Unaudited Financial Statements for the period ending March 31, 2018: Environment and Climate Change Canada, chapter 6

Notes to the Financial Statements (Unaudited)

1. Authority and objectives

Environment and Climate Change Canada was established under Department of the Environment Act .  Under this Act, the powers, duties and functions of the Minister of the Environment and Climate Change Canada extend to and include matters relating to:

  • The preservation and enhancement of the quality of the natural environment (including water, air and soil quality);
  • Renewable resources, including migratory birds and other non-domestic flora and fauna;
  • Water;
  • Meteorology;
  • Enforcement of any rules or regulations made by the International Joint Commission relating to boundary waters; and
  • Coordination of the policies and programs of the Government of Canada respecting the preservation and enhancement of the quality of the natural environment.

Environment and Climate Change Canada delivers its mandate by promoting the three (3) following Strategic Outcomes:

  • Conservation of Canada's Natural Environment
    • Canada's natural environment is conserved and restored for present and future generations.
  • Weather Information
    • Canadians are equipped to make informed decisions on changing weather, water and climate conditions.
  • Threats from Pollution Minimized
    • Threats to Canadians and their environment from pollution are minimized.

The Internal Services Program includes groups of related activities and resources that are administered to support the Department's Strategic Outcomes and Programs. It is the basis for a common government-wide approach to planning, designing, budgeting, reporting and communicating all Government of Canada internal services.

In addition, Environment and Climate Change Canada has authority under numerous pieces of legislation which affect how Environment and Climate Change Canada operates. The most significant Acts are as follows:

  • Antarctic Environmental Protection Act
  • Canada Emission Reduction Incentives Agency Act
  • Canada-Newfoundland and Labrador Atlantic Accord Implementation Act
  • Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act
  • Canada Oil and Gas Operations Act
  • Canada Water Act
  • Canada Wildlife Act
  • Canadian Environment Week Act
  • Canadian Environmental Assessment Act, 2012
  • Canadian Environmental Protection Act, 1999
  • Department of the Environment Act
  • Environmental Enforcement Act
  • Environmental Violations Administrative Monetary Penalties Act
  • Federal Sustainable Development Act
  • Fisheries Act (Sections 36-42)
  • Greenhouse Gas Pollution Pricing Act
  • International River Improvements Act
  • Lac Seul Conservation Act, 1928
  • Lake of the Woods Control Board Act, 1921
  • Manganese-Based Fuel Additives Act
  • Migratory Birds Convention Act, 1994
  • National Strategy for Safe and Environmentally Sound Disposal of Lamps Containing Mercury Act
  • National Wildlife Week Act
  • Perfluorooctane Sulfonate Virtual Elimination Act
  • Species at Risk Act
  • Weather Modification Information Act
  • Wild Animal and Plant Protection and Regulation of International and Interprovincial Trade Act

2. Summary of significant accounting policies

These financial statements are prepared using the department'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

Environment and Climate Change Canada is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to Environment and Climate Change Canada 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 2017-18 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 2017-18 Departmental Plan

(b) Net Cash Provided by Government

Environment and Climate Change Canada operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by Environment and Climate Change Canada is deposited to the CRF, and all cash disbursements made by Environment and Climate Change Canada 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) Amount Due from or 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 Environment and Climate Change Canada is entitled to draw from the CRF without further authorities to discharge its liabilities.

(d) Revenues

  • Revenues from regulatory fees are recognized based on the services provided in the year.
  • Funds received from external parties for specified purposes are recorded upon receipt as deferred revenue.
  • Revenues are then recognized in the period in which the related expenses are incurred.
  • Deferred revenue consists of amounts received in advance of the delivery of goods and rendering of services that will be recognized as revenue in a subsequent fiscal year as it is earned.
  • Other revenues are recognized in the period the event giving rise to the revenues occured.
  • Revenues that are non-respendable are not available to discharge Environment and Climate Change Canada's liabilities. While the Deputy Head 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 entity's gross revenues.

(e) Expenses

  • Transfer payments are recorded as an expense in the year the transfer is authorized and eligibility criteria have been met by the recipient.
  • Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
  • Services provided without charge by other government departments for accommodation, employer contributions to the health and dental insurance plans, legal services and workers' compensation are recorded as operating expenses at their 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. Environment and Climate Change Canada’s contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. Environment and Climate Change Canada’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: 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 receivable

Accounts receivable are initially recorded at cost and when necessary, an allowance for valuation is recorded to reduce the carrying value of accounts receivable to amounts that approximate their net recoverable value.

(h) Non-financial assets

The costs of acquiring land, buildings, equipment and other capital property are capitalized as tangible capital assets and, except for land, are amortized to expense over the estimated useful lives of the assets, as described in Note 11. All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. Tangible capital assets do not include works of art, museum collection and Crown land to which no acquisition cost is attributable; and intangible assets.

Inventories are valued at cost and are comprised of spare parts and supplies held for future program delivery and are not primarily intended for resale. Inventories that no longer have service potential are valued at the lower of cost or net realizable value.

(i)  Contingent liabilities

Contingent liabilities are potential liabilities which 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, a provision is accrued and an expense recorded to other expenses. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

(j)  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.

(k)  Environmental liabilities

An environmental liability for the remediation of contaminated sites is recognized when all of the following criteria are satisfied: an environmental standard exists, contamination exceeds the environmental standard, the Government 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 the Government’s best estimate of the amount required to remediate the sites to the current minimum standard for its use prior to contamination. When the future 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 rate used reflects 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.

(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.  The  most  significant  items  where  estimates  are  used  are  contingent  liabilities, environmental liabilities, the liability for employee future benefits and the useful life of tangible capital assets. 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.

Environmental liabilities are subject to measurement uncertainty as discussed in Note 5 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:

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

 

3. Parliamentary authorities

Environment and Climate Change Canada receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Departmental Net Financial Position and the Statement of Financial Position in one year may be funded through parliamentary authorities in prior, current or future years. Accordingly, Environment and Climate Change Canada 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) 2018 2017
Net cost of operations before government funding and transfers $1,260,139 $1,104,102
Adjustments for items affecting net cost of operations but not affecting authorities
Amortization of tangible capital assets (Note 11) (49,640) (44,891)
Net loss on disposals, write-off and adjustments to tangible capital assets (3,302) (6,523)
Common services provided without charge by other government departments (Note 14) (107,702) (101,145)
Refunds/adjustments to previous years' expenses 3,531 2,932
Decrease (increase) in liabilities related to the workforce adjustment
212 518
Decrease (increase) in accrued liabilities not charged to authorities 8,018 4,724
Decrease (increase) in vacation pay and compensatory leave
(17,886) 8,001
Decrease (increase) in employee future benefits (Note 8) (1,025) 10,166
Decrease (increase) in environmental  liabilities (Note 5) 2,093 (54,185)
Increase (decrease) in inventory (Note 10) (2,966) 13,513
Other
567 2,538
Total items affecting net cost of operations but not affecting authorities (168,100) (164,352)
Adjustments for items not affecting net cost of operations but affecting authorities
Acquisition of tangible capital assets (Note 11) 62,495 59,930
Transition payments for implementing salary payments in arrear 8 -
Prepaid expenses 87 (87)
Salary Overpayments 8,926  5,560
Other Loans and advances to employees 500  3
Capital lease payments 752 712
Total items not affecting net cost of operations but affecting authorities 72,768 66,118
Current year authorities used
$1,164,807 $1,005,868
(b) Authorities provided and used
(in thousands of dollars) 2018 2017
Authorities Provided
Vote 1 - Operating expenditures $837,506 $750,844
Vote 5 - Capital expenditures 84,575 73,872
Vote 10 - Grants & Contributions 309,277 149,433
Statutory amounts 85,585 84,490
Total 1,316,943 1,058,639
Less:
Authorities available for future years (796) (427)
Lapsed authorities (151,340) (52,344)
Total (152,136) (52,771)
Current year authorities used $1,164,807 $1,005,868

4. Accounts payable and accrued liabilities

The following table presents details of Environment and Climate Change Canada's accounts payable and accrued liabilities:

(in thousands of dollars) 2018 2017
Accounts payable - Other government departments and agencies $17,203 $10,816
Accounts payable - External parties 169,052 99,946
Total accounts payable 186,255 110,762
Accrued liabilities 40,297 30,473
Total accounts payable and accrued liabilities $226,552 $141,235
In Canada’s Economic Action Plan 2012 , the Government announced savings measures to be implemented by departments starting in 2012-2013 and extending over the three subsequent fiscal years. To this effect, the Department has recorded an obligation for termination benefits as part of accrued liabilities to reflect the estimated workforce adjustment costs. The remaining balance of these measures as of March 31, 2018 is $0 ($211,500 as of March 31, 2017).

5. Environmental liabilities

The Government’s “Federal Approach to Contaminated Sites” sets 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 aids in identification of the high risk sites in order to allocate limited resources to those sites which pose the highest risk to human health and the environment.

Environment and Climate Change Canada has identified approximately 80 sites (111 sites in 2016-2017) where contamination may exist and assessment, remediation and monitoring may be required. Of these, the Department has identified approximately 17 sites (17 sites in 2016-2017) where action is required and for which a gross liability of 180,882 thousand (183,006 thousand in 2016-2017) has been recorded. This liability estimate has been determined based on site assessments performed by environmental experts.

In addition, a statistical model based upon a projection of the number of sites that will proceed to remediation and upon which current and historical costs are applied is used to estimate the liability for a group of unassessed sites. As a result, there are 21 unassessed sites ‎(13 sites in 2016-2017) where a liability estimate of $230 thousand ($199 thousand in 2016-2017) has been recorded using this model.

Moreover, there is 1 site that has not been assessed by environmental experts (1 site in 2016-2017) for which the department has estimated and recorded a liability of $12,398 thousand ($12,398 thousand in 2016-2017).

These three estimates combined, totalling $193,510 thousand ($195,603 thousand in 2016-2017), 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.

For the remaining 41 sites (80 sites in 2016-2017), no liability for remediation has been recognized. Some of these sites are at various stages of testing and evaluation and if remediation is required, liabilities will be reported as soon as a reasonable estimate can be determined. For other sites, Environment and Climate Change Canada does not expect to give up any future economic benefits (there is likely no significant environmental impact or human health threats). These sites will be re-examined and a liability for remediation will be recognized if future economic benefits will be given up.

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, 2018, and March 31, 2017. When the liability estimate is based on a future cash requirement, the amount is adjusted for inflation using a forecast CPI rate of 1.9% (2% in 2016-2017).  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 2018 rates range from 1.79% (0.76% in 2017) for 2 year term to 2.24% (2.39% in 2017) for a 30 or greater year term.

(in thousands of dollars) Number of sites
2018
 
Number of sites with a liability 2018   Estimated
liability
2018
Estimated total
undiscounted
expenditures
2018
Estimated recoveries 2018 Number of sites 2017 Number of sites with a liability 2017 Estimated
Liability
2017
Estimated Total
Undiscounted
Expenditures
2017
Estimated recoveries 2017
Military and Former Military Sites (1) 1 - - - - - - - - -
Fuel Related Practices(2) 23
16 31,577 24,269 - 31 10 32,297 35,355 -
Marine Facilities / Aquatic Sites(3) 13 7 159,519 186,218 - 28 13
162,674 185,119 -
Parks and Protected Areas(4) 29 13 472 433 - 37 7 607 633 -
Office / commercial / industrial operations(5) 14 3 1,942 1,891 - 15 1 25 26 -
Totals 80 39 $193,510 $212,811 - 111 31 $195,603 $221,133 -

(1) Contamination associated with the operations of military and former military sites where activities such as fuel handling and storage activities, waste sites, metals/PCB-based paint used on buildings resulted in former or accidental contamination, e.g. petroleum hydrocarbons, PCBs, heavy metals. Sites often have multiple sources of contamination.

(2) Contamination primarily associated with fuel storage and handling. E.g. accidental spills related to fuel storage tanks or former fuel handling practices, e.g. petroleum hydrocarbons, polyaromatic hydrocarbons and BTEX (benzene, toluene, ethylbenzene and xylenes).

(3) Contamination associated with the operations of marine assets, e.g. port facilities, harbours, navigation systems, light stations, hydrometric stations, where activities such as fuel storage/handling, use of metal based paint (e.g. on light stations) resulted in former or accidental contamination, e.g. metals, petroleum hydrocarbons, polyaromatic hydrocarbons and other organic contaminants. Sites often have multiple sources of contamination.

(4) Contamination associated with the operations and maintenance of parks and protected areas where activities such as fuel storage/handling, waste sites and use of metal-based paint resulted in former or accidental contamination, e.g. metals, petroleum hydrocarbons, polyaromatic hydrocarbons, PCBs and other organic contaminants. Sites often have multiple sources of contamination.

(5) Contamination associated with the operations of the office/commercial/industrial facilities where activities such as fuel storage/handling, waste sites and use of metal-based paint resulted in former or accidental contamination, e.g. metals, petroleum hydrocarbons, polyaromatic hydrocarbons, BTEX, etc. Sites often have multiple sources of contamination

The Department’s ongoing efforts to assess contaminated sites, may result in additional environmental liabilities.

6. Deferred revenue

Deferred revenue represents the balance at year-end of unearned revenues stemming from amounts received from external parties that are restricted in order to fund the expenditures related to specific research projects and stemming from amounts received for fees prior to services being performed. Revenue is recognized in the period in which these expenditures are incurred or in which the service is performed. Details of the transactions related to this account are as follows:

(in thousands of dollars) 2018 2017
Opening balance $6,831 $7,116
Amounts received
Donations 1 2
Cost sharing project deposits 11,899 2,578
Revenue recognized (2,632) (2,865)
Closing balance $16,099 $6,831

7. Lease obligation for tangible capital assets

Environment and Climate Change Canada has entered into agreements to lease certain equipment under capital leases with a cost of $18,199 thousand and accumulated amortization of $11,647 thousand as at March 31, 2018 ($18,199  thousand of cost and $10,919 thousand in accumulated amortization respectively as at March 31, 2017).  The obligations related to the upcoming years include Carleton University for which, on October 13, 2000, Environment and Climate Change Canada entered into an agreement to rent office laboratory space for the National Wildlife Research Centre (NWRC), at an annual cost of $1,300 thousand under a capital lease which expires in 2028.

(in thousands of dollars) 2018
Maturing year
2019 $1,300
2020 1,300
2021 1,300
2022 1,300
2023 1,300
2024 and subsequent
5,200
Total future minimum lease payments 11,700
Less: imputed interest ( 5.63% ) 2,714
Balance of obligation under leased tangible capital assets $8,986

8. Employee future benefits

(a) Pension benefits

Environment and Climate Change Canada'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 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 Economic Action Plan 2012, employee contributors have been divided into two groups - Group 1 related 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 2017-2018 expense amounts to $57,393 thousand ($55,858 thousand in 2016-2017).  For Group 1 members, the expense represents approximately 1.01 times (1.12 times in 2016-2017) the employee contributions and, for Group 2 members, approximately 1.00 times (1.08 times in 2016-2017) the employee contributions.

Environment and Climate Change Canada'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  the  Environment  and  Climate  Change  Canada'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, 2018, 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:

 

(in thousands of dollars) 2018 2017
Accrued benefit obligation, beginning of year $26,260 $36,426
Expense for the year 3,315 (7,385)
Benefits paid during the year (2,290) (2,781)
Accrued benefit obligation, end of year $27,285 $26,260

9. Accounts receivable and advances

The following table presents details of Environment and Climate Change Canada's accounts receivable and advances balances:

(in thousands of dollars) 2018 2017
Receivables - Other government departments and agencies $6,169 $5,234
Receivables - External parties 29,004 21,937
Employee advances 435 36
Subtotal 35,608 27,207
Allowance for doubtful accounts on receivables from external parties (251) (273)
Gross accounts receivable 35,357 26,934
Accounts receivable held on behalf of Government (4,208) (3,333)
Net accounts receivable $31,149 $23,601

10. Inventory

The following table presents details of the inventory:

(in thousands of dollars) 2018 2017
Printed material, books, maps and forms   
$20 $20
Stationery and office paper supplies 201 348
Meteorological supplies 16,894 17,536
Electric lighting 54 81
Compressed gases and acetylene 9
7
Chemicals and related products 5
6
Scientific & technical equipment 827
684
Radar Equipment 4,050 4,235
General purpose machinery and equipment 4 -
Computer equipment 118 2,615
Laboratory materials and supplies 269
174
Test vehicles 3,446 3,157
Total inventory $25,897 $28,863
Inventory is valued using the moving average price.

11. Tangible capital assets

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
Buildings 25 to 40 years
Works and Infrastructure 20 to 40 years
Machinery and Equipment 2 to 30 years
Vehicles 3 to 25 years
Leasehold Improvements Lesser of the remaining term of lease or useful life of the improvement
Leased tangible capital assets Over term of lease/useful life
Assets under construction are recorded in the applicable asset class in the year they are put into service and are not amortized until they are put into service.
Cost
(in thousands of dollars) 2017 Acquisitions Adjustments(3) Disposals and Write-offs 2018
Land $24,336 - - $9 $24,327
Buildings 217,435 25 (23) 73 217,364
Works and infrastructure 36,640 33 (53) -
36,620
Machinery and equipment 496,553 11,466 12,356 44,780 475,595
Vehicles(2) 41,058 1,649 268 1,864 41,111
Leasehold improvements 39,982 -
164 -
40,146
Assets under construction(1) 120,023 49,322 (11,489) 3,498 154,358
Leased tangible capital asset - building 18,199 -
-
-
18,199
  $994,226 $62,495 $1,223 $50,224 $1,007,720
Accumulated amortization
(in thousands of dollars) 2017 Amortization Adjustments(3) Disposals and Write-offs 2018
Buildings $140,338 $6,244 ($3) $58 $146,521
Works and infrastructure 10,503 1,693 ($10) - 12,186
Machinery and equipment 386,055 37,308 $451 44,013 379,801
Vehicles(2) 29,446 2,248 $248 1,682 30,260
Leasehold improvements 34,035 1,419 $19 - 35,473
Leased tangible capital asset - building 10,919 728 - - 11,647
  $611,296 $49,640 $705 $45,753 $615,888
Net book value
(in thousands of dollars) 2017 2018
Land $24,336 $24,327
Buildings 77,097 70,843
Works and infrastructure 26,137 24,434
Machinery and equipment 110,498 95,794
Vehicles(2) 11,612 10,851
Leasehold improvements 5,947 4,673
Assets under construction(1) 120,023 154,358
Leased tangible capital asset - building 7,280 6,552
Net Book Value $382,930 $391,832

(1) Assets under construction include: buildings, engineering works, software and other construction.

(2) Vehicles include: road motor vehicles, off road vehicles, aircraft, mobile laboratories, ships and boats.

(3)  Adjustments include assets under constructions of $11,607 thousand that were transferred to the other categories upon completion of the assets,  post- capitalization and write-offs for a net book value of $516 thousand reduced by transfers of tangible capital assets between departments with a net effect of $2 thousand on the departmental net financial position.

12. Contractual obligations and contractual rights

a) Contractual obligations

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

(in thousands of dollars) Operating leases Transfer payments Capital Assets Other Total
2019 $12,860 $104,411 $15,338 $18,416 $151,025
2020 12,860 59,103 17,810 6,700 96,473
2021 12,860 55,510 21,029 5,111 94,510
2022 12,860 66,031 2,544 111 81,546
2023 12,860 - 5,367 244 18,471
2024 and subsequent
282,920 - - 1,854 284,774
Total $347,220 $285,055 $62,088 $32,436 $726,799

b) Contractual rights

The activities of the department sometimes involve the negotiation of contracts or agreements with outside parties that result in the department having rights to both assets and revenues in the future. They principally involve leases of property, royalties, and sales of goods and services. Major contractual rights that will generate revenues in future years and that can be reasonably estimated are summarized as follows:

(in thousands of dollars) Leases of property Royalties Sales of goods and services Other Total
2019 - - $14,535 - $14,535
2020 - - 14,079 - 14,079
2021 - - 13,787 - 13,787
2022 - - 9,197 - 9,197
2023 - - - - -
2024 and subsequent
- - - - -
Total - - $51,598 - $51,598

13. Contingent liabilities and contingent asset

a) Contingent liabilities

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

Claims and litigation

Claims have been made against Environment and Climate Change Canada in the normal course of operations. These claims include items with pleading amounts and other for which no amount is specified. While the total amount claimed in these actions is significant, their outcomes are not determinable. Environment and Climate Change Canada has recorded an allowance for claims and litigations where it is likely that there will be a future payment and a reasonable estimate of the loss can be made. Claims and litigations for which the outcome is not determinable and a reasonable estimate can be made by management amount to approximately $25,680 thousand ($35,275 thousand in 2016-2017) at March 31, 2018.

b) Contingent asset

Environment and Climate Change Canada has entered into an Agreement in Principle to negotiate a settlement related to the remediation of a lease land. While the amount claimed in this action is significant, the outcome is not determinable.

14. Related party transactions

Environment and Climate Change Canada is related as a result of common ownership to all government departments, agencies, and Crown corporations. Related parties also include individuals who are members of key management personnel or close family members of those individuals, and entities controlled by, or under shared control of, a member of key management personnel or a close family member of that individual.

Environment and Climate Change Canada enters into transactions with these entities in the normal course of business and on normal trade terms.

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

During the year, Environment and Climate Change Canada 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 at the carrying value in the Department’s Statement of Operations and Departmental Net Financial Position as follows:

(in thousands of dollars) 2018 2017
Accommodation $50,293 $49,793
Employer's contribution to the health and dental insurance plans 55,796 49,419
Workers’ compensation 985 1,046
Legal services 628 887
Total $107,702 $101,145
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 and audit services provided by the Office of the Auditor General are not included in the Department’s Statement of Operations and Departmental Net Financial Position.

(b) Other transactions with other government departments and agencies:

(in thousands of dollars) 2018 2017
Accounts receivable $6,169 $5,234
Accounts payable 17,203 10,816
Expenses 218,400 185,111
Revenues 27,177 29,640
Expenses and revenues disclosed in (b) exclude common services provided without charge, which are already disclosed in (a).

15. Transfers from/to other government departments

During the year, Environment and Climate Change Canada transferred tangible capital assets with Agriculture and Agri-Food Canada, Natural Resources and Parks Canada with a net effect of -$2,107 ($198,199 in 2016-2017) on the departmental net financial position affecting categories under other vehicles and machinery and equipment. Environment and Climate Change Canada also transferred salary overpayments and emergency salary advances with a net effect of $62,295 ($0 in 2016-2017).

(in thousands of dollars) 2018
Assets:
Tangible capital assets (Note 11) ($2)
Salary overpayments and emergency salary advances 62
Total assets transferred 60
Adjustment to Environment and Climate Change Canada net financial position $60

16. Segmented information

Presentation by segment is based on Environment and Climate Change Canada'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 by strategic outcomes, by major object of expense and by major type of revenue. The segment results for the period are as follows:

(in thousands of dollars) Conservation of Canada's natural environment Weather Information Threats from pollution minimized Internal Services 2018 2017
Operations and administration
Salaries and employee benefits $202,660 $172,954 $210,223 $178,400 $764,237 $641,072
Professional and special services 47,122 8,721 28,981 21,635 106,459 96,350
Accommodation 16,508 10,857 14,938 12,836 55,139 53,268
Amortization of tangible capital assets 9,848 21,913 12,040 5,839 49,640 44,891
Other contracted services 4,964 12,354 2,588 5,984 25,890 25,648
Materials and supplies 8,750 5,750 7,029 2,229 23,758 24,956
Rentals 7,865 2,917 1,366 33,373 45,521 26,058
Travel 10,991 6,349 7,077 3,119 27,536 25,371
Machinery & equipment 7,363 1,729 3,810 2,797 15,699 10,430
Net loss on disposals, write-off and adjustments to tangible capital assets 574 1,679 638 411 3,302 6,523
Environmental liabilities expenditures - - (2,093) - (2,093) 54,185
Equipment repair and maintenance 3,383 2,856 2,107 1,159 9,505 10,018
Postage 1,599 1,075 590 441 3,705 4,041
Information services – communications 1,083 430 2,589 749 4,851 4,996
Telecommunications 436 529 71 1,062 2,098 1,978
Earmarked fees and levies 2,008 - - - 2,008 1,911
Other 2,298 8,719 1,285 3,426 15,728 8,173
Total Operations and administration 327,452 258,832 293,239 273,460 1,152,983 1,039,869
Transfer payments
Non-profit organizations 84,707 1,888 69,799 - 156,394 116,443
Other countries and international organizations 2,245 5,635 19,691 - 27,571 24,041
Other levels of governments within Canada 6,106 155 8,093 - 14,354 8,449
Other to individuals 177 6 - - 183 218
Industry 386 - 668 - 1,054 486
Total Transfer payments 93,621 7,684 98,251 - 199,556 149,637
Total Expenses 421,073 266,516 391,490 273,460 1,352,539 1,189,506
Revenues
Sales of goods and services 41,531 36,630 3,095 765 82,021 77,968
Other revenues 15,949 3,655 508 582 20,694 18,413
Revenues earned on behalf of Government (6,075) (3,401) 139 (978) (10,315) (10,977)
Total Revenues 51,405 36,884 3,742 369 92,400 85,404
Net cost of operations $369,668 $229,632 $387,748 $273,091 $1,260,139 $1,104,102

17. Comparative information

Certain comparative figures have been reclassified to conform to the current year's presentation.

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