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Unaudited Financial Statements for the period ending March 31, 2009
- 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
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
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