Scotia
13%
4%
13,953
13,383
12,887
13,045
12,318


2.10 	    Exhibit 2.6 shows that over the last five years 
within this comparable group, New Brunswick has 
had one of the highest increases in Net Debt.  New 
Brunswick’s Net Debt has increased by 45% over the 
last five years.  The magnitude of this increase is 
concerning.  The rate of Net Debt growth has also 
increased in the past year.  New Brunswick Net Debt 
grew 9% in fiscal 2013. The overall debt burden for 
the Province remains at an elevated level.  The 2013-
2014 Main Estimates budgets an increase in Net Debt 
of approximately $594 million.  We are concerned at 
the long term implications and borrowing cost of the 
current debt load.
Exhibit 2.7 -	Net Debt Per Capita
	
 

Exhibit 2.8 -	Net Debt Per Capita (data)

Net Debt Per Capita*
($)
Province
2013
2012
2011
2010
2009
Nova Scotia
14,708
14,110
13,634
13,869
13,139
New Brunswick
14,623
13,400
12,880
11,516
10,197
Manitoba
12,544
11,624
10,166
9,544
9,466
Saskatchewan
4,731
4,295
3,622
3,458
3,476

* Using populations from Statistics Canada as of July 1 within the fiscal year (i.e. 2013 uses July 1, 2012 
population), Numbers have been rounded for presentation purposes.


2.11 	Information in Exhibit 2.8 shows that New 
Brunswick has the second highest Net Debt per capita 
in the comparable group. If the debt were to be 
eliminated by way of contributions from New 
Brunswickers, each would contribute $14,623. Again, 
this is an indicator that has increased significantly 
from 2009 at $10,197 to 2013 at $14,623.

2.12 	For the year ended 31 March 2009, New 
Brunswick’s Net Debt per capita was 77.6% of Nova 
Scotia’s Net Debt per capita. By 31 March 2013 the 
percentage reached 99.4%.  
Exhibit 2.9 -	Net Debt as a Percentage of GDP

 

Exhibit 2.10 -	Net Debt as a Percentage of GDP (data)

Net Debt as a Percentage of GDP
(percent)
Province
2013
2012
2011
2010
2009
% Increase 
from 2009 
to 2013
Nova Scotia
36.7
36.2
35.5
37.4
34.8
5.5%
New Brunswick
33.9
31.5
31.3
29.8
26.7
         26.9% 
Manitoba
26.8
25.6
23.1
22.6
22.1
         21.3%
Saskatchewan
6.6
6.1
5.9
6.0
5.3
         24.5%





2.13 	As shown in Exhibit 2.10, New Brunswick had the 
highest increase of Net Debt as a percentage of GDP 
from 2009 to 2013, and the second highest Net Debt 
as a percentage of GDP among comparable provinces 
for 2013. For the year ended 31 March 2009, New 
Brunswick’s Net Debt as a percentage of GDP was 
76.7% of Nova Scotia’s; for the year ended 31 March 
2013 it was 92.4%. 
Net Debt Comparison 
Summary
2.14 	New Brunswick’s Net Debt performance compared 
to other provinces remains a significant concern. 
New Brunswick’s increase in Net Debt of $4.3 billion 
from 2007 indicates the need for continued efforts to 
address the level of Net Debt.  
Comments on the 
Province’s Financial 
Health
2.15 	For the past number of years, we included in our 
annual Report a historical trend analysis of the 
Province’s financial condition by looking at 
measures of sustainability, flexibility and 
vulnerability.

2.16 	Starting in 2009, the Province began reporting 
some of these measures as part of the section called 
Indicators of Financial Health which is reported in 
Volume 1 of Public Accounts. As we commented last 
year, we are pleased to see the Province report this 
information, and we are also pleased to see that for   
31 March 2013 the Province expanded the historical 
timeframe of information provided from nine years 
to ten years.

2.17 	In this section, we report on twelve indicators of 
financial condition identified by the Public Sector 
Accounting Board (PSAB) in a Statement of 
Recommended Practice (SORP). This analysis is 
intended to give a broader view of the financial 
health of the Province as the analysis shows trends. 
The analysis expands on the information reported in 
the audited consolidated financial statements which 
only reflect the Province’s fiscal status at a point in 
time.     
Assumptions Used
2.18 	We have not audited some of the numbers used in 
our indicator analysis; instead, we are using numbers 
the Province restated as per Note 18 of the Province’s 
consolidated financial statements. The Province used 
these restated figures in its Management Discussion 
and Analysis in Volume 1 of Public Accounts. We 
have not audited the annualized numbers we obtained 
from the Province for the years 2004 to 2010. For the 
2011- 2013 numbers, we audited the numbers in 
conjunction with our 2012-2013 audit work. 

2.19 	In some of the Exhibits that follow, we show five 
years of comparative figures instead of ten. For these 
cases, restated numbers for prior years are not 
available because of changes in accounting policies.
Summary of the 
Province’s Financial 
Condition
2.20 	In Exhibit 2.11, we summarize our analysis of 
financial indicators. We show the indicators for each 
element, the purpose of the indicator, the short-term 
(two year) and long-term (five or ten year) trend, as 
well as a reference within this chapter of where we 
discuss the indicator in more detail.

?
Exhibit 2.11 -	Summary of Indicators of Financial Condition

 
Indicator
Purpose
Short-term 
Trend
Term
Long-term Trend
Page
Sustainab
ility
Assets-to-
liabilities
Measures extent that 
government finances 
its operations by 
issuing debt
Unfavourable¹
5 year
Unfavourable  
19

Financial asset-
to-liabilities
Measures whether 
future revenues will 
be needed to pay for 
past transactions
Unfavourable¹
5 year
Unfavourable
20

Net Debt-to-
total annual 
revenue
Shows whether more 
time is needed to 
pay for past 
transactions
  Unfavourable
10 year
Unfavourable
21

Expense by 
function-to-total 
expenses
Shows the trend of 
government 
spending over time
Neutral  
5 year
Neutral  
22

Net Debt-to-
GDP
Shows the 
relationship between 
Net Debt and the 
activity in the 
economy
Unfavourable
10 year
Unfavourable 
23

Accumulated 
deficit–to-GDP
Measures the sum of 
the current and all 
prior year operating 
results relative to the 
growth in the 
economy
Unfavourable
5 year
Unfavourable 
24

Total expenses-
to-GDP
Shows the trend of 
government 
spending over time 
in relation to the 
growth in the 
economy
Favourable
10 year
Unfavourable 
25
 

 
Flexibility
Public debt 
charges-to-
revenues
Measures extent that 
past borrowing 
decisions limits 
ability to meet 
current financial and 
service commitments
Neutral 
10 year
Favourable 
27

Net book value 
of capital 
assets-to-cost 
of capital 
assets
Measures the 
estimated useful 
lives of tangible  
capital assets 
available to provide 
products /services
Neutral 
5 year
Neutral 
28

Own-source 
revenues-to-
GDP
Measures extent 
income is taken out 
of the economy
Neutral 
10 year
Neutral
 29
 

 
Vulnerabil
ity
Government 
transfers-to-
total revenues
Measures the 
dependence on 
another level of 
government
Unfavourable²
10 year
Mixed
31

Foreign 
currency debt-
to-Net Debt
Measures the 
government’s 
potential vulnerability 
to currency 
fluctuations
Favourable
10 year
Favourable
 32
¹ last year was “Neutral”
² last year was “Favourable”
Conclusion
2.21 	The long-term trends continue to show a number of 
unfavorable financial indicators.  The long-term 
financial condition of the Province has remained 
relatively unchanged since the prior year. In addition, 
there have been signs of short term declines in certain 
areas. In particular, we note our assessment of three 
short-term indicators has weakened over the prior 
year.  We are concerned with these signs of 
weakening short term indicators.
2.22 	Although there are a few favourable financial 
indicators, we remain concerned about the level of 
Net Debt, now over $11 billion and the fact Net Debt 
has increased by 63.3% since 2007. This pace of Net 
Debt growth is not sustainable in the long term, and 
significant changes are required to address this 
problem. It may eventually impact the Province's 
ability to meet its existing financial obligations both 
in respect of its service commitments to the public 
and financial commitments to creditors, employees 
and others. We again this year encourage the 
Province to set targets for long term net debt control 
and reduction.
Sustainability 
Indicators
2.23 	Sustainability indicates whether the Province can 
maintain programs and meet existing creditor 
requirements without increasing the debt burden on 
the economy. 
Assets-to-Liabilities
2.24 	The sustainability indicator assets-to-liabilities is 
presented in Exhibit 2.12.















Exhibit 2.12 -	Comparison of Assets-to-Liabilities

Comparison of Assets-to-Liabilities
Year 
ended
Total assets 
($ millions)
Total 
liabilities  
($ millions)
Total assets/ 
total liabilities 
(percent)
 
2009
11,765.6
13,474.5
87.3%

2010
12,045.8
14,485.5
83.1%

2011
13,646.5
16,744.0
81.5%

2012
14,973.9
17,386.9
86.1%

2013
15,948.8
18,744.7
85.1%

As restated
* The 2009-2011 amounts are not restated for accounting changes relating to deferred capital 
contributions and capitalization of computer hardware and software systems.


2.25 	An assets-to-liability indicator below 100% 
indicates a government has accumulated deficits and 
has been financing its operations by issuing debt. For 
the past five years, the Province’s rate was less than 
100%. The increases in 2012 and 2013 compared to 
previous years relates to increases in liabilities.  The 
2009-2011 trend was unfavourable due to continuous 
decline.  Overall we have assessed the short-term and 
long-term trend as unfavourable.
Financial Assets-to-
Liabilities
2.26 	Another sustainability indicator, financial assets-
to-liabilities, is presented in Exhibit 2.13.















Exhibit 2.13 -	Comparison of Financial Assets-to-Liabilities

Comparison of Financial Assets-to-Liabilities
Year 
ended
Total 
financial 
assets 
($ millions)
Total 
liabilities  
($ millions)
Total 
financial 
assets/ total 
liabilities
(percent) 
 
2009
6,086.7
13,474.5
45.2%

2010
6,014.1
14,485.5
41.5%

2011
7,128.3
16,744.0
42.6%

2012
7,264.7
17,386.9
41.8%

2013
7,690.7
18,744.7
41.0%

As restated
* The 2009-2011 amounts are not restated for accounting changes relating to deferred capital 
contributions and capitalization of computer hardware and software systems.


2.27 	When liabilities exceed financial assets the 
government is in a Net Debt position, and the 
implication is that future surpluses will be required to 
pay for past transactions and events. The Province’s 
percentage has decreased slightly since 2011.  We 
have assessed the short term and long term trend as 
unfavourable.
Net Debt-to-Total Annual 
Revenue
2.28 	Net Debt-to-total annual revenue is another 
indicator of sustainability and is presented in Exhibit 
2.14.















Exhibit 2.14 -	Comparison of Net Debt-to-Total Annual Revenue

Comparison of Net Debt-to-Total Annual Revenue
Year 
ended
Net Debt 
($ millions)
Total revenue 
($ millions)
Net Debt/ total 
revenue 
(percent)
 
2004
7,067.2
5,512.0
128.2%

2005
6,948.2
6,043.4
114.9%

2006
6,904.9
6,387.1
108.1%

2007
6,767.7
6,756.3
100.2%

2008
7,158.8
7,190.3
99.6%

2009
7,615.9
7,230.9
105.3%

2010
8,636.7
7,120.5
121.3%

2011
9,697.5
7,542.8
128.6%

2012
10,122.2
7,805.9
129.7%

2013
11,054.0
7,781.7
142.1%



2.29 	Net Debt provides a measure of the future revenue 
required to pay for past transactions and events. A 
Net Debt-to-total revenue percentage that is 
increasing indicates that the Province will need more 
time to eliminate the Net Debt. The Province’s 
percentage has been increasing over the past six 
years, most significantly in 2013 due to a continued 
increase in Net Debt and declining revenue. The 
improvements made from 2004-2008 have now been 
lost.  We have assessed this trend as unfavourable.
Expense by Function-to-
Total Expenses
2.30 	Exhibit 2.15 presents expense by function-to-total 
expenses.












Exhibit 2.15 -	Comparison of Expense by Function-to-Total Expenses

Comparison of Expense by Function-to-Total Expenses
 
2013
2012
2011
2010
2009

($ 
millions)
(%)
($ millions)
(%)
($ millions)
(%)
($ 
millions)
(%)
($ millions)
(%)
Labour and 
Employment
100.5
1.2
108.4
1.3
 141.7
1.7
141.5
1.8
124.4
1.7
Resources
210.1
2.5
214.6
2.7
 215.1
2.7
205.8
2.6
204.2
2.8
Protection 
Services
237.3
2.9
229.9
2.9
260.9
3.2
219.7
2.8
233.9
3.1
Economic 
Development
270.6
3.3
257.3
3.2
328.4
4.0
343.7
4.4
286.3
3.9
Transportation 
and 
Infrastructure
547.7
6.7
527.7
6.6
402.7
     
4.9
381.4
4.9
380.7
5.2
Central 
Government
633.8
7.6
542.3
6.7
722.0
8.8
682.9
8.7
684.9
9.2
Service of the 
Public Debt
660.3
7.9
661.8
8.2
641.5
7.9
616.6
7.9
602.5
8.2
Social 
Development
1,055.6
12.7
1,029.9
12.8
1,037.5
12.8
997.1
12.8
961.0
13.0
Education and 
Training
1,787.6
21.6
1,749.3
21.7
1,723.7
21.1
1,632.0
20.9
1,457.0
19.7
Health
2,785.9
33.6
2,730.0
33.9
2,687.0
32.9
2,595.6
33.2
2,448.7
33.2
Total
8,289.4
100.0
8,051.2
100.0
8,160.5
 100.0
7,816.3
100.0
7,383.6
100.0


2.31 	The years ended 31 March 2009 to 31 March 2013 
reported deficits. This means that while individual 
expense trends may have remained steady, this was 
achieved by incurring a total level of expenses that 
was in excess of revenue generated in those years. 
Education and Training and Health’s allocation of 
expenses consume over 50% of the total expenses, 
consistent with prior years. 
2.32 	The allocation of expenses upon comparing 2012 
was relatively stable, however, the impact of New 
Brunswick’s growing Net Debt will need to be closely 
monitored in the future as the interest burden on it 
consumes resources that would otherwise be used to 
deliver services. We have assessed this indicator as 
neutral.  
Net Debt-to-GDP
2.33 	The sustainability indicator, Net Debt-to-GDP is 
presented in the Exhibit 2.16. The Province also 
reports this indicator in Volume 1 of the Public 
Accounts.





Exhibit 2.16 -	Comparison of Net Debt-to-GDP

Comparison of Net Debt-to-GDP
Year 
ended
Net Debt 
($ millions)
GDP 
($ millions)
Net Debt/ 
GDP 
(percent)
 
2004
7,067.2
22,366
31.6%

2005
6,948.2
23,672
29.4%

2006
6,904.9
24,716
27.9%

2007
6,767.7
25,847
26.2%

2008
7,158.8
27,966
25.6%

2009
7,615.9
28,533
26.7%

2010
8,636.7
29,026
29.8%

2011
9,697.5
30,941
31.3%

2012
10,122.2
32,180
31.5%

2013
11,054.0
32,631
33.9%



2.34 	This indicator compares the Province’s Net Debt, 
the difference between its liabilities and its financial 
assets, to its GDP.  This ratio declined from 2004 to 
2008 indicating that over that time period the level of 
the Province’s debt became less onerous on the 
economy. The ratio increased from 2009 to 2013 
because the rate of growth of Net Debt exceeded the 
rate of growth in GDP over that time period.  In 2013, 
the change in the ratio resulted in this indicator being 
at its highest point since 2004. This means the Net 
Debt of the Province is increasing faster than the 
growth in the economy thus becoming more of a 
burden on the economy. We have assessed the trend 
as unfavourable.
Accumulated Deficit-to-
GDP
2.35 	In the Exhibit 2.17, we present the sustainability 
indicator accumulated deficit-to-GDP.








Exhibit 2.17 -	Comparison of Accumulated Deficit-to-GDP

Comparison of Accumulated Deficit-to-GDP
Year 
ended
Accumulated 
deficit  
($ millions)
GDP 
($ millions)
Accumulated 
deficit/GDP 
(percent)
 
2009
978.1
28,533
3.4%

2010
1,669.0
29,026
5.8%

2011
2,157.7
30,941
7.0%

2012
2,413.0
32,180
7.5%

2013
2,795.9
32,631
8.6%



2.36 	The accumulated deficit is the extent to which 
annual revenues have been insufficient to cover the 
annual costs of providing services. The information 
above shows that from 2009 to 2013, the accumulated 
deficit has increased faster than the growth of the 
economy. This represents an unfavourable trend as 
the deficit increased faster than the economy was 
expanding. 
Total Expenses-to-GDP
2.37 	Exhibit 2.18 presents the total expenses-to-GDP 
indicator.














Exhibit 2.18 -	Comparison of Total Expenses-to-GDP

Comparison of Total Expenses-to-GDP
Year 
ended
Total 
expenses
($ millions)
GDP
($ millions)
Total 
expenses/GDP
(percent)
 
2004
5,708.7
22,366
25.5%

2005
5,822.9
23,672
24.6%

2006
6,160.8
24,716
24.9%

2007
6,481.1
25,847
25.1%

2008
6,950.0
27,966
24.9%

2009
7,383.6
28,533
25.9%

2010
7,816.3
29,026
26.9%

2011
8,160.5
30,941
26.4%

2012
8,051.2
32,180
25.0%

2013
8,289.4
32,631
25.4%



2.38 	Exhibit 2.18 indicates that for five of the last ten 
years government expenses were held to about 25% 
of GDP, however, from 2009 to 2011 the percentage 
was higher. This represents an unfavourable long-
term trend as expenses are growing faster than the 
economy is expanding.  The ratio has decreased in 
2012 and 2013, therefore we assess the short-term 
trend as favourable.
Exhibit 2.19 -	Trends for Sustainability Indicators

Sustainability Indicator Trends
Sustainability indicator
Short-term trend
Long-term trend
Assets-to-liabilities
Unfavourable
Unfavourable 
Financial assets-to-liabilities
Unfavourable
Unfavourable
Net Debt-to-total annual revenue
Unfavourable
Unfavourable
Expense by function-to-total expenses
Neutral
Neutral 
Net Debt-to-GDP
Unfavourable
Unfavourable  
Accumulated deficit-to-GDP
Unfavourable
Unfavourable  
Total expenses-to-GDP
Favourable
Unfavourable  

Summary of 
Sustainability 
Indicators
2.39 	Exhibit 2.19 presents a summary of the Province’s 
sustainability indicators. While we are aware 
significant effort has been exercised in achieving the 
one favourable short term sustainability indicator, 
five of seven sustainability indicators are 
unfavourable in the short term, and therefore our 
overall assessment of the long-term trends remains 
unfavourable.  This negative sustainability trend 
should be of concern to New Brunswickers. 
Flexibility Indicators
2.40 	Flexibility is the degree to which the government 
can change its debt or tax burden on the economy to 
maintain programs and meet existing creditor 
requirements. 
Public Debt Charges-to-
Revenues
2.41 	One of the most publicized factors which affects 
the flexibility of governments is the cost of servicing 
the public debt. This is considered to be an indicator 
of flexibility, since the Province’s first payment 
commitment is to service its debt, leaving no 
flexibility in the timing of these payments.

2.42 	The cost of servicing the public debt is comprised 
mainly of interest on the funded debt of the Province. 
It also includes foreign exchange paid on interest and 
maturities during the year, the amortization of 
foreign exchange gains and losses, and the 
amortization of discounts and premiums which were 
incurred on the issuance of provincial debt. It does 
not include principal repayments on the funded debt 
of the Province. 

2.43 	In Exhibit 2.20, we present the public debt charges-
to-revenues. The Province also reports this indicator 
in Volume 1 of Public Accounts.













Exhibit 2.20 -	Comparison of the Public Debt Charges-to-Revenues

Comparison of the Public Debt Charges-to-Revenues
Year 
ended
Cost of 
servicing 
public 
debt
($ millions)
Revenue
($ millions)
Cost of 
servicing 
public 
debt/ 
revenue 
(percent)
 
2004
581.8
5,512.0
10.6%

2005
579.6
6,043.4
9.6%

2006
590.3
6,387.1
9.2%

2007
558.0
6,756.3
8.3%

2008
575.7
7,190.3
8.0%

2009
601.4
7,230.9
8.3%

2010
607.2
7,120.5
8.5%

2011
641.5
7,542.8
8.5%

2012
661.8
7,805.9
8.5%

2013
660.3
7,781.7
8.5%



2.44 	Exhibit 2.20 shows that the cost of servicing the 
public debt as a percentage of the Province’s total 
revenues is significantly lower in the year ended 31 
March 2013 than it was in the year ended 31 March 
2004. This means that the Province is spending 
proportionately less of its current year revenue to 
cover debt charges resulting in more current year 
revenue available to cover services to the public. For 
the past four years, the ratio has remained the same 
and we are assessing the short-term trend as neutral. 
We are assessing the long-term trend as favourable 
as the current year’s ratio is less than the ratio in 
2004. Although we are assessing this indicator as 
favourable, caution is needed when looking at this 
indicator. The cost of servicing the Province’s debt is 
increasing in a time when interest rates have declined 
and the Province’s debt is increasing significantly.
Net Book Value of Capital 
Assets-to-Cost of Capital 
Assets
2.45 	We present the net book value of capital assets-to-
cost of capital assets in the Exhibit 2.21.
Exhibit 2.21 -	Comparison of Net Book Value of Capital Assets-to-Cost of                
                    Capital Assets
Comparison of Net Book Value of Capital Assets-to-Cost of Capital Assets
Year 
ended
Net book 
value 
($ millions)
Capital cost  
($ millions)
Net book 
value/ capital 
cost (percent)
 
2009
6,394.0
10,341.5
61.8%

2010
6,706.0
10,959.3
61.2%

2011
7,241.7
11,733.2
61.7%

2012
7,452.5
12,221.3
61.0%

2013
7,977.6
13,065.3
61.1%



2.46 	This data indicates that the Province’s inventory 
of capital assets as at 31 March 2013 has 61.1% of its 
average useful life remaining. This roughly means 
that on average any Provincial assets that were 
originally expected to be useable for ten years still 
had just over six years of remaining useful life at 31 
March 2013, and assets with original useful lives of 
twenty years were still considered useable for just 
over twelve years on average. As the ratios have 
remained relatively the same over the past five years, 
we are assessing the short-term and long-term trends 
as neutral. 
Own Source Revenues-to-
GDP
2.47 	We present own source revenues-to-GDP in 
Exhibit 2.22. The Province also reports this indicator 
in Volume 1 of Public Accounts.









Exhibit 2.22 -	Comparison of Own Source Revenues-to-GDP

Comparison of Own Source Revenues-to-GDP
Year 
ended
Own source 
revenues
($ millions)
GDP
($ millions)
Own 
source 
revenues/ 
GDP 
(percent)
 
2004
3,594.1
22,366
16.1%

2005
3,688.6
23,672
15.6%

2006
3,994.2
24,716
16.2%

2007
4,225.4
25,847
16.3%

2008
4,469.7
27,966
16.0%

2009
4,467.4
28,533
15.7%

2010
4,179.7
29,026
14.4%

2011
4,612.5
30,941
14.9%

2012
4,931.7
32,180
15.3%

2013
4,781.2
32,631
14.7%



2.48 	The own source revenues-to-GDP indicator 
measures the extent to which the Province is raising 
its revenue through extracting it from the provincial 
economy. If the ratio increases, more of the 
Province’s revenue is generated from the provincial 
economy. For example, an increase in this ratio could 
result if the Province increased taxes. If the ratio 
decreases, less of the Province’s revenue is generated 
from the provincial economy. A decreasing ratio 
increases the Province’s ability to raise taxes, thus, 
making the Province more flexible in how it can 
generate revenue. Generally, this ratio has stayed the 
same over the long-term and we have assessed this 
indicator as neutral.

2.49 	There was a decrease in the year 2010 mostly as a 
result of a large loss by the New Brunswick Electric 
Finance Corporation (EFC).  In that year, the 
reduction in own source revenue was not as a result 
of lower fees or taxes. 

2.50 	In 2013, own source revenue decreased by        
$150.5 million.  The most significant source of this 
decrease was EFC having a surplus of $17.8 million 
as reported in the Province’s 2013 audited 
consolidated financial statements, compared to the 
surplus of $145.0 million in 2012. 

2.51 	A note of caution should be taken when looking at 
this indicator for the last five years. The Province 
incurred deficits which means it did not generate 
enough revenue in any of those years to cover 
expenses.
Summary of Flexibility 
Indicators

Exhibit 2.23 -	Trends for Flexibility Indicators

Trends for Flexibility Indicators
Flexibility indicator
Short-term trend
Long-term trend
Public debt charges-to-revenues
Neutral
Favourable
Net book value of capital assets-to-cost of 
capital assets
Neutral
Neutral
Own source revenues-to-GDP
Neutral
Neutral


2.52 	As summarized in Exhibit 2.23, our overall 
assessment on flexibility in the short term and long 
term is largely neutral.  However caution should be 
used in interpreting these results as this was achieved 
in a period where the Province incurred its fifth 
consecutive deficit and as the cost of servicing the 
Province’s debt is increasing in a time when rates are 
decreasing and the Province’s debt load is increasing.
Vulnerability Indicators

2.53 	Vulnerability is the degree to which a government 
is dependent on sources of funding outside its control 
or influence. 
Government Transfers-to-
Total Revenues

2.54 	By comparing the proportion of total revenue that 
comes from the federal government to the total 
revenue of the Province, we get a measure of the 
degree to which the Province is dependent on the 
federal government. If that dependence increases, the 
Province is more vulnerable to funding decisions 
made by the federal government. This indicator 
highlights the degree to which one indicator can be 
impacted by another indicator. For example, if the 
Province were in a position to reduce its dependence 
on the federal government by generating more own 
source revenue, the Province’s vulnerability position 
might improve, but its sustainability position might 
become worse.

2.55 	Exhibit 2.24 presents the comparison of 
government transfers-to-total revenues. The Province 
also reports this indicator in Volume 1 of Public 
Accounts.
Exhibit 2.24 -	Comparison of Government Transfers-to-Total Revenues

Comparison of Government Transfers-to-Total Revenues
Year 
ended
Federal 
government 
transfer 
revenue
($ millions)
Total 
revenue
($ millions)
Federal 
government 
transfer 
revenue/ 
total 
revenue 
(percent)
 
2004
1,917.9
5,512.0
34.8%

2005
2,354.8
6,043.4
39.0%

2006
2,392.9
6,387.1
37.5%

2007
2,530.9
6,756.3
37.5%

2008
2,720.6
7,190.3
37.8%

2009
2,763.6
7,230.9
38.2%

2010
2,940.8
7,120.5
41.3%

2011
2,930.3
7,542.8
38.8%

2012
2,874.2
7,805.9
36.8%

2013
3,000.5
7,781.7
38.6%



2.56 	Exhibit 2.24 shows that the Province’s reliance on 
federal government transfers decreased from 2010 to 
2012. For the 2013 year, revenues decreased in part 
due to a lower surplus of $17.8 million in EFC as 
reported in the Province’s 2013 audited consolidated 
financial statements, compared to $145.0 million in 
the prior year. This increased reliance on federal 
transfers in 2013. Thus we are assessing the short-
term trend as unfavourable and the long-term trend 
as mixed.
Foreign Currency Debt-to-
Net Debt

2.57 	The foreign currency debt-to-net debt indicator 
measures the Province’s potential vulnerability to 
currency fluctuations and is presented in Exhibit 
2.25. 

Exhibit 2.25 -	Comparison of Foreign Currency Debt-to-Net Debt

Comparison of Foreign Currency Debt-to-Net Debt
Year 
ended
Foreign 
currency 
debt 
($ millions)
Net Debt  
($ millions)
Foreign 
currency 
debt/ Net 
Debt 
(percent)
Foreign 
currency 
debt/ Net 
Debt 
after 
hedge 
(percent)
 
2004
1,088.9
7,067.2
15.4%
8.7%

2005
717.5
6,948.2
10.3%
4.1%

2006
512.9
6,904.9
7.4%
4.2%

2007
403.5
6,767.7
6.0%
3.9%

2008
937.0
7,158.8
13.1%
0.7%

2009
1,304.8
7,615.9
17.1%
0.8%

2010
1,255.8
8,636.7
14.5%
0.7%

2011
1,247.3
9,697.5
12.8%
0.6%

2012
1,986.8
10,122.2
19.6%
0.0%

2013
1,888.5
11,054.0
17.1%
0.0%



2.58 	The above information shows that the Province’s 
foreign currency debt has increased over the years, 
however decreased in 2013. The risk of exposure to 
foreign currency fluctuations is offset by the 
Province’s hedging strategy. The Province uses 
several alternatives to reduce (hedge) risk associated 
with debt repayable in foreign currencies:

*	purchasing assets denominated in foreign currencies 
for the Province’s sinking fund;
*	entering into debt swap agreements which allows 
repayment of the debt in Canadian dollars; and
*	entering into forward contracts (which allows the 
Province to purchase foreign currency at a stipulated 
price on a specified future date).

2.59 	From Exhibit 2.25, we see the risk of exposure to 
foreign currency fluctuations has decreased 
significantly over time. Because of the effectiveness 
of the Province’s hedging strategy, we assess this 
indicator as favourable.
Summary of 
Vulnerability Indicators

Exhibit 2.26 -	Trends for Vulnerability Indicators

Trends for Vulnerability Indicators
Vulnerability indicator
Short-term trend
Long-term trend
Government transfers-to-total revenues
Unfavourable
Mixed
Foreign currency debt-to-net debt
Favourable
Favourable


2.60 	As summarized in Exhibit 2.26, the Province’s 
vulnerability exposure is mixed. In years when EFC 
generates income through its investment in NB 
Power, the Province’s reliance on federal revenue 
decreased and this indicator improves. Overall, the 
Province is doing a good job at managing and 
controlling its exposure to fluctuations in foreign 
currency.
Comments on 
Significant Trends 
Observed in the 
Province’s 
Consolidated 
Financial Statements       
2.61 	In this section, we discuss significant trends we 
have observed in the Province’s consolidated 
financial statements. We have highlighted these 
trends to raise public awareness and to provide 
legislators with an independent assessment of the 
areas we believe should be a focus for the 
government. 
Deficit
2.62 	For the year ended 31 March 2013, the Province 
reported a deficit of $507.7 million. This is an 
increase of $262.4 million from the $245.3 million 
deficit reported for the year ended 31 March 2012.

2.63 	Exhibit 2.27 shows, at a high level, the reasons for 
the change in the deficit from 31 March 2012 to       
31 March 2013.
Exhibit 2.27 -	Analysis of Deficit Increase
Analysis of Deficit Increase
 
(millions)
2012 Deficit
     $ 245.3
      Decrease in provincial source revenue 
  150.5
      Increase in federal source revenue
  (126.3)    
      Increase in expense
  238.2 
2013 Deficit
     $ 507.7


2.64 	Decreases in provincial source revenue are mainly 
attributable to a decrease in earnings of New 
Brunswick Electric Finance Corporation (EFC) of 
$127.2 million as reported in the Province’s 2013 
audited consolidated financial statements.

2.65 	  There was a reduction of $34.9 million in fiscal 
equalization payments, due to a narrowing of fiscal 
disparities between New Brunswick and the national 
average.  There was also an increase of $28.5 million 
in unconditional grant revenue primarily due to the 
legislated growth in the federal cash funding for the 
Canada Health Transfer and the Canada Social 
Transfer.

2.66 	A change in the accounting policy for deferred 
capital contributions occurred during the 2013 year, 
where the recognition of transfer revenues is only 
deferred when and to the extent that the transfer 
gives rise to an obligation that meets the definition of 
a liability.  As such, there was an overall increase in 
federal source revenue of $126.3 million attributable 
to a one-time capital revenue related to Route One 
Gateway Project.  Also, a decrease in the 
accumulated deficit of $881.2 million has been 
reported as of March 31, 2013 regarding this change 
in accounting policy.

2.67 	Total expenses have increased by $238.2 million.  
This is attributable to an increase in expenses by 
most departments, the most significant being an 
increase of $91.5 million by Central Government 
primarily due to increased pension expense as a 
result of updated actuarial information.  The next 
significant is an increase of $55.9 million by the 
Department of Health.  The overall increase in 
expenses was offset by a decrease in expenses for 
Labour and Employment of $7.9 million, Resources 
of $4.5 million and Service of the Public Debt of $1.5 
million.
Expenses
2.68 	Exhibit 2.28 shows the one year growth rate and 
the average growth rate for the past three years.



Exhibit 2.28 -	Expense Trends by Function (percentage)

Expense Trends by Function
Average 
growth 
rate
Function
2013 
growth 
rate
2012 
growth 
rate
2011 
growth 
rate
 3.1
Education and training
2.2
     1.5
5.6
 2.4
Health
2.0
     1.6
3.5
 2.3
Service of the public debt
(0.2)
      3.2
4.0
 2.0
Social development
2.5
(0.7)
4.1
13.5
Transportation and   
 Infrastructure 
3.8
(31.0)
5.6
 3.4
Protection services
3.2
  (11.9)
18.8
       0.7
Resources
(2.1)
    (0.2)
4.5
 (0.8)
Central government
16.9
  (24.9)
5.7
    (10.2)
Labour and employment
(7.3)
  (23.5)
0.1
      (7.0)
Economic development
5.2
  (21.7)
(4.5)
 0.9
Total
2.6
 (4.5)
4.7


2.69 	Exhibit 2.28 shows the Province’s expense growth 
rate has increased compared to 2012 by 2.6%.  In 
fiscal 2013, seven out of ten functions showed an 
increase in growth rate. Three of ten function areas 
show a negative growth which implies cost 
reductions were realized. The average three year 
expense growth rate for 2013 was 0.9%. This is an 
improved result over the prior year three year 
expense growth rate which was 3.0%.

2.70 	We noted the 2013 expense growth rate has slowed 
in Health and Education and training, the largest 
expense function areas, compared to the 2011 growth 
rate. 
2.71 	However, Exhibit 2.28 shows Central Government 
experienced the largest one year growth rate in 2013, 
primarily due to an increase in pension expense, with 
Protection Services experiencing the second largest 
growth.  In comparing the three year average growth 
rate, Transportation and Infrastructure experienced 
the largest growth rate with Protection Services 
experiencing the second largest growth.  These 
growth rates are concerning as they illustrate the 
inflexibility of these particular expenses in a period 
where, as Exhibit 2.28 shows, government was 
attempting to reduce or restrain spending in other 
expense functions. It also illustrates that regardless 
of the current restraint efforts of government, past 
deficit financing continues to have a fiscal impact. 
Interest costs may grow if debt continues to increase 
or, upon refinancing, interest rates rise.
Revenue
2.72 	   Exhibit 2.29 shows the one year growth rate and 
the average growth rate of revenue for the past three 
years.

2.73 	Total revenues have decreased by $24.2 million.  
This is attributable to decreased revenue from 
provincial sources of $150.5 million and an 
offsetting increase in revenue from federal sources of 
$126.3 million.   
Exhibit 2.29 -	Revenue Trends by Source (percentage)

Revenue Trends by Source¹
Average 
growth rate
Source
2013 
Growth 
Rate
2012 
Growth 
Rate
2011 Growth 
Rate
2.8
Taxes
(0.9)
4.2
5.1
3.9
Licenses and Permits
4.2
3.3
4.2
13.0
Royalties
(3.6)
2.1
40.4
7.4
Other Provincial Revenue 
2.0
15.3
4.9
0.7
Sinking Fund Earnings
(2.2)
0.9
3.3
(1.8)
Fiscal Equalization Payments
(2.1)
(1.8)
(1.6)
3.6
Unconditional Grants
3.3
3.9
3.7
9.3
Conditional Grants
35.3
(11.3)
3.9
4.9
Total¹
4.5
2.1
8.0

¹ Excludes income from government business enterprise. Figures used in calculation from: 
Province of New Brunswick, Public Accounts for the fiscal year ended 31 March 2013 (2013 
and 2012 comparative revenue figures), page 8,  Public Accounts for the fiscal year ended 31 
March 2012 (2011 comparative revenue figure), page 8,  and Public Accounts for the fiscal 
year ended 31 March 2011 (2010 comparative revenue figure), page 8.


2.74 	   Exhibit 2.29 shows the Province’s 2013 revenue 
growth rate was 4.5% with an average growth rate of 
4.9% (excluding income from Government Business 
Enterprises).  The 2013 growth rate shows a notable    
increase in conditional grants relating to a one-time 
capital revenue for Route One Gateway Project. 
Other Provinces – 
Revenue and Expense 
Comparison
2.75 	Exhibit 2.30 shows the trend of gross revenues and 
gross expenses within comparable provinces.  Data 
from other provinces is taken from the audited 
summary financial statements of the individual 
provinces.

Exhibit 2.30 -	Revenue and Expense (Comparison to other provinces)

Revenue & Expense (Comparison to other provinces)
($ millions)
 
Gross Revenues
Gross Expenses
 
2013
2012
2011
% 
Increase 
from 2011 
to 2013
2013
2012
2011
% 
Increase 
from 2011 
to 2013
New Brunswick
7,781.7
7,805.9
7,542.8
3.2%
8,289.4
8,051.2
8,160.5
1.6%
Nova Scotia
10,101.9
9,760.3
9,919.2
1.8%
10,404.4
10,019.3
9,333.8
11.5%
Saskatchewan
13,203.0
12,817.0
12,327.0
7.1%
14,285.0
13,711.0
13,310.9
7.3%
Manitoba
13,786.0
13,688.0
13,240.0
4.1%
14,366.0
14,689.0
13,419.0
7.1%


2.76 	We note that over the last three years within this 
comparable group, New Brunswick shows the lowest 
increase in gross expenses of 1.6% compared to 
7.1%-11.5% elsewhere.  This would appear to be a 
reflection of government restraint measures intended 
to limit expense growth in various departments.


Comments on the Province’s Financial Position                                                                                     Chapter 
2	                                                                                                                          

Chapter 2                                                                                     Comments on the Province’s Financial 
Position

36
                                                                                                                   Report of the Auditor General - 2013
9
Report of the Auditor General – 2013