Financial Statements for the period ended March 31, 2013

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 the Canadian Transportation Agency. 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 Agency's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the Agency's Departmental Performance Report, is consistent with these financial statements.

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 and 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 internal control over financial reporting (ICFR).

Management is also responsible for maintaining an effective system of 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.

The system of ICFR is also 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. In accordance with the Treasury Board Policy on Internal Control, the Agency has undertaken a risk-based assessment of the system of ICFR for the year ended March 31, 2013 and the results and action plan are summarized in the annex.

The Agency will be subject to periodic Core Control Audits performed by the Office of the Comptroller General and will use the results of such audits to adhere to the Treasury Board Policy on Internal Control.

The financial statements of the Canadian Transportation Agency have not been audited.

Geoffrey Hare
Chairman and Chief Executive Officer
Gatineau, Canada
August 16, 2013

Linda Harrison
Chief Financial Officer

Statement of Financial Position (Unaudited) as at March 31 (in thousands of dollars)

  20132012
Departmental net financial position $(1,401) $(1,865)
Liabilities
Accounts payable and accrued liabilities (Note 4) $1,274 $1,308
Vacation pay and compensatory leave 943 918
Lease obligation for tangible capital assets (Note 5) 10 23
Employee future benefits (Note 6) 1,591 2,756
Total net liabilities 3,818 5,005
Financial assets
Due from Consolidated Revenue Fund 1,199 1,202
Accounts receivable and advances (Note 7) 119 136
Total gross financial assets 1,318 1,338
Financial assets held on behalf of Government
Accounts receivable and advances (Note 7) (41) -
Total financial assets held on behalf of Government (41) -
Total net financial assets 1,277 1,338
Departmental net debt 2,541 3,667
Non-financial assets
Prepaid expenses 49 103
Inventory (Note 8) 89 115
Tangible capital assets (Note 9) 1,002 1,584
Total non-financial assets 1,140 1,802

Contractual obligations (Note 10)

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

Geoffrey Hare
Chairman and Chief Executive Officer
Gatineau, Canada
August 16, 2013

Linda Harrison
Chief Financial Officer

Statement of Operations and Departmental Net Financial Position (Unaudited) for the Year Ended March 31(in thousands of dollars)

  2013
Planned Results
20132012
Departmental net financial position - End of year    $(1,401)  $(1,865)
Expenses
Economic regulation $14,042 $14,336 $14,085
Adjudication and alternative dispute resolution 9,539 9,042 8,686
Internal services 8,980 8,799 9,424
Total expenses 32,561 32,177 32,195
Revenues
Revenues from fines 30 40 19
Sales of goods and services 30 40 -
Revenues earned on behalf of Government (60) (80) (19)
Total revenues - - -
Net cost of operations before government funding and transfers 32,561 32,177 32,195
Government funding and transfers
Net cash provided by Government   28,627 29,610
Change in due from Consolidated Revenue Fund   (3) (385)
Services provided without charge by other government departments (Note 11)   4,017 4,023
Net cost of operations after government funding and transfers   (464) (1,053)
Departmental net financial position - Beginning of year   (1,865) (2,918)

Segmented information (Note 12)

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

Statement of Change in Departmental Net Debt (Unaudited) for the Year Ended March 31 (in thousands of dollars)

  20132012
Departmental net debt - End of year $2,541 $3,667
Net cost of operations after government funding and transfers $(464) $(1,053)
Change due to tangible capital assets
Acquisition of tangible capital assets 166 632
Amortization of tangible capital assets (734) (1,114)
Net (loss) or gain on disposal of tangible capital assets including adjustments (14) (4)
Total change due to tangible capital assets (582) (486)
Change due to inventories (26) 28
Change due to prepaid expenses (54) (18)
Net increase (decrease) in departmental net debt (1,126) (1,529)
Departmental net debt - Beginning of year 3,667 5,196

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

Statement of Cash Flows (Unaudited) for the Year Ended March 31 (in thousands of dollars)

  20132012
Net cash provided by Government of Canada $28,627 $29,610
Operating activities
Net cost of operations before government funding and transfers $32,177 $32,195
Non-cash items:
Amortization of tangible capital assets (734) (1,114)
Gain (loss) on disposal of tangible capital assets (10) (4)
Adjustments of tangible capital assets (4) -
Services provided without charge by other government departments (Note 11) (4,017) (4,023)
Variations in Statement of Financial Position:
Increase (decrease) in accounts receivable and advances (58) 72
Increase (decrease) in prepaid expenses (54) (18)
Increase (decrease) in inventory (26) 28
Decrease (increase) in accounts payable and accrued liabilities 34 294
Decrease (increase) in vacation pay and compensatory leave (25) 45
Decrease (increase) in future employee benefits 1,165 1,491
Cash used in operating activities 28,448 28,966
Capital investment activities:
Acquisitions of tangible capital assets 166 632
Cash used in capital investment activities 166 632
Financing activities:
Lease payments for tangible capital assets 13 12
Cash used in financing activities 13 12

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

Notes to the Financial Statements (Unaudited) for the Year Ended March 31

1. Authority and objectives (in thousands of dollars)

The Canadian Transportation Agency (the Agency) was established on July 1, 1996, under the Canada Transportation Act, (S.C. 1996, c. 10), as the continuation of the National Transportation Agency. Under the Act and related legislation, it has various powers to help implement the federal government's transportation policy. The Chairman and Chief Executive Officer is appointed by the Governor-in-Council. The Agency pursues one objective: transparent, fair and efficient economic regulation of the federal transportation system.

As an independent, quasi judicial, administrative tribunal of the Government of Canada, the Agency is responsible for:

  • Dispute resolution, to resolve complaints about transportation services, rates, fees and charges;
  • Accessibility, to ensure that the federal transportation system is accessible, particularly to persons with disabilities; and
  • Economic regulation, to provide approvals, licences, and make decisions on matters involving federally-regulated air, rail and marine transportation.

In exercising its court-like powers, the Agency employs processes that are responsive, fair and transparent, and considers the interests of all parties to disputes involving the national transportation system. Its adjudicative formal decision-making process is governed by the rules of natural justice and fairness.

Through its actions, and by working closely with Transport Canada, other departments, its clients and stakeholder groups, the Agency supports the goal of a Canadian transportation system that is competitive, efficient and accessible – and that meets the needs of those who provide or use transportation services.

The Program Alignment Architecture explains how the program and allocation of resources contribute to the Agency's strategic outcome.

Transparent, fair and timely dispute resolution and economic regulation of the national transportation system.

This is achieved through three programs:

ProgramExpected Result
Economic Regulation Economic and other interests of transportation users, service providers and other affected parties are protected.
Adjudication and Alternative Dispute Resolution Access to a specialized dispute resolution system that is cost-effective, responsive, fair and timely, and serves the needs of users, service providers and other affected parties within the national transportation system.
Internal Services Support the needs of programs and other corporate obligations of the Agency.

2. Summary of significant accounting policies (in thousands of dollars)

These financial statements have been prepared using the Government's accounting policies stated below, which are based on Canadian public sector accounting standards. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.

Significant accounting policies are as follows:

  1. Parliamentary authorities – The Agency is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Agency do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and Departmental Net Financial Position and in the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting. The planned results amounts in the Statement of Operations and Departmental Net Financial Position are the amounts reported in the future-oriented financial statements included in the 2012-13 Report on Plans and Priorities. The future-oriented financial statements for 2012-2013 have been restated to reflect the revenue net of non-respendable amounts. This restatement resulted in a $60 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 or to the CRF are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the net amount of cash that the Agency is entitled to draw from the CRF without further appropriations to discharge its liabilities.

  4. Revenues:

    Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.

    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 the Agency'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:

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

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

  6. Employee future benefits

    1. Pension benefits: Eligible employees participate in the Public Service Pension Plan, a 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 total departmental obligation to the Plan. The Agency's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognised 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 receivables are stated at the lower of cost and net recoverable value. A valuation allowance is recorded for accounts receivable where recovery is considered uncertain.

  8. Inventory – Inventory consists of brochures held for future program delivery and not intended for resale. Inventory is valued at cost using the average cost method. If there is no longer any service potential, inventory is valued at the lower of cost or net realisable value.

  9. Tangible capital assets – All tangible capital assets and leasehold improvements are recorded at their acquisition cost (refer to the following table for the initial cost threshold). 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.  

    The capitalization of software and leasehold improvements has been done on a prospective basis from April 1, 2001. As of April 1, 2012, the Agency has changed prospectively the threshold and the amortization period of its tangible capital assets. Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the capital asset as identified in the table below:

    Asset ClassAmortization PeriodThreshold - initial cost equal/or more than (In thousands of dollars)
    Leased tangible capital assets Over term of lease/useful life $10
    Machinery and equipment  7 years $10
    Computer Hardware 5 years $10
    Computer Software 3 years $10
    Furniture 10 years $10
    Vehicles 7 years $10

    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.

  10. Measurement uncertainty – The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are the liability for employee future benefits and the useful life of tangible capital assets. Actual results could significantly differ from those estimated. Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.

3. Parliamentary authorities (in thousands of dollars)

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

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

  20132012
Net cost of operations before government funding and transfers $32,177 $32,195
Adjustments for items affecting net cost of operations, but not affecting authorities:
Amortization of tangible capital assets (734) (1,114)
Gain (loss) on disposal of tangible capital assets (10) (4)
Adjustments of tangible capital assets (4) -
Services provided without charge by other federal government departments and agencies (4,017) (4,023)
Decrease (increase) in vacation pay and compensatory leave (25) 45
Decrease (increase) in employee future benefits 1,165 1,491
Bad debt expense (4) -
Refunds of prior years' expenditures 54 64
Total items affecting net cost of operations but not affecting authorities (3,575) (3,541)
Adjustment for items not affecting net cost of operations but affecting authorities:
Acquisitions of tangible capital assets 166 632
Decrease in lease obligations for tangible capital assets 13 12
Increase (decrease) in inventory (26) 28
Increase (decrease) in prepaid expenses (54) (18)
Total items not affecting net cost of operations but affecting authorities 99 654
Current year authorities used $28,701 $29,308

b) Authorities provided and used

  20132012
Current year authorities used $28,701 $29,308
Authorities provided:
Vote 25 - Operating expenditures $26,401 $27,020
Statutory amounts 3,411 3,461
Less:
Authorities available for future years - -
Lapsed: Operating (1,111) (1,173)

4. Accounts payable and accrued liabilities (in thousands of dollars)

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

  20132012
Total accounts payable and accrued liabilities $1,274 $1,308
Accounts payable - Other government departments and agencies $36 $20
Accounts payable - External parties Note 1 - 756
Total accounts payable 36 776
Accrued liabilities Note 2 1,238 532

5. Lease obligation for tangible capital assets (in thousands of dollars)

The Agency has entered into agreements to lease photocopiers under capital leases with a cost of $62 thousand and accumulated amortization of $53 thousand as at March 31, 2013 ($62 thousand and $41 thousand respectively as at March 31, 2012). The obligations related to the upcoming years include the following:

  20132012
Balance of obligations under leased tangible capital assets $10 $23
2013 $- $13
2014 10 10
Total future minimum lease payments 10 23
Less: imputed interest (2.49%) - -

Note: The lease contracts for capital asset will expire in 2014. After this date, the Agency will no longer be capitalizing leases for photocopiers.

6. Employee future benefits (in thousands of dollars)

a) 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/Québec Pension Plans benefits and they are indexed to inflation.

Both the employees and the Agency contribute to the cost of the Plan. The 2012-2013 expense amounts to $3,411 thousand ($3,461 thousand in 2011-2012), which represents approximately 1.7 times (1.8 times in 2011-2012) the contributions by employees.

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

b) Severance benefits

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

  20132012
Accrued benefit obligation-End of year $1,591 $2,756
Accrued benefit obligation-Beginning of year $2,756 $4,247
Expense (adjustment) for the year (229) 581
Benefits paid during the year (936) (2,072)

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.

7. Accounts receivable and advances (in thousands of dollars)

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

  20132012
Net accounts receivable $78 $136
Receivables - Other government departments and agencies $75 $135
Receivables - External parties 44 -
Employee advances - 1
Gross accounts receivable 119 136
Accounts receivable held on behalf of Government (41) -

8. Inventory (in thousands of dollars)

The following table presents details of the inventory, measured at cost using the average cost method.

  20132012
Brochures $89 $115

The cost of consumed inventory recognized as an expense in the Statement of Operations and Departmental Net Financial Position is $26 thousand in 2012-2013 (increase in the inventory of $28 thousand in 2011-2012).

9. Tangible capital assets (in thousands of dollars)

Cost
Capital Asset ClassOpening BalanceAcquisitionsAdjustmentsNote 3Disposals and
Write-offsNote 4
Closing Balance
Total $7,822 $166 $- $2,066 $5,922
Machinery and Equipment $- $- $106 $- $106
Computer hardware 2,447 72 - 1,142 1,377
Computer software 3,887 - 104 294 3,697
Furniture 1,385 - (106) 630 649
Vehicles 31 - - - 31
Leased tangible capital assets 62 - - - 62
Assets under construction 10 94 (104) - -

 

Accumulated Amortization
Capital Asset ClassOpening BalanceAmortizationAdjustmentsNote 5Disposals and
Write-offsNote 6
Closing Balance
Total $6,238 $734 $- $2,052 $4,920
Machinery and Equipment $- $- $106 $- $106
Computer hardware 1,590 376 - 1,137 829
Computer software 3,531 295 - 294 3,532
Furniture 1,058 46 (106) 621 377
Vehicles 18 5 -   -   23
Leased tangible capital assets 41 12 -   -   53
Assets under construction -   -   -   -   -  

 

Net Book Value
Capital Asset Class20132012
Total $1,002 $1,584
Machinery and Equipment $-   $-  
Computer hardware 548 857
Computer software 165 356
Furniture 272 327
Vehicles 8 13
Leased tangible capital assets 9 21
Assets under construction - 10

10.  Contractual obligations (in thousands of dollars)

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

  20142015201620172018 and thereafterTotal
Total $771 $743 $593 $593 $593 $3,293
Professional and special services $461 $461 $311 $311 $311 $1,855
Other goods and services 174 174 174 174 174 870
Operating leases and rental of storage 93 92 92 92 92 461
Software maintenance agreements 43 16 16 16 16 107

11.  Related party transactions (in thousands of dollars)

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 common services which were obtained without charge from other government departments as disclosed below.

a) Common services provided without charge by other government departments

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

  20132012
Total $4,017 $4,023
Accommodation $2,096 $2,070
Employer's contribution to the health and dental insurance plans 1,881 1,943
Legal services 31 1
Worker's Compensation 9 9

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

b) Other transactions with related parties

  20132012
Expenses - Other government departments and agencies $4,570 $4,280
Revenues - Other government departments and agencies 3 -  

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

12.  Segmented information (in thousands of dollars)

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

  Economic RegulationAdjudication and Alternative Dispute ResolutionInternal Services2013 Total2012 Total
Net cost of operations before government
funding and transfers
$14,336 $9,042 $8,799 $32,177 $32,195
Operating expenses
Salaries and employee benefits $11,383 $7,520 $6,575 $25,478 $25,593
Accommodation 945 585 566 2,096 2,070
Professional and special services 608 322 632 1,562 1,495
Amortization of tangible capital assets 117 50 567 734 1,114
Rentals 528 13 63 604 229
Transportation and telecommunication 307 135 140 582 517
Machinery and equipment 345 12 58 415 69
Information 28 363 12 403 312
Utilities, materials and supplies 41 21 163 225 237
Repair and maintenance 29 1 15 45 404
Other 5 20 8 33 10
Claims against the Crown -   -   -   -   145
Total expenses 14,336 9,042 8,799 32,177 32,195
Revenues
Revenues from fines 40 -   -   40 19
Sales of goods and services 40 -   -   40 -  
Revenues earned on behalf of Government (80) -   -   (80) (19)
Total revenues  -    -    -    -    -   

13.  Comparative information (in thousands of dollars)

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

Annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting of the Canadian Transportation Agency for the Fiscal Year 2012-2013 (Unaudited)

1. Introduction

In support of an effective system of internal control, the Canadian Transportation Agency (the Agency) annually assesses the performance of it financial controls to ensure:

  • financial arrangements or contracts are entered into only when sufficient funding is available;
  • payments for goods and services are made only when the goods or services are received or the conditions of contracts or other arrangements have been satisfied; and
  • payments have been properly authorized.

The Agency will leverage the results of the periodic Core Control Audit performed by the Office of the Comptroller General. Below is a summary of the results of the assessment conducted during fiscal year 2012-2013.

2. Assessment results during fiscal year 2012-13

For the most part, controls related to payment for goods and services and payment authority were functioning well and form an adequate basis for the Agency's system of internal control.  Some adjustments to reinforce segregation of duties were identified and addressed during the current fiscal year.

3. Assessment Plan

The Agency will continue to monitor the performance of its system of Internal Control over Financial Reporting (ICFR) with a focus on the core controls related to financial transactions.

The Agency is planning to complete the documentation of its internal controls by the end of the 2013-2014 fiscal year, in time for the Core Control Audit performed by the Office of the Comptroller General scheduled for 2014-2015.

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