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- Introduction
- 1. Statement of Management Responsibility
- 2. Statement of Operations (Unaudited)
- 3. Statement of Financial Position (Unaudited)
- 4. Statement of Equity of Canada (Unaudited)
- 5. Statement of Cash Flow (Unaudited)
- 6. Notes to the Financial Statement (Unaudited)
- 7. Notes to Reader
- 8. Annex to the Statement of Management Responsibility
Statement of Management Responsibility
Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2009 and all information contained in these statements rests with departmental management. These financial statements have been prepared by management in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.
Management is responsible for the integrity and objectivity of the information in these financial statements. Some of the information in the 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 to the Public Accounts of Canada and included in the department's Departmental Performance Report is consistent with these financial statements.
Management maintains a system of financial management and internal control designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are in accordance with the Financial Administration Act, are executed in accordance with prescribed regulations, within Parliamentary authorities, and are properly recorded to maintain accountability of Government funds. Management also seeks to ensure the objectivity and integrity of data in its financial statements by careful selection, training and development of qualified staff, by organizational arrangements that provide appropriate divisions of responsibility, and by communication programs aimed at ensuring that regulations, policies, standards and managerial authorities are understood throughout the department.
The Audit Committee comprised of external members ensures that the Deputy Minister receives independent objective advice and assurance on the adequacy of Environment Canada's internal control and accountability processes. It ensures that there are effective arrangements in place to monitor and follow-up on management action plans responding to recommendations from internal audits, the Office of the Auditor General, or other sources. It reviews Environment Canada's financial statements and the corporate risk profile. It also reviews the arrangements established by management to promote public service values and to ensure compliance with legislation, regulations, policies, and standards of ethical conduct.
The financial statements of the department have not been audited.
Ian Shugart,
Deputy Minister
Basia Ruta,
ADM, Finance & Corporate,
Chief Financial Officer
Gatineau, Canada
August 7, 2009
Statement of Operations (Unaudited)
For the year ended March 31 | 2009 | 2008 |
---|---|---|
(in thousands of dollars) | ||
Expenses (Note 4) | ||
Canadians are informed of, and respond appropriately to, current and predicted environmental conditions | $217,831 | $194,947 |
Biodiversity is conserved and protected | 205,268 | 208,465 |
Improved knowledge and information on weather and environmental conditions influences decision-making | 181,150 | 162,561 |
Risks to Canadians, their health and their environment posed by toxic and other harmful substances are reduced | 157,172 | 123,566 |
Risks to Canadians, their health and their environment from air pollutants and greenhouse gas emissions are reduced | 122,305 | 96,431 |
Water is clean, safe and secure | 121,874 | 107,961 |
Canadians adopt sustainable consumption and production approaches | 95,018 | 60,223 |
Revitalization of the Toronto Waterfront | 83,595 | 43,405 |
Canadians adopt approaches that ensure the sustainable use and management of natural capital and working landscapes | 48,011 | 47,168 |
Harbourfront Corporation | 5,531 | 5,394 |
Total expenses | 1,237,755 | 1,050,121 |
Revenues (Note 5) | ||
Canadians are informed of, and respond appropriately to, current and predicted environmental conditions | 45,557 | 45,884 |
Biodiversity is conserved and protected | 4,951 | 4,766 |
Improved knowledge and information on weather and environmental conditions influences decision-making | 19,849 | 18,763 |
Risks to Canadians, their health and their environment posed by toxic and other harmful substances are reduced | 4,626 | 3,501 |
Risks to Canadians, their health and their environment from air pollutants and greenhouse gas emissions are reduced | 799 | 545 |
Water is clean, safe and secure | 4,631 | 5,520 |
Canadians adopt sustainable consumption and production approaches | 12 | 27 |
Revitalization of the Toronto Waterfront | 1 | -- |
Canadians adopt approaches that ensure the sustainable use and management of natural capital and working landscapes | 813 | 1,065 |
Total revenues | 81,239 | 80,071 |
Net cost of operations | $1,156,516 | $970,050 |
The accompanying notes are an integral part of these financial statements.
Statement of Financial Position (Unaudited)
As at March 31 | 2009 | 2008 |
---|---|---|
(in thousands of dollars) | ||
Assets | ||
Financial assets | ||
Accounts receivable and advances (Note 6) | $10,614 | $7,305 |
Non-financial assets | ||
Prepaid expenses | 1,628 | 1,669 |
Inventory | 5,270 | 5,158 |
Tangible capital assets (Note 7) | 357,208 | 341,119 |
364,106 | 347,946 | |
TOTAL | $374,720 | $355,251 |
Liabilities and Equity of Canada | ||
Liabilities | ||
Accounts payable and accrued liabilities (Note 12) | $267,177 | $296,605 |
Vacation pay and compensatory leave | 29,683 | 28,673 |
Deferred revenue (Note 8) | 5,147 | 5,333 |
Lease obligation for tangible capital assets (Note 9) | 14,475 | 14,934 |
Environmental liabilities (Note 11) | 56,269 | 55,520 |
Employee severance benefits (Note 10) | 129,025 | 105,183 |
Other liabilities (Note 11) | 1,943 | 1,644 |
503,719 | 507,892 | |
Equity of Canada | (128,999) | (152,641) |
TOTAL | $374,720 | $355,251 |
The accompanying notes are an integral part of the financial statements.
Statement of Equity of Canada (Unaudited)
As at March 31 | 2009 | 2008 |
---|---|---|
(in thousands of dollars) | ||
Equity of Canada, beginning of the year | ($152,641) | ($238,041) |
Net cost of operations (Note 3b) | (1,156,516) | (970,050) |
Current year appropriations used (Notes 3a, 3b and 3c) | 1,120,367 | 997,031 |
Revenue not available for spending (Notes 3a, 3c) | (13,783) | (13,520) |
Refund of previous year's expenditures (Notes 3a, 3c) | (782) | (1,257) |
Change in net position in the Consolidated Revenue Fund (Note 3c) | (11,724) | (3,465) |
Services provided without charge by other government departments (Notes 3a, 13) | 86,080 | 76,661 |
Equity of Canada, end of the year | ($128,999) | ($152,641) |
The accompanying notes are an integral part of the financial statements.
Statement of Cash Flow (Unaudited)
As at March 31 | 2009 | 2008 |
---|---|---|
(in thousands of dollars) | ||
Operating activities | ||
Net cost of operations | $1,156,516 | $970,050 |
Non-cash items: | ||
Services provided without charge by other government departments (Note 3a, 13) | (86,080) | (76,661) |
Amortization of tangible capital assets (Note 7) | (33,432) | (36,879) |
Loss on disposal and write-down of tangible capital assets | (688) | (2,251) |
Found assets credited to Revenue | 211 | 411 |
Variations in Statement of Financial Position: | ||
Increase (decrease) in financial assets | 3,309 | (7,675) |
Increase (decrease) in prepaid expenses | (41) | 113 |
Increase in inventory | 112 | 2,518 |
Decrease in liabilities | 4,173 | 87,647 |
Cash used by operating activities | 1,044,080 | 937,273 |
Capital investment activities | ||
Acquisition of tangible capital assets (Note 7) | 50,762 | 42,225 |
Proceeds from the disposal of tangible capital assets | (764) | (709) |
Cash used for capital investment activities | 49,998 | 41,516 |
Financing activities | ||
Net cash provided by Government of Canada | $1,094,078 | $978,789 |
The accompanying notes are an integral part of the financial statements.
Notes to the Financial Statement (Unaudited)
- Authority and objectives
- Summary of significant accounting policies
- Parliamentary appropriations
- Expenses
- Revenues
- Accounts receivable and advances
- Tangible capital assets
- Deferred Revenue
- Lease obligation for tangible capital assets
- Employee Benefits
- Contingent liabilities
- Contractual Obligations
- Related party transactions
- Comparative information
Notes to the Financial Statements (Unaudited)
1. Authority and objectives
Environment Canada (EC) was established under legislation by the Department of the Environment Act. Under this Act, the powers, duties and functions of the Minister of the Environment extend to and include matters relating to:
- The preservation and enhancement of the quality of the natural environment (including water, air and soil quality);
- Renewable resources, including migratory birds and other non-domestic flora and fauna;
- Water;
- Meteorology;
- Enforcement of any rules or regulations made by the International Joint Commission relating to boundary waters; and
- Coordination of the policies and programs of the Government of Canada respecting the preservation and enhancement of the quality of the natural environment.
Environment Canada delivers its mandate through the following 10 programs:
- Biodiversity is conserved and protected
- Canadians are informed of, and respond appropriately to, current and predicted environmental conditions
- Improved knowledge and information on weather and environmental conditions influences decision-making
- Risks to Canadians, their health and their environment posed by toxic and other harmful substances are reduced
- Water is clean, safe and secure
- Risks to Canadians, their health and their environment from air pollutants and greenhouse gas emissions are reduced
- Canadians adopt sustainable consumption and production approaches
- Canadians adopt approaches that ensure the sustainable use and management of natural capital and working landscape
- Revitalization of the Toronto Waterfront
- Harbourfront Corporation
Through Orders in Council effective October 30th, 2008, the responsibility for matters relating to the activities of the federal government with respect to the Toronto Waterfront Revitalization Initiative (TWRI) and Harbourfront Centre (HC) was transferred from the Minister of the Environment to the Minister of Finance. Although powers and duties were assumed by the Department of Finance during part of the fiscal year, funding authority remained with Environment Canada for the entire exercise period. As such, Environment Canada is responsible to report TWRI and HC program spending within its 2008-2009 Financial Statements.
Conversely, also by Order in Council, the Mackenzie Gas Project was transferred to the Minister of the Environment from the Minister of Industry and will be reported under that Department this fiscal year.
In addition, Environment Canada has authority under numerous pieces of legislation which affect how the department operates. The most significant Acts are as follows:
- Antarctic Environmental Protection Act
- Canada Water Act
- Canada Wildlife Act
- Canadian Environment Week Act
- Canadian Environmental Assessment Act
- Canadian Environmental Protection Act, 1999
- Department of the Environment Act
- Fisheries Act (Sections 36-42)
- International River Improvements Act
- Migratory Birds Convention Act, 1994
- National Wildlife Week Act
- Species at Risk Act
- Weather Modification Information Act
- Wild Animal and Plant Protection and Regulation of International and Interprovincial Trade Act
- Kyoto Protocol Implementation Act (2007, c. 30)
- Federal Sustainable Development Act (2008, c. 33)
2. Summary of significant accounting policies
The financial statements have been prepared in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.
Significant accounting policies are as follows:
(a) Parliamentary appropriations
Environment Canada is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to Environment Canada do not parallel financial reporting according to generally accepted accounting principles since appropriations are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and the Statement of Financial Position are not necessarily the same as those provided through appropriations from Parliament. Note 3 provides a high-level reconciliation between the basis of reporting.
(b) Net Cash Provided by Government
Environment Canada operates within the Consolidated Revenue Fund (CRF). The CRF is administered by the Receiver General for Canada. All cash received by Environment Canada is deposited to the CRF and all cash disbursements made by Environment Canada are paid from the CRF. Net cash provided by Government is the difference between all cash receipts and all cash disbursements including transactions between departments of the federal government.
(c) Change in net position in the Consolidated Revenue Fund
Change in net position in the Consolidated Revenue Fund is the difference between the net cash provided by Government and appropriations used in a year, excluding the amount of non respendable revenue recorded by Environment Canada. It results from a timing difference between when a transaction affects appropriations and when it is processed through the CRF.
(d) Revenues
Revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues. Revenues that have been received but not yet earned are presented as deferred revenues (Note 8).
(e) Expenses
Expenses are recorded on the accrual basis:
- Grants are recognized in the year in which payment is due or in which the recipient has met the eligibility criteria. In the case of grants which do not form part of an existing program, the expense is recognized 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 financial statements;
- Contributions are recognized in the year in which the recipient has met the eligibility criteria or fulfilled the terms of a contractual transfer agreement;
- Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment;
- Services provided without charge by other government departments for accommodation, the employer’s contribution to the health and dental insurance plans, and legal services, are recorded as operating expenses at their estimated cost. The providers of these services determine the estimated costs to be recorded by the departments.
(f) Employee future benefits
- Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multi-employer administered by the Government of Canada. Environment Canada’s contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. Current legislation does not require Environment Canada to make contributions for any actuarial deficiencies of the Plan.
- Severance benefits: Employees are entitled to severance benefits under labour contracts or conditions of employment. These benefits are accrued as employees render the services necessary to earn them. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.
(g) Accounts and loans receivables
Accounts and loans receivables are stated at amounts expected to be ultimately realized; a provision is made for receivables where recovery is considered uncertain.
(h) Contingent liabilities
Contingent liabilities are potential liabilities which 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 financial statements.
(i) Environmental liabilities
Environmental liabilities reflect the estimated costs related to the management and remediation of environmentally contaminated sites. Based on management’s best estimates, a liability is accrued and an expense recorded when the contamination occurs or when Environment Canada becomes aware of the contamination and is obligated, or is likely to be obligated to incur such costs. If the likelihood of Environment Canada’s obligation to incur these costs is either not determinable or unlikely, or if an amount cannot be reasonably estimated, the costs are disclosed as contingent liabilities in the notes to the financial statements.
(j) Inventory
Inventory consist of parts, material and supplies held for future program delivery and not intended for re-sale. They are valued at cost. If they no longer have service potential, they are valued at the lower of cost or net realizable value.
(k) Tangible capital assets
All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. Environment Canada 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.
Capital assets are amortized on a straight-line basis over the estimated useful life of the asset as follows:
Asset class | Amortization Period |
---|---|
Buildings | 25 to 40 years |
Works and Infrastructure | 20 to 40 years |
Machinery and Equipment | 2 to 15 years |
Vehicles | 3 to 25 years |
Leasehold Improvements | Lesser of useful life or lease term |
Assets under construction | Once in service, in accordance with asset type |
Leased tangible capital assets | In accordance with asset type |
(l) Measurement uncertainty
The preparation of these financial statements in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these 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 severance benefits and the useful life of tangible capital assets. Actual results could differ from those estimated. Management’s estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.
3. Parliamentary appropriations
Environment Canada receives most of its funding through annual Parliamentary appropriations. Items recognized in the Statement of Operations and the Statement of Financial Position in one year may be funded through Parliamentary appropriations in prior, current or future years. Accordingly, Environment Canada has different net results of operations for the year on a government funding basis than on an accrual accounting basis. The differences between net results of operations and appropriations are reconciled in the following tables:
(a) Reconciliation of net cost of operations to current year Parliamentary appropriations used:
(in thousands of dollars) | 2009 | 2008 |
---|---|---|
Net cost of operations | $1,156,516 | $970,050 |
Adjustments for items affecting net cost of operations but not affecting appropriations: | ||
Add: | ||
Expenses not being charged to Appropriations at the same time | 46,100 | 70,175 |
Revenues not available for spending | 13,783 | 13,520 |
Adjustments for prior years PAYE | 2,217 | 1,071 |
Refund of previous year's expenditures | 782 | 1,257 |
Inventory | 112 | 2,517 |
62,994 | 88,540 | |
Less: | ||
Services received without charge | (86,080) | (76,661) |
Amortization of tangible capital assets (Note 7) | (33,432) | (36,879) |
Employee Severance Benefits | (24,298) | 5,618 |
Project deposits | (2,536) | (2,977) |
Vacation pay and compensatory leave | (1,010) | 2,424 |
Expenses related to Environmental Liabilities | (748) | 7,746 |
Environmental Damage Fund | (595) | (346) |
Expenses for claims pending litigation | (583) | 25 |
Bad debt expense | (203) | (1) |
Prepaid expenses previously charged to appropriation | (41) | 113 |
Foreign exchange losses | -- | (20) |
Other | (838) | (3,261) |
(150,364) | (104,219) | |
Adjustments for items not affecting net cost of operations but affecting appropriations: | ||
Add: | ||
Acquisition of tangible capital assets (Note 7) | 50,762 | 42,225 |
Capital lease payments | 459 | 435 |
51,221 | 42,660 | |
Current year Parliamentary appropriations used | $1,120,367 | $997,031 |
(b) Appropriations provided and used:
(in thousands of dollars) | 2009 | 2008 |
Vote 1 – Operating expenditures | $798,246 | $759,649 |
Vote 5 – Capital expenditures | 51,129 | 40,612 |
Vote 10 – Grants & Contributions | 200,622 | 293,178 |
Statutory amounts | 147,353 | 154,070 |
1,197,350 | 1,247,509 | |
Less: | ||
Appropriations available for future years | (162) | (115) |
Lapsed appropriations | (76,821) | (250,363) |
(76,983) | (250,478) | |
Total appropriations used | $1,120,367 | $997,031 |
(c) Reconciliation of net cash provided by Government of Canada to current year Parliamentary appropriations used:
(in thousands of dollars) | 2009 | 2008 |
Net cash provided by Government | $1,094,078 | $978,789 |
Revenues not available for spending | 13,783 | 13,520 |
Refund of previous year’s expenditures | 782 | 1,257 |
1,108,643 | 993,566 | |
Change in net position in the Consolidated Revenue Fund | ||
Variation in accounts receivable and advances | (3,309) | 7,675 |
Variation in accounts payable and accrued liabilities | (29,428) | (70,117) |
Variation in deferred revenue | (186) | (607) |
Expenses not being charged to Appropriations at the same time | 46,100 | 70,175 |
Other adjustments | (1,453) | (3,661) |
11,724 | 3,465 | |
Current year Parliamentary appropriations used | $1,120,367 | $997,031 |
4. Expenses
(in thousands of dollars) | 2009 | 2008 |
---|---|---|
Operations and administration | ||
Salaries and employee benefits | $653,169 | $590,207 |
Professional and special services | 89,058 | 78,358 |
Accommodation | 46,385 | 44,691 |
Other contracted services | 45,709 | 34,594 |
Travel | 40,843 | 34,114 |
Machinery & equipment | 39,357 | 32,305 |
Amortization | 33,432 | 36,879 |
Rentals | 32,909 | 28,494 |
Materials and supplies | 29,963 | 21,937 |
Telecommunications | 15,556 | 15,282 |
Equipment repair and maintenance | 14,208 | 13,422 |
Postage | 4,271 | 4,018 |
Information services – communications | 3,693 | 8,983 |
Environmental liabilities | 1,332 | (7,746) |
Loss on disposal of capital assets | 688 | 2,251 |
Other | 914 | 785 |
Sub-total Operations and administration | 1,051,487 | 938,574 |
Transfer payments | ||
Non-profit organizations | 163,412 | 87,800 |
Other countries and international organizations | 12,523 | 13,115 |
Other levels of governments within Canada | 6,826 | 7,302 |
Other to individuals | 3,285 | 3,268 |
Industry | 222 | 63 |
Sub-total transfer payments | 186,268 | 111,548 |
Total Expenses | $1,237,755 | $1,050,122 |
5. Revenues
(in thousands of dollars) | 2009 | 2008 |
---|---|---|
Sales of goods and services | ||
Sales of goods and information products | $44,991 | $43,570 |
Services of a non-regulatory nature | 24,230 | 21,560 |
Services of a regulatory nature | 5,448 | 5,141 |
Lease and use of public property | 2,786 | 4,615 |
Rights and privileges | 447 | 616 |
Sub-total sales | 77,902 | 75,502 |
Other | ||
Joint projects and cost sharing agreements | 2,555 | 2,987 |
Other | 782 | 1,582 |
Sub-total | 3,337 | 4,569 |
Total revenues | $81,239 | $80,071 |
6. Accounts receivable and advances
(in thousands of dollars) | 2009 | 2008 |
---|---|---|
Receivables from external parties | $4,401 | $3,337 |
Receivables from other Federal Government departments and agencies | 6,565 | 4,221 |
10,966 | 7,558 | |
Less: allowance for doubtful accounts on external receivables | (503) | (444) |
Net accounts receivables | 10,463 | 7,114 |
Employee advances | 151 | 191 |
Total | $10,614 | $7,305 |
7. Tangible capital assets
Cost (in thousands of dollars) | Opening Balance | Acqui- sitions | Disposals and write-offs* | Closing Balance |
---|---|---|---|---|
Land | $25,244 | -- | -- | $25,244 |
Buildings | 150,323 | 491 | 16 | 150,798 |
Works and infrastructure | 3,845 | 210 | -- | 4,055 |
Machinery and equipment | 430,634 | 20,231 | 5,000 | 445,865 |
Vehicles | 37,390 | 7,108 | 2,830 | 41,668 |
Leasehold improvements | 34,992 | 305 | -- | 35,297 |
Assets under construction | 87,599 | 22,417 | 332 | 109,684 |
Capital lease for office and laboratory space | 18,213 | -- | 14 | 18,199 |
$788,240 | $50,762 | $8,192 | $830,810 | |
Accumulated amortization (in thousands of dollars) | Opening Balance | Amorti- zation | Disposals and write-offs | Closing Balance |
---|---|---|---|---|
Buildings | $83,255 | $5,136 | $11 | $88,380 |
Works and infrastructure | 1,966 | 150 | -- | 2,116 |
Machinery and equipment | 312,116 | 22,832 | 4,891 | 330,057 |
Vehicles | 24,986 | 3,169 | 2,045 | 26,110 |
Leasehold improvements | 20,428 | 1,416 | -- | 21,844 |
Capital lease for office and laboratory space | 4,370 | 729 | 4 | 5,095 |
$447,121 | $33,432 | $6,951 | $473,602 | |
Net book value (in thousands of dollars) | Opening Balance | Closing Balance | ||
---|---|---|---|---|
Land | 25,244 | 25,244 | ||
Buildings | 67,068 | 62,418 | ||
Works and infrastructure | 1,879 | 1,939 | ||
Machinery and equipment | 118,518 | 115,808 | ||
Vehicles | 12,404 | 15,558 | ||
Leasehold improvements | 14,564 | 13,453 | ||
Assets under construction | 87,599 | 109,684 | ||
Capital lease for office and laboratory space | 13,843 | 13,104 | ||
Net Book Value | $341,119 | $357,208 |
Amortization expense for the year ended March 31, 2009 is $33,431,975 ($36,879,108 in 2008).
* Assets under construction include: buildings, engineering works, softwares and other construction. Disposals include those Assets under construction that have been placed in service. Assets that are still under construction are not treated as a depreciable asset.
8. Deferred Revenue
Deferred revenue represents the balance at year-end of unearned revenue stemming mainly from special purpose accounts,funds for joint projects with other parties and donations which are restricticted to specific purposes. The presentation has been modified to include special purpose accounts and joint projects which were previously reported under other liabilities. Revenue is recognized each year in the amount of the total cost incurred. Details of the transactions related to this account are as follow:
(in thousands of dollars) | 2009 | 2008 |
Opening balance | $5,333 | $5,940 |
Donations received | 11 | 200 |
Project deposits | 2,359 | 2,306 |
Revenue recognized | (2,556) | (3,113) |
Closing balance | $5,147 | $5,333 |
9. Lease obligation for tangible capital assets
On October 13, 2000, Environment Canada entered into an agreement to rent office and laboratory space from Carleton University, for the National Wildlife Research Centre (NWRC), under capital lease which expires in 2028. Current cost is of $18,212,685 and accumulated amortization of $5,094,933 as at March 31, 2009 ($18,212,685 and $4,369,842 respectively as at March 31, 2008).
The obligation for the upcoming years includes the following:
(in thousands of dollars) | 2009 | 2008 |
Maturing year | ||
2010 | $1,300 | $1,300 |
2011 | 1,300 | 1,300 |
2012 | 1,300 | 1,300 |
2013 | 1,300 | 1,300 |
2014 and thereafter | 18,200 | 19,500 |
Total future minimum lease payments | 23,400 | 24,700 |
Less: imputed interest (5.63%) | 8,925 | 9,766 |
Balance of obligation under leased tangible capital assets | $14,475 | $14,934 |
10. Employee Benefits
(a) Pension benefits
Environment Canada’s employees participate in the Public Service Pension 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% per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Québec Pension Plans benefits and they are indexed to inflation.
Both the employees and Environment Canada contribute to the cost of the Plan. The 2008-2009 expense amounts to $58,601,522 ($59,113,373 in 2007-2008) which represents approximately 2.0 times the contributions by employees (2.1 times in 2007-2008).
Environment Canada'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
Environment Canada provides severance benefits to its employees based on eligibility, years of service and final salary. These severance benefits are not pre-funded. Benefits will be paid from future appropriations. Information about the severance benefits, measured as at March 31, is as follows:
(in thousands of dollars) | 2009 | 2008 |
Employee severance benefits, beginning of year | $105,184 | $110,801 |
Expense for the year recorded as employee benefits | 32,782 | 2,738 |
Benefits paid during the year | (8,941) | (8,355) |
Employee severance benefits, end of year | $129,025 | $105,184 |
Notes to the Financial Statements (Unaudited)
11. Contingent liabilities
(a) Contaminated sites
Liabilities are accrued to record the estimated costs related to the management and remediation of contaminated sites where Environment Canada is obligated to incur or likely to be obligated to incur such costs. Environment Canada does an annual review of all contaminated sites and as such Environment Canada has identified 10 projects (15 in 2007-2008) where such action is possible and for which a liability of $56,268,622 ($55,520,174 in 2007-2008) has been recorded. Environment Canada has estimated a contingent liability of $60,710,707 ($45,486,719 in 2007-2008) where it is unclear whether the department is obligated to incur such costs or to potentially incur any additional costs. Environment Canada's ongoing efforts to assess contaminated sites may result in additional environmental liabilities related to newly identified sites, or changes in the assessments or intended use of existing sites. These liabilities will be accrued by Environment Canada in the year in which they become known.
(b) Claims and litigation
Environment Canada records an allowance for claims and pending or threatened litigation where cases are expected to be lost and where the cost can be reasonably estimated. 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 in the financial statements. At March 31, 2009, Environment Canada had contingent liabilities identified as likely for claims and for pending and threatened litigation which were recorded as expenses for an amount of $495,000 which is included under other liabilities along with contractors holdback ($1,200,000).
12. Contractual Obligations
The nature of Environment Canada's activities can result in some large multi-year contracts and obligations whereby Environment Canada will be obligated to make future payments when the services/goods are received. The costs identified for the supercomputer are estimates based on current expenditures. The current lease expires in February 2012. Future obligations regarding the Super Computer are unknown at this time. A new contract will be required to ensure continuity of this function. Significant contractual obligations that can be reasonably estimated are summarized as follows:
(in thousands of dollars) | Operating Leases | Super Computer | Total |
---|---|---|---|
2010 | $7,900 | $8,025 | $15,925 |
2011 | 7,900 | 7,946 | 15,846 |
2012 | 7,900 | 7,211 | 15,111 |
2013 | 7,900 | -- | 7,900 |
2014 | 7,900 | -- | 7,900 |
Thereafter | 221,894 | -- | 221,894 |
Total | $261,394 | $23,182 | $284,576 |
13. Related party transactions
Environment Canada is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations. The Government has structured some of its administrative activities for efficiency and cost-effectiveness purposes so that one department performs these on behalf of all without charge. The costs of these services, which include payroll and cheque 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 Environment Canada’s Statement of Operations. There are other types of services received without charge, such as accommodation, certain employee benefits, workers’ compensation cost and legal services which are attributed to Environment Canada and are disclosed in Environment Canada’s Statement of Operations in the following amounts:
(a) Services received without charge:
(in thousands of dollars) | 2009 | 2008 |
Employer's contribution to the health and dental insurance plans | $40,588 | $32,813 |
Accommodation | 40,364 | 38,784 |
Legal services | 3,476 | 3,735 |
Workers’ compensation cost | 1,652 | 1,329 |
Total | $86,080 | $76,661 |
(b) Payables and receivables outstanding at year-end with related parties:
(in thousands of dollars) | 2009 | 2008 |
Accounts receivable from other government departments and agencies | $6,565 | $4,221 |
Accounts payable to other government departments and agencies | 10,814 | 15,602 |
14. Comparative information
Comparative figures have been reclassified to conform to the current year's presentation. This includes the reclassification of Tangible Capital Assets from seven accounts into four accounts and reflecting Special Purposes accounts as Deferred Revenues instead of Other
Notes to Reader
With the Treasury Board Policy on Internal Control, effective April 1, 2009, departments are required to demonstrate the measures they are taking to maintain an effective system of internal control over financial reporting.
As part of this policy departments are expected to conduct annual assessments of their system of internal control over financial reporting, establish action plan(s) to address any necessary adjustments, and to attach to their Statement of Management Responsibility Including Internal Control over Financial Reporting a summary of their assessment results and action plan.
Effective systems of internal control over financial reporting aim to achieve reliable financial statements and to provide assurances that:
- transactions are appropriately authorized
- financial records are properly maintained
- assets are safeguarded from risks such as waste, abuse, loss, fraud and mismanagement
- applicable laws, regulations and policies are followed
It is important to note that the system of internal control over financial reporting is not designed to eliminate all risks, rather to mitigate risk to a reasonable level with controls that are balanced with and proportionate to the risks they aim to mitigate.
The system of internal control over financial reporting is designed to mitigate risks to an acceptable level based on an on-going process to identify key risks, to assess the effectiveness of associated key controls and adjust as required, as well as to monitor the system in support of continuous improvement. As a result, the scope, pace and status of departmental assessments of the effectiveness of the system of internal control over financial reporting will vary from one organization to another based on risks and taking into account their unique circumstances.
Annex to the Statement of Management Responsibility
1. Introduction
This document is attached to the Environment Canada Statement of Management Responsibility Including Internal Control Over Financial Reporting for the fiscal-year 2011-2012. As required by Treasury Board Policy on Internal Control, this document provides summary information on the measures taken by Environment Canada to maintain an effective system of internal control over financial reporting (ICFR). In particular, it provides summary information on the assessments conducted by Environment Canada as of March 31, 2012, including progress, results and related action plans along with some financial highlights pertinent to understanding the control environment unique to Environment Canada.
ICFR is a process designed to provide reasonable assurance regarding the reliability of financial disclosures and the preparation of financial statements for external purposes in accordance with applicable accounting policies. This is the third ICFR Annex produced by this Department.cial reporting and the preparation of financial statements for external purposes in accordance with applicable accounting policies. This is the second ICFR Annex produced by this department.
1.1 Authority, Mandate and Program Activities
Environment Canada is the federal lead Department on a wide range of environmental issues important to Canadians. Environment Canada addresses these issues through research, policy development, service delivery to Canadians, regulation and enforcement of environmental laws, and strategic partnerships. The Department's programs are focused on conserving and restoring Canada's natural environment; equipping Canadians to make informed decisions on weather, water and climate conditions; and minimizing threats to Canadians and their environment from pollution. The scope of these programs illustrates how the Department is responding to the interdependence between environmental sustainability and economic well-being.nvironment Canada is the federal lead department on a wide range of environmental issues facing Canadians. As a science-based department, Environment Canada addresses these issues through research, policy development, service delivery to Canadians, regulation and enforcement of environmental laws, and strategic partnerships. Programs are focused on conserving and restoring Canada’s natural environment; equipping Canadians to make informed decisions on weather, water and climate conditions; and minimizing threats to Canadians and their environment from pollution. The department’s program focus reflects the increasingly evident interdependence between environmental sustainability and economic well-being. A number of acts and regulations provide the department with its mandate and allow it to carry out its programs.
Further information on Environment Canada's authority, mandate and program activities can be found in the Report on Plans and Priorities and Departmental Performance Report.
1.2 Financial highlights
Below is key financial information for fiscal-year 2010-2011. More information can be found in Environment Canada’s Financial Statements (unaudited) and in the Public Accounts of Canada .
- Environment Canada has four departmental accounting offices. Each has a decentralized finance and accounting function where operating expenses are approved and processed.
- Total expenses were $1,231.7M. Salaries and Employee Benefits were the largest expense, accounting for 58% or $709.7M.
- Total revenues were $79.6M. Major revenue items include Ocean disposal permit applications, Hydraulics laboratory, and Ocean disposal monitoring fees.
- Financial assets and non-financial assets each comprise about $211.2M and $395.0M (35% and 65% respectively) of the department’s total assets, which are $606.2M.
- Total liabilities were $458.0M. Accounts payable and accrued liabilities represent the majority of liabilities (41%), followed by Employee future benefits (25%)
- Net cash provided by the Government of Canada totalled $1,110.4M.
1.3 Service arrangements relevant to financial statements
Environment Canada relies on other organizations for the processing of certain transactions that are recorded in its financial statements.
- Public Works and Government Services Canada (PWGSC) centrally administers the payments of salaries and expenditures, and the procurement of goods and services, as per the Department's Delegation of Authority.
- Accommodations are provided without charge from PWGSC totaling $48.5 million throughout the year.
- The Treasury Board Secretariat provides Environment Canada with information used to calculate some accruals and allowances, such as accrued severance liability.
- The Department of Justice provides legal services to Environment Canada totaling $3.160 million.
- Shared Services Canada (SSC) was established on August 4, 2011, to consolidate, Government. On November 15, 2011, Environment Canada became a partnering organization of SSC through Order in Council and related funds and personnel were transferred at that time. On April 1, 2012, Environment Canada's email, data centre (including the Super Computer), and networks were officially under accountability of SSC.
1.4 Material changes in fiscal-year 2011-2012
Departmental Strategic and Operating Review
During 2011-2012, the Department went through a Strategic Review exercise with the dual objective of reducing expenditures and ensuring that its resources remained allocated to departmental priorities and core services. In light of fiscal restraints, Environment Canada Department. A realignment of enabling functions to support corporate priorities resulted in a new Corporate Services Branch, integrating Information Management and Information Technology (IM&IT) services with Asset, Contracting and Environmental Management.
Governance Oversight
Effective February 1, 2012, Environment Canada's governance structure evolved, introducing new approaches to policy discussions and internal horizontal management with a move away from the previous "board" structure. The model introduces a new Deputy Minister-led forum for policy development. The Governance model supports horizontal collaboration, facilitates Headquarters / Regional interface, and works to address having the right resources address the right issues towards timely decisions. This also resulted in a newly formed Finance Branch.
Senior Management Team
Changes to the senior management team during 2011-2012 reporting directly to the Deputy Minister include:
- Andrea Lyon was appointed Associate Deputy Minister (July 11, 2011);
- Carol Najm, previously the Director General of the Audit and Evaluation Branch and Chief Audit Executive of Environment Canada, Chief Financial Officer and Assistant Deputy Minister of the new Finance Branch (January 26, 2012);
- George Enei was appointed Assistant Deputy Minister of the new Corporate Services Branch, integrating the former Chief Information Officer Branch services with administrative services including the Asset, Contracting and Environmental Management Directorate which was previously aligned under the Finance and Corporate Branch (January 26, 2012); and
- Robert D’Aoust was appointed Acting Director General of the Audit and Evaluation Branch and Chief Audit Executive of Environment Canada (January 26, 2012)
2. Environment Canada's control environment relevant to Internal Control Over Financial Reporting
Senior Management of Environment Canada provide the leadership to help ensure that staff at all levels in the Department understand the purpose and importance of maintaining risk-based effective internal control systems as well as their roles and responsibilities in support of sound stewardship of public resources and reliable financial reporting. Environment Canada's focus relative to ICFR is to ensure that risks are well managed through a responsive and risk-based control environment that enables continuous improvement and innovation.Canada provide the leadership to help ensure that staff at all levels in the department understand the purpose and importance of maintaining risk-based effective internal control systems as well as their roles and responsibilities in support of sound stewardship of public resources and reliable financial reporting. Environment Canada’s focus is to ensure that risks are well managed through a responsive and risk-based control environment that enables continuous improvement and innovation.
2.1 Key positions, roles and responsibilities
Below are Environment Canada's key positions and committees with responsibilities for maintaining and reviewing the effectiveness of its system of ICFR.
Deputy Minister – Environment Canada's Deputy Minister, as Accounting Officer, assumes overall responsibility and leadership for the measures taken to maintain an effective system of internal control.
Chief Financial Officer (CFO) – Environment Canada's CFO reports directly to the Deputy Minister and provides leadership for the coordination, coherence and focus on the design and maintenance of an effective and integrated system of ICFR, including its annual assessment. The CFO is also responsible for the Corporate Risk Profile of Environment Canada.
Senior Departmental Managers - Environment Canada's Senior Departmental Managers in charge of program delivery are responsible for reviewing and maintaining the effectiveness of their system of ICFR within their mandate.
Chief Audit Executive (CAE) – Environment Canada's CAE reports directly to the Deputy Minister and undertakes periodic reviews of the effectiveness of the system of internal control, including ICFR, as part of the department's Risk Based Audit Plan, and provides assurance through periodic internal audits which are instrumental to the maintenance of an effective system of ICFR.
External Audit Advisory Committee (EAAC) – The EAAC is an independent external advisory committee that provides the Deputy Minister with advice and objective views on the Department's risk management, control and governance frameworks. It provides advice on the adequacy of the financial reporting, financial disclosures and the systems of internal control, including the review the annual Statement of Management Responsibility Including Internal Control over Financial Reporting and on risk-based assessment plans and associated results related to the effectiveness of the departmental system of ICFR.
Executive Management Committee (EMC) - This is the most senior management committee with oversight responsibilities for the Department. EMC is responsible for monitoring the organization's response to corporate risks and ensuring the effectiveness of risk mitigation measures and that controls are in place to address key corporate risks.
2.2 Key measures taken by Environment Canada
Environment Canada's control environment includes a series of measures which focus on ensuring that risks are effectively managed through a responsive and risk-based control environment, and on developing employee knowledge on internal control. Key measures include:
Governance
- A Values, Integrity and Disclosure program designed to reinforce Public Service values and ethics.
- An annual review of the Delegation of Financial Signing Authorities matrix.
- An Integrated Risk Management Framework and multi-year Corporate Risk Profile.
- An Internal Audit Directorate, reporting directly to the Deputy Minister and supported by the independent EAAC, which supports the achievement of departmental objectives and continuous improvement of programs, policies and initiatives, guided by a three-year Risk Based Audit Plan reviewed annually.
- Annual Performance Management Agreements with Senior Departmental Managers that assess accountabilities and financial management responsibilities.
- A Letter of Representation for Public Accounts signed by each Senior Departmental Manager as confirmation that their respective organizations have maintained a system of internal control.
Oversight
- A centralized ICFR program based upon the renewed departmental Internal Control Framework.
- A centralized quality assurance unit within Finance Operations that specifically monitors key Financial Transaction and Reporting Controls.
- A Corporate Accountability and Administrative Renewal (CAAR) governance structure that includes senior level Steering Committees.
- A Management Variance Report process that informs decision making and supports riskbased resource management and decisions, reviewed monthly by Senior Departmental Managers.
- Regular departmental EAAC meetings.
Capacity
- Training programs and regular communication to employees on core areas of financial management and financial policies, including a training strategy on the renewed departmental Financial Management Framework.
- Mandatory Canada Public School financial courses incorporated in the learning plan of financial specialists to ensure a skilled workforce.
- Hiring through the Environment Canada version of the Financial Officer Recruitment and Development (FORD) Program to maintain a strong finance community.
3. Assessment of Environment Canada’s system of ICFR
Canada must be able to maintain an effective system of ICFR with the objective to provide reasonable assurance that: Transactions are appropriately authorized; Financial records are properly maintained; Assets are safeguarded; and Applicable laws, regulations and policies are followed.
3.1 Assessment approach
To meet these objectives, over time, this includes the assessment of documentation, and design and operating effectiveness of the system of ICFR leading to ongoing monitoring and continuous improvement of the departmental system of ICFR.
- Design effectiveness means ensuring that key control points are identified, documented, in place and that they are aligned with the risks (i.e. controls are balanced with and proportionate to the risks they aim to mitigate) and that any required remediation is addressed.
- Operating effectiveness means that key controls have been tested over a defined period and that any required remediation is addressed. The testing of controls covers all departmental control levels which include corporate or entity, general computer and business process controls.
In 2009, Environment Canada completed an initial audit readiness assessment to determine its ability to sustain a controls-based audit of the departmental financial statements. This assessment, which met the requirements of the Treasury Board Policy on Internal Control, was used as the basis from which Environment Canada began to develop an approach to implement ICFR.
Subsequently, Environment Canada employs an annual financial statement risk assessment process that covers all departmental control levels including, Entity Level controls, Information Technology general controls (ITGCs), and Financial Transaction and Reporting (business process) controls.
3.2 Scope of departmental assessment during fiscal year 2011-2012
In the planning and scoping phase, a risk based approach was used to determine which control level, processes and locations were in scope. The table below highlights the areas of assessment focus based upon the assessed risks relative to Environment Canada's expenditures.
The following depicts the overall approach and the key elements of the assessment process:
Control Level | Scope |
Entity Level Controls | Entity Level Control Environment Assessment Corporate Risk Profile and Risk Management Information and Communication Monitoring |
Information Technology General Controls (ITGCs) | Accessent Program Development IT Operations End User Computing |
Financial Transaction and Reporting Controls | Inventory Capital Assets Procure to Payment (Travel, Acquisition Card, and Hospitality processes) Procure to Payment (De-commitment process subsequently added) Pay Administration (subsequently added) Year End Reporting (subsequently added) Transfer Payments (subsequently deferred) |
The assessment process covers all departmental control levels which include entity level controls, information technology (IT) level controls and financial transaction and reporting (business processes) level controls.
4. Departmental assessment results during fiscal year 2011-2012
In assessing its key controls, Environment Canada continued to focus on design effectiveness testing which was significantly advanced during the year and will continue in 2012-2013. Also,
operating effectiveness testing of controls commenced during 2011-2012 on a number of key Procure to Payment processes.
4.1 Design effectiveness of key controls
As part of the design effectiveness assessment phase highlighted in Section 3.1, Environment Canada is in the process of completing the following remedial activities to address internal control weaknesses at the design level.
Entity Level Controls:
- Commenced work towards the development of a refreshed departmental Financial Management Framework and work is underway to finalize this framework
- Updated and prepared a draft of the Financial Management Policy Suite
- Prepared draft of a departmental Internal Control Framework, which includes establishing a sustainable approach to maintain a program of continuous control monitoring at the department level
- Commenced the update of month-end procedures and the Accounting Manual Handbook
- Implemented, in conjunction with new Treasury Board directives, mandatory training for the Finance community
Information Technology Level Controls:
- Substantial progress has been made in addressing the identified IT financial control deficiencies
- All of the high risk areas, were found to be well addressed by the work undertaken to date. The high risk areas were around segregation of duties, access controls and change management
- A few controls were found to still have moderate issues to address, each posing a medium level of residual risk to the department. The first of these two is regarding eliminating active accounts that are assigned to former employees; and the second is to ensure that activity by privileged Oracle Financial (Merlin) users is monitored
- The remaining control gaps were found to be largely effective with only minor issues that need to be addressed – each posing a low level of risk to the department
- A release management process was established to deal with the complexity of financial systems in order to guarantee the success and long-term value of a product or project
Financial Transaction and Reporting Level Controls:
- Strengthened the processes to evaluate and approve Grants & Contributions recipient eligibility
- Implemented monitoring standards for payables at year-end (PAYE) and for receivables at year-end (RAYE)
- Implemented an improved post audit process on payments across all regions
- Implemented a financial coding tool, including a roll-out plan and training schedules
- Implemented centralized G/L coding / cost centre administration
- Strengthened internal monitoring and review of the environmental liability reporting process
- Implemented formal procedures for cut-off of payables and accruals at year-end and strengthened procedures around period-end accounting processes
- Implemented formal sign-off of Receiver General Public Accounts submissions
- Developed, validated and approved the documentation for the following business processes and their key controls: Travel; Hospitality; and Acquisition Cards. Documentation of other processes is underway
- Provided greater clarity of roles and responsibilities as well as improved challenge functions and quality assurance within Finance Operations and over disclosures in the financial statements
4.2 Operating effectiveness of key controls
In 2010-2011, Environment Canada commenced the development of a risk-based testing approach to identify key controls to be tested over a defined period of time, including the selection of locations, the test period as well as the method and frequency of testing. Operating effectiveness assessment will not commence until all remediation of design effectiveness, have been implemented. When completing operating effectiveness testing, the department will ensure that key controls are well functioning over a specified period of time.
Monitoring is in place for specific key controls and will be strengthened with the implementation of the risk based operating effectiveness assessment and remediation process currently underway.
5. Environment Canada’s action plan
Environment Canada is in year 3 of its ICFR Five-Year Plan and the overall project is on track. A risk-based approach for ensuring efficient and effective internal control management has been established (see Section 3.2 for results of the 1st assessment). The ICFR project is two-pronged:
1) This program component focuses on bringing remediation work that emanated from Environment Canada’s Audit Readiness Assessment to a close. In summary, the following outcomes were achieved to date:
- A follow-up Audit of IT Financial Controls has concluded that substantial progress has been made in addressing the IT financial control recommendations
- Half of the transactional level control weaknesses have been remediated
- For controls at the entity-level, a project plan was developed and a draft Financial Management Framework and its underlying components have been developed and work is underway to finalize it and proceed with implementation
2) This particular program component focuses on implementing a sustainable enabling program for internal control management and to institutionalize a culture of continuous improvement and excellence in the area of internal control. In summary, the following milestones were achieved:
- A cyclical financial reporting risk assessment function was established and the first risk assessment was conducted in March 2011
- An operational plan for internal control management was developed using the risk assessment which informs the priority and timing of the deliverables within the overall ICFR Five-Year Plan
5.1 Progress as of March 31, 2011
Environment Canada continued to update and develop formal documentation and remediation of control weaknesses (refer to Section 4.1 for a listing of key controls remediation). Key progress was made over the year as follows:
- Commenced work towards the significant control assessment and remediation required around asset / inventory and valuation - the work in this area will span 3 years of the 5-Year Plan. The validation of departmental asset records commenced in 2010-11 and is estimated to be completed by March 31, 2012
- Developed, validated and approved financial transaction and reporting controls documentation (process maps and control matrices) for Travel, Hospitality and Acquisition Cards processes. Progress on business process documentation and standardization will continue using a risk based approach as planned
- Incorporated into project timelines the Treasury Board established schedule for implementation of common business processes
- Upgraded the financial systems to a new Linux platform to be ready to migrate to Oracle R12 or Government of Canada common SAP environment.
- Updated and prepared a draft of the Financial Management Policy Suite, currently in the approval stages, and began work to refresh the departmental Financial Management Framework
- Strengthened the Finance and Integrated Enterprise Services teams with an increased focus on quality assurance, greater clarity of roles and responsibilities as well as improved challenge functions and quality assurance
5.2 Action plan for the next fiscal year and subsequent years
Over 2011-2012, subject to available resources, Environment Canada will focus on the finalization and implementation of a Departmental Internal Control Framework and the development of a governance structure for Internal Control Management in accordance with the ICFR Five-Year Action Plan. In parallel, efforts will be concentrated as follows:
- Pursuant to the financial reporting risk assessment conducted in March 2011, Environment Canada will undertake a review of specific business processes by starting with the highest risk areas. In 2011-2012, the focus will be on Inventory, Capital Assets, and Procure-to-Pay processes (based on OCG Common Financial Management Business Processes). Subsequent to 2011-2012, the focus will be on documenting and testing control design effectiveness in the areas of Transfer Payments, Environmental Liabilities and the Financial Close process
- Evolving financial risk assessment by conducting a second risk assessment using the new methodology developed in 2010-2011
- Regular quality monitoring and reporting on internal controls will take place on a quarterly basis and continued quality assurance efforts focused on IT controls with transactional control monitoring beginning in the third quarter of the fiscal year
- The key focus areas in 2011-2012 for each control level will be:
Entity Level Controls:
- Complete entity level control documentation and conduct design effectiveness testing around entity level controls
- Develop a refreshed departmental Financial Management Framework and Internal Control Framework and associated implementation strategies, including change management and strengthening staff awareness and role clarification
Information Technology Level Controls:
- Complete operational effectiveness testing of all Information Technology general controls
- Finalize control documentation including process procedures and monitoring reporting requirements
Financial Transaction and Reporting Controls:
- Document and complete design effectiveness testing for Inventory Management, Capital Assets Management and Procure to Pay processes
- Conduct walkthroughs and control effectiveness testing for Travel, Hospitality and Acquisition Card business processes
Two significant financial disclosure risks remain pertaining to the valuation and measurement of inventory and tangible capital assets. These risks should be addressed by 2013-2014.
Environment Canada will continue with its Corporate Accountability and Administrative Renewal (CAAR) initiative to provide the foundation for strengthened ICFR for more reliable financial statement disclosures and preparedness for audit readiness.
Environment Canada is currently in year 3 of the overall Five-Year ICFR project plan to achieve auditable financial statements by April 2014. Progress in future years is subject to departmental priorities and funding availability.
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