Home / Annual Report 2011-2012 – Notes to the Financial Statements

Annual Report 2011-2012 – Notes to the Financial Statements

For the year ended March 31

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 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. GOVERNMENT FUNDING AND TRANSFERS

On March 29, 2012, the Government of Canada announced its intention to liquidate and close the NRTEE by April 1, 2013. This intention was approved through adoption (Royal Assent) of Bill C-38 on June 29, 2012. The going concern basis of presentation assumes that the NRTEE will continue in operation for the foreseeable future and that it will be able to realize its assets and discharge its responsibilities in the normal course of business. With the discontinuance of all of the NRTEE operations in 2012-13, the going concern basis of presentation is no longer appropriate. As a result, the 2011-12 financial statements have been prepared on a liquidation basis of accounting. Any liabilities that remain unsatisfied upon liquidation of the NRTEE will become the liabilities of Her Majesty in right of Canada.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These financial statements have been prepared using the Government’s accounting policies stated below, which are based on Canadian public sector accounting standards. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.

Under the liquidation basis of accounting, the assets and liabilities would be measured based on their net realizable value and settlement amounts respectively. Due to the nature of NRTEE’s assets and liabilities, no changes in the measurement of assets and liabilities have been considered necessary. As a result of the decision to liquidate and close the NRTEE disclosed in note 2, a liability in respect of termination benefits was recognized in the current year.

Significant accounting policies are as follow:

a) Parliamentary authorities

the NRTEE is financed by the Government of Canada through Parliamentary appropriations. Financial reporting of authorities provided to the NRTEE do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and Net Financial Position and in the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 4 provides a reconciliation between the bases of reporting. The planned results amounts in the Statement of Operations and Net Financial Position are the amounts reported in the future-oriented financial statements included in the 2011-12 Report on Plans and Priorities.

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

d) Revenues

Contributions from external parties for specified purposes are recorded upon receipt as deferred revenues. Contributions are recognized in the period in which the related expenses are incurred.

Miscellaneous revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenue takes place.

Revenues that are non-respendable are not available to discharge the NRTEE’s liabilities. While the President and CEO is expected to maintain accounting control, he has no authority regarding the disposition of nonrespendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the NRTEE’s gross revenue.

e) Expenses

Expenses are recorded on the accrual basis:

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 such items as accommodation are recorded as operating expenses at their estimated cost.

A termination benefit is payable when employment is terminated before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits. A termination benefits liability based on the employee’s years of continuous service in the public service is recorded by NRTEE when it is demonstrably committed to terminate the employment of current employees.

f) Employee future benefits

1. Pension benefits: Eligible employees participate in the Public Service Pension Plan (PSSA), 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. 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.
2. Severance benefits: Employees entitled to severance benefits under labour contracts or conditions of employment earn these benefits as services necessary to earn them are rendered. The obligation relating to the benefits earned by employees is calculated using the layoff entitlement of two weeks for the first year of continuous employment followed by one week for each subsequent year of continuous employment. In 2010-11, severance benefits were calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

g)

Accounts receivable are stated at the lower of cost and the net recoverable value; a valuation allowance is recorded for receivables where recovery is considered uncertain.

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) Contingent liabilities

Contingent liabilities are potential liabilities which 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. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

i) Tangible capital assets

All tangible capital assets and leasehold improvements having an initial cost of $2,000 or more are recorded at their acquisition cost.

Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:

j) Measurement uncertainty

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are the liability for termination benefits, the liability for severance benefits, the liability for vacation pay and compensatory leave, and the useful life of tangible capital assets. Actual results could significantly differ from those estimated. Management’s estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.

4. PARLIAMENTARY AUTHORITIES

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

b) Authorities provided and used

5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

The following table presents details of the NRTEE’s accounts payable and accrued liabilities:

As a result of the closure of the NRTEE in 2012-13, the NRTEE has recorded at March 31, 2012 an obligation of $1,326,928 as part of accrued liabilities for termination benefits to reflect the estimated workforce adjustment costs.

6. EMPLOYEE FUTURE BENEFITS

i) 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.

Both the employees and the NRTEE contribute to the cost of the Plan. The 2011-12 expense amounts to $323,071 ($299,056 in 2010-11), which represents approximately 1.7 times (1.7 times in 2010-11) the contributions by employees.

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.

ii) Severance benefits

The NRTEE provides severance benefits to some of its employees based on eligibility, years of service and salary at termination of employment. These severance benefits are not pre-funded. Benefits will be paid from future authorities. Information about the severance benefits, measured as at March 31, is as follows:

As part of collective agreement negotiations with certain employee groups, and changes to conditions of employment for executives and certain non-represented employees, the accumulation of severance benefits under the employee severance pay program ceased for these employees commencing in 2011-12. Employees subject to these changes have been given the options to be immediately paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits on termination from the public service. These changes have been reflected in the calculation of the outstanding severance benefit obligation.

7. ACCOUNTS RECEIVABLE AND ADVANCES

The following table presents details of the NRTEE’s accounts receivable and advances balances:

8. TANGIBLE CAPITAL ASSETS

9. CONTRIBUTIONS

A portion of the NRTEE’s net financial position is used for a specific purpose. Related revenues and expenses are included in the Statement of Operations and Net Financial Position. The NRTEE Act allows the NRTEE to receive funds from external parties for specified purposes. In 2011-12, funds in the amount of $4,322 were received from a third party, and were used to offset the cost of video conferencing at the NRTEE’s Water Forum held in Ottawa (In 2010-11, funds in the amount of $88,770 were received and used to convene a meeting to discuss an Oil Sands Dialogue).

10. CONTRACTUAL OBLIGATIONS

The nature of the NRTEE’s activities can result in some large multi-year contracts and obligations whereby the NRTEE will be obligated to make future payments when services/goods are received. Significant contractual obligations that can be reasonable estimated are summarized as follows:

The NRTEE estimates that upon closure in 2012-13, a payment of $12,000 will be required for penalties related to the termination of various contracts.

11. RELATED PARTY TRANSACTIONS

The NRTEE is related as a result of common ownership to all Government departments, agencies, and Crown Corporations. The NRTEE enters into transactions with these entities in the normal course of business and on normal trade terms. During the year, the NRTEE received common services which were obtained without charge from other government departments as disclosed below.

a) Common Services provided without charge by other government departments

During the year, the NRTEE received services without charge from certain common service organizations. These services provided without charge have been recorded in the NRTEE’s Statement of Operations and Net Financial Position as follows:

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 and Net Financial Position.

b) Other transactions with related parties

Revenues and expenses disclosed in (b) exclude commons services provided without charge, which are already disclosed in (a).

12. 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 3. 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:

13. ACCOUNTING CHANGES

During 2011, amendments were made to Treasury Board Accounting Standard 1.2 – Departmental and Agency Financial Statements to improve financial reporting by government departments and agencies. The amendments are effective for financial reporting years ending March 31, 2012, and later. The significant changes to the NRTEE’s financial statements are described below. These changes have been applied retroactively, and comparative information for 2010-11 has been restated.

Net debt (calculated as liabilities less financial assets) is now presented in the Statement of Financial Position. Accompanying this change, the NRTEE now presents a Statement of Change in Net Debt and no longer presents a Statement of Equity.

Revenue and related accounts receivable are now presented net of non-respendable amounts in the Statement of Operations and Net Financial Position and Statement of Financial Position. The effect of this change was to increase the net cost of operations after government funding and transfers by $1,572 for 2011 and to decrease total net financial assets by $1,000 for 2011.

Government funding and transfers, as well as the credit related to services provided without charge by other government departments, are now recognized in the Statement of Operations and Net Financial Position below “Net cost of operations before government funding and transfers”. In previous years, the NRTEE recognized these transactions directly in the Statement of Equity of Canada. The effect of this change was to decrease the net cost of operations after government funding and transfers by $5,482,603 for 2011.

14. COMPARATIVE INFORMATION

Comparative figures have been reclassified to conform to the current year’s presentation.