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Agriculture and Agri-Food Canada Consolidated Financial Statements (Unaudited) for the year ending March 31, 2020

Consolidated Financial Statements (Unaudited) For the year ending March 31, 2020 (PDF, 670 KB)

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, 2020, 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, 2020 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
October 7, 2020

Christine Walker, Chief Financial Officer

Consolidated Statement of Financial Position (Unaudited)
As at March 31
(in thousands of dollars)
2020 2019
Liabilities
Accounts payable and accrued liabilities (Note 4) $817,225 $859,956
Vacation pay and compensatory leave 36,512 29,208
Environmental liabilities (Note 5) 9,284 5,979
Deferred revenue (Note 6) 13,254 12,653
Employee future benefits (Note 7) 16,651 17,979
Other liabilities (Note 8) 57,043 59,405
Total liabilities 949,969 985,180
Financial assets
Due from Consolidated Revenue Fund 847,679 892,240
Accounts receivable and advances (Note 9) 38,359 35,962
Loans receivable (Note 10) 287,873 226,043
Total gross financial assets 1,173,911 1,154,245
Financial assets held on behalf of Government
Accounts receivable and advances (Note 9) (1,367) (2,006)
Loans receivable (Note 10) (287,873) (226,043)
Total financial assets held on behalf of Government (289,240) (228,049)
Total net financial assets 884,671 926,196
Departmental net debt 65,298 58,984
Non-financial assets
Prepaid expenses and inventory 1,465 1,452
Tangible capital assets (Note 11) 444,253 439,249
Total non-financial assets 445,718 440,701
Departmental net financial position (Note 12) $380,420 $381,717

Contractual obligations and contractual rights (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
October 7, 2020

Christine Walker, Chief Financial Officer

Consolidated Statement of Operations and Departmental Net Financial Position (Unaudited)
For the year ended March 31

(in thousands of dollars)
2020
Planned Results
2020 2019
Expenses
Sector Risk $1,511,632 $1,128,570 $1,136,371
Domestic and International Markets 241,810 623,757 290,056
Science and Innovation 566,140 544,097 526,559
Internal Services 271,253 303,436 284,400
Expenses incurred on behalf of Government (86) 39 (91)
Total expenses 2,590,749 2,599,899 2,237,295
Revenues
Sale of goods and services 65,354 63,980 66,591
Interest 11,453 13,147 11,221
Gain on disposal of assets 1,545 10,233 1,126
Joint project and cost sharing agreements 8,648 6,782 8,274
Miscellaneous revenues 1,864 2,139 2,180
Crop Reinsurance Fund 900 25 572
Revenues earned on behalf of Government (21,651) (41,761) (32,334)
Total revenues 68,113 54,545 57,630
Net cost of operations before government funding and transfers 2,522,636 2,545,354 2,179,665
Government funding and transfers
Net cash provided by Government of Canada 2,527,458 2,121,159
Change in due from Consolidated Revenue Fund (44,561) 43,061
Services provided without charge by other government departments (Note 15) 61,374 55,361
Other transfers of assets (to) / from other government departments (214) (48)
Net cost of operations after government funding and transfers 1,297 (39,868)
Departmental net financial position - Beginning of year 381,717 341,849
Departmental net financial position - End of year $380,420 $381,717

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)
2020 2019
Net cost of operations after government funding and transfers $1,297 $(39,868)
Change due to tangible capital assets
Acquisition of tangible capital assets 48,353 59,212
Amortization of tangible capital assets (42,805) (43,266)
Proceeds from disposal of tangible capital assets (10,390) (1,304)
Net (loss) or gain on disposal of tangible capital assets including adjustments 9,790 537
Non-cash changes of tangible capital assets 242 399
Transfer (to) / from other government departments (186) (49)
Total change due to tangible capital assets 5,004 15,529
Change due to prepaid expenses and inventory 13 (3,498)
Net increase (decrease) in departmental net debt 6,314 (27,837)
Departmental net debt - Beginning of year 58,984 86,821
Departmental net debt - End of year $65,298$58,984

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)
2020 2019
Operating activities
Net cost of operations before government funding and transfers $2,545,354 $2,179,665
Non-cash items:
Amortization of tangible capital assets (42,805) (43,266)
Gain (Loss) on disposal of tangible capital assets 9,790 537
Non-cash changes of tangible capital assets 242 399
Services provided without charge by other government departments (Note 15) (61,374) (55,361)
Other transfers of assets to / (from) other government departments 28 (1)
Variations in Consolidated Statement of Financial Position:
Increase (decrease) in accounts receivable and advances 3,036 1,056
Increase (decrease) in prepaid expenses and inventory 13 (3,498)
Decrease (increase) in accounts payable and accrued liabilities 42,731 (16,553)
Decrease (increase) in vacation pay and compensatory leave (7,304) 589
Decrease (increase) in environmental liabilities (3,305) 651
Decrease (increase) in deferred revenue (601) 5,058
Decrease (increase) in employee future benefits 1,328 (99)
Decrease (increase) in other liabilities 2,362 (5,926)
Cash used in operating activities 2,489,495 2,063,251
Capital investing activities
Acquisition of tangible capital assets 48,353 59,212
Proceeds from disposal of tangible capital assets (10,390) (1,304)
Cash used in capital investing activities 37,963 57,908
Net cash provided by Government of Canada $2,527,458 $2,121,159

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 through the following core responsibilities:

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:

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:

(a) Reconciliation of net cost of operations to current year authorities used
2020 2019
Net cost of operations before government funding and transfers $2,545,354 $2,179,665
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets (42,805) (43,266)
Gain (Loss) on disposal of tangible capital assets 9,790 537
Non-cash changes of tangible capital assets 242 399
Services provided without charge by other government departments (61,374) (55,361)
Increase (decrease) in prepaid expenses and inventory 13 (3,498)
Decrease (increase) in vacation pay and compensatory leave (7,304) 589
Decrease (increase) in accrued liabilities 755 26,766
Decrease (increase) in environmental liabilities (3,305) 651
Decrease (increase) in employee future benefits 1,360 (228)
Decrease (increase) in allowances for bad debt expenses 3,291 (13,386)
Refund and adjustment of prior years' expenditures 65,971 16,567
Respendable revenue 3,313 4,761
Other 13,602 12,165
Total items affecting net cost of operations but not affecting authorities (16,451) (53,304)
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisition of tangible capital assets 48,353 59,212
Proceeds from disposal of tangible capital assets (10,390) (1,304)
Increase (decrease) in accounts receivable and advances 1,373 2,362
Increase (decrease) in loans receivable (309) (28,685)
Total items not affecting net cost of operations but affecting authorities 39,027 31,585
Current year authorities used $2,567,930 $2,157,946
(b) Authorities provided and used
2020 2019
Authorities provided:
Vote 1 - Operating expenditures $610,572 $622,435
Vote 5 - Capital expenditures 63,036 68,942
Vote 10 - Transfer payment 477,341 426,625
Vote 15 - Budget Implementation 17,486 -
Statutory amounts 1,504,081 1,152,226
Total 2,672,516 2,270,228
Less:
Authorities available for future years 16,421 18,066
Lapsed authorities 88,165 94,216
Total 104,586 112,282
Current year authorities used $2,567,930 $2,157,946
- represents zero

Note 4 – Accounts payable and accrued liabilities

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

2020 2019
Accounts payable - Other government departments and agencies $15,228 $10,675
Accounts payable - External parties 785,279 831,441
Total accounts payable 800,507 842,116
Accrued liabilities 16,718 17,840
Total accounts payable and accrued liabilities $817,225 $859,956

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 63 sites (82 sites in 2018-2019) where contamination may exist and assessment, remediation and monitoring may be required. Of these, the Department has identified 14 sites (10 sites in 2018-2019) where action is required and for which a liability of $8,536,000 ($4,784,000 in 2018-2019) has been recorded. This liability estimate has been determined based on site assessments performed by environmental experts.

In addition, there are 17 sites that have not been assessed by environmental experts (26 sites in 2018-2019) for which the department has estimated and recorded a liability of $748,000 ($1,195,000 in 2018-2019).

These two estimates combined, totalling $9,284,000 ($5,979,000 in 2018-2019), 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 32 sites (46 sites in 2018-2019), no liability for remediation has been recognized. Some of these sites are closed and some 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, 2020 and March 31, 2019. When the liability estimate is based on a future cash requirement, the amount is adjusted for inflation using a forecast CPI rate of 2.0% (2.2% in 2018-2019). 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 2020 rates range from 0.45% for a 2 year term to 1.37% for a 30 or greater year term.

Nature and Source of Liability 2020
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) 24 13 563 575 -
Landfills/Waste Sites(2) 18 7 260 267 -
Engineered Asset/Air & Land Transportation(3) 11 2 68 70 -
Other(4) 10 7 8,393 8,476 -
Totals 63 29 9,284 9,388 -

- represents zero

(1) 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).

(2) Contamination associated with former landfill/waste site or leaching from materials deposited in the landfill/waste site, e.g. 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, e.g. metals, petroleum hydrocarbons, polyaromatic hydrocarbons, BTEX and other organic contaminants. Sites often have multiple sources of contamination.

(4) Contamination from other sources, e.g. 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 2019
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) 34 13 995 1,039 -
Landfills/Waste Sites(2) 27 6 417 443 -
Engineered Asset/Air & Land Transportation(3) 11 10 383 417 -
Other(4) 10 7 4,184 4,391 -
Totals 82 36 5,979 6,290 -

- represents zero

(1) 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).

(2) Contamination associated with former landfill/waste site or leaching from materials deposited in the landfill/waste site, e.g. 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, e.g. metals, petroleum hydrocarbons, polyaromatic hydrocarbons, BTEX and other organic contaminants. Sites often have multiple sources of contamination.

(4) Contamination from other sources, e.g. 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:

2020 2019
Opening balance $12,653 $17,711
Amounts received 7,383 3,225
Revenue recognized (6,782) (8,283)
Closing balance $13,254 $12,653

Note 7 – Employee future benefits

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 self-managed producer-government savings account that allows producers to set money aside which can be used to recover from small income shortfalls, or to make investments to reduce on-farm risks. Program payments are cost-shared with the province or territory, which producers can withdraw under specific terms and conditions. Producers make their AgriInvest deposits at a participating financial institution of their choice. 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:

2020 2019
Opening balance $59,405 $53,479
Deposits 257,842 296,153
Withdrawals (260,204) (290,227)
Ending balance $57,043 $59,405

Note 9 – Accounts receivable and advances

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

2020 2019
Receivables - Other government departments and agencies $14,291 $13,193
Receivables - External parties 33,819 36,629
Employee advances 131 108
Subtotal 48,241 49,930
Allowance for doubtful accounts on receivables from external parties (9,882) (13,968)
Gross accounts receivable 38,359 35,962
Accounts receivable held on behalf of Government 1,483 2,100
Allowance for doubtful accounts held on behalf of Government (116) (94)
Net accounts receivable held on behalf of Government 1,367 2,006
Net accounts receivable $36,992 $33,956

Note 10 – Loans receivable

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

2020 2019
Unconditionally repayable contributions $152,312 $140,071
Loans resulting from loan guarantee programs 271,127 262,219
Subtotal 423,439 402,290
Less: Allowance for uncollectibility (135,566) (176,247)
Gross loans receivable 287,873 226,043
Loans receivable held on behalf of Government 287,873 226,043
Net loans receivable $- $-
- represents zero

(a) 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 $25,666,000 ($28,243,000 in 2018-2019) has been recorded.

(b) 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 $109,900,000 ($148,004,000 in 2018-2019) 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:

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 $13,190 $- $214 $234 $13,170
Buildings 768,983 185 5,952 550 774,570
Works and infrastructure 37,443 35 2,510 - 39,988
Machinery and equipment 248,351 13,933 2,253 3,564 260,973
Vehicles 66,975 3,443 (472) 2,791 67,155
Computer hardware and software 49,735 236 78 180 49,869
Leasehold improvements 33,295 - 589 - 33,884
Assets under construction 39,587 30,521 (11,746) 244 58,118
Total $1,257,559 $48,353 $(622) $7,563 $1,297,727

- represents zero

(1) Adjustments include assets under construction of $11,746,000 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 513,423 20,562 (263) 550 533,172
Works and infrastructure 18,868 1,371 - - 20,239
Machinery and equipment 167,118 14,409 (35) 3,471 178,021
Vehicles 47,649 4,325 (369) 2,762 48,843
Computer hardware and software 48,774 649 (11) 180 49,232
Leasehold improvements 22,478 1,489 - - 23,967
Assets under construction - - - - -
Total $818,310 $42,805 $(678) $6,963 $853,474

- represents zero

(1) Adjustments include assets under construction of $11,746,000 that were transferred to the other categories upon completion of the assets.

Tangible capital assets - Net Book Value
Capital Asset Class 2020 2019
Land $13,170 $13,190
Buildings 241,398 255,560
Works and infrastructure 19,749 18,575
Machinery and equipment 82,952 81,233
Vehicles 18,312 19,326
Computer hardware and software 637 961
Leasehold improvements 9,917 10,817
Assets under construction 58,118 39,587
Total $444,253 $439,249

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:

2020 2019
Crop Reinsurance Fund - Restricted
Balance - Beginning of year - Restricted $299,862 $299,290
Revenues 25 572
Expenses - -
Balance - End of year - Restricted 299,887 299,862
Agricultural Commodities Stabilization Accounts - Restricted 647 647
Unrestricted 79,886 81,208
Departmental net financial position - End of year $380,420 $381,717
- represents zero

Note 13 – Contractual obligations and contractual rights

Note 14 – Contingent liabilities and contingent assets

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.

Note 16 – Segmented information

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

Sector Risk Domestic and
International Markets
Science and Innovation Internal Services 2020 Total 2019
Total
Expenses
Transfer payments $1,077,250 $538,834 $147,734 $- $1,763,818 $1,387,418
Salaries and employee benefits 34,308 61,175 283,825 175,272 554,580 515,061
Professional and other services 10,504 19,463 32,175 50,473 112,615 111,881
Allowance for loan guarantees and bad debts 5,175 - 1,622 (10) 6,787 23,303
Materials and supplies 426 570 35,039 5,450 41,485 44,510
Amortization of tangible capital assets - 277 - 42,528 42,805 43,266
Accommodation and other 181 437 10,538 27,057 38,213 69,120
Travel 576 2,786 6,311 1,536 11,209 12,217
Repairs and maintenance 111 173 11,611 462 12,357 13,859
Electricity and other public services 39 42 15,242 668 15,991 16,751
Expenses incurred on behalf of Government - - - 39 39 (91)
Total expenses 1,128,570 623,757 544,097 303,475 2,599,899 2,237,295
Revenues
Sale of goods and services 1,333 9,391 31,727 21,529 63,980 66,591
Interest 12,943 - - 204 13,147 11,221
Gain on disposal of assets - - - 10,233 10,233 1,126
Joint project and cost sharing agreements - - - 6,782 6,782 8,274
Miscellaneous revenues 1,244 7 120 768 2,139 2,180
Crop Reinsurance Fund 25 - - - 25 572
Revenues earned on behalf of Government (15,209) (236) (8,045) (18,271) (41,761) (32,334)
Total revenues 336 9,162 23,802 21,245 54,545 57,630
Net cost of operations $1,128,234 $614,595 $520,295 $282,230 $2,545,354 $2,179,665
- represents zero

Note 17 – Subsequent events

The outbreak of the Coronavirus disease [“COVID-19”] has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption to businesses globally resulting in an economic slowdown. The duration and impact of the COVID-19 outbreak is unknown at this time. As a result, it is not possible to reliably estimate the length and severity of the impact on Agriculture and Agri-Food Canada's financial position and financial results in future periods.

During the first half of fiscal year 2020-21, Agriculture and Agri-Food Canada received approval and funding for the following new programs and initiatives in support of Canada's COVID-19 pandemic response:

Note 18 – 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 2019-2020 (Unaudited)

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 Core Responsibilities 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 comprises:

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 processing certain transactions that are recorded in its financial statements, as follows:

Common Service Arrangements

Readers of this annex may refer to the annexes of the above-noted departments for a greater understanding of the systems of internal control over financial reporting related to these specific services.

Specific Arrangements

3. Agriculture and Agri-Food Canada's assessment results for the 2019-2020 fiscal year

The Department has adopted an ongoing risk-based monitoring approach to support testing of internal control over financial reporting. The level of risk impacts the extent and frequency of testing required for key control activities. High risk areas are assessed annually, medium risk at least every two to three years, and low risk, at least every three to four years.

3.1 New or significantly amended key controls

In the current fiscal year, there were no new or significantly amended key controls in existing processes that required reassessment.

The Internal Control over Financial Reporting business process - year-end close occurred solely after the start of the COVID-19 pandemic. As a result, the effectiveness of these controls were reviewed for changes and the identification of new risks within the process that could potentially impact the validity, accuracy and completeness of the Financial Statements. It was determined, that our controls for year-end close operated effectively and no new risks were identified.

3.2 Ongoing Monitoring Program

For 2019-2020, adjustments were not required to the rotational ongoing monitoring plan and the Department adopted the ongoing monitoring plan outlined in the Department's Annex for 2018-2019 and validated and reassessed internal controls in the following areas:

Previous fiscal year's rotational ongoing monitoring plan for the current fiscal year Status
Financial Close and Reporting

Completed as planned.
Where required, remedial actions have either been completed or are planned during 2020-2021.

Section 33
Forecasting
Payroll
Budgeting
Loan Guarantees
Information Technology General Controls (ITGCs) for SAP, PeopleSoft and Advance Payments Program Electronic Delivery System (APPEDS)

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

The testing period covered January 1, 2019 to December 31, 2019. 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 and monitoring. Where feasible, corrective actions were implemented shortly after adjustments were identified and management action plans either have been or are currently being developed to fully address the recommendations. A follow-up will be performed to ensure action plans are being implemented as planned.

4. Action plan for the next fiscal year and subsequent fiscal years

Agriculture and Agri-Food Canada's rotational ongoing monitoring plan over the next three fiscal years, based on an annual validation of the high-risk processes and controls and related adjustments to the ongoing monitoring plan as required, is shown in the following table.

Business Processes
Key Control Areas Fiscal Year
2020-2021
Fiscal Year
2021-2022
Fiscal Year
2022-2023
Higher Risk
(Annual)
Financial Close and Reporting X X X
Section 33 X X X
Forecasting X X X
Payroll X X X
Medium Risk
(2-3 years)
Capital Assets X X
Low Risk
(3-4 years)
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 Fiscal Year
2020–2021
Fiscal Year
2021–2022
Fiscal Year
2022–2023
Higher Risk
(Annual)
PeopleSoft X X X
SAP (ECC/BW/BPC) X X X
Medium Risk
(2-3 years)
Advance Payments Program Electronic Delivery System (APPEDS) X
Business Risk Management Suite (BRMS) X
Production Insurance National Statistical
System (PINSS)
X
Low Risk
(3-4 years)
Entity Level Controls X
X: applicable

High risk control areas will continue to be assessed annually, medium risk at least every 2-3 years and low risk at least every 3-4 years.

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