Passport Canada Revolving Fund

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Statement of Management Responsibility

We have prepared the accompanying financial statements of the Passport Canada Revolving Fund in accordance with the policy of the Treasury Board on revolving funds and the reporting requirements and standards of the Receiver General for Canada. These financial statements were prepared by the management of the Fund in accordance with the significant accounting policies set out in Note 2 of the statements on a basis consistent with that of the preceding year.

Responsibility for the integrity and objectivity of these financial statements rests with the management of the Fund. The information included in these financial statements is based on management's best estimates and judgement with due consideration given to materiality. To fulfill its accounting and reporting responsibilities, the Fund maintains a set of accounts which provides a centralized record of the Fund's financial transactions.

The Fund's directorate of financial operations develops and disseminates financial management and accounting policies and issues specific directives which maintain standards of accounting and financial management. The Fund maintains systems of financial management and internal control which gives due consideration to costs, benefits and risks. The systems are designed to provide reasonable assurance that transactions are properly authorized by Parliament, are executed in accordance with prescribed regulations, and are properly recorded to maintain accountability of Government funds and safeguard the assets under the Fund's administration. The Fund also seeks to assure the objectivity and integrity of data in its financial statements by the careful selection, training and development of qualified staff, by organizational arrangements that provide appropriate divisions of responsibility, and by communication programs aimed at ensuring that its regulations, policies, standards and managerial authorities are understood throughout the organization.

Management has presented the financial statements to the independent auditors, who have audited them and has provided an independent opinion which has been appended to these financial statements.

Approved by:

Anick Ouellette
Director General and
Deputy Chief Financial Officer,
Financial Operations
Citizenship and Immigration Canada

Tony Matson
Assistant Deputy Minister and
Chief Financial Officer,
Citizenship and Immigration Canada

May 27, 2015

Statement of Authority provided (Used) (Unaudited) for the year ended as at March 31

Table Summary

The table presents on a comparative basis the statement of Authority provided (Used) (Unaudited). It consists of seven columns: item descriptions, current year with two columns — estimates and actual, and previous year with two columns — estimates and actual. Subtotals are displayed at operating source of funds and totals are displayed at authority (used).

(in thousands of dollars)

  2015 2014
Estimates Actual Estimates Actual
Net results 294,110 290,113 (negative 56,085) 186,839
Add: Items not requiring use of funds 10,082 8,164 (negative 288) (negative 28,785)
Operating source (use) of funds 304,192 298,277 (negative 56,373) 158,054
Less: items requiring use of funds        
Net capital acquisitions 19,338 2,851 14,000 6,543
Net other assets and liabilities   3,829   (negative 41,243)
Modernization Fund 30,662 2,625    
Transition payments for implementing salary payments in arrears   1,585    
Authority provided (used) 254,192 287,387 (negative 70,373) 192,754

Reconciliation of Unused Authority (Unaudited) as at March 31

Table Summary

The table presents on a comparative basis the reconciliation of Unused Authority (Unaudited). It consists of three columns: item descriptions, current year and previous year. Subtotals are displayed at net authority used (provided) end of year and totals are displayed at the unused authority carried forward.

(in thousands of dollars)

  2015 2014
Debit balance in the accumulated net charge against the Fund's authority (negative 426,695) (negative 80,427)
Add: payables at year‑end charged against the appropriation after March 31 56,871 36,492
Less: Amounts credited to the appropriation after March 31 12,908 49,649
Cumulative amounts credited to the appropriation for expenses paid on behalf of other government departments 81,886 81,886
Other items   1,761
Net authority provided, end of year (negative 464,618) (negative 177,231)
Authority limit    
Unused authority carried forward 464,618 177,231

Independent Auditors' Report

To the Assistant Deputy Minister and Chief Financial Officer, Citizenship and Immigration Canada

We have audited the accompanying financial statements of Passport Canada Revolving Fund, which comprise the statement of financial position as at March 31, 2015, the statements of operations and changes in net assets (liabilities) and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information. These financial statements have been prepared by management in accordance with Section 6, subsection 4 of the Treasury Board of Canada's Policy on Special Revenue Spending Authorities.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the reporting requirements of Section 6, subsection 4 of the Treasury Board of Canada's Policy on Special Revenue Spending Authorities, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform an audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity's preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of Passport Canada Revolving Fund as at March 31, 2015, and its results of operations and its cash flows for the year then ended, in accordance with the reporting requirements of Section 6, subsection 4 of the Treasury Board of Canada's Policy on Special Revenue Spending Authorities.

Basis of Accounting and Restriction on Use

Without modifying our opinion, we draw attention to Note 2 to the financial statements which describe the basis of accounting. The financial statements are prepared solely for the information and use of the management of the Revolving Fund, Assistant Deputy Minister and Chief Financial Officer, Citizenship and Immigration Canada and the Treasury Board of Canada Secretariat for reporting on the use of the Fund authority. The financial statements are not intended to be and should not be used by anyone other than the specified users or for any other purpose.

KPMG LLP
Chartered Professional Accountants,
Licensed Public Accountants

Ottawa, Canada
May 27, 2015

Statement of Financial Position as at March 31

Table Summary

The table presents on a comparative basis the statement of Financial Position. It consists of three columns: item descriptions, current year and previous year. Item descriptions are grouped in two: assets and liabilities, both displaying totals. Current item descriptions are grouped together for assets and for liabilities, both displaying subtotals. Subtotals are displayed for current assets, long‑term assets, current liabilities and long‑term liabilities.

(in thousands of dollars)

  2015 2014
Assets    
Current    
Accounts receivable    
Government of Canada 13,728 49,584
Outside parties 45 67
Prepaid expenses 772 875
Inventories 17,381 13,449
Subtotal 31,926 63,975
Long‑term    
Capital assets (Note 3)    
At cost 71,840 81,178
Less: accumulated amortization (negative 54,088) (negative 58,680)
Subtotal 17,752 22,498
Total 49,678 86,473
Liabilities    
Current    
Accounts payable and accrued liabilities    
Government of Canada 45,021 24,759
Outside parties    
Accounts payable 9,768 10,050
Accrued liabilities 2,349 1,796
Contractors' holdbacks 2,010 1,684
Employee termination benefits 72 240
Subtotal 59,220 38,529
Long‑term    
Employee termination benefits 2,850 2,318
Total 62,070 40,847
Net assets (liabilities) (Note 4) (negative 12,392) 45,626
Total 49,678 86,473

Statement of Operations and Net Assets for the year ended as at March 31

Table Summary

The table presents on a comparative basis the statement of Operations and Net Assets. It consists of three columns: item descriptions, current year and previous year. Item descriptions for revenues and for expenses are grouped together, each displaying subtotals. Subtotals for revenues, net of expenses are displayed at net results and totals are displayed at net assets end of year.

(in thousands of dollars)

  2015 2014
Revenues    
Fees earned 644,903 533,417
Miscellaneous revenues 245 378
Subtotal 645,148 533,795
Expenses    
Professional and special services (Note 6) 200,028 148,342
Salaries and employee benefits 55,081 93,350
Freight, express and cartage 34,281 31,942
Passport materials 34,116 32,050
Repair and maintenance 6,430 6,615
Amortization of capital assets 5,415 7,251
Accommodation 4,656 6,380
Passport operations at missions abroad (Note 6) 4,339 4,342
Printing, stationery and supplies 4,148 1,578
Information 2,957 3,408
Provision for employee termination benefits 1,183 557
Travel and removal 333 649
Rentals 65 166
Postal services and postage 59 38
Utility 23 111
Miscellaneous 9 220
Telecommunications 8 14
Subtotal 353,131 337,013
Net results before disposal of assets 292,017 196,782
Loss on disposal of assets 1,904 2,924
Loss on disposal of obsolete inventory   7,019
Total 1,904 9,943
Net results 290,113 186,839
Net assets, beginning of year (Note 4) 45,626 32,262
Net financial resources provided and change in the accumulated net charge against the Fund's authority, during the year (negative 346,268) (negative 75,781)
Transfer of the transition payments for implementing salary payments in arrears (Note 9) (negative 1,585)  
Transfer to other government departments (Note 4) (negative 278) (negative 97,694)
Net assets (liabilities), end of year (Note 4) (negative 12,392) 45,626

Statement of Cash Flows for the year ended March 31

Table Summary

The table presents on a comparative basis the statement of Cash Flows. It consists of three columns: item descriptions, current year and previous year. Item descriptions are grouped in 3: operating activities, investing activities and financing activities, all displaying subtotals. Subtotals are displayed at net financial resources used and change in the accumulated net charge against the Fund's authority during the year. Totals are displayed at accumulated net charge against the Fund's authority end of year.

(in thousands of dollars)

  2015 2014
Operating activities    
Net results 290,113 186,839
Add: Provision for employee termination benefits 532 (negative 1,887)
Amortization of capital assets 5,415 7,251
Loss on disposal of assets 1,904 2,924
Loss on disposal of obsolete inventory   7,019
Transition payments for implementing salary payments in arrears (Note 9) (negative 1,585)  
Subtotal 296,379 202,146
Changes in current assets and liabilities (Note 7) 52,740 (negative 44,092)
Net financial resources provided by operating activities 349,119 158,054
Investing activities    
Capital assets acquired (negative 2,851) (negative 6,543)
Net financial resources used by investing activities (negative 2,851) (negative 6,543)
Financing activities    
Transfers to other government departments   (negative 75,730)
Net financial resources used by financing activities   (negative 75,730)
Net financial resources provided and change in the accumulated net charge against the Fund's authority, during the year 346,268 75,781
Accumulated net charge against the Fund's authority, beginning of year 80,427 4,646
Accumulated net charge against the Fund's authority, end of year (Note 4) 426,695 80,427

Notes to the financial statements for the year ended March 31, 2015

1. Authority and purpose

The Passport Canada Revolving Fund (the "Fund") was established in 1969 to provide for the issue of appropriate passport and other travel document services in Canada and at posts abroad. The Revolving Funds Act authorized the operation of the Fund.

Effective July 2, 2013, the accountability for the passport program and the Fund shifted from the Department of Foreign Affairs, Trade and Development (DFATD) to Citizenship and Immigration Canada (CIC). In addition, the Fund transferred its passport delivery and processing services to Employment and Social Development Canada (ESDC) on July 2, 2013.

The Fund has a continuing non‑lapsing authority from Parliament to make payments out of the Consolidated Revenue Fund for working capital, capital acquisitions and temporary financing of accumulated operating deficits.

2. Significant accounting policies

a. Basis of accounting

These financial statements have been prepared in accordance with the significant accounting policies set out below to comply with the requirements of Section 6, subsection 4 of the Treasury Board of Canada Policy on Special Revenue Spending Authorities and the reporting requirements for revolving funds prescribed by the Receiver General for Canada. The basis of accounting used in these financial statements differs from Canadian Generally Accepted Accounting Principles because:

  • revenues from passport service request fees are recognized upon receipt of payment and verification of an application for completeness as stated in the Regulations prescribing fees for passport services; and
  • funding for capital assets received from Treasury Board is recorded as contributed capital and not as a reduction of the cost of capital assets.

b. Revenue recognition

Revenues from passport fees are recognized upon request for a passport service, which is upon receipt of payment and verification of the passport application for completeness.

c. Inventory

Inventories of materials and supplies are carried at the lower of cost using the average cost and the net realizable value.

d. Capital assets

Capital assets are recorded at cost and amortized on a straight‑line basis over their estimated useful lives, as follows:

Table Summary

The table presents capital assets and consists of two columns: the asset categories with their respective amortization periods.

Category Estimated useful life
Furniture 10 years
Vehicles 5 years
Computer hardware and software 3-5 years
Other machines and equipment 5 years

The capital projects are assets under construction which are not yet amortized; these capital assets will be amortized once they are in service. Leasehold improvements are amortized on a straight‑line basis on the lesser of the remaining term of the lease or estimated useful life of the improvement.

e. Employee termination benefits

Employees charged to the Fund are entitled to specified termination benefits, calculated based on salary levels in effect at the time of termination as provided for under collective agreements and conditions of employment. The cost of these benefits is recorded in the accounts as the benefits accrue to the employees. The obligation relating to the benefits earned by employees is calculated using information derived from results of the actuarially determined liability for employee's termination benefits for the government as a whole and is provided by Treasury Board of Canada.

f. Pension plan

Employees charged to the Fund are covered by the Public Service Retirement Pension Plan (the "Plan") administered by the Government of Canada. Under present legislation, contributions made by the Fund to the Plan are limited to an amount equal to the employee's contributions on account of current service. These contributions represent the total pension obligations of the Fund and are charged to operations on a current basis. The Fund is not required under present legislation to make contributions with respect to actuarial deficiencies of the Public Service Superannuation Account and/or with respect to charges to the Consolidated Revenue Fund for the indexation of payments under the Supplementary Retirement Benefits Act.

g. Use of estimates

The preparation of financial statements requires management and the Treasury Board Secretariat to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant areas requiring the use of estimates relate to employee termination benefits and to accrued liabilities. Actual results could differ from these estimates. These estimates are reviewed annually and as adjustments become necessary, they are recorded in the financial statements in the period in which they become known.

h. Financial instruments

The Fund's financial instruments consist of accounts receivable, accounts payable, accrued liabilities and employee termination benefits. The carrying values of these financial instruments approximate their fair value because of their short terms to maturity. Unless otherwise noted, it is management's opinion that the Fund is not exposed to significant interest, currency or credit risk arising from these financial instruments.

3. Capital assets

Table Summary

The table presents the capital assets and accumulated amortization, with five columns. The first column lists the item descriptions and the next four columns are grouped in two: capital assets (balance beginning of the year, acquisitions, disposals transfers and adjustment, and balance end of the year) and accumulated amortization (balance beginning of the year, amortization and balance end of the year). The last column provides the net book value. Totals are displayed at the last row.

(in thousands of dollars)

  Balance, beginning of the year Acquisitions Disposals, transfers and adjustments Balance, end of the year
Technology Enhancement Plan Project 2,906     2,906
Capital projects 757 111 (negative 868)  
Leasehold Improvements 36,296   (negative 3,362) 32,934
Furniture 97   (negative 2) 95
Computer hardware and software 38,898 2,740 (negative 6,160) 35,478
Vehicles 21     21
Machinery and equipment 2,203   (negative 1,797) 406
Total 81,178 2,851 (negative 12,189) 71,840
Accumulated amortization Balance, beginning of the year Amortization Disposals, transfers and adjustments Balance, end of the year
Technology Enhancement Plan Project 2,906     2,906
Capital projects        
Leasehold Improvements 32,194 970 (negative 3,177) 29,987
Furniture 79 2 (negative 12) 69
Computer hardware and software 21,762 4,345 (negative 5,139) 20,968
Vehicles 1 4   5
Machinery and equipment 1,738 94 (negative 1,679) 153
Total 58,680 5,415 (negative 10,007) 54,088
Net book value       Balance, end of the year
Leasehold Improvements       2,947
Furniture       26
Computer hardware and software       14,510
Vehicles       16
Machinery and equipment       253
Subtotal       17,752

4. Net assets (liabilities)

Accumulated net charge against the Fund's authority:

Table Summary

The table presents on a comparative basis the Net Assets. It consists of three columns: item descriptions, current year and previous year. Totals are displayed on the last row.

(in thousands of dollars)

  2015 2014
Accumulated net charge against the Fund's authority (negative 426,695) (negative 80,427)
Accumulated surplus 333,829 45,579
Contributed capital 80,474 80,474
Total (negative 12,392) 45,626

Accumulated net charge against the Fund's authority is the cash position of the Fund, held by the Government on the Fund's behalf.

Accumulated surplus (deficit):

The accumulated surplus (deficit) is an accumulation of each year's surpluses (deficits) including the absorption of the opening net assets of $746,000 upon establishment of the Fund. Other adjustments to the Fund's net financial position were made in 2012 for $419,771, in 2013 for $19,936 and in 2014 for $220,842 as a result of the Fund transferring its information technologies services to Shared Services Canada on November 15, 2011. Additional adjustments to the Fund's net financial position were made in 2014 for $97,472,888 as a result of the Fund transferring its passport delivery and processing services to ESDC on July 2, 2013. In 2015, further adjustments to the Fund's net financial position were made totaling the amount of $1,861,937 for the pay in arrears ($1,585,685) and asset transfers to ESDC ($187,127) and SSC ($91,125).

Contributed capital:

In the year, there were no additional capital contributions from Treasury Board to finance the Fund's capital projects.

5. Contractual obligations

Because of the nature of its activities, the Fund is engaged in contractual obligations for the purchase of goods and other services.

Below are the expected future maximum payments under contract for its supplier of blank passports:

Table Summary

The table presents the total annual contractual obligations for the expected future maximum payments under contract for its supplier of blank passports. It consists of two columns: the year and the estimated payment amount. The total is displayed on the last row.

(in thousands of dollars)

2016 37,090

Below are expected future minimum payments for rents of office premises and other suppliers:

Table Summary

The table presents the total annual contractual obligations for the expected future minimum payments for rents of office premises and other suppliers. It consists of two columns: the year and the estimated payment amount. The total is displayed on the last row.

(in thousands of dollars)

2016 7,112
2017 5,494
2018 4,380
2019 2,679
Total 19,665

6. Related party transactions

Through common ownership, the Fund is related to all Government of Canada created departments, agencies and Crown corporations. Payments for passport operations at missions abroad, passport delivery and processing service throughout Canada, accommodation and legal services, and the employers' contributions to the health and dental insurance plans are made to related parties in the normal course of business. All related party transactions are accounted for at the exchange amount, which represents the consideration agreed to by both parties.

As part of its operations, the Fund collects Consular fees on behalf of DFATD. These fees are not recorded as revenues in the Statement of Operations and Change in Net Assets (liabilities). In 2015, the Fund collected and remitted to DFATD $101,007,265 (2014 — $97,671,047) in consular fees.

Effective November 15, 2011, the Fund transferred its information technologies services to SSC. The cost of these services provided by SSC is reported in the Professional and Special Services line item in the Statement of Operations and Change in Net Assets (liabilities). In 2015, SSC charged the Fund a total of $11,473,156 (2014 — $11,771,132) for Information technologies services.

Effective July 2, 2013, the Fund transferred its passport delivery and processing service to ESDC. In 2014–2015, ESDC and CICsigned a service level agreement to ensure optimal and sound financial management of Passport Program and for the recovery of costs associated with Passport Service Delivery and Operations, Receiving Agent Services, Transition and Modernization costs and Internal Services provided by Service Canada, an initiative operating within ESDC.

The cost of the Service Delivery, Operations and Internal Services provided by ESDC is reported in the Professional and Special Services line item in the Statement of Operations and Change in Net Assets (liabilities). In 2015, ESDC charged the Fund a total of $161,619,403 (2014 — $109,078,645) for these services.

Effective for all applications processed by ESDC from April 1, 2014 to March 31, 2015, a fee of $13.90 per application, plus a fixed amount of approximately 1 million dollars was charged to the Fund for the Receiving Agent Services. These fees are reported in the Professional and Special Services line item in the Statement of Operations and Change in Net Assets (liabilities). In 2015, ESDC charged the Fund a total of $10,711,754 (2014 — $8,802,250) for application processing fees.

The Fund was charged for transition and modernization costs. The cost for these activities provided by ESDC is reported in the Professional and Special Services line item in the statement of Operations and Change in Net Assets (liabilities). In 2015, ESDC charged the Fund a total of $4,411,691 (2014 — $3,253,827).

7. Changes in current assets and liabilities

Table Summary

The table presents on a comparative basis the changes in current assets and liabilities. It consists of three columns: item descriptions, current year and previous year. The last row represents the total for all item descriptions.

(in thousands of dollars)

  2015 2014
Assets    
Accounts receivable — Government of Canada 35,856 (negative 41,244)
Accounts receivable — Outside parties 22 226
Prepaid expenses 103 70
Inventories (negative 3,932) (negative 3,506)
Accounts payable and accrued liabilities    
Government of Canada 20,262 11,714
Outside parties — Accounts payable (negative 282) (negative 6,366)
Outside parties — Accrued liabilities 553 (negative 2,895)
Outside parties — Contractors' holdbacks 326 330
Employee termination benefits (negative 168) (negative 2,421)
Total 52,740 (negative 44,092)

8. Contingencies

The Fund is subject to various legal claims arising in the normal course of its operations. Some of these potential liabilities may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability has been accrued and an expense recorded on the Fund's financial statements. Based on the Fund's legal assessment of potential liability as at March 31, 2015, the Fund has one outstanding claim with a contingent liability of $175,597.

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

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

10. Transfer to other government departments

Effective July 2, 2013, the Fund transferred its passport delivery and processing service to ESDC in accordance with Order‑in‑Council P.C. 2013–0540, including the stewardship responsibility for the assets and liabilities related to the service activities. Accordingly, the Fund transferred the following assets, liabilities and related expenses to ESDC:

Table Summary

The table presents the transfer to other government departments (Employment and Social Development Canada). It consists of two columns: item descriptions and the total for all item descriptions.

(in thousands of dollars)

  2015 2014
Asset    
Capital assets (net book value) (Note 3) 187 21,964
Liabilities    
Allowance for severance and vacation pay   (negative 5,903)
Other   (negative 256)
Total Liabilities   (negative 6,159)
Expenses paid on behalf of ESDC   81,668
Adjustment to the Fund's net financial position 187 97,473

Effective November 15, 2011, the Fund transferred its information technologies services to SSC, including the stewardship responsibility for the assets and liabilities related to the service activities. As a result in 2014, the Fund transferred the following assets and related expenses to SSC for its Information technologies services:

Table Summary

The table presents the transfer to other government departments (Shared Services Canada). It consists of two columns: item descriptions and the total for all item descriptions.

(in thousands of dollars)

  2015 2014
Asset    
Capital assets (net book value) (Note 3) 91  
Prepaid expenses   3
Expenses paid on behalf of SSC   218
Adjustment to the Fund's net financial position 91 221

11. Comparative figures

Comparative figures have been reclassified to conform to the current year's presentation.

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