Financial Statements of Fisheries and Oceans Canada

Year ended March 31, 2014

Fisheries and Oceans Canada

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, 2014, and all information contained in these statements rests with the management of Fisheries and Oceans Canada. These financial statements have been prepared by management using the Government's accounting policies, which are based on Canadian public sector accounting standards.

Management is responsible for the integrity and objectivity of the information in these 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 risk-based assessment of the effectiveness of the system of internal control over financial reporting.

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

A risk-based assessment of the system of internal control over financial reporting for the year ended March 31, 2014, was completed in accordance with the Treasury Board Policy on Internal Control and the results and action plans are summarized in the annex.

The effectiveness and adequacy of the department's system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of the department's operations, and by the Departmental Audit Committee, which oversees management's responsibilities for maintaining adequate control systems and the quality of financial reporting, and which recommends the financial statements to the Deputy Minister.

The financial statements of Fisheries and Oceans Canada have not been audited.

 

Matthew King, Deputy Minister
Ottawa, Canada
August 28, 2014
Marty Muldoon, CPA, CMA, MBA
Chief Financial Officer
Ottawa, Canada
August 28, 2014

 

Statement of Financial Position (Unaudited)

As at March 31

(in thousands of dollars)
  2014 2013
Liabilities
Accounts payable and accrued liabilities (Note 4) $ 317,521 $ 332,216
Vacation pay and compensatory leave 68,405 67,632
Deferred revenue (Note 5) 11,208 10,275
Other liabilities (Note 6) 26,797 34,355
Employee future benefits (Note 7) 56,491 85,223
Contingent liabilities (Note 8) 130,138 129,541
Total gross liabilities 610,560 659,242
 
Liabilities held on behalf of Government
Deferred revenue (Note 5) (11,208) (10,275)
Total liabilities held on behalf of Government (11,208) (10,275)
 
Total net liabilities 599,352 648,967
 
Financial assets
Due from Consolidated Revenue Fund 268,595 254,820
Accounts receivable and advances (Note 9) 29,994 21,365
Loans receivable (Note 10) - -
Total gross financial assets 298,589 276,185
 
Financial assets held on behalf of Government
Accounts receivable and advances (Note 9) (22,604) (15,023)
Loans receivable (Note 10) - -
Total financial assets held on behalf of Government (22,604) (15,023)
 
Total net financial assets 275,985 261,162
 
Departmental net debt 323,367 387,805
 
Non-financial assets
Inventory (Note 11) 51,188 48,510
Tangible capital assets (Note 12) 2,671,788 2,635,725
Total non-financial assets 2,722,976 2,684,235
 
Departmental net financial position (Note 13) $ 2,399,609 $ 2,296,430

Contingent liabilities (Note 8)
Contractual obligations (Note 14)

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

 

Matthew King, Deputy Minister
Ottawa, Canada
August 28, 2014
Marty Muldoon, CPA, CMA, MBA
Chief Financial Officer
Ottawa, Canada
August 28, 2014

 

Statement of Operations and Departmental Net Financial Position (Unaudited)

For the Year Ended March 31

(in thousands of dollars)
  2014
Planned Results
2014 2013
Expenses
Economically Prosperous Maritime Sectors and Fisheries $ 423,885 $ 509,546 $ 564,398
Sustainable Aquatic Ecosystems 294,222 303,354 243,996
Safe and Secure Waters 801,664 716,615 708,998
Internal Services 311,973 336,753 336,487
Total expenses 1,831,744 1,866,268 1,853,879
 
Revenues
Sales of goods and services 91,252 86,319 85,871
Net gain (net loss) on disposal of tangible capital assets including adjustments 3,544 2,804 (22,396)
Other revenues 3,724 3,102 4,663
Revenues earned on behalf of Government (43,337) (47,508) (48,291)
Total revenues 55,183 44,717 19,847
 
Net cost of operations before government funding and transfers 1,776,561 1,821,551 1,834,032
 
Government funding and transfers
Net cash provided by Government 1,699,588 1,788,789 1,751,081
Change in due from the Consolidated Revenue Fund (30,306) 13,775 35,967
Services provided without charge by other government departments (Note 15) 118,207 122,107 123,117
Transfer of assets and liabilities from (to) other government departments (Notes 8 & 12) - 59 5
Total Government funding and transfers 1,787,489 1,924,730 1,910,170
 
Net cost of operations after government funding and transfers (10,928) (103,179) (76,138)
 
Departmental net financial position - Beginning of year 2,208,079 2,296,430 2,220,292
 
Departmental net financial position - End of year $ 2,219,007 $ 2,399,609 $ 2,296,430

Segmented Information (Note 16)

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

 

Statement of Change in Departmental Net Debt (Unaudited)

For the Year Ended March 31

(in thousands of dollars)
  2014
Planned Results
2014 2013
Net cost of operations after government funding and transfers ($  10,928) ($  103,179) ($  76,138)
Change due to tangible capital assets
Acquisition of tangible capital assets 186,762 212,737 231,222
Amortization of tangible capital assets (186,354) (177,204) (174,637)
Proceeds from disposal of tangible capital assets (4,181) (2,137) (2,073)
Net gain (net loss) on disposal of tangible capital assets including adjustments (16,135) 2,804 (22,396)
Transfers to other government departments (Note 12) - (137) 5
Total change due to tangible capital assets (19,908) 36,063 32,121
 
Change due to inventories 3,388 2,678 794
 
Net decrease in departmental net debt (27,448) (64,438) (43,223)
 
Departmental net debt - Beginning of year 444,010 387,805 431,028
 
Departmental net debt - End of year $ 416,562 $ 323,367 $ 387,805

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

 

Statement of Cash Flows (Unaudited)

For the Year Ended March 31

(in thousands of dollars)
  2014 2013
Operating activities
Net cost of operations before government funding and transfers $ 1,821,551 $ 1,834,032
Non-cash items:
Amortization of tangible capital assets (177,204) (174,637)
Gain (loss) on disposal of tangible capital assets including adjustments 2,804 (22,396)
Services provided without charge by other government departments (Note 15) (122,107) (123,117)
Variations in Statement of Financial Position:
Decrease (increase) in accounts payable and accrued liabilities 14,695 (45,285)
Decrease (increase) in vacation pay and compensatory leave (773) 5,015
Decrease in other liabilities 7,558 10,072
Decrease in employee future benefits 28,732 31,115
Decrease (increase) in contingent liabilities (793) 7,184
Increase (decrease) in accounts receivable and advances 1,048 (845)
Increase in inventory 2,678 794
Cash used in operating activities 1,578,189 1,521,932
 
Capital investing activities
Acquisitions of tangible capital assets 212,737 231,222
Proceeds from disposal of tangible capital assets (2,137) (2,073)
Cash used in capital investing activities 210,600 229,149
 
Net cash provided by the Government of Canada $ 1,788,789 $ 1,751,081

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

 

Notes to the Financial Statements (Unaudited)

For the Year Ended March 31

1. Authority and objectives

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

Fisheries and Oceans Canada's main legislative authorities are:

  • the Oceans Act;
  • the Fisheries Act;
  • the Species at Risk Act;
  • the Coastal Fisheries Protection Act; and
  • the Canada Shipping Act, 2001.

Fisheries and Oceans Canada has three strategic outcomes that are delivered through twenty-five programs. The three strategic outcomes are:

Economically Prosperous Maritime Sectors and Fisheries: Through its policies, programs and services, and while supporting the sustainable and effective use of Canada's water resources, Fisheries and Oceans Canada contributes to the capacity of Canada's maritime sectors and fisheries to derive economic benefits and further enhance their competitiveness.

Sustainable Aquatic Ecosystems: Fisheries and Oceans Canada's programs and policies contribute to the conservation, protection, and sustainability of Canada's aquatic ecosystems through the management of risks that affect species, oceans and fish habitats.

Safe and Secure Waters: Fisheries and Oceans Canada contributes to maintaining and improving maritime safety and security through the provision of maritime infrastructure, information, products and services necessary to ensure safe navigation and the protection of life and property.

Internal Services are activities and resources that are administered to support the needs of programs under all three strategic outcomes and other corporate obligations: Management and Oversight Services; Communications; Legal Services; Human Resources Management; Information Management; Information Technology; Financial Management; Travel and Other Administrative Services; Real Property; Materiel; and Acquisition. 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 using the Government's accounting policies stated below which are based on Canadian public sector accounting standards. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.

Significant accounting policies are as follows:

  1. Parliamentary authorities
    Fisheries and Oceans Canada is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to Fisheries and Oceans Canada 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 Departmental Net Financial Position and in 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 and Departmental Net Financial Position are the amounts reported in the future-oriented financial statements included in the 2013-2014 Report on Plans and Priorities.

  2. Net Cash Provided by Government
    Fisheries and Oceans Canada operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by Fisheries and Oceans Canada is deposited to the CRF and all cash disbursements made by Fisheries and Oceans Canada 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. Due from the CRF
    Amounts due from or to the CRF are the result of timing differences that occur 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 Fisheries and Oceans Canada is entitled to draw from the CRF without further authorities 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 Fisheries and Oceans Canada has an obligation to other parties for the provision of goods, services or the use of assets in the future.

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

    Revenues that are non-respendable are not available to discharge Fisheries and Oceans Canada's liabilities. While the Deputy Minister is expected to maintain accounting control, he has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the entity's gross revenues.

  5. Expenses
    Expenses are recorded on the accrual basis:

    Transfer payments are recorded as expenses when authorization for the payment exists and the recipient has met the eligibility criteria or the entitlements established for the transfer payment program. In situations where payments do not form part of an existing program, transfer payments are recorded as expenses when the Government announces a decision to make a non-recurring transfer, provided the enabling legislation or authorization for payment receives parliamentary approval prior to the completion of the financial statements. Transfer payments that become repayable as a result of conditions specified in the contribution agreement that have come into being are recorded as a reduction to transfer payment expense and as a receivable.

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

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

  6. Employee future benefits

    1. Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multi-employer plan administered by the Government of Canada. Fisheries and Oceans Canada's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. Fisheries and Oceans 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.

    2. Severance benefits: Employees entitled to severance benefits under labour contracts or conditions of employment earn these benefits as services necessary to earn them are rendered. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

  7. Accounts and loans receivable
    Accounts and loans receivable are stated at the lower of cost and net recoverable value. A valuation allowance is recorded for accounts and loans receivable where recovery is considered uncertain.

  8. Contingent liabilities
    Contingent liabilities are potential liabilities that may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded. If the likelihood is not determinable or if an amount cannot be reasonably estimated the contingency is disclosed in the notes to the financial statements.

  9. Environmental liabilities
    Environmental liabilities consist of estimated costs related to the remediation of environmentally contaminated sites as well as estimated costs related to obligations associated with future asset restoration.

    1. Remediation liabilities are recorded as accrued liabilities to recognize the estimated costs related to the management and remediation of contaminated sites where Fisheries and Oceans Canada is obligated, or likely to be obligated, to remediate the sites. If the responsibility to remediate is undeterminable, the amount is disclosed as a contingent liability. If the responsibility to remediate is undeterminable and a reasonable estimate cannot be made, the nature, source and extent of contamination is disclosed as a contingent liability.

    2. Future Asset Restoration Obligations are recorded as accrued liabilities to recognize the estimated costs related to the restoration of tangible capital assets. These costs are usually capitalized and amortized over the asset's estimated useful life based on an obligation imposed by legislation, regulation or contractual agreement where Fisheries and Oceans Canada is obligated, or likely to be obligated, to restore the tangible capital asset. If the obligation to restore the tangible capital asset is undeterminable, the amount is disclosed as a contingent liability. If the obligation to restore the tangible capital asset is undeterminable and an estimate cannot be made, the nature and source of the potential obligation is disclosed as a contingent liability.

  10. Inventory
    Inventory held for future program delivery consists of spare parts, materials, supplies and fuel. Spare parts, materials and supplies are valued at cost or net realizable value. Fuel is valued using the moving weighted average cost method.

    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.

  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. Fisheries and Oceans Canada 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 15-40 years
    Work and infrastructure 5-75 years
    Machinery and equipment 3-25 years
    Informatics 3-5 years
    Other Equipment 10 years
    Ships and boats 5-40 years
    Aircrafts 15-25 years
    Vehicles 5-20 years
    Leasehold improvements Period of expected use; lesser of economic life of the improvement or the lease term
    Work in progress Work in progress are recorded in the applicable 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 workforce adjustment liability, allowance for vacation pay and compensatory leave, liability for employee future benefits, contingent liabilities, environmental liabilities, allowance for bad debts, and the useful life of tangible capital assets.

    Actual results could significantly 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 authorities

Fisheries and Oceans Canada receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Departmental Net Financial Position and the Statement of Financial Position in one year may be funded through parliamentary authorities in prior, current or future years. Accordingly, Fisheries and Oceans Canada 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)
  2014 2013
Net cost of operations before government funding and transfers $ 1,821,551 $ 1,834,032
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets (177,204) (174,637)
Net gain (net loss) on disposal of tangible capital assets including adjustments 2,804 (22,396)
Services provided without charge by other government departments (122,107) (123,117)
Decrease (increase) in accrued liabilities not charged to authorities 31,882 (14,704)
Decrease (increase) in vacation pay and compensatory leave (773) 5,015
Decrease in employee future benefits not charged to authorities 32,068 31,115
Decrease (increase) in contingent liabilities (793) 7,184
Increase in inventory 2,678 794
Bad debt expense (1,199) (858)
Refunds of previous years expenditures 2,936 2,856
Revenues not available for spending in the current year 2,775 2,740
Increase in deferred revenue (933) (2,352)
(Decrease) increase in earmarked supplementary fines (Note 13) (2) 223
Other (17) (12)
Total Adjustments for items affecting net cost of operations but not affecting authorities (227,885) (288,149)
 
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisition of tangible capital assets 212,737 231,222
Total Adjustments for items not affecting net cost of operations but affecting authorities 212,737 231,222
 
Current year authorities used $ 1,806,403 $ 1,777,105

 

b) Authorities provided and used
(in thousands of dollars)
  2014 2013
Authorities provided:
Vote 1 - Operating expenditures $ 1,342,830 $ 1,308,196
Vote 5 - Capital expenditures 409,221 396,353
Vote 10 - Grants and contributions 88,234 88,933
Statutory amounts 140,011 141,830
Total authorities provided 1,980,296 1,935,312
Less:
Authorities available for future years (1,660) (1,780)
Lapsed authorities:
Operating (59,415) (67,195)
Capital (109,854) (88,485)
Grants and Contributions (2,964) (747)
Current year authorities used $ 1,806,403 $ 1,777,105

 

4. Accounts payable and accrued liabilities

The following table presents the details of Fisheries and Oceans Canada's accounts payable and accrued liabilities:

(in thousands of dollars)
  2014 2013
Accounts payable - Other government departments and agencies $ 33,097 $ 23,168
Accounts payable - External parties 162,357 145,626
Total accounts payable 195,454 168,794
 
Accrued liabilities 122,067 163,422
 
Total accounts payable and accrued liabilities $ 317,521 $ 332,216

In Canada's Economic Action Plan 2012, the Government announced savings measures to be implemented by departments over the next three fiscal years starting in 2012-2013. As a result, Fisheries and Oceans Canada has recorded at March 31, 2014, an obligation for termination benefits for an amount of $44,690,000 ($76,722,000 in 2012-2013) as part of accrued liabilities to reflect the estimated workforce adjustment costs.

 

5. Deferred revenue

Deferred revenue from fishing 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 projects. Revenue is recognized in the period in which these expenditures are incurred or in which the service is performed.

(in thousands of dollars)
  2014 2013
Opening balance $ 10,275 $ 7,923
Amounts received 11,206 15,008
Revenue recognized (10,273) (12,656)
Gross closing balance 11,208 10,275
 
Deferred revenues held on behalf of Government (11,208) (10,275)
 
Net closing balance $ - $ -

 

6. Other liabilities

Other liabilities represent deferred revenue funds received by Fisheries and Oceans Canada 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 Receipts and
other credits
Payments and
other charges
Closing balance
Research projects deposits $ 32,739 $ 7,899 ($ 15,643) $ 24,995
Federal/Provincial cost-sharing agreements 449 905 (1,073) 281
Sales of seized assets - Fisheries Act 1,061 321 (210) 1,172
Contractor security deposits 106 352 (109) 349
Total other liabilities $ 34,355 $ 9,477 ($ 17,035) $ 26,797

Research projects deposits: This account was established to record contributions received from organizations and individuals, for the furtherance of research work.

Federal/provincial cost-sharing agreements: This account was established to record the deposit of money received from the provinces for cost-shared programs. The funds are disbursed according to agreements.

Sale of seized assets: This account was established to record the proceeds of sale of seized items by Fisheries and Oceans Canada from a person contravening the Fisheries Act. Money so received is held in the Consolidated Revenue Fund pending final resolution of the case by the Minister of Fisheries and Oceans Canada or the courts.

Contractor security deposits: This account was established to record money held to ensure that a contractor's obligations under contracts are carried out, to protect the interests of subcontractors, sub-subcontractors and suppliers, and to protect the Crown against loss should a bidder fail to honor a contract.

 

7. Employee future benefits

  1. Pension benefits

    Fisheries and Oceans Canada's employees participate in the Public Service Pension Plan (the "Plan"), which is sponsored and administered by the Government of Canada. Pension benefits accrue up to a maximum period of 35 years at a rate of 2 percent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Québec Pension Plan benefits and they are indexed to inflation.

    Both the employees and Fisheries and Oceans Canada contribute to the cost of the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to Economic Action Plan 2012, employee contributors have been divided into two groups - Group 1 relates to existing Plan members as of December 31, 2012, and Group 2 relates to members joining the Plan as of January 1, 2013. Each group has a distinct contribution rate.

    The 2013-2014 expense amounts were $95,867,633 ($96,998,896 in 2012-2013). For Group 1 members, the expense represents approximately 1.6 times (1.7 times in 2012-13) the employee contributions and, for Group 2 members, approximately 1.5 times (1.6 times in 2012-2013) the employee contributions.

    Fisheries and Oceans 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.

  2. Severance benefits

    Fisheries and Oceans Canada provides severance benefits to its employees based on eligibility, years of service and salary at termination of employment. These severance benefits are not pre-funded. Benefits will be paid from future authorities.

    As part of the collective agreement negotiations with certain employee groups, and changes to the conditions of employment for executives and certain non-represented employees, the accumulation of severance benefits under the employee severance pay program ceased for these employees commencing in 2012. Employees subject to these changes have been given the option to be immediately paid full or partial value of benefits earned to date or collect the full or remaining value of benefits on termination from the public service. These changes have been reflected in the calculation of the outstanding severance benefit obligation.

Information about the severance benefits, measured as at March 31, is as follows:

(in thousands of dollars)
  2014 2013
Accrued benefit obligation, beginning of year $ 85,223 $ 116,338
Expense for the year 41,113 4,049
Benefits paid during the year (69,845) (35,164)
Accrued benefit obligation, end of year $ 56,491 $ 85,223

 

8. 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:

  1. Environmental Liabilities

    Fisheries and Oceans Canada has identified approximately 898 sites (853 sites in 2012-2013) where the department is obligated, or likely to be obligated, to remediate for which a remediation liability of $96,498,180 ($94,450,638 in 2012-2013) has been recorded in accrued liabilities. In addition, Fisheries and Oceans Canada has disclosed contingent liabilities in the amount of $24,868,772 for 61 sites ($10,318,318 in 2012-2013 for 36 sites) where the department has determined that it is not directly responsible, nor does it accept responsibility, however, there is uncertainty as to whether the department may be responsible. Fisheries and Oceans Canada's ongoing efforts to assess contaminated sites may result in additional environmental liabilities related to newly identified sites, or changes in the assessments of existing sites. These liabilities will be accrued by Fisheries and Oceans Canada in the year in which they become likely and are reasonably estimable.

    Fisheries and Oceans Canada transferred the administration and control of land which includes a remediation liability of $195,765 to another department.

  2. Claims and Litigations

    Claims have been made against Fisheries and Oceans Canada in the normal course of operations. These claims include items with pleading amounts and others for which no amount is specified. While the total amount claimed in these actions is significant, their outcomes are not determinable. Fisheries and Oceans Canada has recorded an allowance of $33,640,000 ($35,090,000 in 2012-2013) for claims and litigations where it is likely that there will be a future payment and a reasonable estimate of the loss can be made. Based on the Department's assessment, legal proceedings for claims estimated at $345,385,000 ($322,337,500 in 2012-2013) will be pending at March 31, 2014.

 

9. Accounts receivable and advances

The following table presents details of Fisheries and Oceans Canada's accounts receivable and advances balances:

(in thousands of dollars)
  2014 2013
Accounts receivable and advances
Receivables - Other government departments and agencies $ 13,891 $ 11,135
Receivables - External parties 45,882 38,811
Accountable advances 178 191
Subtotal 59,951 50,137
 
Less: Allowance for doubtful accounts on receivables from external parties (29,957) (28,772)
 
Gross accounts receivable and advances 29,994 21,365
 
Accounts receivable held on behalf of Government (22,604) (15,023)
 
Net accounts receivable and advances $ 7,390 $ 6,342

 

10. Loans receivable

The following table presents details of Fisheries and Oceans Canada's loans receivable balances:

(in thousands of dollars)
  2014 2013
Loans receivable
Loans receivable (1) $ 1,472 $ 1,472
Accrued interest on loans 1,556 1,556
Less: Allowance on loans (3,028) (3,028)
 
Total loans receivable held on behalf of Government $ - $ -

(1) Loans of $1,471,652 have been made to haddock fishermen ($1,343,337, interest of 8% per annum, repayable over 4 years until 1979) and to Canadian producers of frozen groundfish ($128,315, 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, Fisheries and Oceans Canada has established an allowance equivalent to the total amount of principal and interest on the loans receivable.

 

11. Inventory

The following table presents details of inventory:

(in thousands of dollars)
  2014 2013
Inventory held for future program delivery $ 50,637 $ 47,538
Inventory held for resale 551 972
Total inventory $ 51,188 $ 48,510

The cost of consumed inventory recognized as an expense in the Statement of Operations and Departmental Net Financial Position is $68,283,449 in 2013-2014 ($64,589,592 in 2012-2013).

 

12. Tangible capital assets

(in thousands of dollars)
Cost
  Opening Balance Acquisitions Ajustements (1) Disposals and
write-offs
Closing Balance
Land $ 24,028 $ - $ 268 $ 64 $ 24,232
Buildings 701,908 23 6,985 690 708,226
Works and infrastructure 2,342,626 32 87,552 29,045 2,401,165
Machinery and equipment 346,334 5,876 12,509 12,853 351,866
Informatics 79,139 19 15,181 736 93,603
Other equipment 46 - - - 46
Ships and boats 1,765,312 161 183,314 7,934 1,940,853
Aircrafts 35,610 - - 1,948 33,662
Vehicles 69,299 1,286 465 4,284 66,766
Leasehold improvements 496,618 - 2,953 4,852 494,719
Work in progress 358,963 205,340 (295,390) 5,909 263,004
  $ 6,219,883 $ 212,737 $ 13,837 $ 68,315 $ 6,378,142

(1) Adjustments include work in progress of $295,390,318 that were transferred to other categories upon completion of the assets, reclassifications among categories and transfers of assets of $1,657,516 and accumulated amortization of $1,520,985.

(in thousands of dollars)
Accumulated Amortization
  Opening Balance Amortization Ajustements (1) Disposals and
write-offs
Closing Balance
Land $ - $ - $ - $ - $ -
Buildings 430,817 16,483 (180) 674 446,446
Works and
infrastructure
1,190,424 61,636 10 22,568 1,229,502
Machinery
and
equipment
229,817 17,560 115 12,443 235,049
Informatics 68,300 9,239 (283) 737 76,519
Other equipment 29 3 - - 32
Ships and
boats
1,267,288 54,001 (1,010) 7,823 1,312,456
Aircrafts 32,200 161 - 1,947 30,414
Vehicles 50,557 5,044 (22) 4,080 51,499
Leasehold
improvements
314,726 13,077 (151) 3,215 324,437
  $ 3,584,158 $ 177,204 ($ 1,521) $ 53,487 $ 3,706,354

(1) Adjustments include work in progress of $295,390,318 that were transferred to other categories upon completion of the assets, reclassifications among categories and transfers of assets of $1,657,516 and accumulated amortization of $1,520,985.

(in thousands of dollars)
Net book value
  2013 2014
Land $ 24,028 $ 24,232
Buildings 271,091 261,780
Works and infrastructure 1,152,202 1,171,663
Machinery and equipment 116,517 116,817
Informatics 10,839 17,084
Other equipment 17 14
Ships and boats 498,024 628,397
Aircrafts 3,410 3,248
Vehicles 18,742 15,267
Leasehold improvements 181,892 170,282
Work in progress 358,963 263,004
  $ 2,635,725 $ 2,671,788

 

13. Departmental net financial position

A portion of Fisheries and Oceans Canada's net financial position is used for a specific purpose. Related revenues and expenses are included in the Statement of Operations and Departmental Net Financial Position.

The Supplementary Fines - Fisheries Act 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 Supplementary Fines - Species at Risk Account was established pursuant to the Species at Risk 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 the purpose of conducting research into the protection of the wildlife species in respect of which the offence was committed.

Activity in the aforementioned accounts is as follows:

(in thousands of dollars)
  2014 2013
Restricted - Supplementary Fines
Fisheries Act
Balance - Beginning of year $ 1,756 $ 1,553
Revenues 177 452
Expenses (189) (249)
Balance - End of year 1,744 1,756
 
Species at Risk Act
Balance - Beginning of year 20 -
Revenues 10 20
Expenses - -
Balance - End of year 30 20
 
Total Balance - End of year - Restricted 1,774 1,776
 
Unrestricted 2,397,835 2,294,654
 
Departmental net financial position - End of year $ 2,399,609 $ 2,296,430

 

14. Contractual obligations

The nature of Fisheries and Oceans Canada's activities can result in some large multi-year contracts and obligations whereby Fisheries and Oceans Canada will be obligated to make future payments in order to carry out its transfer payment programs or when the services/goods are received.

Significant contractual obligations that can be reasonably estimated are summarized as follows:

(in thousands of dollars)
  2015 2016 2017 Total
Construction of assets $ 48,871 $ 3,768 $ - $ 52,639
Business Services 12,659 12,659 14,312 39,630
Total $ 61,530 $ 16,427 $ 14,312 $ 92,269

 

15. Related Party Transactions

Fisheries and Oceans Canada is related as a result of common ownership to all government departments, agencies, and Crown corporations. Fisheries and Oceans Canada enters into transactions with these entities in the normal course of business and on normal trade terms. During the year, Fisheries and Oceans Canada received services which were obtained without charge from other government departments as disclosed below.

a) Common services provided without charge by other government departments

During the year, Fisheries and Oceans Canada 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 recognized in Fisheries and Oceans Canada's Statement of Operations and Departmental Net Financial Position as follows:

(in thousands of dollars)
  2014 2013
Employer's contribution to the health and dental insurance plans $ 69,145 $ 70,453
Accommodation 49,410 49,079
Legal services 2,548 2,634
Worker's compensation 1,004 951
  $ 122,107 $ 123,117

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 Fisheries and Oceans Canada's Statement of Operations and Departmental Net Financial Position.

 

b) Other transactions with related parties
(in thousands of dollars)
  2014 2013
Accounts receivable - Other Government departments and agencies $ 13,891 $ 11,135
Accounts Payable - Other Government departments and agencies 33,097 23,168
Expenses - Other Government departments and agencies 260,192 248,994
Revenues - Other Government departments and agencies 82 7

Expenses and revenues disclosed in b) exclude common services provided without charges, which are already disclosed in a).

 

16. Segmented information

Presentation by segment is based on Fisheries and Oceans Canada's program alignment architecture. The presentation by segment is based on the same accounting policies as described in the Summary of Significant Accounting Policies in Note 2. The following table presents the expenses incurred and revenues generated by strategic outcomes, by major object of expense and by major type of revenue. The segment results for the period are as follows:

(in thousands of dollars)
  Economically Prosperous Maritime Sectors and Fisheries Sustainable Aquatic Ecosystems Safe and Secure Waters Internal Services 2014 2013
Transfer Payments
First Nations and Inuit people $ 64,364 $ 120 $ - $ - $ 64,484 $ 64,536
Non-profit organizations 10,140 3,633 5,107 75 18,955 21,573
Other levels of governments within Canada 1,557 - - 10 1,567 964
Individuals 145 - - - 145 1,029
Other countries and international organizations 40 10 15 - 65 53
Industry - 55 - - 55 32
Total transfer payments 76,246 3,818 5,122 85 85,271 88,187
 
Operating Expenses
Salaries and employee benefits 216,361 185,347 434,969 177,920 1,014,597 1,028,480
Professional and special services 59,619 62,996 59,812 66,473 248,900 234,216
Amortization of tangible capital assets 58,223 8,822 71,878 38,281 177,204 174,637
Repair and maintenance 29,549 2,554 61,213 14,555 107,871 97,490
Utilities, materials, supplies and fuel 45,503 11,357 39,633 9,811 106,304 99,637
Travel, relocation and freight 9,264 12,956 16,606 4,550 43,376 50,349
Machinery and equipment 4,143 6,069 20,724 10,302 41,238 48,384
Rental 5,900 4,514 2,505 2,888 15,807 16,057
Payments in Lieu of Taxes Paid to municipalities 51 - - 9,995 10,046 10,180
Telecommunications 163 1,152 4,644 66 6,025 5,438
Communications services 538 279 332 577 1,726 2,315
Variation in contingent liabilities (1,400) - (50) 2,243 793 (7,184)
Other 5,386 3,490 (773) (993) 7,110 5,693
Total operating expenses 433,300 299,536 711,493 336,668 1,780,997 1,765,692
- - - - - - -
Total expenses 509,546 303,354 716,615 336,753 1,866,268 1,853,879
 
Revenues
Sales of goods and services 55,689 349 30,223 58 86,319 85,871
Net gain (net loss) on disposal of tangible capital assets including adjustments 4,556 2,295 (4,962) 915 2,804 (22,396)
Revenues earned on behalf of Government (41,625) (2,556) (2,603) (724) (47,508) (48,291)
Other revenues (22) 2,379 81 664 3,102 4,663
Total revenues 18,598 2,467 22,739 913 44,717 19,847
- - - - - - -
Net cost of operations $ 490,948 $ 300,887 $ 693,876 $ 335,840 $ 1,821,551 $ 1,834,032

17. Comparative information

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


Fisheries and Oceans Canada

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

Fiscal year 2013-2014

Table of Contents
  1. Introduction

  2. Departmental system of internal control over financial reporting
    2.1 Internal Control Management
    2.2 Service Arrangements relevant to financial statements

  3. Departmental assessment results during fiscal year 2013-2014
    3.1 Design effectiveness testing of key controls
    3.2 Operating effectiveness testing of key controls
    3.3 On-going monitoring of key controls

  4. Fisheries and Oceans Canada's Action Plan
    4.1 Progress during fiscal year 2013-2014
    4.2 Status and action plan for the next fiscal year and subsequent years

1. Introduction

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, including information on internal control management, assessment results and related action plans.

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

2. Departmental system of internal control over financial reporting

2.1 Internal Control Management

Fisheries and Oceans Canada has a well-established governance and accountability structure to support departmental assessment efforts and oversight of its system of internal control. A departmental internal control management framework, approved by the Deputy Minister, is in place and includes:

  • Organizational accountability structures as they relate to internal control management to support sound financial management, including roles and responsibilities of senior managers in their areas of responsibility for control management;

  • values and ethics;

  • ongoing communication and training on statutory requirements, and policies and procedures for sound financial management and control; and

  • quarterly monitoring of and regular updates on internal control management, as well as the provision of related assessment results and action plans to the Deputy Minister and departmental senior management and, as applicable, the Departmental Audit Committee.

The Departmental Audit Committee provides advice to the Deputy Minister on the adequacy and functioning of the department's risk management, control and governance frameworks and processes.

2.2 Service Arrangements relevant to financial statements

Fisheries and Oceans Canada relies on other organizations for the processing of certain transactions that are recorded in its financial statements as follows.

Common Arrangements:

  • Public Works and Government Services Canada centrally administers the payroll and the procurement of goods and services in accordance with the Fisheries and Oceans Canada Delegation of Authority, and provides accommodation services;

  • the Treasury Board Secretariat provides Fisheries and Oceans Canada with information used to calculate various accruals and allowances, such as the accrued severance liability;

  • administration costs and commissions paid to provincial workers' compensation boards are provided by Employment and Social Development Canada.

  • the Department of Justice Canada provides legal services to Fisheries and Oceans Canada; and

  • Shared Services Canada provides information technology (IT) infrastructure services to Fisheries and Oceans Canada in the areas of data centre and network services. The scope and responsibilities are addressed in the interdepartmental arrangement between Shared Services Canada and Fisheries and Oceans Canada.

Specific Arrangements:

  • An external service provider, pursuant to a contract with the Government of Canada, administers the Marine Navigation Services Fee revenues for the west coast on behalf of the Canadian Coast Guard Marine Navigation program. The external service provider has the authority and responsibility to ensure that billing and collection of the Western Region's Marine Navigation Services Fee are made in accordance with the terms and conditions set out by the Canadian Coast Guard Marine Navigation program. As a result, reliance is placed on the control procedures of the external service provider; and

  • Public Works and Government Services Canada provides Fisheries and Oceans Canada billing, banking, electronic funds processing and similar payment services for a significant portion of the revenues from commercial fishing licenses.

3. Departmental assessment results during fiscal year 2013-2014

Fisheries and Oceans Canada completed all design effectiveness testing in 2012-13 and most of its operating effectiveness testing of key control areas in the current year. On-going monitoring is being implemented as per the Internal Control Action Plan.

3.1 Design effectiveness testing of key controls

In 2012-13, the Department completed all design effectiveness testing of key business processes.

3.2 Operating effectiveness testing of key controls

In 2013-14, Fisheries and Oceans Canada continued to advance operating effectiveness according to its plan by starting work on Operating expense (Procurement to Payment), Revenue, and Pay administration.

Fisheries and Oceans Canada plans to complete operating effectiveness testing in 2014-15 with the exception of Tangible Capital Assets and Inventory which still require design effectiveness remediation.

3.3 On-going monitoring of key controls

In 2013-14, the department completed planned ongoing monitoring of Entity Level Controls and Budgeting & Forecasting controls. Entity Level Controls were re-assessed in order to achieve early adoption of the revised COSO framework, required by December 2014.

As a result of ongoing monitoring, the department identified the following required remediation:

  • The department should update its general control activities over technology to support the achievement of objectives. In 2013-14, the department has started work to reassess its Information Technology General Computer Controls. The assessment is to be completed in 2014-15.

  • The department should consider more formally the potential for fraud in assessing risks to the achievement of objectives. The department has started an official fraud and risk assessment to be completed in 2014-15.

4. Fisheries and Oceans Canada's Action Plan

4.1 Progress during fiscal year 2013-2014

During 2013-14, Fisheries and Oceans Canada continued to make significant progress in assessing and improving its key controls. The following table summarizes the department's progress based on the plans identified in the previous fiscal year's annex.

Element in previous year's action plan Status
Review the department risk assessment of Internal Control over Financial Reporting.
  • The department completed the risk assessment exercise, which resulted in minor changes to the multi-year on-going monitoring plan.
Perform operating effectiveness testing for Operating Expenditure (Procurement to Payment), Salaries and Benefits (Pay administration), Revenue, Information Technology General Control, Inventory, and Tangible Capital Assets.
  • The department has advanced operating effectiveness testing for Operating Expenditures (Procurement to Payment), Salaries and Benefits (Pay Administration), Revenue, Information Technology General Control

  • The department has begun operating effectiveness for Inventory and Tangible Capital Assets where remediation was not required. Operating effectiveness is to be completed in 2016-17.

Perform on-going monitoring for Entity Level Control and Budgeting and Forecasting.
  • The department has completed on-going monitoring for Entity Level Control and Budget and Forecasting as planned.
Remediation activities for Operating Expenditures (Procurement to Payment), Financial Close, Inventory, Revenue, Environmental Liabilities, and Tangible Capital Assets.
  • Operating Expenditures: management has completely reviewed all delegations of authority; put in place two new policies for electronic approval and management of electronic financial record. Finally, the department finished the consolidation of procurement and accounting operations which significantly reinforce internal control.

  • Financial Close: the department has aligned itself to government wide requirements for recording contingent liabilities.

  • Inventory: management has put in place a working group that is reviewing assets and inventory life-cycle management.

  • Revenues related to fisheries license: management has implemented a national online licensing system.

  • Environmental liabilities: the department has made progress in aligning with government wide requirements for recording environmental liabilities.

  • Tangible Capital Assets: progress was made in the implementation and renewal of related policy and three directives which partly addressed the challenges in providing guidance on the application of accounting standards.

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

In 2014-15, Fisheries and Oceans Canada plans to complete operating effectiveness testing with the exception of its Tangible Capital Assets and Inventory which are to be completed in 2016-17.

In addition, the department also plans to continue its ongoing monitoring program to reassess control performance on a risk basis. The reader should note that the action plan below has been revised to take into effect results from the review of the department risk assessment of Internal Control over Financial Reporting in 2013-14.

Status summary - next fiscal year and subsequent years:
Key Control Areas Assessment Elements
Operating
Effectiveness
Testing
On-going Monitoring Five Year Plan
2014-15 2015-16 2016-17 2017-19
Business processes
Entity Level Controls X - - -
Tangible Capital Assets 2016-17 - - -
Inventory 2016-17 - - -
Financial Close X
Revenue
  • Marine services

  • Fisheries Licensing


2014-15
2014-15

-




Budgeting and Forecasting X
Operating Expenditures 2014-15 - -
Environmental Liabilities X - -
Salaries and Benefits X - -
Grants and Contributions X - -
Information Technology General Controls
Financial system X -
Delegation of authority X - -
Salary Management X - - -
Legend:
X denotes work has been completed in previous years
✔ denotes work is planned for completion in future years