Financial Statements of Transport Canada - 2012-2013

|Print Version|

(Unaudited)

For the year ended March 31, 2013

Transport Canada

Statement of Management Responsibility Including Internal Control over Financial Reporting

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2013, and all information contained in these statements rests with the management of Transport Canada. These financial statements have been prepared by management using the Government’s accounting policies, which are based on Canadian public sector accounting standards.

Management is responsible for the integrity and objectivity of the information in these financial statements. Some of the information in the financial statements is based on management's best estimates and judgment, and gives due consideration to materiality. To fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the Transport Canada’s financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in Transport Canada’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 Transport Canada 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, 2013 was completed in accordance with the Treasury Board Policy on Internal Control and the results and action plans are summarized in the annex.

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

The financial statements of Transport Canada have not been audited.

Original signed by

Louis Lévesque,
Deputy Minister
Ottawa, Canada

August 30, 2013

Original signed by

André Morency,
Chief Financial Officer
Ottawa, Canada

August 30, 2013

TRANSPORT CANADA
Statement of Financial Position (Unaudited)
As at March 31

(in thousands of dollars)

2013 2012
Liabilities
Accounts payable and accrued liabilities (note 4) $766,282 $1,356,521
Vacation pay and compensatory leave 23,785 27,573
Deferred revenue (note 5) 3,702 4,236
Lease obligations for tangible capital assets (note 6) 569,452 587,862
Employee future benefits (note 7) 69,167 73,933
Environmental remediation and contingent liabilities (note 15) 248,677 219,566
Total liabilities 1,681,065 2,269,691
Financial assets
Due from Consolidated Revenue Fund 647,609 1,256,092
Accounts receivable and advances (note 8) 46,352 33,316
Loans receivable (note 9) 1,637 1,679
Rent receivable (note 10) 20,139 27,461
Total gross financial assets 715,737 1,318,548
Financial assets held on behalf of Government
Accounts receivable and advances (note 8) (21,642) (13,008)
Loans receivable (note 9) (1,637) (1,679)
Total financial assets held on behalf of Government (23,279) (14,687)
Total net financial assets 692,458 1,303,861
Departmental net debt 988,607 965,830
Non-financial assets
Prepaid expenses 2,435 13,896
Inventory (note 11) 11,855 13,485
Tangible capital assets (note 12) 2,365,719 2,482,049
Total non-financial assets 2,380,009 2,509,430
Departmental net financial position (note 13) $1,391,402 $1,543,600

Contractual obligations (note 14)
Environmental remediation and contingent liabilities (note 15)

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

Original signed by

Louis Lévesque,
Deputy Minister
Ottawa, Canada

August 30, 2013

Original signed by

André Morency,
Chief Financial Officer
Ottawa, Canada

August 30, 2013

TRANSPORT CANADA
Statement of Operations and Departmental Net Financial Position (Unaudited)
For the Year Ended March 31

(in thousands of dollars)

2013
Planned
Results
Restated
(note 2)

2013

2012
Reclassified
(note 18)

Expenses

An Efficient Transportation System

$1,470,693

$850,215

$671,210

A Safe Transportation System

445,005

420,587

481,297

Internal Services

195,382

207,498

279,383

A Secure Transportation System

80,304

57,981

79,624

A Clean Transportation System

61,088

72,680

40,170

Ship-Source Oil Pollution Fund and other programs (note 13)

4,687

1,807

3,470

Expenses incurred on behalf of Government

(4,687)

(1,807)

(3,470)

Total expenses

2,252,472

1,608,961

1,551,684

Revenues

Airport rent

289,958

282,403

272,996

Monitoring and enforcement revenues

43,154

43,941

40,853

Aircraft maintenance and flying services

33,384

31,194

34,319

Rentals and concessions

19,880

29,045

26,837

Transport facilities user fees

14,600

16,551

15,664

Pollution control revenues (note 13)

9,466

5,201

6,706

Miscellaneous

1,519

1,697

4,537

Revenues earned on behalf of Government

(328,128)

(322,363)

(313,513)

Total revenues

83,833

87,669

88,399

Net cost from continuing operations

2,168,639

1,521,292

1,463,285

Transferred operations

Expenses

-

-

3,997

Net cost of transferred operations

-

-

3,997

Net cost of operations before government funding and transfers

2,168,639

1,521,292

1,467,282

Government funding and transfers

Net cash provided by Government

1,992,691

1,890,734

1,002,110

Change in due from Consolidated Revenue Fund

96,669

(608,483)

184,746

Services provided without charge by other government departments (note 16)

83,191

86,843

89,715

Transfer of assets and liabilities from (to) other government departments

-

-

(4,062)

Net cost of operations after government funding and transfers

(3,912)

152,198

194,773

Departmental net financial position – Beginning of year

1,678,339

1,543,600

1,738,373

Departmental net financial position – End of year

$1,682,251

$1,391,402

$1,543,600

Segmented information (note 17)

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

TRANSPORT CANADA
Statement of Change in Departmental Net Debt (Unaudited)
For the Year Ended March 31

(in thousands of dollars)

2013
Planned
Results
Restated

(note 2)

2013

2012
Reclassified
(note 18)

Net cost of operations after government funding and transfers

$(3,912)

$152,198

$194,773

Change due to tangible capital assets

Acquisition of tangible capital assets

114,242

59,154

69,478

Amortization of tangible capital assets

(153,099)

(144,729)

(143,157)

Proceeds from disposal of tangible capital assets

(19,423)

(14,137)

(14,923)

Gain (Loss) on disposal of tangible capital assets

(17,383)

(9,286)

(9,835)

Prior years’ work-in-progress expensed

(11,017)

(6,870)

(34,784)

Adjustment to tangible capital assets

-

-

(10,556)

Transfer to other government departments (note 12)

-

(462)

(6,573)

Total change due to tangible capital assets

(86,680)

(116,330)

(150,350)

Change due to inventories

118

(1,630)

663

Change due to prepaid expenses

(117)

(11,461)

10,946

Net increase (decrease) in departmental net debt

(90,591)

22,777

56,032

Departmental net debt - Beginning of year

873,009

965,830

909,798

Departmental net debt - End of year

$782,418

$988,607

$965,830

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

TRANSPORT CANADA
Statement of Cash Flows (Unaudited)
For the Year Ended March 31

(in thousands of dollars)

2013

2012
Reclassified
(note 18)

Operating activities

Net cost of operations before government funding and transfers

$1,521,292

$1,467,282

Non-cash items:

Amortization of tangible capital assets (note 12)

(144,729)

(143,157)

Services provided without charge by other government departments (note 16)

(86,843)

(89,715)

Loss on disposal of tangible capital assets

(9,286)

(9,835)

Prior years’ work-in-progress expensed

(6,870)

(34,784)

Adjustment to tangible capital assets

-

(10,556)

Variations in Statement of Financial Position:

Increase (decrease) in accounts receivables and advances

4,402

(4,550)

Increase (decrease) in rents receivable

(7,322)

(7,323)

Increase (decrease) in prepaid expenses

(11,461)

10,946

Increase (decrease) in inventory

(1,630)

663

Decrease (increase) in accounts payables and accrued liabilities

590,239

(239,788)

Decrease (increase) in vacation pay and compensatory leave

3,788

(1,920)

Decrease (increase) in deferred revenue

534

(616)

Decrease (increase) in employee future benefits

4,766

19,017

Decrease (increase) in environmental remediation and contingent liabilities

(29,111)

(23,207)

Transfer of liabilities to other government departments

-

(1,198)

Cash used in operating activities

1,827,769

931,259

Capital investing activities

Acquisitions of tangible capital assets

59,154

69,478

Transfer of tangible capital assets to other government departments

(462)

(1,313)

Proceeds from disposal of tangible capital assets

(14,137)

(14,923)

Cash used in capital investing activities

44,555

53,242

Financing activities

Lease payments for tangible capital assets

18,410

17,609

Cash used in financing activities

18,410

17,609

Net cash provided by Government of Canada

$1,890,734

$1,002,110

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

TRANSPORT CANADA
Notes to the Financial Statements (Unaudited)
For the Year Ended March 31

(in thousands of dollars)

1. Authority and objectives

Transport Canada is a department of the Government of Canada named in Schedule 1 of the Financial Administration Act and reports to Parliament through the Minister of Transport.

Transport Canada is responsible for the transportation policies, programs and goals set by the Government of Canada, which are supported through the following departmental programs:

  • An Efficient Transportation System program: establishes marketplace frameworks to govern the economic behavior of transportation sector organizations; provides leadership for Gateways and Trade Corridors strategies; provides stewardship for federal transportation assets and implements transportation infrastructure projects in partnership with provinces, territories, municipal governments and private sector entities; and stimulates innovation.
  • A Clean Transportation System program: advances the federal government’s clean air agenda in the transportation sector and complements other federal programs designed to reduce air emissions for the health of Canadians; helps to protect the marine environment by reducing the pollution of water from transportation sources; fulfills Transport Canada’s responsibilities in working towards a cleaner and healthier environment with regard to its own operations.
  • A Safe Transportation System program: develops transportation safety regulations and oversees their implementation; manages programs to support safety-related investments at small airports, to protect navigable waterways, to certify and license aircrafts, vessels and road vehicles; and provides air transport services to support aviation safety oversight work and federal and municipal clients.
  • A Secure Transportation System program: develops policies and programs that respond to emerging security risks and keep Canada competitive; develops transportation security regulations and oversees their implementation by industry; and works with international and national partners to advance a shared and effective transportation security agenda.
  • The Internal Services program: Internal Services are groups of related activities and resources that are administrated to support the needs of programs and other corporate obligations of Transport Canada. Internal Services include only those activities and resources that apply across its organization and not to those provided specifically to a program.

Transport Canada delivers its programs and services under numerous legislative and constitutional authorities including the Department of Transport Act, Canada Transportation Act, Aeronautics Act, Canada Marine Act, Canada Shipping Act, Navigable Waters Protection Act, Railway Safety Act, Transportation of Dangerous Goods Act, Motor Vehicle Safety Act, Canadian Air Transport Security Authority Act and Marine Transportation Security Act.

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 – Transport Canada is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to Transport Canada do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and Departmental Net Financial Position and in the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting. The planned results amounts in the Statement of Operations and Departmental Net Financial Position are the amounts reported in the future-oriented financial statements included in the 2012-2013 Report on Plans and Priorities.

    The future-oriented financial statements for 2012-2013 have been restated to segregate non respendable amounts of expenses incurred and revenues earned on behalf of Government. This restatement resulted in a $323,441,000 increase in net costs of operations before government funding and transfers. The future-oriented financial statements have also been reclassified to conform to the current year presentation.
  2. Net cash provided by Government – Transport Canada operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by Transport Canada is deposited to the CRF, and all cash disbursements made by Transport Canada are paid from the CRF. The net cash provided by Government is the difference between all cash receipts and all cash disbursements, including transactions between departments of the Government.
  3. 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 Transport Canada is entitled to draw from the CRF without further authorities to discharge its liabilities.
  4. Revenues:
    Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.

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

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

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

    Revenues that are non-respendable are not available to discharge Transport Canada's liabilities. While the Deputy Head (DH) is expected to maintain accounting control, he or 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:

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

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

    Services provided without charge by other government departments for accommodation, employer contributions to the health and dental insurance plans, legal services and worker's compensation are recorded as operating expenses at their estimated cost.
  6. Employee future benefits
    1. Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. Transport Canada’s contributions to the plan are charged to expenses in the year incurred and represent Transport Canada’s total obligation to the Plan. Transport Canada’s responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan’s sponsor.
    2. Severance benefits: Employees entitled to severance benefits under labour contracts or conditions of employment earn these benefits as services necessary to earn them are rendered. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.
  7. Accounts and loans receivable are stated at the lower of cost and net recoverable value. However, when the terms of the loans are concessionary, such as those provided with a low or no interest clause, they are recorded at their estimated present value. A portion of the unamortized discount is recorded as revenue each year to reflect the change in the present value of the loans outstanding. 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. Contingent liabilities – Contingent liabilities are potential liabilities that may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded. If the likelihood is not determinable or if an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.
  9. Environmental remediation liabilities – Environmental remediation 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 Transport Canada becomes aware of the contamination and is obligated, or is likely to be obligated to incur such costs. If the likelihood of Transport Canada’s obligation to incur these costs is not determinable, or if an amount cannot be reasonably estimated, the costs are disclosed as contingent liabilities in the notes to the financial statements.
  10. Inventory – Inventory consists of parts, materials and supplies held for future program delivery and not intended for resale. Inventories, other than serialized inventory items, are valued at average cost method. Serialized inventory items parts are valued on a specific cost basis. A serialized inventory item is consumable inventory, which has a serial number and is required to be tracked for airworthiness purposes. If there is no longer any service potential, inventory is valued at the lower of cost or net realizable value.
  11. Foreign currency transactions – Transactions involving foreign currencies are translated into Canadian dollar equivalents using rates of exchange in effect at the time of those transactions. Monetary assets and liabilities denominated in a foreign currency are translated into Canadian dollars using the rate of exchange in effect at year-end. Gains and losses resulting from foreign currency transactions are included in Miscellaneous in the Statement of Operations and Departmental Net Financial Position.
  12. 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. Transport 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. Land has no minimal capitalization threshold.

    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

    Confederation Bridge

    100 years

    Buildings and works:

    Buildings

    20 to 40 years

    Works and Infrastructure

    10 to 40 years

    Machinery and equipment:

    Machinery and equipment

    5 to 15 years

    Computer hardware

    3 to 5 years

    Computer software

    3 years

    Vehicles:

    Ships and boats

    10 to 35 years

    Aircraft

    6 to 20 years

    Motor vehicles

    6 to 35 years

    Leasehold improvements

    Lesser of the remaining term of lease or useful life of the improvement

    Leased tangible capital assets

    According to the useful life of the asset if a bargain purchase offer exists or over 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.

  13. 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 allowance for doubtful accounts, contingent liabilities, environmental remediation liabilities, 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

Transport Canada receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Departmental Net Financial Position and the Statement of Financial Position in one year may be funded through parliamentary authorities in prior, current or future years. Accordingly, Transport Canada has different net results of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled in the following tables:
(a) Reconciliation of net cost of operations to current year authorities used:

2013

2012
Reclassified
(note 18)

(in thousands of dollars)

Net cost of operations before government funding and transfers

$1,521,292

$1,467,282

Adjustments for items affecting net cost of operations but not affecting authorities:

Amortization of tangible capital assets

(144,729)

(143,157)

Gain (loss) on disposal of tangible capital assets

(9,286)

(9,835)

Prior years’ work-in-progress expensed

(6,402)

(34,784)

Adjustment to tangible capital assets

-

(10,556)

Services provided without charge by other government departments

(86,843)

(89,715)

Decrease (increase) in vacation pay and compensatory leave

1,558

(2,147)

Decrease (increase) in employee future benefits

6,084

18,046

Decrease (increase) in environmental remediation and contingent liabilities

(29,111)

(23,207)

Decrease (increase) in accrued liabilities not charged to authorities

(7,341)

(16,090)

Refund of prior years' expenditures

1,099

1,038

Adjustments of previous years accounts payable

6,064

5,295

Provision for valuation of loans

(182)

(794)

Expenditures not affecting authorities

(402)

(1,216)

Total items affecting net cost of operations but not affecting authorities

(269,491)

(307,122)

Adjustments for items not affecting net cost of operations but affecting authorities:

Acquisitions of tangible capital assets

58,207

69,478

Transfer of tangible capital assets from operations

480

(311)

Increase (decrease) in prepaid expenses

(11,461)

10,946

Increase (decrease) in inventory

(1,630)

663

Decrease (increase) in lease obligations for tangible capital assets

18,947

17,609

Debt forgiveness relating to the Saint John Harbour Bridge Authority

-

22,646

Decrease in previous year accrued liabilities charged to authorities

16,134

-

Total items not affecting net cost of operations but affecting authorities

80,677

121,031

Current year authorities used

$1,332,478

$1,281,191

(b) Authorities provided and used

2013

2012

(in thousands of dollars)

Authorities provided

Vote 1 – Operating expenditures

$618,805

$626,321

Vote 5 – Capital expenditures

106,273

93,858

Vote 17 – Debt forgiveness

-

22,646

Transfer payments

1,251,941

782,882

Statutory amounts

144,771

167,979

Total authorities provided

2,121,790

1,693,686

Less:

Authorities available for future years

(3,634)

-

Lapsed: Operating

(93,642)

(31,605)

Lapsed: Capital

(48,066)

(24,691)

Lapsed: Transfer payments

(643,970)

(356,199)

Current year authorities used

$1,332,478

$1,281,191

4. Accounts payable and accrued liabilities

The following table presents details of Transport Canada’s accounts payable and accrued liabilities:

2013

2012

(in thousands of dollars)

Accounts payable - External parties

$643,434

$1,176,589

Accounts payable - Other government departments and agencies

10,237

92,133

Total accounts payable

653,671

1,268,722

Accrued salaries

18,786

38,790

Other accrued liabilities

93,825

49,009

Total accrued liabilities

112,611

87,799

Total accounts payable and accrued liabilities

$766,282

$1,356,521

In Canada’s Economic Action Plan 2012, the Government announced savings measures to be implemented by departments over three fiscal years starting in 2012-2013. As a result, Transport Canada has recorded at March 31, 2013, an obligation for termination benefits for an amount of $6,970,000 ($27,703,062 in 2011-2012) as part of accrued liabilities to reflect the estimated workforce adjustment costs.

5. Deferred revenue

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

2013

2012

(in thousands of dollars)

Shared-cost agreements—Transportation research and development *

Opening balance

$957

$1,606

Amounts received

229

458

Revenue recognized

(402)

(1,107)

Closing balance

784

957

Others

Opening balance

3,279

2,014

Amounts received

1,381

1,454

Revenue recognized

(1,742)

(189)

Closing balance

2,918

3,279

Net closing balance

$3,702

$4,236

* A shared-cost agreement is a common undertaking whereby the parties involved agree to participate in carrying out a project. This may involve the sharing of resources and the purchase of goods or services. The Transportation Development Center utilizes joint cost sharing agreements with private and other government organizations on Research and Development projects related to transportation. The major themes include: rail, aviation safety and surface transportation.

6. Lease obligation for tangible capital assets

Under the Northumberland Strait Crossing Act, the Government of Canada entered into a long-term capital lease arrangement in 1992 and is obligated to pay an annual subsidy of $41,900,000 indexed to the annual inflation rate to the Strait Crossing Finance Inc., a wholly owned corporation of the Province of New Brunswick, for the construction of the Confederation Bridge. The annual payments made by Transport Canada are due on April 1st and will be used to retire $661,542,613 of 4.5 percent real rate bonds issued in October 1993 by Strait Crossing Finance Inc. to finance the construction of the bridge. Annual payments made by Transport Canada began in 1997 and will continue until 2033. At such time, the ownership of the bridge will be transferred to the Government of Canada.

On April 1st,2012 an annual payment in the amount of $60,529,578 ($59,075,229 in 2011-2012) was made. This payment represents payment of principal in the amount of $18,410,515 ($17,608,845 in 2011-2012) and interest expense of $42,119,063 ($41,466,384 in 2011-2012).

Transport Canada has a capital lease obligation of $569,451,517 as at March 31,2013 ($587,862,032 as at March 31,2012), based on the present value for the future payments using an interest rate of 6.06% (6.06% in 2012).

The obligations related to the upcoming years include the following:

2013

2012

(in thousands of dollars)

2012-2013

$-

$60,529

2013-2014

60,830

57,506

2014-2015

58,375

58,375

2015-2016

59,257

59,257

2016-2017

60,152

60,152

2017-2018 and thereafter

1,031,989

1,031,989

Total future minimum lease payments

1,270,603

1,327,808

Less: imputed interest (6.06%)

(701,151)

(739,946)

Balance of obligations under leased tangible capital assets

$569,452

$587,862


7. Employee future benefits

(a) Pension benefits

Transport 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 35years at a rate of 2percent 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 Transport Canada contribute to the cost of the Plan. The 2012-2013 expense amounts to $63,917,722 ($67,442,315 in 2011-2012), which represents approximately 1.7 times (1.8times in 2011-2012) the contributions by employees.

Transport 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

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

As part of 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.

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

2013

2012

(in thousands of dollars)

Accrued benefit obligation - Beginning of year

$73,933

$92,950

Transferred to other government department

-

(971)

Subtotal

73,933

91,979

Expense for the year

12,956

(10,899)

Benefits paid during the year

(17,722)

(7,147)

Accrued benefit obligation - End of year

$69,167

$73,933

8. Accounts receivable and advances

The following table presents details of Transport Canada’s accounts receivable and advances balances:

2013

2012

(in thousands of dollars)

Receivables - Other government departments

$21,010

$13,610

Receivables - External parties

27,838

22,133

Employee advances

166

135

Subtotal

49,014

35,878

Allowance for doubtful accounts on receivables from external parties

(2,662)

(2,562)

Gross accounts receivable

46,352

33,316

Accounts receivable held on behalf of Government

(21,642)

(13,008)

Net accounts receivable

$24,710

$20,308

9. Loans receivable

The following table presents details of Transport Canada’s loans and transfer payments recoverable balances:

2013

2012

(in thousands of dollars)

Victoria Harbour

$2,237

$2,280

St. Lawrence Seaway Management Corporation

7

77

Subtotal

2,244

2,357

Less: Unamortized discount

(600)

(678)

Subtotal

1,644

1,679

Less: Allowance for uncollectibility

(7)

-

Gross loans receivable

1,637

1,679

Loans receivable held on behalf of Government

(1,637)

(1,679)

Total loans receivable

$-

$-

  1. Loan receivable from Victoria Harbour:

    The Victoria Harbour loan receivable relates to the sale of a parcel of Victoria Harbour land for $2,578,469. A discount of $599,958 is recorded to reflect the concessionary nature of the loan ($677,578 at March 31, 2012). A payment of $42,720 was received in fiscal year 2012-2013 ($42,720 in 2011-2012).

  2. Loan receivable from St-Lawrence Seaway Management Corporation:

    The St-Lawrence Seaway Management Corporation loan portfolio account was established by subsection 80(1) of the Canada Marine Act. The loan portfolio is managed in accordance with the Seaway Agreements between Transport Canada and the St-Lawrence Seaway Management Corporation. The remaining loan is secured by title on the property, and has prescribed monthly repayment terms with an annual interest rate of 7%. The mortgagor is in negotiations with Transport Canada and Justice Canada with respect to the loan, which was repayable March 2004.

10. Rent receivable

The National Airport System (NAS) consists of Canadian airports considered essential to air transportation in Canada, including 3 airports owned by Territorial Governments. Transport Canada has leased all of these airports under long-term operating agreements with Canadian Airport Authorities and a municipal government.

In fiscal year 2003-2004, Transport Canada entered into lease amendments with eight of the Canadian Airport Authorities, which provided for deferral of a portion of the airport rent payable by the Airport Authorities to Transport Canada for the 2003 to 2005 lease years. The total rent deferred for 2003 to 2005 is payable to Transport Canada over ten years beginning in the 2006 lease year. Repayments of $7,322,682 were received in fiscal year 2012-2013 ($7,322,682 in 2011-2012). Rent receivable was $20,138,532 at March 31, 2013 ($27,461,214 at March 31,2012).

11. Inventory

The following table presents detail of the inventory.


2013

2012

(in thousands of dollars)

Consumable parts

$11,855

$13,485

Total inventory

$11,855

$13,485

The cost of consumed inventory recognized as an expense in the Statement of Operations and Departmental Net Financial Position is $2,180,323 in 2012-2013 ($1,101,939 in 2011-2012).

12. Tangible capital assets


Capital Asset Class
(in thousands of dollars)

Cost

Opening balance

Acquisitions

Adjustments
(a)

Disposals and
write-offs

Closing
balance

Land (1)

$264,284

$1,150

$(28)

$(2,826)

$262,580

Buildings and works (2)

3,747,755

2,629

41,971

(79,532)

3,712,823

Machinery and equipment (3)

189,599

3,171

14,480

(1,280)

205,970

Vehicles

737,512

3,732

(777)

(18,311)

722,156

Leasehold improvements (4)

28,528

-

764

-

29,292

Assets under construction

68,329

48,472

(63,399)

-

53,402

Confederation Bridge

818,820

-

-

-

818,820

TOTAL

$5,854,827

$59,154

$(6,989)

$(101,949)

$5,805,043



Capital Asset Class
(in thousands of dollars)

Accumulated Amortization

Opening balance

Amortization

Adjustments
(a)

Disposals and
write-offs

Closing
balance

Land (1)

-

-

-

-

-

Buildings and works (2)

2,545,088

99,065

287

(62,481)

2,581,959

Machinery and equipment (3)

125,075

21,901

(144)

(981)

145,851

Vehicles

565,845

15,391

215

(15,064)

566,387

Leasehold improvements (4)

15,312

184

(15)

-

15,481

Assets under construction

-

-

-

-

-

Confederation Bridge

121,458

8,188

-

-

129,646

TOTAL

$3,372,778

$144,729

$343

$(78,526)

$3,439,324



Capital Asset Class
(in thousands of dollars)

Net book value

2013

2012

Land (1)

$262,580

$264,284

Buildings and works (2)

1,130,864

1,202,667

Machinery and equipment (3)

60,119

64,524

Vehicles

155,769

171,667

Leasehold improvements (4)

13,811

13,216

Assets under construction

53,402

68,329

Confederation Bridge

689,174

697,362

TOTAL

$2,365,719

$2,482,049

(a) Adjustments

This column includes assets under construction of $63,335,705 that were transferred to the other categories upon completion of the assets.

Adjustments also include $6,869,515 of work-in-progress expensed and assets transferred to or received from other departments with a total historical cost of $119,082 (net value of $462,295), the transferred assets being higher than assets received.

The net values transferred are as follow:

  • Effective April 2012, Transport Canada received a building with a net book value of $204,510 from Canada Border Services Agency.
  • Effective April 2012, Transport Canada transferred 9 equipment assets with a net book value of $168,673 and transferred 17 informatics equipment with a net book value of $498,043 to Shared Services Canada.
  • Effective November 2012, Transport Canada received a vehicle with a net book value of $20,724 from Foreign Affairs and International Trade Canada.
  • Effective November 2012, Transport Canada transferred a vehicle with a net book value of $20,813 to Treasury Board Secretariat.
National Airport System assets

The National Airport System (NAS) assets recorded above consist of the land, buildings, works and infrastructures of 23 Canadian airports.

Transport Canada has leased all of these airports under long-term operating agreements with Canadian Airport Authorities and a municipal government. These agreements are in accordance with the federal National Airports Policy, the Public Accountability Principles for Canadian Airport Authorities and the Fundamental Principles for the Creation and Operations of Canadian Airport Authorities, which, in part, entails the transfer of the management, operations and maintenance of certain airports in Canada to Canadian Airport Authorities.

Transport Canada has the right to terminate the operating agreements and assume the responsibility for the management, operation and maintenance of the airport if the leased airports are not operated in accordance with the terms of the respective operating agreements and the Policies and Principles referred to above.

Value recorded for the National Airport System (NAS) assets:

  1. Includes land for 23 National Airports with a net book value of $164,859,068 (2012 - $167,546,503).
  2. Includes building and works for 23 National Airports with a net book value of $477,773,790 (2012 - $552,013,147).
  3. Includes machinery and equipment for 23 National Airports with a net book value of $451,810 (2012 - $497,439).
  4. Includes leasehold improvements for 23 National Airports with a net book value of $334,880 (2012 - $376,740).

13. Departmental net financial position

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

(a) The Ship-Source Oil Pollution Fund

The Ship-Source Oil Pollution Fund was established pursuant to section 702 of the Canada Shipping Act, to record levy tonnage payments for oil carried by ships in Canadian waters. Maritime pollution claims, the fee of the fund administrator and related oil pollution control expenses are financed out of the Fund.

(b) Fines for transport of dangerous goods

The fines for transport of dangerous goods account was established pursuant to the Transportation of Dangerous Goods Act 1992 and related regulations to record fines levied by courts under the Act. The balance of the account is to be used for program funding.

Activities in these accounts are as follows:

2013

2012

(in thousands of dollars)

(a) Ship-source Oil Pollution - Restricted:

Balance - Beginning of year - Restricted

$395,794

$392,525

Revenues

5,171

6,706

Expenses

(1,767)

(3,437)

Balance - End of year - Restricted

399,198

395,794

(b) Fines for transport of dangerous goods - Restricted:

Balance - Beginning of year - Restricted

626

659

Revenues

30

-

Expenses

(40)

(33)

Balance - End of year - Restricted

616

626

Balance - End of year - Restricted

399,814

396,420

Unrestricted

991 588

1,147,180

Departmental net financial position - End of year

$1,391,402

$1,543,600


14. Contractual obligations

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

(in thousands of dollars)

2014

2015

2016

2017

2018 and
thereafter

Total

Transfer payments

$456,690

$563,519

$396,911

$65,314

$71,733

$1,554,167

Tangible capital assets

2,971

-

-

-

-

2,971

Other goods and services

41,619

10,966

8,515

5,691

59,667

126,458

Software maintenance agreements

176

-

-

-

-

176

Operating leases

1,829

951

923

50

-

3,753

Total

$503,285

$575,436

$406,349

$71,055

$131,400

$1,687,525

15. Environmental remediation and contingent liabilities

Environmental remediation 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 accrued to record the estimated costs related to the management and remediation of contaminated sites where Transport Canada is obligated or likely to be obligated to incur such costs. Transport Canada has identified approximately 383 sites (320 sites in 2011-2012) where such action is possible and for which a liability of $180,760,825 for 101 sites ($156,065,875 for 102 sites in 2011-2012) has been recorded in accrued liabilities. Transport Canada has estimated additional clean-up costs of $7,368,094 for 9 sites ($16,554,703 for 12 sites in 2011-2012) that are not accrued, as these are not considered likely to be incurred at this time. Transport Canada’s ongoing efforts to assess contaminated sites may result in additional environmental remediation liabilities related to newly identified sites, or changes in the assessments or intended use of existing sites. These liabilities will be accrued by Transport Canada in the year in which they become likely and are reasonably estimable.

(b) Claims and litigation

Claims have been made against Transport Canada in the normal course of operations. These claims include items with pleading amounts and others for which no amount is specified. While the total amount claimed in these actions is significant, their outcomes are not determinable. Transport Canada has recorded an allowance for claims and litigations where it is likely that there will be a future payment and a reasonable estimate of the loss can be made. An amount of $67,916,666 has been recorded in the financial statements as of March 31, 2013 ($63,500,000 in 2011-2012). Claims and litigations for which the outcome is not determinable and a reasonable estimate can be made by management amount to approximately $6,505,208 at March 31, 2013 ($5,925,208 in 2011-2012).

16. Related party transactions

Transport Canada is related as a result of common ownership to all government departments, agencies, and Crown corporations. Transport Canada enters into transactions with these entities in the normal course of business and on normal trade terms. During the year, Transport Canada 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, Transport Canada received services without charge from certain common service organizations, related to accommodation, legal services, the employer’s contribution to the health and dental insurance plans and worker's compensation coverage. These services provided without charge have been recorded in Transport Canada’s Statement of Operations and Departmental Net Financial Position as follows:

2013

2012

(in thousands of dollars)

Accommodation

$40,563

$39,716

Employer's contribution to the health and dental insurance plans

38,647

39,593

Worker's compensation

3,222

3,109

Legal services

4,411

7,297

Total

$86,843

$89,715

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 Transport Canada’s Statement of Operations and Departmental Net Financial Position.

(b) Administration of programs on behalf of other government departments

  1. Canada Strategic Infrastructure Fund (CSIF) and Border Infrastructure Fund (BIF)

    Under a memorandum of understanding signed with Infrastructure Canada on January 31, 2003, Transport Canada administers the Canada Strategic Infrastructure Fund (CSIF) and the Border Infrastructure Fund (BIF). During the year, Transport Canada incurred expenses of $210,878,246 ($120,100,719 in 2011-2012) related to CSIF and $7,449,801 ($35,026,220 in 2011-2012) related to BIF on behalf of Infrastructure Canada. These expenses are reflected in the financial statements of Infrastructure Canada and are not recorded in these financial statements.

  2. Building Canada Fund (BCF)

    Under a memorandum of understanding signed with Infrastructure Canada on April 25, 2008, Transport Canada administers the Building Canada Fund (BCF). During the year, Transport Canada incurred expenses of $848,261,579 ($635,288,639 in 2011-2012) related to BCF on behalf of Infrastructure Canada. These expenses are reflected in the financial statements of Infrastructure Canada and are not recorded in these financial statements.
(c) Other transactions with related parties

2013

2012
Restated

(in thousands of dollars)

Accounts receivable - Other government departments

$21,010

$13,610

Accounts payable - Other government departments and agencies

10,237

92,133

Expenses – Other government departments and agencies

60,155

73,623

Revenues – Other government departments and agencies

37,795

42,129

Expenses and revenues disclosed in (c) exclude common services provided without charge, which are already disclosed in (a).

17. Segmented information

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

(in thousands of dollars)

An Efficient Transportation System

A Safe Transportation System

Internal
Services

A Secure Transportation System

A Clean Transportation System

Ship-source Oil Pollution Fund and
other programs

2013
Total

2012
Total Reclassified
(note 18)

Transfer payments

Other levels of governments within Canada

$348,352

$24,604

$-

$-

$-

$-

$372,956

$225,675

Industry

134,543

10,536

-

1,248

112

-

146,439

91,163

Non-profit organizations

27,283

11,592

(2)

-

-

-

38,873

33,569

Individuals

379

(106)

-

-

-

-

273

574

Other countries and international organizations

55

179

-

-

-

-

234

261

Total transfer payments

510,612

46,805

(2)

1,248

112

-

558,775

351,242

Operating expenses

Salaries and employee benefits

42,781

268,784

141,091

44,774

21,115

-

518,545

594,585

Amortization of tangible capital assets

116,564

14,364

12,718

117

966

-

144,729

142,325

Professional and special services

25,233

22,384

36,581

4,658

42,636

-

131,492

153,740

Management fees for operation and maintenance of the St. Lawrence Seaway Management Corporation

74,341

-

-

-

-

-

74,341

69,387

Interest on capital lease

41,582

-

-

-

-

-

41,582

42,119

Accommodation (note 16)

3,368

21,059

10,750

3,626

1,760

-

40,563

39,717

Other

6,075

438

7,320

1,242

6,114

-

21,189

2,421

Travel and relocation

1,473

12,720

1,505

1,939

916

-

18,553

27,159

Utilities, materials and supplies

2,915

11,593

1,097

248

74

-

15,927

19,135

Equipment repair and maintenance

3,090

14,761

(4,575)

(303)

(1,414)

-

11,559

72,343

Net loss on disposal of tangible capital assets

13,960

(1,366)

(3,343)

-

35

-

9,286

9,835

Payments in lieu of taxes

5,205

1,247

631

19

-

-

7,102

6,825

Rentals

394

3,766

2,334

219

106

-

6,819

8,278

Damage and other claims against the Crown

1,807

1,314

10

-

-

-

3,131

5,598

Information services – communications

681

1,170

639

38

216

-

2,744

2,466

Postage

125

1,287

678

145

43

-

2,278

2,490

Pollution control (note 13)

-

-

-

-

-

1,807

1,807

3,470

Telecommunications

9

261

64

11

1

-

346

2,019

Expenses incurred on behalf of Government

-

-

-

-

-

(1,807)

(1,807)

(3,470)

Total operating expenses

339,603

373,782

207,500

56,733

72,568

-

1,050,186

1,200,442

Total expenses

850,215

420,587

207,498

57,981

72,680

-

1,608,961

1,551,684

Revenues

Airport rent

282,403

-

-

-

-

-

282,403

272,996

Monitoring and enforcement revenues

18,428

24,529

961

23

-

-

43,941

40,853

Aircraft maintenance and flying services

-

31,194

-

-

-

-

31,194

34,319

Rentals and concessions

15,233

280

13,532

-

-

-

29,045

26,837

Transport facilities user fees

16,134

417

-

-

-

-

16,551

15,664

Pollution control revenues (note 13)

-

-

-

-

-

5,201

5,201

6,706

Miscellaneous

733

702

262

-

-

-

1,697

4,537

Revenues earned on behalf of Government

(302,137)

(1,127)

(13,895)

(3)

-

(5,201)

(322,363)

(313,513)

Total – Revenues

30,794

55,995

860

20

-

-

87,669

88,399

Net cost from continuing operations

$819,421

$364,592

$206,638

$57,961

$72,680

$-

$1,521,292

$1,463,285

18. Comparative information

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

The following document is available for downloading or viewing:

To access the Portable Document Format (PDF) version you must have a PDF reader installed. If you do not already have such a reader, there are numerous PDF readers available for free download or for purchase on the Internet:

Date modified: