Canadian Heritage financial statements for the year ended March 31, 2016

Statement of management responsibility including internal control over financial reporting

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2016, and all information contained in these statements rests with the management of the Department of Canadian Heritage. These financial statements have been prepared by management using the Government’s accounting policies, which are based on Canadian public sector accounting standards.

Management is responsible for the integrity and objectivity of the information in these financial statements.  Some of the information in the financial statements is based on management’s best estimates and judgment, and gives due consideration to materiality.  To fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the Department of Canadian Heritage’s financial transactions.  Financial information submitted in the preparation of the Public Accounts of Canada, and included in the Department of Canadian Heritage’s Departmental Performance Report, is consistent with these financial statements.

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

Management seeks to ensure the objectivity and integrity of data in its financial statements through careful selection, training and development of qualified staff; through organizational arrangements that provide appropriate divisions of responsibility; through communication programs aimed at ensuring that regulations, policies, standards, and managerial authorities are understood throughout the Department of Canadian Heritage and through conducting an annual risk-based assessment of the effectiveness of the system of ICOFR.

The system of ICOFR 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 ICOFR for the year ended March 31, 2016 was completed in accordance with the Treasury Board Policy on Internal Control and the results and action plans are summarized in the annex.

The effectiveness and adequacy of the Department of Canadian Heritage’s system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of the Department of Canadian Heritage’s operations, and by the Departmental Audit Committee, which provides objective advice and recommendations to the Deputy Minister regarding the sufficiency, quality and results of assurance on the adequacy and functioning of the department’s risk management, control and governance frameworks and processes (including accountability and auditing systems).

The financial statements of the Department of Canadian Heritage have not been audited.

Original signed by
Graham Flack
Deputy Minister

Andrew Francis
Chief Financial Officer

Gatineau, Canada
Date: August 30, 2016

Statement of financial position (unaudited) as at March 31
(in thousands of dollars)
 20162015

Liabilities

Accounts payable and accrued liabilities (note 4)

469,142

522,246

Vacation pay

6,580

5,559

Employee future benefits (note 5)

10,465

10,292

Other liabilities

711

787

Total net liabilities

486,898

538,884

Financial assets

Due from the Consolidated Revenue Fund (note 2)

470,749

521,475

Accounts receivable and advances (note 6)

6,476

2,692

Total gross financial assets

477,225

524,167

Financial assets held on behalf of Government

Accounts receivable and advances (note 6)

(95)

(69)

Total financial assets held on behalf of Government

(95)

(69)

Total net financial assets

477,130

524,098

Departmental net debt

9,768

14,786

Non-financial assets

Prepaid expenses

340

585

Inventory (note 7)

2,075

2,104

Tangible capital assets (note 8)

7,879

5,647

Total non-financial assets

10,294

8,336

Departmental net financial position

526

(6,450)

Contractual Obligations (note 9)
Contingent Liabilities (note 10)

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

Original signed by
Graham Flack
Deputy Minister

Canadian Heritage

Andrew Francis
Chief Financial Officer
Canadian Heritage

Gatineau, Canada
Date: August 30, 2016

Statement of operations and departmental net financial position (unaudited) for the year ended March 31 (in thousands of dollars)
 2016 Planned Results20162015

Expenses

Official Languages

352,906

360,170

358,220

Cultural Industries

307,449

306,405

302,841

Sport

243,741

220,825

471,215

Arts

117,509

112,350

115,220

Engagement and Community Participation

47,973

47,421

43,347

Attachment to Canada

92,717

102,454

92,828

Heritage

33,411

32,348

35,203

Internal Services

81,047

90,189

94,254

Total expenses

1,276,753

1,272,161

1,513,128

Revenues

Revenue from the 1979 Federal-provincial Lottery-agreement

72,521

71,904

71,310

Miscellaneous revenues

4,424

7,940

4,829

Sale of goods and services

3,756

4,303

4,057

Revenues earned on behalf of Government

(72,581)

(72,213)

(71,567)

Total revenues

8,120

11,934

8,629

Net cost from continuing operations

1,268,633

1,260,227

1,504,499

 20162015

Transferred operations

Expenses

3,788

-

Revenues

-

-

Net cost of transferred operations

3,788

-

Net cost of operations before government funding and transfers

1,264,015

1,504,499

Government funding and transfers

Net cash provided by Government of Canada

1,295,946

1,378,820

Reduction in amounts due from the Consolidated Revenue Fund

(50,726)

101,366

Services provided without charge by other government departments (note 12)

26,982

26,280

Transition payments for implementing salary payments in arrears (note 13)

(50)

(5,141)

Transfer of assets and liabilities to/from other government departments (note 14)

(1,161)

63

Net cost of operations after government funding and transfers

(6,976)

3,111

Departmental net financial position - Beginning of year

(6,450)

(3,339)

Departmental net financial position - End of year

526

(6,450)

Non-monetary transactions (note 11)

Segmented information (note 15)

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

Statement of change in departmental net debt (unaudited) for the year ended March 31 (in thousands of dollars)
 20162015

Net cost of operations after government funding and transfers

(6,976)

3,111

Change due to tangible capital assets (note 8)

Acquisition of tangible capital assets

4,366

227

Amortization of tangible capital assets

(2,128)

(1,618)

Proceeds from disposal of tangible capital assets

-

-

Net gain (loss) on disposal of tangible capital assets including adjustments

(6)

(2)

Transfer from / to other government departments

-

-

Total change due to tangible capital assets

2,232

(1,393)

Change due to inventories

(29)

(536)

Change due to prepaid expenses

(245)

70

Net increase (decrease) in departmental net debt

(5,018)

1,252

Departmental net debt – Beginning of year

14,786

13,534

Departmental net debt – End of year

9,768

14,786

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)
 20162015

Operating activities

Net cost of operations before government funding and transfers (note 3)

1,264,015

1,504,499

Non-cash items:

 

 

Amortization of tangible capital assets

(2,128)

(1,618)

Loss on disposal of tangible capital assets

-

(2)

Services provided without charge by other government departments (note 12)

(26,982)

(26,280)

Adjustments to tangible capital assets (note 8)

(6)

-

Transition payments for implementing salary payments
arrears (note 13)

50

5,141

Variations in Statement of Financial Position:

Increase (decrease) in accounts receivable and advances

3,758

(457)

Increase (decrease) in prepaid expenses

(245)

70

Increase (decrease) in inventory

(29)

(536)

Decrease (increase) in accounts payable and accrued liabilities

53,104

(101,309)

Decrease (increase) in vacation pay

(1,021)

713

Decrease (increase) in employee future benefits

(173)

(2,070)

Decrease (increase) in other liabilities

76

505

Transfer of net liabilities to/from other government departments (note 14)

1,161

(63)

Cash used in operating activities

1,291,580

1,378,593

Capital investing activities

Acquisition of tangible capital assets

4,366

227

Proceeds from disposal of tangible capital assets

-

-

Cash used in capital investing activities

4,366

227

Net cash provided by Government of Canada

1,295,946

1,378,820

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

Canadian Heritage notes to the financial statements (unaudited) for the year ended March 31, 2016

1. Authority and objectives

The Department of Canadian Heritage was established in 1995 under the Department of Canadian Heritage Act.

The Department of Canadian Heritage is responsible for formulating policies and delivering programs that help all Canadians participate in their shared cultural and civic life.

The Department of Canadian Heritage’s work is structured around the following three strategic outcomes:

  • Canadian artistic expressions and cultural content are created and accessible at home and abroad;
  • Canadians share, express and appreciate their Canadian identity; and
  • Canadians participate and excel in sport.

The Department of Canadian Heritage is specifically responsible for formulating and implementing cultural policies related to copyright, foreign investment and broadcasting, as well as policies related to arts, heritage, official languages, sports, state ceremonial and protocol, and Canadian symbols.

The programs include:

  • Arts: This program improves Canadians’ opportunities to engage with the arts, contributes to the resilience of the arts sector and deepens the connections between cultural organizations and their communities. This program encourages access and participation, resilience and excellence in the arts for all Canadians by supporting institutions that offer artists and performers training of the highest calibre in preparation for professional careers, the presentation of professional arts festivals or performing arts series, the improvement of arts and heritage infrastructure, the improvement of business practices of arts and heritage organizations, and the development of partnerships in the sector. Policy, legislative and regulatory measures targeting the Canadian arts sector also further this program’s objectives.
  • Cultural Industries: This Program supports Canadian cultural industries in adapting to a changing and challenging global marketplace. This is achieved through the delivery of grants, contributions and tax credits as well as policy, regulatory and legislative measures. Fostering the competitiveness and creative output of these industries ensures that Canadian and international audiences access a range of Canadian content across a variety of formats and platforms and contributes to the Canadian economy.
  • Heritage: The Heritage Program ensures that Canada's cultural heritage is preserved and accessible to Canadians today and in the future. It enables the heritage sector to improve professional knowledge, skills and practices, to preserve and present heritage collections and objects, and to create and circulate exhibitions and other forms of heritage content. This is accomplished by providing funding such as grants, contributions and tax incentives; information, expertise, training and other services; and regulatory and legislative measures. The primary goal of this Program is to promote the preservation and presentation of Canada’s cultural heritage.
  • Attachment to Canada: This Program strengthens Canadian identities by promoting pride and sense of common purpose among Canadians. It celebrates and commemorates Canada and enhances understanding of shared values, cultural diversity and knowledge of Canada. Also, it promotes civic education and participation among Canadians, including youth, as well as provides them with the opportunity to learn about and understand Canada’s society, diversity, history and institutions. This is achieved by delivering programs and services through grants and contributions, as well as commemorations and celebrations of national significance. The core concept of this program is to promote knowledge and experiences of Canada among Canadians.
  • Engagement and Community Participation: This Program aims to engage Canadians and provide them with opportunities to participate in the civil, social and cultural aspects of life in Canada and in their communities. This is accomplished through funding programs and initiatives that support the efforts of communities to build stronger citizen engagement, and to encourage social inclusion and collaboration through a variety of activities, including events marking the 150th anniversary of Confederation, and through local arts and heritage; contribute to increasing the respect for and awareness of human rights in Canada; and develop innovative and culturally appropriate initiatives to support the efforts of Indigenous communities in the revitalization and preservation of their languages and cultures. This Program has strong social benefits, as it contributes to the preservation of the history and identity of Canada’s diverse communities, while offering a way for traditions and identities to evolve over time. The Program supports the Department’s mandate to strengthen Canadian identity and values, and build attachment to Canada.
  • Official Languages: Canadian Heritage plays an important role in the horizontal coordination of official languages within the federal government and especially with respect to coordination and support to federal institutions in the implementation of the government’s commitment towards the development of official-language minority communities and the promotion of linguistic duality, pursuant to section 42 of the Official Languages Act (OLA). Canadian Heritage is also responsible for the planning, implementation and management of the Official Languages Support Programs pertaining to the promotion of linguistic duality within Canada and the development of official-language minority communities, in accordance with section 43 of the OLA. These activities contribute to achieving the following Government Outcome: “A diverse society that promotes linguistic duality and social inclusion”.
  • Sport: This Program promotes development and excellence in sport among Canadians and Canadian communities through initiatives that provide direct support to Canadian high-performance athletes; enhance Canada’s ability to host the Canada Games and international sport events in Canada; support the development of excellence in the Canadian sport system; and contribute to increasing participation in sport by Canadians of all ages and abilities. The core concept of this Program is to enhance and promote Canadian participation and excellence in sport, by providing funding, expertise and other services to Canadian athletes, sport organizations, stakeholders and event organizers.
  • Internal Services: Internal Services are groups of related activities and resources that are administered to support the needs of programs and other corporate obligations of an organization. These groups are: Management and Oversight Services; Communications Services; Legal Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Management Services; Materiel Services; Acquisition Services; and Travel and Other Administrative Services. Internal Services include only those activities and resources that apply across an organization, and not to those provided specifically to a program.

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:

a. Parliamentary authorities

The Department of Canadian Heritage is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Department of Canadian Heritage 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 the amounts reported in the Future-oriented Statement of Operations included in the 2015-2016 Report on Plans and Priorities. Planned results are not presented in the “Government funding and transfers” section of the Statement of Operations and Departmental Net Financial Position and in the Statement of Change in Departmental Net Debt because these amounts were not included in the 2015-2016 Report on Plans and Priorities.

b. Consolidation

These consolidated financial statements include the accounts of the following sub-entities that the Deputy Minister is accountable for: Canadian Conservation Institute and Canadian Heritage Information Network.  The accounts of these sub-entities have been consolidated with those of the Department of Canadian Heritage, and all inter-organizational balances and transactions have been eliminated.

c. Net cash provided by government of Canada

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

d. Amounts due from or to the consolidated revenue fundM

Amounts due from or to the CRF are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF.  Amounts due from the CRF represent the net amount of cash that the Department of Canadian Heritage is entitled to draw from the CRF without further authorities to discharge its liabilities.

e. Non-monetary transactions

In the normal course of business, the Department of Canadian Heritage regularly signs non-monetary agreements, which result in the exchange of non-monetary assets, goods or services for other non-monetary assets, goods or services with little or no monetary consideration involved.  When a non-monetary transaction has a commercial substance, the transaction is recorded at the fair value of the asset, good or service given up, unless the fair value of the asset, good or service received is more reliable. If the transaction lacks commercial substance, it is recorded at the carrying amount of the asset, good or service given up.

f. Revenues

Revenues from sale of goods and services are recognized in the accounts based on the goods and services provided in the year.

Other revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenue takes place.

Revenues that are non-respendable are not available to discharge the Department of Canadian Heritage’s liabilities. While the Deputy Minister is expected to maintain accounting control, he has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the Department of Canadian Heritage’s gross revenues.

g. 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 a reduction to transfer payment expense and as a receivable.

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

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

h. Employee future benefits

  • Pension benefits:  Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. The Department of Canadian Heritage’s contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. The Department of Canadian Heritage’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. 

i. Accounts receivable

Accounts receivable are stated at the lower of cost and net recoverable value. A valuation allowance is recorded for accounts receivable where recovery is considered uncertain.

j. Inventory

Inventory consists of parts, materials and supplies held for future program delivery and not intended for resale.  Inventory is valued at the actual cost.  If there is no longer any service potential, inventory is valued at the lower of cost or net realizable value.

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. The Department does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on First Nation reserves and museum collections.

Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:

Asset classAmortization period

Machinery and equipment

5 and 10 years

Computer Hardware

5 years

Computer Software

3 and 5 years

Vehicles

7 and 10 years

Leasehold improvements

Lesser of the remaining term of lease or useful life of the improvement

l. 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 if an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

m. Foreign currency transactions

Transactions involving foreign currencies are translated into Canadian dollar equivalents using rates of exchange in effect at the time of those transactions. Monetary assets and liabilities denominated in a foreign currency are translated into Canadian dollars using the rate of exchange in effect at year-end. Gains and losses resulting from foreign currency transactions are respectively included in the miscellaneous revenues and other operating expenses in the Statement of Operations and Departmental Net Financial Position.

n. 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, the liability for employee future benefits, the useful life of tangible capital assets, the allowance for doubtful accounts, and the fair value of non-monetary transactions.  Actual results could significantly differ from those estimated.  Management’s estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.

 

3. Parliamentary authorities

The Department of Canadian Heritage receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Departmental Net Financial Position and in the Statement of Financial Position in one year may be funded through parliamentary authorities in prior, current or future years. Accordingly, the Department of Canadian Heritage 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 (in thousands of dollars)

 20162015

Net cost of operations before government funding and transfers

1,264,015

1,504,499

Adjustments for items affecting net cost of operations but not affecting authorities:

Amortization of tangible capital assets

(2,128)

(1,618)

Loss on disposal of tangible capital assets

-

(2)

Adjustments to tangible capital assets

(6)

-

Services provided without charge by other
government departments

(26,982)

(26,280)

Decrease (increase) in vacation pay

(1,021)

682

Decrease (increase) in employee future benefits

(173)

(2,102)

Decrease (increase) in accrued liabilities not charged
to authorities

(248)

(796)

Bad debt expense

(11)

(274)

Refund of prior years’ expenditures

3,358

2,938

Miscellaneous revenues

25

36

Outstanding respendable revenue

(16)

(112)

Total items affecting net cost of operations but not
affecting authorities

(27,202)

(27,528)

Adjustments for items not affecting net cost of operations but affecting authorities:

Acquisitions of tangible capital assets

4,366

227

Increase (decrease) in prepaid expenses

(245)

70

Transition payments for implementing salary payments in  arrears (note 13)

50

5,141

Increase (decrease) in inventory

(29)

(536)

Other adjustment

(7)

(17)

Total items not affecting net cost of operations but
affecting authorities

4,135

4,885

Current year authorities used

1,240,948

1,481,856

b. Authorities provided and used (in thousands of dollars)

 20162015

Authorities provided:

Vote 1 – Operating expenditures

186,162

192,427

Vote 5 – Grants and contributions

1,068,791

1,273,511

Statutory amounts

24,917

26,043

Less:

Authorities available for future years

(21)

(21)

Lapsed: Operating expenditures (1)

(7,297)

(4,053)

Lapsed: Grants and contributions (2)

(31,604)

(6,051)

Current year authorities used

1,240,948

1,481,856

(1) The lapse of $7,297K in Operating expenditures includes an amount of $4,555K which has been approved by Treasury Board to be carried over to 2016-2017, $1,626K of special purpose allotments which can only be spent on advertising initiatives for the 150th Anniversary of Confederation, and $888K of frozen allotments (funds withheld by Treasury Board which cannot be spent by Canadian Heritage).

(2) The lapse of $31,604K in Grants and Contributions is largely due to a decrease of $22,900K in transfer payments under the Sport Hosting Program, which are related to the 2015 Pan American and Parapan American Games that closed in August 2015.  An additional amount of $5,979K under the Attachment to Canada Program is related to Road to 2017 which was approved by Treasury Board to be reprofiled to 2016-2017, and another $740K consists of frozen allotments (funds withheld by Treasury Board which cannot be spent by Canadian Heritage).

4. Accounts payable and accrued liabilities

The following table presents details of the Department of Canadian Heritage’s accounts payable and accrued liabilities (in thousands of dollars):

 20162015

Accounts payable - External parties

455,399

508,908

Accounts payable - Other government departments and agencies

1,396

2,028

Accrued salaries, wages and employee benefits (1)

12,347

11,310

Total accounts payable and accrued liabilities

469,142

522,246

(1) In Canada's Economic Action Plan 2012, the Government announced savings measures to be implemented by departments over the next three fiscal years starting in 2012-2013.  As a result, the Department of Canadian Heritage has recorded at March 31, 2016 an obligation for termination benefits for an amount of $248K ($796K in 2014-2015) as part of accrued liabilities to reflect the estimated workforce adjustment costs.

5. Employee future benefits

a. Pension benefits

The Department of Canadian Heritage’s employees participate in the Public Service Pension Plan, which is sponsored and administered by the Government. Pension benefits accrue up to a maximum period of 35 years at a rate of 2 percent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Québec Pension Plans benefits and they are indexed to inflation.

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

The 2015-2016 expense amounts to $22,228K ($22,800K in 2014-2015). For Group 1 members, the expense represents approximately 1.25 times (1.41 times in 2014-2015) the employee contributions and, for Group 2 members, approximately 1.24 times (1.39 times in 2014-2015) the employee contributions.

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

b. Severance benefits

The Department of Canadian Heritage provides severance benefits to its employees based on eligibility, years of service and salary at termination of employment. These severance benefits are not pre-funded. Benefits will be paid from future authorities.

Information about the severance benefits, measured as at March 31, is as follows (in thousands of dollars):

 20162015

Accrued benefit obligation - Beginning of year

10,292

8,222

Transfer to/from other government departments and agencies
(note 14)

-

(33)

Subtotal

10,292

8,189

Expense for the year

2,748

5,335

Benefits paid during the year

(2,575)

(3,232)

Accrued benefit obligation - End of year

10,465

10,292

6. Accounts receivable and advances

The following table presents details of the Department of Canadian Heritage’s accounts receivable and advances (in thousands of dollars):

 20162015

Receivables - External parties

5,697

2,097

Receivables - Other government departments and agencies

1,185

999

Employee advances

12

11

Subtotal

6,894

3,107

Allowance for doubtful accounts on receivables from external parties

(418)

(415)

Gross accounts receivable

6,476

2,692

Accounts receivable held on behalf of Government

(95)

(69)

Net accounts receivable

6,381

2,623

7. Inventory

The following table presents details of the inventory, measured at cost using the actual cost method (in thousands of dollars):

 20162015

Canadian Symbols - Promotional items

1,912

1,941

Canadian Gift Bank for Dignitaries

163

163

Total inventory

2,075

2,104

The cost of consumed inventory recognized as an expense in the Statement of Operations and Departmental Net Financial Position is $1,391K in 2015-2016 ($1,407K in 2014-2015).

8. Tangible capital assets

(in thousands of dollars)
CostAccumulated amortizationNet book value
Capital Asset Class Opening balance Acquisitions Adjustments Disposals and write-Offs Closing balance Opening balance Amortization Adjustments Disposals and write-offs Closing balance 2015 2016
Machinery and equipment 5,752 4,211 - - 9,963 4,552 874 - - 5,426 4,537 1,200
Computer hardware 92 - - - 92 92 - - - 92 - -
Computer software 5,097 - - - 5,097 4,863 - - - 4,863 234 234
Vehicles 483 26 21 45 485 333 27 27 (45) 342 143 150
Leasehold improvements 13,925 129 - - 14,054 9,862 1,227 - - 11,089 2,965 4,063
Total 25,349 4,366 21 45 29,691 19,702 2,128 27 (45) 21,812 7,879 5,647

9. Contractual obligations

The nature of the Department of Canadian Heritage’s activities can result in some large multi-year contracts and obligations whereby the Department of Canadian Heritage will be obligated to make future payments in order to carry out its transfer payment programs or when the services/goods are received. Significant contractual obligations that can be reasonably estimated are summarized as follows:

(in thousands of dollars)20172018201920202021 and thereafterTotal

Transfer payments

793,665

387,427

42,607

14,379

-

1,238,078

10. Contingent liabilities

Claims have been made against the Department in the normal course of operations. These claims include items with pleading amounts and others for which no amount is specified. While the total amount claimed in these actions is significant, their outcomes are not determinable. The Department of Canadian Heritage would record an allowance for claims and litigations where it is likely that there will be a future payment and a reasonable estimate of the loss can be made. There are no claims for 2015-2016 ($0K in 2014-2015) and litigations for which the outcome is determinable and a reasonable estimate can be made by management at March 31, 2016.

Pursuant to s. 3(1) of the Canada Travelling Exhibition Indemnification Act (the "Act") the Minister of Canadian Heritage is authorized to enter into indemnification agreements with owners of objects or appurtenances on loan to travelling exhibitions in Canada.  Under the Act, maximum levels of liability are established including: no more than $600M in respect of each travelling exhibition and; no more than $3,000M at any given time in respect of all travelling exhibitions.  The Canada Travelling Exhibitions Indemnification Regulations set out specific requirements to be met when owners are seeking indemnification agreements with the Minister.  The Regulations also set limitations on the scope of indemnity, establish deductibles, define maximums for and period of coverage, set requirements for condition reporting, outline a claims procedure and provide  for dispute resolution, among other things. 

11. Non-monetary transactions

During the year, the Department of Canadian Heritage entered into sponsorship agreements through which it received various goods or services. In exchange, the sponsors received various benefits, including exclusive marketing rights and visibility. These non-monetary transactions with unrelated parties were recorded equally in revenues and cost of operations. The estimated value of these transactions is $1.5 million ($1.2 million in 2015), which represents the fair value of the goods and services received.

12. Related Party transactions

The Department of Canadian Heritage is related as a result of common ownership to all government departments, agencies, and Crown corporations. The Department of Canadian Heritage enters into transactions with these entities in the normal course of business and on normal trade terms.  In addition, the Department of Canadian Heritage has various agreements such as the one with Parks Canada for the provision of functional services related to the financial system.  During the year, the Department of Canadian Heritage received common services which were obtained without charge from other government departments as disclosed below.

a. Common services provided without charge by other government departments

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

 20162015

 

(in thousands of dollars)

Employer’s contribution to the health and dental insurance plans

12,575

11,838

Accommodation

13,258

13,532

Legal services

1,136

857

Workers’ compensation

13

53

Total

26,982

26,280

The Government has centralized some of its administrative activities for efficiency, cost-effectiveness purposes and economic delivery of programs to the public.  As a result, the Government uses central agencies and common service organizations so that one department performs services for all other departments and agencies without charge. The costs of these services, such as the payroll and cheque issuance services provided by Public Works and Government Services Canada, are not included in the Department of Canadian Heritage’s Statement of Operations and Departmental Net Financial Position.

b. Other transactions with related parties (in thousands of dollars)

 20162015

Accounts receivable – Other government departments and agencies

1,185

999

Accounts payable – Other government departments and agencies

1,396

2,028

Expenses – Other government departments and agencies

31,334

31,730

Revenues – Other government departments and agencies

2,667

2,638

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

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

The Government of Canada implemented salary payments in arrears in 2014-2015. As a result, a one-time payment was issued to employees and will be recovered from them in the future. The transition to salary payments in arrears forms part of the transformation initiative that replaces the pay system and also streamlines and modernizes the pay processes.

This change to the pay system had no impact on the expenses of the Department. 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 Works and Government Services Canada, who is responsible for the administration of the Government pay system.

14. Transfer to / from other government departments and agencies

On November 4th, 2015, the Department of Citizenship and Immigration transferred responsibility for the Multiculturalism program to the Department of Canadian Heritage in accordance with Order in Council (P.C. 2015-1247), including stewardship responsibility for the operations, assets and liabilities related to the program.  Accordingly, the Department of Citizenship and Immigration transferred assets and liabilities related to the Multiculturalism program to the Department of Canadian Heritage on March 31, 2016. 

Through the coming into force of the Administrative Tribunals Support Service of Canada Act on November 1st, 2014, the Government of Canada consolidated the provision of support services to eleven administrative tribunals, including the Canadian Cultural Property Export Review Board (CCPERB), into a single organization, the Administrative Tribunals Support Service of Canada (ATSSC). Accordingly, the Department transferred responsibility for the assets and liabilities related to the CCPERB to the ATSSC on November 1st, 2014.

The impact on the financial statements are as follows:
(in thousands of dollars)
 20162015

Assets:

Employee advances

1

-

Total assets transferred

1

-

Liabilities:

Accounts payable and accrued liabilities

945

-

Vacation pay

104

30

Employee future benefits (note 5)

113

33

Total liabilities transferred

1,162

63

Expenses:

Adjustment to the Statement of operations and departmental     net financial position

1,161

63

15. Segmented information

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

(in thousands of dollars)Official LanguagesCultural IndustriesSportArtsEngagement and Community ParticipationAttachment to CanadaHeritageInternal ServicesUnallocated20162015
Transfer payments
Non-profit organizations 69,738 153,949 178,985 98,066 31,447 52,469 14,637 - - 599,292   839,591
Other levels of government within Canada 272,042 - -  400  993  6,117 56 - - 279,607   273,407
Industry - 112,764 - - -  1,151  - - - 113,915   113,053
Individuals - - 27,607 - -  2,026  - - - 29,633   29,433
Other countries and international organizations - 10,641 - - -  -  - - - 10,641   10,419
Total transfer payments 341,780 277,353 206,593 98,466 32,440 61,763 14,693 - -   1,033,089  1,265,903
Operating expenses
Salaries and employee benefits 15,433 25,041 11,802 12,299 12,573 21,566 13,301 68,586 - 180,601   180,725
Professional services 1,257 1,747  989  504  555  5,806 846 10,584 - 22,289   21,199
Accommodation 1,023 1,600  790  761  822  2,292 984 4,986 - 13,258   13,532
Information  60  48  38  22  86  6,623 76  741 - 7,693   11,144
Travel and relocation  294  261  371  181  185 511 202 493 - 2,499 2,300
Utilities, materials and supplies 74 100 87 29 533 1,741 580 2,007 - 5,151 9,951
Amortization 8 4 2 2 16 582 1,170 345 - 2,128 1,618
Freight and communications 25 75 16 10 8 96 41 482 - 753 820
Repairs and maintenance 5 8 3 2 2 142 156 687 - 1,003 1,611
Rentals 78 62 57 28 46 837 265 1,011 - 2,386 2,608
Loss on disposal of capital assets - - - - - - - - - - 2
Other operating expenses 134 103 76 48 155 494 35 267 - 1,313 1,715
Total operating expenses 18,390 29,051 14,232 13,885 14,980 40,691 17,655 90,189 - 239,072 247,225
Total expenses 360,170 306,405 220,825 112,350 47,421 102,454 32,348 90,189 - 1,272,161 1,513,128
Revenues
Revenue from the 1979 Federal-provincial Lottery agreement - - - - - - - - 71,904 71,904 71,310
Miscellaneous revenues 2 4,750 - 18 1 233 - 2,936 - 7,940 4,829
Sale of goods and services - - - - - 1,851 844 1,608 - 4,303 4,057
Revenues earned on behalf of Government (2) (98) - (18) (1) (187) (3) (71,904) (72,213) (71,567)
Total revenues - 4,652 - - - 1,897 c844 4,541 - 11,934 8,629
Net cost of operations before government funding and transfers 360,170 301,753 220,825 112,350 47,421 100,557 31,504 85,648 - 1,260,227 1,504,499
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