Agriculture and Agri-Food Canada Consolidated Financial Statements (Unaudited) for the year ended March 31, 2022

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, 2022, and all information contained in these 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, 2022 was completed in accordance with the Treasury Board Policy on Financial Management and the results and action plans are summarized in the Annex.

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, and which recommends the consolidated financial statements to the Deputy Minister of Agriculture and Agri-Food Canada.

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

Chris Forbes, Deputy Minister
Ottawa, Canada
September 7, 2022

Marie-Claude Guérard, Chief Financial Officer

Consolidated Statement of Financial Position (Unaudited)
As at March 31, 2022
(in thousands of dollars)
  2022 2021
Liabilities
Accounts payable and accrued liabilities (Note 4) 1,319,759 1,675,272
Vacation pay and compensatory leave 47,006 51,942
Environmental liabilities (Note 5) 9,421 9,253
Deferred revenue (Note 6) 22,329 15,329
Employee future benefits (Note 7) 8,675 11,195
Other liabilities (Note 8) 61,366 57,906
Total liabilities 1,468,556 1,820,897
Financial assets
Due from Consolidated Revenue Fund 1,355,365 1,712,524
Accounts receivable and advances (Note 9) 34,740 30,526
Loans receivable (Note 10) 318,127 308,377
Total financial assets 1,708,232 2,051,427
Financial assets held on behalf of Government
Accounts receivable and advances (Note 9) (3,217) (1,696)
Loans receivable (Note 10) (318,127) (308,377)
Total financial assets held on behalf of Government (321,344) (310,073)
Total net financial assets 1,386,888 1,741,354
Departmental net debt 81,668 79,543
Non-financial assets
Prepaid expenses and inventory 2,977 3,907
Tangible capital assets (Note 11) 453,756 446,629
Total non-financial assets 456,733 450,536
Departmental net financial position (Note 12) 375,065 370,993

Contractual obligations and contractual rights (Note 13)
Contingent liabilities and contingent assets (Note 14)

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

Chris Forbes, Deputy Minister
Ottawa, Canada
September 7, 2022

Marie-Claude Guérard, Chief Financial Officer

Consolidated Statement of Operations and Departmental Net Financial Position (Unaudited)
For the year ended March 31, 2022
(in thousands of dollars)
  2022
Planned results
2022 2021
Expenses
Sector Risk 1,533,043 1,727,424 1,234,842
Science and Innovation 584,975 597,192 685,915
Domestic and International Markets 711,192 419,860 1,818,650
Internal Services 261,620 323,216 324,359
Expenses incurred on behalf of Government (45) 27 (55)
Total expenses 3,090,785 3,067,719 4,063,711
Revenues
Sale of goods and services 66,199 62,157 61,800
Interest 14,598 13,599 12,857
Joint project and cost sharing agreements 7,477 7,319 3,355
Gain on disposal of assets 1,439 1,642 591
Miscellaneous revenues 2,376 1,028 1,133
Crop Reinsurance Fund 190 211 612
Revenues earned on behalf of Government (33,491) (32,187) (27,169)
Total revenues 58,788 53,769 53,179
Net cost of operations before government funding and transfers 3,031,997 3,013,950 4,010,532
Government funding and transfers
Net cash provided by Government of Canada   3,311,279 3,073,287
Change in due from Consolidated Revenue Fund   (357,159) 864,845
Services provided without charge by other government departments (Note 15)   63,829 63,112
Transfer of the transition payments for implementing salary payments in arrears   - (2)
Other transfers of assets from / (to) other government departments   73 (137)
Net cost of operations after government funding and transfers   (4,072) 9,427
Departmental net financial position - Beginning of year   370,993 380,420
Departmental net financial position - End of year   375,065 370,993
– represents zero

Segmented information (Note 16)

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, 2022
(in thousands of dollars)
  2022 2021
Net cost of operations after government funding and transfers (4,072) 9,427
Change due to tangible capital assets
Acquisition of tangible capital assets 50,901 48,652
Amortization of tangible capital assets (41,702) (41,851)
Proceeds from disposal of tangible capital assets (1,679) (641)
Net (loss) on disposal of tangible capital assets including adjustments (444) (3,638)
Non-cash changes of tangible capital assets 51 (96)
Transfer (to) other government departments - (50)
Total change due to tangible capital assets 7,127 2,376
Change due to prepaid expenses and inventory (930) 2,442
Net increase in departmental net debt 2,125 14,245
Departmental net debt - Beginning of year 79,543 65,298
Departmental net debt - End of year 81,668 79,543
– 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, 2022
(in thousands of dollars)
  2022 2021
Operating activities
Net cost of operations before government funding and transfers 3,013,950 4,010,532
Non‑cash items:
Amortization of tangible capital assets (41,702) (41,851)
Net (loss) on disposal of tangible capital assets (444) (3,638)
Non‑cash changes of tangible capital assets 51 (96)
Services provided without charge by other government departments (Note 15) (63,829) (63,112)
Other transfers of assets (from) / to other government departments (73) 87
Transition payments for implementing salary payments in arrears - 2
Variations in Consolidated Statement of Financial Position:
Increase (decrease) in accounts receivable and advances 2,693 (8,162)
(Decrease) increase in prepaid expenses and inventory (930) 2,442
Decrease (increase) in accounts payable and accrued liabilities 355,513 (858,047)
Decrease (increase) in vacation pay and compensatory leave 4,936 (15,430)
(Increase) decrease in environmental liabilities (168) 31
(Increase) in deferred revenue (7,000) (2,075)
Decrease in employee future benefits 2,520 5,456
(Increase) in other liabilities (3,460) (863)
Cash used in operating activities 3,262,057 3,025,276
Capital investing activities
Acquisition of tangible capital assets 50,901 48,652
Proceeds from disposal of tangible capital assets (1,679) (641)
Cash used in capital investing activities 49,222 48,011
Net cash provided by Government of Canada 3,311,279 3,073,287
– represents zero

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, 2022

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 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 refers to the activities and resources of the 10 distinct services that support program delivery in the organization, regardless of the Internal Services delivery model in a department. These services are: 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 2021–22 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 2021–22 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 to 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) Accounts and loans receivable
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. Transfer payments that are unconditionally repayable 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.

(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 11. 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
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 standard for its use prior to contamination. 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, for present value adjustments, inflation, new obligations, changes in management estimates and actual costs incurred.

If the likelihood of the Department's responsibility is not determinable, a contingent liability is disclosed in the notes to the consolidated financial statements.

(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, 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.

(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

  2022 2021
  (in thousands of dollars)
Net cost of operations before government funding and transfers 3,013,950 4,010,532
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets (41,702) (41,851)
Net (loss) on disposal of tangible capital assets (444) (3,638)
Non-cash changes of tangible capital assets 51 (96)
Services provided without charge by other government departments (63,829) (63,112)
(Decrease) increase in prepaid expenses and inventory (930) 2,442
Increase in restricted accounts 283 -
Decrease (increase) in vacation pay and compensatory leave 4,936 (15,430)
Decrease (increase) in accrued liabilities 451,524 (923,762)
(Increase) decrease in environmental liabilities (168) 31
Decrease in employee future benefits 2,520 5,240
Decrease (increase) in allowances for bad debt expenses 3,831 (2,566)
Refund and adjustment of prior years' expenditures 26,920 14,889
Respendable revenue 4,826 4,449
Other 20,556 13,096
Total items affecting net cost of operations but not affecting authorities 408,374 (1,010,308)
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisition of tangible capital assets 50,901 48,652
Proceeds from disposal of tangible capital assets (1,679) (641)
Transition payments for implementing salary payments in arrears - 2
Increase in accounts receivable and advances 1,404 1,769
(Decrease) in loans receivable (11,026) (12,391)
Total items not affecting net cost of operations but affecting authorities 39,600 37,391
Current year authorities used 3,461,924 3,037,615
– represents zero

(b) Authorities provided and used

  2022 2021
  (in thousands of dollars)
Authorities provided:
Vote 1 ‑ Operating expenditures 655,426 625,349
Vote 5 ‑ Capital expenditures 56,290 52,877
Vote 10 ‑ Transfer payments 751,122 620,499
Statutory amounts 2,116,777 1,879,839
Total 3,579,615 3,178,564
Less:
Authorities available for future years 15,831 15,555
Lapsed authorities 101,860 125,394
Total 117,691 140,949
Current year authorities used 3,461,924 3,037,615

Note 4 – Accounts payable and accrued liabilities

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

  2022 2021
  (in thousands of dollars)
Accounts payable - Other government departments and agencies 9,264 14,773
Accounts payable - External parties 1,280,924 1,643,341
Total accounts payable 1,290,188 1,658,114
Accrued liabilities 29,571 17,158
Total accounts payable and accrued liabilities 1,319,759 1,675,272

Note 5 – Environmental liabilities

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 51 sites (45 sites in 2021) where contamination may exist and assessment, remediation and monitoring may be required. Of these, the Department has identified 8 sites (11 sites in 2021) where action is required and for which a liability of $5.0 million ($8.6 million in 2021) has been recorded. This liability estimate has been determined based on site assessments performed by environmental experts.

In addition, there are 20 sites that have not been assessed by environmental experts (13 sites in 2021) for which the department has estimated and recorded a liability of $4.4 million ($0.7 million in 2021).

These two estimates combined, totalling $9.4 million ($9.3 million in 2021), 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. The Department's ongoing efforts to assess contaminated sites may result in additional environmental liabilities.

For the remaining 23 sites (21 sites in 2021), no liability for remediation has been recognized. 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. For other sites, the Department does not expect to give up any future economic benefits (there is likely no significant environmental impact or human health threats). These sites will be re-examined and a liability for remediation will be recognized if future economic benefits will be given up.

The following table presents the total estimated amounts of these liabilities by nature and source, the associated expected recoveries and the total undiscounted future expenditures as at March 31, 2022 and March 31, 2021. When the liability estimate is based on a future cash requirement, the amount is adjusted for inflation using a forecast CPI rate of 2.0% (2.0% in 2021). 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 2022 rates range from 2.24% for a 2 year term to 2.35% for a 30 or greater year term.

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)
Estimated recoveries
($'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 - - - -
Other(4) 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 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 2021
Nature and source Total number of sites Number of sites with a liability Estimated liability
($'000)
Estimated total undiscounted expenditures
($'000)
Estimated recoveries
($'000)
Fuel related practices(1) 20 12 489 497 -
Landfills/waste sites(2) 16 6 215 222 -
Engineered asset/air and land transportation(3) 1 1 52 53 -
Other(4) 8 5 8,497 8,526 -
Totals 45 24 9,253 9,298 -

– 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 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.

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:

  2022 2021
  (in thousands of dollars)
Opening balance 15,329 13,254
Amounts received 14,326 5,497
Revenue recognized (7,326) (3,422)
Closing balance 22,329 15,329

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 2021–22 expense amounts to $44.8 million ($46.5 million in 2021). For Group 1 members, the expense represents approximately 1.01 times (1.01 times in 2021) the employee contributions and, for Group 2 members, approximately 1.00 times (1.00 times in 2021) 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, 2022, 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:

  2022 2021
  (in thousands of dollars)
Accrued benefit obligation - Beginning of year 11,195 16,651
Expense for the year 686 (2,485)
Benefits paid during the year (3,206) (2,971)
Accrued benefit obligation - End of year 8,675 11,195

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:

  2022 2021
  (in thousands of dollars)
Opening balance 57,906 57,043
Deposits 255,787 254,109
Withdrawals (252,327) (253,246)
Ending balance 61,366 57,906

Note 9 – Accounts receivable and advances

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

  2022 2021
  (in thousands of dollars)
Receivables - Other government departments and agencies 8,220 9,356
Receivables - External parties 36,091 31,524
Employee advances 105 116
Subtotal 44,416 40,996
Allowance for doubtful accounts on receivables from external parties (9,676) (10,470)
Total accounts receivable and advances 34,740 30,526
Accounts receivable held on behalf of Government 3,286 1,917
Allowance for doubtful accounts held on behalf of Government (69) (221)
Net accounts receivable held on behalf of Government 3,217 1,696
Net accounts receivable and advances 31,523 28,830

Note 10 – Loans receivable

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

  2022 2021
  (in thousands of dollars)
Unconditionally repayable contributions 156,897 155,110
Loans resulting from loan guarantee programs 294,069 291,983
Subtotal 450,966 447,093
Less: Allowance for uncollectibility (132,839) (138,716)
Total loans receivable 318,127 308,377
Loans receivable held on behalf of Government 318,127 308,377
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. An allowance of $9.6 million ($21.7 million in 2021) 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 $123.2 million ($117.1 million in 2021) relating to these loans has been recorded.

Note 11 – 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 11,671 - - 19 11,652
Buildings 795,927 33 9,894 - 805,854
Works and infrastructure 42,945 12 1,366 23 44,300
Machinery and equipment 268,084 11,851 174 3,775 276,334
Vehicles 69,088 2,791 - 2,005 69,874
Computer hardware and software 48,952 142 739 236 49,597
Leasehold improvements 34,228 - 323 - 34,551
Assets under construction 63,589 36,072 (12,414) 1,901 85,346
Total 1,334,484 50,901 82 7,959 1,377,508
– represents zero
(1) Adjustments include assets under construction of $12.4 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 552,153 21,032 - - 573,185
Works and infrastructure 20,632 1,508 - 23 22,117
Machinery and equipment 190,799 13,868 31 3,607 201,091
Vehicles 50,620 3,780 - 1,970 52,430
Computer hardware and software 48,543 379 - 236 48,686
Leasehold improvements 25,108 1,135 - - 26,243
Assets under construction - - - - -
Total 887,855 41,702 31 5,836 923,752
– represents zero
(1) Adjustments include assets under construction of $12.4 million that were transferred to the other categories upon completion of the assets.
Tangible capital assets – Net book value
Capital asset class 2022 2021
  (in thousands of dollars)
Land 11,652 11,671
Buildings 232,669 243,774
Works and infrastructure 22,183 22,313
Machinery and equipment 75,243 77,285
Vehicles 17,444 18,468
Computer hardware and software 911 409
Leasehold improvements 8,308 9,120
Assets under construction 85,346 63,589
Total 453,756 446,629

Note 12 – 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:

  2022 2021
  (in thousands of dollars)
Crop Reinsurance Fund ‑ Restricted
Balance - Beginning of year - Restricted 300,499 299,887
Revenues 211 612
Expenses 283 -
Balance - End of year - Restricted 300,993 300,499
Agricultural Commodities Stabilization Accounts ‑ Restricted 647 647
Unrestricted 73,425 69,847
Departmental net financial position - End of year 375,065 370,993
– represents zero

Note 13 – 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)
2023 489,686
2024 14,111
2025 309
2026 288
2027 -
2028 and subsequent -
Total 504,394
– 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 reasonably estimated are summarized as follows:

  Interest on loans receivable Research agreements Total
  (in thousands of dollars)
2023 12,564 17,128 29,692
2024 12,565 7,635 20,200
2025 12,565 5,917 18,482
2026 12,565 319 12,884
2027 12,565 152 12,717
2028 and subsequent 62,823 80 62,903
Total 125,647 31,231 156,878

Note 14 – 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
    2022 2021 2022 2021
  (in thousands of dollars)
Loans according to the Advance Payments Program under the Agricultural Marketing Programs Act 7,500,000 920,690 1,242,827 28,723 16,258
Loans to farmers under the Canadian Agricultural Loans Act 3,000,000 84,828 90,051 848 900
Price guarantee agreements with marketing agencies pursuant to the Price Pooling Program under the Agricultural Marketing Programs Act No limit - - - -
National Biomass Ethanol Program 140,000 - - - -
Total   1,005,518 1,332,878 29,571 17,158
– 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. The federal government pays the interest on the first $0.1 million (temporarily increased to $0.5 million for advance on canola for the 2019 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 Minister of Agriculture and Agri-Food is authorized to guarantee Line of Credit Agreements entered into by Farm Credit Canada under the National Biomass Ethanol Program.

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 and for the National Biomass Ethanol Program 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 2021–22 total $33.1 million ($33.1 million in 2021). Repayments are determined by a project's profitability, and have a maximum repayment period of 10 years which ends on June 30, 2022.

Under the Slaughter Improvement Program, conditionally repayable contributions which are outstanding in 2021–22 total $14.3 million ($17.8 million in 2021). 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 2021–22 total $12.0 million ($13.4 million in 2021). 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 is a federally and provincially/territorially cost shared program 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 $5.2 million ($5.3 million in 2021). Contingent recoveries are not recorded in the consolidated financial statements.

Note 15 – 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:

  2022 2021
  (in thousands of dollars)
Employer's contribution to the health and dental insurance plans 43,407 42,996
Accommodation 18,812 18,433
Legal services 942 936
Workers' compensation 668 747
Total 63,829 63,112

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

  2022 2021
  (in thousands of dollars)
Expenses 135,496 141,477
Revenues 23,836 27,374

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 16 – 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
2022
Total
2021
Total
  (in thousands of dollars)
Expenses
Transfer payments 1,643,036 202,679 340,256 - 2,185,971 3,177,697
Salaries and employee benefits 35,099 285,139 60,822 198,908 579,968 601,159
Professional and other services 11,036 39,367 17,235 50,085 117,723 111,178
Allowance for loan guarantees and bad debts 37,835 (4,078) - (10) 33,747 32,638
Materials and supplies 297 33,943 346 6,724 41,310 33,565
Amortization of tangible capital assets - - 119 41,583 41,702 41,851
Accommodation and other 197 10,606 523 25,640 36,966 38,872
Travel 88 965 295 71 1,419 558
Repairs and maintenance 59 10,485 250 215 11,009 10,788
Electricity and other public services 60 18,086 14 - 18,160 15,460
Crop Reinsurance Fund (283) - - - (283) -
Expenses incurred on behalf of Government - - - 27 27 (55)
Total expenses 1,727,424 597,192 419,860 323,243 3,067,719 4,063,711
Revenues
Sale of goods and services 743 29,276 8,132 24,006 62,157 61,800
Interest 13,510 - - 89 13,599 12,857
Joint project and cost sharing agreements - - - 7,319 7,319 3,355
Gain on disposal of assets - - - 1,642 1,642 591
Miscellaneous revenues 533 (3) 15 483 1,028 1,133
Crop Reinsurance Fund 211 - - - 211 612
Revenues earned on behalf of Government (14,720) (7,650) (14) (9,803) (32,187) (27,169)
Total revenues 277 21,623 8,133 23,736 53,769 53,179
Net cost of operations 1,727,147 575,569 411,727 299,507 3,013,950 4,010,532
– represents zero

Note 17 – COVID-19 pandemic

In March 2020, the World Health Organization officially declared the outbreak of COVID-19 as a global pandemic. The COVID-19 pandemic continues to have a significant adverse impact on the global economy. The overall economy continues to navigate the pandemic with continuing uncertainty. As this pandemic is ongoing and the government response is continuing to evolve, the impact on the government's financial results is subject to considerable uncertainty. The consolidated financial statements for the fiscal year end March 31, 2022, reflect the impacts resulting from the COVID-19 pandemic to the extent known and estimable at the reporting date.

During the year, the Department led various transfer payment programs to support Canada's Economic Response Plan which are included within the Consolidated Statement of Operations. The most significant of which include: 

(a) $130.4 million for the Emergency Food Security Fund (Local Food Infrastructure Fund), included in Domestic and International Markets; and

(b) $52.9 million for the Mandatory Isolation Support for Temporary Foreign Workers Program, included in Sector Risk.

The effects of the pandemic will continue into the foreseeable future, and the Department continues to assess and monitor the effects on its financial situation.

Annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting of Agriculture and Agri-Food Canada for the 2021–22 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 on 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, Department of Fisheries and Oceans, Health Canada, the Patented Medicine Prices Review Board, the Public Health Agency of Canada, and Shared Services Canada.

3. Agriculture and Agri-Food Canada's assessment results for the 2021–22 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 2021–22, 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 2022–23.
Section 33
Forecasting
Payroll
Generic grants and contributions
Operating expenditures
AgriInsurance
Information Technology General Controls (ITGCs) for SAP, PeopleSoft and Production Insurance National Statistical System (PINSS)

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, 2021 to December 31, 2021. 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 2022–23
Fiscal year
2023–24
Fiscal year
2024–25
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   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 2022–23
Fiscal year
2023–24
Fiscal year
2024–25
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.