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Statement of Management Responsibility Including Internal Control Over Financial Reporting

Responsibility for the integrity and objectivity of the accompanying consolidated financial statements for the year ended March 31, 2014, and all information contained in these consolidated statements rests with the management of Natural Resources Canada.  These consolidated 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 consolidated financial statements. Some of the information in the consolidated 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 department's financial transactions.  Financial information submitted in the preparation of the Public Accounts of Canada, and included in the department's Departmental Performance Report, is consistent with these consolidated financial statements.

Management is also responsible for maintaining an effective system of internal control over financial reporting (ICFR) designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are properly authorized and recorded in accordance with the Financial Administration Act and other applicable legislation, regulations, authorities and policies.

Management seeks to ensure the objectivity and integrity of data in its financial statements through careful selection, training, and development of qualified staff; through organizational arrangements that provide appropriate divisions of responsibility; through communication programs aimed at ensuring that regulations, policies, standards, and managerial authorities are understood throughout the department; 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, 2014 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 the department's system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of the department's operations, and by the Departmental Audit Committee, which oversees management's responsibilities for maintaining adequate control systems and quality of financial reporting, and which recommends the consolidated financial statements to the deputy head of Natural Resources Canada.

The consolidated financial statements of Natural Resources Canada have not been audited.

Original signed by
Bob Hamilton
Deputy Minister

Original signed by
Marc Bélisle
A/Chief Financial Officer


Ottawa, Canada
August 15, 2014

Ottawa, Canada
August 15, 2014

 
Natural Resources Canada
Consolidated Statement of Financial Position (Unaudited)
As at March 31
(in thousands of dollars)
  2014 2013
Liabilities
Accounts payable and accrued liabilities (note 4) 553,871 570,717
Vacation pay and compensatory leave 27,521 22,573
Lease obligation for tangible capital assets (note 5) 71,812 74,012
Employee future benefits (note 6) 23,749 53,509
Other liabilities (note 7) 15,129 13,250
Environmental liabilities (note  15a) 987,527 1,035,415
Total net liabilities 1,679,609 1,769,476
Financial assets
Due from Consolidated Revenue Fund 490,010 456,696
Accounts receivable and advances (note 8) 207,782 202,964
Loan receivable (note 9) 39,333 40,000
Total gross financial assets 737,125 699,660
Financial assets held on behalf of Government
Accounts receivable and advances (note 8) (205,317) (198,034)
Loan receivable (note 9) (39,333) (40,000)
Total financial assets held on behalf of Government (244,650) (238,034)
Total net financial assets 492,475 461,626
Departmental net debt 1,187,134 1,307,850
Non-financial assets
Prepayments (note 10) 11,117 10,241
Inventory (note 11) 1,159 1,660
Tangible capital assets (note 12) 250,824 235,680
Total non-financial assets 263,100 247,581
Departmental net financial position (note 13) (924,034) (1,060,269)

Contractual obligations (Note 14)

Contingent liabilities (Note 15)

Contingent recoveries (Note 16)

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

Original signed by
Bob Hamilton
Deputy Minister

Original signed by
Marc Bélisle
A/Chief Financial Officer

Ottawa, Canada
August 15, 2014


Ottawa, Canada
August 15, 2014

 
Natural Resources Canada
Consolidated Statement of Operations and Departmental Net Financial Position (Unaudited)
For the year ended March 31
(in thousands of dollars)
  2014
Planned Results
2014 2013
Expenses
Statutory Programs - Atlantic Offshore 1,208,302 787,318 632,456
Energy-efficient Practices and Lower-carbon Energy Sources 547,270 307,946 335,752
Responsible Natural Resource Management 153,764 233,568 236,713
Internal Services 245,742 204,137 179,651
Technology Innovation 207,993 165,127 161,632
Innovation for New Products and Processes 119,687 93,677 143,093
Protection for Canadians and Natural Resources 66,203 73,169 64,525
Investment in Natural Resource Sectors 78,594 67,148 77,279
Landmass Information 74,598 63,419 81,644
Market Access and Diversification 61,742 55,388 51,134
Total expenses 2,763,895 2,050,897 1,963,879
Revenues
Rights and privileges 1,055,658 680,994 543,084
Miscellaneous revenue 282,579 518,726 470,927
Revenue from services of a non-regulatory nature 25,952 20,068 21,462
Proceeds from sales of goods and information products 2,995 2,762 2,512
Revenue from services of a regulatory nature 1,968 1,477 1,464
Services to other government departments -   107 111
Revenues earned on behalf of Government (1,333,382) (1,194,912) (1,013,591)
Total revenues 35,770 29,222 25,969
Net cost of operations before government funding and transfers 2,728,125 2,021,675 1,937,910
Government funding and transfers
Net cash provided by Government 2,699,012 2,072,893 2,411,672
Change in due from (to) Consolidated Revenue Fund 131,590 33,314 (468,491)
Services provided without charge by other government departments (note 17a) 52,752 51,635 53,732
Transfer of assets and liabilities to other government departments -   68 (91)
Net cost of operations after government funding and transfers (155,229) (136,235) (58,912)
Departmental net financial position - Beginning of year (1,005,759) (1,060,269) (1,119,181)
Departmental net financial position - End of year (850,530) (924,034) (1,060,269)

Segmented information (note 18)

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

Natural Resources Canada
Consolidated Statement of Change in Departmental Net Debt (Unaudited)
For the year ended March 31
(in thousands of dollars)
  2014
Planned Results
2014 2013
Net cost of operations after government funding and transfers (155,229) (136,235) (58,912)
Change due to tangible capital assets  
Acquisition of tangible capital assets 31,228 32,159 31,375
Amortization of tangible capital assets (17,807) (19,200) (17,533)
Proceeds from disposal of tangible capital assets (517) (479) (320)
Net gain on disposal of tangible capital assets including adjustments (33) 2,596 857
Transfer to other government departments - 68 (91)
Total change due to tangible capital assets 12,871 15,144 14,288
Change due to inventories (86) (501) (158)
Change due to prepayment 1,534 876 (80,120)
Net decrease in departmental net debt (140,910) (120,716) (124,902)
Departmental net debt - Beginning of year 1,251,082 1,307,850 1,432,752
Departmental net debt - End of year 1,110,172 1,187,134 1,307,850

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

Natural Resources Canada
Consolidated Statement of Cash Flows (Unaudited)
For the year ended March 31
(in thousands of dollars)
  2014 2013
Operating activities
Net cost of operations before government funding and transfers: 2,021,675 1,937,910
Non-cash items:
Amortization of tangible capital assets (19,200) (17,533)
Net gain on disposal of tangible capital assets including adjustments 2,596 857
Services provided without charge by other government departments (51,635) (53,732)
Variations in Statement of financial position:
Increase (decrease) in accounts receivable and advances (2,465) 1,668
Increase (decrease) in prepayments 876 (80,120)
Decrease in inventory (501) (158)
Decrease in accounts payable and accrued liabilities 16,846 519,934
Decrease (increase) in vacation pay and compensatory leave (4,948) 1,361
Decrease in future employee benefits 29,760 13,810
Decrease in environmental liabilties 47,888 49,595
Decrease (increase) in other liabilities (1,879) 4,900
Cash used in operating activities 2,039,013 2,378,492
Capital investing activities
Acquisitions of tangible capital assets 32,159 31,375
Proceeds from disposal of tangible capital assets (479) (320)
Cash used in capital investing activities 31,680 31,055
Financing activities
Lease obligation for tangible capital assets (2,518) (2,593)
Lease payments for tangible capital assets 4,718 4,718
Cash used in financing activities 2,200 2,125
Net cash provided by Government of Canada 2,072,893 2,411,672

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

Natural Resources Canada
Notes to the Consolidated Financial Statements (Unaudited)
For the year ended March 31, 2014

1. Authority and Objectives

The Department of Natural Resources Canada (NRCan) was created on June 25, 1993 by the merger of the Department of Energy, Mines and Resources and the Department of Forestry. This organizational change was effected by Order in Council, pending the passage of legislation which occurred in 1994. The Department's mandate is primarily based on the Department of Natural Resources Act, the Resources and Technical Surveys Act and the Forestry Act.     

NRCan's vision is to improve the quality of life of Canadians by creating a sustainable resource advantage. It seeks to fulfill this vision by working to: improve the competitiveness of the natural resource sectors; enable the sustainable development of Canada's resources; and enhance the safety and security of citizens.  

NRCan fulfills its mandate through the following activities:

Market Access and Diversification

Canada's natural resource sectors face two key barriers to market access and diversification: 1) trade and policy barriers, and 2) lack of awareness of Canada's natural resource products. The objectives of this program are to break down those barriers and support natural resource markets by making information available to Canadians, supporting negotiations to reduce trade barriers, and ensuring that regulations are up to date. This helps maintain natural resource sectors' access to existing markets and increases their access to new market segments.

Innovation for New Products and Processes

Optimizing the use of Canada's natural resources and the processes by which they are developed would improve the productivity of the natural resource sectors and reduce Canada's dependency on the sale of traditional natural resource products. The objective of this program is twofold: to maximize productivity and to decrease Canada's dependency on the sale of traditional products by encouraging natural resource sectors to adopt new technologies and processes to develop new products. This objective is achieved by conducting science, research, development, and demonstrations on new applications, technologies, processes, and products.

Investment in Natural Resource Sectors

Investing in the development of natural resources is costly and risky due to the uncertainties related to the potential economic viability of natural resources. There are many factors to consider when deciding whether or not to develop a natural resource – such as investors and/or companies lack knowledge on, and thus being unaware of, potential opportunities, or regulatory delays and uncertainty impeding the investment climate. The objective of this program is to encourage natural resource sector investment by either decreasing the risk of development, or increasing knowledge on opportunities. This objective is achieved by advancing federal system-wide regulatory improvements and providing funding and information on the factors that determine the potential economic viability of natural resources.

Statutory Programs – Atlantic Offshore

This program activity is about monitoring and facilitating payment disbursal agreements and transfer payments under the Atlantic Offshore Accord Acts.­­

Energy-efficient Practices and Lower-carbon Energy Sources

Canada's energy markets are defined by consumption and production decisions; however, consumers and producers do not necessarily make decisions that minimize their impact on the environment due to several barriers including: 1) a lack of awareness of available options and their benefits, 2) insufficient capacity for adoption (e.g. regulatory frameworks, codes and standards, etc.) and 3) financial risk. The objective of this program is to address these barriers and encourage and enable energy consumers and producers to adopt cleaner and more efficient technologies, products, services and practices, thereby transforming the market.

This objective is achieved through education and outreach activities, targeted incentives, and regulatory interventions that keep pace with technological changes.

Technology Innovation

Solutions to the environmental challenges faced by the natural resource sectors require sustained efforts in research, development and demonstration because the current level of science and technology is inadequate to address these concerns. However, the natural resource sectors neither have all the necessary knowledge nor make the necessary investments in innovation due to the potential poor return on investment. The objective of this program is to encourage academia, industry and the public sector to research, develop and demonstrate innovative solutions to environmental challenges encountered in the natural resource sectors. This objective is achieved through the generation and dissemination of scientific knowledge, and the development and demonstration of new technologies.

Responsible Natural Resource Management

Greater knowledge of risks and environmentally responsible practices could help to prevent and reduce the environmental impacts of natural resource development. The objectives of the program are to enable government departments, regulatory bodies and industry to assess these impacts to the environment and develop, monitor and maintain resources or clean up wastes responsibly. These objectives are achieved through the provision of assessments and knowledge rooted in sound science, and waste management efforts in collaboration with provinces, federal agencies and municipalities.

Protection for Canadians and Natural Resources

Natural resource development, military activities and changes in the environment pose risks to human, natural resource and infrastructure health. Without the appropriate coordination for and knowledge on the management of these risks, the impacts would be severe. The objective of this program is to enable other government departments, communities and the private sector to manage these risks to human, natural resource and infrastructure. This objective is achieved by providing regulation and knowledge, fulfilling legislated and regulatory responsibilities, and ensuring capacity.

Landmass Information

NRCan provides clearly-defined legal boundaries, a robust property system framework, authoritative geographic infrastructure and fundamental geospatial information on Canada's landmass. Without these frameworks, negative impacts will result to the Canadian economy, environment and standard of living. This program delivers Canada's regulatory system for Canada Lands legal surveys, the fundamental geodetic reference system, earth observation and mapping information. Together, these support the Canadian public, other federal departments and levels of government, the private sector and academia to carry out a variety of decisions founded on location-based information, such as land transactions, commercial/industrial development, transportation and logistics. This information enables effective management of Canada's natural resources and lands including opportunities for collaboration across jurisdictions (e.g., cross-border planning, regulatory efficiency), which advances the interests of Canada's natural resources sectors, both domestically and at the international level.

Internal Services

This program regroups three areas that assist NRCan in delivering on its mandate and priorities: governance and management support, resource management services, and asset management services. The key to the effectiveness and efficiency of this program is the ability of internal services to adjust and respond to evolving business priorities and requirements. This will allow the Department to better align its priorities with the needs and expectations of Canadians, its activities to its priorities, and its resources to its activities. It will also increase NRCan's capacity to monitor the financial and non-financial performance of its activities and programs.

For 2013-14, NRCan will deliver on its management priority to increase the effectiveness and efficiency of its operations through four guiding principles: asserting policy leadership, mobilizing science and technology, transforming business, and growing human capital. These will ensure that the Department further develops its capacity, responsiveness and resilience to maximize its contribution to the Government of Canada and to Canadians.

2. Summary of Significant Accounting Policies

These consolidated 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 Department is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Department 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 Consolidated Statement of Operations and Departmental Net Financial Position and in the Consolidated 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 Consolidated Statement of Operations and Departmental Net Financial Position and in the Consolidated Statement of Change in Departmental Net Debt are the amounts reported in the future-oriented financial statements included in the 2013-14 Report on Plans and Priorities. The future oriented financial statements have been reclassified to conform to the current year presentation.
  2. Consolidation – These consolidated financial statements include the accounts of the sub-entities that are under the control of the Department.  The accounts of the Geomatics Canada Revolving Fund have been consolidated with those of the Department, and all inter-organizational balances and transactions have been eliminated.
  3. Net Cash Provided by Government – The Department operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the Department is deposited to the CRF and all cash disbursements made by the Department 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.
  4. 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 Department is entitled to draw from the CRF without further authorities to discharge its liabilities. 
  5. Revenues:
    • Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.
    • Funds that have been received are recorded as deferred revenue, provided the Department 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 the Department's liabilities.  While the Deputy Head 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.
  6. 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 consolidated 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 workers' compensation are recorded as operating expenses at their estimated cost.
  7. Employee future benefits    
    1. Pension benefits:  Eligible employees participate in the Public Service Pension Plan, a multiemployer plan administered by the Government.  The Department's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan.  The Department's responsibility with regard to the Plan is limited to its contributions.  Actuarial surpluses or deficiencies are recognized in the consolidated 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 those 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 employee severance benefits for the Government as a whole.           
  8. 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.
  9.     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 an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the consolidated financial statements. 
  10. Environmental liabilities - Environmental liabilities consist of estimated costs related to the remediation of environmentally contaminated sites as well as estimated costs related to obligations associated with future asset restoration.
    1. Remediation liabilities are recorded as accrued liabilities to recognize the estimated costs related to the management and remediation of contaminated sites where the Department is obligated, or likely to be obligated, to remediate the sites.  If the responsibility to remediate is undeterminable, the amount is disclosed as a contingent liability.  If the responsibility to remediate is undeterminable and a reasonable estimate cannot be made, the nature, source and extent of contamination is disclosed as a contingent liability.
    2. Future Asset Restoration Obligations are recorded as accrued liabilities to recognize the estimated costs related to the restoration of tangible capital assets.  These costs are usually capitalized and amortized over the asset's estimated useful life based on an obligation imposed by legislation, regulation or contractual agreement where the Department is obligated, or likely to be obligated, to restore the tangible capital asset.  If the obligation to restore the tangible capital asset is undeterminable, the amount is disclosed as a contingent liability.  If the obligation to restore the tangible capital asset is undeterminable and an estimate cannot be made, the nature and source of the potential obligation is disclosed as a contingent liability.
  11. Inventory – Inventory consists of parts, materials and supplies 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 realizable value.
  12. 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 the Consolidated Statement of Operations and Departmental Net Financial Position and note 18 in the operating expenses – other.
  13. Tangible capital assets – All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more ($1,000 or more for the Geomatics Canada Revolving Fund) are recorded at their acquisition cost.  The Department does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian reserves and museum collections.
    Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the capital asset as follows:
    Asset Class Amortization period
    Buildings 15 to 40 years
    Machinery and equipment 5 to 15 years
    Vehicles 3 to 10 years
    Leasehold improvements Lesser of the remaining term of lease or useful life of the improvement
    Leased tangible capital assets Over term of lease/useful life
    Assets under construction Once in service, in accordance with asset class

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

3. Parliamentary authorities

The Department receives most of its funding through annual parliamentary authorities.  Items recognized in the Consolidated Statement of Operations and Departmental Net Financial Position and the Consolidated Statement of Financial Position in one year may be funded through parliamentary authorities in prior, current or future years.  Accordingly, the Department 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
  2014 2013
(in thousands of dollars)
Net cost of operations before government funding and transfers $ 2,021,675 $ 1 ,937,910    
Adjustments for items affecting net cost of operations but not affecting authorities:
Add (Less):  
NRCan's authorities  
Refunds of prior years expenditures 13,320 37,426
Services provided without charge by other government departments (51,635) (53,732)
Decrease in allowance for environmental liabilities 47,888 49,595
Amortization of tangible capital assets (19,200) (17,533)
Decrease in employee future benefits 29,760 13,810
Adjustments of prior year accounts payable 8,544 34,198
Adjustments from prepayments 876 (80,120)
Increase in accrued liabilities not charged to authorities 10,318 14,218
Decrease in adjustments of previous years inventory (501) (158)
Decrease (increase) in vacation pay and compensatory leave (4,948) 1,361
Gain on disposal of tangible capital assets (2,596) (857)
Other adjustments 3,184 (2,838)
Total items affecting net cost of operations but not affecting authorities 35,010 (4,630)
Adjustments for items not affecting net cost of operations but affecting authorities: 
Add (Less):  
Receivables, Advances, and Prepayments -          31
Acquisitions of tangible capital assets 32,159 31,375
Decrease in lease obligations for tangible capital assets 2,200 2,125
Total items not affecting net cost of operations but affecting authorities 34,359 33,531
Current year authorities used $ 2,091,044 $ 1,966,811
b) Authorities provided and used
  2014 2013
(in thousands of dollars)
Authorities Provided:
Vote 1 - Operating expenditures $ 871,008 $ 860,552
Vote 5 - Capital expenditures 28,795 31,957
Vote 10 - Transfer payments 608,828 742,019
Statutory amounts 864,652 756,439
Less:
Authorities available for future years (7,302) (7,315)
Lapsed - Operating (64,781) (95,368)
Lapsed - Capital (2,726) (2,912)
Lapsed - Transfer payment (207,430) (318,562)
Lapsed – Statutory Amounts - -
Current year authorities used $ 2,091,044 $ 1,966,811

4. Accounts payable and accrued liabilities

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

  2014 2013
(in thousands of dollars)
Accounts payable – Other government departments and agencies $ 7,228 $ 21,537
Accounts payable – External parties 222,091 205,998
Total accounts payable 229,319 227,535
Accrued liabilities 324,552 343,182
Total accounts payable and accrued liabilities $553,871 $570,717

In Canada's Economic Action Plan 2012, the Government announced savings measures to be implemented by departments over the next three fiscal years starting in 2012-13. As a result, the Department has recorded at March 31, 2014, an obligation for termination benefits for an amount of $182,000 ($4,092,000 in 2012-13) as part of accrued liabilities to reflect the estimated workforce adjustment costs.

5.  Lease obligation for tangible capital assets

The Department has entered into agreements to lease a building under a capital lease with a cost of $90,953,000 and accumulated amortization of $12,314,000 as at March 31, 2014 ($8,676,000 as at March 31, 2013). The obligations related to the upcoming years include the following:

  2014 2013
(in thousands of dollars)
2014 - 4,718
2015 4,718 4,718
2016 4,718 4,718
2017 4,718 4,718
2018 4,718 4,718
2019 and thereafter 83,113 83,113
Total future minimum lease payments 101,985 106,703
Less: imputed interest (3.45%) 30,173 32,691
Balance of obligations under leased tangible capital assets $ 71,812 $ 74,012

6.  Employee future benefits

(a) Pension benefits:  The Department'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 Department contribute to the cost of the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to EAP 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 2013-2014 expense amounts to $60,890,000 ($63,505,000 in 2012-2013).  For Group 1 members, the expense represents approximately 1.6 times (1.7 times in 2012-2013) the employee contributions and, for Group 2 members, approximately 1.5 times (1.6 times in 2012-2013) the employee contributions.

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

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

As part of the collective agreement negotiations with certain employee groups, 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.

  2014 2013
(in thousands of dollars)
Accrued benefit obligation - Beginning of year $ 53,509 $ 67,319
Expense for the year (2,828) 7,056
Benefits paid during the year (26,932) (20,866)
Accrued benefit obligation - End of year $ 23,749 $ 53,509

7. Other Liabilities

   April 1,    2013 Receipts and other credits Payments and other charges March 31, 2014 
(in thousands of dollars)
Guarantee deposits - Oil and gas $ 4,706 $835,207 $ (832,957) $ 6,956
Shared costs projects 981 1,645 (1,806) 820
Market development and incentive payments - Alberta 3,507 - (209) 3,298
Shared costs agreements  - Research 4,056 2,705 (2,706) 4,055
Total $ 13,250 $839,557 $ (837,678) $ 15,129

Guarantee deposits – Oil and gas: This account was established to record securities in the form of cash which are required to be issued to, and held by the Government of Canada pursuant to an Exploration License in accordance with section 24 of the Canada Petroleum Resources Act.  These securities are a performance guarantee that the agreed exploration will be performed in the manner and time frame specified.  Interest is not paid on these deposits.

Shared-cost projects - This account was established to facilitate the retention and disbursement of moneys received from private organizations and other governments for cost-sharing scientific projects.

Market development incentive payments– Alberta: This account records money received from the Government of Alberta, to encourage the expansion of natural gas market in Alberta and provinces to the East, in accordance with an agreement between the Government of Canada and the Government of Alberta dated September 1, 1981 and pursuant to section 39 of the Energy Administration Act.  The original term of the agreement was from November 1, 1981 to January 31, 1987.  As a result of the Western Accord of March 25, 1985, payments from the Government of Alberta terminated as at April 30, 1986, however, payments are being made from the account for selected programs which encourage the use of natural gas for vehicles.

Shared-cost agreements– Research: This account was established to facilitate the retention and disbursement of moneys received from private industries and other governments for joint projects or shared-cost research agreements.

8.  Accounts receivable and advances

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

  2014 2013
(in thousands of dollars)
Receivables - Other government departments and agencies $ 10,849 $ 12,245
Receivables - External parties 197,217 191,753
Employee advances 91 104
Subtotal 208,157 204,102
Allowance for doubtful accounts on receivables from external parties (375) (1,138)
Gross accounts receivable 207,782 202,964
Accounts receivable held on behalf of Government (205,317) (198,034)
Net accounts receivable $ 2,465 $ 4,930

9.  Loan receivable

The following table presents details of the Department's loan balance:

  2014 2013
(in thousands of dollars)
Loan to Nordion International Inc. $ 46,000 $ 50,000
Unamortized discounts (6,667) (10,000)
Gross Loan balance 39,333 40,000
Loans receivable held on behalf of government (39,333) (40,000)
Loan balance - -

Nordion International Inc. (loan)

Interest Free Loan Agreement; to be repaid over 30 semi-annual payments commencing October 1, 2000; fully secured by a financial instrument in Canada's name which guarantees that the loan will be repaid.  Balance remaining as of March 31, 2014 is $46,000,000.  Due to the concessionary terms of this loan, the estimated present value is $39,333,000 as at March 31, 2014.

10.  Prepayments

The following presents details of the Department's prepayments:

  2014 2013
(in thousands of dollars)
Prepaid expenses $ 11,117 $ 10,241
Total $ 11,117 $ 10,241

11.  Inventory

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

  2014 2013
(in thousands of dollars)
Inventories held for consumption $ 1,100 $ 1,606
Inventories for re-sale 59 54
Total $ 1,159 $ 1,660

The cost of consumed inventory recognized as an expense in the Consolidated Statement of Operations and Departmental Net Financial Position is $501,066 in 2013-14 ($158,035 in 2012-13).

12.  Tangible capital assets

Capital asset class (in thousands of dollars)
Cost Accumulated amortization Net book value
Opening balance Acqui-sitions Adjust-ments (1) Disp-osals and write-offs Closing balance Opening balance Amortization Adjustments (1) Disposals and write-offs Closing balance 2014 2013
Net book value Net book value
Land 11,127 -   932 -   12,059 -   -   -   -   -   12,059 11,127
Buildings 195,026 818 2,955 12 198,787 139,247 3,070 (2) 1 142,314 56,473 55,778
Machinery and equipment 208,128 6,175 9,922 2,879 221,346 159,980 10,653 1,219 2,749 169,103 52,243 48,148
Vehicles 9,528 252 46 1,231 8,595 6,629 785 27 1,021 6,420 2,175 2,900
Leasehold improvements 1,515 -   19,136 -   20,651 81 1,054 -   -   1,135 19,516 1,434
Leased tangible capital assets 90,953 -   -   -   90,953 8,676 3,638 -   -   12,314 78,639 82,277
Assets under construction 34,016 24,914 (28,450) 761 29,719 -   -   -   -   -   29,719 34,016
Total 550,293 32,159 4,541 4,883 582,110 314,613 19,200 1,244 3,771 331,286 250,824 235,680

Note (1) Adjustments include assets under construction of $31,114,000 that were transferred to the other categories upon completion of the assets.  During the year, the Department transferred tangible capital assets with Other Government Departments with a net effect of $68,000 on the departmental net financial position. 

13. Departmental net financial position

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

The Environmental Studies Research Fund account was established pursuant to subsection 76(1) of the Canada Petroleum Resources Act.  The purpose of the fund is to finance environmental and social studies pertaining to the manner in which, and the terms and conditions under which, exploration development and production activities on frontier land, authorized under this Act or any other Act of Parliament, should be conducted.  Legislation required that the revenues of these accounts to be earmarked and that related payments and expenses be charged against such revenues.  The transactions do not represent liabilities to third parties but are internally restricted for specified purposes. 

  2014 2013
(in thousands of dollars)
Environmental Studies Research Fund – Restricted Departmental net financial position
Balance, beginning of year – Restricted $ 3,460 $ 2,804
Revenues 2,453 1,151
Expenses (1,212) (495)
Balance, end of year – Restricted 4,701 3,460
Unrestricted Departmental net financial position (928,735) (1,063,729)
Departmental net financial position – End of year $ (924,034) $ (1,060,269)

 

14. Contractual obligations

The nature of the Department's activities can result in some large multi-year contracts and obligations whereby the Department 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) 2015 2016 2017 2018 2019 and thereafter TOTAL
Transfer payments $332,236 188,310 155,228 125,201 250,229 $1,051,204

15. Contingent liabilities

 Contingent liabilities arise in the normal course of operations and their ultimate disposition is unknown.  They are grouped into three categories as follows:

(a) Environmental liabilities

The Department has identified approximately 11 sites (6 sites in 2012-2013) where the department is obligated or likely to be obligated, to remediate for which a remediation liability of $987,527,000 ($1,035,415,000 in 2012-2013) has been recorded in accrued liabilities.  The Department's ongoing efforts to assess contaminated sites may result in additional environmental liabilities related to newly identified sites, or changes in the assessments of existing sites.  These liabilities will be accrued by the Department in the year in which they become likely and are reasonably estimable.

(b) Claims and litigation

Claims have been made against the Department in the normal course of operations. These claims include items with pleading amounts and other for which no amount is specified. While the total amount claimed in these actions is significant, their outcomes are not determinable. The Department 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. Claims and litigations for which the outcome is not determinable and a reasonable estimate can be made by management amount to approximately $175,000 ($75,000 in 2012-13). 

(c) Loan guarantees

(in thousands of dollars) Authorized Limit Outstanding guarantees
2014 2013
Lower Churchill Hydroelectric Projects $6,300,000 $312,526 -

Under the Lower Churchill Projects, $6.3 billion was raised through the issuance of bonds guaranteed by Canada for the following projects: Muskrat Falls and Labrador Transmission Assets; Labrador-Island Link; and Maritime Link.  As of March 31, 2014, $312,526,000 has been advanced to the project entities for construction costs.  Once the projects are operational, principal and interest payments will be made by the project entities to repay the guaranteed debt.  As a condition of the loan guarantee, all of the project entities' shares, assets and agreements have been pledged as security to Canada. 

No allowance for losses on this guarantee has been recorded for this loan guarantee as, at this time, no costs are likely to occur. An allowance will be recorded if it becomes likely that Canada will incur costs under the guarantee and when the amount of the loss can be reasonably estimated.

16. Contingent recoveries

NRCan issues conditionally repayable contributions that become repayable if conditions specified in the contribution agreement come into effect. 

Lloydminster Bi-Provincial Upgrader - Canada sold its interests in the Lloydminster Bi-Provincial Upgrader to Husky Oil in 1995.  The terms of sale included an upside interest provision whereby Canada would be eligible to receive additional payments for a period of up to 20 years if the differential between light and heavy crude oil reached a certain threshold.  As a result of the increase in oil prices since the date of sale, the upside interest provision was triggered and eligible payments to Canada have increased. Canada's eligibility for upside interest payments ends in 2015.

The Ethanol Expansion Program (EEP) was launched in August 2003 with a budget of $100 million, as part of the Budget 2003 Climate Change measures. The purpose of the EEP was to contribute to the expansion of ethanol production and use in Canada and the reduction of transportation greenhouse gas emissions.  Incentives were provided to enable the construction of new ethanol facilities or the expansion of existing ones. The support was provided in the form of repayable contributions. Repayments are to be made over a seven year period or until Canada has received repayments totalling an amount equal to the contribution, whichever comes first. Repayment is contingent upon the proponents meeting certain financial conditions. The final repayment reports will be received in 2017.

Other contingent recoveries relate to agreements entered into with proponents for early stage research and development (R&D) activities.  Recoveries are contingent upon the successful commercialization of products generated by the R&D activities.

The Department has estimated the contingent recoverable amounts as $13,804,000 ($23,190,000 in 2013).  Contingent recoveries are not recorded in the consolidated financial statements. 

17. Related party transactions

The Department is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations.  The Department enters into transactions with these entities in the normal course of business and on normal trade terms.  Also, during the year, the Department received common services which were obtained without charge from other Government departments as presented in part (a).

(a)    Common services provided without charge by other government departments:

During the year the Department 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 received without charge have been recorded in the Department's Consolidated Statement of Operations and Departmental Net Financial Position as follows:

  2014 2013
(in thousands of dollars)
Employer's contribution to the health and dental insurance plans $ 32,035 $ 35,131
Accommodation 18,240 17,291
Legal services 965 1,063
Workers' compensation 395 247
Total $ 51,635 $ 53,732

The Government has centralized some of its administrative activities for efficiency and 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, which include payroll and check issuance services provided by Public Works and Government Services Canada and audit services provided by the Office of the Auditor General, are not included as an expense in the Department's Consolidated Statement of Operations and Departmental Net Financial Position.

(b)    Other transactions with related parties:  

  2014 2013
(in thousands of dollars)
Expenses - Other government departments and agencies 174,136 140,893
Revenues - Other government departments and agencies 3,410 3,104

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

18. Segmented information

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

(in thousands of dollars)

  Statutory Programs - Atlantic Offshore Energy-efficient Practices and Lower-carbon Energy Sources Responsible Natural Resource Management Internal Services Technology Innovation Innovation for New Products and Processes Protection for Canadians and Natural Resources Investment in natural resource sectors Landmass Information Market Access and Diversification 2014                    Grand Total 2013 Total
Transfer payments
Industry   258,248 1,151   32,664 26,068 287 6 -   (4,146) 314,278 345,023
International   95 1,442 100 466 82 -   31 -   1,331 3,547 4,745
Non-profit organization   1,109 375 20 19,016 26,724 3,832 1,524 250 12,963 65,813 114,080
Other levels of government 787,318 1,409     447 178 512 3 -   (56) 789,811 638,958
Individuals   (546)     25     189   369 37 (28,966)
Total transfer payments 787,318 260,315 2,968 120 52,618 53,052 4,631 1,753 250 10,461 1,173,486 1,073,840
Operating Expenses
Salaries and employee benefits -   33,330 29,893 110,296 77,529 36,193 56,480 53,867 47,588 30,695 475,871 493,346
Environmental expenses -   -   (50,268) 2,380 -   -   -   -   -   -   (47,888) (49,595)
Information -   338 102 14,958 342 126 166 253 129 763 17,177 14,093
Professional and special services -   14,058 194,686 33,815 13,139 5,413 6,721 6,957 7,140 13,385 295,314 264,590
Rentals -   379 1,403 5,021 7,760 598 2,306 3,443 6,324 450 27,684 31,310
Transportation -   638 1,199 1,623 1,825 985 2,155 1,678 2,354 1,239 13,696 16,970
Utilities, material and supplies -   272 598 13,363 5,201 1,402 1,671 1,591 3,104 290 27,492 25,637
Purchased repairs and upkeep 4 199 1,904 1,395 170 402 87 230 9 4,400 4,986
Acquisitions -   175 409 2,227 7,489 458 1,086 569 15,710 83 28,206 33,664
Amortization -   -   -   19,200 -   -   -   -   -   -   19,200 17,533
Other -   (1,563) 52,379 (770) (2,171) (4,720) (2,449) (3,050) (19,410) (1,987) 16,259 37,505
Total Operating Expenses -   47,631 230,600 204,017 112,509 40,625 68,538 65,395 63,169 44,927 877,411 890,039
Total Expenses 787,318 307,946 233,568 204,137 165,127 93,677 73,169 67,148 63,419 55,388 2,050,897 1,963,879
Revenues
Rights and privileges 677,349 -   -   -   -   175 1,904 -   2 1,564 680,994 543,084
Miscellaneous Revenue 13,707 2 59 1,515 3,166 16 19 1 121 500,120 518,726 470,927
Revenue from services of a non-regulatory nature -   591 1,133   12,390 1,269 2,270 285 2,123 7 20,068 21,462
Proceeds from sales of goods and information products     319   3 1,073 922   449 (4) 2,762 2,512
Revenue from services of a regulatory nature             1,477       1,477 1,464
Services to other government departments as per Section 29.2 of the Financial Administration Act       107             107 111
Revenues earned on behalf of Government (691,056) 19 (83) (1,465) (771) 99 33 -   (32) (501,656) (1,194,912) (1,013,591)
Total Revenues -   612 1,428 157 14,788 2,632 6,625 286 2,663 31 29,222 25,969
Net cost from operations 787,318 307,334 232,140 203,980 150,339 91,045 66,544 66,862 60,756 55,357 2,021,675 1,937,910

19. Comparative information

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 Natural Resources Canada

for fiscal year 2013-14 (unaudited)

Summary of the assessment of effectiveness of the system of internal control over financial reporting and the action plan

1.         Introduction

This document provides summary information on the measures taken by Natural Resources Canada (NRCan) to maintain an effective system of internal control over financial reporting (ICFR), including information on internal control management and assessment results and related action plans. 

Detailed information on NRCan's authority, mandate, and program activities can be found in the 2013-14 Departmental Performance Report and the 2014-15 Report on Plans and Priorities

2.         Departmental system of internal control over financial reporting

2.1       Internal Control Management

NRCan has a well-established governance and accountability structure to support departmental assessment efforts and oversight of its system of internal control.  A departmental internal control management framework approved by the Deputy Minister is in place (NRCan Framework for Internal Control over Financial Reporting) and includes:

  • roles and responsibilities for the maintenance and assessment of the system of ICFR for the Chief Financial Officer (CFO), Chief Information Officer, senior departmental managers, process owners and all NRCan employees;
  • requirements for the maintenance of an effective risk-based system of ICFR;
  • risk-based approach for the assessment of the system of ICFR;
  • regular updates/reports to departmental senior management and the Departmental Audit Committee;
  • sign-offs on the maintenance of a system of financial management and internal control by the Deputy Minister, the CFO and Assistant Deputy Ministers; and
  • expectation for corrective actions where required.

NRCan has a Corporate Risk Profile (CRP) in place.  The CRP allows all staff to familiarize themselves with key operational and strategic risks and risk mitigation measures, with the view of ensuring that risks are being managed sufficiently, consistently and comprehensively.  The Department reports on significant financial risks in the Quarterly Financial Reports, including changes to risks and newly identified risks.

The Department's control environment also includes: 

  • A departmental Integrated Risk Management Policy Framework.
  • A departmental Values and Ethics Code and a Values and Ethics Centre of Expertise. 
  • A dedicated unit under the CFO to conduct risk-based assessments of the system of ICFR, including follow-ups on corrective actions.
  • An Internal Audit function which provides independent and objective assurance on the effectiveness of internal controls through periodic risk-based audits and continuous audits, as well as through follow-up activities on the progress of the implementation of management action plans identified to address audit recommendations.
  • A multi-year risk-based audit plan, reviewed by the Departmental Audit Committee and approved by the Deputy Minister. Plans and audit reports are available on the departmental internet site.
  • Senior managers' performance agreements with clear commitments to sound financial management.
  • Intranet based communication tools for policy instruments and procedures.
  • Mandatory training for financial officers.

The Departmental Audit Committee (DAC) is an advisory committee to the Deputy Minister. The Committee provides objective advice and recommendations to the Deputy Minister regarding the sufficiency, quality and results of assurance provided by the internal audit function on the adequacy and functioning of the department's risk management, control and governance frameworks and processes. Using a risk-based approach, the Committee has the responsibility to review all core areas of departmental management control and accountability processes, including reporting. Other areas of responsibility within the DAC's scope include values and ethics, external assurance providers, quarterly financial reporting, departmental financial statements and the assessments of ICFR.

The DAC is composed of five members including the Deputy Minister, the Associate Deputy Minister and three external members recruited from outside of the federal public administration. The NRCan Chief Financial Officer and Chief Audit Executive attend all meetings of the DAC. The Chair may request the attendance of other departmental officials, or invite representatives from external assurance providers.

The DAC meets at least four times a year, and may convene additional meetings as circumstances require.

2.2       Service arrangements relevant to financial statements

The Department relies on other organizations for the processing of certain transactions that are recorded in its financial statements as follows:

Common arrangements:

  • Public Works and Government Services Canada (PWGSC) centrally administers the payments of salaries, and provides pay administration services to NRCan employees through the Public Service Pay Centre;
  • PWGSC centrally administers the procurement of goods and services, as per established  delegated authorities, and provides accommodation services;
  • Treasury Board Secretariat provides the Department with information used to calculate various accruals and allowances, such as the accrued severance liability;
  • The department of Justice provides legal services to NRCan; and
  • Shared Services Canada (SSC) provides Information Technology infrastructure services to NRCan in the areas of email platform, data centres, telecommunications and workplace technology devices. The scope and responsibilities are addressed in an interdepartmental arrangement between SSC and NRCan.

PWGSC has provided NRCan a letter of assurance regarding the proper management of key controls for the Receiver General and Compensation central systems.

Specific arrangement:

The department of Agriculture and Agri-Food Canada provides Integrated Financial and Material System services (SAP) to NRCan. 

3.         Departmental assessment results during fiscal year 2013-14

The key findings and significant adjustments required from the current year's assessment activities are summarized below.

New or significantly amended key controls:

In the current year, the following updates were made to the existing internal control documentation:

  • Significant update to the Payroll and Benefits documentation to reflect the transfer of responsibilities of pay services to the Public Service Pay Centre of PWGSC, and the implementation of the Government of Canada Pay Interface in PeopleSoft.
  • Minor updates to the documentation for Loans and for Offshore royalty revenues and corresponding statutory transfers.

In the current year, the existing internal control documentation for IT General Controls was updated, and design effectiveness testing was conducted in the following areas:

  • Human Resources Management System (PeopleSoft), taking into account the implementation of the Government of Canada Pay Interface.
  • eTools (used for the submission and electronic approval of transactions) – ePayment, eProcurement and the PAYE tool.

The testing of the IT General Controls in the areas mentioned above indicated that, for the most part, appropriate controls were in place and aligned with the risks.  The following key remediation requirements were identified:

  • Finalize the certification and accreditation process for the eTools.
  • Ensure compliance to the departmental standard for password settings, where technically feasible.
  • Examine the process for the monitoring of access to sensitive data in ePayment.
  • Implement procedures for the management of user access rights for the eTools.
  • Resolve issues surrounding segregation of duties.

Management action plans addressing the remediation requirements above were developed.

Ongoing monitoring program:

As part of its rotational ongoing monitoring plan, the department completed its reassessment of entity-level controls, and reassessment of internal controls within the following business processes: financial closeFootnote 1 and reporting, repayable contributions, grants and contributions (standard), and environmental liabilities. The department also conducted operating effectiveness testing of remediation actions that consist of reviews and which were implemented in 2012-13. For the most part, the internal controls that were tested performed as intended. The following key remediation requirements were identified:

  • Improve information on the intranet and Wiki.
  • Develop procedures for the approval of certain journal vouchers.
  • Maintain evidence of the review of environmental liabilities data by the responsible manager.
  • Improve instructions to program managers regarding the processes that support the monitoring of repayments for repayable contributions.
  • More clearly document evidence of project approval in the area of grants and contributions.

Management action plans addressing the remediation requirements above were developed. 

4. Departmental Action Plan

4.1   Progress during fiscal year 2013-14

NRCan continued to conduct ongoing monitoring according to the previous year's rotational plan as shown in Table 1.

Table 1 - Progress during Fiscal Year 2013-14
Previous year's rotational ongoing monitoring plan for current year – Operating Effectiveness testing Status as of March 31, 2014
Financial closeFootnote 1 and reporting.  Completed.  Remediation actions are planned.
Repayable contributions. Completed. Remediation actions are planned.
Grants and contributions (standard). Completed. Remediation actions are planned.
Entity-level controls. Completed. Remediation actions have started.
Environmental liabilities. Completed. Remediation actions are planned.
Testing of remediation actions that consist of reviews and which were implemented in 2012-2013. Completed. No further remediation actions required.
Other on-going monitoring activities from previous year's plan for the current year Status as of March 31, 2014
Payroll and Benefits - Update the internal control documentation to reflect the transfer of pay services to the Public Service Pay Centre of PWGSC. Completed.
IT general controls under departmental management - Update documentation and design effectiveness testing to reflect new controls relevant to ICFR (e.g. pay interface between PeopleSoft and the Regional Pay System, legacy systems remaining under the SAP environment and new application). Completed. Remediation actions have started.
Loans - Update the internal control documentation to add further details and reflect changes in program responsibilities. Completed.
Offshore royalty revenues and corresponding statutory transfers – Update internal control documentation to add new controls. Completed.
Remediation actions - Implement required remediation actions. Remediation actions outstanding as of March 31, 2013 are substantially completed.
4.2 Action plan for the next fiscal year and subsequent fiscal years

NRCan's rotational ongoing monitoring plan over the next three years, based on risk and reviewed each year to take into account process changes and new risks, is shown in Table 2. 

The planned assessments of internal controls in 2014-15 will be conducted through a collaborative effort between the Chief Financial Officer and the Chief Audit Executive. An internal audit of ICFR was initiated in the later part of fiscal year 2013-14, with a planned completion date in 2014-15. The audit scope includes testing of internal controls for a number of key control areas, and is reflected in the plan shown in Table 2. 

Table 2 - Rotational Ongoing Monitoring Plan
Key control areas Fiscal Year
2014-15
Fiscal Year
2015-16
Fiscal Year
2016-17
Financial closeFootnote 1 and reporting No Yes No
Repayable contributions No Yes No
Grants and Contributions (standard) No Yes No
Operating expenditures Yes No Yes
Payroll and benefits Yes No Yes
Capital assets Yes No No
Entity level controls Yes Yes Yes
Revenues and accounts receivable Yes No No
IT general controls under departmental management No Yes No
Environmental liabilities No No Yes
Loans (final repayment in 2015) Yes n/a n/a
Offshore royalty revenues and corresponding statutory transfers Yes No No
Testing of remediation actions that consist of reviews and which were implemented in the previous fiscal year  Yes Yes Yes

In addition to the rotational ongoing monitoring, NRCan plans to expand its internal control documentation to describe the controls as they specifically apply to revenues from Net Profit Interests and Incidental Net Profit Interests and to Crown Share Adjustment Payments.

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