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Financial Statements 2015-2016

Table of Contents

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, 2016, and all information contained in these statements rests with the management of the Department. These financial statements have been prepared by management using the Government'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 Department’s financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the Department’s Departmental Performance 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 Department 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 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 ICFR for the year ended March 31, 2016 was completed in accordance with the Treasury Board Policy on Internal Control and the results and action plans are summarized in the annex.

The effectiveness and adequacy of the Department’s system of internal control is reviewed by the Office of the Chief Audit Executive, which conducts audits of various areas of the Department’s operations, as well as audit work specific to annual financial reporting. Management is also supported by a Departmental Audit Committee (DAC). The fundamental role of the DAC is to provide objective advice and recommendations to the Deputy Ministers on the adequacy of the Department’s risk management, control and governance processes. The DAC confirms their support of the financial statements to the Deputy Ministers.

The Financial Statements of the Department have not been audited.

Ian Shugart
Deputy Minister of Foreign Affairs

T. Christine Hogan
Deputy Minister of International Trade

Peter M. Boehm
Deputy Minister of International Development

Arun Thangaraj
Assistant Deputy Minister and Chief Financial Officer
Corporate Planning, Finance and Information Technology

Ottawa, Canada
September 2, 2016

Statement of Financial Position (Unaudited)

Statement of Financial Position (Unaudited)
As at March 31 (in thousands of dollars)20162015
Liabilities
Accounts payable and accrued liabilities (Note 4, 5)1,062,5731,325,796
Vacation pay and compensatory leave40,78842,039
Deferred revenue35,500-
Employee future benefits (Note 6)128,110118,473
Total liabilities1,266,9711,486,308
Financial assets
Due from the Consolidated Revenue Fund931,0961,205,724
Accounts receivable and advances (Note 7)126,321109,444
Loans receivable (Note 8)519,042521,934
Investments and advances to International Financial Institutions (IFI) (Note 9)8,371,9428,010,639
Allowance for valuation of investments and advances to IFI (Note 9)(8,371,942)(8,010,639)
Canada Investment Fund for Africa (Note 10)1,27110,875
Total gross financial assets1,577,7301,847,977
Financial assets held on behalf of Government
Accounts receivable and advances (Note 7)(943)(940)
Loans receivable (Note 8)(519,042)(521,934)
Investments and advances to IFI (Note 9)(8,371,942)(8,010,639)
Allowance for valuation of investments and advances to IFI (Note 9)8,371,9428,010,639
Canada Investment Fund for Africa (Note 10)(1,271)(10,875)
Total financial assets held on behalf of Government(521,256)(533,749)
Total net financial assets1,056,4741,314,228
Departmental net debt210,497172,080
Non-financial assets
Prepaid expenses19,14512,787
Tangible capital assets (Note 11)1,406,5461,399,741
Total non-financial assets1,425,6911,412,528
Departmental net financial position1,215,1941,240,448

Contractual obligations (Note 12)
Contingent liabilities (Note 13)

The accompanying notes form an integral part of the Financial Statements.

Ian Shugart
Deputy Minister of Foreign Affairs

T. Christine Hogan
Deputy Minister of International Trade

Peter M. Boehm
Deputy Minister of International Development

Arun Thangaraj
Assistant Deputy Minister and Chief Financial Officer
Corporate Planning, Finance and Information Technology

Ottawa, Canada
September 2, 2016

Statement of Operations and Departmental Net Financial Position (Unaudited)

Statement of Operations and Departmental Net Financial Position (Unaudited)
For the year ended March 31 (in thousands of dollars)Planned Results *
2016
20162015
* Planned Results as per GAC's future-oriented statement of operations.
Expenses
International Development2,530,1482,537,761-
Diplomacy, Advocacy, and International Agreements939,555961,1201,044,537
International Humanitarian Assistance395,008694,009-
Mission Network Governance, Strategic Direction and Common Services700,722585,005715,944
Internal Services289,890365,791267,052
International Security and Democratic Development383,238363,585-
Management of Government of Canada Terms and Conditions of Employment Abroad201,774257,182217,292
International Commerce186,013250,150175,524
Integrated Foreign Affairs, Trade, and Development Policy80,60075,66491,654
Consular Services and Emergency Management53,91944,27257,826
Global Engagement and Strategic Policy--1,212,570
Fragile States and Crisis-Affected Communities--924,847
Low-Income Countries--688,601
Middle-Income Countries--342,442
Canadian Engagement for Development--219,203
Expenses incurred on behalf of Government(244,147)(369,367)(434,326)
Total expenses5,516,7205,765,1725,523,166
Revenues
Sale of goods and services138,013161,213167,236
Gain on disposal of tangible capital assets163,28197,74323,195
Foreign exchange realized gain-8,0846,783
Foreign exchange unrealized gain10,13529,302140,430
Amortization of discount on loans19,03619,16519,134
Other revenues6,1548,9307,433
Revenues earned on behalf of Government(291,452)(286,646)(329,171)
Total revenues45,16737,79135,040
Net cost of operations before government funding and transfers5,471,5535,727,3815,488,126
Government funding and transfers
Net cash provided by Government5,886,9215,303,069
Change in Due from Consolidated Revenue Fund(274,628)183,426
Services provided without charge by other government departments (Note 14)90,07797,690
Transfer of the transition payments for implementing salary payments in arrears (Note 15)(222)(20,151)
Transfer of assets and liabilities from/to other government departments(21)-
Net cost (revenue) of operations after government funding and transfers25,254(75,908)
Departmental net financial position - Beginning of year1,240,4481,164,540
Departmental net financial position - End of year1,215,1941,240,448

Segmented Information (Note 16)

The accompanying notes form an integral part of the Financial Statements.

Statement of Change in Departmental Net Debt (Unaudited)

Statement of Change in Departmental Net Debt (Unaudited)
For the year ended March 31 (in thousands of dollars)20162015
Net cost (revenue) of operations after government funding and transfers25,254(75,908)
Change due to tangible capital assets
Acquisitions of tangible capital assets128,842195,687
Amortization of tangible capital assets(101,930)(95,649)
Proceeds from disposal of tangible capital assets(112,901)(36,737)
Net gain on disposal of tangible capital assets including adjustments92,79413,262
Total change due to tangible capital assets6,80576,563
Change due to prepaid expenses6,358(7,728)
Net increase (decrease) in departmental net debt38,417(7,073)
Departmental net debt - Beginning of year172,080179,153
Departmental net debt - End of year210,497172,080

The accompanying notes form an integral part of the Financial Statements.

Statement of Cash Flow (Unaudited)

Statement of Cash Flow (Unaudited)
For the year ended March 31 (in thousands of dollars)20162015
Operating activities
Net cost of operations before government funding and transfers5,727,3815,488,126
Non-cash items:
Amortization of tangible capital assets(101,930)(95,649)
Services provided without charge by other government departments (Note 14)(90,077)(97,690)
Transition payments for implementing salary payments in arrears (Note 15)22220,151
Net gain on disposal of tangible capital assets including adjustments92,79413,262
Variations in Statement of Financial Position:
Increase in accounts receivable and advances16,87412,514
Increase (decrease) in prepaid expenses6,358(7,728)
Decrease (increase) in accounts payable and accrued liabilities263,223(195,726)
Increase in deferred revenue(35,500)-
Decrease (increase) in vacation pay and compensatory leave1,251(9,381)
(Increase) decrease in employee future benefits(9,637)16,240
Transfers from/to other government departments21-
Cash used in operating activities5,870,9805,144,119
Capital investing activities
Acquisitions of tangible capital assets (Note 11)128,842195,687
Proceeds from disposal of tangible capital assets(112,901)(36,737)
Cash used in capital investing activities15,941158,950
Net cash provided by Government of Canada5,886,9215,303,069

The accompanying notes form an integral part of the Financial Statements.

Notes to the Financial Statements (Unaudited)

For the Year Ended March 31

1. Authority and objectives

The Department of Global Affairs (hereinafter called "the Department") operates under the legislation set out in the Department of Foreign Affairs, Trade and Development Act, S.C. 2013, c. E-33, s. 174.

The 2015-2016 Report on Plans and Priorities (RPP) was based on the Global Affairs Canada (GAC) Program Alignment Architecture (PAA), as approved by Treasury Board (TB). As a result of the amalgamation of DFAIT and CIDA, the department's Program Alignment Architecture (PAA) has evolved significantly in recent years. The most recent PAA, for 2015-16, has been streamlined and includes fewer program and sub-program headings compared with PAA 2014-15. A PAA crosswalk can be found in the 2014-15 departmental performance report. The PAA presents the Department’s four strategic outcomes. Strategic outcomes are supported by a cascading matrix of programs, sub-programs and sub-sub-programs, each of which has associated expected results and performance indicators.

Strategic Outcome #1: Canada’s International Agenda - The international agenda is shaped to advance Canadian security, prosperity, interests and values.

Strategic Outcome #2: International Commercial and Consular Services for Canadians - Canadians are satisfied with commercial and consular services.

Strategic Outcome #3: International Assistance and Poverty Alleviation - Poverty is reduced, and security and democracy are increased for those living in countries where Canada engages.

Strategic Outcome #4: Canada’s Network Abroad - The Department maintains a mission network of infrastructure and services to enable the Government of Canada to achieve its international priorities.

The internal services program provides essential support functions to all Global Affairs Canada programs and includes the following services: Management and Oversight; Communications; Legal; Human Resources Management; Financial Management; Information Management; Information Technology; Real Property; Materiel Services; and Acquisition Services.

2. 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.

Significant accounting policies are as follows:

(a) Parliamentary authorities

The Department is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Department do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and Departmental 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 Departmental Net Financial Position are the amounts reported in the Future-oriented Statement of Operations included in the 2015-2016 Report on Plans and Priorities. Planned results are not presented in the “Government funding and transfers” section of the Statement of Operations and Departmental Net Financial Position and in the Statement of Change in Departmental Net Debt because these amounts were not included in the 2015-2016 Report on Plans and Priorities.

(b) Net cash provided by Government

The Department 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 Department 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) Amounts due from the CRF

Amounts due from 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 Department is entitled to draw from the CRF without further authorities to discharge its liabilities.

(d) Revenues

  1. Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.
  2. Funds received from external parties for specified purposes are recorded upon receipt as deferred revenue. These revenues are recognized in the period in which the related expenses are incurred.
  3. Funds that have been received are recorded as deferred revenue, provided the Department has an obligation to other parties for the provision of goods, services or the use of assets in the future.
  4. Other revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenue takes place.
  5. Revenues that are non-respendable are not available to discharge the Department's liabilities. While the Deputy Head is expected to maintain accounting control, he or she has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the entity's gross revenues.

(e) Expenses

Expenses are recorded on an accrual basis:

  1. Transfer payments are recorded as expenses when authorization for the payment exists and the recipient has met the eligibility criteria or the entitlements established for the transfer payment program. In situations where payments do not form part of an existing program, transfer payments are recorded as expenses when the Government announces a decision to make a non-recurring transfer, provided the enabling legislation or authorization for payment receives parliamentary approval prior to the completion of the financial statements. Transfer payments that become repayable as a result of conditions specified in the contribution agreement that have come into being are recorded as a reduction to transfer payment expense and as a receivable.
  2. Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
  3. 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.
  4. Expenses related to assets that are not available to discharge the Department's liabilities are considered to be incurred on behalf of the Government of Canada and are therefore presented in reduction of the entity's gross expenses. For example, these expenses include related transactions arising from the recording of the loans receivable, including the recording of the discount.

(f) Employee future benefits

  1. Pension benefits: Eligible Canada-Based Staff (CBS) participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government of Canada. The Department’s contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. The Department’s responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan’s sponsor. Eligible Locally-Engaged Staff (LES), who are employees hired at Missions abroad, participate in a combination of plans developed and administered based on local laws and practice, or in a worldwide pension scheme, which is administered by the Department. As the Government of Canada is the sponsor of LES pension plans, the funds for the contributions have been provided to the Department (Vote 15).
  2. Severance benefits: Employees (both CBS and LES) who are 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 CBS employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole. The LES severance obligation is established on the basis of operational requirements of the specific Mission, local laws or practice, and is calculated based on the number of eligible employees multiplied by the estimated value of the severance payment based on historical experience.

(g) Accounts receivable and advances

Accounts receivable and advances are stated at the lower of cost and net recoverable value. An allowance for doubtful accounts is recorded for accounts receivable where recovery is considered uncertain.

Accounts receivable and advances that are not available to discharge the Department's liabilities are considered to be held on behalf of the Government of Canada.

(h) Environmental liabilities

Environmental liabilities reflect the estimated costs related to the management and remediation of environmentally contaminated sites. Based on management's best estimates, a liability is accrued and an expense recorded when the contamination occurs or when the Department becomes aware of the contamination and is obligated, or is likely to be obligated to incur such costs. If the likelihood of the Department's obligation to incur these costs is not determinable, or if an amount cannot be reasonably estimated, the costs are disclosed as contingent liabilities in the notes to the financial statements.

Contaminated Sites:
A liability for remediation of contaminated sites is recognized when all of the following criteria are satisfied: an environmental standard exists, contamination exceeds the environmental standard, the government is directly responsible or accepts responsibility, it is expected that future economic benefits will be given up and a reasonable estimate of the amount can be made. The liability reflects the Government’s best estimate of the amount required to remediate the sites to the current minimum standard for its use prior to contamination. When the cash flows required to settle or otherwise extinguish a liability are expected to occur over extended future periods, a present value technique is used. The discount rate applied is taken from the government’s consolidated revenue fund monthly lending rates for periods of one year and over. The discount rates used are based on the term rate associated with the estimated number of years to complete remediation. For remediation costs with estimated future cash flows spanning more than 25 years, the 25-year Government of Canada lending rate is used as the discount rate.

(i) Loans receivable

Loans to developing countries and IFI for international development assistance and transfer payments recoverable are recorded at cost and are adjusted to reflect the concessionary terms of those loans made on a long-term, low interest or interest-free basis. The discount determined at the date of the issuance is amortized to revenue using a straight-line amortization. Any interest or service fees revenue is recognized with the passage of time and according to the terms of the loan agreement. However, when specific loan balances are deemed uncollectible, interest and service fees revenue cease to be accrued on these loans.

An allowance for valuation is further used to reduce the carrying value of the loans to amounts that approximate their net realizable value. The allowance is determined based on the Government's identification and evaluation of countries that have formally applied for debt relief, estimated probable losses that exist on the remaining portfolio, and changes in the economic conditions of sovereign debtors.

Any loans written off or forgiven are presented as an expense in the Statement of Operations and Departmental Net Financial Position, under Transfer payments, in the fiscal year during which the required Parliamentary authority is obtained and the Government of Canada writes off or forgives the loan amounts owing to the Department. Should subsequent recoveries arise, they are presented as a revenue in the Statement of Operations and Departmental Net Financial Position, in the fiscal year during which the monies are received.

Loans receivable are not available to discharge the Department's liabilities and therefore considered to be held on behalf of the Government of Canada.

(j) Investments and advances to International Financial Institutions (IFI)

Investments and advances to IFI are recorded at cost.

Investments consist of subscriptions to the share capital of a number of IFI and are composed of both paid-in and callable capital. Subscriptions to international organizations do not provide a return on investment, but are repayable on termination of the organization or upon the Department’s withdrawal from the organization. Paid-in capital is made through a combination of cash payments and the issuance of non-interest bearing, non-negotiable notes payable to the organization. Callable share capital is composed of resources that are not paid to the banks but act as a guarantee to allow them to borrow on international capital markets to finance their lending program.

Advances are issued to IFI that use these funds to issue loans to developing countries at concessionary terms.

For these investments and advances to IFI, an allowance is established based on their estimated realizable value.

Investments and advances to IFI and related allowance are not available to discharge the Department's liabilities and are therefore considered to be held on behalf of the Government of Canada.

(k) Canada Investment Fund for Africa (CIFA)

The Canada Investment Fund for Africa (CIFA) is designed to provide risk capital for private investments in Africa that generate growth. The CIFA is presented at cost.

The investment period ended on January 2009. Returns on investment generated by the CIFA are recorded as revenues while the return of capital and applicable management fees are capitalized in the investment. An allowance was established based on the estimated realizable value of the fund.

CIFA is not available to discharge the Department's liabilities and is therefore considered to be held on behalf of the Government of Canada.

(l) Contingent liabilities

Contingent liabilities are potential liabilities that may become actual liabilities when one or more future events occur or fail to occur. To the extent that the 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 if an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

(m) Prepaid expenses

Prepaid expenses for the Department consist primarily of rent payments. Prepaid expenses are accounted for as non-financial assets until the related services are rendered, goods are consumed, or terms of the contractual agreement are fulfilled.

(n) Foreign currency transactions

Transactions involving foreign currencies are translated into Canadian dollar equivalents using rates of exchange in effect at the time of those transactions. Monetary assets and liabilities denominated in a foreign currency are translated into Canadian dollars using the rate of exchange in effect at year-end. Gains and losses resulting from foreign currency transactions are included in either Expenses or Revenues in the Statement of Operations and Departmental Net Financial Position (and in Note 16), depending on whether the net result is a loss or gain.

(o) Tangible capital assets

All tangible capital assets and leasehold improvements having an initial cost per unit of $10,000 or more are recorded at their acquisition cost. The Department does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value.

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

Tangible capital assets
Asset CategoriesAmortization Period
Buildings10 to 25 years
Works and infrastructure30 years
Machinery and equipment3 to 25 years
Informatics hardware3 to 15 years
Informatics software3 to 10 years
Vehicles5 to 10 years
Leasehold improvementsTerm of the lease or 25 years

Assets under construction are recorded in the applicable capital asset class in the year that they become available for use and are not amortized until they become available for use.

(p) Measurement uncertainty

The preparation of these financial statements requires management (or the Government) 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 contingent liabilities, the liability for employee future benefits, the allowance for loans, the allowance for doubtful accounts 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.

3. Parliamentary authorities

The Department receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Departmental 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 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
(in thousands of dollars)20162015
Net cost of operations before government funding and transfers5,727,3815,488,126
Adjustments for items affecting net cost of operations but not affecting authorities:
Services provided without charge by other government departments(90,077)(97,690)
Amortization of tangible capital assets(101,930)(95,649)
Refund of prior years' expenditures24,43417,396
Decrease in accrued liabilities for workforce adjustment costs534482
Decrease in accrued liabilities for Matching Fund program2,9932,125
Bad debt expense(6,043)(4,168)
Loss on disposal of tangible capital assets (net)(3,079)(9,487)
Decrease (increase) in vacation pay and compensatory leave1,429(9,160)
(Increase) decrease in accrued employee future benefits(9,637)15,964
(Increase) in environmental liabilities(15)-
(Increase) in other accrued liabilities-(2,580)
Revenues not affecting authorities73101
 5,546,0635,305,460
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisitions of tangible capital assets128,842195,687
Debt forgiveness of loans on behalf of Government-47,612
Loss on foreign exchange-IFI on behalf of Government29,302140,430
Transfer payments to IFI on behalf of Government287,540239,023
Transition payments for implementing salary payments in arrears22220,151
Increase (decrease) in prepaid expenses6,773(7,674)
Proceeds from the disposal of surplus moveable Crown assets1,1061,116
Gain on foreign exchange(3,425)(2,307)
Increase (decrease) in accountable advances410(170)
Revenues earned on behalf of Government affecting authorities2016
Current year authorities used5,996,8535,939,344
(b) Authorities provided and used
(in thousands of dollars)20162015
Authorities provided
Vote 1 - Operating Expenditures1,601,3701,590,882
Vote 5 - Capital Expenditures180,760323,434
Vote 10 - Grants and Contributions3,938,4813,667,075
Vote 15 - Payments, in respect of pension, insurance and social security programs or other arrangements for LES64,50852,532
Other Statutory559,378679,410
 6,344,4976,313,333
Less
Authorities available for future years127,155124,894
Lapsed authorities: Operating71,38973,522
Lapsed authorities: Capital45,019116,086
Lapsed authorities: Grants and Contributions103,60559,191
Lapsed authorities: Payments, in respect of pension, insurance and social security programs or other arrangements for LES476296
 347,644373,989
Current year authorities used5,996,8535,939,344

Parliamentary authorities provided are reconciled to Parliamentary authorities used in the current year and agree with amounts shown as "Available for Use and Authorities Used" as reflected in the "Summary of Source and Disposition of Authorities" in Volume II of the Public Accounts.

4. Accounts payable and accrued liabilities

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

Accounts payable and accrued liabilities
(in thousands of dollars)20162015
Accounts payable to external parties902,1141,195,298
Accounts payable to other government departments and agencies31,76043,681
Total accounts payable933,8741,238,979
Accrued liabilities128,69986,817
Total accounts payable and accrued liabilities1,062,5731,325,796

5. Environmental Liabilities

Remediation of contaminated sites

The government has developed a “Federal Approach to Contaminated Sites”, which incorporates a risk-based approach to the management of contaminated sites. Under this approach the Government has inventoried the contaminated sites on federal lands that have been identified, allowing them to be classified, managed and recorded in a consistent manner. This systematic approach aides in the identification of the high risk sites in order to allocate limited resources to those sites which pose the highest risk to the environment and human health.

The Department has identified a total of 52 sites (31 sites in 2015) where contamination may exist and assessment, remediation and monitoring may be required. Of these, the Department has assessed 1 site (0 sites in 2015) where action is possible and for which a liability of $15,000 ($0 in 2015) has been recorded. This liability estimate has been determined after the sites are assessed and is based on scientific/engineering contractors reviewing the results of site assessments, and proposing possible remediation solutions.

Additionally, there are 26 unassessed sites (31 sites in 2015) where estimates have been calculated using a modelling technique based on contaminated sites with similar functions and a liability estimate of $0 ($0 in 2015) has been estimated.

These two estimates combined represents management’s best estimate of the amount required to complete the remediation of the sites to the current minimum standard for its use prior to contamination, based on information available at the financial statement date. A net present value technique has been used for sites where the cash flows are expected to occur over extended future periods.

Of the remaining 25 sites, 24 sites were closed, as they were either remediated or assessed and found not to be contaminated. 1 site is not considered a priority for action because information indicates there is likely no significant environmental impact or human health threats and there is likely no need for action unless new information becomes available indicating greater concerns, in which case, the site will be re-examined.

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, 2016, and March 31, 2015. When the liability estimate is based on a future cash requirement, the amount is adjusted for inflation using a forecast CPI rate of 2%. Inflation is included in the undiscounted amount. The Government of Canada lending rate applicable to loans with similar terms to maturity has been used to discount the estimated future expenditures. The March 2016 rates range from 0.62% for 2 year term to 2.13% for a 25 or greater year term.

Nature and Source of the Liability
Nature & SourceFuel Related Practices (1)Total
(in thousands of dollars)
Number of Sites 201611
Estimated Liability 20161515
Estimated Total Undiscounted Expenditures 20161515
Estimated Recoveries 201600
Number of Sites 201500
Estimated Liability 201500
Estimated Total Undiscounted Expenditures 201500
Estimated Recoveries 201500
(1) Contamination associated with leaks/spills from fuel storage tanks.

6. Employee future benefits

(a) Pension benefits

The Department's Canada-Based Staff (CBS) participate in the public service pension plan (the "Plan"), which is sponsored and administered by the Government of Canada. Pension benefits accrue up to a maximum period of 35 years at a rate of 2 percent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Québec Pension Plan benefits and they are indexed to inflation.

Both the employees and the Department contribute to the cost of the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to Economic Action Plan 2012, employee contributors have been divided into two groups - Group 1 relates to existing plan members as of December 31, 2012 and Group 2 relates to members joining the Plan as of January 1, 2013. Each group has a distinct contribution rate.

The 2015-2016 expense amounts to $73,187,949 ($75,708,267 in 2014-2015). For Group 1 members, the expense represents approximately 1.25 times (1.41 times in 2014-2015) the employee contributions and, for Group 2 members, approximately 1.24 times (1.39 times in 2014-2015) the employee contributions.

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

For Locally-Engaged Staff (LES), the Government of Canada participates in local social security programs where possible. Where Canada does not participate in a local social security system providing pension benefits, or Canada participates in the local system and in addition, employer-sponsored supplemental pension plans are typically provided in the country, the Government of Canada provides supplemental pension benefits through a combination of local separate pension plans developed and administered based on local law and practice, or through the Pension Scheme for Employees of the Government of Canada, LES which is administered by the Department. Local separate pension plans are pre-funded and are provided on defined benefit or defined contribution basis. The Pension Scheme is a defined benefit plan provided on a pay-as-you-go basis. The Department is responsible for the expenses related to LES social security and pension via Vote 15 (contributions to social security and separate pension plans and benefits from the Pension Scheme). The 2015-2016 employer contributions were $45,898,508 ($35,419,210 in 2014-2015). The Department’s responsibility with regard to the Plan is limited to its contributions. The Government of Canada, the Plan's sponsor, is responsible for surpluses or deficiencies.

(b) Severance benefits

The Department provides severance benefits to its employees based on eligibility, years of service and salary at termination of employment. The severance benefit liability for CBS is based on a percentage provided by Treasury Board of Canada Secretariat (TBS), applied to the eligible payroll as at March 31. TBS determines the percentages based on an actuarial evaluation of the future liability for the government's eligible employees. As part of collective agreement negotiations with all 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 has ceased for these employees commencing in 2012. Employees subject to these changes were given the option 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.

For LES, the estimated future cash flow for severance benefits is based on an average severance payment determined from experience. This average severance payment is multiplied by a percentage to reflect the notion that not all LES receive a severance at end-of-service. Finally, this amount is multiplied by the total number of LES. These future severance benefits are not pre-funded so benefits will be paid from future authorities.

Information about the severance benefits, measured as at March 31, is as follows:

Employee future benefits - Severance benefits
(in thousands of dollars)20162015
Accrued benefit obligation, beginning of year118,473134,713
Expense for the year25,82313,478
Benefits paid during the year(16,186)(29,718)
Accrued benefit obligation, end of year128,110118,473

CBS severance benefit liability amounts to $38,657,106, whereas the LES liability is $89,453,000.

(c) Locally-Engaged Staff insurance benefits

The Department is responsible for the expenses (premiums to local insured plans and benefits from local self-insured plans) related to LES insurance benefits, which include medical, dental, disability and life insurance (via Vote 15). The 2015-2016 expense was $18,133,639 ($16,816,576 in 2014-2015).

7. Accounts receivable and advances

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

Accounts receivable and advances
(in thousands of dollars)20162015
Advances to Missions abroad42,64446,018
Employee advances
Posting advances24,37722,513
Other employee advances858465
Total employee advances25,23522,978
Receivables from other government departments and agencies30,08420,627
Receivables from external parties25,31721,198
Cash in transit13,1098,117
Other advances6,5866,586
Subtotal142,975125,524
Allowance for doubtful accounts on external receivables and advances(16,654)(16,080)
Gross accounts receivable and advances126,321109,444
Accounts receivable held on behalf of Government(943)(940)
Net accounts receivable and advances125,378108,504

8. Loans receivable

The following table presents details of the Department’s loans and transfer payments recoverable to developing countries and IFI:

Loans receivable
(in thousands of dollars)20162015
(a) 30-year term, 7-year grace period, unsecured, 3.0 percent interest per annum, with the agreed final repayment in March 2005:
Cuba9,5479,547
(b) 35-year term, 4-year grace period, unsecured, 5.0 percent interest per annum, semi-annual interest repayments with first principal repayment due January 2017 and final repayment in July 2026:
Egypt44,99644,996
(c) 50-year term, 10-year grace period, unsecured, non-interest bearing, with final repayments between March 2015 and September 2035:
African Development Bank594719
Algeria3,1703,796
Andean Development Corporation9381,063
Argentina2847
Bolivia254297
Central American Bank for Economic Integration115191
Chile-245
Colombia6692
Dominican Republic1,8542,090
Ecuador1,7562,061
Guatemala1,0811,181
Indonesia104,894115,204
Malaysia9791,042
Malta200225
Mexico47
Morocco3,2243,609
Pakistan122,614122,614
Paraguay2040
Peru913
Philippines820966
Sri Lanka49,57853,872
Thailand9,0449,718
Tunisia25,51428,810
(d) 50-year term, 13-year grace period, unsecured, non-interest bearing, with the final repayment in March 2023:
Algeria8,71610,583
 390,015413,028
Unamortized discount(234,348)(248,091)
 155,667164,937
Allowance for uncollectibility(58,903)(59,859)
Total – Loans to developing countries and IFI96,764105,078
(e) Transfer payments recoverable525,000525,000
Unamortized discount(102,722)(108,144)
Total – Transfer payments recoverable422,278416,856
Gross loans receivable519,042521,934
Loans receivable held on behalf of Government(519,042)(521,934)
Net loans receivable--

The grace period refers to interval from date of issuance of the loan to first repayment of loan principal.

Final repayment on Cuba loan was due in March 2005. In default of payment, the country has been in arrears since 1986. No repayment is anticipated. The allowance for uncollectibility of this loan has therefore been adjusted to reflect this situation. On December 12, 2015, the Paris Club of sovereign bilateral creditors (of which Canada is a member) recommended that their governments restructure a portion of Cuba’s bilateral arrears over an 18 year period. The Government of Canada has yet to formally decide how Cuba’s arrears to the Department will be restructured.

In 2006-2007, the Government of Canada, as represented by the Department, entered into an agreement with the Government of Pakistan to forgive its outstanding $447,500,000 loan. In order to expire its debt obligation, the Government of Pakistan is required to make education sector investments over an estimated period of five years, that are equivalent to the present value of its debt of $132,600,000. According to the agreement, Pakistan’s debt is to be written down proportionally by GAC as the investments are made. Since 2009-2010, the Government of Pakistan's debt has been reduced by a total amount of $324,893,000. Subsequent to the date of these financial statements, the Pakistan-Canada Debt for Education Conversion committee has agreed on an additional write-down of $11,840,000 of the present value of the Government of Pakistan’s debt. The impact of this decision will be reflected in the 2016-17 GAC financial statements.

Transfer payments recoverable relate to contributions made to outside parties which are repayable without or with conditions specified in the contribution agreement that have come into being.

9. Investments and advances to IFI

The following table presents details of the Department’s investments and advances to IFI:

Investments and advances to IFI
(in thousands of dollars)20162015
Investments
African Development Bank305,177263,345
Asian Development Bank380,011375,909
Caribbean Development Bank50,81549,714
Inter-American Development Bank321,334296,223
Inter-American Investment Corporation1,9481,900
 1,059,285987,091
Advances
African Development Fund2,770,0232,664,516
Asian Development Bank - Special27,02727,027
Asian Development Fund2,305,8852,258,195
Caribbean Development Bank - Agricultural Development Fund2,0002,000
Caribbean Development Bank - Commonwealth Caribbean Regional5,1955,066
Caribbean Development Bank - Special Development Fund338,389321,281
Global Environment Facility Trust Fund835,820781,070
Inter-American Development Bank - Fund for Special Operations395,285388,505
International Bank for Reconstruction and Development25,97425,332
International Fund for Agriculture Development429,384379,384
International Monetary Fund14,24613,894
Montreal Protocol Multilateral Fund114,121107,970
Multilateral Investment Fund49,30849,308
 7,312,6577,023,548
Investments and advances to IFI8,371,9428,010,639
Allowance for valuation(8,371,942)(8,010,639)
Net investments and advances to IFI--

The allowance for valuation reduces the net realizable value of the investments and advances to IFI to zero, as it is not expected that the Department will recover these investments and advances in the future.

10. Canada Investment Fund for Africa

The Canada Investment Fund for Africa (CIFA) is a joint public-private sector initiative designed to provide risk capital for private investments in Africa that generate growth. The CIFA is a direct response to the New Partnership for Africa’s Development (NEPAD) and the G8 Africa Action Plan. The main objectives of the CIFA are to optimize public-private investments in the Fund, to confer a beneficial development impact on Africa by way of increased foreign direct investments and to optimize the beneficial impact of the Fund’s activities on Canadian interests.

The Government of Canada is a limited partner in the CIFA and its commitment towards the Fund was subject to matching mechanism of other investors and was to be equal to the lesser of: (i) $100 million or (ii) the aggregated commitments of all other limited partners of the partnership. The investment period in the CIFA ended January 1, 2009. From there on, and until the term of the partnership is reached, the Department will receive income and returns of capital. Since its inception, the Department received capital reimbursement from CIFA amounting to $60,050,000 and investment income of $8,200,000.

This partnership has been officially dissolved on December 31, 2015 and is currently closing its operations. It will reach its term on December 31, 2016.

The fair value of the CIFA has declined. An allowance of $45,600,000 is recorded to that effect.

The following table presents details of the CIFA:

Canada Investment Fund for Africa
(in thousands of dollars)20162015
CIFA opening balance51,47572,856
Returns of capital(4,604)(21,549)
Capitalized management fees-168
 46,87151,475
Allowance for valuation(45,600)(40,600)
Gross Canada Investment Fund for Africa1,27110,875
CIFA held on behalf of Government(1,271)(10,875)
Net Canada Investment Fund for Africa--

11. Tangible capital assets

Tangible capital assets
(in thousands of dollars)Opening BalanceAcquisitionsAdjustments (1)Disposals & Write-offsClosing Balance
(1) Adjustments include assets under construction of $72,421 that were transferred to other asset categories upon completion of the assets, reclassification, post capitalization and assets transferred to/from other government departments.
The Department transferred tangible capital assets with a net book value of $21,092. This transfer is included in the adjustment column.
Cost
Land252,1601,41213,059(8,921)257,710
Buildings1,575,70422,11336,171(30,764)1,603,224
Works and infrastructure4,3646413,233-8,238
Machinery and equipment51,4307,9684,878(5,088)59,188
Informatics hardware3,782---3,782
Informatics software112,5272,4701,321-116,318
Vehicles59,1675,266(59)(3,864)60,510
Leasehold improvements252,9669,35914,615-276,940
Assets under construction213,56979,613(72,421)(2)220,759
 2,525,669128,842797(48,639)2,606,669
(in thousands of dollars)Opening BalanceAmortizationAdjustments (1)Disposals & Write-offsClosing Balance
Accumulated amortization
Buildings865,89658,720-(19,598)905,018
Works and infrastructure608153--761
Machinery and equipment36,9583,441395(4,785)36,009
Informatics hardware3,493146--3,639
Informatics software58,21412,7892-71,005
Vehicles31,2455,597(35)(3,714)33,093
Leasehold improvements129,51421,084--150,598
 1,125,928101,930362(28,097)1,200,123
Net book value2015   2016
Land252,160   257,710
Buildings709,808   698,206
Works and infrastructure3,756   7,477
Machinery and equipment14,472   23,179
Informatics hardware289   143
Informatics software54,313   45,313
Vehicles27,922   27,417
Leasehold improvements123,452   126,342
Assets under construction213,569   220,759
 1,399,741   1,406,546

12. Contractual obligations

The nature of the Department’s activities can result in some large multi-year contracts and obligations whereby the Department will be obligated to make future payments in order to carry out its transfer payment programs or when the services or goods are received. There are a significant number of small dollar value leases for residential and office building rentals abroad. Significant contractual obligations that can be reasonably estimated are summarized as follows:

Contractual obligations
(in thousands of dollars)20172018201920202021 and thereafterTotal
Chancery Lease in Moscow-2,4932,6432,80129,38737,324
Chancery Lease in Hong Kong1,9751,9751,9751,9756,67514,575
Chancery Lease in Madrid1,8601,9251,9921,24316,40723,427
Chancery Annex Lease in Hong Kong2,1702,1702,1702,1706,01014,690
Chancery Lease in Dublin55055055055010,36012,560
Chancery Lease in Shanghai10,956----10,956
Chancery Lease in Brussels93693693693610,32614,070
Transfer payments1,726,4121,268,273959,607608,220127,5284,690,040
Investments and advances to IFI243,278112,22540,25215,21215,548426,515
 1,988,1371,390,5471,010,125633,107222,2415,244,157

13. Contingent liabilities

(a) Claims and litigation

The Department is involved in various legal actions in the ordinary course of business and also as a result of its role in administering the North American Free Trade Agreement (NAFTA) treaty. These claims include items where the amount of damages is specified, and others for which no amount is specified. While the total amount claimed in these actions is significant, their outcomes are not determinable. Pending claims and legal proceedings for which the outcome is not determinable and a reasonable estimate can be made by management amount to approximately $30,283,818 ($27,175,000 in 2014-2015) at March 31, 2016.

An allowance for claims and litigation is established when it becomes likely that the Department is liable and it will incur an expense and the amount can be reasonably estimated. In management's opinion, the ultimate disposition of these actions, individually or in the aggregate, will not have a material adverse affect on the financial condition of the Department.

(b) Callable share capital

The Department is liable for callable share capital in certain international organizations that could require future payments to those organizations. Callable share capital is composed of resources that are not paid to the organizations but act as a guarantee to allow them to borrow on international capital markets to finance their lending program. Callable share capital would only be utilized in extreme circumstances to repay unrecoverable loans, should the organization's reserves not be sufficient. Callable share capital has never been drawn on by the organizations. For this reason, despite the difficult international economic environment, these contingent liabilities represent no additional risk to the Department. As at March 31, 2016, the callable share capital is valued at $21.0 billion and no provision was recorded for this amount.

Also, different methods are used by the Department and by the Asian Development Bank (ADB) to calculate the value of the Department’s callable shares for disclosure as a contingent liability. The Department uses the US foreign exchange rate at the time of the investments and revalues its shares at the end of every fiscal year using the year-end US exchange rate. On the basis of this method, the Department's valuation of its ADB callable shares is $8,264,115,911 as at March 31, 2016. However, ADB decided to use the Special Drawing Right (SDR) for purposes of denominating its capital in lieu of the US dollar. The value of the SDR against the US and Canadian dollar exchange rates at the time of inception was used to establish the par value of SDR. This par value of the Department's callable shares is then translated using the latest exchange rate of SDR against the US and Canadian dollar exchange rates. Valuation of these callable shares on this basis amounts to $9,639,246,762 representing a difference of $1,375,130,851 with the Department's own valuation as at March 31, 2016.

14. Related party transactions

The Department is related as a result of common ownership to all government departments, agencies, and Crown corporations. The Department enters into transactions with these entities in the normal course of business and on normal trade terms. During the year, the Department received common services that 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 Department received services without charge from certain common service organizations related to accommodation, legal services, 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 Department’s Statement of Operations and Departmental Net Financial Position as follows:

Related party transactions - Common services provided without charge by other government departments
(in thousands of dollars)20162015
Employer's contribution to health and dental insurance plans57,72457,897
Accommodation30,34638,069
Legal services1,6991,419
Workers' compensation308305
 90,07797,690

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

(b) Management and administration of Common Services

In accordance with the Treasury Board Common Service Policy (February 1997), and the Department of Foreign Affairs, Trade and Development Act, S.C. 2013, c. E-33, s. 174., the Department has the mandate to manage the procurement of goods, services and real property at missions abroad. These common services are mandatory for departments to use when required to support Canada's diplomatic and consular missions abroad.

Memoranda of Understanding (MOUs) are in force to cover the roles and responsibilities of the Department, partner departments, Crown corporations and non-federal organizations. These MOUs outline the principles and operational guidelines for the management and administration of the common services regime, specifications with respect to services and service delivery standards, the funding of common services, the responsibilities of parties, and dispute resolution.

i. Common Services provided to other government departments

To facilitate the efficient and cost-effective delivery of common services in support of the international programs of all federal departments and agencies of the Government of Canada, a new Interdepartmental Memorandum of Understanding on Operations and Support at Missions Abroad (the Generic MOU) was signed in September 2014.

In the fiscal year ended March 31, 2016, expenses related to changes made to partner departments’ representation abroad are reflected in the Financial Statements of the Department. Authorities for the Department are adjusted via the Annual Reference Level Updates (ARLU) and Supplementary Estimates.

ii. Common Services provided to co-locators

To facilitate the efficient and cost-effective delivery of common services in support of the international programs of co-locators, individual MOUs are signed with each co-locator. Co-locators comprise all non-departmental entities, and include Crown corporations, provincial or territorial governments, foreign governments, and non-governmental organizations co-located at the Department’s missions abroad.

In the fiscal year ended March 31, 2016, this activity amounted to approximately $26,242,368 ($25,788,523 in 2014-2015) of in-year funds received via the Specified Purpose Accounts and Net-Voted Revenues.

(c) Administration of programs on behalf of other government departments

The Department has a number of MOUs with partner departments for the administration of unique, in-year programs delivered abroad. The Department issued approximately $63,000,000 ($52,000,000 in 2014-2015) in payments for operational and program activities on behalf of several partner departments. The Department also collected approximately $163,000,000 ($169,000,000 in 2014-2015) in revenues on behalf of Immigration, Refugees and Citizenship Canada. These expenses and the revenues are not reflected in these Financial Statements, but rather in the Financial Statements of the respective government departments.

(d) Other transactions with related parties

Related party transactions - Other transactions with related parties
(in thousands of dollars)20162015
Revenues - other government departments and agencies98,756106,422
Expenses - other government departments and agencies226,569240,564

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

15. Transfer of the transition payments for implementing salary payments in arrears

The Government of Canada implemented salary payments in arrears in 2014-2015. As a result, a one-time payment was issued to employees and will be recovered from them in the future. The transition to salary payments in arrears forms part of the transformation initiative that replaces the pay system and also streamlines and modernizes the pay processes. This change to the pay system had no impact on the expenses of the Department. However, it did result in the use of additional spending authorities by the Department. Prior to year end, the transition payments for implementing salary payments in arrears were transferred to a central account administered by Public Services and Procurement Canada, who is responsible for the administration of the Government pay system.

16. Segmented information

Presentation by segment is based on the Department's Strategic Outcomes and Programs as presented in Note 1. 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 expenses and by major type of revenues. The segmented results for the period are as follows:

Segmented information
(in thousands of dollars)Canada's International AgendaInternational Services for CanadiansInternational Development and Humanitarian AssistanceCanada's International PlatformInternal ServicesTotal 2016Total 2015
Integrated Foreign Affairs, Trade, and Development Policy (PA # 1.1)Diplomacy, Advocacy, and International Agreements (PA # 1.2)International Commerce (PA # 2.1)Consular Services and Emergency Management (PA # 2.2)International Security and Democratic Development (PA # 3.1)International Development (PA # 3.2)International Humanitarian Assistance (PA # 3.3)Mission Network Governance, Strategic Direction and Common Services (PA # 4.1)Management of Government of Canada Terms and Conditions of Employment Abroad (PA # 4.2)Internal Services (PA # 5)
Transfer payments
Other countries and international organizations636651,443694-168,1962,569----823,538678,004
Non-profit organizations-45,5366,074-20,311-----71,92177,677
Other levels of government in Canada-13,805--------13,80513,504
International development assistance-406--143,5522,416,140693,799---3,253,8973,137,124
Individuals--------241-241202
Industry-1,8123,339-1,216-----6,3674,647
Refund of prior years' transfer payments-(395)(5)-(854)(11,390)(3,794)---(16,438)(10,218)
Transfer payments incurred on behalf of Government----(5,404)(332,492)(2,169)---(340,065)(293,896)
Total transfer payments636712,60710,102-327,0172,074,827687,836-241-3,813,2663,607,044
Operating expenses
Salaries and employee benefits65,318189,511126,88030,97214,39085,4123,392186,833202,919256,0091,161,6361,129,832
Professional and special services3,30329,03818,7866,8835,6342,33614494,9786,07156,938224,111226,032
Rentals1,6758,6255,7781,2819002,587106172,7768,03922,670224,437234,216
Transportation3,22312,2178,2783,2158,0634,39735416,04739,4687,877103,13997,257
Amortization of tangible capital assets26736772,58631732--19,441-8,920101,93095,649
Acquisition of machinery and equipment, including parts and consumables3471,622945464305137117,6631384,52026,14221,503
Utilities, materials and supplies4471,7421,153309464106639,330942,42046,07144,264
Repair and maintenance-3811552131,258--23,114211,43226,57430,252
Information1892,8954,3941101493182373,27011,79611,685
Bad debt-----6,043----6,0434,168
Telecommunications2535010864352-1,152164132,165848
Loss on disposal of tangible capital assets--17722---5,192-25,39310,381
Foreign exchange realized loss2131,502807280331-7,19815798611,1775,518
Foreign exchange unrealized loss-----29,302----29,302140,430
Other2126311423626-458113341,2924,517
Expenses incurred on behalf of Government-----(29,302)----(29,302)(140,430)
Total operating expenses75,028248,513240,04844,27231,164101,1404,004585,005256,941365,7911,951,9061,916,122
Total expenses75,664961,120250,15044,272358,1812,175,967691,840585,005257,182365,7915,765,1725,523,166
Revenues
Sale of goods and services-1683,21498,781---59,050--161,213167,236
Gain on disposal of tangible capital assets--186----91,066-6,49197,74323,195
Foreign exchange realized gain1521,060563195231-5,2511097308,0846,783
Foreign exchange unrealized gain-----29,302----29,302140,430
Amortization of discount on loans-----19,165----19,16519,134
Other revenues6423733290-4,840-3,20731578,9307,433
Revenues earned on behalf of Government(216)(1,107)(4,099)(96,582)(23)(53,308)-(124,139)(112)(7,060)(286,646)(329,171)
Total revenues-3581962,484---34,435-31837,79135,040
Net cost from continuing operations75,664960,762249,95441,788358,1812,175,967691,840550,570257,182365,4735,727,3815,488,126

Annex to the Statement of Management Responsibility Including Internal Control Over Financial Reporting - Fiscal Year 2015-16

1. Introduction

This document provides summary information on the measures taken by Global Affairs Canada (GAC) to maintain an effective system of internal control over financial reporting (ICFR), including information on internal control management, assessment results and related action plans.

Detailed information on GAC’s authority, mandate, and program activities can be found in the Departmental Performance Report and the Report on Plans and Priorities.

2. Departmental System of Internal Control over Financial Reporting

2.1 Internal Control Management

GAC 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 Head, is in place and includes:

The Department’s control environment also includes:

2.2 Service Arrangements relevant to Financial Statements

Common Arrangements

Global Affairs Canada relies on other government departments for the processing of many of the transactions that are recorded in its financial statements:

Specific Arrangements:

3. Departmental Assessment Results during Fiscal Year 2015-16

During 2015-16, Global Affairs Canada completed operating effectiveness testing on the last remaining process; Transfer Payments – Development Programs. The Department’s risk based ongoing monitoring program was implemented according to plan.

The following sections will summarize the significant findings of the internal control assessment activities undertaken during fiscal year 2015-16.

3.1 Operating Effectiveness Testing of Key Controls

During 2015-16, GAC completed operating effectiveness testing for the final business process; Transfer payments – Development programs.

As a result of the operating effectiveness testing, the department identified the following required remediation:

3.2 New or significantly amended key controls

In the current year, there were no significantly amended key controls in existing processes which required a reassessment. Changes to the government wide payroll system and the impact on internal controls will be reviewed in 2016-17.

3.3 Ongoing monitoring program

During 2015-16, GAC implemented a risk-based ongoing monitoring program which encompasses all three control areas and is designed to continuously monitor the effectiveness of internal controls over financial reporting. The program is a two-pronged approach that envisions:

3.3.1 Annual Risk Based Assessment

During 2015-16, the department completed its reassessment of Entity Level Controls and the financial controls within the business processes of Revenues, Loans to developing countries and International Financial Institutions, and Investments and advances to International Financial Institutions. Key controls over significant risks within the Payments, Year-end procedures, and mission specific processes were also assessed. For the most part, the key controls that were tested performed as intended, with remediation required as follows:

Remediation identified from departmental self-assessments is addressed through risk based management action plans prepared by the business process owners.

4. Global Affairs Canada's Progress and Action Plan

4.1 Progress during Fiscal year 2015-16

Global Affairs Canada conducted its ongoing monitoring according to the previous year’s rotational plan as shown in the following table.

Element in previous year’s assessment and ongoing monitoring planStatus
Operating effectiveness testing – Transfer payments development programs.Completed as planned. Recommendations have been presented to senior management and remedial actions have started.
Ongoing monitoring of the Entity-level controls (ELCs) process.Completed as planned. Recommendations have been presented to senior management and remedial actions have started.
Ongoing monitoring of the Salaries and benefits process.

Deferred until 2016-17 due to the centralization of compensation activities and the introduction of a new payroll system, during 2015-16.

Ongoing monitoring of the Revenue process was performed instead.

Ongoing monitoring of the Revenues process.Completed ahead of schedule. Recommendations have been presented to senior management and remedial actions have started.
Ongoing monitoring of the Loans to developing countries and International Financial Institutions process.Completed as planned. Recommendations have been presented to senior management and remedial actions have started.
Ongoing monitoring of the Investments and advances to International Financial InstitutionsCompleted as planned. Recommendations have been presented to senior management and remedial actions have started.
Ongoing monitoring of Mission specific processesAssessed one mission, as planned. Recommendations have been presented to senior management and remedial actions have started.
Ongoing monitoring of key controls over significant risks.Completed as planned; remedial actions have started.

4.2 Action Plan

Global Affairs Canada’s rotational ongoing monitoring plan over the next three years, based on an annual validation of the high-risk processes and controls and related adjustments to the ongoing monitoring plan, is presented in table 4.2.1. The plan calls for a triennial review of each process in conjunction with an annual assessment of key controls at missions and key controls over significant risks.

4.2.1 Assessment and monitoring plan for 2016-17 and subsequent years
Business ProcessOngoing Monitoring
2016-17
Ongoing Monitoring 2017-18Ongoing Monitoring 2018-19
Entity-level controls (ELCs)  
Information technology general controls (ITGCs)  
Transfer Payments  
Salaries and benefits  
Capital assets at HQ  
Payments at HQ  
Loans to developing countries and International Financial Institutions  
Investments and advances to International Financial Institutions  
Foreign Service Directives  
Revenues  
Year-end procedures and financial statement preparation  
Mission specific processes
Key controls over significant risks
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