Archived - Financial Statements for the Year Ended March 31, 2017 (Unaudited)
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Table of contents
- Statement of Management Responsibility Including Internal Control Over Financial Reporting
- Statement of Financial Position (Unaudited) as at March 31
- Statement of Operations and Departmental Net Financial Position (Unaudited) for the Year Ended March 31
- Statement of Change in Departmental Net Debt (Unaudited) for the Year Ended March 31
- Statement of Cash Flow (Unaudited) for the Year Ended March 31
- Notes to the Financial Statements (Unaudited) for the Year Ended March 31
- Authority and objectives
- Summary of significant accounting policies
- Parliamentary authorities
- Accounts payable and accrued liabilities
- Other liabilities
- Trust accounts
- Settled claims
- Contingent liabilities
- Environmental liabilities
- Employee future benefits
- Accounts receivable and advances
- Loans and interest receivable
- Land held for future claims settlements
- Tangible capital assets
- Departmental net financial position
- Contractual obligations
- Related party transactions
- Transfer of the transition payments for implementing salary payments in arrears
- Transfer to other government departments
- Segmented information
- Subsequent Events
- Comparative information
- Annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting
- Additional information
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, 2017, and all information contained in these statements rests with the management of Indigenous and Northern Affairs Canada (INAC). 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 INAC's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in INAC's Departmental Plan is consistent with these financial statements.
Management is also responsible for maintaining an effective system of internal control over financial reporting 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 INAC; and through conducting an annual risk-based assessment of the effectiveness of the system of internal control over financial reporting.
The system of internal control over financial reporting 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 internal control over financial reporting for the year ended March 31, 2017 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 INAC's system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of INAC's operations, and by the Departmental Audit Committee, which oversees management's responsibilities for maintaining adequate control systems and the quality of financial reporting, and which recommends the financial statements to the Deputy Minister.
The financial statements of INAC have not been audited.
Original signed by Hélène Laurendeau
_________________________________
Hélène Laurendeau
Deputy Minister
Original signed by Paul Thoppil
_________________________________
Paul Thoppil, CPA, CA
Chief Finances, Results and Delivery Officer
Gatineau, Canada
September 1, 2017
Statement of Financial Position (Unaudited) as at March 31
(in thousands of dollars) | 2017 | 2016 |
---|---|---|
Liabilities | ||
Accounts payable and accrued liabilities (note 4) |
762,879 | 754,863 |
Vacation pay and compensatory leave |
18,954 | 15,157 |
Other liabilities (note 5) |
62,049 | 60,458 |
Trust accounts (note 6) |
701,209 | 766,810 |
Settled claims (note 7) |
203,950 | 228,117 |
Contingent liabilities (note 8) |
15,065,865 | 11,550,744 |
Environmental liabilities (note 9) |
3,394,399 | 3,765,010 |
Employee future benefits (note 10) |
18,042 | 23,956 |
Total liabilities | 20,227,347 | 17,165,115 |
Financial assets | ||
Due from the Consolidated Revenue Fund |
1,501,826 | 1,555,701 |
Accounts receivable and advances (note 11) |
67,357 | 84,861 |
Loans and interest receivable (note 12) |
799,916 | 874,274 |
Total gross financial assets |
2,369,099 | 2,514,836 |
Financial assets held on behalf of Government |
||
Loans and interest receivable (note 12) |
(799,916) | (874,274) |
Total financial assets held on behalf of government |
(799,916) | (874,274) |
Total net financial assets | 1,569,183 | 1,640,562 |
Departmental net debt | 18,658,164 | 15,524,553 |
Non-financial assets | ||
Land held for future claims settlements (note 13) |
38,847 | 38,847 |
Prepaid expenses |
161 | 67 |
Tangible capital assets (note 14) |
173,787 | 137,589 |
Total non-financial assets |
212,795 | 176,503 |
Departmental net financial position (note 15) | (18,445,369) | (15,348,050) |
|
Original signed by Hélène Laurendeau
_________________________________
Hélène Laurendeau
Deputy Minister
Original signed by Paul Thoppil
_________________________________
Paul Thoppil, CPA, CA
Chief Finances, Results and Delivery Officer
Gatineau, Canada
September 1, 2017
Statement of Operations and Departmental Net Financial Position (Unaudited) for the Year Ended March 31
(in thousands of dollars) | 2017 Planned Results |
2017 | 2016 |
---|---|---|---|
Expenses | |||
People |
3,634,071 | 6,298,697 | 3,672,644 |
Government |
1,251,647 | 3,440,247 | 2,781,954 |
Land and Economy |
1,498,860 | 2,217,674 | 1,961,920 |
North |
116,033 | 73,309 | 866,819 |
Internal Services |
253,041 | 318,591 | 308,854 |
Expenses incurred on behalf of Government |
6,394 | (96,870) | (15,877) |
Total expenses |
6,760,046 | 12,251,648 | 9,576,314 |
Revenues | |||
Resource royalties |
2,000 | 852 | 17,821 |
Norman Wells project profits |
67,465 | 0 | 10,471 |
Interest on loans |
5,845 | 5,952 | 3,829 |
Miscellaneous |
4,152 | 5,343 | 2,968 |
Finance and administrative services |
1,654 | 2,264 | 2,448 |
Leases and rentals |
537 | 977 | 1,445 |
Revenues earned on behalf of Government |
(79,428) | (11,202) | (35,681) |
Total revenues |
2,225 | 4,186 | 3,301 |
Net cost from continuing operations | 6,757,821 | 12,247,462 | 9,573,013 |
Transferred operations | |||
Expenses |
0 | 187 | |
Net cost of operations before government funding and transfers | 12,247,462 | 9,573,200 | |
Government funding and transfers | |||
Net cash provided by Government |
9,123,809 | 7,998,681 | |
Change in due from the Consolidated Revenue Fund |
(53,875) | (82,392) | |
Services provided without charge by other government departments (note 17a) |
81,528 | 80,437 | |
Transfer of the transition payments for implementing salary payments in arrears (note 18) |
0 | (144) | |
Transfer of assets and liabilities to Canadian High Arctic Research Station (note 19a) |
(1,293) | 146 | |
Transfer of assets and liabilities to Other government departments and agencies |
(26) | 0 | |
Transfer of assets and liabilities from Truth and Reconciliation Commission (note 19b) |
0 | (215) | |
Net cost of operations after government funding and transfers | 3,097,319 | 1,576,687 | |
Departmental net financial position – Beginning of year | (15,348,050) | (13,771,363) | |
Departmental net financial position – End of year | (18,445,369) | (15,348,050) | |
|
Statement of Change in Departmental Net Debt (Unaudited) for the Year Ended March 31
(in thousands of dollars) | 2017 | 2016 |
---|---|---|
Net cost of operations after government funding and transfers | 3,097,319 | 1,576,687 |
Change due to tangible capital assets |
||
Acquisition of tangible capital assets (note 14) |
47,979 | 55,076 |
Amortization of tangible capital assets (note 14) |
(10,436) | (10,133) |
Proceeds from disposal of tangible capital assets |
(1,922) | (853) |
Gain (loss) on disposal of tangible capital assets |
1,896 | 662 |
Adjustments to tangible capital assets |
0 | (267) |
Transfer to Other government departments and agencies |
(26) | 0 |
Transfer to Canadian High Artic Research Station (note 19a) |
(1,293) | 146 |
Total change due to tangible capital assets |
36,198 | 44,631 |
Change due to land held for future claims settlements (note 13) |
0 | (699) |
Change due to prepaid expenses |
94 | (84) |
Net increase (decrease) in departmental net debt | 3,133,611 | 1,620,535 |
Departmental net debt – Beginning of year | 15,524,553 | 13,904,018 |
Departmental net debt – End of year | 18,658,164 | 15,524,553 |
The accompanying notes form an integral part of these financial statements. |
Statement of Cash Flow (Unaudited) for the Year Ended March 31
(in thousands of dollars) | 2017 | 2016 |
---|---|---|
Operating activities | ||
Net cost of operations before government funding and transfers | 12,247,462 | 9,573,200 |
Non-cash items: | ||
Amortization of tangible capital assets (note 14) |
(10,436) | (10,133) |
Gain on disposal of tangible capital assets |
1,896 | 662 |
Adjustments to tangible capital assets |
0 | (267) |
Services provided without charge by other government departments (note 17a) |
(81,528) | (80,437) |
Transition payments for implementing salary payments in arrears (note 18) | 0 | 144 |
Variations in Statement of Financial Position: | ||
Increase (decrease) in accounts receivable and advances |
(17,504) | 15,540 |
Increase (decrease) in land held for future claims settlements |
0 | (699) |
Increase (decrease) in prepaid expenses |
94 | (84) |
Increase in liabilities |
(3,062,232) | (1,553,683) |
Transfer of assets and liabilities from Truth and Reconciliation Commission (note 19b) |
0 | 215 |
Cash used in operating activities | 9,077,752 | 7,944,458 |
Capital investing activities | ||
Acquisitions of tangible capital assets (note 14) |
47,979 | 55,076 |
Proceeds from disposal of tangible capital assets |
(1,922) | (853) |
Cash used in capital investing activities | 46,057 | 54,223 |
Net cash provided by Government of Canada | 9,123,809 | 7,998,681 |
The accompanying notes form an integral part of these financial statements. |
Notes to the Financial Statements (Unaudited) for the Year Ended March 31
1. Authority and objectives
The mandate for Indigenous and Northern Affairs (INAC) is derived from a number of sources, including the following: the Canadian Constitution; the Department of Indian Affairs and Northern Development Act; the Indian Act (as amended over the years); statutes dealing with environmental and resource management, such as the Nunavut Planning and Project Assessment Act; the Nunavut Waters and Nunavut Surface Rights Tribunal Act, the Canada Petroleum Resources Act, and the Territorial Lands Act.
INAC has a mandate to support Canada's Indigenous peoples (First Nations, Inuit and Métis) and Northerners in their efforts to:
- Improve social well-being and economic prosperity;
- Develop healthier, more sustainable communities; and
- Participate more fully in Canada's political, social and economic development — to the benefit of all Canadians.
To deliver on its mandate, INAC has structured its operations along four strategic outcomes as follows:
- a) People - Individual, family and community well-being for First Nations and Inuit.
- b) Land and Economy – Full participation of First Nations, Métis, Non-Status Indians and Inuit individuals and communities in the economy.
- c) Government - Support good governance, rights and interests of Indigenous peoples.
- d) North - Self-reliance, prosperity and well-being for the people and communities of the North.
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:
- Parliamentary authorities – INAC is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to INAC do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and Departmental Net Financial Position and in the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting.
The planned results amounts in the "Expenses" and "Revenues" sections of the Statement of Operations and Departmental Net Financial Position are consistent with the amounts reported in the Future-Oriented Statement of Operations included in the 2016-2017 Report on Plans and Priorities. Planned results are not presented in the "Government funding and transfers" section of the Statement of Operations and Departmental Net Financial Position and in the Statement of Change in Departmental Net Debt because these amounts were not included in the 2016-2017 Report on Plans and Priorities. - Net cash provided by Government – INAC operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by INAC is deposited to the CRF and all cash disbursements made by INAC 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.
- Amounts due from/to the Consolidated Revenue Fund (CRF) – These 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 INAC is entitled to draw from the CRF without further authorities to discharge its liabilities.
- Revenues – Revenues are recorded on an accrual basis:
- Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.
- Other revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenue takes place.
- Revenues that are non-respendable are not available to discharge INAC'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 INAC's gross revenues. INAC's revenues earned on behalf of government include revenues related to resource royalties, guarantees deposits, interest on loans and leases and rentals.
- Expenses – Expenses are recorded on an accrual basis:
- Transfer payments are recorded as expenses when authorization for the payment exists and the recipient has met the eligibility criteria or the entitlements established for the transfer payment program. In situations where payments do not form part of an existing program, transfer payments are recorded as expenses when the Government announces a decision to make a non-recurring transfer, provided the enabling legislation or authorization for payment receives parliamentary approval prior to the completion of the financial statements. Transfer payments that become repayable as a result of conditions specified in the contribution agreement that have come into being are recorded as a reduction to transfer payment expense and as a receivable.
- Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
- Services provided without charge by other government departments for accommodation, the employer's contribution to the health and dental insurance plans, legal services, and workers' compensation are recorded as operating expenses at their estimated cost.
- Employee future benefits
- Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. INAC's contributions to the plan are charged to expenses in the year incurred and represent the total departmental obligation to the plan. INAC'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.
- 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.
- Accounts and loans receivable – Accounts and loans receivable are stated at the lower of cost and net recoverable value. A valuation allowance is recorded for accounts and loans receivable where recovery is considered uncertain.
The amount of allowance on loans receivable is determined on an assessment of collectability of each loan on an annual basis using a standard set of criteria to assess the default risk. Interest on loans receivable is calculated in accordance with the terms and conditions of each individual program.
If loans and interest receivables cannot be used to discharge INAC's liabilities or to issue new loans, they are considered to be held on behalf of government and are therefore presented as an offsetting amount to INAC's financial position. - 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 financial statements.
- Environmental liabilities – Environmental liabilities consist of estimated costs related to the remediation of environmentally contaminated sites. A liability for remediation of contaminated sites is recognized when all of the following criteria are satisfied:
- an environmental standard exists,
- contamination exceeds the environmental standard,
- INAC is directly responsible or accepts responsibility, and
- it is expected that future economic benefits will be given up and a reasonable estimate of the amount can be made.
- Tangible capital assets – All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. INAC 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.
Capital assets include lands held for future claim settlements which are to be transferred to First Nations upon settlements.
Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the assets as follows:Asset Class Amortization Period Buildings 20 to 40 years Works and infrastructure 25 to 30 years Machinery and equipment 5 to 15 years Informatics hardware and software 3 to 10 years Ships and boats 10 years Motor vehicles 4 to 10 years Other vehicles 5 to 10 years Leasehold improvements Lesser of the remaining term of lease or useful life of the improvement - 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 contingent liabilities, environmental liabilities, the liability for employee future benefits, the allowance for doubtful accounts and the useful life of tangible capital assets. Actual results could differ significantly 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
INAC receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Departmental Net Financial Position and the Statement of Financial Position in one year may be funded through parliamentary authorities in prior, current or future years. Accordingly, INAC 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
2017 | 2016 | |
---|---|---|
(in thousands of dollars) | ||
Net cost of operations before government funding and transfers | 12,247,462 | 9,573,200 |
Adjustments for items affecting net cost of operations but not affecting authorities: | ||
Amortization of tangible capital assets |
(10,436) | (10,133) |
Gain on disposal of tangible capital assets |
1,896 | 662 |
Transfer of land held for future claims settlements |
0 | (699) |
Services provided without charge by other government departments |
(81,528) | (80,437) |
Bad debt expense (not incurred on behalf of government) |
(1,720) | 1,235 |
Decrease (increase) in vacation pay and compensatory leave |
(3,797) | 37 |
Decrease in liability for settled claims |
24,167 | 53,737 |
Increase in provision for contingent liabilities |
(3,515,116) | (913,331) |
Decrease (increase) in environmental liabilities |
370,611 | (764,663) |
Decrease in employee future benefits |
5,914 | 1,762 |
Decrease (increase) in accrued liabilities not charged to authorities |
1,993 | (14,315) |
Increase (decrease) in prepaid expenses |
94 | (84) |
Refunds/adjustments to prior years' expenditures |
36,527 | 54,051 |
Other |
7,293 | (217) |
Total items affecting net cost of operations but not affecting authorities | (3,164,102) | (1,672,395) |
Adjustments for items not affecting net cost of operations but affecting authorities: | ||
Acquisition of tangible capital assets |
47,979 | 55,076 |
Refunds of previous year revenues |
1,166 | 0 |
Transition payments for implementing salary payments in arrears |
0 | 144 |
Adjustment – Revenues earned on behalf of government |
0 | (730) |
Total items not affecting net cost of operations but affecting authorities | 49,145 | 54,490 |
Current year authorities used | 9,132,505 | 7,955,295 |
b) Authorities provided and used
2017 | 2016 | |
---|---|---|
(in thousands of dollars) | ||
Authorities provided | ||
Vote 1 – Operating expenditures | 996,549 | 1,486,190 |
Vote 5 – Capital expenditures | 55,426 | 57,703 |
Vote 10 – Grants and contributions | 8,260,275 | 7,165,401 |
Statutory amounts | 202,496 | 181,607 |
Total authorities provided | 9,514,746 | 8,890,901 |
Less: | ||
Authorities available for future years | (34,412) | (33,344) |
Authorities lapsed: | ||
Vote 1 – Operating expenditures | (124,800) | (221,966) |
Vote 5 – Capital expenditures | (7,750) | (568) |
Vote 10 – Grants and contributions | (214,836) | (679,105) |
Statutory amounts | (443) | (623) |
Total authorities lapsed | (347,829) | (902,262) |
Total authorities lapsed and available for future years | (382,241) | (935,606) |
Current year authorities used | 9,132,505 | 7,955,295 |
In addition to the amount for authorities available for future years presented above, most of the other lapsed amounts may become available to INAC in the 2018 fiscal year and in future years, but due to the timing of parliamentary approvals, these amounts had not been approved at March 31, 2017. Additional information on the use of authorities, including explanation of variances and lapsed amounts, can be found in INAC's Departmental Result Report.
4. Accounts payable and accrued liabilities
The following table presents a detail of INAC's accounts payable and accrued liabilities:
2017 | 2016 | |
---|---|---|
(in thousands of dollars) | ||
Accounts payable – Other government departments and agencies | 28,423 | 17,842 |
Accounts payable – External parties | 215,435 | 246,119 |
Total accounts payable | 243,858 | 263,961 |
Accrued liabilities | 519,021 | 490,902 |
Total accounts payable and accrued liabilities | 762,879 | 754,863 |
5. Other liabilities
The following table presents details of other liabilities:
(in thousands of dollars) | April 1, 2016 | Receipts | Interest | Disbursements | March 31, 2017 |
---|---|---|---|---|---|
Cash guarantee deposits | 16,997 | 365 | 0 | (828) | 16,534 |
Other specified purpose accounts | 43,461 | 15,115 | 748 | (13,809) | 45,515 |
Total | 60,458 | 15,480 | 748 | (14,637) | 62,049 |
Cash guarantee deposits
In fulfilling its duties under various acts that govern the use of federal Crown land, including land use activities, water resources, and water rights, INAC may issue licences, permits, and other instruments to individuals and organizations that propose to undertake resource exploration and other types of development projects.
In accordance with the terms and conditions of the instrument, INAC may require security deposits to ensure the lands and waters are returned in a condition acceptable to INAC. These guarantee deposits are received in the form of cash and are deposited to and held in the Consolidated Revenue Fund.
Other specified purpose accounts
These accounts are established to receive, hold and disburse moneys in accordance with relevant statutes, departmental policies and agreements. The most significant of these accounts is the Indian Moneys Suspense Account. This statutory account was established to hold moneys received for individual Indians and bands pending execution of the related lease, permit or licence, settlement of litigation, registration of the Indian or identification of the recipient, and for Indian locatees pursuant to land tenure instruments issued by INAC. These moneys are eventually disbursed to individual Indians, credited to Band Fund or Individual Trust Fund accounts, or returned to payers, as appropriate.
6. Trust accounts
In accordance with the Indian Act, INAC has responsibility to administer Indian moneys of bands and certain individual Indians, including minors, dependant adults and deceased Indians.
Moneys collected or received for the use and benefit of these groups are deposited to the Consolidated Revenue Fund. Pursuant to Section 61(2) of the Indian Act, interest on Indian moneys held in the Consolidated Revenue Fund is allowed at a rate fixed from time to time by the Governor-in-Council. Interest accumulated in the accounts is compounded semi-annually.
There are three categories of Indian moneys administered by INAC: Indian band funds, Indian savings accounts, and Indian estate accounts. The following table shows INAC's financial obligations in its role as administrator of trust accounts for Indian moneys:
(in thousands of dollars) | April 1, 2016 | Receipts | Interest | Disbursements | March 31, 2017 |
---|---|---|---|---|---|
Indian band funds | 710,294 | 99,390 | 13,552 | (178,156) | 645,080 |
Indian savings accounts | 30,700 | 2,244 | 1,976 | (5,205) | 29,715 |
Indian estate accounts | 25,816 | 6,969 | 351 | (6,722) | 26,414 |
Total trust accounts | 766,810 | 108,603 | 15,879 | (190,083) | 701,209 |
Indian Band Funds
These accounts were established to record moneys belonging to Indian bands throughout Canada pursuant to sections 61 to 69 of the Indian Act.
Indian moneys of the bands are classified as either capital moneys or revenue moneys. Capital moneys of the band include all moneys derived from the sale of surrendered lands or the sale of band capital assets. Moneys from the sale of surrendered lands can include land sales, timber sales, oil and gas royalties, and sale of gravel. Revenue moneys are all moneys not classified as capital moneys.
Moneys are generally disbursed from these accounts pursuant to an authorized request from a band.
Indian Savings Accounts
These accounts were established to record moneys belonging to certain individual Indians pursuant to sections 52 and 52.1 to 52.5 of the Indian Act.
Sources of moneys include inheritances and per capita distribution of band funds. Moneys are generally disbursed from these accounts pursuant to an authorized request from an individual and upon reaching the age of majority.
Indian Estate Accounts
These accounts were established to record moneys belonging to dependant adults (referred to as mentally incompetent individuals in the Indian Act) and deceased Indians pursuant to sections 42 to 51 of the Indian Act.
Sources of moneys belonging to dependant adults include insurance proceeds, per capita distribution of band funds, and federal and provincial payments. Payments are made from these accounts for the maintenance and care of the individuals.
Estate accounts for deceased Indians include the proceeds of their liquidated assets that are held pending the settlement of the estate. The closing of the account usually corresponds with the final distribution to their heirs.
7. Settled claims
The liability for settled claims represents INAC's financial obligation pursuant to agreements related to comprehensive land claims which INAC has settled with the First Nations.
Comprehensive land claims are negotiated in areas where Aboriginal title has not been dealt with by treaty or by other legal methods. In such cases, the claim is based on an Aboriginal group's traditional use and occupancy of that land. Comprehensive land claim settlements result in agreement on special rights Aboriginal peoples will have in the future with respect to lands and resources.
An act of Parliament, based on a negotiated agreement, establishes the authority for INAC to make claim payments. The interest rate attached to these claim payments is set out in the act, along with a claim payment schedule. Claim payments are generally made over a number of years.
At March 31, 2017, INAC had 10 outstanding settled claims (9 in 2016). Settlement payments made during 2017 totalled $55,828,000 in 2017 ($57,412,000 in 2016).
The present value of the liability for outstanding settled claims, calculated using the appropriate Consolidated Revenue Fund Monthly Lending Rate as published by the Department of Finance, at March 31, 2017 is $203,950,000 ($228,117,000 in 2016). Future scheduled claim payments (on a cash basis) are as follows:
(in thousands of dollars) | 2018 | 2019 | 2020 | 2021 | 2022 and thereafter | Total |
---|---|---|---|---|---|---|
Scheduled payments | 62,000 | 55,000 | 52,000 | 20,000 | 21,000 | 210,000 |
8. Contingent liabilities
Contingent liabilities arise in the normal course of operations and their ultimate disposition is unknown. They are grouped into three categories: claims and litigation, loan guarantees and environmental liabilities for contaminated sites.
Claims and litigation
Claims and pending and threatened litigation cases outstanding against INAC 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, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded in the financial statements.
There are four significant types of claims faced by INAC: comprehensive land claims, specific claims, general litigation claims, and claims arising from the legacy of Indian residential schoolsFootnote 1.
Comprehensive land claims arise in areas of the country where Aboriginal rights and title have not been resolved by treaty or by other legal means. There are currently 70 (76 in 2016) comprehensive land claims under negotiation, accepted for negotiation or under review.
Specific claims deal with the past grievances of First Nations related to Canada's obligations under historic treaties or the way it managed First Nations' funds or other assets. The Government of Canada will pursue a settlement agreement with the First Nation when a claim demonstrates an outstanding lawful obligation. There are currently 528 (503 in 2016) specific claims under negotiation, accepted for negotiation or under review.
There are legal proceedings for 615 (566 in 2016) general litigation claims being pursued through the courts still pending at March 31, 2017. There are also thousands of claims being managed through INAC with respect to the legacy of Indian residential schools, including class action claims, as well as claims submitted under the Alternative Dispute Resolution process and the Independent Assessment Process.
INAC has recorded a provision of $15,064,295,000 ($11,549,179,000 in 2016) as an estimate of the likely liability that will result from the above claims. This estimate includes projections based on historical rates and costs of settlement of similar claims. Exposure to liability in excess of the amount accrued is $915,964,000 ($425,016,000 in 2016 amended) and an additional amount of $4,558,905,000 ($4,466,977,000 in 2016 amended) is considered uncertain as the probability of the occurrence or non-occurrence of the future events confirming that a liability existed at the financial statements date cannot be determined.
Loan guarantees
(in thousands of dollars)
Authorized Limit | Loan Guarantees | Provision for Losses | |||
---|---|---|---|---|---|
2017 | 2016 | 2017 | 2016 | ||
On-Reserve Housing Guarantee program | 2,200,000 | 1,735,537 | 1,782,727 | 1,500 | 1,490 |
Indian Economic Development Guarantee program | 60,000 | 864 | 928 | 70 | 75 |
Total | 2,260,000 | 1,736,401 | 1,783,655 | 1,570 | 1,565 |
Due to the security restrictions in the Indian Act which prevent the mortgage and seizure of property located on reserves, INAC issues loan guarantees under two programs: On-Reserve Housing Guarantee program and Indian Economic Development Guarantee program.
On-Reserve Housing Guarantee Program
This program authorizes INAC to guarantee loans to individuals and Indian bands to assist in the purchase of housing on reserve. These loan guarantees enable status Indians residing on reserve, Band councils, or their delegated authorities, to secure housing loans without giving the lending institution rights to the property. The authorized limit is $2.2 billion.
Indian Economic Development Guarantee Program
This program authorizes INAC to guarantee loans for non-incorporated Indian businesses on a risk-sharing basis with commercial lenders. Guarantees are provided for various types of borrowers whose activities contribute to the economic development of First Nations and enable them to develop long-term credit relationships with mainstream financial institutions. The authorized limit is $60 million.
Provision for losses
A provision for losses on loan guarantees is recorded when it is likely that a payment will be made in the future to honour a guarantee and when the amount of the loss can be reasonably estimated. The provision recorded in 2017 is $1,570,000 ($1,565,000 in 2016). The provision is determined by applying the weighted average historical percentage of default to total outstanding loan guarantees, less expected recoveries. The provision is reviewed on a quarterly basis with any changes being charged or credited to current year expenses.
Environmental liabilities
INAC has estimated a contingent liability in the amount of $8,865,600 for 4 sites ($0 in 2016 for 0 sites) where the department has determined that it is not directly responsible, nor does it accept responsibility; however, there is legal uncertainty as to the department's position.
9. Environmental liabilities
Remediation of contaminated sites
The government has developed a "Federal Approach to Contaminated Sites", which incorporates a risk-based approach to the management of contaminated sites. Under this approach INAC has inventoried the contaminated sites on federal lands that have been identified, allowing them to be classified, managed and recorded in a consistent manner. This systematic approach aides in the identification of the high risk sites in order to allocate limited resources to those sites which pose the highest risk to the environment and human health.
INAC has identified a total of 2,221 sites (2,362 sites in 2016) where contamination may exist and assessment, remediation and monitoring may be required. Of these, INAC has identified 785 sites (1,061 sites in 2016) where action is possible and for which a liability of $3,275,187,000 ($3,555,944,000 in 2016) has been recorded. This liability estimate was determined after the sites are assessed and is based on scientific/engineering contractors reviewing the results of site assessments, and proposing possible remediation solutions.
In 2015-16, a statistical model (Golder model) was developed by the Government to estimate the liability for unassessed sites based on historical costs incurred for contaminated sites with similar nature and source. As a result, there are 1,195 unassessed sites (991 sites in 2016) where a liability estimate of $126,380,000 ($217,867,000 in 2016) has been recorded using this model. Furthermore, there are 12 unassessed sites (18 sites in 2016) where estimates have been calculated based on extrapolation and a liability of $20,273,000 ($21,881,000 in 2016) has been recorded. These estimates will be refined in future years as sites are assessed and costs are revised.
These three estimates combined, totaling $3,421,840,000 ($3,795,691,000 in 2016) with an expected recovery of $27,441,000 ($30,681,000 in 2016) represents management's best estimate of the costs required to remediate the sites to the current minimum standard for its use prior to contamination, based on information available at the financial statement date. A net present value technique has been used for sites where the cash flows are expected to occur over extended future periods.
Of the remaining 229 sites (292 sites in 2016), 83 sites were closed, as they were merged with another site, or remediated, or assessed but found not to be contaminated. 146 sites are not considered a priority for action because information indicates there is likely no significant environmental impact or human health threats and there is likely no need for action unless new information becomes available indicating greater concerns, in which case, the site will be re-examined.
The following table presents the total estimated amounts of these liabilities by nature and source, the current year remediation expenditures and the associated expected recoveries as at March 31, 2017 and March 31, 2016. When the liability estimate is based on a future cash requirement, the amount is adjusted for inflation using a forecast CPI rate of 2%. Inflation is included in the undiscounted amount. The Government of Canada lending rate applicable to loans with similar terms to maturity has been used to discount the estimated future expenditures. The March 2017 rates range from 0.89% for a 2 year term to 2.55% for a 25 or greater year term.
Nature and Source* | Number of Sites | Estimated Liability | Current Year Remediation Expenditures | Estimated Recoveries |
---|---|---|---|---|
Radioactive Material (1) | 1 | 6,292 | 0 | 0 |
Former Mineral Exploration Sites (2) | 82 | 2,854,587 | 122,126 | 27,441 |
Military & Former Military Sites (3) | 46 | 131,332 | 11,086 | 0 |
Fuel Related Practices (4) | 912 | 233,340 | 39,644 | 0 |
Land Fill/ Waste Sites (5) | 708 | 113,750 | 4,690 | 0 |
Land Fill/Waste Sites (Yukon Devolution) (5) | 1 | 9,615 | 583 | 0 |
Engineering Asset/ Air & Land Transportation (6) | 1 | 1,331 | 0 | 0 |
Marine Facilities / Aquatic Sites (7) | 1 | 255 | 0 | 0 |
Office/ Commercial/ Industrial Operations (8) | 64 | 37,440 | 467 | 0 |
Other (9) | 176 | 33,898 | 3,875 | 0 |
Totals | 1,992 | 3,421,840 | 182,471 | 27,441 |
*See endnotes for description of nature and source. |
Nature and Source* | Number of Sites | Estimated Liability | Current Year Remediation Expenditures | Estimated Recoveries |
---|---|---|---|---|
Radioactive Material (1) | 1 | 6,326 | 0 | 0 |
Former Mineral Exploration Sites (2) | 93 | 3,081,242 | 127,376 | 30,681 |
Military & Former Military Sites (3) | 50 | 152,790 | 9,441 | 0 |
Fuel Related Practices (4) | 1,054 | 254,858 | 18,242 | 0 |
Land Fill/ Waste Sites (5) | 766 | 179,116 | 903 | 0 |
Land Fill/Waste Sites (Yukon Devolution) (5) | 1 | 10,198 | 984 | 0 |
Engineering Asset/ Air & Land Transportation (6) | 10 | 1,283 | 0 | 0 |
Marine Facilities / Aquatic Sites (7) | 2 | 250 | 0 | 0 |
Office/ Commercial/ Industrial Operations (8) | 67 | 46,751 | 272 | 0 |
Other (9) | 43 | 62,877 | 4,750 | 0 |
Totals | 2,087 | 3,795,691 | 161,968 | 30,681 |
*See endnotes for description of nature and source. |
10. Employee future benefits
a) Pension benefits
INAC'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 INAC 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 2016-2017 expense amounts to $38,580,000 ($38,754,000 in 2015-2016). For Group 1 members, the expense represents approximately 1.12 times (1.25 times in 2015-2016) the employee contributions and, for Group 2 members, approximately 1.08 times (1.24 times in 2015-2016) the employee contributions.
INAC'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
Severance benefits provided to INAC's employees were previously based on an employee's eligibility, years of service and salary at termination of employment. However, since 2011 the accumulation of severance benefits for voluntary departures progressively ceased for substantially all employees. Employees subject to these changes were given the option to be paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits upon departure from the public service. By March 31, 2017, all settlements for immediate cash out were completed. Severance benefits are unfunded and, consequently, the outstanding obligation will be paid from future authorities.
The changes in the obligations during the year were as follows:
2017 | 2016 | |
---|---|---|
(in thousands of dollars) | ||
Accrued benefit obligation - Beginning of year | 23,956 | 25,586 |
Adjustments for change in rate for the year | (2,274) | 2,738 |
Benefits paid during the year | (3,640) | (4,368) |
Accrued benefit obligation - End of year | 18,042 | 23,956 |
11. Accounts receivable and advances
The following table presents details of INAC's accounts receivable and advances balances:
2017 | 2016 | |
---|---|---|
(in thousands of dollars) | ||
Receivables – Other government departments and agencies | 12,418 | 12,730 |
Receivables – External parties | 73,360 | 94,724 |
Advances to employees and others | 4,662 | 763 |
Gross accounts receivable and advances | 90,440 | 108,217 |
Less: Allowance for doubtful accounts on receivables from external parties | (23,083) | (23,356) |
Net accounts receivable and advances | 67,357 | 84,861 |
12. Loans and interest receivable
The following table presents details of loans and interest receivable*:
2017 | 2016 | |
---|---|---|
(in thousands of dollars) | ||
Direct loans portfolio: | ||
Native claimants |
462,484 | 457,406 |
First Nations in British Columbia |
536,906 | 522,781 |
Other direct loans |
504 | 504 |
Total direct loans portfolio |
999,894 | 980,691 |
Add: Interest receivable |
6,241 | 5,814 |
Less: Allowance for doubtful loans and interest receivable |
(210,276) | (119,045) |
Net direct loans portfolio |
795,859 | 867,460 |
Defaulted guaranteed loans portfolio: | ||
On-reserve housing guarantees |
9,527 | 10,958 |
Indian economic development guarantees |
346 | 422 |
Other defaulted guaranteed loans |
0 | 104 |
Total defaulted guaranteed loans portfolio |
9,873 | 11,484 |
Add: Interest receivable |
29,253 | 28,490 |
Less: Allowance for doubtful loans and interest receivable |
(35,069) | (33,160) |
Net defaulted guaranteed loans portfolio |
4,057 | 6,814 |
Net loans and interest receivable (held on behalf of Government) | 799,916 | 874,274 |
* Interest receivable is being allocated to its loans receivable portfolio. |
These loans are considered to be held on behalf of government since they are not available to discharge INAC’s liabilities or to issue new loans and are therefore presented as an offsetting amount to INAC’s financial position.
Direct loans portfolio
The objective of direct loans is to support active participation by First Nations and First Nations organizations and to promote a balanced exchange of ideas in negotiating the settlement of comprehensive land claims, specific claims, and treaties.
INAC's direct loans portfolio has two active programs in support of this objective.
Native claimants
These are loans made to Native claimants to defray the costs related to the research, development and negotiation of comprehensive land claims and specific claims.
The significant terms and conditions of loans to Native claimants are as follows:
- Loans made before an agreement-in-principle for the settlement of a claim is reached are non-interest bearing;
- Loans made after the date on which an agreement-in-principle has been reached, bear interest at a rate equal to the rate established by the Minister of Finance in respect of borrowings for equivalent terms by Crown corporations;
- Loans are due and payable, as to principal and interest, on the date on which the claim is settled, or on a date fixed in the loan agreement;
- Loans may be restructured, including forgiveness of a portion of the principal or interest in arrears, when the borrower cannot meet the term of the original loan agreement; and
- INAC may seek security for loans when deemed appropriate.
When an agreement-in-principle is reached for the settlement of a claim, any accrued interest receivable is compounded semi-annually as part of the principal amount owing on the loan. After a final agreement is reached, any accrued interest receivable outstanding is compounded annually as part of the principal amount owing on the loan.
The interest bearing and non-interest bearing portions of direct loans for Native claimants outstanding at March 31 are as follows:
2017 | 2016 | |
---|---|---|
(in thousands of dollars) | ||
Interest bearing | 54,637 | 60,001 |
Non-interest bearing | 407,847 | 397,405 |
Total | 462,484 | 457,406 |
First Nations in British Columbia
These are loans made to First Nations in British Columbia to support their participation in the British Columbia Treaty Commission and to defray the costs related to the research, development and negotiation of treaties.
The significant terms and conditions of direct loans to First Nations in British Columbia are the same as those for loans to Native claimants, except as follows:
- Loans made between April 1, 2004 and March 31, 2017, and after the date on which an agreement-in-principle for the settlement of a treaty has been reached shall be non-interest bearing unless the loans become due and payable during this period.
The interest bearing and non-interest bearing portions of direct loans for First Nations in British Columbia outstanding at March 31 are as follows:
2017 | 2016 | |
---|---|---|
(in thousands of dollars) | ||
Interest bearing | 22,422 | 14,583 |
Non-interest bearing | 514,484 | 508,198 |
Total | 536,906 | 522,781 |
Other direct loans
INAC also has legacy programs that are no longer active including the Inuit Loan Fund, Indian Economic Guarantee Fund and Stoney Band Perpetual Loan. These legacy programs will continue to operate under their existing arrangements. All these loans outstanding are interest bearing.
Defaulted guaranteed loans portfolio
The objective of loan guarantees is to encourage lending institutions to make loans for properties located on First Nations lands and to support access to credit markets for First Nations and First Nations organizations. Since properties located on First Nations lands cannot be used as collateral to secure the loans and lending institutions are prevented from foreclosing on these properties in the event of borrower default as prescribed by the Indian Act, lending institutions can be exposed to greater business risk in issuing loans for properties located on First Nations lands.
As guarantor, loan guarantees issued under the various programs may become receivables of the Department when, at the request of a lending institution, INAC is required to honour these loan guarantees. As a result, INAC makes payment to the lending institution and establishes a receivable from the First Nation or First Nation organization.
INAC has access to an annual $2 million statutory authority for funding payments to lending institutions to honour loan guarantees. Payments made in excess of the $2 million authority limit are charged to program expenses and funded by budgetary authorities.
There were no loan defaults in 2017 (5 in 2016) which resulted in no charge to INAC's reserve for payments to cover defaults ($2,155,491 in 2016).
The significant terms and conditions of the two loan guarantee programs are as follows:
On-Reserve Housing Guarantee program
- Payments of principal and interest for loans issued under this program are amortized over a period of 25 years. The interest rates on the guaranteed loans are consistent with conventional mortgage interest rates offered by the major banks. On a semi-annual basis, any accrued interest receivable outstanding is compounded as part of the principal amount owing on the loan.
- To control the occurrence of defaulted loans in this program, the Department restricts the eligibility of recipients for further loans until such time as a recovery plan has been reached and has been in operation in accordance with its terms and conditions for a period of six months.
Indian Economic Development Guarantee program
- Loans issued under this program cannot exceed a term of 15 years and the line of credit must be renewed every year. Interest rates on guaranteed loans are consistent with rates provided by lending institutions to commercial businesses, which are usually based on a spread from the prime lending rate. Accrued interest on loans issued under this program is not compounded. Any security pledged for a guaranteed loan may not be released by the lending institution without the prior approval of the Minister of INAC.
Other defaulted guaranteed loans
- INAC also has a legacy program that is no longer active. During 2016-2017, there was one defaulted loan outstanding which was deemed to be uncollectible and was written-off.
13. Land held for future claims settlements
Land held for future claims settlements in the amount of $38,847,000 (no change from 2016) is segregated from other tangible capital assets as these assets are not acquired with the intention of being used on a continuous basis in government operations. Rather, these assets are properties acquired and held by INAC for the purpose of future settlements of Aboriginal land claims. Following the ratification of a negotiated agreement, these assets are transferred to the Aboriginal group.
14. Tangible capital assets
The following table presents details of the cost of tangible capital assets:
(in thousands of dollars)
Category | Opening Balance | Acquisitions | Adjustments(1) | Disposals and Write-offs |
Closing Balance |
---|---|---|---|---|---|
Land | 1,349 | 0 | 0 | 0 | 1,349 |
Buildings | 13,631 | 0 | 8,138 | (26) | 21,743 |
Works and infrastructure | 1,409 | 0 | 0 | 0 | 1,409 |
Machinery and equipment | 9,198 | 546 | 0 | (214) | 9,530 |
Informatics hardware | 2,706 | 15 | 0 | (53) | 2,668 |
Informatics software | 75,841 | 0 | 1,054 | 0 | 76,895 |
Ships and boats | 14 | 0 | 0 | 0 | 14 |
Motor vehicles | 2,628 | 407 | (182) | (303) | 2,550 |
Other vehicles | 558 | 0 | 0 | 0 | 558 |
Leasehold improvements | 5,760 | 0 | 26 | 0 | 5,786 |
Assets under construction | 90,496 | 47,011 | (10,372) | 0 | 127,135 |
Gross tangible capital assets | 203,590 | 47,979 | (1,336) | (596) | 249,637 |
The following table presents details of the amortization of tangible capital assets and its net book value:
(in thousands of dollars)
Category | Opening Balance | Amort-ization | Adjust-ments(1) | Disposals and Write-offs | Closing Balance | Net Book Value | |
---|---|---|---|---|---|---|---|
2017 | 2016 | ||||||
Land | 0 | 0 | 0 | 0 | 0 | 1,349 | 1,349 |
Buildings | 6,925 | 639 | 0 | 0 | 7,564 | 14,179 | 6,706 |
Works and infrastructure | 1,409 | 0 | 0 | 0 | 1,409 | 0 | 0 |
Machinery and equipment | 7,124 | 707 | 0 | (214) | 7,617 | 1,913 | 2,074 |
Informatics hardware | 2,689 | 10 | 0 | (53) | 2,646 | 22 | 17 |
Informatics software | 42,231 | 7,737 | 0 | 0 | 49,968 | 26,927 | 33,610 |
Ships and boats | 14 | 0 | 0 | 0 | 14 | 0 | 0 |
Motor vehicles | 1,852 | 298 | (17) | (303) | 1,830 | 720 | 776 |
Other vehicles | 539 | 2 | 0 | 0 | 541 | 17 | 19 |
Leasehold improvements | 3,218 | 1,043 | 0 | 0 | 4,261 | 1,525 | 2,542 |
Assets under construction | 0 | 0 | 0 | 0 | 0 | 127,135 | 90,496 |
Total | 66,001 | 10,436 | (17) | (570) | 75,850 | 173,787 | 137,589 |
(1) Adjustments include assets under construction of $10,371,602 that were transferred to the other categories upon completion of the assets. During the fiscal year, the Department transferred machinery and equipment and motor vehicles with a net book value of $1,154,250 and $138,597 respectively to the Canadian High Arctic Research Station and motor vehicles with a net book value of $26,422 to Environment and Climate Change Canada. |
15. Departmental net financial position
A portion of INAC's net financial position is restricted to be used for a specific purpose. Related revenues and expenses are included in the Statement of Operations and Departmental Net Financial Position.
The Environmental Studies Research Fund account was established pursuant to the Canada Petroleum Resources Act and related regulations to record levies stipulated under the Act. The balance of the account is to be used 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 lands authorized under this Act or any other Act of Parliament should be conducted.
The Bowater Environmental Remediation Fund account was established to finance the remediation of environmental damage caused by Bowater Canadian Forest Products Inc. relative to a land lease issued by INAC. During the year, the cleanup was completed and the outstanding balance has been transferred to the Indian band funds revenue account (Note 6).
The balance of the accounts at the end of the year is included in Departmental Net Financial Position. Activity in the accounts is as follows:
2017 | 2016 | |
---|---|---|
(in thousands of dollars) | ||
Environmental Studies Research Fund – Restricted | ||
Balance – Beginning of year – Restricted | 1,110 | 1,323 |
Revenues | 661 | 1,110 |
Expenses | (1,110) | (1,323) |
Balance – End of year – Restricted | 661 | 1,110 |
Bowater Environmental Remediation Fund – Restricted | ||
Balance – Beginning of year – Restricted | 2,099 | 2,127 |
Expenses | (2,099) | (28) |
Balance – End of year – Restricted | 0 | 2,099 |
Total restricted | 661 | 3,209 |
Unrestricted | (18,446,030) | (15,351,259) |
Departmental net financial position – End of year | (18,445,369) | (15,348,050) |
16. Contractual obligations
The nature of INAC's activities can result in many multi-year contracts and obligations whereby INAC will be obligated to make future payments in order to carry out its transfer payment programs. Significant contractual obligations that can be reasonably estimated are summarized as follows:
(in thousands of dollars) | 2018 | 2019 | 2020 | 2021 | 2022 and thereafter | Total |
---|---|---|---|---|---|---|
Transfer payments | 5,073,009 | 3,211,712 | 1,902,596 | 1,222,938 | 589,141 | 11,999,396 |
17. Related party transactions
INAC is related as a result of common ownership to all Government departments, agencies, and Crown corporations. INAC enters into transactions with these entities in the normal course of business and on normal trade terms. In addition, INAC has agreements with the Canadian Northern Economic Development Agency, Health Canada and the Public Health Agency of Canada related to the provision of finance and administrative services. During the year, INAC 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, INAC 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 INAC's Statement of Operations and Departmental Net Financial Position as follows:
2017 | 2016 | |
---|---|---|
(in thousands of dollars) | ||
Accommodation | 35,221 | 36,217 |
Employer's contribution to the health and dental insurance plans | 35,056 | 32,110 |
Legal services | 10,884 | 11,734 |
Workers' compensation | 367 | 376 |
Total | 81,528 | 80,437 |
The Government has centralized some of its administrative activities for efficiency, cost-effectiveness purposes and economical 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, audit services provided by the Office of the Auditor General and information technology infrastructure services provided by Shared Services Canada are not included in INAC's Statement of Operations and Departmental Net Financial Position.
b) Other transactions with related parties
2017 | 2016 | |
---|---|---|
(in thousands of dollars) | ||
Expenses – Other government departments and agencies | 300,888 | 306,039 |
Revenues – Other government departments and agencies | 2,928 | 3,561 |
Expenses and revenues disclosed in (b) exclude common services provided without charge, which are already disclosed in (a).
18. Transfer of the transition payments for implementing salary payments in arrears
The Government of Canada implemented salary payments in arrears in 2014-15. 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 INAC. However, it did result in the use of additional spending authorities by the Department. Prior to year-end, the transition payments for implementing salary payments in arrears were transferred to a central account administered by Public Services and Procurement Canada, who is responsible for the administration of the Government pay system.
19. Transfer to other government departments
a) Transfer to Canadian High Arctic Research Station
Effective June 1, 2015, the Department transferred responsibility for the Arctic Science and Technology program to Polar Knowledge Canada in accordance with Order in Council P.C 2015-0581, including the stewardship responsibility for the assets and liabilities related to the program. Accordingly, INAC transferred tangible capital assets in the amount of $1,293,000 related to the Arctic Science and Technology program to Canadian High Arctic Research Station during 2017.
The management of the construction of the Canadian High Artic Research Station will remain within INAC until completion of this major crown project, which is expected to be in 2017-2018, at which time the transfer of the station will be reflected in INAC's financial statements. Until then, the asset under construction will continue to be included in INAC's financial statements.
b) Transfer from Truth and Reconciliation Commission
Effective June 30, 2015, pursuant to Order-in-council P.C. 2015-1042, the mandate of the Truth and Reconciliation commission (TRC) was extended to December 31, 2015 when it was amalgamated and combined with INAC under the Minister of INAC. TRC was wound down its operations as of December 31, 2015 and its residual assets and liabilities in the amount of $244,000 and $29,000 respectively were transferred to INAC.
20. Segmented information
Presentation by segment is based on INAC'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 each of INAC's strategic outcomes, by major object of expense and by major type of revenue. The segment results for the period are as follows:
(in thousands of dollars) | People | Land and Economy | Government | North | Internal Services | 2017 Total | 2016 Total |
---|---|---|---|---|---|---|---|
Transfer Payments | |||||||
Indigenous peoples |
3,351,312 | 2,107,546 | 1,612,943 | 14,958 | 0 | 7,086,759 | 5,413,818 |
Claims and litigation (note 8) |
0 | 0 | 1,448,525 | 0 | 0 | 1,448,525 | 1,161,582 |
Provincial / territorial governments and institutions |
575,947 | 71,312 | 223,163 | 98,465 | 0 | 968,887 | 980,821 |
Environmental liabilities (note 9) |
0 | (106,851) | 0 | (165,022) | 0 | (271,873) | 398,200 |
Industry |
9,150 | 4,203 | 0 | 74,694 | 0 | 88,047 | 76,507 |
Non-profit organizations |
43,940 | 19,948 | 478 | 3,086 | 0 | 67,452 | 55,881 |
Other |
776 | 0 | 0 | 127 | 0 | 903 | 660 |
Refunds/adjustments to prior years' expenditures |
(22,570) | (6,462) | (1,987) | (3,395) | (295) | (34,709) | (48,785) |
Total Transfer Payments | 3,958,555 | 2,089,696 | 3,283,122 | 22,913 | (295) | 9,353,991 | 8,038,684 |
Operating Expenses | |||||||
Claims and litigation (note 8) |
2,075,894 | (7,775) | (1,528) | 0 | 0 | 2,066,591 | (248,251) |
Salaries and employee future benefits |
98,283 | 94,349 | 87,904 | 42,888 | 136,674 | 460,098 | 469,447 |
Professional and special
services |
26,662 | 12,230 | 5,880 | 94,484 | 56,046 | 195,302 | 212,789 |
Court awards and other
settlements |
116,274 | 8,275 | 51,565 | 0 | 1,031 | 177,145 | 552,206 |
Legal services |
2,047 | 123 | 61 | 0 | 77,487 | 79,718 | 77,713 |
Accommodations |
7,515 | 7,504 | 6,428 | 2,737 | 11,037 | 35,221 | 36,217 |
Travel and relocation |
4,938 | 4,380 | 5,293 | 3,839 | 3,829 | 22,279 | 24,877 |
Rentals of buildings and machinery |
376 | 265 | 413 | 1,510 | 15,019 | 17,583 | 16,498 |
Amortization |
2,556 | 56 | 144 | 488 | 7,192 | 10,436 | 10,129 |
Bad debt |
389 | 6,701 | 0 | 36 | 311 | 7,437 | 7,510 |
Information services |
4,688 | 146 | 184 | 194 | 1,930 | 7,142 | 9,306 |
Other |
104 | 1,021 | 476 | 2,307 | 1,317 | 5,225 | 9,875 |
Machinery and equipment |
152 | 483 | 107 | 585 | 2,580 | 3,907 | 3,912 |
Utilities, materials and supplies |
670 | 354 | 267 | 410 | 1,984 | 3,685 | 3,340 |
Transportation and
telecommunications |
275 | 22 | 37 | 74 | 1,284 | 1,692 | 2,357 |
Repairs and maintenance |
29 | 124 | 153 | 111 | 1,206 | 1,623 | 4,386 |
Refunds/adjustments to prior
years’ expenditures
|
(710) | (280) | (259) | (528) | (41) | (1,818) | (5,267) |
Expenses incurred on behalf of Government |
0 | (5,640) | (91,230) | 0 | 0 | (96,870) | (15,877) |
Environmental liabilities (note 9) |
0 | 0 | 0 | (98,739) | 0 | (98,739) | 366,463 |
Total Operating Expenses | 2,340,142 | 122,338 | 65,895 | 50,396 | 318,886 | 2,897,657 | 1,537,630 |
Total Expenses | 6,298,697 | 2,212,034 | 3,349,017 | 73,309 | 318,591 | 12,251,648 | 9,576,314 |
Revenues | |||||||
Interest on loans |
0 | 3,835 | 2,117 | 0 | 0 | 5,952 | 3,829 |
Miscellaneous |
0 | 1,919 | 7 | 3,228 | 189 | 5,343 | 2,968 |
Finance and administrative services |
0 | 0 | 0 | 0 | 2,264 | 2,264 | 2,448 |
Leases and rentals |
0 | 2 | 3 | 972 | 0 | 977 | 1,445 |
Resource royalties |
0 | 0 | 0 | 852 | 0 | 852 | 17,821 |
Revenues earned on behalf of
Government |
0 | (3,900) | (2,127) | (5,045) | (130) | (11,202) | (35,681) |
Norman Wells project profits |
0 | 0 | 0 | 0 | 0 | 0 | 10,471 |
Total Revenues | 0 | 1,856 | 0 | 7 | 2,323 | 4,186 | 3,301 |
Net cost from continuing operations | 6,298,697 | 2,210,178 | 3,349,017 | 73,302 | 316,268 | 12,247,462 | 9,573,013 |
The major categories of revenue are described below.
Leases and rentals
The major source of lease and rental revenues is lease fees prescribed in the Northwest Territories and Nunavut Mining Regulations. After a waiting period of 10 years, companies may lease land in the North for purposes of exploration and extraction of minerals. Leases are for a period of 21 years and are renewable. Lease fees are set out in the Northwest Territories and Nunavut Mining Regulations and are payable annually on the anniversary date of the signing of the lease.
Resource royalties
The most significant sources of resource royalty revenues are those earned pursuant to the Northwest Territories and Nunavut Mining Regulations and the Frontier Lands Petroleum Royalty Regulations.
The Northwest Territories and Nunavut Mining Regulations prescribe a profit-sharing formula upon which royalty revenues are based. INAC receives a percentage of the profits companies earn from the sale of minerals extracted from land leased by these companies pursuant to the Mining Regulations. The Northwest Territories and Nunavut Mining Regulations prescribe that royalties are generally payable four months after the fiscal year-end of the company.
The Frontier Lands Petroleum Royalty Regulations also prescribe a profit-sharing formula upon which royalty revenues are based. INAC receives a percentage of the profits companies earn from the sale of oil and gas extracted from the land, which the company has the right to use pursuant to a production licence issued under the authority of the Canada Petroleum Resources Act. The Frontier Lands Petroleum Royalty Regulations prescribe that royalties are generally payable on the last day of the month following the month of production.
Norman Wells project profits
This project is a source of revenues earned pursuant to an agreement between INAC and Imperial Oil. This agreement prescribes a profit-sharing formula and sets out a payment schedule, whereby payments are made annually to INAC no later than March 20 of each year.
21. Subsequent Events
Contingent Liabilities - Claims and Litigation
Subsequent to year-end, INAC has settled claims amounting to $306,000,000 for specific claims, comprehensive native land claims, litigation claims and Indian Residential School claims.
22. Comparative information
Comparative figures have been reclassified to conform to the current year's presentation.
Endnotes
- Contamination associated with former nuclear operations, e.g. low-level radioactive waste, radioactive isotopes.
- Contamination associated with former mine activities, e.g. heavy metals, petroleum hydrocarbons, etc. Sites often have multiple sources of contamination.
- Contamination associated with the operations of military and former military sites where activities such as fuel handling and storage activities, waste sites, metals/PCB-based paint used on buildings resulted in former or accidental contamination, e.g. petroleum hydrocarbons, PCBs, heavy metals. Sites often have multiple sources of contamination.
- Contamination primarily associated with fuel storage and handling,. Ee.g. accidental spills related to fuel storage tanks or former fuel handling practices, e.g. petroleum hydrocarbon, polyromantic hydrocarbons and BTEX.
- Contamination associated with former landfill/waste site or leaching from materials deposited in the landfill/waste site, e.g. metals, petroleum hydrocarbons, polyromantic hydrocarbons, BTEX, other organic contaminants, etc.
- Contamination associated with the operations of engineered assets such as airports, railways and roads where activities such as, fuel storage/handling, waste sites, firefighting training facilities and chemical storage areas resulted in former or accidental contamination, e.g. metals, petroleum hydrocarbons, polyromantic hydrocarbons, BTEX and other organic contaminants. Sites often have multiple sources of contamination.
- Contamination associated with the operations of marine assets, e.g., port facilities, harbours, navigation systems, light stations, hydrometric stations, where activities such as fuel storage/handling, use of metal based paint (e.g., on light stations) resulted in former or accidental contamination, e.g. metals, petroleum hydrocarbons, polyromantic hydrocarbons and other organic contaminants. Sites often have multiple sources of contamination.
- Contamination associated with the operations of the office/commercial/industrial facilities where activities such as fuel storage/handling, waste sites and use of metal- based paint resulted in former or accidental contamination, e.g. metals, petroleum hydrocarbons, polyromantic hydrocarbons, BTEX, etc. Sites often have multiple sources of contamination.
- Contamination from other sources, e.g. use of pesticides, herbicides, fertilizers at agricultural sites; use of PCBs, firefighting training areas, firing ranges and training facilities, etc.
Summary of the assessment of effectiveness of the system of Internal Control over Financial Reporting and the action plan of
Indigenous and Northern Affairs Canada
For Fiscal Year 2016-2017
Annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting
1.0 Introduction
This document provides summary information on the measures taken by Indigenous and Northern Affairs Canada (INAC) to maintain an effective system of internal control over financial reporting including information on internal control management and assessment results and related action plans.
Detailed information on INAC's authority, mandate and program activities can be found in the 2016-17 Departmental Result Report and the Archived: 2017-18 Departmental Plan.
2.0 Departmental system of internal control over financial reporting
2.1 Internal control management
INAC 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 Head, is in place and includes:
- Organizational accountability structures as they relate to internal control management to support sound financial management, including roles and responsibilities of senior managers in their areas of responsibility for control management;
- Values and ethics;
- Ongoing communication and training on statutory requirements, and policies and procedures for sound financial management and control; and
- At least semi-annual monitoring of and regular updates on internal control management, as well as the provision of related assessment results and action plans to the Deputy Head and departmental senior management and, as applicable, the Departmental Audit Committee.
The Departmental Audit Committee provides advice to the Deputy Head on the adequacy and functioning of the department's risk management, control and governance frameworks and processes.
2.2 Service arrangements relevant to financial statements
INAC relies on other organizations for the processing of certain transactions that are recorded in its financial statements as follows:
Common arrangements:
- Public Services and Procurement Canada centrally administers the payments of salaries and the procurement of goods and services in accordance with the INAC Delegation of Authority, and provides accommodation services;
- The Department of Justice Canada provides legal services to INAC.
- The Treasury Board of Canada Secretariat provides INAC with information used to calculate various accruals and allowances, such as the accrued severance liability; and
- Shared Services Canada provides information technology (IT) infrastructure services to INAC in the areas of data centre and network services. The scope and responsibilities are addressed in the interdepartmental arrangements between Shared Services Canada and INAC.
Specific Arrangements
- Health Canada provides INAC with a SAP financial system platform to capture and report all financial transactions.
3.0 INAC's assessment results during fiscal year 2016-2017
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, there were no significantly amended key controls in existing processes which required a reassessment.
Ongoing monitoring program: As part of its rotational ongoing monitoring plan, INAC completed reassessments of the financial controls within the business processes of direct loans, specific claims, comprehensive claims, grants and contributions, and financial reporting and close processes. Key controls tested were found to be operating effectively with no significant deficiencies. However, opportunities for improvement were identified in the following areas:
Comprehensive Claims
- Contingent liability reports should be reconciled with a secondary data source to ensure their accuracy and completeness.
- Change management controls over data source for contingent liabilities should be improved to prevent unauthorized changes.
Grants and Contributions
- Transfer payment directives should be reviewed and updated periodically to ensure requirements are communicated and well understood.
- Monitoring of compliance with policies and directives should be improved to ensure that requirements are enforced.
Financial Reporting and Close
- The review and approval processes for trial balances and manual journal entries should be documented for audit trail purposes.
- User access roles and privileges in SAP should be reviewed periodically to ensure that incompatible functions are segregated.
4.0 INAC's action plan
Management action plans addressing recommendations for the three business processes were developed by the business process owners.
4.1 Progress during fiscal year 2016-2017
INAC continued to conduct its ongoing monitoring according to the previous fiscal year's rotational plan as shown in the following table.
Previous year's rotational ongoing monitoring plan for current year | Status | Remedial action required |
---|---|---|
Direct Loans | Completed as planned | No |
Specific Claims | Completed as planned | No |
Comprehensive Claims | Completed as planned | Yes |
Grants and Contributions | Completed as planned | Yes |
Financial Reporting and Close | Completed as planned | Yes |
4.2 Action plan for the next fiscal year and subsequent years
INAC's rotational ongoing monitoring plan over the next five years, based on an annual validation of the high-risk processes and controls and related adjustments to the ongoing monitoring plan as required, is shown in the following table.
Business Process | Risk Ranking | 2017-2018 | 2018-2019 | 2019-2020 | 2020-2021 | 2021-2022 |
---|---|---|---|---|---|---|
Grants & Contributions | High | TEST | TEST | TEST | ||
Payroll | High | TEST | TEST | |||
Environmental Liabilities | High | TEST | TEST | TEST | ||
ITGCs | Medium | TEST | TEST | |||
Trust Accounts | Medium | TEST | TEST | |||
Revenue Management and Guarantee Deposits | Medium | TEST | TEST | |||
Tangible Capital Assets | Medium | TEST | TEST | |||
Entity Level Controls | Low | TEST | ||||
Specific Claims | Low | TEST | ||||
Financial Reporting | Low | TEST | ||||
Purchases, Payables and Payments | Low | TEST | ||||
General Litigation | Low | TEST | ||||
Guaranteed Loans | Low | TEST | ||||
Direct Loans | Low | TEST | ||||
Comprehensive Claims | Low | TEST |