NRCan 2015-2016 Consolidated Financial Statements
Statement of Management Responsibility Including Internal Control Over Financial Reporting
Responsibility for the integrity and objectivity of the accompanying consolidated financial statements for the year ended March 31, 2016, and all information contained in these consolidated statements rests with the management of Natural Resources Canada. These consolidated financial statements have been prepared by management using the Government’s accounting policies, which are based on Canadian public sector accounting standards.
Management is responsible for the integrity and objectivity of the information in these consolidated financial statements. Some of the information in the consolidated financial statements is based on management's best estimates and judgment, and gives due consideration to materiality. To fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the department’s financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the department’s Departmental Performance Report, is consistent with these consolidated financial statements.
Management is also responsible for maintaining an effective system of internal control over financial reporting (ICFR) designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are properly authorized and recorded in accordance with the Financial Administration Act and other applicable legislation, regulations, authorities and policies.
Management seeks to ensure the objectivity and integrity of data in its financial statements through careful selection, training, and development of qualified staff; through organizational arrangements that provide appropriate divisions of responsibility; through communication programs aimed at ensuring that regulations, policies, standards, and managerial authorities are understood throughout the department; and through conducting an annual risk-based assessment of the effectiveness of the system of ICFR.
The system of ICFR is designed to mitigate risks to a reasonable level based on an ongoing process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.
A risk-based assessment of the system of ICFR for the year ended March 31, 2016 was completed in accordance with the Treasury Board Policy on Internal Control and the results and action plans are summarized in the annex.
The effectiveness and adequacy of the department’s system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of the department’s operations, and by the Departmental Audit Committee, which oversees management’s responsibilities for maintaining adequate control systems and quality of financial reporting, and which recommends the consolidated financial statements to the deputy head of Natural Resources Canada.
The consolidated financial statements of Natural Resources Canada have not been audited.
Christyne Tremblay
Deputy Minister
Cheri Crosby
A/Chief Financial Officer
September 19, 2016
September 19, 2016
2016 | 2015 | |
---|---|---|
Liabilities | ||
Accounts payable and accrued liabilities (note 4) | 303,867 | 463,583 |
Environmental liabilities (note 5) | 4,614 | 988,831 |
Vacation pay and compensatory leave | 21,278 | 20,561 |
Deferred revenue | 174 | 264 |
Lease obligation for tangible capital assets (note 6) | 64,335 | 66,592 |
Employee future benefits (note 7) | 23,437 | 24,712 |
Other liabilities (note 8) | 14,587 | 15,280 |
Total liabilities | 432,292 | 1,579,823 |
Financial assets | ||
Due from Consolidated Revenue Fund | 256,351 | 376,025 |
Accounts receivable and advances (note 9) | 46,614 | 67,594 |
Loan receivable (note 10) | - | 38,667 |
Total gross financial assets | 302,965 | 482,286 |
Financial assets held on behalf of Government | ||
Accounts receivable and advances (note 9) | (45,192) | (65,437) |
Loan receivable (note 10) | - | (38,667) |
Total financial assets held on behalf of Government | (45,192) | (104,104) |
Total net financial assets | 257,773 | 378,182 |
Departmental net debt | 174,519 | 1,201,641 |
Non-financial assets | ||
Prepayments | 1,505 | 17,786 |
Inventory (note 11) | 883 | 806 |
Tangible capital assets (note 12) | 270,000 | 248,763 |
Total non-financial assets | 272,388 | 267,355 |
Departmental net financial position (note 13) | 97,869 | (934,286) |
Contractual obligations (note 14)
Contingent liabilities (note 15)
Contingent recoveries (note 16)
The accompanying notes form an integral part of these consolidated financial statements.
Christyne Tremblay
Deputy Minister
Cheri Crosby
A/Chief Financial Officer
September 19, 2016
September 19, 2016
2016 | 2016 | 2015 | |
---|---|---|---|
Planned Results | |||
Expenses | |||
Statutory Programs - Atlantic Offshore | 1,174,871 | 328,110 | 840,779 |
Energy-efficient Practices and Lower-carbon Energy Sources | 255,595 | 202,911 | 293,741 |
Internal Services | 171,733 | 153,670 | 177,860 |
Technology Innovation | 147,956 | 151,382 | 164,384 |
Innovation for New Products and Processes | 89,641 | 94,649 | 69,733 |
Landmass Information | 80,338 | 78,607 | 86,504 |
Protection for Canadians and Natural Resources | 71,200 | 78,363 | 71,504 |
Investment in Natural Resource Sectors | 60,580 | 68,497 | 61,734 |
Market Access and Diversification | 49,553 | 55,497 | 69,253 |
Responsible Natural Resource Management | 33,626 | 37,006 | 36,478 |
Total expenses | 2,135,093 | 1,248,692 | 1,871,970 |
Revenues | |||
Rights and privileges | 1,036,895 | 231,497 | 697,569 |
Other, such as revenue pursuant to agreements | 572,221 | 108,713 | 362,134 |
Revenue from services of a non-regulatory nature | 24,165 | 21,410 | 19,068 |
Proceeds from sales of goods and information products | 2,886 | 2,492 | 2,748 |
Revenue from services of a regulatory nature | 1,958 | 2,227 | 1,932 |
Services to other government departments | 100 | 166 | 107 |
Revenues earned on behalf of Government | (1,603,146) | (335,669) | (1,057,662) |
Total net revenues | 35,079 | 30,836 | 25,896 |
Net cost from continuing operations | 2,100,014 | 1,217,856 | 1,846,074 |
Transferred operations (note 19) | |||
Expenses | 55,073 | 124,470 | 228,607 |
Net cost of transferred operations | 55,073 | 124,470 | 228,607 |
Net cost of operations before government funding and transfers | 2,155,087 | 1,342,326 | 2,074,681 |
Government funding and transfers | ||
---|---|---|
Net cash provided by Government | 1,440,439 | 2,143,834 |
Change in due to Consolidated Revenue Fund | (119,674) | (113,985) |
Services provided without charge by other government departments (note 17a) | 51,122 | 47,245 |
Transfer of the transition payments for implementing salary payments in arrears (note 18) | (72) | (12,687) |
Transfer to a Crown corporation (note 19) | 1,002,651 | - |
Transfers of assets from other government departments (note 12) | 15 | 22 |
Net (revenue) cost of operations after government funding and transfers | (1,032,155) | 10,252 |
Departmental net financial position - Beginning of year | (934,286) | (924,034) |
Departmental net financial position - End of year | 97,869 | (934,286) |
Segmented information (note 20)
The accompanying notes form an integral part of these consolidated financial statements.
2016 | 2015 | |
---|---|---|
Net (revenue) cost of operations after government funding and transfers | (1,032,155) | 10,252 |
Change due to tangible capital assets | ||
Acquisition of tangible capital assets (note 12) | 49,663 | 21,611 |
Amortization of tangible capital assets (note 12) | (21,154) | (20,718) |
Proceeds from disposal of tangible capital assets | (5,300) | (317) |
Net gain (loss) on disposal of tangible capital assets, including adjustments | 2,444 | (2,659) |
Transfer to a Crown corporation (note 19) | (4,431) | - |
Transfers of assets from other government departments (note 12) | 15 | 22 |
Total change due to tangible capital assets | 21,237 | (2,061) |
Change due to inventories | 77 | (353) |
Change due to prepayment | (16,281) | 6,669 |
Net (decrease) increase in departmental net debt | (1,027,122) | 14,507 |
Departmental net debt - Beginning of year | 1,201,641 | 1,187,134 |
Departmental net debt - End of year | 174,519 | 1,201,641 |
The accompanying notes form an integral part of these consolidated financial statements.
Operating activities | 2016 | 2015 |
---|---|---|
Net cost of operations before government funding and transfers: | 1,342,326 | 2,074,681 | Non-cash items: |
Amortization of tangible capital assets (note 12) | (21,154) | (20,718) |
Net gain (loss) on disposal of tangible capital assets, including adjustments | 2,444 | (2,659) |
Services provided without charge by other government departments (note 17a) | (51,122) | (47,245) |
Transition payments for implementing salary payments in arrears (note 18) | 72 | 12,687 |
Variations in Statement of financial position: | ||
Decrease in accounts receivable and advances | (735) | (308) |
(Decrease) increase in prepayments | (16,281) | 6,669 |
Increase (decrease) in inventory | 77 | (353) |
Decrease in accounts payable and accrued liabilities | 159,716 | 90,288 |
(Increase) decrease in vacation pay and compensatory leave | (717) | 6,960 |
Decrease (increase) in deferred revenue | 90 | (264) |
Decrease (increase) in future employee benefits | 1,275 | (963) |
Increase in environmental liabilities, excluding the adjustment related to the transfer to a Crown corporation | (22,865) | (1,304) |
Decrease (increase) in other liabilities | 693 | (151) |
Cash used in operating activities | 1,393,819 | 2,117,320 |
Capital investing activities | ||
Acquisitions of tangible capital assets (note 12) | 49,663 | 21,611 |
Proceeds from disposal of tangible capital assets | (5,300) | (317) |
Cash used in capital investing activities | 44,363 | 21,294 |
Financing activities | ||
Lease obligation for tangible capital assets | (2,261) | 702 |
Lease payments for tangible capital assets | 4,518 | 4,518 |
Cash used in financing activities | 2,257 | 5,220 |
Net cash provided by Government of Canada | 1,440,439 | 2,143,834 |
The accompanying notes form an integral part of these consolidated financial statements.
Natural Resources Canada
Notes to the Consolidated Financial Statements (Unaudited)
For the year ended March 31, 2016
1. Authority and objectives
The Department of Natural Resources Canada (NRCan) was created on June 25, 1993 by the merger of the Department of Energy, Mines and Resources and the Department of Forestry. This organizational change was effected by Order in Council, pending the passage of legislation which occurred in 1994. The Department’s mandate is primarily based on the Department of Natural Resources Act, the Resources and Technical Surveys Act and the Forestry Act.
The vision of NRCan is to improve the quality of life of Canadians by creating a sustainable resource advantage. It seeks to achieve this vision by working to improve the competitiveness of the natural resource sectors and to grow their contribution to Canada’s economy. NRCan supports the responsible development of Canada’s resources in a manner that advances the country’s global standing as a leader on the environment, and uses its knowledge and expertise of Canada’s landmass to support the safety and security of citizens.
NRCan fulfills its mandate through the following activities:
Market Access and Diversification
Canada’s natural resource sectors face two key barriers to market access and diversification: 1) trade and policy barriers, and 2) lack of awareness of Canada’s natural resource products. The objectives of this Program are to break down those barriers and support the development and expansion of markets for Canadian natural resource products by making information available to Canadians, supporting negotiations to reduce trade barriers, and ensuring that regulations are up to date. This helps maintain natural resource sectors’ access to existing markets and increases their access to new market segments.
Innovation for New Products and Processes
Optimizing the use of Canada's natural resources and the processes by which they are developed would improve the productivity and competitiveness of natural resource sectors. The objective of this Program is to maximize productivity and competitiveness by encouraging the adoption of new technologies and processes and the development of new products. These objectives are achieved by conducting and supporting research and development and by delivering frameworks and policies for, and demonstrations of, new applications, technologies, processes, and products.
Investment in Natural Resource Sectors
Investing in the development of natural resources is costly and risky due to inherent uncertainties in the potential economic viability of natural resource projects. Many factors must be considered when deciding whether to develop a natural resource project. In some cases, limited information may make it difficult for investors and/or companies to assess potential opportunities. The objective of this Program is to encourage investment in the natural resource sectors by increasing industry's knowledge of opportunities, regulations and obligations. This ensures that a more accurate assessment of the expected benefits of an investment can be made and subsequently compared to its costs and risks, thereby allowing for a more comprehensive investment decision. This objective is achieved by providing funding and information on the factors that determine the potential economic viability of natural resource projects.
Statutory Programs – Atlantic Offshore
Through this Program, NRCan monitors and facilitates payment disbursal agreements and transfer payments under the Atlantic Offshore Accord Acts. The Program includes the following programs: Canada Newfoundland Offshore Petroleum Board; Payments to the Newfoundland Offshore Petroleum Resource Revenue Fund; Payments to the Nova Scotia Offshore Revenue Account; Nova Scotia Crown Share Adjustment Payment; and Canada-Nova Scotia Offshore Petroleum Board.
Energy-Efficient Practices and Lower-Carbon Energy Sources
Canada’s energy markets are defined by the decisions of consumers and producers who do not necessarily make choices that minimize their impact on the environment. Multiple barriers exist, including a lack of awareness of available options and their benefits, insufficient capacity for adoption (e.g., regulatory frameworks, codes and standards), and financial risk. The objectives of this Program are to address these barriers by encouraging and enabling energy consumers and producers to adopt cleaner and more efficient technologies, products, services and practices. These objectives are achieved through education and outreach activities, targeted incentives, and regulatory interventions that keep pace with technological changes.
Technology Innovation
Science and technology is key to overcoming challenges confronted by natural resource sectors in pursuing responsible development. Through this Program, NRCan encourages academia, industry and the public sector to research, develop and demonstrate innovative solutions to environmental challenges. This objective is achieved through the generation and dissemination of scientific knowledge, and the development and demonstration of new technologies.
Responsible Natural Resource Management
Greater knowledge of environmental risks and environmentally responsible practices help prevent and reduce the environmental impacts of past, present and future natural resource development. The objectives of this Program are to enable government departments, regulatory bodies and industry to assess these impacts, and to develop, monitor and maintain resources or clean up wastes responsibly. These objectives are achieved through the provision of assessments and knowledge rooted in sound science, and through waste management efforts that are undertaken in collaboration with provinces, federal agencies and municipalities.
Protection for Canadians and Natural Resources
Natural resource development and changes in the environment pose risks to human, natural resource and infrastructure health. The objective of this Program is to enable other government departments, communities, and the private sector to manage these risks and to ensure the appropriate capacity is in place. NRCan achieves this objective by providing regulation, knowledge, tools and services and by fulfilling legislated responsibilities.
Landmass Information
Public, academic and private sectors as well as Canadians rely on up-to-date, comprehensive and accessible landmass information to make sound socio-economic and environmental decisions. This Program provides open access to Canada’s fundamental geomatics framework and information system, including accurate three-dimensional positioning, high-resolution satellite imagery and other remote sensing products, legal (boundary) surveys, mapping and other analysis applications. In addition, it delivers logistics support in the North and regulatory oversight for a robust property system framework on Canada Lands.
Internal Services
Internal Services are groups of related activities and resources that are administered to support the needs of programs and other corporate obligations of an organization. These groups are: Management and Oversight Services; Communications Services; Legal Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Services; Materiel Services; Acquisition Services. Internal Services include only those activities and resources that apply across an organization and not to those provided specifically to a program.
2. Summary of significant accounting policies
These consolidated financial statements have been prepared using the Government’s accounting policies stated below, which are based on Canadian public sector accounting standards. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.
Significant accounting policies are as follows:
- Parliamentary authorities – The Department is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Department do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Consolidated Statement of Operations and Departmental Net Financial Position and in the Consolidated Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting. The planned results amounts in the "Expenses" and "Revenues" sections of the Consolidated Statement of Operations and Departmental Net Financial Position are the amounts reported in the Consolidated Future-oriented Statement of Operations included in the 2015-2016 Report on Plans and Priorities and have been reclassified to conform to the current year’s presentation. Planned results are not presented in the "Government funding and transfers" section of the Consolidated Statement of Operations and Departmental Net Financial Position and in the Statement of Change in Departmental Net Debt because these amounts were not included in the 2015-2016 Report on Plans and Priorities.
- Consolidation – These consolidated financial statements include the accounts of the sub-entities that are under the control of the Department. The accounts of the Geomatics Canada Revolving Fund have been consolidated with those of the Department, and all inter-organizational balances and transactions have been eliminated.
- Net Cash Provided by Government – The Department operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the Department is deposited to the CRF and all cash disbursements made by the Department are paid from the CRF. The net cash provided by Government is the difference between all cash receipts and all cash disbursements including transactions between departments of the Government.
- Amounts due from or to the CRF are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the net amount of cash that the Department is entitled to draw from the CRF without further authorities to discharge its liabilities.
- Revenues:
- Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.
- Funds that have been received are recorded as deferred revenue, provided the Department has an obligation to other parties for the provision of goods, services or the use of assets in the future.
- Other revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenue takes place.
- Revenues that are non-respendable are not available to discharge the Department's liabilities. While the deputy head is expected to maintain accounting control, she has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the entity’s gross revenues.
- Expenses – Expenses are recorded on the accrual basis:
- Transfer payments are recorded as expenses when authorization for the payment exists and the recipient has met the eligibility criteria or the entitlements established for the transfer payment program. In situations where payments do not form part of an existing program, transfer payments are recorded as expenses when the Government announces a decision to make a non-recurring transfer, provided the enabling legislation or authorization for payment receives parliamentary approval prior to the completion of the consolidated financial statements. Transfer payments that become repayable as a result of conditions specified in the contribution agreement that have come into being are recorded as a reduction to transfer payment expense and as a receivable.
- Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
- Services provided without charge by other government departments for accommodation, employer contributions to the health and dental insurance plans, legal services and workers' compensation are recorded as operating expenses at their estimated cost.
- Environmental liabilities consist of estimated costs related to the remediation of contaminated sites. A liability for remediation of contaminated sites is recognized when all of the following criteria are satisfied: an environmental standard exists, contamination exceeds the environmental standard, the government is directly responsible or accepts responsibility, it is expected that future economic benefits will be given up and a reasonable estimate of the amount can be made. The liability reflects the Department’s best estimate of the amount required to remediate the sites to the current minimum standard for its use prior to contamination. When the cash flows required to settle or otherwise extinguish a liability are expected to occur over extended future periods, a present value technique is used. The discount rate applied is taken from the government’s consolidated revenue fund monthly lending rates for periods of one year and over. The discount rates used are based on the term rate associated with the estimated number of years to complete remediation. For remediation costs with estimated future cash flows spanning more than 25 years, the 25 year Government of Canada lending rate is used as the discount rate.
- Employee future benefits
- Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer plan administered by the Government. The Department’s contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. The Department’s responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the consolidated financial statements of the Government of Canada, as the Plan’s sponsor.
- Severance benefits: Employees entitled to severance benefits under labour contracts or conditions of employment earn those benefits as services necessary to earn them are rendered. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability employee severance benefits for the Government as a whole.
- Accounts and loans receivable are stated at the lower of cost and net recoverable value. However, when the terms of the loans are concessionary, such as those provided with a low or no interest clause, they are recorded at their estimated present value. A portion of the unamortized discount is recorded as revenue each year to reflect the change in the present value of the loans outstanding. Transfer payments that are unconditionally repayable are recognized as loans receivable. A valuation allowance is recorded for accounts and loans receivable where recovery is considered uncertain.
- Prepayments are disbursements made before the completion of the work, delivery of the goods or rendering of the services. They are accounted for as non-financial assets until the related services are rendered, goods are consumed, or terms of the contractual agreement are fulfilled.
- Inventory
- Inventory held for consumption: Inventory not intended for resale consists of parts, materials and supplies held for future program delivery. It is valued at cost using the average cost method. If there is no longer any service potential, inventory is valued at the lower of cost or net realizable value.
- Inventory held for resale: Inventory consists of maps, which is valued at the lower of cost or net realizable value, with cost being determined using the weighted average cost of each title.
- Foreign currency transactions - Transactions involving foreign currencies are translated into Canadian dollar equivalents using rates of exchange in effect at the time of those transactions. Monetary assets and liabilities denominated in a foreign currency are translated into Canadian dollars using the rate of exchange in effect at year end. Gains and losses resulting from foreign currency transactions are included in the Consolidated Statement of Operations and Departmental Net Financial Position and note 20 in the operating expenses – other.
- Tangible capital assets – All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more ($1,000 or more for the Geomatics Canada Revolving Fund) are recorded at their acquisition cost. The Department does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian reserves and museum collections.
Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the capital asset as follows:
Asset Class Amortization period Buildings 15 to 40 years Machinery and equipment 5 to 15 years Vehicles 3 to 10 years Leasehold improvements Lesser of the remaining term of lease or useful life of the improvement Leased tangible capital assets Over term of lease/useful life Assets under construction Once in service, in accordance with asset class - Contingent liabilities – Contingent liabilities are potential liabilities that may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the consolidated financial statements.
- Measurement uncertainty – The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the consolidated financial statements. At the time of preparation of these consolidated statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are contingent liabilities, environmental liabilities, the liability for employee future benefits, the useful life of tangible capital assets, and the allowance for doubtful accounts. Actual results could significantly differ from those estimated. Management’s estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the consolidated financial statements in the year they become known.
The recorded environmental liabilities are adjusted each year, as required, for present value adjustments, inflation, new obligations, changes in management estimates and actual costs incurred.
If the likelihood of the Department’s responsibility is not determinable, a contingent liability is disclosed in the notes to the financial statements. If measurement uncertainty exists, it is also disclosed in the notes to the financial statements.
3. Parliamentary authorities
The Department receives most of its funding through annual parliamentary authorities. Items recognized in the Consolidated Statement of Operations and Departmental Net Financial Position and the Consolidated Statement of Financial Position in one year may be funded through parliamentary authorities in prior, current or future years. Accordingly, the Department has different net results of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled in the following tables.
a) Reconciliation of net cost of operations to current year authorities used
2016 | 2015 | ||
---|---|---|---|
(in thousands of dollars) | |||
Net cost of operations before government funding and transfers | 1,342,326 | 2,074,681 | |
Adjustments for items affecting net cost of operations but not affecting authorities: | |||
Amortization of tangible capital assets | (21,154) | (20,718) | |
Net gain (loss) on disposal of tangible capital assets, including adjustments | 2,444 | (2,659) | |
Services provided without charge by other government departments | (51,122) | (47,245) | |
(Decrease) increase in prepayments | (16,281) | 6,669 | |
Increase (decrease) in inventory | 77 | (353) | |
Decrease (increase) in accrued liabilities | 49,863 | (16,642) | |
(Increase) decrease in vacation pay and compensatory leave | (717) | 6,960 | |
Decrease (increase) in employee future benefits | 1,275 | (963) | |
Increase in environmental liabilities, excluding the adjustment related to the transfer to a Crown corporation | (22,865) | (1,304) | |
Refunds of prior years’ expenditures | 7,983 | 12,286 | |
Expenses restricted under the Environmental Studies Research Fund | (3,687) | (1,285) | |
Other adjustments | (4,955) | 474 | |
Total items affecting net cost of operations but not affecting authorities | (59,139) | (64,780) | |
Adjustments for items not affecting net cost of operations but affecting authorities: | |||
Acquisitions of tangible capital assets | 49,663 | 21,611 | |
Decrease in lease obligations for tangible capital assets | 2,257 | 5,220 | |
Transition payments for implementing salary payments in arrears | 72 | 12,687 | |
Total items not affecting net cost of operations but affecting authorities | 51,992 | 39,518 | |
Current year authorities used | 1,335,179 | 2,049,419 |
b) Authorities provided and used
2016 | 2015 | ||
---|---|---|---|
(in thousands of dollars) | |||
Authorities Provided: | |||
Vote 1 - Operating expenditures | 945,618 | 913,223 | |
Vote 5 - Capital expenditures | 54,422 | 18,280 | |
Vote 10 - Grants and contributions | 306,909 | 450,039 | |
Statutory amounts | 408,685 | 900,817 | |
Less: | |||
Authorities available for future years | (7,164) | (6,684) | |
Lapsed - Operating | (314,876) | (128,480) | |
Lapsed - Capital | (4,833) | (152) | |
Lapsed - Grants and contributions | (53,582) | (97,398) | |
Lapsed – Statutory Amounts | - | (226) | |
Current year authorities used | 1,335,179 | 2,049,419 |
4. Accounts payable and accrued liabilities
The following table presents details of the Department's accounts payable and accrued liabilities:
2016 | 2015 | ||
---|---|---|---|
(in thousands of dollars) | |||
Accounts payable – Other government departments and agencies | 11,382 | 4,180 | |
Accounts payable – External parties | 127,450 | 210,088 | |
Total accounts payable | 138,832 | 214,268 | |
Accrued liabilities | 165,035 | 249,315 | |
Total accounts payable and accrued liabilities | 303,867 | 463,583 |
In Canada’s Economic Action Plan 2012, the Government announced savings measures to be implemented by departments over the next three fiscal years starting in 2013. As a result, the Department has recorded at March 31, 2016, an obligation for termination benefits for an amount of $76 thousand ($148 thousand in 2015) as part of accrued liabilities to reflect the estimated workforce adjustment costs.
5. Environmental liabilities
Remediation of contaminated sites: The government has developed a "Federal Approach to Contaminated Sites", which incorporates a risk-based approach to the management of contaminated sites. Under this approach the Government has inventoried the contaminated sites on federal lands that have been identified, allowing them to be classified, managed and recorded in a consistent manner. This systematic approach aides in the identification of the high risk sites in order to allocate limited resources to those sites which pose the highest risk to the environment and human health.
The Department has identified a total of 8 sites (13 sites in 2015 – reclassified) where contamination may exist and assessment, remediation and monitoring may be required. Of these, the Department has assessed 7 sites (11 sites in 2015) where action is possible and for which a liability of $3,466 thousand ($988,831 thousand in 2015) has been recorded. This liability estimate has been determined after the sites are assessed and is based on scientific/engineering contractors reviewing the results of site assessments, and proposing possible remediation solutions.
In 2016, a statistical model was developed to estimate the liability for unassessed sites based on historical costs incurred for contaminated sites with similar functions. As a result, there is 1 unassessed site where a liability estimate of $1,148 thousand has been recorded prospectively in 2016. This estimate will be refined in future years as the site is assessed and estimated costs are revised.
These two estimates combined represent management’s best estimate of the amount required to complete the remediation of the sites to the current minimum standard for its use prior to contamination, based on information available at the financial statement date. A net present value technique has been used for sites where the cash flows are expected to occur over extended future periods.
In addition, during the year, 1 site was closed as it was assessed and found not to be contaminated.
The following table presents the total estimated amounts of these liabilities by nature and source, the associated expected recoveries and the total undiscounted future expenditures as at March 31, 2016, and March 31, 2015. When the liability estimate is based on a future cash requirement, the amount is adjusted for inflation using a forecast Consumer Price Index (CPI) rate of 2%. Inflation is included in the undiscounted amount. The Government of Canada lending rate applicable to loans with similar terms to maturity has been used to discount the estimated future expenditures. The March 2016 rates are 0.62% for 2 year term and 1.92% for 15 year term.
Nature and Source of Liability | 2016 | 2015 | ||||||
---|---|---|---|---|---|---|---|---|
Number of Sites | (in thousands of dollars) | Number of Sites | (in thousands of dollars) | |||||
Estimated Liability | Estimated Total Undiscounted Expenditures | Estimated Recoveries | Estimated Liability | Estimated Total Undiscounted Expenditures | Estimated Recoveries | |||
Radioactive Material(1) | - | - | - | - | 4 | 985,517 | 1,016,686 | - |
Fuel Practices(2) | 1 | 1,148 | 1,148 | - | - | - | - | - |
Office/Commercial/Industrial Operations(3) | 7 | 3,466 | 3,657 | - | 7 | 3,314 | 3,314 | - |
Total | 8 | 4,614 | 4,805 | - | 11 | 988,831 | 1,020,000 | - |
- Notes
-
(1) Contamination associated with former nuclear operations, e.g. low-level radioactive waste, radioactive isotopes. This liability was transferred to Atomic Energy of Canada Limited (AECL). Details can be found in note 19 on the transfer.
-
(2) Contamination primarily associated with fuel storage and handling, e.g., accidental spills related to fuel storage tanks or former fuel handling practices, e.g. petroleum hydrocarbons, polyaromatic hydrocarbons and BTEX.
-
(3) Contamination associated with the operations of the office/commercial/industrial facilities where activities such as fuel storage/handling, waste sites and use of metal-based paint resulted in former or accidental contamination, e.g. metals, petroleum hydrocarbons, polyaromatic hydrocarbons, BTEX, etc. Sites often have multiple sources of contamination.
6. Lease obligation for tangible capital assets
The Department has entered into an agreement to lease a building under a capital lease with a cost of $87,606 thousand as at March 31, 2016 ($87,606 thousand in 2015) and accumulated amortization of $19,334 thousand as at March 31, 2016 ($15,829 thousand in 2015). Interest on this obligation of $2,261 thousand ($1,961 thousand in 2015) is reported in the Consolidated Statement of Operations and Departmental Net Financial Position as part of Internal Services expenses. The obligation related to the upcoming years includes the following:
2016 | 2015 | ||
---|---|---|---|
(in thousands of dollars) | |||
2016 | - | 4,518 | |
2017 | 4,518 | 4,518 | |
2018 | 4,518 | 4,518 | |
2019 | 4,518 | 4,518 | |
2020 | 4,518 | 4,518 | |
2021 and thereafter | 70,560 | 70,560 | |
Total future minimum lease payments | 88,632 | 93,150 | |
Less: imputed interest (3.45%) | 24,297 | 26,558 | |
Lease obligation for tangible capital assets | 64,335 | 66,592 |
7. Employee future benefits
- Pension benefits: The Department's employees participate in the public service pension plan ("the Plan"), which is sponsored and administered by the Government of Canada. Pension benefits accrue up to a maximum period of 35 years at a rate of 2 percent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Québec Pension Plan benefits and they are indexed to inflation.
Both the employees and the Department contribute to the cost of the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to Canada’s Economic Action Plan 2012, employee contributors have been divided into two groups – Group 1 relates to existing plan members as of December 31, 2012 and Group 2 relates to members joining the Plan as of January 1, 2013. Each group has a distinct contribution rate.
The 2016 expense amounts to $53,228 thousand ($55,372 thousand in 2015). For Group 1 members, the expense represents approximately 1.25 times (1.41 times in 2015) the employee contributions and, for Group 2 members, approximately 1.24 times (1.39 times in 2015) the employee contributions.
The Department's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the Financial Statements of the Government of Canada, as the Plan's sponsor.
- Severance benefits: The Department provides severance benefits to its employees based on eligibility, years of service and salary at termination of employment. These severance benefits are not pre-funded. Benefits will be paid from future authorities. Information about the severance benefits, measured as at March 31, is as follows:
As part of the collective agreement negotiations with certain employee groups, the accumulation of severance benefits under the employee severance pay program ceased for these employees commencing in 2012. Employees subject to these changes have been given the option to be immediately paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits on termination from the public service. These changes have been reflected in the calculation of the outstanding severance benefit obligation.
2016 | 2015 | |
---|---|---|
(in thousands of dollars) | ||
Accrued benefit obligation - Beginning of year | 24,712 | 23,749 |
Expense for the year | 3,248 | 8,492 |
Benefits paid during the year | (4,523) | (7,529) |
Accrued benefit obligation - End of year | 23,437 | 24,712 |
8. Other liabilities
The following table presents a detail of the Department’s other liabilities:
2016 | 2015 | |
---|---|---|
(in thousands of dollars) | ||
Guarantee deposits - Oil and gas | 7,970 | 8,427 |
Shared costs projects | 182 | 477 |
Market development and incentive payments - Alberta | 1,787 | 2,114 |
Shared costs agreements - Research | 4,648 | 4,262 |
Total other liabilities | 14,587 | 15,280 |
Guarantee deposits – Oil and gas: This account was established to record securities in the form of cash, which are required to be issued to, and held by the Government of Canada pursuant to an Exploration License in accordance with section 24 of the Canada Petroleum Resources Act. These securities are a performance guarantee that the agreed exploration will be performed in the manner and time frame specified. Interest is not paid on these deposits.
Shared-cost projects - This account was established to facilitate the retention and disbursement of funds received from private organizations and other governments for cost-sharing scientific projects.
Market development incentive payments – Alberta: This account records funds received from the Government of Alberta to encourage the expansion of natural gas market in Alberta and provinces to the East, in accordance with an agreement between the Government of Canada and the Government of Alberta dated September 1, 1981 and pursuant to section 39 of the Energy Administration Act. The original term of the agreement was from November 1, 1981 to January 31, 1987. As a result of the Western Accord of March 25, 1985, payments from the Government of Alberta terminated as at April 30, 1986; however, payments continued to be made from the account for selected programs which encouraged the use of natural gas for vehicles.
More recently, a new strategy for the expenditure of these funds has been agreed upon. This strategy consists of expending the remaining funds in support of expanding the use of natural gas in transportation and combined heat and power applications across Canada.
Shared-cost agreements – Research: This account was established to facilitate the retention and disbursement of funds received from private industries and other governments for joint projects or shared-cost research agreements.
9. Accounts receivable and advances
The following presents details of the Department’s accounts receivable and advances balances:
2016 | 2015 | |
---|---|---|
(in thousands of dollars) | ||
Receivables - Other government departments and agencies | 9,416 | 9,717 |
Receivables - External parties | 37,130 | 58,092 |
Employee advances | 364 | 212 |
Subtotal | 49,910 | 68,021 |
Allowance for doubtful accounts on receivables from external parties | (296) | (427) |
Gross accounts receivable and advances | 46,614 | 67,594 |
Accounts receivable held on behalf of Government | (45,192) | (65,437) |
Net accounts receivable and advances | 1,422 | 2,157 |
10. Loan receivable
The following table presents details of the Department’s loan receivable balance:
2016 | 2015 | |
---|---|---|
(in thousands of dollars) | ||
Loan to Nordion International Inc. | - | 42,000 |
Unamortized discounts | - | (3,333) |
Gross Loan receivable balance | - | 38,667 |
Loans receivable held on behalf of government | - | (38,667) |
Loan receivable balance | - | - |
Nordion International Inc. (loan): Interest Free Loan Agreement; to be repaid over 30 semi-annual payments commencing October 1, 2000; fully secured by a financial instrument in Canada’s name which guarantees that the loan will be repaid. The balance remaining as of March 31, 2015 was $42,000 thousand. The final payment was received on April 1, 2015.
11. Inventory
The following table presents details of the inventory:
2016 | 2015 | |
---|---|---|
(in thousands of dollars) | ||
Inventories held for consumption | 859 | 747 |
Inventories for re-sale | 24 | 59 |
Total inventory | 883 | 806 |
The cost of consumed inventory recognized as an expense in the Consolidated Statement of Operations and Departmental Net Financial Position is $95 thousand in 2016 ($353 thousand in 2015).
12. Tangible capital assets
(in thousands of dollars)Cost | Accumulated amortization | Net book value | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Capital asset class | Opening balance | Acquisitions | Adjustments(1) | Disposals and write-offs | Closing balance | Opening balance | Amortization | Adjustments(1) | Disposals and write-offs | Closing balance | 2016 | 2015 | ||
Land | 12,059 | - | (3,137) | 983 | 7,939 | - | - | - | - | - | 7,939 | 12,059 | ||
Buildings | 205,717 | 462 | (14,994) | 8,059 | 183,126 | 145,416 | 3,313 | (7,020) | 7,995 | 133,714 | 49,412 | 60,301 | ||
Machinery and equipment | 249,518 | 7,620 | 2,686 | 3,901 | 255,923 | 178,236 | 12,404 | 289 | 3,607 | 187,322 | 68,601 | 71,282 | ||
Vehicles | 9,086 | 693 | 85 | 926 | 8,938 | 7,097 | 618 | 44 | 883 | 6,876 | 2,062 | 1,989 | ||
Leasehold improvements | 21,422 | - | 18,095 | - | 39,517 | 2,434 | 1,314 | 7,594 | - | 11,342 | 28,175 | 18,988 | ||
Leased tangible capital assets | 87,606 | - | - | - | 87,606 | 15,829 | 3,505 | - | - | 19,334 | 68,272 | 71,777 | ||
Assets under construction | 12,367 | 40,888 | (5,087) | 2,629 | 45,539 | - | - | - | - | - | 45,539 | 12,367 | ||
Total | 597,775 | 49,663 | (2,352) | 16,498 | 628,588 | 349,012 | 21,154 | 907 | 12,485 | 358,588 | 270,000 | 248,763 |
-
(1) Adjustments include assets under construction of $5,097 thousand that were transferred to the other categories upon completion of the assets. It also includes a transfer of land and buildings with a net book value of $4,431 thousand to AECL effective September 13, 2015 (refer to note 19 for more information on the transfer). And finally, during the year, the Department transferred tangible capital assets with Other Government Departments with a net effect of $15 thousand on the departmental net financial position.
13. Departmental net financial position
A portion of the Department’s net financial position is used for a specific purpose. Related revenues and expenses are included in the Consolidated Statement of Operations and Departmental Net Financial Position.
The Environmental Studies Research Fund account was established pursuant to subsection 76(1) of the Canada Petroleum Resources Act. The purpose of the fund is to finance environmental and social studies pertaining to the manner in which, and the terms and conditions under which, exploration development and production activities on frontier land, authorized under this Act or any other Act of Parliament, should be conducted. Legislation required that the revenues of these accounts to be earmarked and that related payments and expenses be charged against such revenues. The transactions do not represent liabilities to third parties but are internally restricted for specified purposes.
2016 | 2015 | |
---|---|---|
(in thousands of dollars) | ||
Environmental Studies Research Fund – Restricted | ||
Balance, beginning of year – Restricted | 3,534 | 4,701 |
Revenues | 3,399 | 118 |
Expenses | (3,686) | (1,285) |
Balance, end of year – Restricted | 3,247 | 3,534 |
Unrestricted | 94,622 | (937,820) |
Departmental net financial position – End of year | 97,869 | (934,286) |
14. Contractual obligations
The nature of the Department’s activities can result in some large multi-year contracts and obligations whereby the Department will be obligated to make future payments in order to carry out its transfer payment programs. Significant contractual obligations that can be reasonably estimated are summarized as follows:
2017 | 2018 | 2019 | 2020 | 2021 and thereafter | TOTAL | |
---|---|---|---|---|---|---|
(in thousands of dollars) | ||||||
Transfer payments | 172,995 | 125,392 | 106,140 | 92,078 | 57,726 | 554,331 |
15. Contingent liabilities
Contingent liabilities arise in the normal course of operations and their ultimate disposition is unknown. They are grouped into two categories as follows:
- Claims and litigation: Claims have been made against the Department in the normal course of operations. These claims include items with pleading amounts and other for which no amount is specified. While the total amount claimed in these actions is significant, their outcomes are not determinable. The Department has recorded an allowance for claims and litigations where it is likely that there will be a future payment and a reasonable estimate of the loss can be made. For all other claims and litigations where the outcome is not determinable, no reasonable estimate can be made by management ($100 thousands in 2015).
- Loan guarantees:
Authorized Limit | Outstanding guarantees | ||
---|---|---|---|
2016 | 2015 | ||
(in thousands of dollars) | |||
Lower Churchill Hydroelectric Projects | 6,300,000 | 3,549,839 | 1,792,798 |
Under the Lower Churchill Projects, $6.3 billion was raised through the issuance of bonds guaranteed by Canada for the following projects: Muskrat Falls and Labrador Transmission Assets; Labrador-Island Link; and Maritime Link. As of March 31, 2016, $3,549,839 thousand ($1,792,798 thousand in 2015) has been advanced to the project entities for construction costs. As per the terms of the bonds that were issued, initially, only interest payments are being made on the guaranteed debt. The commencement of principal payments on the guaranteed debt has been scheduled to coincide with the expected commissioning dates of the projects, with the schedule of these payments depending on the specific terms and conditions of each of the guaranteed bonds. Among the many safeguards put in place to protect Canada’s interest, all of the project entities’ shares, assets and agreements have been pledged as security to Canada.
No allowance for losses on this guarantee has been recorded for this loan guarantee as, at this time, no costs are likely to occur. An allowance will be recorded if it becomes likely that Canada will incur costs under the guarantee and when the amount of the loss can be reasonably estimated.
16. Contingent recoveries
NRCan issues conditionally repayable contributions that become repayable if conditions specified in the contribution agreement come into effect.
The Department has estimated the contingent recoverable amounts as $1,200 thousand ($8,459 thousand in 2015). These contingent recoveries relate to agreements entered into with proponents for early stage research and development (R&D) activities. Recoveries are contingent upon the successful commercialization of products generated by the R&D activities. Contingent recoveries are not recorded in the consolidated financial statements.
17. Related party transactions
The Department is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations. The Department enters into transactions with these entities in the normal course of business and on normal trade terms. Also, during the year, the Department received common services which were obtained without charge from other Government departments as presented in part (a).
- Common services provided without charge by other government departments: During the year the Department received services without charge from certain common service organizations, related to accommodation, legal services, the employer’s contribution to the health and dental insurance plans, and workers’ compensation coverage. These services received without charge have been recorded in the Department’s Consolidated Statement of Operations and Departmental Net Financial Position as follows:
- Other transactions with related parties:
2016 | 2015 | |
---|---|---|
(in thousands of dollars) | ||
Employer's contribution to the health and dental insurance plans | 27,931 | 27,090 |
Accommodation | 21,447 | 18,837 |
Legal services | 1,521 | 1,098 |
Workers' compensation | 223 | 220 |
Total common services provided without charge | 51,122 | 47,245 |
The Government has centralized some of its administrative activities for efficiency and cost-effectiveness purposes and economic delivery of programs to the public. As a result, the Government uses central agencies and common service organizations so that one department performs services for all other departments and agencies without charge. The costs of these services, which include payroll and check issuance services provided by Public Services and Procurement Canada and audit services provided by the Office of the Auditor General, are not included as an expense in the Department’s Consolidated Statement of Operations and Departmental Net Financial Position.
2016 | 2015 | ||
---|---|---|---|
(in thousands of dollars) | |||
Expenses - Other government departments and agencies | 143,100 | 148,619 | |
Revenues - Other government departments and agencies | 3,805 | 2,993 |
Expenses and revenues disclosed in (b) exclude common services provided without charge, which are already disclosed in (a).
18. Transfer of the transition payments for implementing salary payments in arrears
The Government of Canada implemented salary payments in arrears in 2015. As a result, a one-time payment was issued to employees totaling $12,687 thousand and will be recovered from them in the future. Employees that were on leave without pay when the initial one-time transition payments were issued will receive the transition payment shortly after their return to work from their leave without pay. In 2016, the total amount of this transition payment is $72 thousand. The transition to salary payments in arrears forms part of the transformation initiative that replaces the pay system and also streamlines and modernizes the pay processes. This change to the pay system had no impact on the expenses of the Department. However, it did result in the use of additional spending authorities by the Department. Prior to year-end, the transition payments for implementing salary payments in arrears were transferred to a central account administered by Public Services and Procurement Canada, who is responsible for the administration of the Government pay system.
19. Transfer to a Crown corporation
Effective September 13, 2015, the Department transferred the responsibilities of the Nuclear Legacy Liabilities Program and the Historic Waste Program to Atomic Energy of Canada Limited (AECL) including the stewardship responsibilities for tangible capital assets and the environmental liabilities related to these programs.
Assets: | |||
---|---|---|---|
(in thousands of dollars) | |||
Tangible capital (net book value) (note 12) | 4,431 | ||
Total assets transferred | 4,431 | ||
Liabilities: | |||
Environmental liabilities (note 5) | 1,007,082 | ||
Total liabilities transferred | 1,007,082 | ||
Adjustment to the departmental net financial position | (1,002,651) |
In addition, comparative figures have been reclassified on the Consolidated Statement of Operations and Departmental Net Financial Position to present the expenses of the transferred operations related to AECL.
20. Segmented information
Presentation by segment is based on the Department’s program alignment architecture. The presentation by segment is based on the same accounting policies as described in the Summary of significant accounting policies in note 2. The following table presents the expenses incurred and revenues generated for the main program, by major object of expense and by major type of revenue. The segment results for the period are as follows:
(in thousands of dollars)Statutory Programs Atlantic Offshore | Energy efficient Practices and Lower carbon Energy Sources | Internal Services | Technology Innovation | Innovation for New Products and Processes | Landmass Infomation | Protection for Canadians and Natural Resources | Investment in natural resource sectors | Market Access and Diversification | Responsible Natural Resource Management | 2016 Total | 2015 Total | |||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Transfer payments | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Industry | - | 151,357 | (327) | 12,278 | 20,323 | - | 143 | 5 | (76) | - | 183,703 | 275,562 | ||||||||||||||||||||||||||||||||||||||||||||||
International | - | 342 | 100 | 449 | 16 | - | 19 | 42 | 1,391 | 11 | 2,370 | 1,901 | ||||||||||||||||||||||||||||||||||||||||||||||
Non-profit organization | - | 1,353 | 10 | 15,597 | 24,833 | - | 2,689 | 886 | 10,258 | 15 | 55,641 | 59,267 | ||||||||||||||||||||||||||||||||||||||||||||||
Other levels of government | 328,110 | 2,209 | - | 203 | 72 | - | 6 | - | 599 | - | 331,199 | 843,566 | ||||||||||||||||||||||||||||||||||||||||||||||
Individuals | - | (326) | (12) | (247) | 313 | - | (18) | - | (2) | - | (292) | 453 | ||||||||||||||||||||||||||||||||||||||||||||||
Total transfer payments | 328,110 | 154,935 | (229) | 28,280 | 45,557 | - | 2,839 | 933 | 12,170 | 26 | 572,621 | 1,180,749 | ||||||||||||||||||||||||||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Salaries and employee benefits | - | 29,897 | 93,545 | 77,734 | 35,228 | 41,579 | 52,617 | 46,121 | 29,822 | 26,916 | 433,459 | 436,365 | ||||||||||||||||||||||||||||||||||||||||||||||
Environmental expenses | - | - | 1,300 | - | - | - | - | - | - | - | 1,300 | 40 | ||||||||||||||||||||||||||||||||||||||||||||||
Information | - | 637 | 1,948 | 870 | 432 | 412 | 330 | 341 | 282 | 215 | 5,467 | 6,891 | ||||||||||||||||||||||||||||||||||||||||||||||
Professional and special services | - | 14,172 | 23,213 | 25,478 | 6,867 | 9,674 | 15,289 | 8,212 | 12,860 | 6,749 | 122,514 | 103,264 | ||||||||||||||||||||||||||||||||||||||||||||||
Rentals | - | 1,630 | 6,576 | 8,547 | 1,978 | 17,678 | 3,464 | 6,428 | 1,660 | 1,460 | 49,421 | 53,871 | ||||||||||||||||||||||||||||||||||||||||||||||
Transportation | - | 394 | 1,489 | 1,963 | 945 | 2,578 | 2,311 | 2,296 | 1,442 | 737 | 14,155 | 14,562 | ||||||||||||||||||||||||||||||||||||||||||||||
Utilities, material and supplies | - | 344 | 3,223 | 9,131 | 2,672 | 4,953 | 3,284 | 2,301 | 731 | 1,475 | 28,114 | 30,203 | ||||||||||||||||||||||||||||||||||||||||||||||
Purchased repairs and upkeep | - | 57 | 3,164 | 3,733 | 2,537 | 1,156 | 890 | 3,281 | 44 | 1,805 | 16,667 | 5,304 | ||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | - | 276 | 3,037 | 2,930 | 593 | 2,669 | 2,264 | 1,009 | 289 | 899 | 13,966 | 22,427 | ||||||||||||||||||||||||||||||||||||||||||||||
Amortization | - | - | 21,145 | - | - | - | - | - | - | - | 21,145 | 20,701 | ||||||||||||||||||||||||||||||||||||||||||||||
Other | - | 569 | (4,741) | (7,284) | (2,160) | (2,092) | (4,925) | (2,425) | (3,803) | (3,276) | (30,137) | (2,407) | ||||||||||||||||||||||||||||||||||||||||||||||
Total operating expenses | - | 47,976 | 153,899 | 123,102 | 49,092 | 78,607 | 75,524 | 67,564 | 43,327 | 36,980 | 676,071 | 691,221 | ||||||||||||||||||||||||||||||||||||||||||||||
Total expenses | 328,110 | 202,911 | 153,670 | 151,382 | 94,649 | 78,607 | 78,363 | 68,497 | 55,497 | 37,006 | 1,248,692 | 1,871,970 | ||||||||||||||||||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rights and privileges | 228,330 | - | - | - | 295 | - | 1,964 | - | 908 | - | 231,497 | 697,569 | ||||||||||||||||||||||||||||||||||||||||||||||
Other, such as revenue pursuant to agreements | 11,062 | 10 | 5,770 | 4,413 | 25 | 538 | 189 | 57 | 86,634 | 15 | 108,713 | 362,134 | ||||||||||||||||||||||||||||||||||||||||||||||
Revenue from services of a non-regulatory nature | - | 313 | - | 14,039 | 898 | 2,458 | 2,025 | - | - | 1,677 | 21,410 | 19,068 | ||||||||||||||||||||||||||||||||||||||||||||||
Proceeds from sales of goods and information products | - | - | - | - | 1,021 | 324 | 1,147 | - | - | - | 2,492 | 2,748 | ||||||||||||||||||||||||||||||||||||||||||||||
Revenue from services of a regulatory nature | - | - | - | 96 | - | - | 2,131 | - | - | - | 2,227 | 1,932 | ||||||||||||||||||||||||||||||||||||||||||||||
Services to other government departments | - | - | 166 | - | - | - | - | - | - | - | 166 | 107 | ||||||||||||||||||||||||||||||||||||||||||||||
Revenues earned on behalf of Government | (239,392) | (24) | (5,764) | (2,862) | (39) | 70 | (142) | (57) | (87,542) | 83 | (335,669) | (1,057,662) | ||||||||||||||||||||||||||||||||||||||||||||||
Total net revenues | - | 299 | 172 | 15,686 | 2,200 | 3,390 | 7,314 | - | - | 1,775 | 30,836 | 25,896 | ||||||||||||||||||||||||||||||||||||||||||||||
Net cost from continuing operations | 328,110 | 202,612 | 153,498 | 135,696 | 92,449 | 75,217 | 71,049 | 68,497 | 55,497 | 35,231 | 1,217,856 | 1,846,074 |
21. Comparative information
Comparative figures have been reclassified to conform to the current year’s presentation.
Annex to the Statement of Management Responsibility
Including Internal Control over Financial Reporting
of Natural Resources Canada
for fiscal year 2015-16 (unaudited)
Summary of the assessment of effectiveness of the system of internal control over financial reporting and the action plan
1. Introduction
This document provides summary information on the measures taken by Natural Resources Canada (NRCan) to maintain an effective system of internal control over financial reporting (ICFR), including information on internal control management and assessment results and related action plans.
Detailed information on NRCan’s authority, mandate, and programs can be found in the 2015-16 Departmental Performance Report and the 2016-17 Report on Plans and Priorities..
2. Departmental system of internal control over financial reporting
2.1 Internal Control Management
NRCan has a well-established governance and accountability structure to support departmental assessment efforts and oversight of its system of internal control. A departmental internal control management framework approved by the Deputy Minister is in place (NRCan Framework for Internal Control over Financial Reporting) and includes:
- Roles and responsibilities for the maintenance and assessment of the system of ICFR for the Chief Financial Officer (CFO), Chief Information Officer, senior departmental managers, process owners and all NRCan employees;
- Requirements for the maintenance of an effective risk-based system of ICFR;
- Risk-based approach for the assessment of the system of ICFR;
- Regular updates/reports to departmental senior management and the Departmental Audit Committee;
- Sign-offs on the representation related to the maintenance of a system of financial management and internal control by the Deputy Minister, the CFO and Assistant Deputy Ministers; and
- Expectations for corrective actions where required.
NRCan has a Corporate Risk Profile (CRP) which was updated in 2015-16. The CRP allows all staff to familiarize themselves with key operational and strategic risks and risk mitigation measures, with the view of ensuring that risks are being managed sufficiently, consistently and comprehensively. The Department reports on significant financial risks in the Quarterly Financial Reports, including changes to risks and newly identified risks.
The Department's control environment also includes:
- A departmental Values and Ethics Code and a Values and Ethics Centre of Expertise;
- A dedicated unit under the CFO to conduct risk-based assessments of the system of ICFR, including follow-ups on corrective actions;
- An Internal Audit function which provides independent and objective assurance on the effectiveness of internal controls through periodic risk-based audits and continuous audits, as well as through follow-up activities on the progress of the implementation of management action plans identified to address audit recommendations;
- A multi-year risk-based audit plan, reviewed by the Departmental Audit Committee (DAC) and approved by the Deputy Minister. Plans and audit reports are available on the departmental internet site;
- Senior managers’ performance agreements that include commitments on financial management;
- Intranet based communication tools for policy instruments and procedures; and
- Mandatory training for financial officers.
The DAC is an advisory committee to the Deputy Minister. The Committee provides objective advice and recommendations to the Deputy Minister regarding the sufficiency, quality and results of assurance provided by the internal audit function on the adequacy and functioning of the department's risk management, control and governance frameworks and processes. Using a risk-based approach, the Committee has the responsibility to review all core areas of departmental management control and accountability processes, including reporting. Other areas of responsibility within the DAC’s scope include values and ethics, external assurance providers, quarterly financial reporting, departmental financial statements and the assessments of ICFR.
The DAC is composed of five members including the Deputy Minister, the Associate Deputy Minister and three external members recruited from outside of the federal public administration. The NRCan Chief Financial Officer and Chief Audit Executive attend all meetings of the DAC. The Chair may request the attendance of other departmental officials, or invite representatives from external assurance providers.
The DAC meets at least four times a year, and may convene additional meetings as circumstances require.
2.2 Service arrangements relevant to financial statements
The Department relies on other organizations for the processing of certain transactions that are recorded in its financial statements as follows:
Common arrangements:- Public Services and Procurement Canada (PSPC) centrally administers the payments of salaries, and provides pay administration services to NRCan employees through the Public Service Pay Centre;
- PSPC centrally administers the procurement of goods and services, as per established delegated authorities, and provides accommodation services;
- Treasury Board Secretariat provides the Department with information used to calculate various accruals and allowances, such as the accrued severance liability;
- The department of Justice provides legal services to NRCan; and
- Shared Services Canada (SSC) provides information technology infrastructure services to NRCan in the areas of data centre and network services.
Specific arrangement:
The department of Agriculture and Agri-Food Canada provides Integrated Financial and Material System services (SAP) to NRCan.
3. Departmental assessment results during fiscal year 2015-16
The key findings and significant adjustments required from the current year's assessment activities are summarized below.
New or significantly amended key controls
In the current year, there were no significantly amended key controls in existing processes which required a reassessment except for the implementation of a new payroll system (Phoenix) in February 2016. Review and update of the payroll and benefits business process documentation related to departmental control responsibilities is planned for 2016-17.
Ongoing monitoring program
- As part of its rotational ongoing monitoring plan, the department completed its reassessment of the control environment portion of entity-level controls, and reassessment of internal controls within the following business processes: financial close and reporting, repayable contributions, grants and contributions (standard), IT general controls of the Application for Modules and Interfaces (AMI), Main IT general controls, SAP Logical Security, and the departmental eTools. For the most part, the internal controls that were tested performed as intended.
The following key recommendations were identified:
- Finalize the security assessment and authorization process for the eTools;
- Where technically feasible, update the departmental policy for database password settings and ensure compliance; and
- Resolve issues surrounding segregation of duties for eTools and grants and contributions.
Management action plans to address the above recommendations were developed.
4. Departmental Action Plan
4.1 Progress during fiscal year 2015-16
NRCan continued to conduct ongoing monitoring according to the previous year’s rotational plan as shown in Table 1.
Table 1 - Progress during Fiscal Year 2015-16
Previous year’s rotational ongoing monitoring plan for current year – Operating Effectiveness testing |
Status as of March 31, 2016 |
---|---|
Financial close(1) and reporting | Completed. Corrective actions have started. |
Repayable contributions(2) | Completed. No corrective actions were required. |
Grants and Contributions(2) (standard) | Completed. Corrective actions have started. |
Entity-Level Controls | Completed. No corrective actions were required. |
IT general controls under departmental management(2) | Completed. Corrective actions have started. |
Other on-going monitoring activities from previous year's plan for the current year |
Status as of March 31, 2016 |
Corrective actions - Implement required corrective actions. | Corrective actions outstanding as of March 31, 2015 are substantially completed. |
4.2 Action plan for the next fiscal year and subsequent fiscal years
NRCan’s rotational ongoing monitoring plan over the next three years, based on risk and reviewed each year to take into account process changes and new risks, is shown in Table 2.
Table 2 - Rotational Ongoing Monitoring Plan
Key control areas | Fiscal Year 2016-17 |
Fiscal Year 2017-18 |
Fiscal Year 2018-19 |
---|---|---|---|
Financial close(1) and reporting | No | Yes | No |
Repayable contributions | No | Yes | No |
Grants and Contributions (standard) | No | Yes | No |
Operating expenditures | Yes | No | Yes |
Payroll and benefits(3) | Yes | No | Yes |
Capital assets | No | Yes | No |
Entity level controls(4) | Yes | Yes | Yes |
Revenues and accounts receivable | No | Yes | No |
IT general controls under departmental management(5) | Yes | No | Yes |
Environmental liabilities | No | Yes | No |
Offshore royalty revenues and corresponding statutory transfers | No | Yes | No |
- Notes
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(1) Financial close refers to the posting of accounting entries at period-end to ensure all financial activity for the period is accurately recorded in the accounts.
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(2) The assessment of internal controls in 2015-16 was conducted based on work completed by the Chief Financial Officer (CFO) and the Chief Audit Executive (CAE). NRCan internal audit work included internal control testing of NRCan corporate grants and contributions processes and activities (including risk management and governance) for the repayable contributions and standard grants and contributions processes. A joint internal audit (Agriculture and Agri-Food Canada (AAFC), the Canadian Food Inspection Agency (CFIA) and NRCan) of SAP internal controls, led by AAFC, was completed in 2015-16. The joint audit included internal control testing for the operating effectiveness testing of the IT general controls under departmental management for the SAP Logical Security. The audit results can be found on the NRCan website. Reliance on internal control testing completed by internal audit in 2015-16 minimized the duplication of efforts between the CFO and CAE’s respective functions.
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(3) In 2016-17, the internal control documentation will be updated to reflect PSPC implementation of a new pay system Phoenix.
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(4) Entity Level Controls assessment is being done over a three year period. In 2016-17, the Risk Assessment portion will be assessed. In 2017-18, the Information Systems and Communications, and Monitoring portions will be assessed. In 2018-19, the Control Environment portion will be reassessed.
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(5) In 2016-17, the Human Resource Management System and the Specimen Signature Record application will be assessed.
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