Canadian Heritage financial statements for the year ended March 31, 2017

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 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, 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 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

Graham Flack
Deputy Minister

Andrew Francis
Chief Financial Officer

Gatineau, Canada
Date: August 25, 2017

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

	2017	2016
Liabilities
Accounts payable and accrued liabilities (note 4)	326,81	469,142
Vacation pay	7,099	6,580
Employee future benefits (note 5)	7,687	10,465
Other liabilities	1,030	711
Total net liabilities	342,617	486,898
Financial assets
Due from the Consolidated Revenue Fund (note 2)	323,243	470,749
Accounts receivable and advances (note 6)	9,031	6,476
Total gross financial assets	332,274	477,225
Financial assets held on behalf of Government
Accounts receivable and advances (note 6)	(106)	(95)
Total financial assets held on behalf of Government	(106)	(95)
Total net financial assets	332,168	477,130
Departmental net debt	10,449	9,768
Non-financial assets
Prepaid expenses	1,123	340
Inventory (note 7)	2,129	2,075
Tangible capital assets (note 8)	10,741	7,879
Total non-financial assets	13,992	10,294
Departmental net financial position	3,544	526

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

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

Original signed

Graham Flack
Deputy Minister

Andrew Francis
Chief Financial Officer

Gatineau, Canada
Date: August 25, 2017

2017: Statement of operations and departmental net financial position (unaudited) for the year ended March 31
(in thousands of dollars)

	Planned Results	2017	2016
Expenses
Official Languages	353,759	367,032	360,170
Cultural Industries	307,715	311,625	306,405
Sport	206,432	211,413	220,825
Arts	117,536	195,756	112,350
Engagement and Community Participation	69,750	52,449	47,421
Attachment to Canada	155,449	155,850	102,454
Heritage	33,165	33,849	32,348
Multiculturalism for Newcomers and all Canadians	-	10,353	-
Internal Services	81,036	82,960	90,189
Total expenses	1,324,842	1,421,287	1,272,161
Revenues
Revenue from the 1979 Federal-provincial Lottery-agreement	73,270	73,013	71,904
Miscellaneous revenues	6,045	6,025	7,940
Sale of goods and services	5,617	3,987	4,303
Revenues earned on behalf of Government	(73,332)	(73,355)	(72,213)
Total revenues	11,600	9,670	11,934
Net cost from continuing operations	1,313,242	1,411,617	1,260,227

	2017	2016
Transferred operations
Expenses	-	3,788
Revenues	-	-
Net cost of transferred operations	-	3,788
Net cost of operations before government funding and transfers	1,411,617	1,264,015
Government funding and transfers
Net cash provided by Government of Canada	1,534,185	1,295,946
Reduction in amounts due from the Consolidated Revenue Fund	(147,506)	(50,726)
Services provided without charge by other government departments (note 12)	27,958	26,982
Transition payments for implementing salary payments in arrears (note 13)	(2)	(50)
Transfer of assets and liabilities to/from other government departments (note 14)	-	(1,161)
Net cost of operations after government funding and transfers	(3,018)	(6,976)
Departmental net financial position - Beginning of year	526	(6,450)
Departmental net financial position - End of year	3,544	526

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)

	2017	2016
Net cost of operations after government funding and transfers	(3,018)	(6,976)
Change due to tangible capital assets (note 8)
Acquisition of tangible capital assets	5,398	4,366
Amortization of tangible capital assets	(2,522)	(2,128)
Proceeds from disposal of tangible capital assets	(12)	-
Net gain (loss) on disposal of tangible capital assets including adjustments	(2)	(6)
Total change due to tangible capital assets	2,862	2,232
Change due to inventories	54	(29)
Change due to prepaid expenses	783	(245)
Net increase (decrease) in departmental net debt	681	(5,018)
Departmental net debt – Beginning of year	9,768	14,786
Departmental net debt – End of year	10,449	9,768

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 (note 3)	1,411,617	1,264,015
Non-cash items:
Amortization of tangible capital assets	(2,522)	(2,128)
Loss on disposal of tangible capital assets	(2)	-
Services provided without charge by other government departments (note 12)	(27,958)	26,982)
Adjustments to tangible capital assets (note 8)	-	(6)
Transition payments for implementing salary payments arrears (note 13)	2	50
Variations in Statement of Financial Position:
Increase (decrease) in accounts receivable and advances	2,544	3,758
Increase (decrease) in prepaid expenses	783	(245)
Increase (decrease) in inventory	54	(29)
Decrease (increase) in accounts payable and accrued liabilities	142,341	53,104
Decrease (increase) in vacation pay	(519)	(1,021)
Decrease (increase) in employee future benefits	2,778	(173)
Decrease (increase) in other liabilities	(319)	76
Transfer of net liabilities to/from other government departments (note 14)	-	1,161
Cash used in operating activities	1,528,799	1,291,580
Capital investing activities
Acquisition of tangible capital assets	5,398	4,366
Proceeds from disposal of tangible capital assets	(12)	-
Cash used in capital investing activities	5,386	4,366
Net cash provided by Government of Canada	1,534,185	1,295,946

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

Notes to the financial statements (unaudited) for the year ended March 31, 2017

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, multiculturalism, official languages, sports, state ceremonial and protocol, and Canadian symbols.

The programs include:

• Arts: The Arts 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 a shared 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 through delivering programs and services in the form of grants and contributions. 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 social inclusion through the performing and visual arts; express, celebrate and preserve local 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 of Canada Outcome: “A diverse society that promotes linguistic duality and social inclusion”.

• Multiculturalism: In accordance with the Canadian Multiculturalism Act, the Multiculturalism Program seeks to build an integrated, socially cohesive society; improve the responsiveness of institutions to the needs of a diverse population; and engage in discussions on multiculturalism, integration and diversity at the international level. To advance these objectives, the Multiculturalism Program: provides grants and contributions to not-for-profit organizations, the private sector, non-federal public institutions, and individuals; conducts direct public outreach and promotional activities; helps federal institutions to meet their obligations under the Act; supports the annual tabling in Parliament of a report on the operation of the Act; and engages non-federal public institutions seeking to respond to diversity. The Multiculturalism Program also supports Canada’s participation in international agreements and institutions.

• 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 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 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.

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 Fund

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 class	Amortization 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)

	2017	2016
Net cost of operations before government funding and transfers	1,411,617	1,264,015
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets	(2,522)	(2,128)
Loss on disposal of tangible capital assets	(2)	-
Adjustments to tangible capital assets	-	(6)
Services provided without charge by other government departments	(27,958)	(26,982)
Decrease (increase) in vacation pay	(519)	(1,021)
Decrease (increase) in employee future benefits	2,778	(173)
Decrease (increase) in accrued liabilities not charged to authorities	1,143	(248)
Bad debt expense	(255)	(11)
Refund of prior years’ expenditures	2,607	3,358
Miscellaneous revenues	12	25
Outstanding respendable revenue	133	(16)
Total items affecting net cost of operations but not affecting authorities	(24,583)	(27,202)
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisitions of tangible capital assets	5,398	4,366
Increase (decrease) in prepaid expenses	783	(245)
Transition payments for implementing salary payments in  arrears (note 13)	(2)	50
Increase (decrease) in inventory	54	(29)
Other adjustment	-	(7)
Total items not affecting net cost of operations but affecting authorities	6,233	4,135
Current year authorities used	1,393,267	1,240,948

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

	2017	2016
Authorities provided:
Vote 1 – Operating expenditures	211,480	186,162
Vote 5 – Grants and contributions	1,204,970	1,068,791
Statutory amounts	23,899	24,917
Less:
Authorities available for future years	(21)	(21)
Lapsed: Operating expenditures (1)	(24,586)	(7,297)
Lapsed: Grants and contributions (2)	(22,475)	(31,604)
Current year authorities used	1,393,267	1,240,948

1. The lapse of $24,586K in Operating expenditures includes a $10,000K for a special purpose allotment created in order to reflect non-monetary transactions received from sponsors for the Canada 150 initiative. PCH was able to set aside $6,746K to help with future pressures resulting from the renewal of collective bargaining agreements. Also contributing to the lapse is an amount of $2,092K in frozen allotments for Government-wide Initiatives such as the Back-Office Transformation, the Budget 2016 reduction for professional services, advertising and travel and for the tax to convert salary dollars to operating dollars (funds withheld by Treasury Board Secretariat which cannot be spent by Canadian Heritage). An amount of $278K is also attributable to the special purpose allotment which can only be spent on advertising initiatives for the 150th Anniversary of Confederation. The remaining lapse of $5,470K has been approved by Treasury Board to be carried over to 2017-2018.
2. The lapse of $22,475K in Grants and Contributions is due to $11,871K put aside for an anticipated reprofile request to 2017-18. An amount of $9,337K is related to unused funds for the provision of services in French and Indigenous languages in the Territories which must be placed in a frozen allotment, pursuant to the Treasury Board decision, and $1,227K for an approved reprofile of funds to 2017-18 related to Road to 2017 initiative.

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) :

	2017	2016
Accounts payable - External parties	310,134	455,399
Accounts payable - Other government departments and agencies	2,481	1,396
Accrued salaries, wages and employee benefits (1)	14,186	12,347
Total accounts payable and accrued liabilities	326,801	469,142

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 recorded an obligation for termination benefits as part of the accrued liabilities to reflect the estimated workforce adjustment costs. There is no remaining balance of these measures as of March 31, 2017 ($248K in 2015-2016).

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 2016-2017 expense amounts to $21,252K ($22,228K 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.

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):

	2017	2016
Accrued benefit obligation - Beginning of year	10,465	10,292
Expense for the year	(1,716)	2,748
Benefits paid during the year	(1,062)	(2,575)
Accrued benefit obligation - End of year	7,687	10,465

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):

	2017	2016
Receivables - External parties	4,453	5,697
Receivables - Other government departments and agencies	5,094	1,185
Employee advances	12	12
Subtotal	9,559	6,894
Allowance for doubtful accounts on receivables from external parties	(528)	(418)
Gross accounts receivable	9,031	6,476
Accounts receivable held on behalf of Government	(106)	(95)
Net accounts receivable	8,925	6,381

7. Inventory

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

	2017	2016
Canadian Symbols - Promotional items	1,990	1,912
Canadian Gift Bank for Dignitaries	139	163
Total inventory	2,129	2,075

8. Tangible capital assets

(in thousands of dollars)

	Cost					Accumulated amortization					Net Book Value
Capital Asset Class	Opening Balance	Acquisi-tions	Adjustments	Disposals and Write-Offs	Closing balance	Opening balance	Amortization	Adjustments	Disposals and Write-offs	Closing balance	2017	2016
Machinery and equipment	9,963	621	(1)	-	10,583	5,426	1,048	-	-	6,474	4,109	4,537
Computer Hardware	92	11	-	-	103	92	-	-	-	92	11	-
Computer Software	5,097	-	1	-	5,098	4,863	234	-	-	5,097	1	234
Vehicles	485	-	-	25	460	342	31	-	11	362	98	143
Leasehold improvements	14,054	381	-	-	14,435	11,089	1,209	-	-	12,298	2,137	2,965
Software - under construction (1)	-	4,385	-	-	4,385	-	-	-	-	-	4,385	-
Total	29,691	5,398	-	25	35,064	21,812	2,522	-	11	24,323	10,741	7,879

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)	2018	2019	2020	2021	2022 and thereafter	Total
Transfer payments	700,582	137,341	68,316	7,942	5,951	920,132

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 2016-2017 ($0K in 2015-2016) and litigations for which the outcome is determinable and a reasonable estimate can be made by management at March 31, 2017.

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 $1.3 million ($1.5 million in 2016), 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:

	2017	2016
Employer’s contribution to the health and dental insurance plans	13,330	12,575
Accommodation	13,419	13,258
Legal services	1,195	1,136
Workers’ compensation	14	13
Total	27,958	26,982

The Government has centralized some of its administrative activities for efficiency, cost-effectiveness purposes and economic delivery of programs to the public. As a result, the Government uses central agencies and common service organizations so that one department performs services for all other departments and agencies without charge. The costs of these services, such as the payroll and cheque issuance services provided by Public Services and Procurement Canada, 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)

	2017	2016
Accounts receivable – Other government departments and agencies	4,367	1,185
Accounts payable – Other government departments and agencies	2,474	1,396
Expenses – Other government departments and agencies	34,400	31,334
Revenues – Other government departments and agencies	3,032	2,667

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.

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.

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, 2017.

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

	2017	2016
Assets:
Employee advances	-	1
Total assets transferred	-	1
Liabilities:
Accounts payable and accrued liabilities	-	945
Vacation pay	-	104
Employee future benefits (note 5)	-	113
Total liabilities transferred	-	1,162
Expenses:
Adjustment to the Statement of operations and departmental net financial position	-	1,161

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)	Sport	Arts	Cultural Industries	Heritage	Attachment to Canada	Engagement and Community Participation	Official Languages	Multiculturalism for Newcomers and All Canadians	Internal Services	Unallocated	2017	2016
Transfer payments
Non-profit organizations	169,748	164,956	157,332	15,654	100,450	33,119	72,329	7,373	-	-	720,963	599,292
Other levels of government within Canada	-	16,134	-	548	6,485	176	276,531	335	-	-	300,208	279,607
Industry	-	-	113,808	-	5,606	-	-	-	-	-	119,414	113,915
Individuals	27,944	-	6	-	1,959	-	-	-	-	-	29,909	29,633
Other countries and international organizations	-	-	10,119	-	634	-	-	43	-	-	10,795	10,641
Total transfer payments	197,692	181,090	281,265	16,202	115,134	33,295	348,860	7,751	-	-	1,181,289	1,033,089
Operating expenses
Salaries and employee benefits	10,325	12,872	24,782	12,568	21,887	11,595	14,985	2,173	63,212	-	174,399	180,601
Professional services	1,200	348	2,375	813	5,629	2,822	900	148	8,904	-	23,138	22,289
Accommodation	791	816	1,692	988	2,310	1,063	1,036	145	4,578	-	13,419	13,258
Information	64	19	204	20	5,857	569	63	31	1,517	-	8,342	7,693
Travel and relocation	488	225	491	217	757	194	325	89	384	-	3,170	2,499
Utilities, materials and supplies	399	122	278	800	1,249	1,750	369	9	1,737	-	6,714	5,151
Amortization	1	2	2	1,126	1,050	4	7	-	330	-	2,522	2,128
Freight and communications	73	23	47	49	125	44	72	0	147	-	581	753
Repairs and maintenance	5	2	4	176	288	25	6	0	546	-	1,052	1,003
Rentals	71	21	54	812	960	372	69	7	1,546	-	3,912	2,386
Loss on disposal of capital assets	-	-	-	-	-	-	-	-	2	-	2	-
Other operating expenses	303	218	430	80	605	715	341	0	55	-	2,747	1,313
Total operating expenses	13,722	14,666	30,360	17,647	40,715	19,154	18,172	2,602	82,960	-	239,998	239,072
Total expenses	211,413	195,756	311,625	33,849	155,850	52,449	367,032	10,353	82,960	-	1,421,287	1,272,161
Revenues
Revenue from the 1979 Federal-provincial Lottery agreement	-	-	-	-	-	-	-	-	-	73,013	73,013	71,904
Miscellaneous revenues	-	22	5,198	1	822	3	1	-	-	-	6,025	7,940
Sale of goods and services	-	-	-	808	1,376	-	-	-	1,803	-	3,987	4,303
Revenues earned on behalf of Government	-	(22)	(8)	-	(291)	(3)	(1)	-	(39)	(73,013)	(73,355)	(72,213)
Total revenues	-	-	5,190	809	1,907	-	-	-	1,764	-	9,670	11,934
Total revenues	-	-	5,190	-	1,907	-	-	-	1,764	(73,013)	(53,673)	(48,036)
Net cost of operations before government funding and transfers	211,413	195,756	306,435	33,040	153,943	52,449	367,032	10,353	81,196	-	1,411,617	1,260,227