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Financial Statements of Department of Fisheries and Oceans Canada

Year ended March 31, 2011

Department of Fisheries and Oceans

Statement of Management Responsibility Including Internal Control Over Financial Reporting

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2011, and all information contained in these statements rests with the management of Fisheries and Oceans. These financial statements have been prepared by management in accordance with Treasury Board accounting policies, which are based on 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 in the preparation of the Public Accounts of Canada, and included in the Department’s Departmental Performance Report, is consistent with these financial statements.

Management is also responsible for maintaining an effective system of internal control over financial reporting designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are properly authorized and recorded in accordance with the Financial Administration Act and other applicable legislation, regulations, authorities and policies.

Management seeks to ensure the objectivity and integrity of data in its financial statements through careful selection, training, and development of qualified staff; through organizational arrangements that provide appropriate divisions of responsibility; through communication programs aimed at ensuring that regulations, policies, standards, and managerial authorities are understood throughout the Department; and through conducting an annual assessment of the effectiveness of the system of internal control over financial reporting.

An assessment for the year ended March 31, 2011 was completed in accordance with the Policy on Internal Control and the results and action plans are summarized in the annex.

The system of internal control over financial reporting is designed to mitigate risks to a reasonable level based on an on-going process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.

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 the quality of financial reporting, and which recommends the financial statements to the Deputy Minister.

The financial statements of the Department have not been audited.

Claire Dansereau, Deputy Minister
Ottawa, Canada
July 25, 2011
Roch Huppé, Chief Financial Officer
July 25, 2011

 

Statement of Financial Position (Unaudited)

As at March 31

(in thousands of dollars)

  2011 2010
(Restated
Note 17)
Assets
Financial Assets
Due from Consolidated Revenue Fund 288,794 291,742
Accounts receivable and advances (Note 4) 23,961 19,280
Total financial assets 312,755 311,022
Non-financial Assets
Inventory (Note 5) 26,252 39,285
Tangible capital assets (Note 6) 2,580,242 2,414,262
Total non-financial assets 2,606,494 2,453,547
 
  2,919,249 2,764,569
Liabilities
Accounts payable and accrued liabilities (Note 7) 289,390 292,537
Vacation pay and compensatory leave 72,558 74,041
Deferred revenue (Note 8) 8,849 9,645
Lease obligation for tangible capital assets (Note 9) 58 134
Other liabilities (Note 10) 30,035 30,509
Employee future benefits (Note 11) 165,074 157,524
Environmental liabilities (Note 12) 108,699 73,175
Total liabilities 674,663 637,565
Equity of Canada (Note 13) 2,244,586 2,127,004
 
  2,919,249 2,764,569

Contingent liabilities (Note 12)
Contractual obligations (Note 14)

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

Claire Dansereau, Deputy Minister
Ottawa, Canada
July 25, 2011
Roch Huppé, Chief Financial Officer
Chief Financial Officer
July 25, 2011

 

Statement of Operations (Unaudited)

For the Year Ended March 31

(in thousands of dollars)

  2011
(Planned results)
2011 2010
(Restated
Note 17)
Expenses
Safe and Accessible Waterways
Canadian Coast Guard Agency 723,402 763,616 764,136
Small Craft Harbours 141,194 146,792 135,587
Science 41,786 42,820 42,780
Sustainable Fisheries and Aquaculture
Fisheries and Aquaculture Management 365,255 375,262 360,832
Science 144,893 146,527 146,462
Healthy and Productive Aquatic Ecosystems
Habitat Management 66,925 59,875 68,324
Science 59,565 61,803 66,428
Species at Risk Management 24,051 23,195 17,379
Oceans Management 17,567 16,192 22,289
Internal Services 380,746 398,079 361,598
Total Expenses 1,965,384 2,034,161 1,985,815
Revenues
Safe and Accessible Waterways
Canadian Coast Guard Agency 38,314 41,633 44,434
Small Craft Harbours 1,072 3,659 3,775
Science 2,566 4,039 2,060
Sustainable Fisheries and Aquaculture
Fisheries and Aquaculture Management 38,541 43,368 47,490
Science 303 341
Healthy and Productive Aquatic Ecosystems
Habitat Management 22 263 368
Science 120 19 145
Species at Risk Management 12
Oceans Management 38 65
Total Revenues 80,635 93,322 98,690
Net Cost of Operations 1,884,749 1,940,839 1,887,125

Segmented information (Note 16)

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

 

Statement of Equity of Canada (Unaudited)

For the Year Ended March 31

(in thousands of dollars)

  2011 2010
(Restated
Note 17)
Equity of Canada, beginning of year 2,127,004 1,988,351
Net cost of operations (Note 15) (1,940,839) (1,887,125)
Net cash provided by Government 1,941,614 1,880,548
Change in due from the Consolidated Revenue Fund (2,948) 26,468
Services provided without charge by other government departments (Note 15) 119,755 118,762
Equity of Canada, end of year 2,244,586 2,127,004

Restricted Equity of Canada (Note 13)

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

 

Statement of Cash Flow (Unaudited)

For the Year Ended March 31

(in thousands of dollars)

  2011 2010
(Restated
Note 17)
Operating activities
Net cost of operations 1,940,839 1,887,125
Non-cash Items
Amortization of tangible capital assets (Note 6) (185,472) (175,651)
Net loss on write-offs, write-downs and disposals of capital assets (17,796) (17,911)
Services provided without charge by other government departments (119,755) (118,762)
Variations in Statement of Financial Position
Increase (Decrease) in accounts receivable and advances 4,681 628
Increase (Decrease) in inventory (13,033) 739
Decrease (Increase) in accounts payable and accrued liabilities 3,147 (26,273)
Decrease (Increase) in vacation pay and compensatory leave 1,483 (6,459)
Decrease (Increase) in other liabilities 474 (16,847)
Decrease (Increase) in employee future benefits (7,550) 11,189
Decrease (Increase) in deferred revenue 796 (578)
Decrease (Increase) in environmental liabilities (35,524) (2,720)
 
Cash used in operating activities 1,572,290 1,534,480
 
Capital Investing Activities
Acquisitions of tangible capital assets (Note 6) 374,788 347,871
Proceeds from disposal of tangible capital assets (5,540) (1,876)
 
Cash used in capital investing activities 369,248 345,995
 
Financing Activities
Decrease in lease obligations for tangible capital assets 76 73
 
Cash used in financing activities 76 73
 
Net cash provided by Government of Canada 1,941,614 1,880,548

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

 

1. Authority and purpose

The Department of Fisheries and Oceans was established under the Department of Fisheries and Oceans Act. The Department reports to Parliament through the Minister of Fisheries and Oceans.

The mandate of the Department, on behalf of the Government of Canada, is to be responsible for developing and implementing policies and programs in support of Canada’s economic, social, ecological and scientific interests in oceans and fresh waters.

The Department's guiding legislation includes the Oceans Act and the Fisheries Act. The Department is also one of the three departments responsible for the Species at Risk Act.

The Department’s three strategic outcomes are delivered through ten program activities, which are described below.

Safe and Accessible Waterways: Providing access to Canadian waterways and ensuring the overall safety and integrity of Canada's marine infrastructure for the benefit of all Canadians.

Canadian Coast Guard Agency: Provision of maritime services that contribute to the enhancement and maintenance of maritime safety and commerce, protection of the marine and freshwater environment, as well as oceans and fisheries resource management, security and other government maritime priorities via maritime expertise, Canada's civilian fleet, a broadly distributed shore infrastructure and collaboration with various stakeholders.

Small Craft Harbours: Operation and maintenance of a national system of harbours critical to Canada’s commercial fishing industry.

Science: Provision of scientific research, monitoring, advice, products and services and data management in support of Safe and Accessible Waterways.

Sustainable Fisheries and Aquaculture: Delivering an integrated fisheries and aquaculture program that is credible, science-based, affordable, effective, and contributes to sustainable wealth for Canadians while respecting Aboriginal and treaty rights.

Fisheries and Aquaculture Management: The conservation of Canada’s fisheries resources to ensure sustainable resource utilization through close collaboration with resource users and stakeholders based on shared stewardship. Fisheries and Aquaculture Management contributes to international fisheries conservation negotiations and relations, shared management of interception fisheries in international waters, management of the Aboriginal, commercial, recreational fishing in the coastal waters of Canada's three oceans and creating the conditions for a vibrant and innovative aquaculture industry and for an economically prosperous fishing sector as a whole.

Science: Provision of scientific research, monitoring, advice, products and services and data management in support of Sustainable Fisheries and Aquaculture.

Healthy and Productive Aquatic Ecosystems: Ensuring the sustainable development and integrated management of resources in or around Canada's aquatic environment and carrying out critical science and fisheries management activities.

Oceans Management: Conservation and sustainable use of Canada's oceans in collaboration with other levels of government, Aboriginal organizations and other non-government stakeholders through the development and implementation of objectives-based integrated oceans management plans and the application of marine conservation tools.

Habitat Management: Protection and conservation of freshwater and marine fish habitat, in collaboration with others, through a balanced application of regulatory and non-regulatory activities, including reviewing development proposals, conducting environmental assessments and monitoring compliance and effectiveness.

Species At Risk Management: Development of recovery strategies, action plans and management plans for all aquatic species; promoting recovery implementation and monitoring of marine and anadromous (moving between fresh and salt water) species over which the federal government has exclusive jurisdiction; and promoting freshwater species for which certain provinces have specific delegated responsibilities related to fisheries management through regulations under the Fisheries Act.

Science: Provision of scientific research, monitoring, advice, products and services and data management in support of Healthy and Productive Aquatic Ecosystems.

Internal Services: Activities and resources that are administered to support the needs of programs and other corporate obligations of an organization. These groups are: Management and Oversight Services; Communications Services; Legal Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Services; Materiel Services; Acquisition Services; and Travel and Other Administrative Services. Internal Services include only those activities and resources that apply across an organization and not to those provided specifically to a program.

 

2. Summary of Significant Accounting Policies

These financial statements have been prepared in accordance with the Treasury Board accounting policies stated below, which are based on Canadian generally accepted accounting principles for the public sector. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian generally accepted accounting principles.

Significant accounting policies are as follows:

  1. Parliamentary authorities: The Department is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Department do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting. The planned results amounts in the Statement of Operations are the amounts reported in the future-oriented financial statements included in the 2010-2011 Report on Plans and Priorities.
  2. 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.
  3. Amounts due from/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 appropriations to discharge its liabilities.
  4. Revenues:

    Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.

    Funds received from external parties for specified purposes are recorded upon receipt as deferred revenue. These revenues are recognized in the period in which the related expenses are incurred.

    Funds that have been received are recorded as deferred revenue, provided the Department has an obligation to other parties for the provision of goods, services or the use of assets in the future.

    Other revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenue takes place.

  5. Expenses – Expenses are recorded on the accrual basis:

    Grants are recognized in the year in which the conditions for payment are met. 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, provided that the transfer is authorized and a reasonable estimate can be made.

    Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.

    Services provided without charge by other government departments for accommodation, employer contributions to the health and dental insurance plans, legal services and workers' compensation are recorded as operating expenses at their estimated cost.

  6. Employee future benefits
    • Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. The Department’s contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. Current legislation does not require the Department to make contributions for any actuarial deficiencies of the Plan.
    • Severance benefits: Employees are entitled to severance benefits, as provided for 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.
  7. Accounts and loans receivables are stated at the lower of cost and net recoverable value; a valuation allowance is recorded for receivables where recovery is considered uncertain.
  8. 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.
  9. 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 the Department becomes aware of the contamination and is obligated, or is likely to be obligated to incur such costs. If the likelihood of the Department’s obligation to incur these costs is not determinable, or if an amount cannot be reasonably estimated, the costs are disclosed as contingent liabilities in the notes to these financial statements.
  10. Inventory:
    • Inventory held for resale consists of supplies for the production of publications and publications which will be sold in the future. It is valued at the lower of cost or net realizable value.
    • Inventories held for future program delivery consist of spare parts, material and supplies. They are valued at cost or net realizable value. Items for which the cost is not readily available have been valued using management’s best estimate of original cost.
  11. 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. The Department does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian Reserves or museum collections.

    Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:

    Asset Class Amortization Period
    Buildings 10-40 years
    Work and infrastructure 5-75 years
    Machinery and equipment 3-25 years
    Informatics 3-5 years
    Other equipment, including furniture 5-10 years
    Ships and boats 5-40 years
    Aircrafts 15-25 years
    Vehicles 5-20 years
    Leasehold improvements *
    Capital lease **

    * The lesser of the economic life of the improvement or the lease term
    ** Over the period of expected use, i.e., the economic life or lease term

    Work in progress are recorded in the applicable capital asset class in the year that they become available for use and are not amortized until they become available for use.

  12. Measurement uncertainty: The preparation of these financial statements 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 the allowance for vacation pay and compensatory leave, allowance for bad debts, environmental liabilities, the useful life of tangible capital assets, contingent liabilities and the liability for employee severance benefits. Actual results could differ significantly 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 Authorities

The Department receives most of its funding through annual Parliamentary authorities. Items recognized in the statement of operations and the 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)

  2011 2010
(Restated
Note 17)
 
Net cost of operations 1,940,839 1,887,125
Adjustments for items affecting net cost of operations but not affecting authorities
 
Revenue not available for spending 57,059 55,539
Amortization of tangible capital assets (Note 6) (185,472) (175,651)
Net loss on write-offs, write-downs and disposals of capital assets (17,796) (17,911)
Services provided without charge by other government departments (119,755) (118,762)
Increase (Decrease) in inventory (13,033) 739
Decrease (Increase) in vacation pay and compensatory leave 1,483 (6,459)
Decrease (Increase) in environmental liabilities (35,524) (2,720)
Decrease (Increase) in employee future benefits (7,550) 11,189
Earmarked supplementary fish fines (Note 13) (254) 672
Other (1,962) (468)
Total adjustments for items not affecting authorities (322,804) (253,832)
 
Adjustments for items not affecting net cost of operations but affecting authorities
Acquisitions of tangible capital assets 374,788 347,871
Decrease in lease obligations for tangible capital assets 76 73
Total adjustments for items affecting authorities 374,864 347,944
 
Current year authorities used 1,992,899 1,981,237
(b) Authorities provided and used

(in thousands of dollars)

  2011 2010
Authorities provided
Vote 1 - Operating expenditures 1,344,584 1,346,613
Vote 5 - Capital expenditures 453,686 428,606
Vote 10 - Grants and contributions 133,416 131,074
Statutory amounts 141,367 142,706
Less:
Authorities available for future years (4,432) (724)
Lapsed authorities (75,722) (67,038)
Current year authorities used 1,992,899 1,981,237

 

4. Accounts receivable and advances

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

(in thousands of dollars)

  2011 2010
Receivables
Receivables from external parties 33,594 35,146
Receivables from other federal government departments and agencies 16,755 10,687
Accrued interest on loans 1,556 1,556
Refunds of program expenses 274 266
Less:
Allowance for doubtful accounts (28,428) (28,624)
Total receivables 23,751 19,031
 
Loans and advances
Loans (1) 1,472 1,472
Accountable advances 210 249
Less:
Allowance on loans (1,472) (1,472)
 
Total loans and advances 210 249
 
Total accounts receivable and advances 23,961 19,280

(1) Loans of $1.4 million have been made to haddock fishermen ($1.3 million, interest of 8% per annum, repayable over 4 years until 1979) and to Canadian producers of frozen groundfish ($0.1 million, interest of 13 % per annum, repayable over 7 years until 1987). Allowances on loans receivable are determined on a loan by loan basis. As a result of the postponement of principal and interest payments beyond the loan's original term, the Department has established an allowance equivalent to the total amount of principal and interest on the loans receivable.

 

5. Inventory

The following table presents details of the inventory.

(in thousands of dollars)

  2011 2010
Inventory held for future program delivery 25,329 38,136
Inventory for resale 923 1,149
Total 26,252 39,285

 

6. Tangible capital assets

(in thousands of dollars)

  Cost
  Opening balance
April 1, 2010
Acquisitions Disposals /
write-offs /
Other
Work in progress
transfers
Closing balance
March 31, 2011
Land 20,572 2 20,570
Buildings 511,174 4,267 21,905 528,812
Work and infrastructure 1,989,395 461 15,954 199,362 2,173,264
Machinery and equipment 379,617 3,647 82,227 22,523 323,560
Informatics 78,678 73 14,975 14,893 78,669
Other equipment, including furniture 747 644 103
Ships and boats 1,672,793 754 32,985 103,609 1,744,171
Aircrafts 39,322 3,712 35,610
Vehicles 73,890 5,777 8,042 612 72,237
Leasehold improvements 555,814 12,545 24,294 567,563
Work in progress 543,619 364,076 15,926 (387,198) 504,571
Capital lease 525 525
Total 5,866,146 374,788 191, 279 6,049,655

 

(in thousands of dollars)

  Accumulated Amortization Net Book Value
  Opening balance
April 1, 2010
Amortization Disposals /
write-offs /
Other
Closing balance
March 31, 2011
March 31, 2011 March 31, 2010
Land 20,570 20,572
Buildings 344,179 14,278 2,050 356,407 172,405 166,995
Works and infrastructure 1,086,922 62,860 15,346 1,134,436 1,038,828 902,473
Machinery and equipment 280,602 20,206 78,731 222,077 101,483 99,015
Informatics 72,931 10,990 15,511 68,410 10,259 5,747
Other equipment, including furniture 700 6 642 64 39 47
Ships and boats 1,220,753 52,231 32,323 1,240,661 503,510 452,040
Aircrafts 33,812 1,025 3,712 31,125 4,485 5,510
Vehicles 49,013 6,495 9,352 46,156 26,081 24,877
Leasehold improvements 362,630 17,276 10,276 369,630 197,933 193,184
Work in progress 504,571 543,619
Capital lease 342 105 447 78 183
Total 3,451,884 185,472 167,943 3,469,413 2,580,242 2,414,262

Work in progress (WIP) transfers of $387,198 ($140,579 in 2010) represent assets that were put into use in the year and have been transferred to the other capital asset classes as applicable.

 

7. Accounts payable and accrued liabilities

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

(in thousands of dollars)

  2011 2010
Accounts payable to external parties 169,487 169,342
Accounts payable to other government departments and agencies 42,193 60,477
Accrued liabilities 77,710 62,718
Total accounts payable and accrued liabilities 289,390 292,537

 

8. Deferred revenue

(in thousands of dollars)

  Opening balance
April 1, 2010
Receipts and
other credits
Payments and
other charges
Closing balance
March 31, 2011
Licenses - Fisheries and Aquaculture Management 9,622 8,826 (9,622) 8,826
Other 23 23
Total 9,645 8,826 (9,622) 8,849

Deferred revenue from the Fisheries and Aquaculture Management licenses represents the balance at year end of unearned revenues stemming from fees received prior to services being performed. Other revenues are from external parties which are restricted to fund the expenditures related to specific research projects. Revenue is recognized in the period that these expenditures are incurred or the service is performed.

 

9. Lease obligation for tangible capital assets

The Department has entered into agreements to rent information technology equipment under capital lease with a cost of $524,772 and accumulated amortization of $446,914 as at March 31, 2011 ($524,772 and $341,959 respectively as at March 31, 2010) (Note 6). The obligations for the upcoming years include the following:

(in thousands of dollars)

Maturing year 2011 2010
2011 80
2012 59 58
Total future minimum lease payments 59 138
Less: imputed interest (4.1%) (1) (4)
Balance of obligations under leased tangible capital assets 58 134

 

10. Other liabilities

Other liabilities include funds received by the Department under regulations, cost-sharing agreements or to fund projects. Details of the transactions related to these accounts are as follows:

(in thousands of dollars)

  Opening balance
April 1, 2010
Receipts and
other credits
Payments and
other charges
Closing balance
March 31, 2011
Research projects deposits 28,640 30,959 (31,295) 28,304
Sales of seized assets - Fisheries Act 954 316 (578) 692
Federal/provincial cost-sharing agreements 729 1,050 (1,099) 680
Contractors' security deposits 186 664 (491) 359
Total 30,509 32,989 (33,463) 30,035

 

11. Employee future benefits

(a) Pension benefits

The Department’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 two percent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Quebec Pension Plans benefits and they are indexed to inflation.

Both the employees and the Department contribute to the cost of the Plan. The 2010-2011 expense amounts to $95 million ($99 million in 2009-2010), which represents approximately 1.9 times (1.9 times in 2009-2010) the contributions by employees.

The Department’s responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan’s sponsor.

(b) Severance benefits

The Department provides severance benefits to its employees based on eligibility, years of service and final salary. These severance benefits are not pre-funded. Benefits will be paid from future authorities. Information about the severance benefits, measured as at March 31, are as follows.

(in thousands of dollars)

  2011 2010
Accrued benefit obligation, beginning of year 157,524 168,713
Expense for the year 23,745 2,669
Benefits paid during the year (16,195) (13,858)
Accrued benefit obligation, end of year 165,074 157,524

 

12. Environmental and Contingent liabilities

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

(a) Contaminated sites

Liabilities are accrued to record the estimated costs related to the management and remediation of contaminated sites where the Department is obligated or likely to be obligated to incur such costs. The Department has identified 940 sites where such action is possible and for which a liability of $108.7 million ($73.2 million in 2009-10) has been recorded. The Department has estimated additional clean-up costs of $130.4 million ($148.9 million in 2009-2010) that are not accrued, as these are not considered likely to be incurred at this time. The Department’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 in the year in which they become likely and are reasonably estimable.

(b) Claims and litigation

Claims have been made against the Department in the normal course of operations. These claims include items with pleading amounts and other for which no amount is specified. Based on the Department's assessment, legal proceedings for claims estimated at $90,326.3 million ($289.6 million in 2009-2010) were pending at March 31, 2011. Some of these potential liabilities 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 accrued liability is estimated (nil in 2010-2011 and $0.4 million in 2009-2010) and an expense recorded in the financial statements.

 

13. Restricted Equity of Canada

A portion of the Department's equity is restricted to be used for a specific purpose. Related revenues and expenses are included in the Statement of Operations.

The Supplementary Fish Fines Account was established pursuant to the Fisheries Act and related regulations to record fines and penalties levied by courts under the Act. The balance in the account is to be used for remedial or preventive action to fish habitat as well as the promotion of proper management, control, conservation, and protection of fisheries or fish habitat. The balance of the account at the end of the year is included in Equity of Canada. Activity in the account is as follows:

(in thousands of dollars)

  2011 2010
(Restated
Note 17)
Supplementary Fish Fines Account
Balance, beginning of year - Restricted 1,346 674
Revenues 175 899
Expenses (429) (227)
Balance, end of year - Restricted 1,092 1,346
Unrestricted Equity of Canada, end of year 2,243,494 2,125,658
Total Equity of Canada, end of year 2,244,586 2,127,004

 

14. Contractual Obligations

The nature of the Department’s activities can result in some large multi-year contracts and obligations whereby the Department will be obligated to make future payments when the services/goods are received. Significant contractual obligations that can be reasonably estimated are summarized as follows:

(in thousands of dollars)

  2012 2013 2014 2015 2016 and
thereafter
Total
Operating Lease 12,659 12,659 12,659 12,657 - 50,634
Construction of Assets 74,613 68,484 17,179 2,260 - 162,536
Total 87,272 81,143 29,838 14,917 - 213,170

 

15. Related party transactions

The Department is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations. The Department enters into transactions with these entities in the normal course of business and on normal trade terms. Also, during the year, the Department received common services which were obtained without charge from other Government departments as presented below.

(a) Common services provided without charge by other government departments

During the year, the Department received services without charge from certain common service organizations, related to accommodation, legal services, the employer’s contribution to the health and dental insurance plans and workers' compensation coverage. These services provided without charge have been recorded in the Department’s Statement of Operations, and are therefore included in the Net Cost of Operations, with a corresponding credit to the equity:

(in thousands of dollars)

  2011 2010
Employer's contribution to the health and dental insurance plans 67,219 68,591
Accommodation 45,115 44,108
Legal services 6,367 4,920
Worker’s Compensation 1,054 1,143
Total services provided without charge 119,755 118,762

The Government 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 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 the 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 in the Department’s Statement of Operations.

(b) Other transactions with related parties

The following expenses and revenues exclude common services without charge, which are already disclosed in (a).

(in thousands of dollars)

  2011 2010
Expenses - Other Government departments and agencies 267,323 282,306
Revenues - Other Government departments and agencies 24 18

 

16. Segmented information

Presentation by segment is based on the Department's program activity architecture. The presentation by segment is based on the same accounting policies as described in the Summary of significant accounting policies in note 2. The following table presents the expenses incurred and revenues generated for the main program activities, by major object of expenses and by major type of revenues. The segment results for the period are as follows:

(in thousands of dollars)

  Safe and Accessible Waterways Sustainable Fisheries and Aquaculture Healthy and
Productive Aquatic Ecosystems
Internal Services 2011 Total 2010 Total
(Restated Note 17)
Operating expenses
Salaries and employee benefits 476,112 253,084 115,015 179,335 1,023,546 1,004,933
Professional and special services 85,237 72,666 20,154 77,365 255,422 261,660
Amortization of tangible capital assets 131,038 7,750 3,236 43,448 185,472 175,651
Repair and maintenance 102,041 3,586 965 16,187 122,779 141,845
Utilities, material, supplies, and fuel 65,161 22,763 6,134 7,647 101,705 105,900
Machinery and equipment 32,437 8,296 2,030 12,091 54,854 56,605
Travel and relocation 20,265 18,414 7,268 6,307 52,254 55,637
Variation in environmental liability 35,524 35,524 2,720
Loss on write-offs and write-downs of capital assets 15,451 204 316 7,365 23,336 22,427
Other 1,363 9,589 531 4,540 16,023 6,117
Telecommunication 7,666 4,108 1,211 4,974 17,959 19,804
Rental 3,055 7,919 1,379 1,972 14,325 15,958
Communication services 1,028 1,078 523 1,324 3,953 4,778
Total operating expenses 940,854 409,457 158,762 398,079 1,907,152 1,874,035
Transfer Payments
First Nations and Inuit People 87,339 150 87,489 81,181
Non-profit organizations 10,824 18,149 2,063 31,036 19,445
Individuals 5,988 5,988 9,616
Other level of governments within Canada 1,400 680 2,080 1,190
Other countries and international organizations 150 176 90 416 348
Total transfer payments 12,374 112,332 2,303 127,009 111,780
Total Expenses 953,228 521,789 161,065 398,079 2,034,161 1,985,815
Revenues
Sales of goods and services 42,514 41,682 119 84,315 90,842
Other revenue 6,817 1,989 201 9,007 7,848
Total revenues 49,331 43,671 320 93,322 98,690
Net cost of operations 903,897 478,118 160,745 398,079 1,940,839 1,887,125

 

17. Restatement of previous year’s balance

During the year, the Department of Fisheries and Oceans Canada reviewed its processes and procedures and determined that the recognition of revenues from Fisheries licensing and the related deferred revenues were not reported correctly. Therefore, the financial statements for the year ended March 2010 have been revised to better recognize deferred revenues. This resulted in an understatement of liabilities of $9,621,819 for the year ended March 31, 2010.

The revision has been accounted for retroactively with the following impact on the comparative figures for 2009-2010:

(in thousands of dollars)

  2010
As previously stated
Effect of changes 2010 Restated
Statement of Financial Position:
Deferred revenue 9,645 9,645
Other liabilities 30,532 (23) 30,509
Equity of Canada 2,136,626 (9,622) 2,127,004
Statement of Operations:
Revenues 99,268 (578) 98,690

 

18. Comparative information

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


Annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting

Fiscal year 2010-2011

Note to the 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:

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.

 

Table of Contents

  1. Introduction
    1.1 Authority, Mandate, and Program Activities
    1.2 Financial profile highlights
    1.3 Service arrangements relevant to financial statements
    1.4 Material changes in fiscal year 2010-11
  2. Fisheries and Oceans Canada's control environment relevant to Internal Control over Financial Reporting.
    2.1 Key positions, roles and responsibilities
    2.2 Key measures taken by Fisheries and Oceans Canada
  3. Assessment of Fisheries and Oceans Canada's System of Internal Control over Financial Reporting
    3.1 Assessment approach
    3.2 Scope of Fisheries and Oceans Canada's Assessment during 2010-2011
  4. Fisheries and Oceans Canada's Assessment Results
    4.1 Design effectiveness of key controls
    4.2 Operating effectiveness of key controls
  5. Action Plan of Fisheries and Oceans Canada
    5.1 Progress during 2010-2011
    5.2 Action plan

 

1. Introduction

This document is appended to the Statement of Management Responsibility Including Internal Control Over Financial Reporting of Fisheries and Oceans Canada for the fiscal-year 2010-2011. As required by the Treasury Board Policy on Internal Control, this document provides summary information on the measures taken by Fisheries and Oceans Canada to maintain an effective system of internal control over financial reporting. In particular, it provides summary information on the assessments conducted by Fisheries and Oceans Canada as at March 31, 2011, including progress, results and related action plans along with some financial highlights pertinent to understanding the control environment unique to the Department. This is the second annex produced by this department.

1.1 Authority, Mandate and Program Activities

The responsibility of Fisheries and Oceans Canada for policy and program coordination of oceans was originally established by the Department of Fisheries and Oceans Act (1979). The Department’s guiding legislation includes the Oceans Act, which charges the Minister with leading oceans management and providing coast guard and hydrographic services on behalf of the Government of Canada, and the Fisheries Act, which confers responsibility to the Minister for the management of fisheries, habitat and aquaculture. The Department is also one of the three responsible authorities under the Species at Risk Act.

On behalf of the Government of Canada, Fisheries and Oceans Canada is responsible for developing and implementing policies and programs in support of Canada’s scientific, ecological, social and economic interests in oceans and fresh waters.

Further details regarding Fisheries and Oceans Canada’s mission, priorities, strategic outcomes and program activity architecture are available in the Departmental Performance Report and Report on Plans and Priorities.

1.2 Financial profile highlights

Below is key financial information for fiscal-year 2010-2011. More information can be found in Fisheries and Oceans Canada’s Financial Statements (unaudited) and the Public Accounts of Canada.

1.3 Service arrangements relevant to financial statements

The Department relies on other organizations for the processing of certain transactions that are recorded in its financial statements:

1.3.1 Other government service providers

Common Arrangements:

Specific Arrangements:

1.3.2 Non-government service providers
1.4 Material changes in fiscal-year 2010-2011

Under Canada’s Economic Action Plan announced by the Minister of Finance, Fisheries and Oceans Canada has invested $446 million in various projects and programs. This initiative has had a significant and temporary increase in activity for the Department over the two year period of 2009-2010 and 2010-2011.

A new Chief Audit Executive, Linda Saunders, was appointed effective March 21, 2011.

 

2. Fisheries and Oceans Canada's control environment relevant to internal control over financial reporting

Senior Management of Fisheries and Oceans 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.

Key components of entity level controls in the department aim to ensure that governance structures and management policies are carried out to ensure effective risk management at the departmental level. Key entity-level controls currently in place and relevant to internal control over financial reporting are set out below.

2.1 Key positions, roles and responsibilities
2.2 Key measures taken by Fisheries and Oceans Canada

Key measures taken by Fisheries and Oceans Canada contribute to preparing departmental personnel for managing risks by raising awareness and providing appropriate knowledge, skills, and enablers. In doing so, Fisheries and Oceans Canada places particular focus on the following key control governance instruments and measures:

 

3. Assessment of Fisheries and Oceans Canada's system of internal control over financial reporting

3.1 Assessment approach

The Fisheries and Oceans Canada assessments and action plans are fundamental in meeting the requirements of the Treasury Board Policy on Internal Control. They constitute the base through which, over time, the Department will be able to provide reasonable assurance that it maintains an effective system of internal control over financial reporting.

In support of the Policy on Internal Control, Fisheries and Oceans Canada is required to assess design and operating effectiveness of the system of internal controls over financial reporting leading to ensuring the on-going monitoring and the continuous improvement of the departmental system of internal control over financial reporting.

Design effectiveness means to ensure 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 remediation is addressed. This includes the mapping of key processes and information technology systems to the main accounts by location as applicable.

Operating effectiveness means that the application of key controls has been tested over a defined period and that any required remediation is addressed.

Such testing covers all departmental control levels which include corporate or entity, general computer and business process controls.

3.2 Scope of Fisheries and Oceans Canada's Assessment during 2010-2011

Fisheries and Oceans Canada has taken measures to assess its system of internal controls over financial reporting. Key elements of the Department’s framework are as follows:

The Department’s internal control over financial reporting Action Plan (see Section 5 below) has been prioritized to focus on the most significant financial statement risks requiring immediate attention, such as tangible capital assets (including work in progress) and inventory. Other processes, such as revenues and pay administration, have also received targeted attention (design effectiveness testing) and remediation where solutions for remediation were identified and opportune.

For each significant account and location, Fisheries and Oceans Canada began by gathering available information pertaining to existing processes, risks and controls relevant to internal controls over financial reporting, including appropriate policies and procedures. The internal control over financial reporting action plan ensures that key risks and controls are adequately documented. On this basis, the Department has begun to assess the design effectiveness of key controls and address necessary remediation.

These assessments leverage the reports and work of Fisheries and Oceans Canada internal audit, audit reports of the Office of the Auditor General, as well as financial statement audit-readiness assessments.

Finally, Fisheries and Oceans Canada also leverages the work of internal audit aimed at providing assurance whether the management control framework and practices are in place and effective to ensure adequate internal control, compliance with legislation, regulations and policies, and accurate financial information.

 

4. Fisheries and Oceans Canada's assessment results

In assessing its key controls, Fisheries and Oceans Canada has continued to focus this year on its design effectiveness testing which is the prerequisite to testing operating effectiveness. The testing of design effectiveness of key controls is partially complete and will continue in 2011-2012 and beyond.

4.1 Design effectiveness of key controls

When undertaking design effectiveness testing, Fisheries and Oceans Canada reviewed documentation (including its validation by process owners) and verified whether the process and information technology system documentation are in place and corresponding to actual practice. Remediation requirements were identified for each of the processes listed in section 3.2. These activities covered both headquarters and all regional offices. Design effectiveness also included ensuring appropriate alignment of each key control with the associated risks.

As a result of these assessments, Fisheries and Oceans Canada identified remediation requirements which are currently being pursued:

Entity Level Controls
Business Process Controls
Information Technology General Controls
Other Financial Reporting Processes Including the Financial Statement Close Process
4.2 Operating effectiveness of key controls

Fisheries and Oceans Canada is committed to completing the testing of the design effectiveness of key controls and the required remediation prior to initiating the testing of operating effectiveness of key controls. When completing operating effectiveness testing, Fisheries and Oceans Canada intends to develop a risk-based monitoring plan that identifies key controls to be tested over a multi-year period in order to ensure that key controls are functioning over time as specified and any necessary corrective actions that are identified are initiated.

 

5. Action Plan of Fisheries and Oceans Canada

5.1 Progress during 2010-2011

During 2010-2011 Fisheries and Oceans Canada has continued to make significant progress in assessing and improving its key controls. As indicated above, the testing of design effectiveness of key controls is partially complete and will continue in 2011-2012.

The Department met commitments for 2010-11 in the 2009-2010 action plan as follows:
The Department also made progress during 2010-2011 in the following areas:
5.2 Action plan

Fisheries and Oceans Canada is committed to improving its framework of internal control and internal controls over financial reporting to ensure that the key controls appropriately mitigate associated risks.

By end of 2011-2012 Fisheries and Oceans Canada plans to:
In 2012-2013, Fisheries and Oceans Canada plans to:
In subsequent years, Fisheries and Oceans Canada plans to: