Financial Statements for the Year Ended March 31, 2022

a) Parliamentary authorities

CIRNAC is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to CIRNAC 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 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 2021-2022 Departmental Plan. 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 2021-2022 Departmental Plan.

b) Net cash provided by Government

CIRNAC operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by CIRNAC is deposited to the CRF and all cash disbursements made by CIRNAC 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.

c) Amounts due from/to the Consolidated Revenue Fund (CRF)

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 CIRNAC is entitled to draw from the CRF without further authorities to discharge its liabilities.

d) Revenues

Revenues are recorded on the accrual basis:

• Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.
• Other revenues are recognized in the period the event giving rise to the revenues occurred.
• Revenues that are non-respendable are not available to discharge CIRNAC'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 CIRNAC's gross revenues.

e) Expenses

Expenses are recorded on the accrual basis:

• Transfer payments are recorded as expenses when authorization for the payment exists and the recipient has met the eligibility criteria or the entitlements established for the transfer payment program. In situations where payments do not form part of an existing program, transfer payments are recorded as expenses when the Government announces a decision to make a non-recurring transfer, provided the enabling legislation or authorization for payment receives parliamentary approval prior to the completion of the financial statements. Transfer payments that become repayable as a result of conditions specified in the contribution agreement that have come into being are recorded as areduction 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 contribution to the health and dental insurance plans, legal services, and workers' compensation are recorded as operating expenses at their carrying value.

f) Employee future benefits

Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. CIRNAC'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 contribution. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.

Severance benefits: The accumulation of severance benefits for voluntary departures ceased for applicable employee groups. The remaining obligation for employees who did not withdraw benefits is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

g) Accounts and loans receivable

Accounts and loans receivable are stated at the lower of cost and net recoverable value.

When necessary, an allowance for valuation is recorded to reduce the carrying value of accounts and loans receivable to amounts that approximate their net recoverable value.

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 CIRNAC's liabilities or to issue new loans, they are considered to be held on behalf of the Government and are therefore presented as an offsetting amount to CIRNAC's financial position.

h) Contingent liabilities

Contingent liabilities are potential liabilities that may become actual liabilities when one or more future events occur or fail to occur. If 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.

i) Contingent assets

Contingent assets are possible assets which may become actual assets when one or more future events occur or fail to occur. If the future even is likely to occur or fail to occur, the contingent asset is disclosed in the notes to the financial statements.

j) Environmental liabilities

An environmental 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,
• CIRNAC is directly responsible or accepts responsibility,
• it is expected that future economic benefits will be given up, and
• a reasonable estimate of the amount can be made.

The liability reflects CIRNAC's best estimate of the amount required to remediate the sites to the current minimum standard for its use prior to contamination. When the cash flows required to settle or otherwise extinguish a liability are estimable, predictable and expected to occur over extended future periods, a present value technique is used. The discount rates used reflect the Government's cost of borrowing associated with the estimated number of years to complete remediation. The recorded liabilities are adjusted each year, for present value adjustments, inflation, new obligations, changes in management estimates and actual costs incurred. If the likelihood of CIRNAC's responsibility is not determinable, a contingent liability is disclosed in the notes to the financial statements.

k) 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. CIRNAC 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 assets as follows:

Assets under construction are recorded in the applicable capital asset class in the year they are put into service and are not amortized until they are put into service.

l) Measurement uncertainty

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported and disclosed amounts of assets, liabilities, revenues and expenses reported in the financial statements and accompanying notes at March 31. The estimates are based on facts and circumstances, historical experience, general economic conditions and reflect the Government's best estimate of the related amount at the end of the reporting period. They are determined according to methodologies that were applied consistently with the previous year. The most significant items where estimates are used are contingent liabilities, environmental liabilities, contractual obligations, 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.

Environmental liabilities are subject to measurement uncertainty as discussed in Note 6 due to the evolving technologies used in the estimation of the costs for remediation of contaminated sites, the use of discounted present value of future estimated costs, and the fact that not all sites have had a complete assessment of the extent and nature of remediation. Changes to underlying assumptions, the timing of the expenditures, the technology employed, or the revisions to environmental standards or changes in regulatory requirements could result in significant changes to the environmental liabilities recorded.

m) Related party transactions

Related party transactions, other than inter-entity transactions, are recorded at the exchange amount.

Inter-entity transactions are transactions between commonly controlled entities. Inter-entity transactions, other than restructuring transactions, are recorded on a gross basis and are measured at the carrying amount, except for the following:

• Services provided on a recovery basis are recognized as revenues and expenses on a gross basis and measured at the exchange amount.
• Certain services received on a without charge basis are recorded for departmental financial statement purposes at the carrying amount.

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

b) Authorities provided and used

a) Contingent liabilities

Contingent liabilities arise in the normal course of operations and their ultimate disposition is unknown. Contingent liabilities are potential liabilities which may become actual liabilities when one or more future events not wholly within the Government's control occur or fail to occur. They are grouped into two categories: claims and pending and threatened litigation, and environmental liabilities for contaminated sites.

b) Contingent assets

Contingent assets arise in the normal course of operations and their ultimate disposition is unknown. CIRNAC has made claims against external parties for which a recovery or gain is likely to materialize, however a reasonable estimate cannot be made. Contingent assets are not recognized in the financial statements.

Remediation of contaminated sites

The Government's "Federal Approach to Contaminated Sites" set out a framework for management of contaminated sites using a risk-based approach. Under this approach, the Government has inventoried the contaminated sites identified on federal lands 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 human health and the environment.

CIRNAC is responsible for the remediation activities for contaminated sites north of 60 degrees. CIRNAC has identified a total of 164 sites (162 sites in 2021) where contamination may exist and assessment, remediation and/or monitoring may be required. Of these, CIRNAC has identified 155 sites (153 sites in 2021) where action is required and for which a gross liability of $6,311 Million ($4,074 Million in 2021) has been recorded. This liability estimate has been determined based on sites assessments performed by environmental experts.

In addition, there are 9 unassessed sites (9 sites in 2021) where estimates have been calculated based on extrapolation and a liability of $22 Million ($21 Million in 2021) has been recorded.

These two estimates combined, totaling $6,333 Million ($4,095 Million in 2021), represents management's best estimate of the costs required to remediate sites to the current minimum standard for its use prior to contamination, based on information available at the financial statement date.

The following table presents the total estimated amounts of these liabilities by nature and source, the associated expected recoveries and the total undiscounted future expenditures as at March 31, 2022 and March 31, 2021. When the liability estimate is based on a future cash requirement, the amount is adjusted for inflation using a forecast Consumer Price Index rate of 2.0% (2.0% in 2021). Inflation is included in the undiscounted amount. The Government of Canada's cost of borrowing by reference to the actual zero-coupon yield curve for Government of Canada bonds has been used to discount the estimated future expenditures. The March 2022 rates range from 2.24% (0.24% in 2021) for a 2 year term to 2.35% (2.01% in 2021) for a 30 or greater year term.

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, CIRNAC 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, CIRNAC may require security deposits to ensure the lands and waters are returned in a condition acceptable to CIRNAC. 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 Treaty Land Entitlement (Saskatchewan) fund. This statutory account was established to hold moneys received for individual bands pending execution of settlement of outstanding Treaty land obligations. These moneys are eventually disbursed to individual Indians, credited to Band Fund or Individual Trust Fund accounts, or returned to payers, as appropriate.

a) Pension benefits

CIRNAC'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 CIRNAC 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 2021-2022 expense amounts to $17.9 Million ($18.8 Million in 2020-21). For Group 1 members, the expense represents approximately 1.01 times (1.01 times in 2020-21) and, for Group 2 members, approximately 1.00 time (1.00 time in 2020-21) the employee contributions.

CIRNAC'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

Severance benefits provided to CIRNAC'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, 2022, substantially 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:

a) Common services provided without charge by other government departments

During the year, CIRNAC received services without charge from certain common service organizations related to the accommodation, 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 CIRNAC's Statement of Operations and Departmental Net Financial Position as follows:

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

b) Other transactions with related parties (Unaudited)

a) Contingent Liabilities- Claims and Litigation

Subsequent to year-end, CIRNAC has settled claims amounting to $1,492 millions for specific claims, pending and threatened litigation claims, special claims and Indian Residential School claims.

1.0 Introduction

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

Detailed information on CIRNAC's authority, mandate and program activities can be found in the  2021-22 Departmental Plan and the 2020-21 Departmental Results Report.

2.0 Departmental System of Internal Control over Financial Reporting

2.1 Internal Control Management

CIRNAC has a well-established governance and accountability structure to support departmental assessment efforts and oversight of its systems 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;
• Ongoing communication and training on statutory requirements, and policies and procedures for sound financial management and control;
• External and internal reporting responsibilities related to risk, assessment results and action plans, which includes engagement with senior management and the Departmental Audit Committee, as applicable;
• CIRNAC ICFR assessment approach and methodology;

The Department's control environment also includes:

• A CIRNAC Values and Ethics Code that incorporates the Values and Ethics for the Public Sector and the Directive on Conflict of Interest;
• A Departmental Audit Committee that provides objective advice and guidance, independent of management in the departmental areas of governance, risk management and control;
• Risk assessments and audit results performed by auditors from Internal Audit, Recipients Audit; Office of the Auditor General and Common Services providers;
• An internal control unit that helps the Chief Finances, Results and Delivery Officer to monitor effectiveness of ICFR across the department, and continuously works in close collaboration with business/risk owners; and
• Senior manager's performance agreements with clear commitments to sound financial and internal control management.

2.2 Service Arrangements Relevant to Financial Reporting

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

3.0 Departmental Assessment Results during fiscal year 2021-22

3.1 Internal Audit of Internal Controls over Financial Reporting

An internal audit of Internal Controls over Financial Reporting was performed during 2021-22 and resulting observations were issued in early 2022-23. An action plan was developed by CIRNAC management to address opportunities for improvements that were noted in the internal audit report. Its implementation was started in early 2022-23, with significant progress achieved by the signature of the 2021-22 CIRNAC financial statements and planned full completion by the end of fiscal year 2022-23.

3.2 Internal Controls Risk Assessment

In early 2022-23, a full risk assessment was conducted to update the residual risk ratings of the department's business processes with an emphasis on those that contain key controls related to the production, review and validation of financial statements and other internal and external financial reports. The results of this risk assessment were presented to senior management and are used to prepare the departments five-year ongoing monitoring plan.

3.3 New or significantly amended key Controls

In the last fiscal year, there were no new substantial business processes implemented or significantly amended key controls in existing business processes that required a reassessment. Management recognizes that there is an increased risk in financial reporting due to the continued transition of CIRNAC into a standalone department, while operating under a shared services model for internal services.

3.4 Ongoing monitoring program

CIRNAC has a mature ongoing risk-based rotational monitoring program encompassing internal control over financial reporting.

As part of ongoing risk-based monitoring program, design effectiveness and operations effectiveness testing is conducted on selected key controls in all of the control environments to obtain sufficient reliable evidence to support the department's financial control environment in place is sound.

In 2021-22, the department performed ongoing monitoring activities of the following business processes controls:

• Financial Close and Reporting
• Interdepartmental settlements (IS) process
• Entity-Level Controls
• Budgeting and Forecasting

Overall, the key internal controls for the above-mentioned business processes were found to be operating effectively. No significant deficiencies or material weaknesses, that could lead to a material misstatement of the financial statements, were identified.

Remediation identified from departmental ongoing monitoring ICFR assessments is addressed through risk-based management action plans prepared and implemented by the business process owners which included action plan recommendations from previous years. ICFR assessments will continue to be monitored in 2022-23 to ensure prompt, adequate and full implementation of all remedial actions.

4.0 Departmental action plan for the next fiscal year and subsequent years

CIRNAC rotational ongoing risk-based monitoring plan over the next five fiscal years is endorsed by management and based on an annual validation of the high-risk processes and controls and related adjustments as required which is shown in the following table.