Financial Statements as of March 31, 2012

Download the PDF version

About this publication

Publication author : Canada Economic Development for Quebec Regions

Publish date : November 8, 2012

Summary :

This report presents the Agency’s financial statements as of March 31, 2012.

Table of Contents

  1. 1. Statement of Management Responsibility Including Internal Control Over Financial Reporting
  2. 2. Annex

1. 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, 2012, and all information contained in these statements rests with the management of the Economic Development Agency of Canada for the Regions of Quebec. 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 contained 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 Agency's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the Economic Development Agency of Canada for the Regions of Quebec 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 the Agency and through conducting an annual risk-based 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.

A risk-based assessment of the system of ICFR for the year ended March 31, 2012, was completed in accordance with the Treasury Board Policy on Internal Control and the results and action plan are summarized in the appendix.

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

The financial statements of the Agency have not been audited.

___________________________
Suzanne Vinet, President
___________________________
Pierre Bordeleau, Chief Financial Officer


Montreal, Canada

____________
Date

Statement of Financial Position (Unaudited)
As at March 31 (in thousands of dollars)
Assets and Liabilities 2012 2011
Restated
(note 13)
Liabilities
Accounts payable and accrued liabilities (note 4) $158,691 $219,296
Vacation pay and compensatory leave 1,815 1,942
Employee future benefits (note 5) 5,685 7,803
Total gross liabilities 166,191 229,041
Liabilities held on behalf of Government
Accounts payable and accrued liabilities (note 4) (68,800) (122,642)
Total liabilities held on behalf of Government (68,800) (122,642)
Total net liabilities 97,391 106,399
Financial assets
Due from Consolidated Revenue Fund 89,815 96,531
Accounts receivable and advances (note 6) 664 390
Loans receivable (note 7) 245,033 214,472
Total gross financial assets 335,512 311,393
Financial assets held on behalf of Government
Accounts receivable and advances (note 6) (481) (177)
Loans receivable (note 7) (245,033) (214,472)
Total financial assets held on behalf of Government (245,514) (214,649)
Total net financial assets 89,998 96,744
Departmental net debt 7,393 9,655
Non-financial assets
Prepaid expenses 260 812
Tangible capital assets (note 8) 1,333 2,829
Total non-financial assets 1,593 3,641
Departmental net financial position $ (5,800) $ (6,014)

Contractual obligations (note 9)

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

_____________________________
Suzanne Vinet, President
_____________________________
Pierre Bordeleau, Chief Financial Officer


Montreal, Canada

____________
Date

Statement of Operations and Departmental Net Financial Position (Unaudited)
For the Year Ended March 31 (in thousands of dollars)
Expenses and Revenues 2012
Planned Results
2012 2011
Restated
(note 13)
Expenses
Development of communities $25,012 $127,668 $126,672
Competitive positioning of sectors and regions 23,797 42,138 38,209
Competitiveness of enterprises 38,321 29,902 34,568
Internal services 25,270 23,571 24,592
Infrastructure 362 13,124 79,375
Policies, programs and initiatives 6,048 6,420 6,536
Special intervention measures 0 (1,919) 92,253
Expenses incurred on behalf of Government (18,629) (14,499) (30,430)
Total expenses 200,181 226,405 371,775
Revenues
Interest revenues 588 682 541
Miscellaneous revenues 270 181 159
Revenues earned on behalf of Government (858) (863) (700)
Total revenues 0 0 0
Net cost from continuing operations 200,181 226,405 371,775
Transferred operations (note 11)
Expenses 945 933 1,609
Net cost of transferred operations 945 933 1,609
Net cost of operations before government funding and transfers 201,126 227,338 373,384
Government funding and transfers
Net cash provided by Government   228,783 302,745
Change in due from Consolidated Revenue Fund   (6,716) 63,979
Services provided without charge by other government departments (note 10a)   6,282 6,267
Transfer of assets and liabilities to other government departments (note 11)   (797) 0
Net cost of operations after government funding and transfers   (214) 393
Departmental net financial position – Beginning of year   (6,014) (5,621)
Departmental net financial position – End of year   $ (5,800) $ (6,014)

Segmented information (note 12)

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

Statement of Change in Departmental Net Debt (Unaudited)
For the Year Ended March 31 (in thousands of dollars)
Change 2012 2011
Net cost of operations after government funding and transfers $ (214) $393
Change due to tangible capital assets
Acquisition of tangible capital assets 326 1,151
Amortization of tangible capital assets (note 8) (852) (707)
Proceeds from disposal of tangible capital assets (5) (4)
Net (loss) or gain on disposal of tangible capital assets including adjustments (2) (2)
Transfer to other government departments (note 11) (963) 0
Total change due to tangible capital assets (1,496) 438
Change due to prepaid expenses (552) 318
Net increase (decrease) in departmental net debt (2,262) 1,149
Departmental net debt – Beginning of year 9,655 8,506
Departmental net debt – End of year $7,393 $9,655

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

Statement of Cash Flow (Unaudited)
For the Year Ended March 31 (in thousands of dollars)
Cash Flow 2012 2011
Restated
(note 13)
Operating activities
Net cost of operations before government funding and transfers $227,338 $373,384
Non-cash items:
Amortization of tangible capital assets (note 8) (852) (707)
Loss on disposal and write-down of tangible capital assets (2) (2)
Services provided without charge by other government departments (note 10a) (6,282) (6,267)
Variations in Statement of Financial Position:
Increase (decrease) in accounts receivable and advances (30) 120
Increase (decrease) in prepaid expenses (552) 318
Decrease (increase) in accounts payable and accrued liabilities 6,763 (64,009)
Decrease (increase) in vacation pay and compensatory leave 127 (12)
Decrease (increase) in future employee benefits 2,118 (1,227)
Transfers of liabilities/assets to other government departments (note 11) (166) 0
Cash used in operating activities 228,462 301,598
Capital investing activities
Acquisition of tangible capital assets (note 8) 326 1,151
Proceeds from disposal of tangible capital assets (5) (4)
Cash used in capital investing activities 321 1,147
Net cash provided by Government of Canada 228,783 $ 302,745 $

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

Notes to the Financial Statements (Unaudited) for the year ended March 31

1. Authorities and objectives

Under the Economic Development Agency of Canada for the Regions of Quebec Act, which came into force on October 5, 2005, the object of the Agency is to promote the long-term economic development of the regions of Quebec by giving special attention to those where slow economic growth is prevalent or where opportunities for productive employment are inadequate. In carrying out its mission, the Agency shall take such measures as will promote co-operation and complementarity with Quebec and the communities in Quebec.

Thus, the Agency aims to build stronger communities and strengthen the competitiveness of enterprises and regions of Quebec and is reflected in a single strategic result: A competitive and diversified economy for the regions of Quebec. To achieve this strategic outcome, the Agency has seven program activities:

  • Competitiveness of enterprises to stimulate the growth and competitiveness of SMEs so as to increase productivity, earned income and the number of jobs in the regions;
  • Competitive positioning of sectors and regions to improve the international competitiveness of the regions by enhancing their knowledge and competitive advantages on the international stage;
  • Development of communities to help communities develop with regard to their capabilities in terms of socio-economic adjustment, support for emergence of new entrepreneurs and creation of small enterprises, attraction of tourists and retention of skilled individuals;
  • Special intervention measures to facilitate the definition and implementation of development and diversification opportunities in communities affected by significant job losses or natural disasters;
  • Infrastructure to renew and build quality public infrastructure in Quebec's rural and urban communities;
  • Policies, programs and initiatives to enhance the Agency’s ability to draw up or help formulate policies, programs and initiatives that better meet the needs of Quebec’s regions and reinforce the timeliness of federal action pertaining to regional development in Quebec; and
  • Internal services are groups of related activities and resources that are administered to support the needs of programs and other corporate obligations. For the Agency, these groups are: Governance and Management Support, Resource Management Services, and Asset Management Services.

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 principles 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 for 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 2011-2012 Report on Plans and Priorities. The future-oriented financial statements for 2011-2012 have been restated to reflect the revenue net of non-respendable amounts. This restatement resulted in a $858 thousand increase in net costs of operations before government funding and transfers. In addition, the future-oriented financial statements have also been reclassified to conform to the current year presentation.
  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 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 - Revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues, except for the item listed below. Loans are non-interest bearing and, due to the uncertainty as to ultimate collection, interest income is only charged on overdue amounts when received. Other revenues consist of other fees and gains on the disposal of capital and non-capital assets.
    Revenues that are non-respendable are not available to discharge the Agency’s liabilities. While the Deputy Head 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 all 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, and legal services 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 multiemployer 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, 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 are stated at the lower of cost and net recoverable value. The present value of these contributions is not estimated, since insufficient conditions of a concessionary nature are attached to them. Transfer payments that are unconditionally repayable are recognized as loans receivable. A valuation allowance is recorded for accounts and loans receivable where recovery is considered uncertain.
  8. Tangible capital assets - All tangible capital assets and leasehold improvements having an initial cost of $5,000 or more are recorded at their acquisition cost. The Agency 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 done on a straight-line basis over the estimated useful life of the asset, as follows

    Asset class

    Computer hardware

    Amortization period

    3 to 7 years

    Asset class

    Computer software

    Amortization period

    3 to 6 years

    Asset class

    Other equipment

    Amortization period

    5 to 10 years

    Asset class

    Motor vehicles

    Amortization period

    6 to 8 years

    Asset class

    Leasehold improvements

    Amortization period

    The remainder of the term of the lease.

    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.
  9. 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 allowances for doubtful accounts, 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

The Agency 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, the Agency has different net results of operations for the year on a government funding basis than on an accrual accounting basis. These differences are reconciled in the following tables:

a) Reconciliation of net cost of operations to current year authorities used
(in thousands of dollars)
Reconciliations 2012 2011
Restated
(note 13)
Net cost of operations before government funding and transfers $227,338 $373,384
Adjustments for items affecting net cost of operations but not affecting authorities:
Services provided without charge (note 10a) (6,282) (6,267)
Amortization of tangible capital assets (note 8) (852) (707)
Adjustments to prepaid expenses (224) 49
Loss on disposal and write-down of tangible capital assets (2) (2)
Vacation pay and compensatory leave 81 (12)
Employee future benefits (note 5) 1,976 (1,227)
Repayment of contributions and previous years’ expenses 7,750 4,951
Other (642) 632
Total items affecting net cost of operations but not affecting authorities: 229,143 370,801
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisition of tangible capital assets (note 8) 326 1,151
New loans (note 7) 76,442 108,054
Other 10 0
Total items not affecting net cost of operations but affecting authorities 76,778 109,205
Current year authorities used $305,921 $480,006

b) Authorities provided and used (in thousands of dollars)
Authorities provided and used 2012 2011
Authorities provided:
Vote 1—Operating expenditures $50,757 $52,596
Vote 5—Grants and contributions 266,924 472,602
Statutory amounts 5,804 12,131
Total 323,485 537,329
Less:
Authorities available for use in future years (12) (6)
Lapsed: Operating and Grants and contributions (17,552) (57,317)
Current year authorities used $305,921 $480,006

4. Accounts payable and accrued liabilities

The following table presents details on accounts payable and accrued liabilities by category:
Accounts payable and accrued liabilities (in thousands of dollars) 2012 2011
Accounts payable – Other government departments and agencies $58,201 $635
Accounts payable – External parties 3,049 2,464
Total accounts payable 61,250 3,099
Accrued liabilities 97,441 216,197
Gross accounts payable 158,691 219,296
Accounts payable on behalf of Government (68,800) (122,642)
Net accounts payable $89,891 $96,654

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, the Department has recorded at March 31, 2012 an obligation for termination benefits for an amount of $668 thousand as part of accrued liabilities to reflect the estimated workforce adjustment costs.

5. Employee future benefits

  1. Pension benefits: The Agency'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 percent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Quebec Pension Plans benefits and are indexed to inflation.

    Both employees and the Agency contribute to the cost of the Plan. The 2011-2012 expense amounts to $4,160 thousand ($4,219 thousand in 2010-2011), which represents approximately 1.8 times (1.9 times in 2010-2011) the contributions by the employee.

    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: 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 have been given the option to be immediately paid the 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.

    Severance benefits (in thousands of dollars) 2012 2011
    Accrued benefit obligation - Beginning of year $7,803 $6,576
    Transferred to other government departments, effective November 15, 2011 (note 11) (142) 0
    Subtotal 7,661 6,576
    Expense for the year (321) 1,852
    Benefits paid during the year (1,655) (625)
    Accrued benefit obligation - End of year $5,685 $7,803

6. Accounts receivable and advances

The following table presents details of accounts receivable and advances balances:
Accounts receivable and advances (in thousands of dollars) 2012 2011
Restated
(note 13)
Receivables – Other government departments and agencies $67 $101
Receivables – External parties 10,524 9,050
Employee advances 14 22
Subtotal 10,605 9,173
Allowance for doubtful accounts on receivables from external parties (9,941) (8,783)
Gross accounts receivable 664 390
Accounts receivable held on behalf of Government (481) (177)
Net accounts receivable $183 $213

Amounts collected in respect to conditionally repayable contributions totalled $5,695 thousand for the 2011-2012 fiscal year ($3,285 thousand in 2010-2011). The Agency wrote off a total of $1,770 thousand in the 2011-2012 fiscal year for accounts deemed uncollectible ($2,482 thousand in 2010-2011).

7. Loans receivable

Loans (unconditionally repayable contributions) are transfer payments made to eligible recipients to carry out a project. The contribution agreement sets out strict conditions for repayment which determine the dates and amounts of payments. In general, the repayment schedule does not exceed five years, beginning no later than 24 to 48 months after the project completion date. The amounts collected in respect to unconditionally repayable contributions totalled $29,705 thousand for the 2011-2012 fiscal year ($34,480 thousand in 2010-2011). The Agency wrote off a total of $11,450 thousand in 2011-2012 for accounts deemed uncollectible ($4,493 thousand in 2010-2011). All loans are held on behalf of Government, since the Deputy Head has no authority with regard to their disposal.

The following table presents the details of the Agency’s loans and transfer payment recoverable balances:
Loans (in thousands of dollars) 2012 2011
Restated
(note 13)
Repayable contributions at the beginning of the year $352,651 $283,324
New contributions paid 76,442 108,054
Repayments received and other credits (45,710) (38,727)
Subtotal: Repayable contributions at year end 383,383 352,651
Less: Allowance for uncollectiblity (138,350) (138,179)
Total loans receivable $245,033 $214,472

8. Tangible capital assets

Capital
Asset
Class
Cost
(in thousands of dollars)
Accumulated Amortization
(in thousands of dollars)
Net Book Value
(in thousands of dollars)
Opening Balance Acqui-
sitions
Adjust-
ments (1)
Dispo-
sals
Closing Balance Opening Balance Acqui-
sitions
Adjust-
ments (1)
Dispo-
sals
Closing Balance 2012 2011
Computer hardware $2,430 $39 $2,205 $0 $264 $1,177 $233 $1,314 $0 $96 $168 $1,253
Computer software 4,536 224 42 0 4,718 3,542 535 146 0 3,931 787 994
Other equipment 104 6 49 0 61 52 12 32 0 32 29 52
Motor vehicles 507 41 0 45 503 280 51 0 38 293 210 227
Leasehold improve-
ments
168 0 0 0 168 24 21 0 0 45 123 144
Assets under construc-
tion
159 16 159 0 16 0 0 0 0 0 16 159
Total $7,904 $326 $2,455 $45 $5,730 $5,076 $852 $1,492 $38 $4,397 $1,333 $2,829

(1) Adjustments include assets under construction of $159 thousand that were transferred to other categories upon completion of the assets.

Effective November 15, 2011, the Agency transferred computer hardware, software and other equipment, with a net book value of $963 thousand, to Shared Services Canada. This transfer is included in the adjustment column (see note 11 for further details on the transfer).

9. Contractual obligations

The nature of the Agency’s activities result in some large multi-year contracts and obligations whereby the Agency will be obligated to make future payments in order to carry out its transfer payment programs. Significant contractual obligations that can be reasonably estimated are summarized as follows:

Contractual obligations
(in thousands of dollars)
2013 2014 2015 2016 2017 and thereafter Total
Transfer payments $133,760 $75,723 $60,539 $42,505 $12,829 $325,356
Loans and advances 35,417 5,490 0 0 0 40,907
Total $169,177 $81,213 $60,539 $42,505 $12,829 $366,263

10. 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. During the year, the Agency 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, the Agency received services without charge from certain common service organizations, related to accommodation, legal services 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:

Common services (in thousands of dollars) 2012 2011
Employer’s contribution to the health and dental insurance plans $3,148 $3,177
Accommodation 2,815 2,799
Legal Services 319 291
Total $6,282 $6,267

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 Statement of Operations and Departmental Net Financial Position.

b) Administration of programs on behalf of other government departments

Under memorandums of understanding with Infrastructure Canada (INFC), the Agency administers and delivers infrastructure programs through federal-provincial agreements with the province of Quebec. Expenses related to federal contributions for these agreements are reflected in the financial statements of INFC and not those of the Agency.

Among the agreements covered by these memorandums of understanding are those of the Municipal Rural Infrastructure Fund (MRIF). During the year, the Agency incurred expenses of $35,055 thousand ($28,302 thousand in 2010-2011). Under the Canada Strategic Infrastructure Fund (CSIF), the Agency incurred expenses of $794 thousand ($19,324 thousand in 2010-2011). Under the Building Canada Fund agreement, the Agency incurred expenses of $40,704 thousand ($90,000 thousand in 2010-2011). To administer these agreements, the Agency receives additional operating funds in its own authorities through budget processes, and these expenses are included in these financial statements.

Under a memorandum of understanding signed on June 27, 2011 with the Department of Foreign Affairs and International Trade Canada for the North American Platform Program (NAPP), the Agency manages a portion of the funds for projects which are under its governance as a partner. Over the course of the year, the Agency incurred expenses of $100 thousand ($190 thousand in 2010-2011). These expenses are recorded in the financial statements of the Department of Foreign Affairs and International Trade Canada.

c) Other transactions with related parties

Expenses (in thousands of dollars) 2012 2011
Expenses – Other government departments and agencies $1,660 $2,607

The expenses disclosed in section (c) do not include common services provided free of charge, which are disclosed in section (a).

11. Transfers to other government departments

Effective November 15, 2011, the Agency transferred responsibility for network services, data centres and electronic mail services to Shared Services Canada, in accordance with the Order-in-Council, including the stewardship responsibility for the assets and liabilities related to the program. Accordingly, the Agency transferred the following assets and liabilities related to network services, data centres and electronic mail services to Shared Services Canada:

Transfers to other government departments
Assets
Accounts receivable and advances $1
Prepaid expenses 21
Tangible capital assets (net book value) (note 8) 963
Total assets transferred 985
Liabilities
Vacation pay and compensatory leave 46
Employee future benefits (note 5) 142
Total liabilities transferred 188
Adjustment to the departmental net financial position $797

In addition, the 2011 comparative figures have been reclassified on the Statement of Operations and Departmental Net Financial Position to present the expenses of the transferred operations.

During the transition period, the Agency continued to administer these activities on behalf of Shared Services Canada. The administered expenses amounted to $778 thousand for the year. These expenses are not included in these financial statements.

12. Segmented information

Presentation by segment is based on the Agency'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 expense and by major type of revenue. The segment results for the period are as follows:

Expenses
(in thousands of dollars)
Competi-
tiveness of enter-
prises
Compe-
titive positio-
ning of sectors and regions
Develop-
ment of commu-
nities
Infra-
stru-
cture
Policies, pro-
grams and initia-
tives
Special Inter-
vention mea-
sures
Inter-
nal
ser-
vices
2012 Total 2011 Total
Restated (note 13)
Transfer payments
Non-repayable payments
Non-profit organizations $9,557 $40,098 $84,525 $248 $192 $ (40) $0 $134,580 $163,479
Other levels of government 0 0 12,756 11,888 0 (379) 0 24,265 132,026
Industry 2,694 600 667 0 0 (281) 0 3,680 7,340
Conditional repayments
Industry 4,452 (76) 17,882 0 0 (1,013) 0 21,245 38,155
Subtotal 16,703 40,622 115,830 12,136 192 (1,713) 0 183,770 341,000
Expenses incurred on behalf of Government (10,564) 2,366 (7,163) 0 0 862 0 (14,499) (30,430)
Total – Transfer payments 6,139 42,988 108,667 12,136 192 (851) 0 169,271 310,570
Operating expenses
Salaries and employee benefits 10,109 1,318 10,548 863 5,506 (193) 17,434 45,585 47,610
Professional and special services 2,019 71 280 46 276 (3) 2,535 5,224 6,573
Accommo-
dation
675 75 597 49 315 (10) 1,669 3,370 3,591
Travel and communi-
cations
304 40 317 26 122 0 244 1,053 1,557
Purchases of equipment and furniture 9 1 9 0 6 0 528 553 369
Amortization 20 3 22 0 2 0 586 633 454
Information 16 2 16 0 1 0 371 406 611
Supplies and procurement 36 5 38 2 12 0 118 211 377
Repairs and maintenance 9 1 9 0 1 0 17 37 73
Loss on disposal of tangible capital assets 1 0 1 0 0 0 0 2 2
Other 1 0 1 2 (13) 0 69 60 (12)
Total – Operating expenses 13,199 1,516 11,838 988 6,228 (206) 23,571 57,134 61,205
Total - Expenses 19,338 44,504 120,505 13,124 6,420 (1,057) 23,571 226,405 371,775
Revenues
Interest revenues 592 26 52 0 0 12 0 682 541
Miscellaneous revenues 174 0 3 0 0 0 4 181 159
Revenues earned on behalf of Government (766) (26) (55) 0 0 (12) (4) (863) (700)
Total - Revenues 0 0 0 0 0 0 0 0 0
Net cost from continuing operations $19,338 $44,504 $120,505 $13,124 $6,420 $ (1,057) $23,571 $226,405 $371,775

13. Accounting changes

During 2011, amendments were made to Treasury Board Accounting Standard 1.2 - Departmental and Agency Financial Statements to improve financial reporting by government departments and agencies. The amendments are effective for financial reporting of fiscal years ending March 31, 2012, and later. The significant changes to the Agency’s financial statements are described below. These changes have been applied retroactively, and comparative information for 2010-2011 has been restated.

Net debt (calculated as liabilities less financial assets) is now presented in the Statement of Financial Position. Accompanying this change, the Agency now presents a Statement of Change in Net Debt and no longer presents a Statement of Equity.

Revenue and related receivables are now presented net of non-respendable amounts in the Agency’s Statement of Operations and Departmental Net Financial Position and Statement of Financial Position. The effect of this change was to increase the net cost of operations before government funding and transfers by $863 thousand for 2012 ($700 thousand for 2011) and decrease total financial assets by $245,514 thousand for 2012 ($214,649 thousand for 2011).

Government funding and transfers, as well as the credit related to services provided without charge by other government departments, are now recognized in the Agency’s Statement of Operations and Departmental Net Financial Position under “Net cost of operations before government funding and transfers.” In previous years, the Agency recognized these transactions directly in the Statement of Equity of Canada. The effect of this change was to decrease the net cost of operations after government funding and transfers, which totalled $280,965 thousand in 2012 ($298,786 thousand in 2011).

Accounting changes 2011
As previously stated
Effect of change 2011
Restated
Statement of Financial Position
Liabilities held on behalf of Government $0 $ (122,642) $ (122,642)
Assets held on behalf of Government 0 (214,649) (214,649)
Departmental financial position 208,635 (214,649) (6,014)
Statement of Operations and Departmental Net Financial Position:
Revenues 700 (700) 0
Expenses 403,814 (32,039) 371,775
Government funding and transfers
Net cash provided by government 0 302,745 302,745
Change in due from Consolidated Revenue Fund 0 63,979 63,979
Services provided without charge by other government departments 0 6,267 6,267
Transfer of assets and liabilities between departments $0 0 $0

14. Comparative information

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

2. Annex

Note to reader

With the new Treasury Board Policy on Internal Control, effective April 1, 2009, departments are now required to demonstrate the measures they are taking to maintain an effective system of Internal Control over Financial Reporting (ICFR).

As part of this policy, departments are expected to conduct annual assessments of their system of ICFR, establish action plan(s) to address any necessary adjustments, and attach to their Statements of Management Responsibility a summary of their assessment results and action plan.

Effective systems of ICFR aim to achieve reliable financial statements and to provide assurances that

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

The maintenance of an effective system of ICFR is an ongoing process designed to identify and assess key risks and the effectiveness of the associated key controls and adjust them as required, as well as to monitor its performance in support of continuous improvement. As a result, the scope, pace and status of the departmental assessments of the effectiveness of their systems of ICFR will vary from one organization to the other, based on risks and taking into account their unique circumstances.

1. Introduction

This document is attached to the Economic Development Agency of Canada for the Regions of Quebec’s Statement of Management Responsibility Including Internal Control over Financial Reporting for the 2011–2012 fiscal year.

As required by the Treasury Board Policy on Internal Control, effective April 1, 2009, this first Annex produced by the Agency provides summary information on the measures taken to maintain an effective system of ICFR. More specifically, it provides the main financial data relevant to understanding the Agency’s control environment, information on the assessments conducted by the Agency up to March 31, 2012, and on the results and related action plans.

1.1 Authority, mandate and program activities

The Agency’s Departmental Performance Report and Report on Plans and Priorities provide information on the Agency’s authority, mandate and program activities.

1.2 Financial highlights

Key financial information for the Agency’s 2011–2012 fiscal year is posted in the electronic version of the Departmental Performance Report. The following information can also be found in the Public Accounts of Canada:

  • Total expenses for 2011–2012 totalled $227.3 million; $169.3 million in transfer payments and $45.6 million in salaries and benefits account for most of the total costs;
  • Net liabilities totalled $97.4 million at the end of the 2011–2012 fiscal period; accounts payable and accrued liabilities accounted for the lion’s share at $89.9 million;
  • Net financial assets were $90.0 million at the end of 2011–2012. The amount due from the Consolidated Revenue Fund accounted for the majority of the assets at $89.8 million;
  • The Agency’s loans, all of which are held on behalf of the government, totalled $245.0 million at the end of 2011–2012;
  • Net cash provided by the Government of Canada totalled $228.8 million.

1.3 Service arrangements relevant to financial statements

The Agency relies on a number of organizations to process operations recorded in the financial statements:

  • Public Works and Government Services Canada administers the payment of salaries and the acquisition of goods and services exceeding $2 million.
  • The Treasury Board Secretariat provides the Agency with the information used to calculate various accruals, such as allowances and accrued liabilities.
  • The Department of Justice provides the Agency with legal services.

1.4 Material changes in fiscal year 2011–2012

During the 2011–2012 exercise, a major change was made to the Agency’s control environment.

During the year, the Agency adopted the revised Treasury Board Accounting Standard (TBAS) 1.2 Departmental and Agency Financial Statements.

The Agency is required to present the net debt, which is calculated as liabilities minus financial assets. Revenue, expenses and related accounts payable and receivable are now presented net of non-respendable amounts and related expenses in the Agency’s Statement of Operations and Net Financial Position. To comply with this standard, the 2010–2011 amounts have been reclassified to facilitate year-over-year comparison.

2. The Agency’s control environment (ICFR)

The Agency recognizes that senior and middle managers have to exercise leadership to ensure that all employees fully understand their role in the maintenance of an effective departmental system of internal control and are able to carry out their responsibilities effectively.

The Agency’s governance structure consists of an Executive Committee, which develops the Agency’s strategic vision and strategic directions; a Departmental Management Committee (DMC), which collectively manages all the activities and monitors the Agency; and many committees that support the President’s decision-making, including

In addition, the Active Monitoring and Internal Controls team, which reports to the Chief Financial Officer, is responsible for implementing the Policy on Internal Control and ensuring that grant/contribution files are managed in compliance with the applicable legislation, policies and directives. The Departmental Performance Branch is responsible for integrated risk management.

2.1 Key position, roles and responsibilities

Below are key positions and committees with responsibilities for maintaining and reviewing the effectiveness of the Agency’s system of ICFR:

President – The President is the Accounting Officer and assumes overall responsibility and leadership for the measures taken to maintain an effective system of internal control. The President chairs the Departmental Management Committee (DMC) and the Executive Committee.

Chief Financial Officer and his Assistant – The Agency’s Chief Financial Officer reports directly to the President 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.

Senior Executives – The Agency’s Senior Executives are in charge of program delivery and are responsible for maintaining and reviewing the effectiveness of the system of ICFR falling within their mandate. They are supported by a quality management system (ISO 9001:2008) monitored by the Finance Directorate.

Chief Audit Executive – The Agency’s Chief Audit Executive reports directly to the President and provides assurance through periodic internal audits that are instrumental to the maintenance of an effective system of ICFR.

2.2 Key measures instituted

The Agency’s control environment is framed by various measures and directives that guide staff in managing risks. They receive the information and tools they need to develop their skills. Key measures include

  • A Values and Ethics Champion and Committee;
  • A corporate risk management process;
  • A risk management mechanism for processing claims for grant/contribution files;
  • A file quality review team;
  • An active monitoring team and internal controls under the Chief Financial Officer;
  • The enforcement of quality management and certification (ISO 9001:2008);
  • Internal financial policies that support government financial policies;
  • A post-audit mechanism for operating and grant/contribution expenditures;
  • Annual update of delegation of authority;
  • Risk-Based Audit Framework.

3. Assessment of the Agency’s Internal Control over Financial Reporting (ICFR)

3.1 Assessment method

In addressing the Policy on Internal Control, the Agency maintains an effective system of ICFR to provide reasonable assurance that

  • Transactions are appropriately authorized;
  • Financial records are properly maintained;
  • Assets are safeguarded; and
  • The applicable legislation, regulations and policies are respected.

Over time, this includes assessment of the design and operating effectiveness of the system of ICFR to ensure its ongoing monitoring and continuous improvement.

Design effectiveness is the assurance that key control points are in place, documented and aligned with the risk levels. This presupposes that remediation is addressed when shortcomings are identified. IT systems must correspond to the main accounts and control systems.

Operating effectiveness means that the key controls have been assessed and tested over a defined period to ensure that they run smoothly and that any required remediation is addressed. Such assessments cover all control levels, including entity (Agency), general computer and business process controls.

3.2 Assessment scope

The Agency has taken measures to assess its system of ICFR, starting with the assessment of its financial statements, by focusing on core business processes.

Over the course of 2011–2012, the Agency gathered all information related to its business processes, risks and controls relevant to ICFR. The Agency documented and validated all the relevant key controls, taking into consideration the risk, materiality, volume, complexity, past history, susceptibility to losses and public perception. The business processes mainly concern grant/contribution management, the Agency’s key process. The efficiency of operations should be audited in the next fiscal period.

The Agency also documented and assessed entity-level controls. The remediations address key control weaknesses identified during design effectiveness testing. Plans for testing of the operating effectiveness of key controls should start in the next fiscal period.

Lastly, the Agency documented and tested the design effectiveness of general computer controls.

To sum up, after having gathered the documentation and validated the controls through the process owner, we assessed the design effectiveness of established internal controls. The Agency examined sample transactions in each sector and questioned key persons to confirm that the controls were in place, documented and designed to mitigate risk effectively. The next step would be to test a representative sample to ensure that the controls work effectively over an entire fiscal period.

4. Result of assessment of design effectiveness

As at March 31, 2012, the design tests have been carried out and the Agency has a system of ICFR for which the design of controls is appropriate for medium- and high-risk processes.

5. Next steps

5.1 Progress made in 2011–2012

In 2011–2012, the first year of implementation of the system of ICFR, the Agency has documented and tested the effectiveness of all the controls for medium- and high-risk processes. The Agency’s ICFR is properly designed.

5.2 Action plan for next year and future years

The Agency’s senior management is determined to maintain and continuously improve its system of ICFR, which includes constant monitoring to ensure that the key controls meet management and stakeholder expectations and mitigate risks to a reasonable level.

To meet the requirements of the Policy on Internal Control, by the end of 2012–2013 the Agency is committed to

  • Complete the documentation and test the design effectiveness of its low-risk processes;
  • Develop and implement a process to monitor, test and continuously improve the operational effectiveness of all its controls;
  • Develop and implement a communication and training plan for all delegated managers with a view to the signing of an Acknowledgment of Responsibility regarding internal control.
Date modified: