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Agriculture and Agri-Food Canada Consolidated Financial Statements (Unaudited) for the year ended March 31, 2018

Financial Statements (Unaudited) For the year ending March 31, 2018 (PDF, 490 KB)

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Statement of Management Responsibility Including Internal Control over Financial Reporting

Responsibility for the integrity and objectivity of the accompanying consolidated financial statements for the year ended March 31, 2018, and all information contained in these statements rests with the management of Agriculture and Agri-Food Canada. These consolidated financial statements have been prepared by management using the Government of Canada'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 consolidated financial statements. Some of the information in the consolidated 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 Agriculture and Agri-Food Canada's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in Agriculture and Agri-Food Canada's Departmental Results Report, is consistent with these consolidated financial statements.

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

Management seeks to ensure the objectivity and integrity of data in its consolidated 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 Agriculture and Agri-Food Canada and through conducting an annual risk-based assessment of the effectiveness of the system of internal control over financial reporting.

The system of internal control over financial reporting is designed to mitigate risks to a reasonable level based on an ongoing process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.

A risk-based assessment of the system of internal control over financial reporting for the year ended March 31, 2018 was completed in accordance with the Treasury Board Policy on Financial Management and the results and action plans are summarized in the Annex.

The effectiveness and adequacy of Agriculture and Agri-Food Canada's system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of Agriculture and Agri-Food Canada's operations, and by the Departmental Audit Committee, which oversees management's responsibilities for maintaining adequate control systems and the quality of financial reporting.

The consolidated financial statements of Agriculture and Agri-Food Canada have not been audited.

Chris Forbes, Deputy Minister
Ottawa, Canada
September 4, 2018

Pierre Corriveau, Chief Financial Officer

Consolidated Statement of Financial Position (Unaudited)
As at March 31
(in thousands of dollars)
2018 2017
Liabilities
Accounts payable and accrued liabilities (Note 4) $843,403 $950,071
Vacation pay and compensatory leave 29,797 26,169
Environmental liabilities (Note 5) 6,630 3,423
Deferred revenue (Note 6) 17,711 17,518
Employee future benefits (Note 7) 17,880 19,194
Other liabilities (Note 8) 53,479 53,339
Total liabilities 968,900 1,069,714
Financial assets
Due from Consolidated Revenue Fund 849,179 958,419
Accounts receivable and advances (Note 9) 34,718 39,391
Loans receivable (Note 10) 261,060 265,587
Total gross financial assets 1,144,957 1,263,397
Financial assets held on behalf of Government
Accounts receivable and advances (Note 9) (1,818) (460)
Loans receivable (Note 10) (261,060) (265,587)
Total financial assets held on behalf of Government (262,878) (266,047)
Total net financial assets 882,079 997,350
Departmental net debt 86,821 72,364
Non-financial assets
Prepaid expenses and inventory 4,950 4,729
Tangible capital assets (Note 11) 423,720 412,924
Total non-financial assets 428,670 417,653
Departmental net financial position (Note 12) $341,849 $345,289

Contractual obligations (Note 13)

Contingent liabilities and contingent assets (Note 14)

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

Chris Forbes, Deputy Minister
Ottawa, Canada
September 4, 2018

Pierre Corriveau, Chief Financial Officer

Consolidated Statement of Operations and Departmental Net Financial Position (Unaudited)
For the year ended March 31
(in thousands of dollars)
2018
Planned Results
2018 2017
Expenses
Business Risk Management $1,346,903 $974,469 $1,317,160
Science, Innovation, Adoption and Sustainability 496,491 556,320 535,343
Internal Services 248,736 301,454 286,613
Market Access, Negotiations, Sector Competitiveness, and Assurance Systems 173,955 193,044 151,468
Industry Capacity 71,393 59,573 414,511
Canadian Pari-Mutuel Agency 10,563 9,414 9,350
Farm Products Council of Canada 2,785 2,593 2,813
Expenses Incurred on behalf of Government (24) (19) (28)
Total expenses 2,350,802 2,096,848 2,717,230
Revenues
Sale of goods and services 68,962 73,350 75,163
Interest 13,512 14,429 12,666
Joint project and cost sharing agreements 7,268 7,958 7,067
Crop Reinsurance Fund 700 2,428 1,409
Gain on disposal of assets 3,506 2,326 3,844
Revenues earned on behalf of Government (25,468) (35,991) (33,842)
Total revenues 68,480 64,500 66,307
Net cost of operations before government funding and transfers 2,282,322 2,032,348 2,650,923
Government funding and transfers
Net cash provided by Government of Canada 2,077,507 2,480,484
Change in due from Consolidated Revenue Fund (109,240) 127,606
Services provided without charge by other government departments (Note 15) 60,588 56,552
Transfer of the transition payments for implementing salary payments in arrears (4) (1)
Other transfers of assets between other government departments 57 17
Net cost of operations after government funding and transfers 3,440 (13,735)
Departmental net financial position - Beginning of year 345,289 331,554
Departmental net financial position - End of year $341,849 $345,289

Segmented information (Note 16)

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

Consolidated Statement of Change in Departmental Net Debt (Unaudited)
For the year ended March 31
(in thousands of dollars)
2018 2017
Net cost of operations after government funding and transfers $3,440 $(13,735)
Change due to tangible capital assets
Acquisition of tangible capital assets 59,523 87,380
Amortization of tangible capital assets (39,874) (40,885)
Proceeds from disposal of tangible capital assets (2,706) (4,347)
Net (loss) or gain on disposal of tangible capital assets including adjustments (6,220) (19,363)
Non-cash changes of tangible capital assets 79 (363)
Transfer (to) / from other government departments (6) 17
Total change due to tangible capital assets 10,796 22,439
Change due to prepaid expenses and inventory 221 472
Net increase (decrease) in departmental net debt 14,457 9,176
Departmental net debt - Beginning of year 72,364 63,188
Departmental net debt - End of year $86,821 $72,364
The accompanying notes form an integral part of these consolidated financial statements.
Consolidated Statement of Cash Flows (Unaudited)
For the year ended March 31
(in thousands of dollars)
2018 2017
Operating activities
Net cost of operations before government funding and transfers $2,032,348 $2,650,923
Non-cash items:
Amortization of tangible capital assets (39,874) (40,885)
Gain (Loss) on disposal of tangible capital assets (6,220) (19,363)
Non-cash changes of tangible capital assets 79 (363)
Services provided without charge by other government departments (Note 15) (60,588) (56,552)
Transition payments for implementing salary payments in arrears 4 1
Other transfers of assets from other government departments (63) -
Variations in Consolidated Statement of Financial Position:
Increase (decrease) in accounts receivable and advances (6,031) (19,392)
Increase (decrease) in prepaid expenses and inventory 221 472
Decrease (increase) in accounts payable and accrued liabilities 106,668 (121,697)
Decrease (increase) in vacation pay and compensatory leave (3,628) (2,388)
Decrease (increase) in environmental liabilities (3,207) 1,414
Decrease (increase) in deferred revenue (193) (1,437)
Decrease (increase) in employee future benefits 1,314 5,365
Decrease (increase) in other liabilities (140) 1,353
Cash used in operating activities 2,020,690 2,397,451
Capital investing activities
Acquisition of tangible capital assets 59,523 87,380
Proceeds from disposal of tangible capital assets (2,706) (4,347)
Cash used in capital investing activities 56,817 83,033
Net cash provided by Government of Canada $2,077,507 $2,480,484

- represents zero

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

Notes to the Consolidated Financial Statements (Unaudited)
For the year ended March 31
(tabular amounts in thousands of dollars)

Note 1 - Authority and objectives

The Department of Agriculture and Agri-Food was established in 1868. Under the Department of Agriculture and Agri-Food Act, the Minister is responsible for agriculture, products derived from agriculture and research related to agriculture, and products derived from agriculture including the operation of experimental farm stations unless they have been assigned by law to another department, board, or agency.

The Department provides information, research and technology, and policies and programs to achieve security of the food system, health of the environment and innovation for growth.

Business Risk Management

Agriculture and Agri-Food Canada has a comprehensive suite of Business Risk Management programs to better equip producers with the tools and capacity to manage business risks. This suite provides support for income losses, a disaster-relief framework and insurance to protect farmers against production losses due to uncontrollable natural hazards, as well as research, development, implementation, and administration of new agricultural risk management tools. In addition to the Business Risk Management suite, Agriculture and Agri-Food Canada provides producers with the ability to market their products when conditions and prices may be more favourable through loan guarantee programs.

Science, Innovation, Adoption and Sustainability

Agriculture and Agri-Food Canada contributes to innovation and sustainability of the agriculture, agri-food and agri-based products sector through science and associated activities designed to improve profitability in new and existing products, services, processes, and markets. Agriculture and Agri-Food Canada provides research, development and knowledge transfer that enhance the sector's resiliency, fosters new areas of opportunity for the sector and supports sector competitiveness, as well as coordinated and informed decision making. Agriculture and Agri-Food Canada promotes integrated planning, engaging industry, government and academia, and collaborative action to accelerate the flow of science and technology along the innovation continuum in support of industry-defined strategies for future success. Farmers, agri-entrepreneurs and agri-based enterprises are supported in their efforts to adopt new technologies and commercialize new products and services. Pathfinding and transformational research help to define future sustainable opportunities and prepare the sector for emerging opportunities and challenges.

Internal Services

Internal Services are those groups of related activities and resources that the federal government considers to be services in support of programs and/or required to meet corporate obligations of an organization. Internal Services refers to the activities and resources of the 10 distinct service categories that support Program delivery in the organization, regardless of the Internal Services delivery model in a department. The 10 service categories 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; Material Services; and Acquisition Services.

Market Access, Negotiations, Sector Competitiveness, and Assurance Systems

Agriculture and Agri-Food Canada supports and equips industry for commercial success in order to maximize the sector's long-term profitability and competitiveness. In pursuing this objective, and in close collaboration with the Canadian agriculture, agri-food and agri-based products sector, Agriculture and Agri-Food Canada works to enhance access to markets, facilitates industry-led activities aimed at developing international markets and assurance systems, and provides information to help position industry to capitalize on market opportunities both at home and abroad. Assurance systems include systems, standards and tools for food safety, biosecurity, traceability, surveillance, animal welfare, and other market attributes.

Industry Capacity

This program helps build the capacity of the sector and businesses to sustainably succeed in a market-driven and competitive world. The program encourages the use of sound business management practices, while also enabling businesses in the sector to understand their financial situation, be profitable and invest where needed. It provides for enhanced participation by young or new entrants, First Nations clients, and clients in specific sub-sectors in transition. The program also supports the sector and its businesses to improve access to key infrastructure.

Canadian Pari-Mutuel Agency

Section 204 of the Criminal Code of Canada designates the Minister of Agriculture and Agri-Food responsible for making the regulations that direct the lawful conduct of pari-mutuel betting in Canada on horse racing. The Canadian Pari-Mutuel Agency is a special operating agency within Agriculture and Agri-Food Canada that approves and supervises pari-mutuel betting conducted at racetracks and betting theatres across Canada, with the objective of ensuring that betting is conducted in a way that is fair to the betting public. Costs associated with the activities of the Canadian Pari-Mutuel Agency are recovered through a levy on every dollar bet in Canada on horse races. The levy is currently set at eight-tenths of a cent of every dollar bet. Canadian Pari-Mutuel Agency's strategic plans are focused on regulating and supervising pari-mutuel betting on horse races in the most modern, effective and transparent manner.

Farm Products Council of Canada

Established under the Farm Products Agencies Act, the Farm Products Council of Canada is an oversight body that reports to Parliament through the Minister of Agriculture and Agri-Food (the Minister). The Farm Products Agencies Act provides for the creation of national marketing agencies, which are not subject to the Competition Act, as well as promotion and research agencies. The Farm Products Council of Canada supervises these agencies, and works with them to ensure that the supply management system for poultry and eggs and promotion-research activities for beef cattle work in the balanced interest of all stakeholders, from producers to consumers, and can evolve to respond to current and future challenges. The Farm Products Council of Canada also provides advice and recommendations to the Minister, collaborates with provincial supervisory boards and actively works with the Department and Agriculture and Agri-Food Portfolio organizations.

Note 2 - Summary of significant accounting policies

These consolidated 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:

  1. Parliamentary authorities
    The Department is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Department 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 Consolidated Statement of Operations and Departmental Net Financial Position and in the Consolidated 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 Consolidated Statement of Operations and Departmental Net Financial Position are the amounts reported in the Consolidated 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 Consolidated Statement of Operations and Departmental Net Financial Position and in the Consolidated Statement of Change in Departmental Net Debt because these amounts were not included in the 2017-18 Departmental Plan.

  2. Consolidation
    These consolidated financial statements include the accounts of the sub‑entities for which the Deputy Minister is accountable for. The accounts of these sub-entities have been consolidated with those of the Department, and all inter‑organizational balances and transactions have been eliminated. The accounting entity comprises the Department of Agriculture and Agri‑Food, the Farm Products Council of Canada and the Canadian Pari-Mutuel Agency. The consolidated financial statements do not include the accounts of the Canadian Grain Commission, the Canadian Dairy Commission and Farm Credit Canada because they are not under the control of Agriculture and Agri‑Food Canada and therefore are not consolidated.

  3. Net Cash Provided by Government
    The Department operates within the Consolidated Revenue Fund, which is administered by the Receiver General for Canada. All cash received by the Department is deposited to the Consolidated Revenue Fund, and all cash disbursements made by the Department are paid from the Consolidated Revenue Fund. The net cash provided by Government is the difference between all cash receipts and all cash disbursements, including transactions between departments of the Government.

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

  5. 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 occurred.
    • Revenues that are non-respendable are not available to discharge the Department's liabilities. While the Deputy Minister is expected to maintain accounting control, he or she has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented as a reduction to the entity's gross revenues.
  6. Expenses
    • Transfer payments are recorded as an expense in the year the transfer is authorized and all 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 the employer's contribution to the health and dental insurance plans, accommodation, legal services, and workers' compensation are recorded as operating expenses at their carrying value.
  7. Employee future benefits
    1. Pension benefits – Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. The Department's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. The Department's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the consolidated financial statements of the Government of Canada, as the Plan's sponsor.
    2. 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.
  8. Accounts and loans receivable
    Accounts and loans receivable are initially recorded at cost and where necessary, are discounted to reflect their concessionary terms. Concessionary terms of loans include cases where loans are made on a long-term, low interest or interest-free basis. Transfer payments that are unconditionally repayable are recognized as loans receivable. When necessary, an allowance for valuation is recorded to reduce the carrying value of accounts and loans receivable to amounts that approximate their net recoverable value.

  9. Tangible capital 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 collections and Crown land to which no acquisition cost is attributable; and intangible assets.

  10. Contingent liabilities
    Contingent liabilities, including the allowance for loan and price guarantees, 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.
    For loan and price guarantees, an allowance is recorded when it is likely that a payment will be made to honour a guarantee and where the amount of the anticipated loss can be reasonably estimated. The amount of the allowance for losses is determined based on historical loss experience and economic conditions adversely affecting the capacity of borrowers to reimburse the loan. The allowance is reviewed on a regular basis with any changes being charged or credited to current year expenses.

  11. 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 event is likely to occur or fail to occur, the contingent asset is disclosed in the notes to the financial statements.

  12. 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 Department 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 Department'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.

    If the likelihood of the Department's responsibility is not determinable, a contingent liability is disclosed in the notes to the consolidated statements.

  13. Measurement uncertainty
    The preparation of these consolidated 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 consolidated financial statements and accompanying notes at March 31. The estimates are based on facts and circumstances, historical experience, general economic conditions and reflect the Department'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 consolidated financial statements in the year they become known.

  14. 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.

Note 3 - Parliamentary authorities

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

  1. Reconciliation of net cost of operations to current year authorities used
    Reconciliation of net cost of operations to current year authorities used
    2018 2017
    Net cost of operations before government funding and transfers $2,032,348 $2,650,923
    Adjustments for items affecting net cost of operations but not affecting authorities:
    Amortization of tangible capital assets (39,874) (40,885)
    Gain (Loss) on disposal of tangible capital assets (6,220) (19,363)
    Non-cash changes of tangible capital assets 79 (363)
    Services provided without charge by other government departments (60,588) (56,552)
    Increase (decrease) in prepaid and inventory 221 472
    Decrease (increase) in vacation pay and compensatory leave (3,628) (2,388)
    Decrease (increase) in accrued liabilities (11,417) (2,217)
    Decrease (increase) in environmental liabilities (3,207) 1,414
    Decrease (increase) in employee future benefits 1,450 5,461
    Decrease (increase) in allowances for bad debt expenses (6,262) (14,664)
    Refund and adjustment of prior years' expenditures 19,186 (2,784)
    Respendable revenue 7,376 5,531
    Other 5,299 8,416
    Total items affecting net cost of operations but not affecting authorities (97,585) (117,922)
    Adjustments for items not affecting net cost of operations but affecting authorities:
    Acquisitions of tangible capital assets 59,523 87,380
    Proceeds from disposal of tangible capital assets (2,706) (4,347)
    Transition payments for implementing salary payments in arrears 4 1
    Increase (decrease) in accounts receivable and advances 3,080 2,374
    Increase (decrease) in loan receivables (9,766) (3,499)
    Total items not affecting net cost of operations but affecting authorities 50,135 81,909
    Current year authorities used $1,984,898 $2,614,910
  2. Authorities provided and used
    2018 2017
    Authorities Provided:
    Vote 1 - Operating expenditures $606,697 $913,242
    Vote 5 - Capital expenditures 80,136 97,479
    Vote 10 - Transfer payments 394,758 373,327
    Statutory amounts 993,717 1,319,899
    Total 2,075,308 2,703,947
    Less:
    Authorities available for future years 19,942 18,519
    Lapsed authorities 70,468 70,518
    Total 90,410 89,037
    Current year authorities used $1,984,898 $2,614,910

Note 4 - Accounts payable and accrued liabilities

The following table presents details of the Department's accounts payable and accrued liabilities:

2018 2017
Accounts payable to other government departments and agencies $12,390 $9,825
Accounts payable to external parties 785,044 900,816
Total accounts payable 797,434 910,641
Accrued liabilities 45,969 39,430
Total accounts payable and accrued liabilities $843,403 $950,071

Note 5 - Environmental liabilities

Remediation of contaminated sites

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.

The Department has identified a total of 120 sites (149 sites in 2017) where contamination may exist and assessment, remediation and monitoring may be required. Of these, the Department has identified 11 sites (14 sites in 2017) where action is required and for which a liability of $4,752,589 ($1,693,389 in 2017) has been recorded. This liability estimate has been determined based on site assessments performed by environmental experts.

In addition, there are 47 sites that have not been assessed by environmental experts (50 sites in 2017) for which the department has estimated and recorded a liability of $1,877,866 ($1,729,699 in 2017).

These two estimates combined, totalling $6,630,455 ($3,423,088 in 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 62 sites (85 sites in 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, the Department 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 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% for a 2 year term to 2.24% for a 30 or greater year term.

Nature and Source of Liability 2018
Nature and Source Total Number of Sites Number of Sites with a liability Estimated Liability Estimated Total Undiscounted Expenditures Estimated Recoveries
Fuel Related Practices[1] 55 25 1,324 1,377 -
Landfills/Waste Sites[2] 40 16 879 909 -
Engineered Asset/Air and Land Transportation[3] 14 9 328 344 -
Other[4] 11 8 4,099 4,275 -
Totals 120 58 6,630 6,905 -

- represents zero

  • [1] Contamination primarily associated with fuel storage and handling, for example accidental spills related to fuel storage tanks or former fuel handling practices, for example petroleum hydrocarbons, polyaromatic hydrocarbons and BTEX (benzene, toluene, ethylbenzene and xylenes).
  • [2] Contamination associated with former landfill/waste site or leaching from materials deposited in the landfill/waste site, for example metals, petroleum hydrocarbons, BTEX, other organic contaminants, etc.
  • [3] Contamination associated with the operations of engineered assets such as airports, railways and roads where activities such as fuel storage/handling, waste sites, firefighting training facilities and chemical storage areas resulted in former or accidental contamination, for example metals, petroleum hydrocarbons, polyaromatic hydrocarbons, BTEX and other organic contaminants. Sites often have multiple sources of contamination.
  • [4] Contamination from other sources, for example use of pesticides, herbicides, fertilizers at agricultural sites; use of PCBs, firefighting training areas, firing ranges and training facilities, etc.
Nature and Source of Liability 2017
Nature and Source Total Number of Sites Number of Sites with a liability Estimated Liability Estimated Total Undiscounted Expenditures Estimated Recoveries
Fuel Related Practices[1] 75 40 1,689 1,717 -
Landfills/Waste Sites[2] 52 13 604 612 -
Engineered Asset/Air and Land Transportation[3] 8 2 325 328 -
Other[4] 14 9 805 821 -
Totals 149 64 3,423 3,478 -

- represents zero

  • [1] Contamination primarily associated with fuel storage and handling, for example accidental spills related to fuel storage tanks or former fuel handling practices, for example petroleum hydrocarbons, polyaromatic hydrocarbons and BTEX (benzene, toluene, ethylbenzene and xylenes).
  • [2] Contamination associated with former landfill/waste site or leaching from materials deposited in the landfill/waste site, for example metals, petroleum hydrocarbons, BTEX, other organic contaminants, etc.
  • [3] Contamination associated with the operations of engineered assets such as airports, railways and roads where activities such as fuel storage/handling, waste sites, firefighting training facilities and chemical storage areas resulted in former or accidental contamination, for example metals, petroleum hydrocarbons, polyaromatic hydrocarbons, BTEX and other organic contaminants. Sites often have multiple sources of contamination.
  • [4] Contamination from other sources, for example use of pesticides, herbicides, fertilizers at agricultural sites; use of PCBs, firefighting training areas, firing ranges and training facilities, etc.

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

Note 6 - Deferred revenue

Deferred revenue represents the balance at year end of unearned revenues stemming mainly from joint collaborative agreements and cost-sharing agreements which are restricted to fund the expenditures related to specific research projects and 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:

2018 2017
Opening balance $17,518 $16,081
Amounts received 8,151 8,518
Revenue recognized (7,958) (7,081)
Closing balance $17,711 $17,518

Note 7 - Employee future benefits

  1. Pension benefits

    The Department'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 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 2017-18 expense amounts to $41,296,225 ($40,169,194 in 2016-17). For Group 1 members, the expense represents approximately 1.01 times (1.12 times in 2016-17) the employee contributions and, for Group 2 members, approximately 1.00 times (1.08 times in 2016-17) the employee contributions.

    The Department'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.

  2. Severance benefits

    Severance benefits provided to the Department'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:

    Severance benefits
    2018 2017
    Accrued benefit obligation - Beginning of year $19,194 $24,559
    Expense for the year 1,233 (2,278)
    Benefits paid during the year (2,547) (3,087)
    Accrued benefit obligation - End of year $17,880 $19,194

Note 8 - Other liabilities

The Department holds funds in trust from the AgriInvest program, the AgriStability program as well as security and other deposits.

AgriInvest is a producer savings account program that replaces the coverage for smaller income declines that was provided by previous programs. Program payments are cost‑shared with the province or territory which producers can withdraw under specific terms and conditions. Since 2010, producers now make their AgriInvest deposits at a participating financial institution of their choice. As such, existing funds held by the federal government are being transferred to the producers' AgriInvest accounts held at the financial institutions.

The AgriStability program helps producers protect their farming operations against larger drops in income. Program payments are shared 60% federally and 40% provincially/territorially. The provincial/territorial share of the contributions and interest paid on the contributions are held in a specified purpose account until the producers draw down their funds.

AgriInvest, AgriStability and security and other deposit account activity during the year was as follows:

AgriInvest, AgriStability and security deposit account activity
2018 2017
Opening balance $53,339 $54,692
Deposits 284,265 297,052
Withdrawals (284,125) (298,405)
Ending balance $53,479 $53,339

Note 9 - Accounts receivable and advances

The following table presents details of the Department's accounts receivable and advances balances:

2018 2017
Receivables from other government departments and agencies $11,954 $17,033
Receivables from external parties 45,445 46,320
Employee advances 72 75
Subtotal 57,471 63,428
Allowance for doubtful accounts on receivables from external parties (22,753) (24,037)
Gross accounts receivable 34,718 39,391
Accounts receivable held on behalf of Government 1,888 505
Allowance for doubtful accounts held on behalf of Government (70) (45)
Net accounts receivable held on behalf of Government 1,818 460
Net accounts receivable $32,900 $38,931

Note 10 - Loans receivable

The following table presents details of the Department's loans receivable balances:

2018 2017
Unconditionally repayable contributions $143,474 $135,517
Loans resulting from loan guarantee programs 289,442 306,855
Subtotal 432,916 442,372
Less: Allowance for uncollectibility (171,856) (176,785)
Gross loans receivable 261,060 265,587
Loans receivable held on behalf of Government 261,060 265,587
Net loans receivable $ - $ -
- represents zero
  1. Unconditionally repayable contributions

    Unconditionally repayable contributions relate to contributions made to outside parties which are repayable based on conditions specified in the contribution agreement that have come into being. An allowance of $17,789,000 ($14,532,000 in 2017) has been recorded.

  2. Loans resulting from loan guarantee programs

    The Department's loan receivables are the result of the exercise of loan guarantees by the initial lender under the terms of various loan guarantee programs. These loans are in default with the initial lender and due immediately to the Department. Interest rates on these loans vary according to the initial terms of the loans and applicable government regulations. An allowance of $154,067,000 ($162,253,000 in 2017) relating to these loans has been recorded.

Note 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:

Tangible capital assets
Asset Class Amortization Period
Buildings 20 to 30 years
Works and infrastructure 15 to 40 years
Machinery and equipment 3 to 20 years
Vehicles 7 to 25 years
Computer hardware and software 3 to 5 years
Leasehold improvements Over the useful life of the improvement or the lease term, whichever is shorter
Assets under construction Once in service, in accordance with asset type

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.

Tangible capital assets - Cost
Capital Asset Class Opening Balance Acquisitions Adjustments[1] Disposals and Write-Offs Closing Balance
Land $12,922 $- $8 $9 $12,921
Buildings 681,467 209 33,210 5,576 709,310
Works and infrastructure 37,127 133 3,441 7,285 33,416
Machinery and equipment 225,504 15,633 167 4,771 236,533
Vehicles 67,837 3,529 (75) 3,991 67,300
Computer hardware and software 49,939 277 (177) 219 49,820
Leasehold improvements 29,212 - 5,980 2,727 32,465
Assets under construction 70,484 39,742 (42,779) - 67,447
Total $1,174,492 $59,523 $(225) $24,578 $1,209,212
- represents zero

[1] Adjustments of $42,779,000 include assets under construction of $42,713,000 that were transferred to the other categories upon completion of the assets.

Tangible capital assets - Accumulated Amortization
Capital Asset Class Opening Balance Amortization Adjustments[1] Disposals and Write-Offs Closing Balance
Land $- $- $- $- $-
Buildings 481,136 17,757 52 4,211 494,734
Works and infrastructure 17,122 1,091 (90) 619 17,504
Machinery and equipment 149,675 13,201 32 4,609 158,299
Vehicles 46,040 4,326 (75) 3,752 46,539
Computer hardware and software 45,701 2,032 (167) 219 47,347
Leasehold improvements 21,894 1,467 (50) 2,242 21,069
Assets under construction - - - - -
Total $761,568 $39,874 $(298) $15,652 $785,492
- represents zero

[1] Adjustments of $42,779,000 include assets under construction of $42,713,000 that were transferred to the other categories upon completion of the assets.

Net Book Value - Tangible capital assets
Capital Asset Class 2018 2017
Land $12,921 $12,922
Buildings 214,576 200,331
Works and infrastructure 15,912 20,005
Machinery and equipment 78,234 75,829
Vehicles 20,761 21,797
Computer hardware and software 2,473 4,238
Leasehold improvements 11,396 7,318
Assets under construction 67,447 70,484
Total $423,720 $412,924

Note 12 - Departmental net financial position

A portion of the Department's net financial position is used for a specific purpose. Related revenues and expenses are included in the Consolidated Statement of Operations and Departmental Net Financial Position. The Department operates two programs which under legislation require that the revenues be earmarked to offset the expenses of the program.

The Crop Reinsurance Fund was established pursuant to the Farm Income Protection Act and provides insurance to participating provinces for costs they incur in operating crop insurance programs. The fund records receipts and disbursements under the terms of reinsurance agreements. When there are insufficient revenues to meet payments, the Minister of Finance may authorize an advance of additional funds to cover these obligations.

The Agricultural Commodities Stabilization Accounts were established pursuant to the Agricultural Stabilization Act, under which the commodity accounts formerly operated, and has since been repealed and replaced by the Farm Income Protection Act effective April 1, 1991. The purpose of these accounts was to reduce income loss to producers from market risks through stabilizing prices. Premiums were shared equally by the Government of Canada, the governments of participating provinces and participating producers. Current activities are limited to collection of accounts receivable.

Activity in the accounts is as follows:

2018 2017
Crop Reinsurance Fund - Restricted
Balance - Beginning of year - Restricted $296,862 $295,453
Revenues 2,428 1,409
Expenses - -
Balance - End of year - Restricted 299,290 296,862
Agricultural Commodities Stabilization Accounts - Restricted 647 647
Unrestricted 41,912 47,780
Departmental net financial position - End of year $341,849 $345,289
- represents zero

Note 13 - Contractual obligations

The nature of the Department's activities can 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. Significant non revocable contractual obligations that can be reasonably estimated are summarized as follows:

2019 2020 2021 2022 2023 2024 and thereafter Total
Transfer payments $202,731 $186,272 $184,894 $180,246 $180,246 $ - $934,389
- represents zero

Note 14 - Contingent liabilities and contingent assets

  1. 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 the Department 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. The Department records an allowance for claims and litigations when it is likely that there will be a future payment and a reasonable estimate of the loss can be made.

    Loan or price guarantees

    Authorized limit Outstanding guarantees Allowance as at March 31
    2018 2017 2018 2017
    Loans according to the Advance Payments Program under the Agricultural Marketing Programs Act $5,000,000 $1,269,711 $1,245,811 $43,600 $35,245
    Loans to farmers under the Canadian Agricultural Loans Act 3,000,000 100,548 103,675 1,006 1,037
    Price guarantee agreements with marketing agencies pursuant to the Price Pooling Program under the Agricultural Marketing Programs Act No limit - - - -
    National Biomass Ethanol Program 140,000 - 19,639 - -
    Total $1,370,259 $1,369,125 $44,606 $36,282
    - represents zero

    Under the Advance Payments Program of Agricultural Marketing Programs Act, the Department guarantees the repayment of advances made by producer organizations to farmers in the spring and in the fall, creating a more stable business environment. The maximum cash advance of the program is $400,000. The loans generally have a repayment term of 18 to 24 months.

    Under the Canadian Agricultural Loans Act, the Department guarantees loans by financial institutions to farmers for improvement and development of farms, and the processing, distribution or marketing of farm products. This program guarantees 95 percent of the value of loans provided to farms and co‑operatives by financial institutions. For individual applicants, including corporations, the maximum amount for a Canadian Agricultural Loans Act loan is $500,000. Most loans are repayable within ten years. For loans on land purchases, the repayment period is 15 years.

    Under the Price Pooling Program of the Agricultural Marketing Programs Act, the Department provides a price guarantee that protects marketing agencies and producers against unanticipated declines in the market price of their products.

    The Minister of Agriculture and Agri-Food is authorized to guarantee Line of Credit Agreements entered into by Farm Credit Canada under the National Biomass Ethanol Program.

    The allowance for losses is the amount recorded for estimated losses on outstanding loan guarantees and which is included in accrued liabilities. No allowance has been recorded for the Price Pooling Program of the Agricultural Marketing Programs Act and for the National Biomass Ethanol Program as no costs are likely to occur.

  2. Contingent assets

    Transfer payments - Conditionally repayable contributions

    Under the EcoAgriculture Biofuels Capital Initiative, conditionally repayable contributions which are outstanding in 2018 total $55,627,141 ($55,627,141 in 2017). Repayments are determined by a project's profitability, and have a maximum repayment period of 10 years. The final repayment is due no later than June 30, 2020.

    Under the Slaughter Improvement Program, conditionally repayable contributions which are outstanding in 2018 total $34,733,613 ($38,263,447 in 2017). Repayments are determined by a project's profitability, and have a maximum repayment period of 10 years. The final repayment is due no later than October 1, 2023.

    Under the Slaughter Waste Innovation Program, conditionally repayable contributions which are outstanding in 2018 total $17,031,338 ($18,417,207 in 2017). Repayments are determined by a project's profitability as well as whether and how a project demonstrates the destruction or deactivation of Specified Risk Material. Contributions have a maximum repayment period of 10 years. The final repayment is due no later than September 1, 2023.

    As these are conditionally repayable contributions, the amounts that will become repayable cannot be currently estimated as contribution agreements are subject to specific program requirements, which require annual determinations as to the value which must be repaid each year. Thus, to forecast a specific amount repayable each year is not possible due to the varying factors facing each recipient as it relates to their economic and production performances.

    Contingent recoveries

    AgriStability and Canadian Agricultural Income Stabilization programs are federally and provincially/territorially cost shared programs and the Canadian Agricultural Income Stabilization Inventory Transition Initiative is a federally funded program. When provincial/territorial governments deliver these programs and overpayments occur, the federal government is entitled to recover its share of funding if and when overpayments are recovered. The Department has estimated the contingent recoverable amount as $6,950,516 ($7,936,598 in 2017). Contingent recoveries are not recorded in the consolidated financial statements.

Note 15 - Related party transactions

The Department 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.

The Department enters into transactions with Government departments, agencies, and Crown Corporations in the normal course of business and on normal trade terms.

  1. Common services provided without charge by other government departments

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

    2018 2017
    Employer's contribution to the health and dental insurance plans $40,218 $35,514
    Accommodation 18,661 18,986
    Legal services 706 995
    Workers' compensation 1,003 1,057
    Total $60,588 $56,552

    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 Consolidated Statement of Operations and Departmental Net Financial Position.

  2. Other transactions with other government departments and agencies
    2018 2017
    Expenses $143,363 $177,635
    Revenues 18,244 18,351

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

Note 16 - Segmented information

Presentation by segment is based on the Department'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 expense and by major type of revenue. The segment results for the period are as follows:

BRM SIA&S IS MANSC&AS IC CPMA FPCC 2018 Total 2017 Total
Expenses
Transfer payments $908,299 $153,369 $- $120,960 $41,401 $- $- $1,224,029 $1,531,892
Salaries and employee benefits 24,142 277,839 164,342 53,344 14,108 3,368 2,025 539,168 474,014
Professional and other services 7,320 41,974 52,471 17,680 2,448 5,161 521 127,575 133,273
Allowance for loan guarantees and bad debts 34,366 6,273 - - (3) - - 40,636 49,394
Materials and supplies 160 36,815 7,874 513 897 110 37 46,406 43,910
Amortization of tangible capital assets - - 39,417 - - 457 - 39,874 40,885
Accommodation and other 154 10,383 37,237 372 325 169 10 48,650 411,405
Travel 16 861 89 8 - - - 974 836
Repairs and maintenance 12 12,322 73 85 214 142 - 12,848 14,508
Electricity and other public services - 16,484 (49) 82 183 7 - 16,707 17,141
Expenses incurred on behalf of Government - - (19) - - - - (19) (28)
Total expenses 974,469 556,320 301,435 193,044 59,573 9,414 2,593 2,096,848 2,717,230
Revenues
Sale of goods and services 1,280 31,922 18,418 - 11,847 9,883 - 73,350 75,163
Interest 13,598 112 697 4 1 17 - 14,429 12,666
Joint project and cost sharing agreements - - 7,958 - - - - 7,958 7,067
Crop Reinsurance Fund 2,428 - - - - - - 2,428 1,409
Gain on disposal of assets - - 2,326 - - - - 2,326 3,844
Revenues earned on behalf of Government (16,949) (7,503) (11,378) (4) (157) - - (35,991) (33,842)
Total revenues 357 24,531 18,021 - 11,691 9,900 - 64,500 66,307
Net cost of operations $974,112 $531,789 $283,414 $193,044 $47,882 $(486) $2,593 $2,032,348 $2,650,923

- represents zero

BRM – Business Risk Management; SIA&S – Science, Innovation, Adoption and Sustainability; IS – Internal Services; MANSC&AS – Market Access, Negotiations, Sector Competitiveness, and Assurance Systems; IC - Industry Capacity; CPMA – Canadian Pari-Mutuel Agency; FPCC – Farm Products Council of Canada

Note 17 - Comparative information

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

Annex to the Statement of Management Responsibility Including Internal Control Over Financial Reporting of Agriculture and Agri-Food Canada for Fiscal Year 2017-2018 (Unaudited)

Note to the Reader

Effective systems of internal control over financial reporting aim to achieve reliable financial statements and to provide assurances that:

The system of internal control over financial reporting is not designed to eliminate all risks, but rather to mitigate risk to a reasonable level with controls that are balanced with and proportionate to the risks they aim to mitigate.

The system of internal control over financial reporting is designed to mitigate risks to a reasonable level based on an on-going process to identify key risks, to assess the effectiveness of associated key controls and adjust as required, as well as to monitor the system in support of continuous improvement. As a result, the scope, pace and status of those departmental assessments of the effectiveness of their system of internal control over financial reporting will vary from one organization to another based on risks and taking into account their unique circumstances.

1. Introduction

This document provides summary information on the measures taken by Agriculture and Agri-Food Canada to maintain an effective system of internal control over financial reporting, including information on internal control management, assessment results and related action plans.

Detailed information on the Department's authority, mandate and program activities can be found in the Departmental Plan and Departmental Results Report.

2. Agriculture and Agri-Food Canada's System of Internal Control Over Financial Reporting

Agriculture and Agri-Food Canada recognizes the importance of setting the tone from the top to help ensure that staff at all levels understand their roles in maintaining effective systems of internal control over financial reporting and are well equipped to exercise these responsibilities effectively. Agriculture and Agri-Food Canada's focus is to ensure risks are well managed through a responsive and risk-based control environment that enables continuous improvement and innovation.

2.1 Internal Control Management

Agriculture and Agri-Food Canada has a well-established governance and accountability structure to support departmental assessment efforts and oversight of its system of internal control. A departmental internal control management framework, approved by the Deputy Minister, is in place and includes:

Key Positions, Roles and Responsibilities

Below are Agriculture and Agri-Food Canada's key positions and committees with responsibilities for maintaining and reviewing the effectiveness of its system of internal control over financial reporting.

Deputy Minister
Agriculture and Agri-Food Canada's Deputy Minister, as Accounting Officer, assumes overall responsibility and leadership for the measures taken to maintain an effective system of internal control. In this role, the Deputy Minister is advised by the Departmental Audit Committee and the Departmental Management Committee.
Chief Financial Officer (CFO)
Agriculture and Agri-Food Canada's CFO reports directly to the Deputy Minister and provides leadership for the coordination, coherence and focus on the design and maintenance of an effective and integrated system of internal control over financial reporting, including its annual assessment. Falling under the CFO responsibilities is also the management of the Corporate Risk Profile of Agriculture and Agri-Food Canada.
Senior Departmental Managers
Agriculture and Agri-Food Canada's senior departmental managers in charge of program delivery are responsible for maintaining and reviewing the effectiveness of the system of internal control over financial reporting falling within their mandate.
Chief Audit Executive (CAE)
Agriculture and Agri-Food Canada's CAE reports directly to the Deputy Minister and provides assurance through periodic internal audits which are instrumental to the maintenance of an effective system of internal control over financial reporting.
Departmental Audit Committee (DAC)
The DAC is an advisory committee that provides objective views on the Department's risk management, control and governance frameworks and processes. It is comprised of three external members and two ex-officio members, the Deputy Minister and Associate Deputy Minister. The DAC formally meets at least three times per year.
Departmental Management Committee (DMC)
The DMC is chaired by the Deputy Minister and serves as an executive forum to address departmental management and operational issues such as human resources, finance, assets, information management/information technology, and public affairs.
Policy and Programs Management Committee (PPMC)
The PPMC is chaired by the Deputy Minister and is responsible for guiding the development and implementation of cohesive and comprehensive policies, programs and services, and monitoring of results.
2.1.1 Key Measures taken by Agriculture and Agri-Food Canada

Agriculture and Agri-Food Canada's control environment also includes a series of measures to equip its staff to manage risks through raising awareness, providing appropriate knowledge and tools as well as developing skills. The most relevant are:

2.2 Service Arrangements relevant to financial statements

Agriculture and Agri-Food Canada relies on other organizations for the processing of certain transactions that are recorded in its financial statements as follows:

Common Service Arrangements
Specific Arrangements

3. Agriculture and Agri-Food Canada's assessment results during fiscal year 2017–2018

The Department has adopted an ongoing risk-based monitoring approach to support testing of internal control over financial reporting. Under this approach, all entity level controls, business cycle controls and information technology general controls are assigned a risk rating of high, medium, or low. High risk areas are assessed annually, medium risk at least every two years, and low risk, at least every three years.

3.1 New or significantly amended key controls

The implementation of the Phoenix payroll system by Public Services and Procurement Canada in February 2016 resulted in changes to control activities associated with the payroll process. As a result, Agriculture and Agri-Food Canada updated the internal control business process and control documentation for payroll and completed testing during 2017-18. No other material changes that would impact the departmental system of internal control over financial reporting were identified.

3.2 Ongoing Monitoring Program

Adopting the ongoing monitoring schedule outlined in the Department's Annex for 2016-17, Agriculture and Agri-Food Canada validated and reassessed internal controls in the following areas during 2017-18:

The ITGCs testing also included the SAP and PeopleSoft process and controls performed by the Department as an administrator and service provider under service arrangements to other federal government departments and agencies.

The testing period for these controls covered January 1, 2017 to December 31, 2017.

Based on areas assessed in the current year, no high risk findings were identified. Therefore, for the most part, the key controls that were tested performed as intended. Remediation points that were identified primarily focused on system access controls. All findings are followed-up on and where feasible, corrective actions were implemented shortly after adjustments were identified. Otherwise, management action plans either have been or are currently being developed to fully address the recommendations within a reasonable timeframe. A follow-up will be performed to ensure action plans are being implemented as planned.

4. Agriculture and Agri-Food Canada's action plan

4.1 Progress during fiscal year 2017–2018

The Department achieved its commitments for 2017-18 by completing activities as follows:

4.2 Action plan for the next fiscal year and subsequent years

Agriculture and Agri-Food Canada is positioned to take corrective measures to improve controls in the areas noted during testing this year. The Department will also proceed with documenting key controls in the areas of costing and investment planning in accordance with the draft Guide to Internal Control over Financial Management. In addition, the Department will continue with the ongoing risk-based monitoring of key internal controls based on the following cycle:

Business Processes
Key Control Areas Year 1
2018–2019
Year 2
2019–2020
Year 3
2020–2021
Higher Risk
(Annual)
Financial Close & Reporting X X X
Section 33 X X X
Forecasting X X X
Payroll X X X
Medium Risk
(2 year cycle)
Capital Assets X X
Low Risk
(3 year cycle)
AgriInsurance X
AgriStability/AgriInvest X
Budgeting X
Generic Grants and Contributions X
Loan Guarantees X
Operating Expenditures X
Revenues X
X: applicable
IT Processes
Key Control Areas Year 1
2018–2019
Year 2
2019–2020
Year 3
2020–2021
Higher Risk
(Annual)
PeopleSoft X X X
SAP (ECC/BW/BPC) X X X
Medium Risk
(2 year cycle)
Advance Payments Program Electronic Delivery
System (APPEDS)
X
Business Risk Management Suite (BRMS) X X
Production Insurance National Statistical
System (PINSS)
X X
Low Risk
(3 year cycle)
Entity Level Controls X
X: applicable
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