Financial Statements for the year ended March 31, 2011


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 the Department of Environment Canada. 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 by Environment Canada, 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 and may not prevent or detect misstatements. It is based on an on-going process designed to identify and prioritize risks and the controls to mitigate these risks.

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 External Audit Advisory Committee, which reviews and provides guidance to the Deputy Minister of the Department of Environment Canada on the adequacy of control systems, the quality of financial reporting, and on disclosures in the financial statements.

The financial statements of the Department of Environment Canada have not been audited.

 

           

Paul Boothe                                                                Carol Najm

Deputy Minister                                                           A/Chief Financial Officer

Gatineau, Canada
Date:


Environment Canada
Statement of Financial Position (Unaudited)

As of March 31
(in thousands of dollars)
)
20112010
Assets 
Financial assets 
Due from Consolidated Revenue Fund$180,975$221,533
Accounts receivable and advances(note 4)30,24712,775
Total Financial Assets211,222234,308
Non-financial assets 
Prepaid expenses1,5131,402
Inventory4,2945,392
Tangible capital assets(note 5)389,180384,121
Total non-financial Assets394,987390,917
Total$606,209$625,225
Liabilities and Equity of Canada 
Liabilities 
Accounts payable & accrued Libilities (note 6)$185,644$227,096
Vacation pay and compensatory leave29,78929,512
Deferred revenue(note 7)5,8225,150
Lease obligation for tangible capital assets (note 8)19,92326,986
Employee future benefits (note 9)114,431113,951
Employee liabilities (note 10)99,88688,795
Other liabilities2,5132,149
 458,008493,639
Equity of Canada148,201131,586
Total$606,209$625,225

Contingent liabilities (note 10)

Contractual obligations (note 11)

The accompanying notes are an integral part of the financial statements.

 


Environment Canada
Statement of operations (Unaudited)

As of March 31
(in thousands of dollars)
201120101
Expenses Restated (note 14)
Weather and Environmental Services for Targeted Users$65,672$58,290
Biodiversity - Wildlife and Habitat136,201139,434
Weather and Environmental Services for Canadians207,363175,595
Substances and Waste Management128,599114,828
Climate Change and Clean Air166,017123,410
Water Resources137,588121,296
Compliance Promotion and Enforcement - Pollution44,12943,778
Compliance Promotion and Enforcement - Wildlife18,96417,739
Sustainable Ecosystems68,58657,171
Toronto Waterfront Revitalization Initiative(66)
Mackenzie Gas Project1,9663,653
Internal Services256,571370,763
Total Expenses1,231,6761,225,291
Revenues 
Weather and Environmental Services for Targeted Users$39,586$47,771
Biodiversity - Wildlife and Habitat3,6944,504
Weather and Environmental Services for Canadians6,1746,213
Substances and Waste Management2,6984,073
Climate Change and Clean Air2,4031,941
Water Resources22,04620,191
Compliance Promotion and Enforcement - Pollution8174
Compliance Promotion and Enforcement - Wildlife5025
Sustainable Ecosystems1,397969
Mackenzie Gas Project96
Internal Services1,4271,658
Total Revenues79,56387,425
 
Net cost of operations$1,152,1111,137,866

Segmented information (note 13)

The accompanying notes are an integral part of these financial statements

 


Environment Canada
Statement of Equity of Canada (Unaudited)

As of March 31
(in thousands of dollars)
20112010
Equity of Canada, beginning of year$131,586$130,299
Net cost of operations(1,152,111)(1,137,866)
Net cash provided by Government1,110,4431,086,428
Change in Due from the Consolidated Revenue Fund(40,558)(37,765)
Common Service provided without charge by other government departments (note 12) (553)
Transfer of assets to OGD) 98,84191,043
Equity of Canada, end of year$148,201$131,586

The accompanying notes are an integral part of these financial statements

 


Environment Canada
Statement of Cash flows (Unaudited)

As of March 31
(in thousands of dollars)
)
20112010
Operating actitivies:) 
 
Net cost of operations$1,152,111$1,137,866
 
Non-cash items: 
Services provided without charge by other government departments (note 12)(98,841)(91,048)
Amortization of tangible capital assets (note 5)(46,016)(41,682)
Loss on disposal of tangible capital assets(3,843)(875)
Variations in Statement of Financial Position: 
Increase in accounts receivable and advances17,4722,161
Increase (decrease) in prepaid expenses111(226)
Increase (decrease)in inventory(1,100)124
Decrease in liabilities other than obligations for tangible capital assets28,56822,591
Decrease in liabilities other than obligations for tangible capital assets-553
Cash used in operating activities1,048,4621,029,469
Capital investment activities: 
Net acquistions of tangible capital assets (note 5)53,03052,901
Proceeds from disposil ot tangible capitals assets(1,237)(955)
Found assets3,125865
Cash used in capital investing activities54,91852,811
Financing activities: 
Lease payments for tangible capital assets7,0634,148
Cash used in financing activities7,0634,148
Net cash provided by Government of Canada$1,110,443$1,086,428

 


Environment Canada
Notes to the Financial Statements

 

1. Authority and objectives

Environment Canada was established under legislation by the Department of the Environment Act. Under this Act , the powers, duties and functions of the Minister of the Environment extend to and include matters relating to:

  • The preservation and enhancement of the quality of the natural environment (including water, air and soil quality);
  • Renewable resources, including migratory birds and other non-domestic flora and fauna;
  • Water;
  • Meteorology;
  • Enforcement of any rules or regulations made by the International Joint Commission relating to boundary waters; and
  • Coordination of the policies and programs of the Government of Canada respecting the preservation and enhancement of the quality of the natural environment.

Environment Canada delivers its mandate through the following programs:

  • Weather and Environmental Services for Canadians
  • Biodiversity - Wildlife and Habitat
  • Substances and Waste Management
  • Weather and Environmental Services for Targeted Users
  • Climate Change and Clean Air
  • Water Resources
  • Compliance Promotion and Enforcement - Pollution
  • Compliance Promotion and Enforcement - Wildlife
  • Sustainable Ecosystems
  • Mackenzie Gas Project (see below)
  • Internal Services

Responsibility for the Mackenzie Gas Project (MGP) has been transferred from the Minister of the Environment to the Minister of Indian Affairs and Northern Development, effective February 16, 2011. Changes to Parliamentary Authorities for this initiative occurred through either the Main Estimates or Supplementary Estimates in 2010-2011. As such, Environment Canada is responsible to report on any residual recoveries of expenditures in its 2010-2011 Financial Statements.

In addition, Environment Canada has authority under numerous pieces of legislation which affect how the department operates. The most significant Acts are as follows:

  • Antarctic Environmental Protection Act
  • Canada Wildlife Act
  • Canada Water Act
  • Canadian Environmental Assessment Act
  • Canadian Environmental Protection Act, 1999
  • Department of the Environment Act
  • Fisheries Act (Sections 36-42)
  • International River Improvements Act
  • Migratory Birds Convention Act, 1994
  • Weather Modification Information Act
  • Wild Animal and Plant Protection and Regulation of International and Interprovincial Trade Act
  • Kyoto Protocol Implementation Act ( 2007, c. 30 )
  • Species at Risk Act
  • Federal Sustainable Development Act ( 2008, c. 33 )

 

2. Summary of significant accounting policies

These financial statements have been prepared in accordance with Treasury Board accounting policies 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:

(a) Parliamentary authorities
Environment Canada is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to Environment 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 the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides reconciliation between the bases of reporting.

(b) Net Cash Provided by Government
Environment Canada operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by Environment Canada is deposited to the CRF and all cash disbursements made by Environment Canada are paid from the CRF. The net cash provided by Government is the difference between all cash receipts and all cash disbursements including transactions between departments of the Government.

(c) Amount Due from the Consolidated Revenue Fund (CRF)
Amount Due from CRF is the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF and represents the net amount of cash that the Department is entitled to draw from the CRF without further appropriations to discharge its liabilities.

(d) 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 which the related expenses are incurred. Other revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenue. Funds that have been received are recorded as deferred revenues (Note 7), provided the department has an obligation to other parties for the provision of goods, services or the use of assets in the future.

(e) 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 worker's compensation are recorded as operating expenses at their estimated cost. The providers of these services determine the estimated costs to be recorded by the departments.

(f) Employee future benefits

  • Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multi-employer pension plan administered by the Government. Environment Canada’s contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. Current legislation does not require Environment Canada to make contributions for any actuarial deficiencies of the Plan.
  • Severance benefits: Employees are entitled to severance benefits under labour contracts or conditions of employment. These benefits are accrued as employees render the services necessary to earn them. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

(g) Accounts and loans receivables
Accounts and loans receivables are stated at the lower of cost and net recoverable value; a valuation allowance is recorded for receivables where recovery is considered uncertain.

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

(i) Environmental liabilities
Environmental liabilities reflect the estimated costs related to the management and remediation of environmentally contaminated sites. Based on management’s best estimates, a liability is accrued and an expense recorded when the contamination occurs or when Environment Canada becomes aware of the contamination and is obligated, or is likely to be obligated to incur such costs. If the likelihood of Environment Canada’s obligation to incur these costs is either not determinable, or if an amount cannot be reasonably estimated, the costs are disclosed as contingent liabilities in the notes to the financial statements.

(j) Inventory
Inventory consists of parts, material and supplies held for future program delivery. Inventory is valued at cost using the average cost method. If there is no longer any service potential, inventory is valued at the lower of cost or net realizable value.

(k) Tangible capital assets
All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. Environment Canada does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian Reserves and museum collections.

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

Asset ClassAmourtization Period
Buildings25 to 40 years
Works and Infrastructure20 to 40 years
Machinery and Equipment2 to 30 years
Vehicles3 to 25 years
Leasehold ImprovementsLesser of the remaining term of lease or useful life of the improvement
Leased tangible capital assetsOver term of lease/useful life

Assets under construction 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.

(l) 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 contingent liabilities, environmental liabilities, the liability for employee severance benefits 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

Environment Canada 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, Environment 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 operations to current year authorities used:

in thousands od dollars)20112010
Net cost of operations$1,152,111$1,137,866
Adjustments for items affecting net cost of operations but not affecting authorities: 
Services provided without charge(98,841)(91,043)
Amortization of tangible capital assets (note 5)(46,016)(41,682)
Expenses not being charged to Appropriations (1)21,70029,300
Revenues not available for spending17,94818,454
Expenses related to Environmental Liabilities(11,091)(32,527)
Gain (Loss) on sales of capital assets(3,843)(875)
Expenses related to Project deposits(2,579)(2,380)
Adjustments for prior years Payables At Year End1,5854,950
Refund of previous year's expenditures1,3941,042
Inventory(1,100)124
Environmental Damage Fund(671)(449)
Employee Future Benefits(480)15,460
Vacation pay and compensatory leave(277)298
Expenses for claims pending litigation(24)495
Other(1,018)(946)
 (123,313)(99,779)
Adjustments for items affecting net cost of operations but not affecting authorities: 
Net acquisition of tangible capital assets (note 5)53,03052,901
Capital lease payments7,0634,148
 60,09357,049
 
Current year authorities used$1,088,891$1,095,136

1. This amount represents monies that are kept in trust by Environment Canada for Nature Conservancy of Canada

(b) Authorities provided and used:

(in thousands od dollars)20112010
Authorities Provided 
Vote 1 - Operating expenditures$831,970$857,172
Vote 5 - Capital expenditures57,17655,035
Vote 10 - Grants & Contributions162,250132,804
Statutory amounts120,292128,697
 1,171,6881,173,708
Less: 
Authorities available for future years(1,373)(843)
Lapsed authorities(81,424)(77,729)
 (82,797)(78,572)
Current year authorities used$1,088,891$1,095,136

 

4. Accounts receivable and advances

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

(in thousands od dollars)20112010
Receivables from other government departments and agencies$18,618$3,714
Receivables from external parties11,9179,346
Total30,53513,060
Less: allowance for doubtful accounts on external receivables(429)(446)
Net accounts receivables30,10612,614
Employee advances141161
Total$30,247$12,775

 

5. Tangible capital assets

Cost
(in thousands of dollars)
2010AcquisitionsDisposals, adjustments2011
Land$25,244$25,244
Buildings152,84774060153,527
Works and infrastructure4,4872564,743
Machinery and equipment461,46724,19911,024474,642
Vehicles(2)41,3072,8284,11540,020
Leasehold improvements35,32435,324
Assets under construction (1)130,32925,007463154,873
Capital lease (note 8)34,85834,858
 $885,863$53,030$15,662$923,231
Accumulated amortization
(in thousands of dollars)
2010AcquisitionsDisposals, adjustments2011
Buildings$93,767$4,524$35$98,256
Works and infrastructure2,2671362562,147
Machinery and equipment347,14426,84510,012363,977
Vehicles(2)25,5794,0213,40426,196
Leasehold improvements23,2751,43224,707
Capital lease9,7109,05818,768
 $501,742$46,016$13,707$534,051
Net book value
(in thousands of dollars)
2010-2011
Land25,24425,244
Buildings59,08055,271
Works and infrastructure2,2202,596
Machinery and equipment114,323110,665
Vehicles(2)15,72813,824
Leasehold improvements12,04910,617
Assets under construction (1)130,329154,873
Capital lease25,14816,090
Net book value $384,121$389,180

1. Assets under construction include: buildings, engineering works, software and other construction. Disposals include those assets under construction that have been placed in service. Assets that are still under construction are not treated as assets as they are not yet available for use

2. Vehicles include: road motor vehicles, off road vehicles, aircraft, mobile laboratories, ships and boats.

 

6. Accounts payable and accrued liabilities

 

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

(in thousands in dollars)20112010
Accounts payable to other government departments and agencies$16,496$25,446
Accounts payable to external parties79,28089,719
 95,776115,165
Accrued liabilities89,868111,931
Closing balance$185,644$227,096

 

7. Deferred revenue

Deferred revenue represents the balance at year-end of unearned revenue stemming from amounts received from external parties which are restricted to fund the expenditures related to specific research projects and amounts received for fees prior to services being performed. Revenue is recognized in the period these expenditures are incurred or the services performed. Details of the transactions related to this account are as follows:

(in thousands of dollars)20112010
Opening balance$5,150$5,147
Amounts received1514
Project deposits2,8242,229
Revenue recognized(2,153)(2,740)
Closing balance$5,822$5,150

 

8. Lease obligation for tangible capital assets

The Department entered into agreements to lease certain space and equipment under capital leases with a cost of $34,857,900 and accumulated amortization of $18,767,794 as at March 31, 2011 ($34,857,900 of cost and $9,710,148 in accumulated amortization respectively as at March 31, 2010) as reflected in note 5. The obligations related to the upcoming years include Carleton University for which, on October 13, 2000, Environment Canada entered into an agreement to rent office laboratory space for the National Wildlife Research Centre (NWRC), at an annual cost of $1.3 million under a capital lease which expires in 2028. The current lease for the Super Computer expires in 2012 with a possibility of an extension to 2014.

(in thousands of dollars)20112010
Maturing year 
2011 $8,664
2012$8,0518,051
20131,3001,300
20141,3001,300
20151,300 
2015 and thereafter 16,900
2016 and thereafter14,300 
Total future minimum lease payments26,25136,215
Less: imputed interest (0.71% to 5.63% )6,3289,229
Balance of obligation under leased tangible capital assets$19,923$26,986

 

9. Employee future benefits

(a) Pension benefits

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

Both the employees and Environment Canada contribute to the cost of the Plan. The 2010-2011 expense amounts to $67,606,370 ($70,764,543 in 2009-2010) which represents approximately 1.9 times (1.9 times in 2009-2010) the contributions by employees.

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

(b) Severance benefits

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

(in thousands of dollars)20112010
Accrued benefit obligation, beginning of year$113,951$129,025
Transferred from other government department 387
 113,951129,412
Expense for the year (reimbursement)9,910(8,154)
Benefits paid during the year(9,430)7,307)
Accrued benefit obligation, end of year$114,431$113,951

 

10. Environmental and contingent liabilities

Environmental and 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 recorded based on the estimated costs related to the management and remediation of contaminated sites where Environment Canada is obligated or likely to be obligated to incur such costs. Environment Canada has identified approximately 18 projects (11 in 2009-2010) where action is required and for which a liability of $99,886,464 ($88,795,353 in 2009-2010) has been recorded in accrued liabilities. Environment Canada has identified $28,278,745 ($27,635,807 in 2009-2010) in contingent liabilities as it is unclear at this time whether Environment Canada is obligated to incur these estimated remediation costs in the future. In these cases, further investigation is required before a liability can be recorded. The contingent liabilities are reviewed each year to reflect any changes in the estimates.

(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 others for which no amount is specified. Based on the Department's assessment, legal proceedings for claims estimated at $11,550,000 ($8,500,000 in 2009-2010) were pending at March 31, 2011 for cases where outcome is not determinable. 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 estimated liability is accrued and an expense recorded in the financial statements. There was an estimated liability of $24,000 booked as an expense in 2010-2011 (nil in 2009-2010).

 

11. Contractual obligations

The nature of Environment Canada's activities can result in large multi-year contracts and obligations that have yet to be recorded as liabilities in the Accounts of Canada but for which Environment Canada is obligated to make future payments in order to be recorded as liabilities in the Accounts of Canada but for which Environment Canada is obligated to make future payments in order to meet its legal contractual requirements. The disclosure threshold in reporting the Contractual Obligations have been changed from $10M in 2009-10 to $1M in 2010-11 to better present Environment Canada long-term obligations. Significant contractual obligations that can be reasonably estimated are summarized as follows:

(in thousands of dollars)Operating leasesCapital leasesTransfer paymentsTotal
2012$7,928$14,877$5,827$28,632
20137,92814,8774,059$26,784
20147,91614,7973,014$25,807
20157,9156,957390$15,262
2016 and thereafter214,00923,400$237,409
Total$245,696$74,908$13,290$333,894

 

12. Related party transactions

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

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

(in thousands of dollars)20112010
Employer's contribution to the health and dental insurance plans$46,097$43,684
Accommodation47,93541,649
Legal services3,5454,240
Workers’ compensation1,2641,470
Total$98,841$91,043

 

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 :

(in thousands of dollars)20112010
Expenses - Other Government departments and agencies$186,578$188,196
Revenue - OGD and Agencies$25,124$26,308

 

13. 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)WESTU1BWH2WESC3SWM4CCCA5
Operations and administration  
Salaries and employee benefits$47,259$53,700$120,374$74,726$71,330
Professional and special services2,82910,42913,01222,01115,876
Accommodation3,3883,7178,8965,0445,552
Other contracted services2,8873,9443,2842,7582,824
Travel3,0044,7508,1152,6514,333
Machinery & equipment1,3611,3148,8667622,696
Amortization1,66566421,1032,4424,969
Rentals7912,4632,448468901
Materials and supplies1,5891,89510,4982,3543,282
Telecommunications1,0027722,793647614
Equipment repair and maintenance8271,0567,7924943,644
Postage1684741,556163354
Information services – communications40318325445218
Environmental liabilities11,091-
Loss on disposal of capital assets56(52)2,70329(346)
Earmarked fees and levies23-
Other(1,305)(1,297)(9,439)(387)(3,275)
Total Operations and administration65,56184,170202,326125,698112,972
Transfer payments 
Non-profit organizations48,1542,0192,29839,596
Other countries and international organizations1111,2062,96160312,526
Other levels of governments within Canada2,57615
Other to individuals842-
Industry8715908
Total transfer payments11152,0315,0372,90153,045
Total Expenses65,672136,201207,363128,599166,017
Revenues 
Sales of goods and services39,5522,8603,5282,6692,091
Other revenues348342,64629312
Total Revenues39,5863,6946,1742,6982,403
Net cost of operations$26,086$132,507$201,189$125,901$163,614

1(WESTU)  Weather and Environmental Services for Targeted Users
2(BWH)      Biodiversity - Wildlife and Habitat
3(WESC)    Weather and Environmental Services for Canadians
4(SWM)      Substances and Waste Management
5(CCCA)     Climate Change and Clean Air

 

(in thousands of dollars)WR6CPE-P7CPE-W8SE9MGP10
Operations and administration 
Salaries and employee benefits$79,726$32,673$12,912$32,876$1,059
Professional and special services15,4652,1101,1314,164682
Accommodation7,8112,1358592,27869
Other contracted services4,3413392919223
Travel5,5242,6981,2821,35981
Machinery and equipment5,0467816731,222-
Amortization4,692479602296-
Rentals12,3534012201,26932
Materials and supplies5,3731,5255668973
Telecommunications1,52245924627421
Equipment repair and maintenance2,5612961871,172 
Postage6149821554
Information services – communications170118101,10115
Environmental liabilities-----
Loss on disposal of capital assets158(9)(7)31-
 Earmarked fees and levies423-621-
Other(9,697)(32)(9)(1,495)(3)
 Total Operations and administration135,66344,09418,98447,0421,966
Non-profit organizations1,40913,976
Other countries and international organizations5003512
 Other levels of governments within Canada7,318
Other to individuals16134
 Industry104
Total transfer payments1,9253521,544
Total Expenses137,58844,12918,98468,5861,966
Revenues 
Sales of goods and services20,93360343429
Other revenues1,11321161,055
Total Revenues22,04681501,3979
Net cost of operations$115,542$44,048$18,934$67,189$1,957

5(CCCA)   ????????

6(WR)          Water Resources
7(CPE-P)     Compliance Promotion and Enforcement – Pollution
8(CPE-W)    Compliance Promotion and Enforcement – Wildlife
9  (SE)          Sustainable Ecosystems
10(MGP)     Mackenzie Gas Project

 

(in thousands of dollars)IS1120112010
Operations and administration 
Salaries and employee benefits$183,030$709,665$686,820
Professional and special services31,661119,37095,880
Accommodation11,86151,61048,927
Other contracted services8,64730,24042,654
Travel4,25738,05441,505
Machinery and equipment9,71232,43336,789
Amortization9,10446,01641,682
Rentals1,78523,13129,228
Materials and supplies2,68030,66229,236
Telecommunications5,62413,97415,577
Equipment repair and maintenance1,13919,16813,060
Postage1,0784,5854,425
Information services – communications3563,1163,727
Environmental liabilities 24 11,11532,032 
Loss on disposal of capital assets1,2803,843874
 Earmarked fees and levies671448 
Other2,888(24,051)(1,836)
 Total Operations and administration275,1261,113,6021,121,028
 Transfer payments 
Non-profit organizations(21,703)85,749 80,828 
Other countries and international organizations17,95410,408 
 Other levels of governments within Canada9,909  9,110
Other to individuals3,1483,348  3,534
 Industry1,114 383 
Total transfer payments(18,555)118,074 104,263
Total Expenses256,5711,231,6761,225,291
Revenues 
Sales of goods and services23172,30983,396
Other revenues1,1967,2564,029
Total Revenues1,42779,56587,425
Net cost of operations$255,144$1,152,111$1,137,866

11 (IS)          Internal Services

 

14. Comparative information

Comparative figures, with the exception of Internal Services, have been reclassified to conform to the current year's presentation. This includes amounts reported against program activities in the Statement of Operations which were restated to comply with new Program Activity Architecture.

Contingent liabilities reported in Note 10 are now only cases where the outcome is not determinable. Cases where the outcome has been deemed as unlikely are not reported.


Environment Canada
Notes to Reader

With the Treasury Board Policy on Internal Control, effective April 1, 2009, departments are required to demonstrate the measures they are taking to maintain an effective system of internal control over financial reporting.

As part of this policy departments are expected to conduct annual assessments of their system of internal control over financial reporting, establish action plan(s) to address any necessary adjustments, and to attach to their Statement of Management Responsibility Including Internal Control over Financial Reporting a summary of their assessment results and action plan.

Effective systems of internal control over financial reporting aim to achieve reliable financial statements and to provide assurances that:

  • transactions are appropriately authorized
  • financial records are properly maintained
  • assets are safeguarded from risks such as waste, abuse, loss, fraud and mismanagement
  • applicable laws, regulations and policies are followed

It is important to note that the system of internal control over financial reporting is not designed to eliminate all risks, rather to mitigate risk to a reasonable level with controls that are balanced with and proportionate to the risks they aim to mitigate.

The system of internal control over financial reporting is designed to mitigate risks to an acceptable level based on an on-going process to identify key risks, to assess the effectiveness of associated key controls and adjust as required, as well as to monitor the system in support of continuous improvement. As a result, the scope, pace and status of departmental assessments of the effectiveness of the system of internal control over financial reporting will vary from one organization to another based on risks and taking into account their unique circumstances.


Environment Canada
Annex to the Statement of Management Responsibility

1. Introduction

This document is attached to the Environment Canada Statement of Management Responsibility Including Internal Control Over Financial Reporting for the fiscal-year 2010-2011. As required by Treasury Board Policy on Internal Control, this document provides summary information on the measures taken by Environment Canada to maintain an effective system of internal control over financial reporting (ICFR). In particular, it provides summary information on the assessments conducted by Environment Canada as at March 31, 2011, including progress, results and related action plans along with some financial highlights pertinent to understanding the control environment unique to Environment Canada. ICFR is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with applicable accounting policies. This is the second ICFR Annex produced by this department.

1.1 Authority, Mandate and Program Activities

Environment Canada is the federal lead department on a wide range of environmental issues facing Canadians. As a science-based department, Environment Canada addresses these issues through research, policy development, service delivery to Canadians, regulation and enforcement of environmental laws, and strategic partnerships. Programs are focused on conserving and restoring Canada’s natural environment; equipping Canadians to make informed decisions on weather, water and climate conditions; and minimizing threats to Canadians and their environment from pollution. The department’s program focus reflects the increasingly evident interdependence between environmental sustainability and economic well-being. A number of acts and regulations provide the department with its mandate and allow it to carry out its programs.

Further information on Environment Canada’s authority, mandate and program activities can be found in the Report on Plans and Priorities and Departmental Performance Report.

1.2 Financial highlights

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

  • Total expenses were $1,231.7M. Salaries and Employee Benefits were the largest expense, accounting for 58% or $709.7M.
  • Total revenues were $79.6M. Major revenue items include Ocean disposal permit applications, Hydraulics laboratory, and Ocean disposal monitoring fees.
  • Financial assets and non-financial assets each comprise about $211.2M and $395.0M (35% and 65% respectively) of the department’s total assets, which are $606.2M.
  • Total liabilities were $458.0M. Accounts payable and accrued liabilities represent the majority of liabilities (41%), followed by Employee future benefits (25%)
  • Net cash provided by the Government of Canada totalled $1,110.4M.

1.3 Service arrangements relevant to financial statements

The department relies on other organizations for the processing of certain transactions that are recorded in its financial statements. These situations, therefore, may affect the financial statements. Those arrangements include government wide services and support, for example, from Public Works and Government Services Canada, Justice Canada and the Treasury Board Secretariat.

In addition, Environment Canada provides certain corporate services to the Canadian Environmental Assessment Agency (CEAA).

1.4 Material changes in fiscal-year 2010-2011

Paul Boothe became the new Deputy Minister of Environment Canada on July 26, 2010.
Subsequent to the 2010-2011 fiscal year-end, the following organizational and senior management changes were made:

  • Andrea Lyon was appointed Associate Deputy Minister (July 11, 2011)
  • George Enei was appointed Acting Assistant Deputy Minister of the new Corporate Services Branch integrating the former Chief Information Officer Branch services with administrative services including the Asset, Contracting and Environmental Management Directorate which was previously aligned under the Finance and Corporate Branch (May 30, 2011)
  • Carol Najm, previously the Director General of the Audit and Evaluation Branch and Chief Audit Executive of Environment Canada, was appointed Acting Chief Financial Official and Assistant Deputy Minister of the new Finance Branch (May 30, 2011)
  • Robert D’Aoust was appointed Acting Director General of the Audit and Evaluation Branch and Chief Audit Executive of Environment Canada (May 30, 2011)

2. Environment Canada's control environment relevant to Internal Control Over Financial Reporting

Senior Management of Environment Canada provide the leadership to help ensure that staff at all levels in the department understand the purpose and importance of maintaining risk-based effective internal control systems as well as their roles and responsibilities in support of sound stewardship of public resources and reliable financial reporting. Environment Canada’s focus is to ensure that risks are well managed through a responsive and risk-based control environment that enables continuous improvement and innovation.

2.1 Key positions, roles and responsibilities

Below are Environment Canada's key positions and committees with responsibilities for maintaining and reviewing the effectiveness of its system of ICFR.


Deputy Minister – Environment Canada's Deputy Minister, as Accounting Officer, assumes overall responsibility and leadership for the measures taken to maintain an effective system of internal control.

Chief Financial Officer (CFO) – Environment Canada's CFO reports directly to the Deputy Minister and provides leadership for the coordination, coherence and focus on the design and maintenance of an effective and integrated system of ICFR (including its annual assessment). The CFO is also responsible for the Corporate Risk Profile of Environment Canada.

Senior Departmental Managers - Environment Canada's senior departmental managers in charge of program delivery are responsible for reviewing and maintaining the effectiveness of their system of ICFR within their mandate.

Chief Audit Executive (CAE) – Environment Canada's CAE reports directly to the Deputy Minister and undertakes periodic reviews of the effectiveness of the system of internal control, including ICFR, as part of the department's Risk Based Audit Plan, and provides assurance through periodic internal audits which are instrumental to the maintenance of an effective system of ICFR.

External Audit Advisory Committee (EAAC) – The EAAC is an independent external advisory committee that provides the Deputy Minister with advice and objective views on the department’s risk management, control and governance frameworks. It provides guidance to the Deputy Minister on the adequacy of the financial reporting, financial disclosures and the systems of internal control, including the assessment and action plans relating to the system of ICFR. Executive Management Committee (EMC) – This is the most senior management committee with oversight responsibilities of the department. EMC is responsible for monitoring the organization's response to corporate risks and ensuring the effectiveness of risk mitigation measures and that controls are in place to address key corporate risks.

2.2 Key measures taken by Environment Canada

Environment Canada's control environment includes a series of measures which focus on ensuring that risks are effectively managed through a responsive and risk-based control environment, and on developing employee knowledge on internal control. Key measures include:

  • Environment Canada prepares a three-year risk based audit plan annually whose deliverables are instrumental to the departmental system of internal control over financial reporting. The annual risk based audit plan is approved by the Deputy Minister upon recommendation by the External Audit Advisory Committee.
  • The assessment and maintenance of corporate risks to maintain an accurate and up to date Corporate Risk Profile. The Profile supports optimal resource allocation with careful consideration given to departmental risks.
  • A Values, Integrity and Disclosure Directorate provides educational and awareness programs designed to: reinforce Public Service values and ethics; further strengthen a solid values and ethics infrastructure; and integrate values and ethics ever more deeply into Environment Canada’s culture. The Directorate plays a major role in ensuring the sustainability of a culture where employees discharge their financial obligations in a manner that can bear the closest public scrutiny.
  • The Corporate Accountability and Administrative Renewal (CAAR) initiative established to improve the financial management infrastructure, business processes and tools of the department, and ICFR requirements. This initiative continues to successfully improve financial information monitoring and reporting systems for managers across EC. This accessible and user friendly financial information supports management accountability through strong budget management and financial decision-making.
  • A Financial Situation Report is reviewed monthly by Senior Departmental Managers and annual Performance Agreements clearly set out financial management responsibilities. The Financial Situation Report exercise ensures accurate monitoring and reporting of the Departmental financial situation and supports the executive management in meeting their financial accountability commitments.
  • A Procurement Review Board (PRB) is in place at Environment Canada. The PRB is a key element of the risk management framework for departmental procurement and is responsible for reviewing and approving the procurement of goods, services and construction within the department. The PRB plays an essential role in ensuring compliance with the government Contract Regulations and financial policies and in supporting value for money through ensuring the integration and consolidation of proposed procurement at EC.
  • An internal control program with dedicated resources is in place to ensure sustainable internal control management. This program is the key for the successful transition from the reactive approach to dealing with control deficiencies to a proactive manner. This program focuses on providing assurance to executive management on the effective and efficient management of the Department’s internal control system.

3. Assessment of Environment Canada’s system of ICFR

3.1 Assessment approach

The following depicts the overall approach and the key elements of the assessment process:

(insert diagram)

The assessment process covers all departmental control levels which include entity level controls, information technology (IT) level controls and financial transaction and reporting (business processes) level controls.

3.2 Scope of departmental assessment during fiscal year 2010-2011

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. Based on the financial statement Audit Readiness Assessment which was completed in March, 2009, Environment Canada has gathered available information pertaining to existing processes, risks and controls relevant to internal controls over financial reporting, including appropriate policies and procedures. The ICFR action plan ensures that key risks and controls are adequately documented. The department has begun to assess the design effectiveness of key controls and address necessary remediation.

A risk assessment was completed on 24th March 2011, to review the financial statements of Environment Canada to identify key accounts, key processes and systems where there is risk of error occurring including the risk of misstatement of financial information presented. The results of the workshop identified four high risk accounts: Inventory; Tangible Capital assets; Accounts Payable and Accrued Liabilities; and Transfer Payments.

These assessments leverage the reports and work of the financial statement Audit Readiness Assessment, Environment Canada’s risk based audit plan, and the audit reports of the Office of the Auditor General.

4. Departmental assessment results during fiscal year 2010-2011

In assessing its key controls, Environment Canada has continued to focus this year on its design effectiveness testing which is a prerequisite to testing operating effectiveness (see the summary of Environment Canada’s assessment process in section 3.1 above). 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

As part of the design effectiveness assessment phase highlighted in Section 3.1, Environment Canada is in the process of completing the following remedial activities to address internal control weaknesses at the design level.

Entity Level Controls:

  • Commenced work towards the development of a refreshed departmental Financial Management Framework and work is underway to finalize this framework
  • Updated and prepared a draft of the Financial Management Policy Suite
  • Prepared draft of a departmental Internal Control Framework, which includes establishing a sustainable approach to maintain a program of continuous control monitoring at the department level
  • Commenced the update of month-end procedures and the Accounting Manual Handbook
  • Implemented, in conjunction with new Treasury Board directives, mandatory training for the Finance community

Information Technology Level Controls:

  • Substantial progress has been made in addressing the identified IT financial control deficiencies
  • All of the high risk areas, were found to be well addressed by the work undertaken to date. The high risk areas were around segregation of duties, access controls and change management
  • A few controls were found to still have moderate issues to address, each posing a medium level of residual risk to the department. The first of these two is regarding eliminating active accounts that are assigned to former employees; and the second is to ensure that activity by privileged Oracle Financial (Merlin) users is monitored
  • The remaining control gaps were found to be largely effective with only minor issues that need to be addressed – each posing a low level of risk to the department
  • A release management process was established to deal with the complexity of financial systems in order to guarantee the success and long-term value of a product or project

Financial Transaction and Reporting Level Controls:

  • Strengthened the processes to evaluate and approve Grants & Contributions recipient eligibility
  • Implemented monitoring standards for payables at year-end (PAYE) and for receivables at year-end (RAYE)
  • Implemented an improved post audit process on payments across all regions
  • Implemented a financial coding tool, including a roll-out plan and training schedules
  • Implemented centralized G/L coding / cost centre administration
  • Strengthened internal monitoring and review of the environmental liability reporting process
  • Implemented formal procedures for cut-off of payables and accruals at year-end and strengthened procedures around period-end accounting processes
  • Implemented formal sign-off of Receiver General Public Accounts submissions
  • Developed, validated and approved the documentation for the following business processes and their key controls: Travel; Hospitality; and Acquisition Cards. Documentation of other processes is underway
  • Provided greater clarity of roles and responsibilities as well as improved challenge functions and quality assurance within Finance Operations and over disclosures in the financial statements

4.2 Operating effectiveness of key controls

In 2010-2011, Environment Canada commenced the development of a risk-based testing approach to identify key controls to be tested over a defined period of time, including the selection of locations, the test period as well as the method and frequency of testing. Operating effectiveness assessment will not commence until all remediation of design effectiveness, have been implemented. When completing operating effectiveness testing, the department will ensure that key controls are well functioning over a specified period of time.

Monitoring is in place for specific key controls and will be strengthened with the implementation of the risk based operating effectiveness assessment and remediation process currently underway.

5. Environment Canada’s action plan

Environment Canada is in year 3 of its ICFR Five-Year Plan and the overall project is on track. A risk-based approach for ensuring efficient and effective internal control management has been established (see Section 3.2 for results of the 1st assessment). The ICFR project is two-pronged:

1) This program component focuses on bringing remediation work that emanated from Environment Canada’s Audit Readiness Assessment to a close. In summary, the following outcomes were achieved to date:

  • A follow-up Audit of IT Financial Controls has concluded that substantial progress has been made in addressing the IT financial control recommendations
  • Half of the transactional level control weaknesses have been remediated
  • For controls at the entity-level, a project plan was developed and a draft Financial Management Framework and its underlying components have been developed and work is underway to finalize it and proceed with implementation

2) This particular program component focuses on implementing a sustainable enabling program for internal control management and to institutionalize a culture of continuous improvement and excellence in the area of internal control. In summary, the following milestones were achieved:

  • A cyclical financial reporting risk assessment function was established and the first risk assessment was conducted in March 2011
  • An operational plan for internal control management was developed using the risk assessment which informs the priority and timing of the deliverables within the overall ICFR Five-Year Plan

5.1 Progress as of March 31, 2011

Environment Canada continued to update and develop formal documentation and remediation of control weaknesses (refer to Section 4.1 for a listing of key controls remediation). Key progress was made over the year as follows:

  • Commenced work towards the significant control assessment and remediation required around asset / inventory and valuation - the work in this area will span 3 years of the 5-Year Plan. The validation of departmental asset records commenced in 2010-11 and is estimated to be completed by March 31, 2012
  • Developed, validated and approved financial transaction and reporting controls documentation (process maps and control matrices) for Travel, Hospitality and Acquisition Cards processes. Progress on business process documentation and standardization will continue using a risk based approach as planned
  • Incorporated into project timelines the Treasury Board established schedule for implementation of common business processes
  • Upgraded the financial systems to a new Linux platform to be ready to migrate to Oracle R12 or Government of Canada common SAP environment.
  • Updated and prepared a draft of the Financial Management Policy Suite, currently in the approval stages, and began work to refresh the departmental Financial Management Framework
  • Strengthened the Finance and Integrated Enterprise Services teams with an increased focus on quality assurance, greater clarity of roles and responsibilities as well as improved challenge functions and quality assurance

5.2 Action plan for the next fiscal year and subsequent years

Over 2011-2012, subject to available resources, Environment Canada will focus on the finalization and implementation of a Departmental Internal Control Framework and the development of a governance structure for Internal Control Management in accordance with the ICFR Five-Year Action Plan. In parallel, efforts will be concentrated as follows:

  • Pursuant to the financial reporting risk assessment conducted in March 2011, Environment Canada will undertake a review of specific business processes by starting with the highest risk areas. In 2011-2012, the focus will be on Inventory, Capital Assets, and Procure-to-Pay processes (based on OCG Common Financial Management Business Processes). Subsequent to 2011-2012, the focus will be on documenting and testing control design effectiveness in the areas of Transfer Payments, Environmental Liabilities and the Financial Close process
  • Evolving financial risk assessment by conducting a second risk assessment using the new methodology developed in 2010-2011
  • Regular quality monitoring and reporting on internal controls will take place on a quarterly basis and continued quality assurance efforts focused on IT controls with transactional control monitoring beginning in the third quarter of the fiscal year
  • The key focus areas in 2011-2012 for each control level will be:

Entity Level Controls:

  • Complete entity level control documentation and conduct design effectiveness testing around entity level controls
  • Develop a refreshed departmental Financial Management Framework and Internal Control Framework and associated implementation strategies, including change management and strengthening staff awareness and role clarification

Information Technology Level Controls:

  • Complete operational effectiveness testing of all Information Technology general controls
  • Finalize control documentation including process procedures and monitoring reporting requirements

Financial Transaction and Reporting Controls:

  • Document and complete design effectiveness testing for Inventory Management, Capital Assets Management and Procure to Pay processes
  • Conduct walkthroughs and control effectiveness testing for Travel, Hospitality and Acquisition Card business processes

Two significant financial disclosure risks remain pertaining to the valuation and measurement of inventory and tangible capital assets. These risks should be addressed by 2013-2014. Environment Canada will continue with its Corporate Accountability and Administrative Renewal (CAAR) initiative to provide the foundation for strengthened ICFR for more reliable financial statement disclosures and preparedness for audit readiness. Environment Canada is currently in year 3 of the overall Five-Year ICFR project plan to achieve auditable financial statements by April 2014. Progress in future years is subject to departmental priorities and funding availability.