Financial Statements for the period ended March 31, 2018

Statement of Management Responsibility Including Internal Control Over Financial Reporting

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2018, and all information contained in these financial statements rests with the management of the Canadian Transportation Agency (the Agency). These 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 financial statements. Some of the information in the 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 the Agency’s financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the Agency’s Departmental Results Report, is consistent with these financial statements.

Management is also responsible for maintaining an effective system of internal control over financial reporting (ICFR) 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 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 the Agency and through conducting an annual risk-based assessment of the effectiveness of the system of ICFR.

The system of ICFR is designed to mitigate risks to a reasonable level based on an on-going process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.

The Agency is subject to periodic Core Control Audits performed by the Office of the Comptroller General (OCG) and uses the results of such audits to comply with the Treasury Board Policy on Financial Management.

A Core Control Audit was performed in 2014-2015 by the OCG for transactions completed in 2013-2014. The Audit Report and related Management Action Plan are posted on the Agency's web site at https://www.otc-cta.gc.ca/eng/corporate-reports

The financial statements of the Agency have not been audited.

Statement of Financial Position (Unaudited) as at March 31 (in dollars)

	2018	2017
Liabilities
Accounts payable and accrued liabilities (note 4)	$2,971,413	$2,594,454
Vacation pay and compensatory leave	1,399,849	1,061,763
Employee future benefits (note 5)	1,156,981	1,008,661
Total liabilities	5,528,243	4,664,878
Financial assets
Due from Consolidated Revenue Fund	2,865,149	2,015,430
Accounts receivable and advances (note 6)	351,963	726,666
Total gross financial assets	3,217,112	2,742,096
Financial assets held on behalf of Government
Accounts receivable and advances (note 6)	(85,596)	(62,266)
Total financial assets held on behalf of Government	(85,596)	(62,266)
Total net financial assets	3,131,516	2,679,830
Agency net debt	2,396,727	1,985,048
Non-financial assets
Prepaid expenses	116,398	100,620
Inventory	31,706	25,655
Tangible capital assets (note 7)	886,389	528,654
Total non-financial assets	1,034,493	654,929
Agency net financial position	$(1,362,234)	$(1,330,119)

Contractual obligations ^{(note 8)}

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

Statement of Operations and Agency Net Financial Position (Unaudited) for the Year Ended March 31 (in dollars)

	2018 Planned Results	2018	2017
Expenses
Economic regulation	$13,370,944	$13,108,177	$12,254,620
Adjudication and alternative dispute resolution	10,032,272	11,475,623	10,236,220
Internal services	8,246,511	8,829,931	8,393,538
Total expenses	31,649,727	33,413,731	30,884,378
Revenues
Revenues from fines	127,464	317,750	106,500
Sales of goods and services	-	100	75
Miscellaneous revenues	58	323	2,867
Revenues earned on behalf of Government	(127,522)	(318,163)	(109,442)
Total revenues	-	10	-
Net cost of operations before government funding and transfers	31,649,727	33,413,721	30,884,378

Government funding and transfers	2018	2017
Net cash provided by Government of Canada	$28,304,753	$27,149,799
Change in due from Consolidated Revenue Fund	849,719	(185,218)
Services provided without charge by other government departments (note 9)	4,227,253	4,024,330
Other transfers of assets and liabilities (to)/from other government departments	(119)	-
Net cost of operations after government funding and transfers	32,115	(104,533)
Agency net financial position - Beginning of year	(1,330,119)	(1,434,652)
Agency net financial position - End of year	$(1,362,234)	$(1,330,119)

Segmented information^{(note 10)}

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

Statement of Change in Agency Net Debt (Unaudited) for the Year Ended March 31 (in dollars)

	2018	2017
Net cost of operations after government funding and transfers	$32,115	$(104,533)
Change due to tangible capital assets
Acquisition of tangible capital assets	533,186	40,875
Amortization of tangible capital assets	(175,451)	(216,977)
Total change due to tangible capital assets	357,735	(176,102)
Change due to inventory	6,051	(5,929)
Change due to prepaid expenses	15,778	27,932
Net increase (decrease) in Agency net debt	411,679	(258,632)
Agency net debt – Beginning of year	1,985,048	2,243,680
Agency net debt – End of year	$2,396,727	$1,985,048

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

Statement of Cash Flows (Unaudited) for the Year Ended March 31 (in dollars)

	2018	2017
Operating activities
Net cost of operations before government funding and transfers	$33,413,721	$30,884,378
Non-cash items:
Amortization of tangible capital assets	(175,451)	(216,977)
Services provided without charge by other government departments (note 9)	(4,227,253)	(4,024,330)
Net transfer of salary overpayments to (from) other government departments	119	-
Variations in Statement of Financial Position:
Increase (decrease) in accounts receivable and advances	(398,033)	354,438
Increase (decrease) in prepaid expenses	15,778	27,932
Increase (decrease) in inventory	6,051	(5,929)
Decrease (increase) in accounts payable and accrued liabilities	(376,959)	(135,079)
Decrease (increase) in vacation pay and compensatory leave	(338,086)	(108,667)
Decrease (increase) in employee future benefits	(148,320)	333,158
Cash used in operating activities	27,771,567	27,108,924
Capital investment activities:
Acquisitions of tangible capital assets	533,186	40,875
Cash used in capital investment activities	533,186	40,875
Net cash provided by Government of Canada	$28,304,753	$27,149,799

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

Notes to the Financial Statements (Unaudited) for the Year Ended March 31 (in dollars)

1. Authority and objectives

The Agency was established on July 1st, 1996, under the Canada Transportation Act (the Act), (S.C. 1996, c. 10), as the continuation of the National Transportation Agency. Under the Act and related legislation, it has various powers to help implement the federal government’s transportation policy.

The Agency is an independent, quasi-judicial tribunal and regulator that has, with respect to all matters necessary for the exercise of its jurisdiction, all the powers of a superior court. It makes decisions and determinations on a wide range of matters within the federal transportation system under the authority of Parliament, as set out in the Act and other legislation. The Agency exercises its powers through its Members, which includes the Chair and Chief Executive Officer (CEO), who are appointed by the Governor-in-Council.

The Agency has three core mandates:

• To help ensure that the national transportation system runs efficiently and smoothly in the interests of all Canadians: those who work and invest in it; the producers, shippers, travellers and businesses who rely on it; and the communities where it operates.
• To protect the human right of persons with disabilities to an accessible transportation network.
• To provide consumer protection for air passengers.

To help advance these mandates, the Agency has three tools at its disposal:

• Rule-making: The Agency develops and applies ground rules that establish the rights and responsibilities of transportation service providers and users and that level the playing field among competitors. These rules can take the form of binding regulations or less formal guidelines, codes of practice or interpretation notes.

• Dispute resolution: The Agency resolves disputes that arise between transportation providers on the one hand and their clients and neighbours on the other, using a range of tools from facilitation and mediation to arbitration and adjudication.

• Information provision: The Agency provides information on the transportation system, the rights and responsibilities of transportation providers and users, and its legislation and services.

The Agency's mandate is achieved through three programs:

Program	Expected Results
Economic Regulation	Service providers (air, rail and marine) comply with legislative requirements. The Canadian National Railway Company (CN) and the Canadian Pacific Railway Company (CP) are provided with the information required to ensure they do not exceed the maximum grain revenue entitlements for the shipment of Western Grain.
Adjudication and Alternative Dispute Resolution	Specialized transportation dispute resolution that is transparent, fair and timely.
Internal Services	Support the needs of programs and other corporate obligations of the Agency.

2. Summary of significant accounting policies

These financial statements are prepared using the Agency'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 Agency is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Agency 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 Agency Net Financial Position and in the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting. The planned results amounts in the “Expenses” and “Revenues” sections of the Statement of Operations and Agency Net Financial Position are the amounts reported in the Future-oriented Statement of Operations included in the 2017-2018 Departmental Plan. Planned results are not presented in the “Government funding and transfers” section of the Statement of Operations and Agency Net Financial Position and in the Statement of Change in Agency Net Debt because these amounts were not included in the 2017-2018 Departmental Plan.

    

2. Net Cash Provided by Government

   The Agency operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the Agency is deposited to the CRF, and all cash disbursements made by the Agency 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.

    

3. Amounts due from or to the CRF

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

    

4. Revenues

   Revenues from regulatory fees are recognized based on the services provided in the year.

   All other revenues, including revenues from fines, are recognized 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 Agency's liabilities. While the Chair and CEO is expected to maintain accounting control, he has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the entity's gross revenues.

    

5. 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 accommodation, employer contributions to the health and dental insurance plans, legal services and workers' compensation are recorded as operating expenses at their estimated cost.

    

6. Employee future benefits

   1. Pension benefits: Eligible employees participate in the Public Service Pension Plan (the Plan), a multiemployer pension plan administered by the Government. The Agency's contributions to the Plan are charged to expenses in the year incurred and represent the total Agency obligation to the Plan. The Agency’s responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognised in the 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.

    

7. Accounts receivable

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

    

8. Inventory

   Inventory is valued at cost using the average cost method and consists of brochures held for future program delivery and is not intended for resale. Inventory that no longer has service potential is deemed obsolete and is written off.

    

9. Tangible capital assets

   The costs of acquiring equipment and other capital property are capitalized as tangible capital assets. All tangible capital assets having an initial cost of $10,000 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:

   Asset Class	Amortization Period
   Machinery and equipment	7 years
   Computer hardware	5 years
   Computer software	3 years
   Furniture	10 years
   Vehicles	7 years

   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.

    

10. Contingent Liabilities

    Contingent liabilities are potential liabilities which may become actual liabilities when one or more future events occur or fail to occur. If the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, a provision is accrued and an expense recorded to other expenses. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

     

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. Measurement uncertainty

    The preparation of these financial statements requires management to make estimates and assumptions that affect the reported and disclosed amounts of assets, liabilities, revenues and expenses reported in the financial statements and accompanying notes as at March 31. The estimates are based on facts and circumstances, historical experience, general economic conditions and reflect the Government's best estimate of the related amount at the end of the reporting period. The most significant items where estimates are used are the liability for employee future benefits and the useful life of tangible capital assets. Actual results could significantly differ from those estimated. Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.

     

13. Related party transactions

    Inter-entity transactions are transactions between commonly controlled entities. Inter-entity transactions, other than restructuring transactions, are recorded on a gross basis and are measured at the carrying amount, except for the following:

    1. Services provided on a recovery basis are recognized as revenues and expenses on a gross basis and measured at the exchange amount.

    2. Certain services received on a without charge basis are recorded for departmental financial statement purposes at the carrying amount.

 

3. Parliamentary authorities

The Agency receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Agency 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 Agency 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

	2018	2017
Net cost of operations before government funding and transfers	$33,413,721	$30,884,378
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets	(175,451)	(216,977)
Services provided without charge by other government departments	(4,227,253)	(4,024,330)
Decrease (increase) in vacation pay and compensatory leave	(338,086)	(108,667)
Decrease (increase) in employee future benefits	(148,320)	333,158
Refunds of prior years' expenditures	231	6,303
Total items affecting net cost of operations but not affecting authorities	(4,888,879)	(4,010,513)
Adjustment for items not affecting net cost of operations but affecting authorities:
Acquisitions of tangible capital assets	533,186	40,875
Increase (decrease) in other receivables and advances	67,960	11,334
Increase (decrease) in inventory	6,051	(5,929)
Increase (decrease) in prepaid expenses	15,778	27,932
Total items not affecting net cost of operations but affecting authorities	622,975	74,212
Current year authorities used	$29,147,817	$26,948,077

b) Authorities provided and used

	2018	2017
Authorities provided:
Vote 25: Operating expenditures	$30,548,408	$25,217,735
Statutory amounts	3,159,906	3,078,589
Less:
Lapsed: Operating	(4,560,497)	(1,348,247)
Current year authorities used	$29,147,817	$26,948,077

4. Accounts payable and accrued liabilities

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

	2018	2017
Accounts payable - Other government departments and agencies	$154,985	$72,799
Accounts payable - External parties	693,300	747,634
Total accounts payable	848,285	820,433
Accrued liabilities	2,123,128	1,774,021
Total accounts payable and accrued liabilities	$2,971,413	$2,594,454

5. Employee future benefits

a) Pension benefits

The Agency'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 are indexed to inflation.

Both the employees and the Agency 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 2017-2018 expense amounts to $2,151,896 ($2,144,853 in 2016-2017). For Group 1 members, the expense represents approximately 1.01 times (1.12 times in 2016-2017) the employee contributions and, for Group 2 members, approximately 1.00 times (1.08 times in 2016-2017) the employee contributions.

The Agency's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the Consolidated Financial Statements of the Government of Canada, as the Plan's sponsor.

b) Severance benefits

Severance benefits provided to the Agency’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:

	2018	2017
Accrued benefit obligation - Beginning of year	$1,008,661	$1, 341,819
Expense for the year	441,254	(218,885)
Benefits paid during the year	(292,934)	(114,273)
Accrued benefit obligation - End of year	$1,156,981	$1,008,661

6. Accounts receivable and advances

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

	2018	2017
Receivables - Other government departments and agencies	$249,504	$662,672
Receivables - External parties	85,596	62,266
Employee advances	16,863	1,728
Gross accounts receivable	351,963	726,666
Accounts receivable held on behalf of Government	(85,596)	(62,266)
Net accounts receivable	$266,367	$664,400

7. Tangible capital assets

Cost

Capital Asset Class	Opening Balance	Acquisitions	Disposals and Write-offs	Closing Balance
Machinery and equipment	$105,746	$-	$-	$105,746
Computer hardware	1,558,291	190,998	-	1,749,289
Computer software	4,038,405	-	-	4,038,405
Furniture	665,441	-	-	665,441
Vehicles	24,285	-	-	24,285
Asset under construction	-	342,188	-	342,188
Total	$6,392,168	$533,186	$-	$6,925,354

Accumulated Amortization

Capital Asset Class	Opening Balance	Amortization	Disposals and Write-offs	Closing Balance
Machinery and equipment	$105,746	$-	$-	$105,746
Computer hardware	1,304,300	86,213	-	1,390,513
Computer software	3,905,802	47,519	-	3,953,321
Furniture	537,258	38,250	-	575,508
Vehicles	10,408	3,469	-	13,877
Asset under construction	-	-	-	-
Total	$5,863,514	$175,451	$-	$6,038,965

Net Book Value

Capital Asset Class	2018	2017
Machinery and equipment	$-	$-
Computer hardware	358,776	253,991
Computer software	85,084	132,603
Furniture	89,933	128,183
Vehicles	10,408	13,877
Asset under construction	342,188	-
Total	$886,389	$528,654

8. Contractual obligations

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

	2019	2020	2021	2022 and thereafter	Total
Professional and special services	$436,007	$18,040	$27,394	$1,000	$482,441
Other goods and services	306,651	57,664	26,191	-	390,506
Software maintenance agreements	96,089	94,886	8,534	-	199,509
Operating leases and rental of storage	53,519	53,654	46,738	-	153,911
Total	$892,266	$224,244	$108,857	$1,000	$1,226,367

9. Related party transactions

The Agency 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 Agency enters into transactions with these entities in the normal course of business and on normal trade terms.

a) Common services provided without charge by other government departments

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

	2018	2017
Accommodation	$2,156,169	$2,142,578
Employer's contribution to the health and dental insurance plans	2,065,405	1,875,710
Worker's compensation	5,679	6,042
Total	$4,227,253	$4,024,330

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 (PSPC) and audit services provided by the Office of the Auditor General are not included in the Agency's Statement of Operations and Agency Net Financial Position.

b) Other transactions with other government departments and agencies

	2018	2017
Expenses	$3,943,069	$3,941,471
Revenues	$-	$-
Total	$3,943,069	$3,941,471

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

10. Segmented information

Presentation by segment is based on the Agency'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:

	Economic Regulation	Adjudication and Alternative Dispute Resolution	Internal Services	Total 2018	Total 2017
Operating expenses
Salaries and employee benefits	$11,725,136	$9,926,663	$6,447,692	$28,099,491	$24,895,165
Accommodation	869,041	762,206	524,922	2,156,169	2,142,578
Professional and special services	247,098	201,704	559,151	1,007,953	1,717,011
Rentals	15,944	130,408	513,438	659,790	622,366
Transportation and telecommunication	155,299	132,491	189,711	477,501	571,178
Machinery and equipment	27,750	38,987	272,083	338,820	194,074
Information	29,874	134,489	171,688	336,051	364,895
Amortization of tangible capital assets	7,197	98,596	69,658	175,451	216,977
Utilities, materials and supplies	30,433	46,127	29,535	106,095	109,702
Repair and maintenance	85	3,952	50,125	54,162	43,186
Other	320	-	1,928	2,248	7,246
Total expenses	13,108,177	11,475,623	8,829,931	33,413,731	30,884,378
Revenues
Revenues from fines	317,750	-	-	317,750	106,500
Sales of goods and services	-	-	100	100	75
Miscellaneous revenues	323	-	-	323	2,867
Revenues earned on behalf of Government	(318,063)	-	(100)	(318,163)	(109,442)
Total revenues	10	-	-	10	-
Net cost of operations before government funding and transfers	$13,108,167	$11,475,623	$8,829,931	$33,413,721	$30,884,378