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, 2015, 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, 2015 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.

Natural Resources Canada
Consolidated Statement of Financial Position (Unaudited)
As at March 31
(in thousands of dollars)

	2015	2014
Liabilities
Accounts payable and accrued liabilities (note 4)	463,583	553,871
Vacation pay and compensatory leave	20,561	27,521
Deferred revenue	264	-
Lease obligation for tangible capital assets (note 5)	66,592	71,812
Employee future benefits (note 6)	24,712	23,749
Other liabilities (note 7)	15,280	15,129
Environmental liabilities (note  8)	988,831	987,527
Total liabilities	1,579,823	1,679,609
Financial assets
Due from Consolidated Revenue Fund	376,025	490,010
Accounts receivable and advances (note 9)	67,594	207,782
Loan receivable (note 10)	38,667	39,333
Total gross financial assets	482,286	737,125
Financial assets held on behalf of Government
Accounts receivable and advances (note 9)	(65,437)	(205,317)
Loan receivable (note 10)	(38,667)	(39,333)
Total financial assets held on behalf of Government	(104,104)	(244,650)
Total net financial assets	378,182	492,475
Departmental net debt	1,201,641	1,187,134
Non-financial assets
Prepayments	17,786	11,117
Inventory (note 11)	806	1,159
Tangible capital assets (note 12)	248,763	250,824
Total non-financial assets	267,355	263,100
Departmental net financial position (note 13)	(934,286)	(924,034)

Contractual obligations (Note 14)

Contingent liabilities (Note 15)

Contingent recoveries (Note 16)

The accompanying notes form an integral part of these consolidated financial statements.

Natural Resources Canada
Consolidated Statement of Operations and Departmental Net Financial Position (Unaudited)
For the year ended March 31
(in thousands of dollars)

	2015	2015	2014
	Planned Results
Expenses
Statutory Programs - Atlantic Offshore	1,282,761	840,779	787,318
Energy-efficient Practices and Lower-carbon Energy Sources	477,746	293,741	307,946
Responsible Natural Resource Management	71,298	264,887	233,568
Internal Services	161,042	178,058	204,137
Technology Innovation	178,382	164,384	165,127
Landmass Information	60,523	86,504	63,419
Protection for Canadians and Natural Resources	64,110	71,504	73,169
Innovation for New Products and Processes	71,986	69,733	93,677
Market Access and Diversification	49,789	69,253	55,388
Investment in Natural Resource Sectors	57,892	61,734	67,148
Total expenses	2,475,529	2,100,577	2,050,897
Revenues
Rights and privileges	1,204,057	697,569	680,994
Other, such as revenue pursuant to agreements	457,653	362,134	518,726
Revenue from services of a non-regulatory nature	24,896	19,068	20,068
Proceeds from sales of goods and information products	2,892	2,748	2,762
Revenue from services of a regulatory nature	1,952	1,932	1,477
Services to other government departments	-	107	107
Revenues earned on behalf of Government	(1,656,399)	(1,057,662)	(1,194,912)
Total net revenues	35,051	25,896	29,222
Net cost of operations before government funding and transfers	2,440,478	2,074,681	2,021,675
Government funding and transfers
Net cash provided by Government		2,143,834	2,072,893
Change in due from (to) Consolidated Revenue Fund		(113,985)	33,314
Services provided without charge by other government departments (note 17a)		47,245	51,635
Transfer of the transition payments for implementing salary payments in arrears (note 18)		(12,687)	-
Transfer of assets and liabilities to other government departments		22	68
Net cost of operations after government funding and transfers		10,252	(136,235)
Departmental net financial position - Beginning of year		(924,034)	(1,060,269)
Departmental net financial position - End of year		(934,286)	(924,034)

Segmented information (note 19)

The accompanying notes form an integral part of these consolidated financial statements.

Natural Resources Canada
Consolidated Statement of Change in Departmental Net Debt (Unaudited)
For the year ended March 31
(in thousands of dollars)

	2015	2014
Net cost of operations after government funding and transfers	10,252	(136,235)
Change due to tangible capital assets
Acquisition of tangible capital assets (note 12)	21,611	32,159
Amortization of tangible capital assets (note 12)	(20,718)	(19,200)
Proceeds from disposal of tangible capital assets	(317)	(479)
Net (loss) gain on disposal of tangible capital assets including adjustments	(2,659)	2,596
Transfer to other government departments (note 12)	22	68
Total change due to tangible capital assets	(2,061)	15,144
Change due to inventories	(353)	(501)
Change due to prepayment	6,669	876
Net increase (decrease) in departmental net debt	14,507	(120,716)
Departmental net debt - Beginning of year	1,187,134	1,307,850
Departmental net debt - End of year	1,201,641	1,187,134

The accompanying notes form an integral part of these consolidated financial statements.

Natural Resources Canada
Consolidated Statement of Cash Flows (Unaudited)
For the year ended March 31
(in thousands of dollars)

	2015	2014
Operating activities
Net cost of operations before government funding and transfers:	2,074,681	2,021,675
Non-cash items:
Amortization of tangible capital assets (note 12)	(20,718)	(19,200)
Net (loss) gain on disposal of tangible capital assets including adjustments	(2,659)	2,596
Services provided without charge by other government departments (note 17a)	(47,245)	(51,635)
Transition payments for implementing salary payments in arrears (note 18)	12,687	-
Variations in Statement of financial position:
Decrease in accounts receivable and advances	(308)	(2,465)
Increase in prepayments	6,669	876
Decrease in inventory	(353)	(501)
Decrease in accounts payable and accrued liabilities	90,288	16,846
Decrease (increase) in vacation pay and compensatory leave	6,960	(4,948)
Increase in deferred revenue	(264)	-
Decrease (increase) in employee future benefits	(963)	29,760
Decrease (increase) in environmental liabilities	(1,304)	47,888
Increase in other liabilities	(151)	(1,879)
Cash used in operating activities	2,117,320	2,039,013
Capital investing activities
Acquisitions of tangible capital assets (note 12)	21,611	32,159
Proceeds from disposal of tangible capital assets	(317)	(479)
Cash used in capital investing activities	21,294	31,680
Financing activities
Lease obligation for tangible capital assets, including adjustements	702	(2,518)
Lease payments for tangible capital assets	4,518	4,718
Cash used in financing activities	5,220	2,200
Net cash provided by Government of Canada	2,143,834	2,072,893

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, 2015

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.     

NRCan’s vision is to improve the quality of life of Canadians by creating a sustainable resource advantage. It seeks to fulfill this vision by working to: improve the competitiveness of the natural resource sectors; enable the sustainable development of Canada’s resources; and enhance 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 resources. 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:

1. 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 Future-oriented Statement of Operations included in the 2014-2015 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 2014-2015 Report on Plans and Priorities.
2. 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.
3. 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.
4. 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. 
5. 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, he 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.
6. 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.
7. Employee future benefits
   1. 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.
   2. 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.
8. Environmental liabilities - 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 for remediation, 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 Government’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.
   
   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.
9. 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. Financial assets held on behalf of Government are presented in the financial statements as the deputy head must maintain accounting control for these elements; however, as the deputy head does not have the authority to use the receipts of accounts and loans receivable to discharge liabilities or issue new loans without further parliamentary authorization, these are considered financial assets held on behalf of Government, and are therefore presented in reduction of the entity’s gross financial assets.
10. 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.
11. Inventory
    • 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 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.
12. 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 19 in the operating expenses – other.
13. 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

    Assets under construction are recorded in the applicable capital asset class in the year that they become available for use and are not amortized until they become available for use.
14. 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. 
15. 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.

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

(in thousands of dollars)

	2015	2014
Net cost of operations before government funding and transfers	$      2,074,681	$    2,021, 675
Adjustments for items affecting net cost of operations but not affecting authorities:   Add (Less):
Amortization of tangible capital assets	(20,718)			(19,200)
Net  (loss) gain on disposal of tangible capital assets, including adjustments	(2,659)			2,596
Services provided without charge by other government departments	(47,245)			(51,635)
Increase in prepayments	6,669			876
Decrease in inventory	(353)			(501)
Decrease (increase) in accrued liabilities not charged to authorities	(21,929)			10,318
Decrease of prior year accounts payable	5,287			8,544
Decrease (increase) in vacation pay and compensatory leave	6,960			(4,948)
Decrease (increase) in employee future benefits	(963)			29,760
Decrease (increase) in environmental liabilities	(1,304)			47,888
Refunds of prior years’ expenditures	12,286			13,320
Other adjustments	(811)			(2,008)
Total items affecting net cost of operations but not affecting authorities	(64,780)			35,010
Adjustments for items not affecting net cost of operations but affecting authorities:   Add (Less):
Acquisitions of tangible capital assets	21,611		32,159
Decrease in lease obligations for tangible capital assets	5,220		2,200
Transition payments for implementing salary payments in arrears	12,687		-
Total items not affecting net cost of operations but affecting authorities	39,518			34,359
Current year authorities used	$ 2,049,419			$ 2,091,044

b) Authorities provided and used

(in thousands of dollars)

	2015	2014
Authorities Provided:
Vote 1 - Operating expenditures	$ 913,223	$ 871,008
Vote 5 - Capital expenditures	18,280	28,795
Vote 10 - Transfer payments	450,039	608,828
Statutory amounts	900,817	864,652
Less:
Authorities available for future years	(6,684)	(7,302)
Lapsed - Operating	(128,480)	(64,781)
Lapsed - Capital	(152)	(2,726)
Lapsed - Transfer payment	(97,398)	(207,430)
Lapsed – Statutory Amounts	(226)	-
Current year authorities used	$ 2,049,419	$ 2,091,044

4. Accounts payable and accrued liabilities

The following table presents details of the Department's accounts payable and accrued liabilities:

(in thousands of dollars)

	2015	2014
Accounts payable – Other government departments and agencies	$     4,180	$     7,228
Accounts payable – External parties	210,088	222,091
Total accounts payable	214,268	229,319
Accrued liabilities	249,315	324,552
Total accounts payable and accrued liabilities	$463,583	$553,871

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 2012-13. As a result, the Department has recorded at March 31, 2015, an obligation for termination benefits for an amount of $148 thousand ($182 thousand in 2012-13) as part of accrued liabilities to reflect the estimated workforce adjustment costs.

5.  Lease obligation for tangible capital assets

The Department has entered into agreements to lease a building under a capital lease with a cost of $ 87,606 thousand as at March 31, 2015 ($90,953 thousand as at March 31, 2014) and accumulated amortization of $ 15,829 thousand as at March 31, 2015 ($12,314 thousand as at March 31, 2014). Interest on this obligation of $1,961 thousand ($2,519 thousand in 2012-2013) is reported in the Consolidated Statement of Operations and Departmental Net Financial Position as part of Internal Services expenses. The obligations related to the upcoming years include the following:

(in thousands of dollars)

	2015	2014
2015	-	4,718
2016	4,518	4,718
2017	4,518	4,718
2018	4,518	4,718
2019	4,518	4,718
2020 and thereafter	75,193	78,395
Total future minimum lease payments	93,265	101,985
Less: imputed interest (3.45%)	26,673	30,173
Balance of obligations under leased tangible capital assets	$ 66,592	$ 71,812

6.  Employee future benefits

(a) 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 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 2014-2015 expense amounts to $55,372 thousand ($60,890 thousand in 2013-2014). For Group 1 members, the expense represents approximately 1.41 times (1.6 times in 2013-2014) the employee contributions and, for Group 2 members, approximately 1.39 times (1.5 times in 2013-2014) 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.

 (b) 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.

(in thousands of dollars)

	2015	2014
Accrued benefit obligation - Beginning of year	$ 23,749	$ 53,509
Expense for the year	8,492	(2,828)
Benefits paid during the year	(7,529)	(26,932)
Accrued benefit obligation - End of year	$ 24,712	$ 23,749

7. Other Liabilities

(in thousands of dollars)

	2015		2014
Guarantee deposits - Oil and gas	$ 8,427	$ 6,956
Shared costs projects	477	820
Market development and incentive payments - Alberta	2,114	3,298
Shared costs agreements  - Research	4,262	4,055
Total	$ 15,280	$ 15,129

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 moneys received from private organizations and other governments for cost-sharing scientific projects.

Market development incentive payments – Alberta: This account records money 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 are being made from the account for selected programs which encourage the use of natural gas for vehicles.

Shared-cost agreements – Research: This account was established to facilitate the retention and disbursement of moneys received from private industries and other governments for joint projects or shared-cost research agreements.

8. 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 aids 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 approximately 55 sites (54 sites in 2013-2014) where contamination may exist and assessment, remediation and monitoring may be required.  Of these, the Department has identified 11 sites (11 sites in 2013-2014) where action is possible and for which a net liability of $988,831 thousand ($987,527 thousand in 2013-2014) has been recorded. This liability represents 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.

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, 2015, and March 31, 2014. When the liability estimate is based on a future cash requirement, 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 2015 rate is 1.11% for a 7 year term.

Nature and Source of Liability

Nature and Source	2015				2014
	Number of Sites	($ thousands)			Number of Sites	($ thousands)
		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	-	4	984,252	1,053,895	-
Office/Commercial/Industrial Operations (2)	7	3,314	3,314	-	7	3,275	3,275	-
Total	11	988,831	1,020,000	-	11	987,527	1,057,170	-

Of the remaining 44 sites, 41 sites were closed, as they were either remediated or assessed and found not to be contaminated, and there are 3 sites for which an estimated liability has not been determined, primarily due to the fact the sites are not yet fully assessed and contamination has not yet been determined or they have not developed a detailed remediation plan. As these 3 sites are assessed, if contamination is found, and it exceeds the environmental standard, a liability will be recognized as soon as a reasonable estimate can be made. Of these 3 sites, 1 is considered a medium to low priority based on the low level of risk to human health or the environment.  Assessment and remediation will be done on this site as resources become available. 2 sites are not yet classified because they are only at the initial testing stages and contamination has not yet been determined.

9.  Accounts receivable and advances

The following presents details of the Department’s accounts receivable and advances balances:

(in thousands of dollars)

	2015	2014
Receivables - Other government departments and agencies	$ 9,717	$ 10,849
Receivables - External parties	58,092	197,217
Employee advances	212	91
Subtotal	68,021	208,157
Allowance for doubtful accounts on receivables from external parties	(427)	(375)
Gross accounts receivable	67,594	207,782
Accounts receivable held on behalf of Government	(65,437)	(205,317)
Net accounts receivable	$ 2,157	$ 2,465

10.  Loan receivable

The following table presents details of the Department’s loan balance:

(in thousands of dollars)

	2015	2014
Loan to Nordion International Inc.	$ 42,000	$ 46,000
Unamortized discounts	(3,333)	(6,667)
Gross Loan balance	38,667	39,333
Loans receivable held on behalf of government	(38,667)	(39,333)
Loan 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.  Balance remaining as of March 31, 2015 is $42,000 thousand with the final payment in April 2015.  Due to the concessionary terms of this loan, the estimated present value is $38,667 thousand as at March 31, 2015.  

11.  Inventory

The following table presents details of the inventory, measured at cost using the average cost method:

(in thousands of dollars)

	2015	2014
Inventories held for consumption	$ 747	$ 1,100
Inventories for re-sale	59	59
Total	$ 806	$ 1,159

The cost of consumed inventory recognized as an expense in the Consolidated Statement of Operations and Departmental Net Financial Position is $353 thousand in 2014-2015 ($501 thousand in 2013-2014).

12. Tangible capital assets

(in thousands of dollars)

Capital asset class	Cost					Accumulated amortization					Net book value
	Opening balance	Acqui-sitions	Adjustments (1)	Disposals and write-offs	Closing balance	Opening balance	Amortization	Adjustments (1)	Disposals and write-offs	Closing balance	2015	2014
											Net book value	Net book value
Land	12,059	-	-	-	12,059	-	-	-	-	-	12,059	12,059
Buildings	198,787	383	6,675	128	205,717	142,314	3,245	(15)	128	145,416	60,301	56,473
Machinery and equipment	221,346	6,070	24,974	2,872	249,518	169,103	11,957	19	2,843	178,236	71,282	52,243
Vehicles	8,595	494	28	31	9,086	6,420	702	6	31	7,097	1,989	2,175
Leasehold improvements	20,651	-	771	-	21,422	1,135	1,299	-	-	2,434	18,988	19,516
Leased tangible capital assets	90,953	-	-	3,347	87,606	12,314	3,515	-	-	15,829	71,777	78,639
Assets under construction	29,719	14,664	(32,003)	13	12,367	-	-	-	-	-	12,367	29,719
Total	582,110	21,611	445	6,391	597,775	331,286	20,718	10	3,002	349,012	248,763	250,824

(1) Adjustments include assets under construction of $32,408 thousand that were transferred to the other categories upon completion of the assets. During the year, the Department transferred tangible capital assets with Other Government Departments with a net effect of $22 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. 

(in thousands of dollars)

	2015	2014
Environmental Studies Research Fund – Restricted
Balance, beginning of year – Restricted	$ 4,701	$ 3,460
Revenues	118	2,453
Expenses	(1,285)	(1,212)
Balance, end of year – Restricted	3,534	4,701
Unrestricted	(937,820)	(928,735)
Departmental net financial position – End of year	$ (934,286)	$ (924,034)

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:

(in thousands of dollars)

	2016	2017	2018	2019	2020 and thereafter		TOTAL
Transfer payments	$224, 613	157,681	124,239	104,525		144,817	$755,875

15. Contingent liabilities

Contingent liabilities arise in the normal course of operations and their ultimate disposition is unknown.  They are grouped into three categories as follows:

(a) 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. Claims and litigations for which the outcome is not determinable and a reasonable estimate can be made by management amount to approximately $100 thousands ($175 thousands in 2013-2014). 

(b) Loan guarantees

(in thousands of dollars)

	Authorized Limit	Outstanding guarantees
		2015	2014
Lower Churchill Hydroelectric Projects	$6,300,000	$1,792,798	$312,526

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, 2015, $1,792,798 thousand ($312 526 thousand as at March 31, 2014) has been advanced to the project entities for construction costs.  Once the projects are operational, principal and interest payments will be made by the project entities to repay the guaranteed debt.  As a condition of the loan guarantee, 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 $8,459 thousand ($13,804 thousand in 2013-2014). 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).

1. 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:

   (in thousands of dollars)

   	2015	2014
   Employer's contribution to the health and dental insurance plans	$27,090	$32,035
   Accommodation	18,837	18,240
   Legal services	1,098	965
   Workers' compensation	220	395
   Total	$47,245	$51,635

   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 Works and Government Services 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.

2. Other transactions with related parties:  

   (in thousands of dollars)

   	2015	2014
   Expenses - Other government departments and agencies	$148,619	$174,136
   Revenues - Other government departments and agencies	2,993	3,410

   Expenses and revenues disclosed in (b) exclude common services provided without charge, which is 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 2014-2015. As a result, a one-time payment was issued to employees totaling $12,687 thousand and will be recovered from them in the future. 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 Works and Government Services Canada, who is responsible for the administration of the Government pay system.

19. 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	Responsible Natural Resource Management	Internal Services	Technology Innovation	Landmass Information	Protection for Canadians and Natural Resources	Innovation for New Products and Processes	Market Access and Diversification	Investment in natural resource sectors	2015 Total	2014 Total
Transfer payments
Industry	-	237,315	451	(8)	35,927	-	376	2,115	(159)	-	276,017	314,278
International	-	115	-	45	490	-	4	11	1,198	38	1,901	3,547
Non-profit organization	-	1,651	51	60	14,726	43	4,026	25,869	11,690	1,151	59,267	65,813
Other levels of government	840,779	2,024	-	-	362	-	216	185	-	-	843,566	789,811
Individuals	-	(48)	-	(14)	46	-	-	429	40	-	453	37
Total transfer payments	840,779	241,057	502	83	51,551	43	4,622	28,609	12,769	1,189	1,181,204	1,173,486
Operating expenses
Salaries and employee benefits	-	31,157	28,270	94,290	76,631	42,610	54,895	33,286	29,792	45,912	436,843	475,871
Environmental expenses	-	-	1,263	40	-	-	-	-	-	-	1,303	(47,888)
Information	-	692	166	3,304	504	255	494	316	814	346	6,891	17,177
Professional and special services	-	12,724	211,532	33,794	13,005	6,965	4,736	4,864	15,539	6,265	309,424	295,314
Rentals	-	179	730	2,882	9,670	34,250	1,560	235	326	4,039	53,871	27,684
Transportation	-	416	1,017	1,327	2,118	2,459	2,385	1,048	1,949	1,847	14,566	13,696
Utilities, material and supplies	-	116	757	12,833	7,128	3,977	1,710	1,216	265	2,201	30,203	27,492
Purchased repairs and upkeep	-	19	136	2,095	2,296	211	247	179	21	100	5,304	4,400
Acquisitions	-	118	566	6,059	4,165	7,263	2,429	538	385	905	22,428	28,206
Amortization	-	-	-	20,718	-	-	-	-	-	-	20,718	19,200
Other	-	7,263	19,948	633	(2,684)	(11,529)	(1,574)	(558)	7,393	(1,070)	17,822	16,259
Total operating expenses	-	52,684	264,385	177,975	112,833	86,461	66,882	41,124	56,484	60,545	919,373	877,411
Total expenses	840,779	293,741	264,887	178,058	164,384	86,504	71,504	69,733	69,253	61,734	2,100,577	2,050,897
Revenues
Rights and privileges	693,905	-	-	-	-	-	1,955	141	1,568	-	697,569	680,994
Other, such as revenue pursuant to agreements	33,998	5	56	543	859	59	135	24	326,324	131	362,134	518,726
Revenue from services of a non-regulatory nature	-	294	1,325	-	13,049	1,961	1,625	805	-	9	19,068	20,068
Proceeds from sales of goods and information products	-	-	-	-	-	520	1,159	1,067	2	-	2,748	2,762
Revenue from services of a regulatory nature	-	-	-	-	-	-	1,932	-	-	-	1,932	1,477
Services to other government departments	-	-	-	107	-	-	-	-	-	-	107	107
Revenues earned on behalf of Government	(727,903)	76	(15)	(465)	(667)	(836)	66	67	(327,877)	(108)	(1,057,662)	(1,194,912)
Total net revenues	-	375	1,366	185	13,241	1,704	6,872	2,104	17	32	25,896	29,222
Net cost of operations	840,779	293,366	263,521	177,873	151,143	84,800	64,632	67,629	69,236	61,702	2,074,681	2,021,675

20. Comparative information

Comparative figures have been reclassified to conform to the current year’s presentation.

21. Subsequent event

As part of the Atomic Energy of Canada Limited (AECL) restructuring and consolidation in the delivery of existing federal radioactive waste management programs, NRCan’s delivery of the Nuclear Legacy Liabilities Program and the Historic Waste Program will be transferred to AECL. The impact of the transfer in responsibilities, once finalized, will be reflected in the 2015-2016 financial statements.

Annex to the Statement of Management Responsibility 
Including Internal Control over Financial Reporting
of Natural Resources Canada
for fiscal year 2014-15 (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 program activities can be found in the 2014-15 Departmental Performance Report and the 2015-16 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 FY 2013-14.  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.
• 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 Works and Government Services Canada (PWGSC) centrally administers the payments of salaries, and provides pay administration services to NRCan employees through the Public Service Pay Centre;
• PWGSC 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 email platform, data centres, telecommunications and workplace technology devices. The scope and responsibilities are addressed in an interdepartmental arrangement between SSC and NRCan.

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 2014-15

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, the following updates were made to the existing internal control documentation:

• Significant update to the offshore royalty revenues and corresponding statutory transfers documentation to reflect the controls as they specifically apply to revenues from Net Profit Interests, Incidental Net Profit Interests and to Crown Share Adjustment Payments.

In the current year, IT General Controls were tested for operating effectiveness for the following application:

• The Specimen Signature Record (SSR) application.

There were no correction requirements following the testing of the SSR application.

Ongoing monitoring program:

As part of its rotational ongoing monitoring plan, the department completed its reassessment of all entity-level controls, and reassessment of internal controls within the following business processes: operating expenditures, payroll and benefits, capital assets, revenue and accounts receivable, loans and offshore royalties revenues and corresponding statutory transfers. The department also conducted operating effectiveness testing of corrective actions that consist of reviews and which were implemented in 2013-14. For the most part, the internal controls that were tested performed as intended.

The following key correction requirements were identified:

• Maintain supporting documentation of periodic inventory counts of capital assets and of subsequent follow-up actions;
• Complete the annual reconciliation between Real Property records and the Department’s financial and material management system;
• Clarify the roles and responsibilities in the NRCan Directive on Management of Accounts Receivables with respect to approving the granting of credit;
• Maintain evidence of the review of delegated human resources and financial signing authorities of managers signing pay actions;
• Improve the employee departure process by clarifying roles and responsibilities; and
• Create a guide in order to assist managers with their financial budgeting and forecasting reviews.

Management action plans addressing the correction requirements above were developed. 

4. Departmental Action Plan

4.1 Progress during fiscal year 2014-15

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 2014-15

Previous year’s rotational ongoing monitoring plan for current year – Operating Effectiveness testing	Status as of March 31, 2015
Operating Expenditures Completed as planned; remedial actions planned.	Completed.  Corrective actions have started.
Payroll and Benefits	Completed.  Corrective actions have started
Entity-Level ControlsFootnote 1	Completed. No corrective actions were required.
Revenue and Accounts Receivable<Footnote 1	Completed.  Corrective actions have started.
LoansFootnote 1	Completed. No corrective actions were required.
Capital AssetsFootnote 1	Completed.   Corrective actions have started.
Offshore royalty revenues and corresponding statutory transfersFootnote 1	Completed. No corrective actions were required.
Testing of corrective actions that consist of reviews and which were implemented in 2013-2014.	Completed.   No further corrective actions required.
Other on-going monitoring activities from previous year's plan for the current year	Status as of March 31, 2015
IT general controls under departmental management – Operating effectiveness testing of the SSR applicationFootnote 1.	Completed. No corrective actions were required.
Offshore royalty revenues and corresponding statutory transfers: Update of documentation to reflect the controls as they specifically apply to revenues from Net Profit Interests, Incidental Net Profit Interests and to Crown Share Adjustment Payments	Completed.
Corrective actions - Implement required corrective actions.	Corrective actions outstanding as of March 31, 2014 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 2015-16	Fiscal Year 2016-17	Fiscal Year 2017-18
Financial closeFootnote 2 and reporting	Yes	No	Yes
Repayable contributions	Yes	No	Yes
Grants and Contributions (standard)	Yes	No	Yes
Operating expenditures	No	Yes	No
Payroll and benefits	No	Yes	No
Capital assets	No	No	Yes
Entity level controlsFootnote 3	Yes	Yes	Yes
Revenues and accounts receivable	No	No	Yes
IT general controls under departmental management Footnote 4	Yes	Yes	No
Environmental liabilities	No	Yes	No
Offshore royalty revenues and corresponding statutory transfers	No	No	Yes
Testing of corrective actions that consist of reviews and which were implemented in the previous fiscal year	Yes	Yes	Yes