2015-16 Year End Financial Statements for the Canadian Northern Economic Development Agency

Table of contents

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, 2016, and all information contained in these statements rests with the management of the Canadian Northern Economic Development Agency (CanNor). 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 CanNor's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in CanNor'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 (ICFR) 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.  CanNor takes a multi-year approach to the assessment of the effectiveness of the system of ICFR.

The system of ICFR 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.

CanNor is subject to periodic Core Control Audits performed by the Office of the Comptroller General and uses the results of such audits to comply with the Treasury Board Policy on Internal Control.

The financial statements of CanNor have not been audited.

 

_________________________________
Dr. Janet King
President

_________________________________
Ross Miller, CPA, CMA
Chief Financial Officer


Ottawa, Canada
September 2, 2016

CANADIAN NORTHERN ECONOMIC DEVELOPMENT AGENCY
Statement of Financial Position (Unaudited)
As at March 31

(in dollars) 2016 2015
  • Contractual obligations (note 8)
  • The accompanying notes form an integral part of these financial statements.
Liabilities
Accounts payable and accrued liabilities (Note 4)
19,361,388 26,460,162
Vacation pay and compensatory leave
487,880 364,821
Employee future benefits (Note 5)
491,107 542,898
Total liabilities 20,340,375 27,367,881
Financial assets
Due from Consolidated Revenue Fund
19,294,640 26,377,836
Accounts receivable and advances (Note 6)
66,748 82,325
Total financial assets 19,361,388 26,460,161
Departmental net debt 978,987 907,720
Non-financial assets
Tangible capital assets (Note 7)
748,724 801,277
Total non-financial assets 748,724 801,277
Departmental net financial position (230,263) (106,443)

 

_________________________________
Dr. Janet King
President

_________________________________
Ross Miller, CPA, CMA
Chief Financial Officer


Ottawa, Canada
September 2, 2016

CANADIAN NORTHERN ECONOMIC DEVELOPMENT AGENCY
Statement of Operations and Departmental Net Financial Position (Unaudited)
For the year ended March 31

(in dollars) 2016
Planned Results
2016 2015
  • Segmented information (Note 10)
  • The accompanying notes form an integral part of these financial statements.
Expenses
Economic development
38,922,000 34,140,846 38,890,014
Policy and alignment
4,858,000 4,280,078  4,138,563
Internal services
7,538,000 7,647,287  8,665,505
Total expenses 51,318,000 46,068,211 51,694,082
Revenues
Recovery of crown housing and other fees
   290,000    275,861     470,660
Revenues earned on behalf of government
 (290,000)   (275,861)    (470,660)
Total revenues
Net cost of operations before government funding and transfers 51,318,00 46,068,211 51,694,082
Government funding and transfers
Net cash provided by government
  51,043,349 47,785,757
Change in due from consolidated revenue fund
  (7,083,196)  1,245,080
Services provided without charge by other government departments (Note 8)
  1,984,238  1,902,700
Transfer of accounts receivable to Public Works and Government Services (Note 11)
  (273,837)
Total Government funding and transfers   45,944,391 50,659,700
Net cost of operations after government funding and transfers   123,820 1,034,382
Departmental net financial position - beginning of year   (106,443) 927,939
Departmental net financial position - end of year   (230,263) (106,443)

CANADIAN NORTHERN ECONOMIC DEVELOPMENT AGENCY
Statement of Change in Departmental Net Debt (Unaudited)
For the year ended March 31

(in dollars) 2016 2015
The accompanying notes form an integral part of these financial statements.
Net cost of operations after government funding and transfers 123,820 1,034,382
Change due to tangible capital assets
Acquistion of tangible capital assets
120,600
Amortization of tangible capital assets
(173,153) (327,075)
Adjustments to tangible capital assets
(493,748)
Total change due to tangible capital assets (52,553) (820,823)
Net increase (decrease) in departmental net debt 71,267 213,559
Departmental net debt - Beginning of year 907,720 694,161
Departmental net debt - End of year 978,987 907,720

CANADIAN NORTHERN ECONOMIC DEVELOPMENT AGENCY
Statement of Cash Flow (Unaudited)
For the year ended March 31

(in dollars) 2016 2015
The accompanying notes form an integral part of these financial statements.
Operating activities
Net cost of operations before government funding and transfers
46,068,211 51,694,082
Non-cash items:
Amortization of tangible capital assets
(173,153) (327,075)
Adjustment to tangible capital assets
(493,748)
Services provided without charge by other government departments (Note 8)
(1,984,238) (1,902,700)
Transition payments for implementing salary payments in arrears (Note 11)
273,837
Variations in Statement of Financial Position:
Increase (decrease) in accounts receivable and advances
(15,577) (35,011)
Decrease (increase) in accounts payable and accrued liabilities
7,098,775 (1,210,070)
Decrease (increase) in vacation pay and compensatory leave
(123,060) (16,571)
Decrease (increase) in future employee benefits
51,791 (196,987)
Cash used in operating activities 50,922,749 47,785,757
Capital Investing Activities    
Acquisition of tangible capital assets
120,600  
Net cash provided by Government of Canada 51,043,349 47,785,757

CANADIAN NORTHERN ECONOMIC DEVELOPMENT AGENCY
Notes to the Financial Statements (Unaudited)
For the Year Ended March 31

1. Authority and Objectives

The Canadian Northern Economic Development Agency (CanNor) was established on August 18, 2009 in accordance with paragraph 2(a) of the Public Service Rearrangement and Transfer of Duties Act. Pursuant to Order-in-Council P.C 2009-1423, the control and supervision portion of the Northern Economic Development Branch in the Department of Indian Affairs and Northern Development was transferred to CanNorCanNor is listed in Schedule I.1 of the Financial Administration Act.

Contributing to the jobs and growth in Canada, CanNor works to develop a diversified, sustainable and dynamic economy across Canada's three territories.  It does this by delivering economic development programs, undertaking policy and research, and by collaborating with and aligning the efforts of other federal departments, territorial governments, Aboriginal organizations, and industry. This is particularly the case in resource development through its Northern Projects Management Office (NPMO).

In pursuit of its mandate and to contribute to its strategic outcome of developed and diversified territorial economies that support prosperity for all Northerners, CanNor has structured its program activities as follows:

  1. Economic Development – This program supports economic development in Canada's three territories: Nunavut, Northwest Territories, and Yukon. Ensuring that the North is able to participate actively in the economy is essential to Canada's economic growth. Each territory has unique opportunities and challenges that require individual strategies to foster sustainable, competitive and diverse economic development. Through funding support, the Canadian Northern Economic Development Agency (CanNor) strengthens and stimulates the northern economy by taking steps to advance private sector efforts, ranging from small and medium enterprises to large-scale industry. There is also a strong focus on creating the conditions to position individuals, including Aboriginal and non-Aboriginal Northerners, communities, and business-related organizations for economic success.
  2. Policy and Alignment – This program supports research and analysis to guide programming and policy choices, the promotion of northern interests both inside and outside of the federal government, and the development of horizontal strategies, initiatives and projects to address economic development challenges in the North.
  3. Internal Services – This program consists of groups of related activities and resources that are administered to support the needs of programs and other corporate obligations of an organization. These groups are Management and Oversight Services; Communications Services; Legal Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Services; Materiel Services; Acquisition Services; and Travel and Other Administrative Services. Internal Services include only those activities and resources that apply across an organization and not to those provided specifically to a program. CanNor receives certain internal services such as human resources support, financial and IT systems support and contribution administration through agreements with other departments.

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 – The Agency is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Agency 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 2015-16 Report on Plans and Priorities.
  2. Net cash provided by Government – The Agency operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the Agency is deposited to the CRF, and all cash disbursements made by the Agency are paid from the CRF. The net cash provided by Government is the difference between all cash receipts and all cash disbursements including transactions between departments of the Government.
  3. Amounts due from or to the CRF are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF.  Amounts due from the CRF represent the net amount of cash that the Agency is entitled to draw from the CRF without further authorities to discharge its liabilities.
  4. Revenues:
    1. Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.
    2. Other revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenue takes place.
    3. Revenues that are non-respendable are not available to discharge the Agency's liabilities. While the President is expected to maintain accounting control, she 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:
    1. 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.
    2. Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
    3. Services provided without charge by other government departments for accommodation and employer contributions to the health and dental insurance plans 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 pension plan administered by the Government. The Agency's contributions to the Plan are charged to expenses in the year incurred and represent the Agency's total obligation to the Plan. The Agency'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 receivable and advances are stated at the lower of cost and net recoverable value. A valuation allowance is recorded for receivables where recovery is considered uncertain.
  8. Tangible capitalassets-–All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. 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
Motor vehicles 5 years
Leasehold Improvements Lesser of useful life or remaining term of lease
  1. 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 liability for employee future 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

The Agency receives its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Departmental Net Financial Position and in the Statement of Financial Position in one year may be funded through parliamentary authorities in prior, current or future years. Accordingly, the Agency 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:

3a) Reconciliation of net cost of operations to current year authorities used

(in dollars) 2016 2015
Net cost of operations before government funding and transfers 46,068,211 51,694,082
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets
(173,153) (327,075)
Acquisition of tangible capital assets
120,600
Allowance for Bad Debt
(43,277)
Adjustment to tangible capital assets
(493,748)
Services provided without charge by other government departments
(1,984,238) (1,902,700)
Adjustments of prior year’s accounts payable
2,138,382 69,063
Refunds of prior year’s expense
850,307 63,937
Decrease (increase) in employee future benefits
51,791 (196,987)
Decrease (increase) in vacation pay and compensatory leave
(123,060) (16,571)
Total items affecting net cost of operations but not affecting authorities
880,629 (2,847,358)
Adjustments for items not affecting net cost of operations but affecting authorities:
Transition payments for implementing salary payments in arrears
273,837
Current Authorities Used 46,948,840 49,120,561

3b) Authorities provided and used

(in dollars) 2016 2015
Authorities Provided:
Vote 1 – Operating expenditures
14,971,158 14,605,534
Vote 5 – Contributions
35,064,622 36,617,328
Statutory amounts
1,339,601 1,462,388
Less:
Lapsed:
Vote 1 – Operating expenditures
(1,653,292) (1,066,943)
Vote 5 – Contributions
(2,773,249) (2,497,746)
Current year authorities used 46,948,840 49,120,561

4. Accounts payable and accrued liabilities

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

(in dollars) 2016 2015
Accounts payable - Other government departments and agencies
597,821 738,651
Accounts payable - External parties
3,435,466 231,478
Total accounts payable
4,033,287 970,129
Accrued liabilities
15,328,101 25,490,033
Total accounts payable and accrued liabilities 19,361,388 26,460,162

5. Employee future benefits

a) Pension benefits

The Agency'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 the Agency 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 2015-2016 expense amounts to $923,387 ($999,689 in 2014-2015). For Group 1 members, the expense represents approximately 1.25 times (1.41 times in 2014-2015) the employee contributions and, for Group 2 members, approximately 1.24 times (1.39 times in 2014-2015) the employee contributions.

The Agency's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the Financial Statements of the Government of Canada, as the Plan's sponsor.

b) Severance benefits

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

As part of collective agreement negotiations with certain employee groups, and changes to 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 were given the option to be paid the full or partial value of benefits earned 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.

(in dollars) 2016 2015
Accrued benefit obligation - beginning of year
542,898 345,911
Expense for the year
(46,008) 278,127
Benefits paid during the year
(5,783) (81,140)
Accrued benefit obligation - End of year 491,107 542,898

6. Accounts receivable and advances

The following table presents details of CanNor's accounts receivable and advances:

(in dollars) 2016 2015
Receivables - Other government departments and agencies
65,127 80,602
Receivables – External parties
42,957 44,750
Employee advances
250 250
Allowance for doubtful accounts
(41,586) (43,277)
Net accounts receivable and advances 66,748 82,325

7. Tangible capital assets

(in dollars) Cost Accumulated Amortization Net Book Value
Capital Asset Class Opening Balance Acquisitions Adjustment Closing Balance Opening Balance Amortization Adjustment Disposals and Write-offs Closing Balance 2016 2015
Motor Vehicles
116,421 116,421 116,421 116,421
Work in Progress – Leaseholds 120,600 120,600   120,600
Leasehold Improvements
2,285,765 2,285,765 1,484,488 173,153 1,657,641 628,124 801,277
Total 2,402,186 120,600 2,522,786 1,600,909 173,153 1,774,062 748,724 801,277

8. Related party transactions

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

(in dollars) 2016 2015
Transfer payments 12,300,000 30,300,000

9. Related party transactions

The Agency is related as a result of common ownership to all government departments, agencies, and Crown corporations. The Agency enters into transactions with these entities in the normal course of business and on normal trade terms. In addition, the Agency has an agreement with Indigenous and Northern Affairs Canada (INAC) related to the provision of finance and administration services. During the year, The Agency 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

During the year, the Agency received services without charge from certain common service organizations, related to accommodation and the employer's contribution to the health and dental insurance plans. These services provided without charge have been recorded in the Agency's Statement of Operations and Departmental Net Financial Position as follows:

(in dollars) 2016 2015
Accommodation
1,186,393 1,144,202
Employer’s contribution to the health and dental insurance plans
797,845 758,498
Total 1,984,238 1,902,700

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 CanNor's Statement of Operations and Departmental Net Financial Position.

b) Other transactions with related parties

(in dollars) 2016 2015
Expenses disclosed in (b) exclude common services provided without charge, which are already disclosed in (a).
Expenses – Other government departments and agencies 3,939,614 4,707,546

10. Segmented information

The presentation by segment is based on the Agency'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 expenses incurred and revenues generated for the main programs. The segment results for the period are as follows:

(in dollars) Economic Development Policy and Alignment Internal Services 2016 Total 2015 Total
Transfer payments 29,506,739 29,506,739 34,078,779
Operating expenses
Salaries and employee benefits
4,011,907 3,587,378 3,675,442 11,274,727 11,537,964
Professional and special services
225,040 453,822 1,306,166 1,885,028 2,167,222
Amortization of tangible capital assets
173,153 173,153 327,075
Travel and relocation
339,221 213,534 353,142 905,897 801,716
Buildings, machinery and equipment
10,723 10,723 8,960
Accommodation
1,186,393 1,186,393 1,144,202
Utilities, materials and supplies
11,526 5,306 49,652 66,484 70,366
Rentals of buildings and machinery
4,911 14,560 857,125 876,596 843,603
Transportation and telecommunication services
249 4,915 5,164 18,974
Information services
22,021 5,054 28,152 55,227 40,930
Repair and maintenance
1,710 355 122,971 125,036 115,116
Other expenses
17,522 69 53.41 17,644 2,150
Allowance for Bad Debts
43,277
Capitalization of Work in Progress (Leaseholds)
(120,600) (120,600)
Re-evaluation of Leasehold Improvements
493,748
Total operating expenses
4,634,107 4,280,078 7,647,287 16,561,472 17,615,303
Total expenses
34,140,846 4,280,078 7,647,287 46,068,211 51,694,082
Revenues
Miscellaneous revenues and fees
3,110 272,751 275,861 470,660
Revenues earned on behalf of Government
(3,110) (272,751) (275,861) (470,660)
Total revenues
Net Cost from continuing operations 34,140,846 4,280,078 7,647,287 46,068,211 51,694,082

11. Transfer of the transition payment for implementing salary payments in arrears

The Government of Canada implemented salary payments in arrears in 2014-15. As a result, a one-time payment was issued to employees and will be recovered from them in the future. The transition to salary payments in arrears forms part of the transformation initiative that replaces the pay system and also streamlines and modernizes the pay processes. This change to the pay system had no impact on the expenses of the Agency.  However, it did result in the use of additional spending authorities by the Agency. Prior to year end, the transition payments for implementing salary payments in arrears were transferred to a central account administered by Public Works and Government Services Canada, who is responsible for the administration of the Government pay system.

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