Financial Statements for the period ended March 31, 2020

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, 2020, and all information contained in these financial statements rests with the management of the Canadian Transportation Agency (the CTA). 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 CTA’s financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the CTA’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 CTA 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 CTA 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 CTA'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)

	2020	2019
Liabilities
Accounts payable and accrued liabilities (note 4)	$3,797,799	$4,680,877
Vacation pay and compensatory leave	1,732,954	1,395,546
Employee future benefits (note 5)	1,012,719	1,029,571
Total liabilities	6,543,472	7,105,994
Financial assets
Due from Consolidated Revenue Fund	3,715,299	4,417,768
Accounts receivable and advances (note 6)	207,237	546,988
Total gross financial assets	3,922,536	4,964,756
Financial assets held on behalf of Government
Accounts receivable and advances (note 6)	(48,346)	(53,346)
Total financial assets held on behalf of Government	(48,346)	(53,346)
Total net financial assets	3,874,190	4,911,410
Agency net debt	2,669,282	2,194,584
Non-financial assets
Prepaid expenses	125,439	232,310
Inventory	40,587	39,696
Tangible capital assets (note 7)	696,028	859,713
Total non-financial assets	862,054	1,131,719
Agency net financial position	$(1,807,228)	$(1,062,865)

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)

	2020 Planned Results	2020	2019
Expenses
Independent regulatory and dispute-resolution services for transportation providers and users	$27,507,079	$30,380,186	$26,975,940
Internal services	8,158,117	10,125,284	10,086,399
Total expenses	35,665,196	40,505,470	37,062,339
Revenues
Revenues from fines	158,935	88,450	131,235
Sales of goods and services	85	20	80
Gain on disposal of assets	-	772	166
Miscellaneous revenues	-	35	1,196
Revenues earned on behalf of Government	(159,020)	(89,242)	(132,351)
Total revenues	-	35	326
Net cost of operations before government funding and transfers	35,665,196	40,505,435	37,062,013

Government funding and transfers	2020	2019
Net cash provided by Government of Canada	$35,795,867	$31,590,840
Change in due from Consolidated Revenue Fund	(702,469)	1,552,619
Services provided without charge by other government departments (note 9)	4,645,193	4,216,967
Other transfers of assets and liabilities (to)/from other government departments	22,481	956
Net cost of operations after government funding and transfers	744,363	(299,369)
Agency net financial position - Beginning of year	(1,062,865)	(1,362,234)
Agency net financial position - End of year	$(1,807,228)	$(1,062,865)

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)

	2020	2019
Net cost of operations after government funding and transfers	$744,363	$(299,369)
Change due to tangible capital assets
Acquisition of tangible capital assets	107,575	288,249
Amortization of tangible capital assets	(271,260)	(314,925)
Total change due to tangible capital assets	(163,685)	(26,676)
Change due to inventory	891	7,990
Change due to prepaid expenses	(106,871)	115,912
Net increase (decrease) in Agency net debt	474,698	(202,143)
Agency net debt – Beginning of year	2,194,584	2,396,727
Agency net debt – End of year	$2,669,282	$2,194,584

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

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

	2020	2019
Operating activities
Net cost of operations before government funding and transfers	$40,505,435	$37,062,013
Non-cash items:
Amortization of tangible capital assets	(271,260)	(314,925)
Services provided without charge by other government departments (note 9)	(4,645,193)	(4,216,967)
Net transfer of salary overpayments to (from) other government departments	(22,481)	(956)
Variations in Statement of Financial Position:
Increase (decrease) in accounts receivable and advances	(334,751)	227,275
Increase (decrease) in prepaid expenses	(106,871)	115,912
Increase (decrease) in inventory	891	7,990
Decrease (increase) in accounts payable and accrued liabilities	883,078	(1,709,464)
Decrease (increase) in vacation pay and compensatory leave	(337,408)	4,303
Decrease (increase) in employee future benefits	16,852	127,410
Cash used in operating activities	35,688,292	31,302,591
Capital investment activities:
Acquisitions of tangible capital assets	107,575	288,249
Cash used in capital investment activities	107,575	288,249
Net cash provided by Government of Canada	$35,795,867	$31,590,840

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 CTA was established with the coming into force of the Canada Transportation Act (S.C. 1996, c. 10) on July 1st, 1996, as the continuation of the National Transportation Agency. The CTA is Canada’s longest-standing independent, quasi-judicial tribunal and regulator having been established in its original form in 1904. The CTA has, with respect to all matters necessary for the exercise of its jurisdiction, all the powers of a superior court. The CTA has three mandates:

• It helps 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.
• It protects the human right of persons with disabilities to an accessible transportation network.
• It provides consumer protection for air passengers.

In delivering its mandates, the CTA operates under the following core responsibilities:

 

• Independent regulatory and dispute-resolution services for transportation providers and users. This core responsibility is supported by the following three key programs:

  • Determinations and Compliance: This program provides analysis and recommendations when industry needs a determination from the CTA to proceed with an activity in the marketplace (e.g. an air carrier licence). It also monitors compliance with legislation and regulations, as well as CTA decisions, orders and determinations and initiates enforcement actions in cases of non-compliance.

  • Dispute Resolution: This program provides dispute resolution services, upon application, for air, rail, marine and accessibility disputes within the CTA's jurisdiction. It does this using a range of approaches from relatively informal facilitation and mediation to more formal arbitration and adjudication.

  • Analysis and Outreach: This program leads CTA regulatory and guidance material modernization and provides strategic research, analysis and legislative advice regarding the national transportation system and key issues. It enhances the accessibility of the federal transportation network. It also leads the CTA's external partnerships, communications and outreach.

 

• Internal Services. Internal Services are those groups of related activities and resources that the federal government considers to be services in support of programs and/or required to meet corporate obligations of an organization. Internal services refer to the activities and resources that support program delivery in the organization, such as human resources management, financial management, information management and information technology.

2. Summary of significant accounting policies

These financial statements are prepared using the CTA'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 CTA is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the CTA 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 2019-2020 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 2019-2020 Departmental Plan.

2. Net Cash Provided by Government

   The CTA operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the CTA is deposited to the CRF, and all cash disbursements made by the CTA 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 CTA 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 CTA'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 CTA's contributions to the Plan are charged to expenses in the year incurred and represent the total CTA obligation to the Plan. The CTA’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 CTA 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 CTA has different net results of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled in the following tables:

a) Reconciliation of net cost of operations to current year authorities used

	2020	2019
Net cost of operations before government funding and transfers	$40,505,435	$37,062,013
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets	(271,260)	(314,925)
Services provided without charge by other government departments	(4,645,193)	(4,216,967)
Decrease (increase) in vacation pay and compensatory leave	(337,408)	4,303
Decrease (increase) in employee future benefits	16,852	127,410
Refunds of prior years' expenditures	3,486	7,911
Other expenditures not affecting authorities	(159)	3,221
Total items affecting net cost of operations but not affecting authorities	(5,233,682)	(4,389,047)
Adjustment for items not affecting net cost of operations but affecting authorities:
Acquisitions of tangible capital assets	107,575	288,249
Increase (decrease) in other receivables and advances	4,438	59,073
Increase (decrease) in inventory	891	7,990
Increase (decrease) in prepaid expenses	(106,871)	115,912
Total items not affecting net cost of operations but affecting authorities	6,033	471,224
Current year authorities used	$35,277,786	$33,144,190

b) Authorities provided and used

	2020	2019
Authorities provided:
Vote 25: Operating expenditures	$36,433,079	$33,908,170
Statutory amounts	3,785,140	3,458,983
Less:
Lapsed: Operating	(4,940,433)	(4,222,963)
Current year authorities used	$35,277,786	$33,144,190

4. Accounts payable and accrued liabilities

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

	2020	2019
Accounts payable - Other government departments and agencies	$729,769	$752,474
Accounts payable - External parties	403,837	1,371,086
Total accounts payable	1,133,606	2,123,560
Accrued liabilities	2,664,193	2,557,317
Total accounts payable and accrued liabilities	$3,797,799	$4,680,877

5. Employee future benefits

a) Pension benefits

The CTA'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 CTA 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 2019-2020 expense amounts to $2,621,811 ($2,412,179 in 2018-2019). For Group 1 members, the expense represents approximately 1.01 times (1.01 times in 2018-2019) the employee contributions and, for Group 2 members, approximately 1.00 times (1.00 times in 2018-2019) the employee contributions.

The CTA'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 CTA’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, 2020, 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:

	2020	2019
Accrued benefit obligation - Beginning of year	$1,029,571	$1,156,981
Expense for the year	16,304	29,002
Benefits paid during the year	(33,156)	(156,412))
Accrued benefit obligation - End of year	$1,012,719	$1,029,571

6. Accounts receivable and advances

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

	2020	2019
Receivables - Other government departments and agencies	$148,842	$477,458
Receivables - External parties	51,650	62,536
Employee advances	6,745	6,994
Gross accounts receivable	207,237	546,988
Accounts receivable held on behalf of Government	(48,346)	(53,346)
Net accounts receivable	$158,891	$493,642

7. Tangible capital assets

Cost

Capital Asset Class	Opening Balance	Acquisitions	Adjustments	Disposals and Write-offs	Closing Balance
Machinery and equipment	$105,746	$ -	$ -	$ -	$105,746
Computer hardware	2,379,726	107,575	-	-	2,487,301
Computer software	4,038,405	-	-	-	4,038,405
Furniture	665,441	-	-	-	665,441
Vehicles	24,285	-	-	-	24,285
Total	$7,213,603	$107,575	$ -	$ -	$7,321,178

Accumulated Amortization

Capital Asset Class	Opening Balance	Amortization	Adjustments	Disposals and Write-offs	Closing Balance
Machinery and equipment	$105,746	-	$ -	$ -	$105,746
Computer hardware	1,578,635	229,938	-	-	1,808,573
Computer software	4,038,405	-	-	-	4,038,405
Furniture	613,758	37,852	-	-	651,610
Vehicles	17,346	3,470	-	-	20,816
Total	$6,353,890	$271,260	$ -	$ -	$6,625,150

Net Book Value

Capital Asset Class	2020	2019
Machinery and equipment	$ -	$ -
Computer hardware	678,728	801,091
Computer software	-	-
Furniture	13,831	51,683
Vehicles	3,469	6,939
Total	$696,028	$859,713

8. Contractual obligations

The nature of the CTA’s activities can result in some large multi-year contracts and obligations whereby the CTA 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:

	2021	2022	2023	2024 and thereafter	Total
Professional and special services	$515,500	$28,908	-	-	$544,408
Machinery and equipment	$386,060	$13,250	-	-	$399,310
Other goods and services	145,338	125,961	53,408	179	324,886
Software maintenance agreements	88,915	50,127	50,127	120,289	309,458
Operating leases and rental of storage	45,000	-	-	-	45,000
Total	$1,180,813	$218,246	$103,535	$120,468	$1,623,062

9. Related party transactions

The CTA 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 CTA 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:

	2020	2019
Accommodation	$2,122,325	$2,137,811
Employer's contribution to the health and dental insurance plans	2,516,416	2,069,961
Worker's compensation	6,452	9,195
Total	$4,645,193	$4,216,967

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 CTA's Statement of Operations and Agency Net Financial Position.

b) Other transactions with other government departments and agencies

	2020	2019
Expenses	$6,519,200	$5,204,914
Revenues	-	-
Total	$6,519,200	$5,204,914

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 Department's core responsibility. The presentation by segment is based on the same accounting policies as described in the Summary of significant accounting policies in note 2. The following table presents the expenses incurred and revenues generated for the main core responsibility, by major object of expense and by major type of revenue. The segment results for the period are as follows:

	Independent regulatory and dispute-resolution services for transportation and users	Internal Services	Total 2020	Total 2019
Operating expenses
Salaries and employee benefits	$26,852,762	$7,120,462	$33,973,224	$29,696,440
Accommodation	1,657,897	464,428	2,122,325	2,137,811
Professional and special services	946,476	687,316	1,633,792	1,605,892
Rentals	93,322	716,221	809,543	753,947
Transportation and telecommunication	413,224	191,283	604,507	788,262
Machinery and equipment	20,914	475,884	496,798	928,994
Information	261,701	205,641	467,342	547,995
Amortization of tangible capital assets	83,220	188,040	271,260	314,926
Utilities, materials and supplies	48,671	37,257	85,928	149,455
Repair and maintenance	130	38,752	38,882	128,711
Other	1,869	-	1,869	9,906
Total expenses	30,380,186	10,125,284	40,505,470	37,062,339
Revenues
Revenues from fines	88,450	-	88,450	131,235
Sales of goods and services	-	20	20	80
Gain on disposal of assets	-	772	772	166
Miscellaneous revenues	35	-	35	1,196
Revenues earned on behalf of Government	(88,450)	(792)	(89,242)	(132,351)
Total revenues	35	-	35	326
Net cost of operations before government funding and transfers	$30,380,151	$10,125,284	$40,505,435	$37,062,013