Agriculture and Agri-Food Canada Consolidated Financial Statements (Unaudited) for the year ended March 31, 2023

Table of contents

Statement of Management Responsibility Including Internal Control over Financial Reporting

Responsibility for the integrity and objectivity of the accompanying consolidated financial statements for the year ended March 31, 2023, and all information contained in these financial statements rests with the management of Agriculture and Agri-Food Canada. These consolidated 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 consolidated financial statements. Some of the information in the consolidated 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 Agriculture and Agri-Food Canada's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada and included in Agriculture and Agri-Food Canada's Departmental Results Report, is consistent with these consolidated financial statements.

Management is also responsible for maintaining an effective system of internal control over financial reporting 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 consolidated 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 Agriculture and Agri-Food Canada and through conducting an annual risk-based assessment of the effectiveness of the system of internal control over financial reporting.

The system of internal control over financial reporting 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 internal control over financial reporting for the year ended March 31, 2023 was completed in accordance with the Treasury Board Policy on Financial Management and the results and action plans are summarized in the Annex.

The Annex also provides information on the status of the risk-based assessment of the controls over common services provided by the department that have a bearing on a recipient's departmental financial statements.

The effectiveness and adequacy of Agriculture and Agri-Food Canada's system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of Agriculture and Agri-Food Canada's operations, and by the Departmental Audit Committee, which oversees management's responsibilities for maintaining adequate control systems and the quality of financial reporting.

The consolidated financial statements of Agriculture and Agri-Food Canada have not been audited.

Consolidated Statement of Financial Position (Unaudited)
As at March 31, 2023
(in thousands of dollars)

	2023	2022 Restated (Note 19)
Liabilities
Accounts payable and accrued liabilities (Note 4)	930,748	1,319,759
Vacation pay and compensatory leave	42,105	47,006
Environmental liabilities and asset retirement obligations (Note 5)	50,427	42,403
Deferred revenue (Note 6)	22,546	22,329
Employee future benefits (Note 7)	8,559	8,675
Other liabilities (Note 8)	69,732	61,366
Total liabilities	1,124,117	1,501,538
Financial assets
Due from Consolidated Revenue Fund	984,918	1,355,365
Accounts receivable and advances (Note 9)	29,387	34,740
Loans receivable (Note 10)	306,114	318,127
Total financial assets	1,320,419	1,708,232
Financial assets held on behalf of Government
Accounts receivable and advances (Note 9)	(3,903)	(3,217)
Loans receivable (Note 10)	(306,114)	(318,127)
Total financial assets held on behalf of Government	(310,017)	(321,344)
Total net financial assets	1,010,402	1,386,888
Departmental net debt	113,715	114,650
Non-financial assets
Prepaid expenses and inventory	2,756	2,977
Tangible capital assets (Note 12)	478,607	456,414
Total non-financial assets	481,363	459,391
Departmental net financial position (Note 13)	367,648	344,741

Contractual obligations and contractual rights (Note 14)
Contingent liabilities and contingent assets (Note 15)

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

Consolidated Statement of Operations and Departmental Net Financial Position (Unaudited)
For the year ended March 31, 2023
(in thousands of dollars)

	2023 Planned results	2023 Actual	2022 Actual restated (Note 19)
Expenses
Sector Risk	1,608,335	1,740,038	1,727,424
Science and Innovation	688,176	733,031	597,192
Domestic and International Markets	316,784	386,915	419,860
Internal services	264,841	353,524	324,136
Expenses incurred on behalf of Government	22	(86)	27
Total expenses	2,878,158	3,213,422	3,068,639
Revenues
Sale of goods and services	70,417	72,088	62,157
Interest	15,269	18,737	13,599
Joint project and cost sharing agreements	6,630	12,121	7,319
Miscellaneous revenues	1,346	1,699	1,028
Gain on disposal of assets	1,535	1,597	1,642
Crop Reinsurance Fund	200	70	211
Revenues earned on behalf of Government	(31,721)	(42,148)	(32,187)
Total revenues	63,676	64,164	53,769
Net cost of operations before government funding and transfers	2,814,482	3,149,258	3,014,870
Government funding and transfers
Net cash provided by Government of Canada		3,463,318	3,311,279
Change in due from Consolidated Revenue Fund		(370,447)	(357,159)
Services provided without charge by other government departments (Note 16)		63,387	63,829
Other transfers of assets from other government departments		15,907	73
Net cost of operations after government funding and transfers		(22,907)	(3,152)
Departmental net financial position - Beginning of year		344,741	341,589
Departmental net financial position - End of year		367,648	344,741

Segmented information (Note 17)

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

Consolidated Statement of Change in Departmental Net Debt (Unaudited)
For the year ended March 31, 2023
(in thousands of dollars)

	2023	2022 Restated (Note 19)
Net cost of operations after government funding and transfers	(22,907)	(3,152)
Change due to tangible capital assets
Acquisition of tangible capital assets	50,459	50,901
Amortization of tangible capital assets	(42,451)	(41,845)
Proceeds from disposal of tangible capital assets	(1,637)	(1,679)
Net gain (loss) on disposal of tangible capital assets including adjustments	1,091	(444)
Non-cash changes of tangible capital assets	(997)	51
Transfer from other government departments	15,728	-
Total change due to tangible capital assets	22,193	6,984
Change due to prepaid expenses and inventory	(221)	(930)
(Decrease) increase in departmental net debt	(935)	2,902
Departmental net debt - Beginning of year	114,650	111,748
Departmental net debt - End of year	113,715	114,650
– represents zero

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

Consolidated Statement of Cash Flows (Unaudited)
For the year ended March 31, 2023
(in thousands of dollars)

	2023	2022 Restated (Note 19)
Operating activities
Net cost of operations before government funding and transfers	3,149,258	3,014,870
Non‑cash items:
Amortization of tangible capital assets	(42,451)	(41,845)
Net gain (loss) on disposal of tangible capital assets including adjustments	1,091	(444)
Non‑cash changes of tangible capital assets	(997)	51
Services provided without charge by other government departments (Note 16)	(63,387)	(63,829)
Other transfers of assets (from) other government departments	(179)	(73)
Variations in Consolidated Statement of Financial Position:
(Decrease) increase in accounts receivable and advances	(6,039)	2,693
(Decrease) in prepaid expenses and inventory	(221)	(930)
Decrease in accounts payable and accrued liabilities	389,011	355,513
Decrease in vacation pay and compensatory leave	4,901	4,936
(Increase) in environmental liabilities and asset retirement obligations	(8,024)	(945)
(Increase) in deferred revenue	(217)	(7,000)
Decrease in employee future benefits	116	2,520
(Increase) in other liabilities	(8,366)	(3,460)
Cash used in operating activities	3,414,496	3,262,057
Capital investing activities
Acquisition of tangible capital assets	50,459	50,901
Proceeds from disposal of tangible capital assets	(1,637)	(1,679)
Cash used in capital investing activities	48,822	49,222
Net cash provided by Government of Canada	3,463,318	3,311,279

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

Notes to the Consolidated Financial Statements (Unaudited)
For the year ended March 31, 2023

Note 1 – Authority and objectives

The Department of Agriculture and Agri‑Food was established in 1868. Under the Department of Agriculture and Agri‑Food Act, the Minister is responsible for agriculture, products derived from agriculture and research related to agriculture, and products derived from agriculture including the operation of experimental farm stations unless they have been assigned by law to another department, board, or agency.

The Department provides information, research and technology, and policies and programs to achieve security of the food system, health of the environment and innovation for growth through the following core responsibilities:

Sector Risk
Agriculture and Agri-Food Canada provides tools to mitigate the financial impact of risks beyond producers' control that threaten the viability of their operations. Agriculture and Agri-Food Canada also works with the sector to ensure that systems, standards, and tools are developed to support its ability to prevent and control risks and address market demands.

Science and Innovation
Agriculture and Agri-Food Canada conducts scientific research, develops new knowledge and new technologies, and transfers the results to the agriculture and agri-food sector. Agriculture and Agri-Food Canada also works with industry and other partners to strengthen the sector's capacity to develop and adopt innovative practices, products, and processes.

Domestic and International Markets
Agriculture and Agri-Food Canada provides programs and services and works in collaboration with the sector to support its competitiveness at home and abroad. Agriculture and Agri-Food Canada also works to increase opportunities for the sector to export its products by maintaining and expanding market access and advancing agricultural interests internationally.

Internal services
Internal services are the services that are provided within a department so that it can meet its corporate obligations and deliver its programs. There are 10 categories of internal services: management and oversight; communications; legal; human resources management; financial management; information management; information technology; real property management; materiel management; and acquisition management.

Note 2 – Summary of significant accounting policies

These consolidated financial statements are prepared using the department'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 Consolidated Statement of Operations and Departmental Net Financial Position and in the Consolidated 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 Consolidated Statement of Operations and Departmental Net Financial Position are the amounts reported in the Consolidated Future-Oriented Statement of Operations included in the 2022–23 Departmental Plan. Planned results are not presented in the “Government funding and transfers” section of the Consolidated Statement of Operations and Departmental Net Financial Position and in the Consolidated Statement of Change in Departmental Net Debt because these amounts were not included in the 2022–23 Departmental Plan.

(b) Consolidation

These consolidated financial statements include the accounts of the sub‑entities for which the Deputy Minister is accountable for. The accounts of these sub-entities have been consolidated with those of the Department, and all inter‑organizational balances and transactions have been eliminated. The accounting entity comprises the Department of Agriculture and Agri‑Food, the Farm Products Council of Canada and the Canadian Pari-Mutuel Agency. The consolidated financial statements do not include the accounts of the Canadian Grain Commission, the Canadian Dairy Commission and Farm Credit Canada because they are not under the control of Agriculture and Agri‑Food Canada and therefore are not consolidated.

(c) Net cash provided by Government of Canada

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

(d) Amounts due from or to the Consolidated Revenue Fund

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

(e) Revenues

Revenues from regulatory fees are recognized based on the services provided in the year. Funds received from external parties for specified purposes are recorded upon receipt as deferred revenue. Revenues are then recognized in the period in which the related expenses are incurred. Deferred revenue consists of amounts received in advance of the delivery of goods and rendering of services that will be recognized as revenue in a subsequent fiscal year as it is earned. Other revenues are recognized in the period the event giving rise to the revenues occurred. Revenues that are non-respendable are not available to discharge the Department's liabilities. While the Deputy Minister 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 as a reduction of the entity's gross revenues.

(f) Expenses

Transfer payments are recorded as an expense in the year the transfer is authorized, and all eligibility criteria have been met by the recipient. 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 the employer's contribution to the health and dental insurance plans, accommodation, legal services, and workers' compensation are recorded as operating expenses at their carrying value.

(g) Employee future benefits

1. Pension benefits – Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. 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 consolidated 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.

(h) Financial instruments

A contract establishing a financial instrument creates, at its inception, rights, and obligations to receive or deliver economic benefits. The financial assets and financial liabilities portray these rights and obligations in the financial statements. The Department recognizes a financial instrument when it becomes a party to a financial instrument contract.

Financial instruments consist of accounts and loans receivable, and accounts payable and accrued liabilities.

All financial assets and liabilities are recorded at cost or amortized cost. Any associated transaction costs are added to the carrying value upon initial recognition.

Accounts and loans receivable are initially recorded at cost and, where necessary, are discounted to reflect their concessionary terms. Concessionary terms of loans include cases where loans are made on a long-term, low interest or interest-free basis or include forgiveness clauses. Unconditionally repayable contributions are recognized as loans receivable. When necessary, an allowance for valuation is recorded to reduce the carrying value of accounts and loans receivable to amounts that approximate their net recoverable value. Loans receivable are subsequently measured at amortized cost.

(i) Tangible capital assets

The costs of acquiring land, buildings, equipment, and other capital property are capitalized as tangible capital assets and, except for land, are amortized to expense over the estimated useful lives of the assets, as described in Note 12. All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. Tangible capital assets do not include works of art, museum collections and Crown land to which no acquisition cost is attributable, and intangible assets.

(j) Contingent liabilities

Contingent liabilities, including the allowance for loan or price guarantees, are potential liabilities which may become actual liabilities when one or more future events not wholly in the Department's control 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 consolidated financial statements.

For loan or price guarantees, an allowance is recorded when it is likely that a payment will be made to honour a guarantee and where the amount of the anticipated loss can be reasonably estimated. The amount of the allowance for losses is determined based on historical loss experience and economic conditions adversely affecting the capacity of borrowers to reimburse the loan. The allowance is reviewed on a regular basis with any changes being charged or credited to current year expenses.

(k) Contingent assets

Contingent assets are possible assets which may become actual assets when one or more future events not wholly in the Department's control 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 consolidated financial statements.

(l) Environmental liabilities and asset retirement obligations

An environmental liability for the remediation of contaminated sites is recognized when all of the following criteria are satisfied: an environmental standard exists, contamination exceeds the environmental standard, the Department 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 Department's best estimate of the amount required to remediate the sites to the current minimum environmental standard for its use prior to contamination.

An asset retirement obligation is recognized when all of the following criteria are satisfied: there is a legal obligation to incur retirement costs in relation to a tangible capital asset, the past event or transaction giving rise to the retirement liability has occurred, it is expected that future economic benefits will be given up and a reasonable estimate of the amount can be made. The costs to retire an asset are normally capitalized and amortized over the asset's estimated remaining useful life. An asset retirement obligation may arise in connection with a tangible capital asset that is not recognized or no longer in productive use. In this case, the asset retirement cost would be expensed. The measurement of the liability is the Department's best estimate of the amount required to retire a tangible capital asset.

When the future cash flows required to settle or otherwise extinguish a liability are estimable, predictable, and expected to occur over extended future periods, a present value technique is used. The discount rate used reflects the government's cost of borrowing, associated with the estimated number of years to complete remediation.

The recorded liabilities are adjusted each year, as required, for present value adjustments, inflation, new obligations, changes in management estimates and actual costs incurred.

(m) Measurement uncertainty

The preparation of these consolidated 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 consolidated financial statements and accompanying notes at March 31. The estimates are based on facts and circumstances, historical experience, general economic conditions and reflect the Department's best estimate of the related amount at the end of the reporting period. The most significant items where estimates are used are contingent liabilities, environmental liabilities and asset retirement obligations, 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 consolidated financial statements in the year they become known.

Environmental liabilities and asset retirement obligations are subject to measurement uncertainty as discussed in Note 5 due to the evolving technologies used in the estimation of the costs for remediation of contaminated sites or asset retirements, the use of discounted present value of future estimated costs, inflation, interest rates and the fact that not all sites have had a complete assessment of the extent and nature of remediation or asset retirement costs. Changes to underlying assumptions, the timing of the expenditures, the technology employed, or the revisions to environmental standards or changes in regulatory requirements could result in significant changes to the environmental liabilities and/or asset retirement obligations recorded.

(n) Related party transactions

Related party transactions, other than inter-entity transactions, are recorded at the exchange amount.

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.

Note 3 – Parliamentary authorities

The Department receives most of its funding through annual parliamentary authorities. Items recognized in the Consolidated Statement of Operations and Departmental Net Financial Position and the Consolidated 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

	2023	2022 Restated (Note 19)
	(in thousands of dollars)
Net cost of operations before government funding and transfers	3,149,258	3,014,870
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets	(42,451)	(41,845)
Net gain (loss) on disposal of tangible capital assets including adjustments	1,091	(444)
Non-cash changes of tangible capital assets	(997)	51
Services provided without charge by other government departments	(63,387)	(63,829)
(Decrease) in prepaid expenses and inventory	(221)	(930)
Increase in restricted accounts	-	283
Decrease in vacation pay and compensatory leave	4,901	4,936
Decrease in accrued liabilities	466,350	451,524
(Increase) in environmental liabilities and asset retirement obligations	(8,024)	(945)
Decrease in employee future benefits	116	2,520
(Increase) decrease in allowances for bad debt expenses	(11,109)	3,831
Refund and adjustment of prior years' expenditures	50,729	26,920
Respendable revenue	5,346	4,826
Other	6,549	20,556
Total items affecting net cost of operations but not affecting authorities	408,893	407,454
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisition of tangible capital assets	50,459	50,901
Proceeds from disposal of tangible capital assets	(1,637)	(1,679)
Increase in accounts receivable and advances	1,113	1,404
(Decrease) in loans receivable	(1,541)	(11,026)
Total items not affecting net cost of operations but affecting authorities	48,394	39,600
Current year authorities used	3,606,545	3,461,924
– represents zero

(b) Authorities provided and used

	2023	2022
	(in thousands of dollars)
Authorities provided:
Vote 1 ‑ Operating expenditures	669,291	655,426
Vote 5 ‑ Capital expenditures	59,741	56,290
Vote 10 ‑ Transfer payments	748,051	751,122
Statutory amounts	2,212,379	2,116,777
Total	3,689,462	3,579,615
Less:
Authorities available for future years	17,054	15,831
Lapsed authorities	65,863	101,860
Total	82,917	117,691
Current year authorities used	3,606,545	3,461,924

Note 4 – Accounts payable and accrued liabilities

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

	2023	2022
	(in thousands of dollars)
Accounts payable - Other government departments and agencies	6,653	9,264
Accounts payable - External parties	901,999	1,280,924
Total accounts payable	908,652	1,290,188
Accrued liabilities	22,096	29,571
Total accounts payable and accrued liabilities	930,748	1,319,759

Note 5 – Environmental liabilities and asset retirement obligations

Environmental liabilities and asset retirement obligations include:

	2023	2022 Restated (Note 19)
	(in thousands of dollars)
Remediation liability for contaminated sites	16,649	9,421
Asset retirement obligations	33,778	32,982
Total environmental liabilities and asset retirement obligations	50,427	42,403

(a) Remediation of contaminated sites

The Government's “Federal Approach to Contaminated Sites” sets out a framework for management of contaminated sites using a risk-based approach. Under this approach the Government has inventoried the contaminated sites identified on federal lands, allowing them to be classified, managed and recorded in a consistent manner. This systematic approach aids in identification of the high risk sites in order to allocate limited resources to those sites which pose the highest risk to human health and the environment.

The Department has identified a total of 56 sites (51 sites in 2022) where contamination may exist and assessment, remediation and monitoring may be required. Of these, the Department has identified 7 sites (8 sites in 2022) where action is required and for which a liability of $11.4 million ($5.0 million in 2022) has been recorded. This liability estimate has been determined based on site assessments performed by environmental experts.

In addition, there are 15 sites that have not been assessed by environmental experts (20 sites in 2022) for which the department has estimated and recorded a liability of $5.2 million ($4.4 million in 2022).

These two estimates combined, totaling $16.6 million ($9.4 million in 2022), represents management's best estimate of the costs required to remediate sites to the current minimum standard for its use prior to contamination, based on information available at the financial statement date.

For the remaining 34 sites (23 sites in 2022), of which 18 sites where no liability for remediation has been recognized and 16 suspected sites where further assessment may be required. Some of these sites are at various stages of testing and evaluation and if remediation is required, liabilities will be reported as soon as a reasonable estimate can be determined.

The following table presents the total estimated amounts of these liabilities by nature and source and the total undiscounted future expenditures as at March 31, 2023 and March 31, 2022. When the liability estimate is based on a future cash requirement, the amount is adjusted for inflation using an expected CPI rate of 2% (2% in 2022). Inflation is included in the undiscounted amount. The Government of Canada's cost of borrowing by reference to the actual zero-coupon yield curve for Government of Canada bonds has been used to discount the estimated future expenditures. The March 2023 rates range from 4.50% (1.88% in 2022) for a 1 year term to 3.01% (2.35% in 2022) for a 30 or greater year term.

Nature and source of liability 2023

Nature and source	Total number of sites	Number of sites with a liability	Estimated liability ($'000)	Estimated total undiscounted expenditures ($'000)
Fuel related practices(1)	26	11	830	892
Landfills/waste sites(2)	19	5	164	177
Engineered asset/air and land transportation(3)	1	-	-	-
Office/commercial/industrial operations(4)	3	1	18	19
Other(5)	7	5	15,637	17,042
Totals	56	22	16,649	18,130
– represents zero (1) Contamination primarily associated with fuel storage and handling, for example accidental spills related to fuel storage tanks or former fuel handling practices, such as petroleum hydrocarbons, polyaromatic hydrocarbons and BTEX (benzene, toluene, ethylbenzene and xylenes). (2) Contamination associated with former landfill/waste site or leaching from materials deposited in the landfill/waste site, for example metals, petroleum hydrocarbons, BTEX, other organic contaminants, etc. (3) Contamination associated with the operations of engineered assets such as airports, railways and roads where activities such as fuel storage/handling, waste sites, firefighting training facilities and chemical storage areas resulted in former or accidental contamination, for example metals, petroleum hydrocarbons, polyaromatic hydrocarbons, BTEX and other organic contaminants. Sites often have multiple sources of contamination. (4) Contamination associated with the operations of the office/commercial/industrial facilities where activities such as fuel storage/handling, waste sites and use of metal-based paint resulted in former or accidental contamination, for example metals, petroleum hydrocarbons, polyaromatic hydrocarbons, BTEX, etc. Sites often have multiple sources of contamination. (5) Contamination from other sources, for example use of pesticides, herbicides, fertilizers at agricultural sites, use of PCBs, firefighting training areas, firing ranges and training facilities, etc.

Nature and source of liability 2022

Nature and source	Total number of sites	Number of sites with a liability	Estimated liability ($'000)	Estimated total undiscounted expenditures ($'000)
Fuel related practices(1)	23	14	641	684
Landfills/waste sites(2)	15	6	208	221
Engineered asset/air and land transportation(3)	1	-	-	-
Office/commercial/industrial operations(4)	-	-	-	-
Other(5)	12	8	8,572	9,058
Totals	51	28	9,421	9,963
– represents zero (1) Contamination primarily associated with fuel storage and handling, for example accidental spills related to fuel storage tanks or former fuel handling practices, such as petroleum hydrocarbons, polyaromatic hydrocarbons and BTEX (benzene, toluene, ethylbenzene and xylenes). (2) Contamination associated with former landfill/waste site or leaching from materials deposited in the landfill/waste site, for example metals, petroleum hydrocarbons, BTEX, other organic contaminants, etc. (3) Contamination associated with the operations of engineered assets such as airports, railways and roads where activities such as fuel storage/handling, waste sites, firefighting training facilities and chemical storage areas resulted in former or accidental contamination, for example metals, petroleum hydrocarbons, polyaromatic hydrocarbons, BTEX and other organic contaminants. Sites often have multiple sources of contamination. (4) Contamination associated with the operations of the office/commercial/industrial facilities where activities such as fuel storage/handling, waste sites and use of metal-based paint resulted in former or accidental contamination, for example metals, petroleum hydrocarbons, polyaromatic hydrocarbons, BTEX, etc. Sites often have multiple sources of contamination. (5) Contamination from other sources, for example use of pesticides, herbicides, fertilizers at agricultural sites, use of PCBs, firefighting training areas, firing ranges and training facilities, etc.

(b) Asset retirement obligations

The Department has recorded asset retirement obligations for the removal of asbestos in buildings.

The changes in asset retirement obligations during the year are as follows:

	2023		2022
	Asbestos in buildings	Total	Restated (Note 19)
	(in thousands of dollars)
Opening balance	32,982	32,982	32,205
Accretion expense(1)	796	796	777
Closing balance	33,778	33,778	32,982
(1) Accretion expense is the increase in the carrying amount of an asset retirement obligation due to the passage of time.

The undiscounted future expenditures, adjusted for inflation, for the planned projects comprising the liability are $52.0 million ($53.0 million in 2022).

Key assumptions used in determining the provision are as follows:

	2023	2022
Discount rate	3.13% - 4.50%	1.88% - 2.44%
Discount period and timing of settlement	1 to 20 years	1 to 20 years
Long-term rate of inflation	2.00%	2.00%

The Department's ongoing efforts to assess contaminated sites and asset retirement obligations may result in additional environmental liabilities and asset retirement obligations.

Note 6 – Deferred revenue

Deferred revenue represents the balance at year‑end of unearned revenues stemming mainly from joint collaborative agreements and cost‑sharing agreements which are restricted to fund the expenditures related to specific research projects and amounts received for fees prior to services being performed. Revenue is recognized in the period in which these expenditures are incurred or in which the service is performed. Details of the transactions related to this account are as follows:

	2023	2022
	(in thousands of dollars)
Opening balance	22,329	15,329
Amounts received	12,386	14,326
Revenue recognized	(12,169)	(7,326)
Closing balance	22,546	22,329

Note 7 – Employee future benefits

(a) Pension benefits

The Department'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% per year of pensionable service, times the average of the best 5 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 2022–23 expense amounts to $45.0 million ($44.8 million in 2022). For Group 1 members, the expense represents approximately 1.02 times (1.01 times in 2022) the employee contributions and, for Group 2 members, approximately 1.00 times (1.00 times in 2022) 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 Consolidated Financial Statements of the Government of Canada, as the Plan's sponsor.

(b) Severance benefits

Severance benefits provided to the Department'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. As at March 31, 2023, 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:

	2023	2022
	(in thousands of dollars)
Accrued benefit obligation - Beginning of year	8,675	11,195
Expense for the year	1,593	686
Benefits paid during the year	(1,709)	(3,206)
Accrued benefit obligation - End of year	8,559	8,675

Note 8 – Other liabilities

The Department holds funds in trust from the AgriInvest program, the AgriStability program as well as security and other deposits.

AgriInvest is a self-managed producer-government savings account that allows producers to set money aside which can be used to recover from small income shortfalls, or to make investments to reduce on-farm risks. Program payments are cost‑shared with the province or territory, which producers can withdraw under specific terms and conditions. Producers make their AgriInvest deposits at a participating financial institution of their choice. Existing funds held by the federal government are being transferred to the producers' AgriInvest accounts held at the financial institutions.

The AgriStability program helps producers protect their farming operations against larger drops in income. Program payments are shared 60% federally and 40% provincially/territorially. The provincial/territorial share of the contributions and interest paid on the contributions are held in a specified purpose account until the producers draw down their funds.

AgriInvest, AgriStability and security and other deposit account activity during the year was as follows:

	2023	2022
	(in thousands of dollars)
Opening balance	61,366	57,906
Deposits	271,937	255,787
Withdrawals	(263,571)	(252,327)
Ending balance	69,732	61,366

Note 9 – Accounts receivable and advances

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

	2023	2022
	(in thousands of dollars)
Receivables - Other government departments and agencies	5,457	8,220
Receivables - External parties	34,964	36,091
Employee advances	100	105
Subtotal	40,521	44,416
Allowance for doubtful accounts on receivables from external parties	(11,134)	(9,676)
Total accounts receivable and advances	29,387	34,740
Accounts receivable held on behalf of Government	3,989	3,286
Allowance for doubtful accounts held on behalf of Government	(86)	(69)
Net accounts receivable held on behalf of Government	3,903	3,217
Net accounts receivable and advances	25,484	31,523

The following table provides an aging analysis of accounts receivable from external parties and the valuation allowance used to reflect their net recoverable value:

	2023	2022
	(in thousands of dollars)
Accounts receivable from external parties
Not past due	13,047	11,171
Number of days past due
1 to 30	191	1,365
31 to 60	262	301
61 to 90	735	438
91 to 365	2,368	5,058
Over 365(1)	18,361	17,758
Subtotal	34,964	36,091
Less: Valuation allowance	(11,134)	(9,676)
Total	23,830	26,415
(1) These amounts represent program and contribution agreement receivables that are in default.

Note 10 – Loans receivable

The following table presents details of the Department's loans receivable balances:

	2023	2022
	(in thousands of dollars)
Unconditionally repayable contributions	161,758	156,897
Loans resulting from loan guarantee programs	276,954	294,069
Subtotal	438,712	450,966
Less: Allowance for valuation	(132,598)	(132,839)
Total loans receivable	306,114	318,127
Loans receivable held on behalf of Government	306,114	318,127
Net loans receivable	-	-
– represents zero

(a) Unconditionally repayable contributions

Unconditionally repayable contributions relate to contributions made to outside parties which are repayable based on conditions specified in the contribution agreement that have come into being. The Department's unconditionally repayable contributions are non-interest bearing and have annual repayment terms of 1 to 10 years following the completion of the project. An allowance of $18.9 million ($9.6 million in 2022) has been recorded.

(b) Loans resulting from loan guarantee programs

The Department's loan receivables are the result of the exercise of loan guarantees by the initial lender under the terms of various loan guarantee programs. These loans are in default with the initial lender and due immediately to the Department. Interest rates on these loans vary according to the initial terms of the loans and applicable government regulations. An allowance of $113.7 million ($123.2 million in 2022) relating to these loans has been recorded.

The following table provides an aging analysis of loans resulting from loan guarantee programs and the valuation allowance used to reflect their net recoverable value:

	2023	2022
	(in thousands of dollars)
Loans resulting from loan guarantee programs
Not past due	11,582	39,872
Number of days past due
1 to 90	561	1,158
91 to 365	861	4,687
Over 365	263,950	248,352
Subtotal	276,954	294,069
Less: Valuation allowance	(113,719)	(123,245)
Total	163,235	170,824

Note 11 – Risk management

The Department has exposure to the following risks from its use of financial instruments: credit risk, interest rate risk and liquidity risk.

(a) Credit Risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss.

The Department's maximum exposure to credit risk at March 31, 2023 and March 31, 2022 is the carrying amount of its financial assets.

The Department has determined that there is no significant concentration of credit risk related to accounts receivable from external parties. An analysis of the age of these financial assets and the valuation allowance used to reflect these accounts at their net recoverable value is disclosed in Note 9.

The Department intentionally takes on counterparty risk related to certain loans receivable with concessionary terms in order to support various policy aims. The valuation allowance is applied accordingly to reflect these accounts at their net recoverable value, as explained in Note 10.

(b) Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Department's loans receivable bears interest which vary according to the initial terms of the loans. Although the fair value of these financial instruments will be affected by changes in market interest rates, there is no impact on the Department's financial statements as these items are measured at cost or amortized cost.

(c) Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting its obligations associated with financial liabilities.

As the funding for the Department's financial liabilities is drawn from the Consolidated Revenue Fund, its exposure to liquidity risk is fully mitigated.

Note 12 – Tangible capital assets

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
Buildings	20 to 30 years
Works and infrastructure	15 to 40 years
Machinery and equipment	3 to 20 years
Vehicles	7 to 25 years
Computer hardware and software	3 to 5 years
Leasehold improvements	Lesser of useful life of the improvement or the lease term
Assets under construction	Once in service, in accordance with asset type

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.

Cost

Capital asset class	Opening balance	Acquisitions	Adjustments(1)	Disposals and write-offs	Closing balance
	(in thousands of dollars)
Land	11,652	-	-	-	11,652
Buildings	814,664	22	7,121	1,830	819,977
Works and infrastructure	44,300	75	28,979	324	73,030
Machinery and equipment	276,334	8,931	77	3,922	281,420
Vehicles	69,874	4,831	-	2,608	72,097
Computer hardware and software	49,597	229	27,547	63	77,310
Leasehold improvements	34,551	-	824	-	35,375
Assets under construction	85,346	36,371	(36,488)	-	85,229
Total	1,386,318	50,459	28,060	8,747	1,456,090
– represents zero (1) Adjustments include assets under construction of $35.5 million that were transferred to the other categories upon completion of the assets.

Accumulated amortization

Capital asset class	Opening balance	Amortization expense	Adjustments(1)	Disposals and write-offs	Closing balance
	(in thousands of dollars)
Land	-	-	-	-	-
Buildings	579,337	20,538	-	1,698	598,177
Works and infrastructure	22,117	2,166	13,277	156	37,404
Machinery and equipment	201,091	14,280	52	3,730	211,693
Vehicles	52,430	3,657	-	2,554	53,533
Computer hardware and software	48,686	497	-	63	49,120
Leasehold improvements	26,243	1,313	-	-	27,556
Assets under construction	-	-	-	-	-
Total	929,904	42,451	13,329	8,201	977,483
– represents zero (1) Adjustments include assets under construction of $35.5 million that were transferred to the other categories upon completion of the assets.

Tangible capital assets – Net book value

Capital asset class	2023	2022 Restated (Note 19)
	(in thousands of dollars)
Land	11,652	11,652
Buildings	221,800	235,327
Works and infrastructure	35,626	22,183
Machinery and equipment	69,727	75,243
Vehicles	18,564	17,444
Computer hardware and software	28,190	911
Leasehold improvements	7,819	8,308
Assets under construction	85,229	85,346
Total	478,607	456,414

During the 2022–23 fiscal year, the Department received works and infrastructure from other government departments with a net book value of $15.7 million.

Note 13 – Departmental net financial position

A portion of the Department's net financial position is used for a specific purpose. Related revenues and expenses are included in the Consolidated Statement of Operations and Departmental Net Financial Position. The Department operates two programs which under legislation require that the revenues be earmarked to offset the expenses of the program.

The Crop Reinsurance Fund was established pursuant to the Farm Income Protection Act and provides insurance to participating provinces for costs they incur in operating crop insurance programs. The fund records receipts and disbursements under the terms of reinsurance agreements. When there are insufficient revenues to meet payments, the Minister of Finance may authorize an advance of additional funds to cover these obligations.

The Agricultural Commodities Stabilization Accounts were established pursuant to the Agricultural Stabilization Act, under which the commodity accounts formerly operated, and has since been repealed and replaced by the Farm Income Protection Act effective April 1, 1991. The purpose of these accounts was to reduce income loss to producers from market risks through stabilizing prices. Premiums were shared equally by the Government of Canada, the governments of participating provinces and participating producers. Current activities are limited to collection of accounts receivable.

Activity in the accounts is as follows:

	2023	2022 Restated (Note 19)
	(in thousands of dollars)
Crop Reinsurance Fund ‑ Restricted
Balance - Beginning of year - Restricted	300,993	300,499
Revenues	70	211
Expenses	-	283
Balance - End of year - Restricted	301,063	300,993
Agricultural Commodities Stabilization Accounts ‑ Restricted	647	647
Unrestricted	65,938	43,101
Departmental net financial position - End of year	367,648	344,741
– represents zero

Note 14 – Contractual obligations and contractual rights

(a) 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. Significant contractual obligations that can be reasonably estimated are summarized as follows:

	Transfer payments
	(in thousands of dollars)
2024	517,915
2025	328,997
2026	289,228
2027	288,543
2028	280,714
2029 and subsequent	-
Total	1,705,397
– represents zero

(b) Contractual rights

The activities of the Department sometimes involve the negotiation of contracts or agreements with outside parties that result in the department having rights to both assets and revenues in the future. They principally involve interest on loans receivable and revenue/profit sharing arrangement from research agreements. Major contractual rights that will generate revenues in future years and that can be estimated are summarized as follows:

	Interest on loans receivable	Research agreements	Total
	(in thousands of dollars)
2024	14,262	11,980	26,242
2025	14,261	8,753	23,014
2026	14,261	1,794	16,055
2027	14,261	530	14,791
2028	14,262	263	14,525
2029 and subsequent	71,307	-	71,307
Total	142,614	23,320	165,934
– represents zero

Note 15 – Contingent liabilities and contingent assets

(a) Contingent liabilities

Contingent liabilities arise in the normal course of operations and their ultimate disposition is unknown. They are grouped into two categories as follows:

Claims and litigation
Claims have been made against the Department in the normal course of operations. These claims include items with pleading amounts and other for which no amount is specified. While the total amount claimed in these actions is significant, their outcomes are not determinable. The Department records an allowance for claims and litigations when it is likely that there will be a future payment and a reasonable estimate of the loss can be made.

Loan or price guarantees

	Authorized limit	Outstanding guarantees		Allowance as at March 31
		2023	2022	2023	2022
	(in thousands of dollars)
Loans according to the Advance Payments Program under the Agricultural Marketing Programs Act	7,500,000	1,436,448	920,690	21,305	28,723
Loans to farmers under the Canadian Agricultural Loans Act	3,000,000	79,082	84,828	791	848
Price guarantee agreements with marketing agencies pursuant to the Price Pooling Program under the Agricultural Marketing Programs Act	No limit	-	-	-	-
Total		1,515,530	1,005,518	22,096	29,571
– represents zero

Under the Advance Payments Program of Agricultural Marketing Programs Act, a producer can obtain a cash advance of up to $1.0 million. While the federal government typically pays the interest on the first $0.1 million, the interest-free limit has been increased to $0.25 million for the 2022 program year (and to $0.35 million for the 2023 program year). Producers are required to repay their advances as they sell their products, with up to 18 months to fully repay advances on most agricultural products (up to 24 months on cattle and bison). By improving producers' cash flow throughout the year, the Advanced Payments Program helps crop and livestock producers meet their financial obligations and benefit from the best market conditions.

Under the Canadian Agricultural Loans Act, the Department guarantees loans by financial institutions to farmers for improvement and development of farms, and the processing, distribution or marketing of farm products. This program guarantees 95% of the value of loans provided to farms and co‑operatives by financial institutions. For individual applicants, including corporations, the maximum amount for a Canadian Agricultural Loans Act loan is $0.5 million. Most loans are repayable within 10 years. For loans on land purchases, the repayment period is 15 years.

Under the Price Pooling Program of the Agricultural Marketing Programs Act, the Department provides a price guarantee that protects marketing agencies and producers against unanticipated declines in the market price of their products.

The allowance for losses is the amount recorded for estimated losses on outstanding loan guarantees and which is included in accrued liabilities. No allowance has been recorded for the Price Pooling Program of the Agricultural Marketing Programs Act as no costs are likely to occur.

(b) Contingent assets

Transfer payments - Conditionally repayable contributions

Under the EcoAgriculture Biofuels Capital Initiative, conditionally repayable contributions which are outstanding in 2022–23 total $0.8 million ($33.1 million in 2022). Repayments are determined by a project's profitability, and have a maximum repayment period of 10 years which ended on June 30, 2022.

Under the Slaughter Improvement Program, conditionally repayable contributions which are outstanding in 2022–23 total $11.2 million ($14.3 million in 2022). Repayments are determined by a project's profitability, and have a maximum repayment period of 10 years. The final repayments are due no later than June 1, 2024.

Under the Slaughter Waste Innovation Program, conditionally repayable contributions which are outstanding in 2022–23 total $10.5 million ($12.0 million in 2022). Repayments are determined by a project's profitability as well as whether and how a project demonstrates the destruction or deactivation of Specified Risk Material. Contributions have a maximum repayment period of 10 years. The final repayments are due no later than September 1, 2023.

As these are conditionally repayable contributions, the amounts that will become repayable cannot be currently estimated as contribution agreements are subject to specific program requirements, which require annual determinations as to the value which must be repaid each year. Thus, to forecast a specific amount repayable each year is not possible due to the varying factors facing each recipient as it relates to their economic and production performances.

Contingent recoveries

AgriStability and AgriRecovery are federally and provincially/territorially cost shared programs, and the Canadian Agricultural Income Stabilization Inventory Transition Initiative is a federally funded program. When provincial/territorial governments deliver these programs and overpayments occur, the federal government is entitled to recover its share of funding if and when overpayments are recovered. The Department has estimated the contingent recoverable amount as $5.1 million ($5.2 million in 2022). Contingent recoveries are not recorded in the consolidated financial statements.

Note 16 – Related party transactions

The Department 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 Department enters into transactions with Government departments, agencies, and Crown Corporations 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 Department received services without charge from certain common service organizations, related to the employer's contribution to the health and dental insurance plans, accommodation, legal services, and workers' compensation coverage. These services provided without charge have been recorded at the carrying value in the Department's Consolidated Statement of Operations and Departmental Net Financial Position as follows:

	2023	2022
	(in thousands of dollars)
Employer's contribution to the health and dental insurance plans	42,531	43,407
Accommodation	19,204	18,812
Legal services	966	942
Workers' compensation	686	668
Total	63,387	63,829

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 are not included in the Department's Consolidated Statement of Operations and Departmental Net Financial Position, as they are not significant.

(b) Other transactions with other government departments and agencies

	2023	2022
	(in thousands of dollars)
Expenses	144,988	135,496
Revenues	27,832	23,836

Expenses and revenues disclosed in (b) exclude common services provided without charge, which are already disclosed in (a). The expenses are related to the acquisition of various goods and services with other departments and agencies and the employer portion of employment insurance and pension contributions. The revenues mainly related to internal support services provided to other departments and agencies.

Note 17 – 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 responsibilities, by major object of expense and by major type of revenue. The segment results for the period are as follows:

	Sector Risk	Science and Innovation	Domestic and International Markets	Internal services	2023 Total	2022 Total Restated (Note 19)
	(in thousands of dollars)
Expenses
Transfer payments	1,652,216	306,722	299,774	-	2,258,712	2,185,971
Salaries and employee benefits	33,023	288,947	63,079	210,409	595,458	579,968
Professional and other services	10,782	39,179	20,379	56,604	126,944	117,723
Allowance for loan guarantees and bad debts	41,162	10,932	-	(4)	52,090	33,747
Materials and supplies	1,799	35,923	345	6,854	44,921	41,310
Amortization of tangible capital assets	-	-	127	42,324	42,451	41,845
Accommodation and other	289	12,215	712	35,791	49,007	37,743
Travel	498	3,390	2,225	1,208	7,321	1,419
Repairs and maintenance	269	13,270	269	333	14,141	11,009
Electricity and other public services	-	22,453	5	5	22,463	18,160
Crop Reinsurance Fund	-	-	-	-	-	(283)
Expenses incurred on behalf of Government	-	-	-	(86)	(86)	27
Total expenses	1,740,038	733,031	386,915	353,438	3,213,422	3,068,639
Revenues
Sale of goods and services	601	34,631	8,928	27,928	72,088	62,157
Interest	18,222	-	-	515	18,737	13,599
Joint project and cost sharing agreements	-	-	-	12,121	12,121	7,319
Miscellaneous revenues	778	47	10	864	1,699	1,028
Gain on disposal of assets	-	-	-	1,597	1,597	1,642
Crop Reinsurance Fund	70	-	-	-	70	211
Revenues earned on behalf of Government	(19,442)	(7,162)	(10)	(15,534)	(42,148)	(32,187)
Total revenues	229	27,516	8,928	27,491	64,164	53,769
Net cost of operations	1,739,809	705,515	377,987	325,947	3,149,258	3,014,870
– represents zero

Note 18 – Subsequent events

Agriculture and Agri-Food Canada received approval and funding for the following significant new and modified initiatives:

(a) On June 15, 2023, the Treasury Board approved $452.8 million over 5 years, to support the Emissions Reduction Plan for Sustainable Agriculture and Tackling Climate Change for the On-Farm Climate Action Fund. The program supports the sector in reducing net greenhouse gas emissions through contribution funding to support the on-farm adoption of beneficial management practices, including a portion for producers in Eastern Canada to adopt nitrogen management beneficial management practices; and

(b) Programming that completes the Government of Canada's commitment to provide full and fair compensation to supply managed sectors for the market concessions made in the Canada-United States-Mexico Agreement (CUSMA) trade agreement is as follows:

1. On June 15, 2023, the Treasury Board approved $278.0 million over 10 years, to support Supply Management, including Solids-Non-Fat in support of the Dairy Innovation and Investment Fund, Poultry & Egg On-Farm Compensation, Dairy Direct Payment Program and the Supply Management Processor Investment Fund.
2. On June 23, 2023, under Supply Management, the Governor in Council approved $295.0 million over 9 years in support of the Dairy Innovation and Investment Fund to provide non-repayable statutory contributions to dairy processors and approved $1.2 billion over 6 years in statutory grant funding to dairy producers, under the Dairy Direct Payment Program.

The impact of these subsequent events will be reflected in the 2023–24 consolidated financial statements.

Note 19 – Adjustments to prior year's results

Effective April 1, 2022 the Government adopted the new Public Sector Accounting Standard PS 3280 Asset Retirement Obligations. This standard requires public sector entities to recognize legally obligated costs associated with the retirement of tangible capital assets on acquisition, construction or development and expense those costs systematically over the life of the asset.

The Government applied the modified retrospective application transitional approach. On initial application of the standard, the Government recognized:

(a) a liability for any existing asset retirement obligations, adjusted for accumulated accretion to that date;

(b) an asset retirement cost capitalized as an increase to the carrying amount of the related tangible capital assets;

(c) accumulated amortization on that capitalized cost; and

(d) an adjustment to the opening balance of the accumulated surplus/deficit.

Asset retirement obligations associated with assets no longer in productive recognized a liability and a corresponding adjustment to the opening accumulated surplus/deficit.

These amounts were measured using information, assumptions and discount rates that are current at the beginning of the fiscal year. The amount recognized as an asset retirement cost is measured as of the date the asset retirement obligation was incurred. Accumulated accretion and amortization are measured for the period from the date the liability would have been recognized had the provisions of this standard been in effect to the date as of which this standard is first applied.

A reconciliation of the restatement for the significant consolidated financial statement line items follow:

	2022 As previously stated	Effect of the adjustment	2022 Restated
	(in thousands of dollars)
Consolidated Statement of Financial Position
Environmental liabilities and asset retirement obligations (Note 5)	9,421	32,982	42,403
Total liabilities	1,468,556	32,982	1,501,538
Departmental net debt	81,668	32,982	114,650
Tangible capital assets (Note 12)	453,756	2,658	456,414
Total non-financial assets	456,733	2,658	459,391
Departmental net financial position (Note 13)	375,065	(30,324)	344,741
Consolidated Statement of Operations and Departmental Net Financial Position
Internal services	323,216	920	324,136
Total expenses	3,067,719	920	3,068,639
Net cost of operations before government funding and transfers	3,013,950	920	3,014,870
Net cost of operations after government funding and transfers	(4,072)	920	(3,152)
Departmental net financial position - Beginning of year	370,993	(29,404)	341,589
Departmental net financial position - End of year	375,065	(30,324)	344,741
Consolidated Statement of Change in Departmental Net Debt
Net cost of operations after government funding and transfers	(4,072)	920	(3,152)
Amortization of tangible capital assets	(41,702)	(143)	(41,845)
Total change due to tangible capital assets	7,127	(143)	6,984
Increase in departmental net debt	2,125	777	2,902
Departmental net debt - Beginning of year	79,543	32,205	111,748
Departmental net debt - End of year	81,668	32,982	114,650
Consolidated Statement of Cash Flows
Net cost of operations before government funding and transfers	3,013,950	920	3,014,870
Amortization of tangible capital assets	(41,702)	(143)	(41,845)
(Increase) in environmental liabilities and asset retirement obligations	(168)	(777)	(945)
Net cash provided by Government of Canada	3,311,279	-	3,311,279
– represents zero

Annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting of Agriculture and Agri-Food Canada for the 2022–23 Fiscal Year (Unaudited)

1. Introduction

This document provides summary information on the measures taken by Agriculture and Agri-Food Canada to maintain an effective system of internal control over financial reporting, including information on internal control management, assessment results and related action plans.

Detailed information on the Department's authority, mandate and Core Responsibilities can be found in the Departmental Plan and Departmental Results Report.

2. Agriculture and Agri-Food Canada's system of internal control over financial reporting

Agriculture and Agri-Food Canada recognizes the importance of setting the tone from the top to help ensure that staff at all levels understand their roles in maintaining effective systems of internal control over financial reporting and are well equipped to exercise these responsibilities effectively. Agriculture and Agri-Food Canada's focus is to ensure risks are well managed through a responsive and risk-based control environment that enables continuous improvement and innovation.

2.1 Internal control management

Agriculture and Agri-Food Canada 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 Minister, is in place and comprises:

• Organizational accountability structures as they relate to internal control management to support sound financial management, including roles and responsibilities of senior departmental managers for control management in their areas of responsibility;
• Values and ethics;
• Ongoing communication and training on statutory requirements, and policies and procedures for sound financial management and control; and
• Monitoring of, and regular updates to, internal control management, as well as the provision of related assessment results and action plans to the Deputy Minister and senior departmental management and, as applicable, the Departmental Audit Committee.

Key positions, roles and responsibilities

Below are Agriculture and Agri-Food Canada's key positions and committees with responsibilities for maintaining and reviewing the effectiveness of its system of internal control over financial reporting.

Deputy Minister

Agriculture and Agri-Food Canada's Deputy Minister, as Accounting Officer, assumes overall responsibility and leadership for the measures taken to maintain an effective system of internal control. In this role, the Deputy Minister is advised by the Departmental Audit Committee and the Departmental Management Committee.

Chief Financial Officer (CFO)

Agriculture and Agri-Food Canada's CFO reports directly to the Deputy Minister and provides leadership for the coordination, coherence and focus on the design and maintenance of an effective and integrated system of internal control over financial reporting, including its annual assessment. Falling under the CFO responsibilities is also the management of the Corporate Risk Profile of Agriculture and Agri-Food Canada.

Senior Departmental Managers

Agriculture and Agri-Food Canada's senior departmental managers in charge of program delivery are responsible for maintaining and reviewing the effectiveness of the system of internal control over financial reporting falling within their mandate.

Chief Audit Executive (CAE)

Agriculture and Agri-Food Canada's CAE reports directly to the Deputy Minister and provides assurance through periodic internal audits which are instrumental to the maintenance of an effective system of internal control over financial reporting.

Departmental Audit Committee (DAC)

The DAC is an advisory committee that provides objective views on the Department's risk management, control and governance frameworks and processes. It is comprised of three external members and two ex-officio members, the Deputy Minister and Associate Deputy Minister. The DAC formally meets at least three times per year.

Departmental Management Committee (DMC)

The DMC is chaired by the Deputy Minister and serves as an executive forum to address departmental management and operational issues such as human resources, finance, assets, information management/information technology, and public affairs.

Policy and Programs Management Committee (PPMC)

The PPMC is chaired by the Deputy Minister and is responsible for guiding the development and implementation of cohesive and comprehensive policies, programs and services, and monitoring of results.

2.1.1 Key measures taken by Agriculture and Agri-Food Canada

Agriculture and Agri-Food Canada's control environment also includes a series of measures to equip its staff to manage risks through raising awareness, providing appropriate knowledge and tools as well as developing skills. The most relevant are:

• Departmental Values and Ethics Policy Centre and Values and Ethics Code which provide information and support to staff on ethical issues;
• Security Guidelines relating to the overall security program including elements of information and personnel security;
• Guidelines for managers, supervisors, and employees for the internal disclosure of wrongdoing;
• Departmental policies tailored to the Department's control environment;
• Regularly updated delegated authorities matrix;
• Training program and communications in core areas of financial management; and
• Documentation and testing of main business processes and related key controls.

2.2 Service arrangements relevant to financial statements

Agriculture and Agri-Food Canada relies on other organizations for processing certain transactions that are recorded in its financial statements, as follows:

Common service arrangements

• Public Services and Procurement Canada, which administers the payments of salaries and the procurement of goods and services, and provides accommodation services;
• Shared Services Canada, which provides information technology (IT) infrastructure services;
• Department of Justice Canada, which provides legal services; and
• Treasury Board of Canada Secretariat, which provides services related to public sector insurance and centrally administers payment of the employer's share of contributions toward statutory employee benefit plans.

Readers of this annex may refer to the annexes of the above-noted departments for a greater understanding of the systems of internal control over financial reporting related to these specific services.

Specific arrangements

• Agriculture and Agri-Food Canada administers a shared instance of SAP, the financial and material management system, on behalf of the Department, the Canadian Food Inspection Agency, Environment and Climate Change Canada, Natural Resources Canada, Northern Pipeline Agency, Impact Assessment Agency of Canada, Canadian Nuclear Safety Commission, Canadian Dairy Commission, Office of the Chief Electoral Officer, and Veterans Affairs Canada;
• Agriculture and Agri-Food Canada provides SAP hosting services to Canadian Space Agency, Canadian Heritage, and Parks Canada; and
• Agriculture and Agri-Food Canada administers PeopleSoft, the Human Resources management system, on behalf of the Department and its portfolio partners (the Canadian Grain Commission and the Canadian Dairy Commission), the Canadian Food Inspection Agency, Health Canada, the Patented Medicine Prices Review Board, the Public Health Agency of Canada, and Shared Services Canada. Agriculture and Agri-Food Canada administered PeopleSoft to the Department of Fisheries and Oceans, until October 24, 2022.

3. Agriculture and Agri-Food Canada's assessment results for the 2022–23 fiscal year

The Department has adopted an ongoing risk-based monitoring approach to support testing of internal control over financial reporting. The level of risk impacts the extent and frequency of testing required for key control activities. High risk areas are assessed annually, medium risk at least every 2 to 3 years, and low risk, at least every 3 to 4 years.

3.1 New or significantly amended key controls

In the current fiscal year, there were no new or significantly amended key controls in existing processes that required reassessment.

3.2 Ongoing monitoring program

For 2022–23, adjustments were not required to the Department's rotational ongoing monitoring plan and as such, internal controls were validated and reassessed in the following areas:

Previous fiscal year's rotational ongoing monitoring plan for the current fiscal year	Status
Financial close and reporting	Completed as planned. Where required, remedial actions have either been completed or are planned during 2023–24.
Section 33
Forecasting
Payroll
Capital assets
Budgeting
Loan guarantees
Information Technology General Controls (ITGCs) for SAP, PeopleSoft and Advance Payments Program Electronic Delivery System (APPEDS)

The ITGCs testing for SAP and PeopleSoft also includes the process and controls performed by the Department as an administrator and service provider to other federal government departments and agencies.

The testing period covered January 1, 2022 to December 31, 2022. Based on areas assessed in the current year, no high risk findings were identified. Therefore, for the most part, the key controls that were tested performed as intended. Remediation points that were identified primarily focused on system access controls, monitoring and documentation. Where feasible, corrective actions were implemented shortly after adjustments were identified and management action plans either have been or are currently being developed to fully address the recommendations. A follow-up will be performed to ensure action plans are being implemented as planned.

4. Action plan for the next three fiscal years

Agriculture and Agri-Food Canada's rotational ongoing monitoring plan over the next 3 fiscal years, based on an annual validation of the high-risk processes and controls and related adjustments to the ongoing monitoring plan as required, is shown in the following table.

Business processes

Key control areas		2023–24 Fiscal year	2024–25 Fiscal year	2025–26 Fiscal year
Higher risk (Annual)	Financial close and reporting	X	X	X
	Section 33	X	X	X
	Forecasting	X	X	X
	Payroll	X	X	X
Medium risk (2–3 years)	Capital assets		X
Low risk (3–4 years)	AgriInsurance		X
	AgriStability/AgriInvest	X
	Budgeting			X
	Generic grants and contributions		X
	Loan guarantees			X
	Operating expenditures		X
	Revenues	X
X: applicable

IT processes

Key control areas		2023–24 Fiscal year	2024–25 Fiscal year	2025–26 Fiscal year
Higher risk (Annual)	PeopleSoft	X	X	X
	SAP (ECC/BW/BPC)	X	X	X
Medium risk (2–3 years)	Advance Payments Program Electronic Delivery System (APPEDS)			X
	Business Risk Management Suite (BRMS)	X
	Production Insurance National Statistical System (PINSS)		X
Low risk (3–4 years)	Entity level controls	X
X: applicable

High risk control areas will continue to be assessed annually, medium risk at least every 2 to 3 years and low risk at least every 3 to 4 years.