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NRCan 2021-2022 Consolidated Financial Statements

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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, 2022, and all information contained in these consolidated statements rests with the management of Natural Resources Canada (Department). 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 Results 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 Ac t and other applicable legislation, regulations, authorities and policies.

Management seeks to ensure the objectivity and integrity of data in its consolidated 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, 2022 was completed in accordance with the Treasury Board Policy on Financial Management 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 Minister of Natural Resources Canada.

The consolidated financial statements of Natural Resources Canada have not been audited.

Original signed by

John F.G. Hannaford
Deputy Minister

Ottawa, Canada
September 12, 2022

Original signed by

Shirley Carruthers, CPA CGA
Chief Financial Officer

Ottawa, Canada
September 7, 2022

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

(in thousands of dollars)

  2022 2021
Liabilities
Accounts payable and accrued liabilities Footnote (Note 4) 727,911 475,967
Vacation pay and compensatory leave 39,456 42,870
Deferred revenue - 405
Environmental liabilities Footnote (Note 5) 3,365 1,950
Lease obligation for tangible capital assets Footnote (Note 6) 53,284 56,746
Employee future benefits Footnote (Note 7) 12,703 15,141
Other liabilities Footnote (Note 8) 27,355 25,867
Total liabilities 864,074 618,946
Financial assets
Due from Consolidated Revenue Fund 747,702 496,951
Accounts receivable and advances Footnote (Note 9) 55,659 39,168
Loans receivable Footnote (Note 10) 99,357 19,329
Total gross financial assets 902,718 555,448
Financial assets held on behalf of Government
Accounts receivable and advances Footnote (Note 9) (35,294) (22,117)
Loans receivable Footnote (Note 10) (99,357) (19,329)
Total financial assets held on behalf of Government (134,651) (41,446)
Total net financial assets 768,067 514,002
Departmental Net debt 96,007 104,944
Non-financial assets
Prepayments 2,548 2,423
Inventory Footnote (Note 11) 488 486
Tangible capital assets Footnote (Note 12) 322,963 329,795
Total non-financial assets 325,999 332,704
Departmental net financial position Footnote (Note 13) 229,992 227,760

Contractual obligations and contractual rights Footnote (Note 14)

Contingent liabilities and contingent assets Footnote (Note 15)

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

Original signed by

John F.G. Hannaford
Deputy Minister

Ottawa, Canada
September 12, 2022

Original signed by

Shirley Carruthers, CPA CGA
Chief Financial Officer

Ottawa, Canada
September 7, 2022

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

(in thousands of dollars)

  2022 Planned Results 2022 2021
Expenses
Innovative and Sustainable Natural Resources Development 936,247 783,198 575,493
Globally Competitive Natural Resource Sectors 439,016 802,921 476,562
Natural Resource Science and Risk Mitigation  283,479 350,954 243,446
Internal services 162,572 170,334 172,229
Total expenses 1,821,314 2,107,407 1,467,730
Revenues
Rights and privileges 102,762 328,137 173,733
Other, such as revenue pursuant to agreements 21,928 241,581 18,307
Revenue from services of a non-regulatory nature 12,330 18,071 16,493
Proceeds from sales of goods and information products 914 2,038 1,125
Revenue from services of a regulatory nature  5,827 1,752 1,307
Services to other government departments  90 151 122
Revenues earned on behalf of Government (114,750) (560,693) (188,461)
Total net revenues 29,101 31,037 22,626
Net cost of operations before government funding and transfers  1,792,213 2,076,370 1,445,104
Government funding and transfers
Net cash provided by Government of Canada   1,773,479 1,295,433
Change in due from Consolidated Revenue Fund   250,751 79,263
Services provided without charge by other government departments Footnote (Note 16a)   54,693 51,682
Transfers of capital assets (to)/from other government departments   (39) 65
Other transfers of assets to other government departments   (282) (112)
Total government funding and transfers   2,078,602 1,426,331
Net (revenue) cost of operations after government funding and transfers   (2,232) 18,773
Departmental net financial position - Beginning of year   227,760 246,533
Departmental net financial position - End of year   229,992 227,760

Segmented information Footnote (Note 17)

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)

  2022 2021
Net (revenue) cost of operations after government funding and transfers (2,232) 18,773
Change due to tangible capital assets
Acquisition of tangible capital assets Footnote (Note 12) 21,355 12,632
Amortization of tangible capital assets Footnote (Note 12) (27,236) (28,150)
Proceeds from disposal of tangible capital assets (133) (86)
Net (loss) gain on disposal of tangible capital assets including adjustments (779) 598
Transfers of capital assets (to)/from other government departments (39) 65
Total change due to tangible capital assets (6,832) (14,941)
Change due to inventory 2 59
Change due to prepayments 125 1,049
Net (decrease) increase in departmental net debt (8,937) 4,940
Departmental net debt - Beginning of year 104,944 100,004
Departmental net debt - End of year 96,007 104,944

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)

  2022 2021
Operating activities
Net cost of operations before government funding and transfers 2,076,370 1,445,104

Non-cash items:

Amortization of tangible capital assets Footnote (Note 12) (27,236) (28,150)
Net (loss) gain on disposal of tangible capital assets including adjustments (779) 598
Services provided without charge by other government departments Footnote (Note 16a) (54,693) (51,682)
Other transfers of assets to other government departments 282 112
Variations in Statement of Financial Position:
Increase (decrease) in accounts receivable and advances 3,314 (5,860)
Increase in prepayments 125 1,049
Increase in inventory 2 59
Increase in accounts payable and accrued liabilities (251,944) (67,468)
Decrease (increase) in vacation pay and compensatory leave 3,414 (10,899)
Decrease in deferred revenue 405 403
Decrease in employee future benefits 2,438 2,104
Increase in environmental liabilities (1,415) (83)
Increase in other liabilities (1,488) (5,805)
Cash used in operating activities 1,748,795 1,279,482
Capital investing activities
Acquisitions of tangible capital assets Footnote (Note 12) 21,355 12,632
Proceeds from disposal of tangible capital assets (133) (86)
Cash used in capital investing activities 21,222 12,546
Financing activities
Payments on lease obligations for tangible capital assets 3,462 3,405
Cash used in financing activities 3,462 3,405
Net cash provided by Government of Canada 1,773,479 1,295,433

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

Natural Resources Canada
Notes to the Consolidated Financial Statement (Unaudited)
For the year ended March 31

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 Ac t and the Forestry Act .

NRCan works to improve the quality of life of Canadians by ensuring that our natural resources are developed sustainably, providing a source of jobs, prosperity and opportunity, while preserving our environment and respecting our communities and Indigenous People.

NRCan fulfills its mandate through the following Core Responsibilities:

Innovative and Sustainable Natural Resources Development: Lead the transformation to a low-carbon economy by improving the environmental performance of Canada’s natural resource sectors through innovation and sustainable development and use.

Globally Competitive Natural Resource Sectors: Advance and promote market access, inclusiveness and competitiveness for Canada’s natural resource sectors, in support of jobs and economic growth.

Natural Resource Science and Risk Mitigation: Lead foundational science and share expertise for managing Canada’s natural resources, reducing the impacts of climate change and mitigating risks from natural disasters and explosives.

Internal Services: Internal Services are those groups of related activities and resources that the federal government considers to be services in support of programs and/or required to meet corporate obligations of an organization. Internal Services refers to the activities and resources of the 10 distinct service categories that support Program delivery in the organization, regardless of the Internal Services delivery model in a department. The 10 service categories 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 and Acquisition Services.

2. Summary of significant accounting policies

These consolidated financial statements are prepared using the Department’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:

(a) 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. Footnote 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 2021-2022 Departmental Plan. 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 Consolidated Statement of Change in Departmental Net Debt because these amounts were not included in the 2021-2022 Departmental Plan.

(b) Consolidation

These consolidated financial statements include the accounts of the sub-entities for which the Deputy Minister is accountable. 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.

(c) 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 of Canada.

(d) Amounts due from or to the CRF

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.

(e) Revenues

  • Revenues from regulatory fees are recognized based on the services provided in the year.
  • Funds 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 recognized in the period the event giving rise to the revenue occurred.
  • Revenues that are non-respendable are not available to discharge the Department’s liabilities. While the Deputy Minister 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 as a reduction of the Department’s gross revenues.

(f) Expenses

Expenses are recorded on the accrual basis:

  1. Transfer payments are recorded as an expense in the year the transfer is authorized and all eligibility criteria have been met by the recipient. 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.
  2. Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
  3. Services provided without charge by other government departments for accommodation, employer contributions to the health and dental insurance plans, and workers’ compensation are recorded as operating expenses at their carrying value.

(g) Environmental liabilities

An environmental liability for the remediation of contaminated sites is recognized when all of the following criteria are satisfied: an environmental standard exists, contamination exceeds the environmental standard, the Department 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 future cash flows required to settle or otherwise extinguish a liability are estimable, predictable and expected to occur over extended future periods, a present value technique is used. The discount rate used reflects the Government’s cost of borrowing, associated with the estimated number of years to complete remediation.

The recorded environmental liabilities are adjusted each year, 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 consolidated financial statements.

(h) Employee future benefits

  1. Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government of Canada. 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 financial statements of the Government of Canada, as the Plan’s sponsor.
  2. Severance benefits: The accumulation of severance benefits for voluntary departures ceased for applicable employee groups. The remaining obligation for employees who did not withdraw benefits is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government of Canada as a whole.

(i) Accounts and loans receivable

Accounts and loans receivable are initially recorded at cost and where necessary, are discounted to reflect their concessionary terms. Concessionary terms of loans include cases where loans are made on a long-term, low interest or interest-free basis. Transfer payments that are unconditionally repayable are recognized as loans receivable. When necessary, an allowance for valuation is recorded to reduce the carrying value of accounts and loans receivable to amounts that approximate their net recoverable value.

(j) Non-financial assets

  1. 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.
  2. Inventory:
    • Inventory held for consumption 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.
  3. Tangible capital assets – The cost of acquiring land, buildings, equipment and other capital property are capitalized as tangible capital assets and, except for land, are amortized to expense over the estimated useful lives of the assets, as described in Footnote (Note 12). All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. Tangible capital assets do not include immovable assets located on reserves as defined in the Indian Act, works of art, museum collection, insect collection, and Crown land to which no acquisition cost is attributable; and intangible assets.

(k) Contingent liabilities

Contingent liabilities, including the allowance for loan guarantees and an insurance program, are potential liabilities which may become actual liabilities when one or more future events occur or fail to occur. If the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, a provision is accrued and an expense is recorded to other operating expenses. 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.

For loan guarantees and the insurance program, an allowance is recorded when it is determined that a loss is likely and the amount of the allowance is estimated taking into consideration the nature of the guarantee and insurance program, loss experience and current conditions. The allowance is reviewed on an ongoing basis and changes in the allowance are recorded as expenses in the year they become known.

(l) Contingent assets

Contingent assets are possible assets which may become actual assets when one or more future events occur or fail to occur. If the future event is likely to occur or fail to occur, the contingent asset is disclosed in the notes to the consolidated financial statements.

(m) Transactions involving foreign currencies

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 foreign currencies are translated into Canadian dollars using the rate of exchange in effect at March 31st. Gains and losses resulting from foreign currency transactions are reported on the Consolidated Statement of Operations and Departmental Net Financial Position and Footnote (Note 17) in other operating expenses according to the activities to which they relate.

(n) 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 and accompanying notes at March 31. The estimates are based on facts and circumstances, historical experience, general economic conditions and reflect the Department's best estimate of the related amount at the end of the reporting period. 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.

(o) Related party transactions

  1. Related party transactions, other than inter-entity transactions, are recorded at the exchange amount.
  2. Inter-entity transactions are transactions between commonly controlled entities. Inter-entity transactions, other than restructuring transactions, are recorded on a gross basis and are measured at the carrying amount, except for the following:
    • Services provided on a recovery basis are recognized as revenues and expenses on a gross basis and measured at the exchange amount.
    • Certain services received on a without charge basis are recorded for departmental consolidated financial statement purposes at the carrying amount.

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)

  2022 2021
Net cost of operations before government funding and transfers 2,076,370 1,445,104
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets (27,236) (28,150)
Net (loss) gain on disposal of tangible capital assets including adjustments (779) 598
Services provided without charge by other government departments (54,693) (51,682)
Increase in prepayments 125 1,049
Increase in inventory 2 59
Decrease in accrued liabilities 12,576 6,783
Decrease (increase) in vacation pay and compensatory leave 3,414 (10,899)
Decrease in employee future benefits 2,438 2,104
Increase in environmental liabilities (1,415) (83)
Refund of prior years' expenditures 1,191 1,169
Revenues and expenses for restricted accounts 391 (1,849)
Other adjustments 3,976 2,265
Total items affecting net cost of operations but not affecting authorities (60,010) (78,636)
Adjustments for items not affecting net cost of operations but affecting authorities:
Increase in loans receivable 80,035 19,329
Acquisitions of tangible capital assets 21,355 12,632
Decrease in lease obligation for tangible capital assets 3,462 3,405
Total items not affecting net cost of operations but affecting authorities 104,852 35,366
Current year authorities used 2,121,212 1,401,834

(b) Authorities provided and used

(in thousands of dollars)

  2022 2021
Authorities provided:
Vote 1 – Program expenditures 814,330 647,088
Vote 5 – Capital expenditures 34,378 16,560
Vote 10 – Grants and contributions 1,722,176 823,664
Statutory amounts: 614,869 314,991
Less:
Authorities available for future years (7,662) (7,875)
Lapsed – Operating expenditures (168,945) (37,074)
Lapsed – Capital expenditures (13,814) (4,001)
Lapsed – Grants and contributions (874,120) (351,467)
Lapsed – Statutory - (52)
Current year authorities used 2,121,212 1,401,834

4. Accounts payable and accrued liabilities

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

(in thousands of dollars)

  2022 2021
Accounts payable - Other government departments and agencies 8,130 14,500
Accounts payable - External parties 244,207 179,771
Total accounts payable 252,337 194,271
Accrued liabilities 475,574 281,696
Total accounts payable and accrued liabilities 727,911 475,967

5. Environmental liabilities

With respect to environmental liabilities for the remediation of contaminated sites, the Government’s “Federal Approach to Contaminated Sites” sets out a framework for management of contaminated sites using a risk-based approach. Under this approach the Government has inventoried the contaminated sites identified on federal lands, allowing them to be classified, managed and recorded in a consistent manner. This systematic approach aids in identification of the high risk sites in order to allocate limited resources to those sites which pose the highest risk to human health and the environment.

The Department has identified 15 sites (12 sites in 2021) where contamination may exist and assessment, remediation and monitoring may be required. Of these, the Department has identified 7 sites (7 sites in 2021) where action is required and for which a gross liability of $599 thousand ($630 thousand in 2021) has been recorded. This liability estimate has been determined based on site assessments performed by environmental experts.

There are 4 sites that have not been assessed by environmental experts (1 site in 2021) for which the department has estimated and recorded a liability of $2,766 thousand ($1,320 thousand in 2021).

These two estimates combined, totaling $3,365 thousand ($1,950 thousand in 2021) represents management’s best estimate of the costs required to remediate sites to the current minimum standard for its use prior to contamination, based on information available at the consolidated financial statement date.

For the remaining 4 sites (4 sites in 2021), no liability for remediation has been recognized. These sites are at early stages of testing and evaluation and if remediation is required, liabilities will be reported as soon as a reasonable estimate can be determined.

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, 2022, and March 31, 2021. 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 2.0% (2.0% in 2021). Inflation is included in the undiscounted amount. The Government of Canada’s cost of borrowing by reference to the actual zero-coupon yield curve for Government of Canada bonds has been used to discount the estimated future expenditures. The March 2022 rates range from 2.36% for a 5 year term to 2.39% for a 9 year term.

  (in thousands of dollars)
Nature and Source Total number of Sites 2022 Number of Sites with a liability 2022 Estimated Liability 2022 Estimated Total Undiscounted Expenditures 2022 Estimated Recoveries 2022
Fuel Related Practices Footnote (1) 4 4 2,766 2,766 -
Office/Commercial/Industrial Operations Footnote (2) 11 7 599 729 -
Totals 15 11 3,365 3,495 -
  (in thousands of dollars)
Nature and Source Total number of Sites 2021 Number of Sites with a liability 2021 Estimated Liability 2021 Estimated Total Undiscounted Expenditures 2021 Estimated Recoveries 2021
Fuel Related Practices Footnote (1) 1 1 1,320 1,320 -
Office/Commercial/Industrial Operations Footnote (2) 11 7 630 729 -
Totals 12 8 1,950 2,049 -

(Return to footnote1) 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 (benzene, toluene, ethylbenzene and xylenes).

(Return to footnote2) 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. These 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 $95,993 thousand as at March 31, 2022 ($95,993 thousand in 2021) and accumulated amortization of $42,740 thousand as at March 31, 2022 ($38,797 thousand in 2021). Interest on this obligation of $910 thousand ($967 thousand in 2021) is reported in the Consolidated Statement of Operations and Departmental Net Financial Position as part of Innovative and Sustainable Natural Resources Development expenses. The obligation related to the upcoming years includes the following:

(in thousands of dollars)

  2022
2023 4,372
2024 4,372
2025 4,372
2026 4,372
2027 4,372
2028 and subsequent 37,670
Total future minimum lease payment 59,530
Less: imputed interest (1.65%) 6,246
Lease obligation for tangible capital assets 53,284

7. 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 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 2022 expense amounts to $41,157 thousand ($42,303 thousand in 2021). For Group 1 members, the expense represents approximately 1.01 times (1.01 times in 2021) the employee contributions and, for Group 2 members, approximately 1.00 times (1.00 times in 2021) 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

Severance benefits provided to the Department’s employees were previously based on an employee’s eligibility, years of service and salary at termination of employment. However, since 2011 the accumulation of severance benefits for voluntary departures progressively ceased for substantially all employees. Employees subject to these changes were given the option to be paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits upon departure from the public service. By March 31, 2022, substantially all settlements for immediate cash out were completed. Severance benefits are unfunded and, consequently, the outstanding obligation will be paid from future authorities. The change in the obligation during the year is as follows:

(in thousands of dollars)

  2022 2021
Accrued benefit obligation - Beginning of year 15,141 17,245
Expense for the year 949 (89)
Benefits paid during the year (3,387) (2,015)
Accrued benefit obligation - End of year 12,703 15,141

8. Other liabilities

The following table presents a detail of the Department’s other liabilities:

(in thousands of dollars)

  2022 2021
Contractor security deposits - Cash 21 8
Guarantee deposits - Oil and gas 15,567 14,225
Shared costs projects 4,016 4,965
Market development and incentive payments – Alberta - 46
Shared costs agreements – Research 7,751 6,623
Total other liabilities 27,355 25,867

Contractor security deposits – Cash: This account was established to record contractor security deposits that are required for the satisfactory performance of work in accordance with Government Contracts Regulations.

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 non-research projects.

Market development incentive payments – Alberta: This account records funds received from the Government of Alberta to encourage the expansion of natural gas markets 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 of April 30, 1986; however, payments continued to be made from the account for selected programs, which encouraged the use of natural gas for vehicles.

In 2009‒2010, a strategy for the expenditure of these funds was 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. All remaining funds have been disbursed as at March 31, 2022. This Program is now closed.

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

9. Accounts receivable and advances

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

(in thousands of dollars)

  2022 2021
Receivables - Other government departments and agencies 7,139 4,430
Receivables - External parties 48,008 34,170
Employee advances 760 795
Subtotal 55,907 39,395
Allowance for doubtful accounts on receivables from external parties (248) (227)
Gross accounts receivable and advances 55,659 39,168
Accounts receivable held on behalf of Government (35,294) (22,117)
Net accounts receivable and advances 20,365 17,051

10. Loans receivable

The following table presents details of the Department's loans receivable and unconditionally repayable contribution balances:

(in thousands of dollars)

  2022 2021
Unconditionally repayable contributions 99,357 19,329
Subtotal 99,357 19,329
Gross loans receivable 99,357 19,329
Loans receivable held on behalf of Government (99,357) (19,329)
Net loans receivable - -

(a) Unconditionally repayable contributions

These loans relate to unconditionally repayable contributions made to outside parties that must be repaid without qualification.

11. Inventory

The following table presents details of the inventory:

(in thousands of dollars)

  2022 2021
Inventories held for consumption 440 438
Inventories held for re-sale 48 48
Total inventory 488 486

The cost of consumed inventory recognized as an expense in the Consolidated Statement of Operations and Departmental Net Financial Position is $73 thousand in 2022 ($22 thousand in 2021).

12. Tangible capital assets

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
Works and infrastructure 20 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 they are put into service and are not amortized until they are put into service.

Cost

(in thousands of dollars)

Opening Balance Acquisitions Adjustments Footnote (1) Disposals and Write-offs Closing Balance
Capital asset class
Land 7,800 - - - 7,800
Buildings 302,782 63 3,131 93 305,883
Works and Infrastructure 21,652 - - - 21,652
Machinery and equipment 272,394 14,133 1,247 4,052 283,722
Vehicles 11,573 615 (35) 430 11,723
Leasehold improvements 69,312 - 139 - 69,451
Leased tangible capital assets 95,993 - - - 95,993
Assets under construction 5,420 6,544 (3,272) - 8,692
Total 786,926 21,355 1,210 4,575 804,916

Accumulated Amortization

(in thousands of dollars)

Opening Balance Amortization Adjustments Footnote (1) Disposals and Write-offs Closing Balance

Capital asset class

Buildings 160,924 6,984 4 93 167,819
Works and Infrastructure 961 788 1 - 1,750
Machinery and equipment 218,666 10,302 728 2,619 227,077
Vehicles 7,977 653 (4) 430 8,196
Leasehold improvements 29,806 4,565 - - 34,371
Leased tangible capital assets 38,797 3,944 (1) - 42,740
Total 457,131 27,236 728 3,142 481,953

Net book value

(in thousands of dollars)

  2022 2021

Capital asset class

Land 7,800 7,800
Buildings 138,064 141,858
Works and Infrastructure 19,902 20,691
Machinery and equipment 56,645 53,728
Vehicles 3,527 3,596
Leasehold improvements 35,080 39,506
Leased tangible capital assets 53,253 57,196
Assets under construction 8,692 5,420
Total 322,963 329,795

(1)Adjustments include assets under construction of $3,266 thousand that were transferred to the other categories upon completion of the assets. It also includes transfers of tangible capital assets with other government departments with a net effect of ($39) 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 lands, authorized under this Act or any other act of Parliament, should be conducted.

The Nuclear Liability Account is established pursuant to sub-section 32(1) of the Nuclear Liability and Compensation Act, to record indemnity fees paid by operators and to provide for payment of any claims arising under the indemnity agreements entered into between the government and nuclear installation operators. This account is a continuation of the Nuclear Liability Reinsurance Account under the previous Nuclear Liability Act, now repealed.

Legislation requires that the revenues of these accounts 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)

  2022 2021

Environmental Studies Research Fund - Restricted

Balance - Beginning of year 3,880 5,874
Revenues 5,556 127
Expenses (5,316) (2,121)
Balance - End of year 4,120 3,880

Nuclear Liability Account - Restricted

Balance - Beginning of year 4,728 4,583
Revenues 152 145
Balance - End of year 4,880 4,728
Subtotal - Restricted 9,000 8,608
Unrestricted 220,992 219,152
Departmental net financial position - End of year 229,992 227,760

14. Contractual obligations

(a) Contractual obligations

The nature of the Department’s activities may 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)

2023 2024 2025 2026 2027 2028 and subsequent Total
Other Transfer Payments 457,014 148,886 53,466 40,716 20,632 - 720,714
Total 457,014 148,886 53,466 40,716 20,632 - 720,714

15. Contingent liabilities and contingent assets

a. Contingent liabilities

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

i) Claims and litigation:

Claims have been made against the Department in the normal course of operations. These claims include items with pleading amounts and others for which no amount is specified. While the total amount claimed in these actions is significant, their outcomes are not determinable. The Department records 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 $11,170 thousand in 2022 ($14,470 thousand in 2021).

ii) Loan guarantees

(in thousands of dollars)

Authorized Limit Outstanding guarantees
  2022 2021
Lower Churchill Hydroelectric Projects 10,200,000 9,056,169 9,149,590

From 2013 to 2017, the Government of Canada guaranteed a total of $9.2 billion in debt issued to support for the construction of the Lower Churchill Hydroelectric Projects, including two projects sponsored by Nalcor Energy ([1] Muskrat Falls and Labrador Transmission Assets and [2] Labrador-Island Link) and one project sponsored by Emera Inc. (Maritime Link).

Interest payments on these bonds began immediately after issuance, occurring every six months on June 1 and December 1 of every year. Principal repayments began in 2020. In some cases, principal repayments are made directly to bondholders every six months; in other cases, the entire principal amount of the bond is repaid on the maturity date – in these cases, funds are gradually set aside every six months to ensure that the full principal amount can be paid on the maturity date.

In March 2022, the Government of Canada issued a subsequent federal loan guarantee for $1 billion in debt. The proceeds of this debt issuance will be used to make principal repayments for the Muskrat Falls and Labrador Transmission Assets project that come due on or before June 1, 2029. Interest payments on this subsequent guarantee begin on June 1, 2022 and will occur every six months until the debt is retired. The principal amounts will be repaid beginning on December 1, 2037, with the final payment occurring on June 1, 2057.

Among the many safeguards put in place to protect Canada's interests, all of the project entities' shares, assets and agreements have been pledged as security to Canada.

The net amount of debt remaining outstanding, having been reduced by both principal repayments to bond holders as well as funds held in escrow for future principal repayments, is $9.06 billion as at March 31, 2022.

iii) Insurance program:

Under the Nuclear Liability and Compensation Act (NLCA), which entered into force on January 1, 2017, and replaced the Nuclear Liability Act (NLA), now repealed, operators of designated nuclear installations are required to maintain financial security against the liability imposed on them by the NLCA.

The NLCA establishes that the operator’s liability for damages resulting from a nuclear incident is limited to $1 billion. This amount applies to the “Power Reactor Class” of nuclear installations prescribed in the Nuclear Liability and Compensation Regulations (NLCR). Lower liability amounts for lower-risk installations, based on their commensurate risk, are prescribed in the NLCR. The Minister of Natural Resources is required to review the operator’s liability limit at least once every five years, and the government may increase the limit by regulation.

Financial security covers all the categories of damage that are compensable under the NLCA, with the exception of damage arising from routine emissions, and bodily injury occurring 10 to 30 years after a nuclear incident. Through the indemnity agreement, entered into with 9 operators, the federal government covers the liability associated with the two exceptions. It also covers the difference between the lower liability amount prescribed in NLCR for lower-risk installations and, as applicable, the $1 billion liability assigned in the NLCA. The federal government charges each operator an annual fee for providing this indemnity coverage.

The Department of Natural Resources administers the Nuclear Liability Account (Account) on behalf of the federal government through a consolidated specified purpose account. This Account is a continuation of the Nuclear Liability Reinsurance Account under repealed NLA. All fees paid by the operators of nuclear installations are credited to this Account. The closing balance of this Account as at March 31 2022, is $4,879,402. Any claims under an indemnity agreement could be up to the level of the liability amount assigned in the NLCA; however, there is no limit to the number of incidents to which the indemnity could apply. There have been no claims against – or payments out of – the Account since its creation under the NLA.

b. Contingent assets

The Department issued conditionally repayable contributions with proponents for early stage research and development (R&D) activities. Repayments are determined upon the successful commercialization of products generated by the R&D. There are no amounts estimated to be repaid as at March 31, 2022 ($0 in 2021).

16. Related party transactions

The Department is related as a result of common ownership to all government departments, agencies, and Crown corporations. Related parties also include individuals who are members of key management personnel or close family members of those individuals, and entities controlled by, or under shared control of, a member of key management personnel or a close family member of that individual.

The department enters into transactions with these entities in the normal course of business and on normal trade terms.

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, the employer’s contribution to the health and dental insurance plans, and workers’ compensation coverage. These services received without charge have been recorded at the carrying value in the Department’s Consolidated Statement of Operations and Departmental Net Financial Position as follows:

(in thousands of dollars)

  2022 2021
Employer's contribution to the health and dental insurance plans 36,678 34,120
Accommodation 17,984 17,391
Workers' compensation 31 171
Total common services provided without charge 54,693 51,682

The Government of Canada has centralized some of its administrative activities for efficiency, cost-effectiveness purposes and economic delivery of programs to the public. As a result, the Government of Canada 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, such as payroll and cheque issuance services provided by Public Services and Procurement Canada and audit services provided by the Office of the Auditor General, are not included in the Department’s Consolidated Statement of Operations and Departmental Net Financial Position.

b) Administration of programs on behalf of other government departments

The Department has a number of Memoranda of Understanding with other government departments for the administration of their programs. The Department issued approximately $18,702 thousand ($22,197 thousand in 2021) in payments on behalf of the other government departments. These expenses are not reflected in the Departmental Consolidated Financial Statements, but rather in the Financial Statements of the respective government departments.

c) Other transactions with other government departments and agencies

(in thousands of dollars)

  2022 2021
Expenses 131,406 135,119
Revenues 6,491 6,387

Expenses and revenues disclosed in (c) exclude common services provided without charge, which are already disclosed in (a).

17. Segmented Information

Presentation by segment is based on Core responsibilities. The presentation by segment is based on the same accounting policies as described in the Summary of significant accounting policies in Footnote (Note 2). The following table presents the expenses incurred and revenues generated for the core responsibilities, by major object of expense and by major type of revenue. The segment results for the period are as follows:

(in thousands of dollars)

  Natural Resource Science and Risk Mitigation Innovative and Sustainable Natural Resources Development Globally Competitive Natural Resource Sectors Internal Services 2022 2021
Transfer payments
Industry 22,402 182,749 56,535 - 261,686 213,669
International 267 2,162 2,120 - 4,549 5,154
Non-profit organizations 28,155 162,091 80,982 - 271,228 120,003
Other levels of government 56,851 16,613 548,076 - 621,540 296,294
Individuals 5,516 97,185 40,895 - 143,596 55,682
Total transfer payments 113,191 460,800 728,608 - 1,302,599 690,802
Operating expenses
Salaries and employee benefits 154,768 217,486 58,726 115,274 546,254 545,086
Information 3,706 5,724 1,687 4,083 15,200 16,132
Professional and special services 31,040 46,576 6,284 40,319 124,219 104,336
Rentals 13,932 10,995 3,784 5,685 34,396 28,739
Transportation and communication 3,162 1,206 285 971 5,624 7,223
Utilities, material and supplies 9,608 11,074 909 1,750 23,341 20,354
Purchased repairs and upkeep 2,276 3,570 150 672 6,668 6,595
Acquisitions of non-capital assets 4,639 4,653 723 1,851 11,866 14,080
Amortization 11,391 13,488 851 1,506 27,236 28,150
Other 3,241 7,626 914 (1,777) 10,004 6,233
Total Operating expenses 237,763 322,398 74,313 170,334 804,808 776,928
Total expenses 350,954 783,198 802,921 170,334 2,107,407

1,467,730

Revenues
Rights and privileges 1,644 114 326,379 - 328,137 173,733
Other, such as revenue pursuant to agreements 1,340 22,233 217,846 162 241,581 18,307
Revenue from services of a non-regulatory nature 7,621 10,450 - - 18,071 16,493
Proceeds from sales of goods and information products 1,061 977 - - 2,038 1,125
Revenue from services of a regulatory nature - 1,752 - - 1,752 1,307
Services to other government departments - - - 151 151 122
Revenues earned on behalf of Government (399) (15,907) (544,225) (162) (560,693) (188,461)
Total net revenues 11,267 19,619 - 151 31,037 22,626
Net cost of operations 339,687 763,579 802,921 170,183 2,076,370 1,445,104

18. COVID-19 pandemic

In March 2020, the World Health Organization officially declared the outbreak of COVID-19 as a global pandemic. The COVID-19 pandemic continues to have a significant adverse impact on the global economy. The overall economy continues to navigate the pandemic with continuing uncertainty. As this pandemic is ongoing and the government response is continuing to evolve, the impact on the department's financial results is subject to considerable uncertainty. The financial statements for the fiscal year end March 31, 2022, reflects the impacts resulting from the COVID-19 pandemic to the extent known and estimable at the reporting date.

During the year, the department led the Emissions Reduction Fund contribution program to support Canada’s COVID-19 Economic Response Plan, for which $127 million are included within the expenses on the Consolidated Statement of Operations and Departmental Net Financial Position.

The effects of the pandemic will continue into the foreseeable future, and the department continues to assess and monitor the effects on its financial condition.

19. Comparative information

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

Annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting of Natural Resources Canada for fiscal year 2021-22 (unaudited)

Summary of the assessment of effectiveness of the system of internal control over financial reporting and the action plan

1. Introduction

This document summarizes the measures taken by Natural Resources Canada (NRCan) to maintain an effective system of internal control over financial management (ICFM), including internal control over financial reporting (a subset of the system of ICFM), as well as information on internal control management, assessment results, and related action plans.

Detailed information on NRCan’s authority, mandate and core responsibilities can be found in the 2022- 23 Departmental Plan and the 2021-22 Departmental Results Reports.

2. Departmental system of internal control over financial management

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. The NRCan Framework for ICFM, approved by the Deputy Minister (DM), is in place and comprises:

  • organizational accountability structures relating to internal control management that support sound financial management, including roles and responsibilities of senior departmental managers for internal control management in their areas of responsibility;
  • values and ethics that describes the expected behaviors that guide employees in all activities related to their professional duties;
  • ongoing communication and training on statutory requirements, and policies and procedures for sound financial management and control; and
  • at least semi-annual monitoring of, and regular updates to, internal control management, with related assessment results and action plans provided to the DM and senior departmental management, and as applicable, the Departmental Audit Committee (DAC).

The DAC provides advice to the DM on the adequacy and functioning of the department’s risk management, control and governance frameworks and processes.

2.2 Service arrangements relevant to financial statements

NRCan relies on other organizations for processing certain transactions that are recorded in its financial statements, as follows.

2.2.1 Common service arrangements

  • Public Services and Procurement Canada (PSPC), which administers the payment of salaries and the procurement of goods and services, and provides accommodation services.
  • Shared Services Canada, which provides information technology (IT) infrastructure services.
  • Department of Justice Canada, which provides legal services.
  • Treasury Board (TB) of Canada Secretariat, which provides information on public service insurance and centrally administers payment of the employer’s share of contributions toward statutory employee benefit plans.

2.2.2 Specific arrangements

NRCan relies on another department for the processing of certain information or transactions that are recorded in its financial statements, as follows:

  • Agriculture and Agri-Food Canada provides NRCan with a SAP financial system platform to capture and report all financial transactions.

Readers of this annex may refer to the annexes of the above-noted departments for a greater understanding of the systems of internal control over financial reporting (ICFR) related to these specific services.

3. Departmental assessment results for fiscal year 2021-22

The following table summarizes the status of the ongoing monitoring activities according to the previous fiscal year’s rotational plan.

Progress during fiscal year 2021-22

Previous fiscal year’s rotational ongoing monitoring plan for current fiscal year Status
Performed by the Audit and Evaluation Branch (AEB) through advisory, audit and evaluation projects.

Design effectiveness (DE) and operating effectiveness (OE) testing completed as planned for each key control area; remedial actions started.

Results are disclosed on NRCan’s Website.
  • Entity Level Controls (ELCs)
  • IT General Controls (ITGCs) – eTools
  • Revenue and Accounts Receivable, including Costing for Charging Agreements
  • Capital Assets
Performed by the Financial Management Internal Control (FMIC) unit through internal control assessments.

DE and OE testing completed as planned for each key control area; remedial actions started.

The key findings and remedial actions are summarized in Section 3.2.

3.1 New or significantly amended key controls

3.1.1 Governance structure

A new DM approved governance structure was established in 2020-21 to enable more strategic, horizontal discussions that will enhance planning and priority setting, resource allocation, and risk management.

3.1.2 Investment planning and project management

Investment planning and project management were integrated and process flows, procedures and tools are under development for piloting in 2022-23 and full implementation in 2023-24. The sub-processes include proposals, business cases, prioritizations, investment plan, and performance and risk management.

3.1.3 Integrated business planning process

An integrated business planning process was established in 2020-21 to articulate a cohesive and horizontal approach to strategic and operational priority setting, risk management, financial analysis, performance measurement, and reporting to better inform decision-making and resource allocation.

3.2 Ongoing monitoring program

As per the previous year’s rotational ongoing monitoring plan (OMP), the FMIC completed the DE and OE testing of the key control areas listed below; review of the results with business process owners is underway. In general, key controls were effective, with remediation required as follows:

3.2.1 Entity level controls

i) Risk Assessment

  • Review and update the NRCan Integrated Risk Management Policy Framework for proper alignment with industry frameworks and current risk management approach.
  • Integrate annual update to Corporate Risk Profile with business planning process to identify and manage emerging risks.
  • Establish departmental Fraud Risk Management (FRM) Framework outlining governance structure, roles and responsibilities of key stakeholders, and overall FRM approach.

3.2.2 Information Technology General Controls

i) User Access Management

  • Update password expiration policies between the Network and IT policy instruments for proper alignment.
  • Reconcile listing of employee departures per Human Resource Management System and user access listing to the Network, including eTools regularly to ensure prompt disablement.

ii) Program Change Management

  • Review annually the access of developers that can promote changes to eTools in the production environment to ensure properly restricted.

iii) Backups and Restorations

  • Plan and perform annual back-up restorations and testing of eTools to prevent lost or damaged data.

3.2.3 Revenue and Accounts Receivable, including Costing for Charging Agreements

i) Receivables management policy instruments

  • Perform a relevancy review between NRCan and TB policy instruments related to the management of accounts receivable and update, as required to ensure continued compliance.

ii) Establish internal and external charging agreements, including pricing and costing

  • Develop tracking system for external charging agreements to support monitoring activities to confirm the validity, accuracy and completeness of costing.

iii) Manage customer credits and master data, and receipts

  • Strengthen the review and approval of new credit agreements, customer master data files, and cash receipts for accuracy and audit trail purposes.

iv) Manage collection of overdue receivables

  • Improve the quarterly aging report to senior management for proper credit risk management, and timely collection practices and write-offs.

3.2.4 Capital Assets

i) Acquisitions

  • Restrict user access to create purchase orders (POs) in SAP to individuals with a delegated transaction authority (TA) and align TA limits between the Specimen Signature Records with the Procurement Sub-Delegation tables for procurement specialists to strengthen compliance.
  • Segregate the user access to create POs and perform goods receipts from the role to create, edit or delete the asset master records in SAP.

ii) Amortization

  • Review useful life by asset class annually between SAP, TB and NRCan accounting standards and the notes to the financial statements for proper alignment and assess the reasonability of life spans for unamortized capital assets triennially.

iii) Maintain Asset Registers

  • Streamline the asset register reconciliation, materiel asset certification, and risk-based physical asset count for operational efficiency and to ensure existence, completeness and appropriate valuation.
  • Expand and automate the sampling process to monitor the procurement of goods and services that meet the capitalization threshold to detect and correct financial coding errors.

iv) Dispositions

  • Strengthen the review of disposal requests for adequate approvals, supporting documentation to ensure that disposals are properly recorded and removed from the capital asset register.

4. Departmental action plan for the next fiscal year and subsequent fiscal years

NRCan’s rotational OMP for the next five fiscal years, based on an annual validation of the high-risk key control areas and related adjustments, as required, is shown in the following table. Note that the OMP includes planned projects as per the NRCan 2022-27 Integrated Audit Evaluation Plan (IAEP) that provide additional assurance over the effectiveness of risk management, control, and governance processes related to the system of ICFM.

Rotational ongoing monitoring plan

Key control areas 2022-23 2023-24 2024-25 2025-26 2026-27
Entity level controls (ELCs)
  1. Control environment
  2. Risk assessment
  3. Control activities
  4. Information and communication
  5. Monitoring activities
No Yes – AEB (2) No Yes – FMIC (1 to 5) No
IT general controls (ITGCs) under departmental management
  1. Change management
  2. Logical security
  3. Computer operations
    1. Specimen Signature Record and Etools (e.g. eProcurement, ePAR, ePayment, ePaye)
    2. SAP, PeopleSoft, and Phoenix (under NRCan’s responsibility)
Yes – AEB (3) Yes – AEB (2) Yes – FMIC (1 to
3 b) and AEB (3)
Yes – FMIC (1 to
3 a) and
AEB (2)
No
Financial close and reporting Yes – FMIC No No No Yes – FMIC
Grants and contributions (G&C), including repayable contributions
  1. Expenditure management process for G&Cs, excluding repayable contributions
  2. Repayable contributions
No Yes – FMIC (1) Yes – AEB (1) Yes – FMIC (2) No
Payroll and benefits Yes – AEB Yes – AEB Yes – FMIC and AEB No No
Procure to pay (P2P)
  1. P2P
  2. Acquisition cards
  3. Contractor and supplier payments
Yes – FMIC (1) Yes – AEB (2) Yes – AEB (3) No Yes – FMIC (1)
Offshore royalty revenues/statutory transfers No Yes – FMIC No No No
Revenue and accounts receivable, including costing for charging agreements No No Yes – AEB Yes – FMIC No
Environmental liabilities Yes – FMIC No No No Yes - FMIC
Contingent liabilities
  1. Lower churchill projects loan guarantees
  2. Nuclear liability account
  3. Claims and litigation
No Yes – FMIC (1) No No No
Capital assets Yes – AEB No Yes – FMIC No No
Budgeting and forecasting (B&F), including integrated business planning
  1. Annual reference level update, budget transfers, and financial situation report
  2. Integrated business planning
Yes – FMIC (2) No No No Yes – FMIC (1
and 2)
Investment planning (IP), including project management (PM) No Yes – FMIC Yes – AEB No No
Chief financial officer attestation (included in TB submissions), and related costing No No Yes – FMIC No No

The OMP was amended as follows:

  1. Advanced the assessment of the repayable contributions business process (BP) from future years given unplanned Continuous Audit of G&Cs, including repayable contributions as per the NRCan 2022-27 IAEP.
  2. Expanded the scope of the B&F BP to include the new integrated business planning process and prioritized the ICFM assessment in 2022-23 instead of 2023-24.
  3. Expanded the scope of the IP BP to include PM and deferred assessment to 2023-24 to allow completion and piloting of the investment planning management framework.
  4. Deferred the IP, including PM assessment planned for 2025-26 to future years given planned Audit of Investment Planning in 2025-26.
  5. Updated the OMP to align with the planned AEB audit projects as per the NRCan 2022-27 IAEP.

5. Departmental status and action plan for the next fiscal year and subsequent fiscal years

Building on progress to date, NRCan is positioned to complete the full assessment of its system of ICFM by 2023-24. At that time, NRCan will fully meet the requirements of the TB Policy on Financial Management and will continue to apply its rotational ongoing monitoring plan to reassess control performance on a risk basis across all key control areas. The status and action plan for the completion of the identified key control areas for the next fiscal year and for subsequent years are shown in the following table.

Status and action plan for the next fiscal year and subsequent fiscal years

Key control areas Design effectiveness testing and remediation Operational effectiveness testing and remediation Ongoing monitoring rotation *
Entity-level controls Complete Complete 2023-24 and 2025-26
IT general controls under departmental management Complete Complete 2022-23, 2023-24, 2024-
25, and 2025-26
Financial close and reporting Complete Complete 2022-23 and 2026-27
Grants and contributions,
including repayable contributions
Complete Complete 2023-24, 2024-25, and
2025-26
Payroll and benefits Complete Complete 2022-23, 2023-24, and
2024-25
Procure to pay Complete Complete 2022-23, 2023-24, 2024-
25, and 2026-27
Offshore royalty revenues/statutory transfers Complete Complete 2023-24
Revenue and accounts receivable,
including costing for charging agreements
Complete Complete 2024-25 and 2025-26
Environmental liabilities Complete Complete 2022-23 and 2026-27
Contingent liabilities Complete Complete 2023-24
Capital assets Complete Complete 2022-23 and 2024-25
Budgeting and forecasting,
including integrated business planning
Complete Complete 2022-23 and 2026-27
Investment planning,
including project management
2023-24 2023-24 2025-26
Chief financial officer attestation (included in TB submissions),
and related costing.
Complete Complete 2024-25

* Ongoing monitoring rotation means that key controls have been documented, assessed for DE and OE, and are now subject to ongoing monitoring to ensure continued effectiveness. Once an organization reaches the ongoing monitoring stage, it will continue to remain at this stage, even when new processes are implemented, or the scope of the program is adjusted to reflect changes in the department’s operations or to incorporate new elements of ICFM.

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