Financial Statements for the period ended March 31, 2016

Table of Contents

Statement of Management Responsibility Including Internal Control Over Financial Reporting

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2016, and all information contained in these statements rests with the management of the Canadian Transportation Agency (the 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 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 and through communication programs aimed at ensuring that regulations, policies, standards, and managerial authorities are understood throughout the Agencyand 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 on-going process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.

The Agency is subject to periodic Core Control Audits performed by the Office of the Comptroller General (OCG) and will use the results of such audits to comply with the Treasury Board Policy on Internal Control.

A Core Control Audit was performed in 2014-2015 by the OCG for transactions completed in 2013-2014. The Audit Report and related Management Action Plan are posted on the Agency's web site at /eng/corporate-reports .

The financial statements of the Agency have not been audited.

Scott Streiner
Chair and Chief Executive Officer
Gatineau, Canada
September 1st, 2016

Jacqueline Bannister
Chief Financial Officer
Gatineau, Canada
September 1st, 2016

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

  2016 2015
Agency net financial position $(1,434,652) $(1,027,653)
Liabilities
Accounts payable and accrued liabilities (note 4) $2,459,375 $3,508,574
Vacation pay and compensatory leave 953,096 722,389
Employee future benefits (note 5) 1,341,819 1,431,230
Total liabilities 4,754,290 5,662,193
Financial assets
Due from Consolidated Revenue Fund 2,200,648 3,364,295
Accounts receivable and advances (note 6) 323,084 340,890
Total gross financial assets 2,523,732 3,705,185
Financial assets held on behalf of Government
Accounts receivable and advances (note 6) (13,122) -
Total financial assets held on behalf of Government (13,122) -
Total net financial assets 2,510,610 3,705,185
Agency net debt 2,243,680 1,957,008
Non-financial assets
Prepaid expenses 72,688 61,720
Inventory 31,584 34,099
Tangible capital assets (note 7) 704,756 833,536
Total non-financial assets 809,028 929,355

Contractual obligations (note 8)

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

Scott Streiner
Chair and Chief Executive Officer
Gatineau, Canada
September 1st, 2016

Jacqueline Bannister
Chief Financial Officer
Gatineau, Canada
September 1st, 2016

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

  2016
Planned
Results
2016 2015
Expenses
Economic regulation $14,366,209 $12,814,318 $13,061,434
Adjudication and alternative dispute resolution 11,992,130 11,696,677 11,647,284
Internal services 6,936,975 8,116,182 7,628,812
Total expenses 33,295,314 32,627,177 32,337,530
Revenues
Revenues from fines 175,000 57,750 208,930
Sales of goods and services - 90 6,388
Other revenues 400 1,998 946
Revenues earned on behalf of Government (175,400) (59,838) (216,264)
Total revenues - - -
Net cost of operations before government funding and transfers 33,295,314 32,627,177 32,337,530

 

Government funding and transfers 2016 2015
Net cash provided by Government 29,272,223 27,212,126
Change in due from Consolidated Revenue Fund (1,163,647) 1,713,960
Services provided without charge by other government departments (note 9) 4,119,905 4,033,280
Transfer of the transition payments for implementing salary payments in arrears (note 10) (8,303) (708,433)
Net cost of operations after government funding and transfers 406,999 86,597
Agency net financial position - Beginning of year (1,027,653) (941,056)
Agency net financial position - End of year $(1,434,652) $(1,027,653)

 

Segmented information(note 11)

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

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

  2016 2015
Agency net debt - End of year $2,243,680 $1,957,008
Net cost of operations after government funding and transfers $406,999 $86,597
Change due to tangible capital assets
Acquisition of tangible capital assets 199,650 295,676
Amortization of tangible capital assets (326,755) (362,899)
Proceeds from disposal of tangible capital assets (13) (9,621)
Net (loss) or gain on disposal of tangible capital assets including adjustments (1,662) (11,613)
Total change due to tangible capital assets (128,780) (88,457)
Change due to inventories (2,515) (11,487)
Change due to prepaid expenses 10,968 13,691
Net increase (decrease) in Agency net debt 286,672 344
Agency net debt - Beginning of year 1,957,008 1,956,664

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

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

  2016 2015
Net cash provided by Government of Canada $29,272,223 $27,212,126
Operating activities
Net cost of operations before government funding and transfers $32,627,177 $32,337,530  
Non-cash items:
Amortization of tangible capital assets (326,755) (362,899)
Gain (loss) on disposal of tangible capital assets (1,662) (11,613)
Services provided without charge by other government departments (note 9) (4,119,905) (4,033,280)
Transition payments for implementing salary payments in arrears (note 10) 8,303 708,433
Variations in Statement of Financial Position:
Increase (decrease) in accounts receivable and advances (30,928) 211,845
Increase (decrease) in prepaid expenses 10,968 13,691
Increase (decrease) in inventory (2,515) (11,487)
Decrease (increase) in accounts payable and accrued liabilities 1,049,199 (1,765,939)
Decrease (increase) in vacation pay and compensatory leave (230,707) 192,039
Decrease (increase) in employee future benefits 89,411 (352,249)
Cash used in operating activities 29,072,586 26,926,071
Capital investment activities:
Acquisitions of tangible capital assets 199,650 295,676
Proceeds from disposal of tangible capital assets (13) (9,621)
Cash used in capital investment activities 199,637 286,055

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

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

1. Authority and objectives

The Canadian Transportation Agency (the Agency) was established on July 1st, 1996, under the Canada Transportation Act (the 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 Agency pursues one objective: transparent, fair and efficient economic regulation of the federal transportation system.

The Agency is an independent, quasi-judicial tribunal and regulator with the powers of a superior court.  It makes decisions and determinations on a wide range of matters within the federal transportation system under the authority of Parliament, as set out in the Act and other legislation.  The Agency exercises its powers through its Members, which includes the Chair and Chief Executive Officer (CEO), who are appointed by the Governor-in-Council (GIC). 

The Agency has three core mandates:

  • To help ensure that the national transportation system runs efficiently and smoothly in the interests of all Canadians: those who work and invest in it; the producers, shippers, travellers and businesses who rely on it; and the communities where it operates.
  • To protect the human right of persons with disabilities to an accessible transportation network.
  • To provide consumer protection for air passengers.

To help advance these mandates, the Agency has three tools at its disposal:

  • Rule-making: The Agency develops and applies ground rules that establish the rights and responsibilities of transportation service providers and users and that level the playing field among competitors. These rules can take the form of binding regulations or less formal guidelines, codes of practice or interpretation notes.
  • Dispute resolution: The Agency resolves disputes that arise between transportation providers on the one hand and their clients and neighbours on the other, using a range of tools from facilitation and mediation to arbitration and adjudication.
  • Information provision: The Agency provides information on the transportation system, the rights and responsibilities of transportation providers and users, and its legislation and services.

The Agency's mandate is achieved through three programs:

Program Expected Result
Economic Regulation
  • Service providers (air, rail and marine) comply with regulatory requirements.
  • The Canadian National Railway Company (CN) and the Canadian Pacific Railway Company (CP) are provided with the information required to ensure they do not exceed the maximum grain revenue entitlements for the shipment of Western grain.
Adjudication and Alternative Dispute Resolution
  • Specialized transportation dispute resolution that is transparent, fair and timely.
Internal Services
  • Support the needs of programs and other corporate obligations of the Agency.

2. Summary of significant accounting policies

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

Significant accounting policies are as follows:

  1. Parliamentary authorities – The Agency is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Agency do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and Agency 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 “Expenses” and “Revenues” sections of the Statement of Operations and Agency Net Financial Position are the amounts reported in the Future-oriented Statement of Operations included in the 2015-2016 Report on Plans and Priorities. Planned results are not presented in the “Government funding and transfers” section of the Statement of Operations and Agency Net Financial Position and in the Statement of Change in Agency Net Debt because these amounts were not included in the 2015-2016 Report on Plans and Priorities.
  2. Net Cash Provided by Government – The Agency operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the Agency is deposited to the CRF, and all cash disbursements made by the Agency are paid from the CRF. The net cash provided by Government is the difference between all cash receipts and all cash disbursements, including transactions between departments of the Government.
  3. Amounts due from or to the CRF are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the net amount of cash that the Agency is entitled to draw from the CRF without further appropriations to discharge its liabilities.
  4. Revenues:
    1. Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.
    2. Other revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenue takes place.
    3. Revenues that are non-respendable are not available to discharge the Agency's liabilities. While the Chair and CEO 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:
    1. Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
    2. 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 Agency 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, obsolete inventory is written off.
  9. Tangible capital assets – All tangible capital assets having an initial cost of $10,000 or more are recorded at their acquisition cost.  
    Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:
    Asset Class Amortization Period
    Machinery and equipment 7 years
    Computer hardware 5 years
    Computer software 3 years
    Furniture 10 years
    Vehicles 7 years
  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

The Agency receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Agency 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

  2016 2015
Current year authorities used $28,254,232 $28,777,849
Net cost of operations before government funding and transfers $32,627,177 $32,337,530
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets (326,755) (362,899)
Gain (loss) on disposal of tangible capital assets (1,662) (11,613)
Services provided without charge by other government departments (4,119,905) (4,033,280)
Decrease (increase) in vacation pay and compensatory leave (230,707) 192,039
Decrease (increase) in employee future benefits 89,411 (352,249)
Refunds of prior years' expenditures 280 11,629
Total items affecting net cost of operations but not affecting authorities (4,589,338) (4,556,373)
Adjustment for items not affecting net cost of operations but affecting authorities:
Acquisitions of tangible capital assets 199,650 295,676
Proceeds from disposal of tangible capital assets (13) (9,621)
Transition payments for implementing salary payments in arrears (note 10) 8,303 708,433
Increase (decrease)  in inventory (2,515) (11,487)
Increase (decrease) in prepaid expenses 10,968 13,691
Total items not affecting net cost of operations but affecting authorities 216,393 996,692

 

b) Authorities provided and used

 

  2016 2015
Current year authorities used $28,254,232 $28,777,849
Authorities provided:
Vote 25: Operating expenditures $25,840,718 $25,898,344
Statutory amounts 3,231,257 3,230,028
Less:
Lapsed: Operating (817,743) (350,523)

4. Accounts payable and accrued liabilities

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

  2016 2015
Total accounts payable and accrued liabilities $2,459,375 $3,508,574
Accounts payable - Other government departments and agencies $85,074 $124,054
Accounts payable - External parties 771,918 1,905,072
Total accounts payable 856,992 2,029,126
Accrued liabilities 1,602,383 1,479,448

5. Employee future benefits

a) Pension benefits

The Agency's employees participate in the public service pension plan (the “Plan”), which is sponsored and administered by the Government of Canada. Pension benefits accrue up to a maximum period of 35 years at a rate of 2 percent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Québec Pension Plan benefits and they are indexed to inflation.

Both the employees and the Agency contribute to the cost of the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to Economic Action Plan 2012, employee contributors have been divided into two groups – Group 1 relates to existing plan members as of December 31, 2012 and Group 2 relates to members joining the Plan as of January 1, 2013. Each group has a distinct contribution rate.

The 2015-2016 expense amounts to $3,231,244 ($3,230,028 in 2014-2015).  For Group 1 members, the expense represents approximately 1.25 times (1.41 times in 2014-2015) the employee contributions and, for Group 2 members, approximately 1.24 times (1.39 times in 2014-2015) the employee contributions.

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

b) Severance benefits

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

  2016 2015
Accrued benefit obligation - End of year $1,341,819 $1,431,230
Accrued benefit obligation - Beginning of year $1,431,230 $1,078,981
Expense for the year 119,281 539,418
Benefits paid during the year (208,692) (187,169)

 

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.

 

6. Accounts receivable and advances

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

  2016 2015
Net accounts receivable $309,962 $340,890
Receivables - Other government departments and agencies $309,962 $340,890
Receivables - External parties 13,122 -
Gross accounts receivable 323,084 340,890
Accounts receivable held on behalf of Government (13,122) -

7. Tangible capital assets

Cost
Capital Asset Class Opening Balance Acquisitions Disposals and
Write-offs
Closing
Balance
Machinery and equipment $105,746 $- $- $105,746
Computer hardware 1,410,632 107,559 775 1,517,416
Computer software 3,972,269 66,136 - 4,038,405
Furniture 644,770 25,955 5,284   665,441
Vehicles 24,285 - - 24,285
Total $6,157,702 $199,650 $6,059 $6,351,293

 

Accumulated Amortization
Capital Asset Class Opening
Balance
Amortization Disposals and
Write-offs
Closing
Balance
Machinery and equipment $105,746 $- $- $105,746
Computer hardware 1,033,167 152,528 736 1,184,959
Computer software  3,729,067 121,559 - 3,850,626
Furniture 452,717 49,199 3,648 498,268
Vehicles 3,469 3,469 - 6,938
Total $5,324,166 $326,755 $4,384 $5,646,537

 

 

Net Book Value
Capital Asset Class 2016 2015
Machinery and equipment $- $-
Computer hardware 332,457 377,465
Computer software 187,779 243,202
Furniture 167,173 192,053
Vehicles 17,347 20,816
Total $704,756 $833,536

 

8. Contractual obligations

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:

  2017 2018 2019 2020 2021
and
thereafter
Total
Professional and special services $834,173 $123,424 $40,758 $1,530 $- $999,885
Other goods and services 171,556 43,198 34,741 6,188 5,004 260,687
Software maintenance agreements 85,157 115,431 40,947 - - 241,535
Operating leases and rental of storage 58,054 54,189 54,188 53,654 46,623 266,708
Total $1,148,940 $336,242 $170,634 $61,372 $51,627 $1,768,815

9. Related party transactions

The Agency is related as a result of common ownership to all government departments, agencies, and Crown corporations. The Agency enters into transactions with these entities in the normal course of business and on normal trade terms. 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, the employer's contribution to the health and dental insurance plans, legal services and workers' compensation coverage. These services provided without charge have been recorded in the Statement of Operations and Agency Net Financial Position as follows:

  2016 2015
Total $4,119,905 $4,033,280
Accommodation $2,316,761 $2,288,971
Employer's contribution to the health and dental insurance plans 1,792,623 1,714,795
Legal services 4,152 21,713
Worker's compensation 6,369 7,801

 

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 Services and Procurement Canada (PSPC) and audit services provided by the Office of the Auditor General are not included in the Agency's Statement of Operations and Agency Net Financial Position.

 

b) Other transactions with related parties

  2016 2015
Total $4,035,397 $4,149,038
Expenses - Other government departments and agencies $4,035,397 $4,149,038
Revenues - Other government departments and agencies $- $-

 

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

 

10. Transfer of the transition payments for implementing salary payments in arrears

The Government of Canada implemented salary payments in arrears in 2014-2015. As a result, a one-time payment was issued to employees and will be recovered from them in the future. The transition to salary payments in arrears forms part of the transformation initiative that replaces the pay system and also streamlines and modernizes the pay processes. This change to the pay system had no impact on the expenses of the Agency. However, it did result in the use of additional spending authorities by the Agency. Prior to year-end, the transition payments for implementing salary payments in arrears were transferred to a central account administered by PSPC, who is responsible for the administration of the Government pay system.

11. Segmented information

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
Regulation
Adjudication
and Alternative
Dispute
Resolution
Internal
Services
Total 2016 Total 2015
Operating expenses
Salaries and employee benefits $10,685,305  $9,119,749 $5,953,707 $25,758,761 $25,090,902
Professional and special services 830,867 1,246,590 593,937 2,671,394 2,147,901
Accommodation 920,497 751,316 644,946 2,316,759 2,288,971
Rentals 53,721 69,455 389,188 512,364 550,611
Transportation and telecommunication 227,350 137,541 106,842 471,733 545,906
Amortization of tangible capital assets 29,257 72,808 224,690 326,755 362,899
Information 17,448 200,775 10,033 228,256 547,504
Utilities, materials and supplies 26,139 37,109 69,497 132,745 196,061
Machinery and equipment 9,988 29,033 71,301 110,322 510,733
Repair and maintenance 13,307 31,484 47,870 92,661 74,999
Other 439 817 4,171 5,427 21,043
Total expenses 12,814,318 11,696,677 8,116,182 32,627,177 32,337,530
Revenues
Revenues from fines 57,750 - - 57,750 208,930
Sales of goods and services - 90 - 90 6,388
Other revenues 498 - 1,500 1,998 946
Revenues earned on behalf of Government (58,248) (90) (1,500) (59,838) (216,264)
Total revenues - - - - -
Net cost of operations before government funding and transfers $12,814,318 $11,696,677 $8,116,182 $32,627,177 $32,337,530
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