Home / Annual Report 2010-2011 – Notes to the Financial Statements

Annual Report 2010-2011 – Notes to the Financial Statements

For the year ended March 31, 2011

1. AUTHORITY AND OBJECTIVES

The National Round Table on the Environment and the Economy (NRTEE) was established in 1994 under the National Round Table on the Environment and the Economy Act and is a departmental corporation named in Schedule II of the Financial Administration Act. The NRTEE fulfils its objective of promoting sustainable development, and the integration of the environment and economy in decision making in all sectors, by conducting studies, organizing stakeholder “dialogues” on specific issues and economic sectors, providing advice, carrying out educational and communication activities, and by acting as a catalyst for change. Its operating expenses are funded mainly by a budgetary lapsing authority and, to a lesser extent, from cost recovery and cost sharing for specific activities. The NRTEE is not subject to the provisions of the Income Tax Act.

The NRTEE has two program activities:

Advisory Program on Environment and Economy Issues (referred to as Program Advisory) – Raising awareness and understanding among Canadians and their governments about the challenges of sustainable development and promoting viable solutions that are vital to Canada’s environmental and economic future.

Internal Services – All services that support the operation of the NRTEE and act as enablers for the NRTEE’s other program activity.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These financial statements have been prepared in accordance with the Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian generally accepted accounting principles, except as disclosed in Note 12 – Net Debt Indicator. Significant accounting policies are as follow:

a) Parliamentary Appropriations

The NRTEE is financed mainly by the Government of Canada through Parliamentary appropriations. Appropriations provided to the NRTEE do not parallel financial reporting according to Canadian generally accepted accounting policies for the public sector, as they are based in a large part on cash flow requirements. Consequently, items recognized in the Statement of Operations and the Statement of Financial Position are not necessarily the same as those provided through appropriations from Parliament. Note 9 provides a high-level reconciliation between the two basis of reporting.

b) Net Cash Provided by Government

The NRTEE operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the department is deposited to the CRF and all cash disbursements made by the NRTEE are paid from the CRF. The net cash provided by Government is the difference between all cash receipts and all cash disbursements including transactions between departments of the Government.

c) Due from Consolidated Revenue Fund

Amounts due from/to the CRF are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF. Due from the CRF represents the net amount of cash that the NRTEE is entitled to draw from the CRF, without further Parliamentary appropriations, in order to discharge its liabilities.

d) Revenues

Revenues are accounted for in the period in which the underlying transaction or event occurred that give rise to the revenues. Revenues that have been received but not yet earned are presented as deferred revenues. Funds received from external parties for specified purposes are recorded upon receipt as deferred revenues. These revenues are recognized in the period in which the related expenses are incurred.

e) Expenses

Expenses are recorded on the accrual basis:

Employees severance benefits are accrued as earned and are calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole. Employee severance benefits on cessation of employment represent obligations of the NRTEE that are normally funded through future year appropriations.

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

Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. The NRTEE’s contributions to the plan are charged to expenses in the year incurred and represent the total NRTEE obligation to the Plan. Current legislation does not require the NRTEE to make contributions for any actuarial deficiencies of the Public Service Pension Plan.

Services provided without charge by other government departments are recorded as expenses at their estimated costs. A corresponding amount is credited directly to the Equity of Canada

f) Receivables

Receivables are stated at amounts expected to be ultimately realized; a provision is made for receivables where recovery is considered uncertain.

g) Contingent Liabilities

In the normal course of its operations, the NRTEE may become involved in various legal actions. Some of these potential liabilities may become actual liabilities when one or more future events occur or fail to occur. To the extent that future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded in the financial statements. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

h) Tangible Capital Assets

Tangible capital assets and leasehold improvements with an acquisition cost of $2,000 or more are recorded at cost and amortized over their estimated useful lives on a straight-line basis. The estimated useful life of each tangible capital asset class is as follows:

i) Measurement Uncertainty

The preparation of these financial statements in accordance with Treasury Board accounting policies, which are consistent with Canadian generally accepted accounting policies for the public sector and yearend instructions issued by the Office of the Comptroller General, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable.

The most significant items where estimates are used are the useful life of tangible capital assets, the liability for vacation pay and compensatory leave and assumptions underlying the employee severance liabilities. Actual results could differ significantly from those estimates. Management’s estimates are reviewed periodically and, as adjustments becomes necessary, they are recorded in the financial statements in the year they become known.

3. RELATED PARTY TRANSACTIONS

The NRTEE is related in terms of common ownership to all Government of Canada departments, agencies, and Crown Corporations. The NRTEE enters into transactions with these entities in the normal course of business and on normal trade terms, with the exception of services provided without charge related to accommodations.

The NRTEE incurred expenses with related parties of $1,103,535 (2010 – $1,205,312). From this amount, $380,746 (2010 – $433,976) represent services provided without charge which includes $378,746 (2010 – $370,976) for the rental of space.

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

4. RECEIVABLES

5. TANGIBLE CAPITAL ASSETS

6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

7. EMPLOYEE FUTURE BENEFITS

i) Severance Benefit

The NRTEE calculates its estimate for the liability for employee severance benefit by using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole. The employee severance benefit liability, including the current portion, is determined to be $544,958 (2010 – $516,474). The amount expensed to salary and benefits in the period was $28,484 (2010 – ($15,731)). No severance benefits were paid to employees in 2011 or 2010.

ii) Pension Benefits

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

The NRTEE’s and employees contribution to the Public Service Pension Plan for the year were as follows:

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

8. CONTRACTUAL OBLIGATIONS

The nature of the NRTEE activities can result in some large multi-year contracts and obligation whereby the NRTEE will be obligated to make future payments when the services are rendered. Significant contractual obligations that can be reasonably established are summarized as follow:

9. PARLIAMENTARY APPROPRIATIONS

The NRTEE receives the majority of its funding through Parliamentary appropriations, which are based primarily on cash flow requirements. Items recognized in the Statement of Operations and Statement of Financial Position in one year may be funded through Parliamentary appropriations in prior, current or future years. Accordingly, the NRTEE has different net results of operations for the year on a government funding basis than on an accrual basis of accounting. These differences are reconciled below.

a) Reconciliation of net cost of operations to current year appropriations used:

b) Appropriations provided and used:

10. CONTRIBUTIONS RECEIVED

The NRTEE Act allows the NRTEE to receive funds from external parties for specified purposes. In 2010-11 funds in the amount of $105,000 (2010 – $0) were received from a third party, and were used to convene a meeting to discuss an Oil Sands ‘Dialogue’. Of the $105,000, $88,770 was spent on the meeting and $16,230 was returned to the third party before March 31, 2011.

11. SEGMENTED INFORMATION

Presentation by segment is based on the NRTEE’s program activity 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 program activities, by major object of expenses and by major type of revenues. The segment results for the period are as follows:

12. NET DEBT INDICATOR

The presentation of the net debt indicator and a statement of change in net debt is required under Canadian generally accepted accounting principles.

Net debt is the difference between a government’s liabilities and its financial assets and is meant to provide a measure of the future revenues required to pay for past transactions and events. A statement of change in net debt would show changes during the period in components such as tangible capital assets, prepaid expenses and inventories. Departments are financed by the Government of Canada through appropriations and operate within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by departments is deposited to the CRF and all cash disbursements made by departments are paid by the CRF. Under this government business model, assets reflected on the NRTEE’s financial statements, with the exception of the Due from the CRF, are not available to use for the purpose of discharging the existing liabilities of the department. Future appropriations and any respendable revenues generated by the NRTEE’s operations would be used to discharge existing liabilities.

13. COMPARATIVE FIGURES

Certain prior year’s comparative figures have been reclassified to conform to current year’s presentation.