Canadian Pari-Mutuel Agency Revolving Fund

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Statement of management responsibility

We have prepared the accompanying financial statements of the Canadian Pari-Mutuel Agency Revolving Fund as required by and in accordance with the Treasury Board Policy on Special Revenue Spending Authorities. 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 fulfil its accounting and reporting responsibilities, the Fund maintains a set of accounts which provides a centralized record of the Fund's financial transactions. Financial information submitted to the Public Accounts of Canada and included in the department's Departmental Performance Report is consistent with that in these financial statements.

The Fund's Corporate Services division 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. They 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. Financial management and internal control systems are augmented by the maintenance of internal audit programs. The Fund also seeks to assure the objectivity and integrity of data in its financial statements by 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 an external auditing firm, which has audited them and has provided an independent opinion that has been appended to these financial statements.

Approved by:

Steve Suttie
Executive Director,
Canadian Pari-Mutuel Agency

Angela Murphy
A/Director General,
Finance and Resource Management Services
(Deputy Chief Financial Officer)

Pierre Corriveau
Assistant Deputy Minister,
Corporate Management
(Chief Financial Officer)

May 27, 2016
Ottawa, Ontario

Statement of authority provided (used) (unaudited) for the year ended March 31

Table summary

The table presents on a comparative basis the statement of authority provided (used) (unaudited). It consists of five 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 (use) of funds and totals are displayed at authority provided (used).

(in thousands of dollars)

  2016 2015
Estimates Actual Estimates Actual
Net results 1,012 1,680 1,317 2,126
Items not requiring use of funds 334 490 395 476
Operating source (use) of funds 1,346 2,170 1,712 2,602
Items requiring use of funds
Net tangible capital assets acquisitions (negative 1,281) (negative 1,274) (negative 375) (negative 303)
Net other assets and liabilities 67 18
Transition payments for implementing salary payments in arrears (negative 84)
Authority provided (used) 65 963 1,337 2,233

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 provided end of year and totals are displayed at the unused authority carried forward.

(in thousands of dollars)

  2016 2015
Debit (credit) balance in the accumulated net charge against the Fund's authority 9,318 8,057
Payables charged against the appropriation at year-end (negative 1,242) (negative 856)
Receivables credited to the appropriation at year-end 191 104
Net authority provided (used), end of year 8,267 7,305
Transfer from Treasury Board–paylist requirements (Vote 30) 302 352
Authority limit 2,000 2,000
Unused authority carried forward 10,569 9,657

Independent auditor's report

To the Assistant Deputy Minister, Corporate Management, Chief Financial Officer Agriculture and Agri-Food Canada

We have audited the accompanying financial statements of the Canadian Pari-Mutuel Agency Revolving Fund, which comprise the statement of financial position as at March 31, 2016, and the statements of operations and net assets, and cash flows for the year then ended, and the related notes, which comprise a summary of significant accounting policies and other explanatory information. These financial statements have been prepared by management of the Fund to meet the requirements of section 6.4 of the Treasury Board of Canada's 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 section 6.4 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 the 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 the auditor's 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, the auditor considers internal control relevant to the entity's preparation and fair presentation 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 the Canadian Pari-Mutuel Agency Revolving Fund as at March 31, 2016 and the results of its operations and its cash flows for the year then ended in accordance with section 6.4 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 describes the basis of accounting. The financial statements are prepared to assist the Canadian Pari-Mutuel Agency Revolving Fund to meet the requirements of section 6.4 of the Treasury Board of Canada's Policy on Special Revenue Spending Authorities. As a result, the financial statements may not be suitable for another purpose. Our report is intended solely for the management of the Canadian Pari-Mutuel Agency Revolving Fund and the Treasury Board of Canada and should not be used by parties other than the Canadian Pari-Mutuel Agency Revolving Fund or the Treasury Board of Canada.

PricewaterhouseCoopers LLP
Chartered Professional Accountants,
Licensed Public Accountants
May 27, 2016
Ottawa, Ontario

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. Assets and liabilities are further divided into current and long-term, displaying subtotals for each.

(in thousands of dollars)

  2016 2015
Assets
Financial assets
Cash in transit 60 65
Accounts receivable (Note 3) 245 272
Accountable advances to employees 1 1
Subtotal 306 338
Non-financial assets
Prepaid expenses 12 6
Tangible capital assets (Note 4) 2,213 1,429
Total 2,531 1,773
Liabilities
Current liabilities
Accounts payable and accrued liabilities (Note 5) 1,228 810
Vacation pay 215 219
Current portion of obligation for employee future benefits 14 47
Subtotal 1,457 1,076
Long-term liabilities
Obligation for employee future benefits 69 111
Net assets (Note 6) 1,005 586
Total 2,531 1,773

Statement of operations and net assets for the year ended 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 operating expenses are grouped together, each displaying subtotals. Subtotals for revenues and operating expenses are displayed at net results and totals are displayed at net assets end of year.

(in thousands of dollars)

  2016 2015
Revenues
Pari-mutuel levy 10,181 10,074
Other 30 25
Subtotal 10,211 10,099
Operating expenses
Salaries and employee benefits 3,141 3,293
Provision for employee future benefits (negative 19) 71
Professional and special services
Drug control 3,053 2,506
Drug research 245 291
Other 996 673
Transportation and telecommunications 275 265
Rentals 213 308
Amortization of tangible capital assets 334 395
Utilities, materials and supplies 101 109
Write-off of tangible capital assets 156 10
Other 36 52
Subtotal 8,531 7,973
Net results 1,680 2,126
Net assets, beginning of year 586 1,244
Net financial resources provided and change in the accumulated net charge against the Fund's authority, during the year (negative 1,261) (negative 2,700)
Transfer of the transition payments for implementing salary payments in arrears (negative 84)
Net assets, end of year 1,005 586

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 two: operating activities and investing activities. Subtotals are displayed at net financial resources provided (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)

  2016 2015
Operating activities
Net results 1,680 2,126
Items not requiring use of funds
Amortization of tangible capital assets 334 395
Write-off of tangible capital assets 156 10
Subtotal 2,170 2,531
Variations in Statement of financial position
Decrease (increase) in cash in transit 5 32
Decrease (increase) in accounts receivable 27 23
Decrease (increase) in prepaid expenses (negative 6) 6
Increase (decrease) in accounts payable and accrued liabilities 418 422
Increase (decrease) in vacation pay (negative 4) 20
Increase (decrease) in obligation for employee future benefits (negative 75) 53
Transition payments for implementing salary payments in arrears (negative 84)
Net financial resources provided by operating activities 2,535 3,003
Capital investing activities
Acquisition of tangible capital assets (negative 1,274) (negative 303)
Net financial resources provided (used) by investing activities (negative 1,274) (negative 303)
Net financial resources provided and change in the accumulated net charge against the Fund's authority, during the year 1,261 2,700
Accumulated net charge against the Fund's authority, beginning of year 8,057 5,357
Accumulated net charge against the Fund's authority, end of year 9,318 8,057

Notes to the financial statements for the year ended March 31, 2016

1. Authority and purpose

The Canadian Pari-Mutuel Agency Revolving Fund (CPMA or "the Fund") was established under Appropriation Act No. 1, 1970, which authorized the operation of the Fund in the current and subsequent fiscal years in accordance with terms and conditions prescribed by the Treasury Board of Canada ("Treasury Board") for the purpose of providing race track supervision in Canada. The Appropriation Act No. 1, 1970 was repealed and replaced by section 2 of the Revolving Funds Act in 1985.

CPMA has a continuing non-lapsing authority from Parliament to make payments out of the Consolidated Revenue Fund for working capital, tangible capital asset acquisitions and temporary financing of accumulated operating deficits, the total of which is not to exceed $2,000,000 at any time.

CPMA's mandate is to regulate and supervise pari-mutuel betting at racetracks across Canada, thereby ensuring that pari-mutuel betting is conducted in a way that is fair to the betting public.

CPMA is not subject to income tax under the provisions of the Income Tax Act.

On March 21, 2012, CPMA received an allotment transfer from the Treasury Board Vote 30 (Paylist Requirements) in the amount of $503,000. This increase in available authority is for the provision to eliminate the accumulation of severance for voluntary termination for CPMA employees who have opted for the immediate cash-out of accumulated severance pay. CPMA is to repay Treasury Board over ten years, starting in the fiscal year ended March 31, 2013.

2. Significant accounting policies

These financial statements have been prepared in accordance with the significant accounting policies issued by the Treasury Board of Canada Secretariat and the reporting requirements of the Receiver General for Canada. The basis of accounting used in these financial statements differs from Canadian generally accepted accounting principles because the employees' vacation pay is based on management's estimates of the liabilities rather than based on actuarial valuations and the services received without charge from other government departments and agencies are not reported as expenses.

The significant accounting policies are as follows:

a. Revenue recognition

Pari-mutuel levy revenues are generated through a levy of 0.8 per cent applied to every dollar bet at Canadian racetracks and are recognized as bets are made. Other revenues are recognized in the period in which they are earned.

b. Cash in transit

Cash in transit includes cash and cheques received prior to March 31, but not deposited until the subsequent year.

c. Accounts receivable

Accounts receivable are stated at amounts expected to be ultimately realized; a provision is made for receivables when a recovery is considered uncertain.

d. Tangible capital assets

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

Table summary

The table presents capital assets and consists of 2 columns: the asset categories with respective amortization periods.

Furniture and equipment 10 to 15 years
Electronic data processing equipment 3 to 5 years
Automotive 8 to 10 years
Buildings 20 to 25 years
Assets under construction Once in service, in accordance with asset class
Leasehold improvements Lesser of the remaining of the occupancy instrument or useful life of the improvement

e. Employee future benefits

  1. Pension benefits: Eligible employees of CPMA participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. CPMA's contributions to the Plan are charged to expenses in the year incurred and represent CPMA's total obligation to the Plan. CPMA's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.

  2. Severance benefits: Eligible employees of CPMA are entitled to severance 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 liability relating to the benefits earned by CPMA employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government of Canada as a whole.

f. Vacation pay

Vacation pay is expensed as the benefits accrue to employees under their respective terms of employment.

g. Sick leave

Employees are permitted to accumulate unused sick leave. However, such leave entitlements may only be used in the event of an illness. Unused sick leave upon employee termination is not payable to the employee. No amount has been accrued in these financial statements and payments of sick leave benefits are included in current operations as incurred.

h. Use of estimates

The preparation of these financial statements requires management 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 revenue and expenses during the periods covered by the financial statements. The principal financial statement components, subject to measurement uncertainty, includes the obligation for employee future benefits, accrued liabilities, the allowance for doubtful accounts and the estimated useful lives of tangible capital assets. 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 year in which they become known.

3. Accounts receivable

Table summary

The table presents on a comparative basis the accounts receivable. It consists of three columns: item descriptions, current year and previous year. The last row presents the totals for accounts receivable net of allowance for doubtful accounts.

(in thousands of dollars)

  2016 2015
Government of Canada 114 36
Outside parties 131 236
Total 245 272

4. Tangible capital assets

Table summary

The table presents capital assets (above) and accumulated amortization (below), both displaying subtotals. The capital asset section of the table consists of five columns (item descriptions, opening balance, acquisitions, disposals and write-offs and closing balance) and the accumulated amortization section of the table consists of five columns (item descriptions, opening balance, amortization, adjustments and closing balance). The bottom of the table displays the capital assets net of accumulated amortization totals at net total for the columns: opening balance and closing balance.

(in thousands of dollars)

Cost Opening balance Acquisitions Disposals, retirements and write-offs Closing balance
Furniture and equipment 1,557 641 (negative 399) 1,799
Electronic data processing equipment 1,544 735 2,279
Automotive 86 74 160
Buildings 575 49 624
Land 98 98
Leasehold improvements 816 816
Assets under construction 225 (negative 225)
Total 4,901 1,274 (negative 399) 5,776
Accumulated amortization Opening balance Amortization Adjustments Closing balance
Furniture and equipment 1,010 109 (negative 243) 876
Electronic data processing equipment 1,012 220 1,232
Automotive 59 5 64
Buildings 575 575
Leasehold improvements 816 816
Total 3,472 334 (negative 243) 3,563
Net book value 2016 2015
Furniture and equipment 923 547
Electronic data processing equipment 1,047 532
Automotive 96 27
Buildings 49
Assets under construction 225
Land 98 98
Leasehold improvements
Total 2,213 1,429

5. Accounts payable and accrued liabilities

Table summary

The table presents on a comparative basis the accounts payable and accrued liabilities. It consists of three columns: item descriptions, current year and previous year. The last row presents the totals.

(in thousands of dollars)

  2016 2015
Government of Canada 37 60
Outside parties 1,191 750
Total accounts payable 1,228 810

6. Net assets

The accumulated surplus is an accumulation of each fiscal year's surplus net of deficits including the absorption of the opening net assets upon establishment of the Fund.

The accumulated net charge against the Fund's authority represents the cumulative receipts and disbursements over the life of the funds.

Table summary

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

(in thousands of dollars)

  2016 2015
Accumulated surplus, beginning of year 8,643 6,601
Net results 1,680 2,126
Transfer of the transition payments from implementing salary payments in arrears (negative 84)
Accumulated surplus, end of year 10,323 8,643
Accumulated net charge against the Fund's authority, beginning of year (negative 8,057) (negative 5,357)
Net financial resources used (provided) and change in the accumulated net charge against the Fund's authority during the year (negative 1,261) (negative 2,700)
Accumulated net charge against the Fund's authority, end of year (negative 9,318) (negative 8,057)
Net assets, end of year 1,005 586

7. Contractual obligations

CPMA leases its premises under occupancy instruments. An occupancy instrument is a formal agreement between CPMA and Public Works and Government Services Canada recording the terms and conditions that govern the provision and occupancy of the accommodation. CPMA is also engaged in contractual obligations for rental of equipment. Expected future payments are as follows.

Table summary

The table presents on a yearly basis the contractual obligations. It consists of two columns: year and expected future payment.

(in thousands of dollars)

2017 205
2018 31
2019 29
2020 30
2021 and thereafter 35

8. Contingent liabilities

In the normal course of its operations, the CPMA becomes involved in various legal actions. 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 is accrued and an expense is recorded in the financial statements.

9. Economic dependence

CPMA is funded solely by a federal levy on pari-mutuel betting in Canada on horse racing, a significant portion of which is generated by the largest racetrack in Canada—The Woodbine Racetrack ("Woodbine") in Toronto, Ontario.

Woodbine generated $6,561,355 (2015—$6,304,486) or 64 per cent (2015—63 per cent) of CPMA's total pari-mutuel levy for the year ended March 31, 2016. As at March 31, 2016, $50,367 (2015—$18,627) or 38 per cent (2015—8 per cent) of CPMA's accounts receivable—Outside parties were owed from this organization.

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