Passport Canada Revolving Fund

Public Accounts of Canada 2017 Volume III—Top of the page Navigation

Statement of management responsibility

We have prepared the accompanying financial statements of the Passport Canada Revolving Fund as required by and in accordance with the Treasury Board Policy on Special Revenue Spending Authorities 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 financial statements, on a basis consistent with that of the preceding year. Some previous year's figures have been reclassified to conform to the current year's presentation.

Responsibility for the integrity and objectivity of these financial statements rests with the management of the Fund. To ensure maximum objectivity and freedom from bias, the financial data contained in these financial statements is examined by the Departmental Audit Committee in conjunction with their review of the departmental financial statements. The information included in these financial statements is based on management's best estimates and judgment 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. Financial information submitted to the Public Accounts of Canada and included in the department's Departmental Results Report is consistent with these financial statements.

The Fund's financial management develops and disseminates financial 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. Financial management and internal control systems are augmented by the maintenance of internal audit programs. The Fund also seeks to ensure 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 Auditor, who audited them and has provided an independent opinion which has been appended to these financial statements.

Approved by:

Benoit St-Jean, CPA, CA
Director General

Financial Operations
Immigration, Refugees and Citizenship Canada

Daniel Mills, CPA, CMA
Assistant Deputy Minister and
Chief Financial Officer
Immigration, Refugees and Citizenship Canada

June 2, 2017
Ottawa, Canada

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

(in thousands of dollars)

  2017 2016
EstimatesLink to footnote 1 Actual EstimatesLink to footnote 1 Actual
Net results 250,217 306,769 244,903 253,337
Items not requiring use of funds 5,415 3,728 7,250 6,813
Operating source of funds 255,632 310,497 252,153 260,150
Items requiring use of funds
Net tangible capital assets acquisitions (negative 25,986) (negative 1,107) (negative 20,000) (negative 76)
Net other assets and liabilities 3,378 1,209
Investment in modernization initiativeLink to footnote 2 (negative 45,438) (negative 7,241) (negative 30,000) (negative 8,866)
Transition payments for implementing salary payments in arrears (negative 12)
Authority provided 184,208 305,527 202,153 252,405

Reconciliation of unused authority (unaudited) as at March 31

(in thousands of dollars)

  2017 2016
Debit balance in the accumulated net charge against the Fund's authority 1,051,480 753,805
Payables charged against the Fund at year-end (negative 42,588) (negative 46,390)
Receivables credited to the Fund at year-end 13,658 9,608
Net authority provided, end of year 1,022,550 717,023
Authority limit
Unused authority carried forward 1,022,550 717,023

Independent Auditors' Report

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

We have audited the accompanying financial statements of Passport Canada Revolving Fund, which comprise the statement of financial position as at March 31, 2017, 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.

Auditors' 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 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, 2017, 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, Immigration, Refugees and Citizenship Canada and the Treasury Board of Canada Secretariat for reporting on the use of the Revolving 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

June 2, 2017
Ottawa, Canada

Statement of financial position as at March 31

(in thousands of dollars)

  2017 2016
Assets
Financial assets
Accounts receivable and advances (Note 4) 14,500 10,486
Inventory held for resale (Note 5) 9,415 13,314
Subtotal 23,915 23,800
Non-financial assets
Prepaid expenses 734 637
Inventory held for consumption (Note 5) 3,444 3,678
Tangible capital assets (Note 6) 9,817 11,803
Subtotal 13,995 16,118
Total 37,910 39,918
Liabilities
Current liabilities
Accounts payable and accrued liabilities (Note 7) 44,940 49,436
Long-term liabilities
Employee future benefits 2,090 3,098
Total 47,030 52,534
Net assets (liabilities) (Note 8) (negative 9,120) (negative 12,616)
Total 37,910 39,918

Statement of operations and net assets (liabilities) for the year ended March 31

(in thousands of dollars)

  2017 2016
Revenues
Fees earned 658,246 610,207
Miscellaneous revenues 271 252
Subtotal 658,517 610,459
Expenses
Professional and special services (Note 11) 199,347 203,597
Salaries and employee benefits 59,059 62,196
Freight, express and cartage 34,361 32,792
Passport materials 32,586 30,564
Passport operations at missions abroad 7,192 4,337
Rentals (Note 3) 6,331 5,700
Accommodation 4,427 4,363
Amortization of tangible capital assets 3,085 4,032
Information 2,488 2,192
Repair and maintenance (Note 3) 2,171 1,680
Travel and removal 1,061 394
Printing, stationery and supplies 700 2,779
Postal services and postage 53 240
Loss on disposal of tangible capital assets 8 1,993
Utility 2 2
Telecommunications 1 1
Provision for employee termination benefits (negative 1,008) 248
Other (negative 116) 12
Subtotal 351,748 357,122
Net results 306,769 253,337
Net assets (liabilities), beginning of year (negative 12,616) (negative 12,392)
Net financial resources provided and change in the accumulated net charge against the Fund's authority, during the year (negative 297,675) (negative 245,224)
Transfer of transition payments for implementing salary payments in arrears (Note 12) (negative 12)
Net investment in modernization initiative–software (Note 13) (negative 5,598) (negative 8,325)
Net liabilities, end of year (Note 8) (negative 9,120) (negative 12,616)

Statement of cash flows for the year ended March 31

(in thousands of dollars)

  2017 2016
Operating activities
Net results 306,769 253,337
Items not requiring use of funds
Amortization of tangible capital assets 3,085 4,032
Loss on disposal of tangible capital assets 8 1,993
Provision for employee future benefits (negative 1,008) 248
Usage charge for modernization initiative–software (Note 13) 1,643 541
Transfer of transition payments for implementing salary payments in arrears (Note 12) (negative 12)
Net results excluding items not requiring use of funds 310,497 260,139
Variations in statement of financial position
Decrease (increase) in accounts receivable and advances (negative 4,014) 3,287
Decrease (increase) in prepaid expenses (negative 97) 135
Decrease in inventory held for resale 3,899 2,145
Decrease (increase) in inventory held for consumption 234 (negative 1,756)
Decrease in accounts payable and accrued liabilities (negative 4,496) (negative 9,712)
Decrease in obligation for employee future benefits (negative 72)
Net financial resources provided by operating activities 306,023 254,166
Capital investing activities
Acquisition of tangible capital assets (negative 1,107) (negative 76)
Investment in modernization initiative–software (Note 13) (negative 7,241) (negative 8,866)
Net financial resources used by investing activities (negative 8,348) (negative 8,942)
Net financial resources provided and change in the accumulated net charge against the Fund's authority during the year 297,675 245,224
Correction from previous year of the accumulated net charge against the Fund's authority 81,886
Accumulated net charge against the Fund's authority, beginning of year 753,805 426,695
Accumulated net charge against the Fund's authority, end of year (Note 8) 1,051,480 753,805

Notes to the financial statements for the year ended March 31, 2017

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 Global Affairs Canada (GAC) to Immigration, Refugees and Citizenship Canada (IRCC). 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 and tangible capital acquisitions.

2. Summary of significant accounting policies

Significant accounting policies are as follows:

(a) Basis ofaccounting

These financial statements have been prepared in accordance with the significant accounting policies stated 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 (GAAP) because the 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, because the funding for tangible 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) Inventories

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

(d) Tangible capital assets

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

Asset class Amortization period
Office furniture 10 years
Vehicles 8 years
Informatics hardware 5 years
Software (purchased and developed) 3 to 10 years
Machinery and equipment 15 years
Leasehold improvements Lesser of the remaining term of the lease or estimated useful life of the improvement

Assets under construction are recorded in the applicable capital asset class in the year that they become available for use and are not amortized until they become available for use.

(e) Employee future benefits

  1. Pension benefits: Eligible employees of the Fund participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. The Fund's contributions to the Plan are charged to expenses in the year incurred and represent the Fund's total obligation to the Plan. The Fund'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: Severance benefits provided to the Fund's employees were previously based on an employee's eligibility, years of service and salary at termination of employment. However, since 2011 the accumulation of severance benefits for voluntary departures progressively ceased for substantially all employees. Employees subject to these changes were given the option to be paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits upon departure from the public service. By March 31, 2017, all settlements for immediate cash out were completed. Severance benefits are unfunded and, consequently, the outstanding obligation will be paid from future authorities.

3. Changes in financial statements presentation

Some expenses from the previous year have been reclassified to comply with the 2016–2017 financial statements' presentation. The net result is an increase in Rentals with a corresponding decrease in Repair and maintenance in the amount of $5,641,825. This adjustment is due to the harmonization of the financial statements' presentation of the Passport program with that of IRCC andto better reflect the nature of the transactions. Passport has integrated into the IRCC financial system in 2015-2016.

4. Accounts receivable and advances

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

(in thousands of dollars)

  2017 2016
Accounts receivable and advances
Accounts receivable—Government of Canada 14,306 10,219
Accounts receivable—Outside parties 194 256
Employee advances 11
Total 14,500 10,486

5. Inventories

The following table presents details of the inventory, measured at the lower of cost using the average cost and net realizable value:

(in thousands of dollars)

  2017 2016
Inventories
Inventories held for consumption 3,444 3,678
Inventories held for resale 9,415 13,314
Total 12,859 16,992

The inventories held for consumption are mainly composed of prepaid envelopes and informatics hardware. The inventories for resale are the passport booklets.

The cost of consumed inventory recognized as an expense in the Statement of Operations and Fund's net assets (liabilities) is $61,234,359 for 2016–2017 ($57,519,097 for 2015–2016).

6. Tangible capital assets

The following table presents details of the tangible capital assets held by the Fund during the fiscal year:

(in thousands of dollars)

Tangible capital assets Balance, beginning of the year Acquisitions Disposals, transfers and adjustments Balance, end of the year
Technology enhancement plan projectLink to footnote 3 2,906 2,906
Leasehold improvements 4,353 4,353
Office furniture 41 41
Informatics hardware 5,231 (negative 42) 5,189
Software 26,724 (negative 911) 25,813
Vehicles 21 21
Machinery and equipment 406 406
Assets under Construction 1,107 1,107
Total 39,682 1,107 (negative 953) 39,836
Accumulated amortization Balance, beginning of the year Amortization Disposals, transfers and adjustments Balance, end of the year
Technology enhancement plan projectLink to footnote 3 2,906 2,906
Leasehold improvements 4,353 4,353
Office furniture 20 3 23
Informatics hardware 2,972 921 (negative 42) 3,851
Software 17,449 2,140 (negative 903) 18,686
Vehicles 7 2 9
Machinery and equipment 172 19 191
Total 27,879 3,085 (negative 945) 30,019
Net book value 2017 2016
Technology enhancement plan project
Leasehold improvements
Office furniture 18 21
Informatics hardware 1,338 2,259
Software 7,127 9,275
Vehicles 12 14
Machinery and equipment 215 234
Assets under Construction 1,107
Total 9,817 11,803

7. Accounts payable and accrued liabilities

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

(in thousands of dollars)

  2017 2016
Accounts payable and accrued liabilities
Accounts payable—Government of Canada 30,079 29,298
Accounts payable—Outside parties 8,056 12,933
Accrued liabilities—Outside parties 6,548 7,205
Contractors' holdbacks—Outside parties 257
Total 44,940 49,436

8. Net assets (liabilities)

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

The accumulated surplus is an accumulation of each fiscal year's surplus net of deficits since the inception of the Fund.

The contributed capital is a financing arrangement approved by Treasury Board, to finance the acquisition of tangible capital assets in substitute of the Fund's authority. In the current year, there were no additional capital contributions from Treasury Board to finance the Fund's capital project.

(in thousands of dollars)

  2017 2016
Net assets (liabilities)
Accumulated net charge against the Fund's authority (negative 1,051,480) (negative 753,805)
Accumulated surplus 961,886 660,715
Contributed capital 80,474 80,474
Total (negative 9,120) (negative 12,616)

9. 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, rent of office premises and other operating expenses:

(in thousands of dollars)

2018 59,326
2019 4,598
2020 4,548
2021 4,566
2022 42
Total 73,080

10. Contingent liabilities

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, 2017, the Fund has one outstanding claim with a contingent liability of $25,000.

11. 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 the GAC. These fees are not recorded as revenues in the Statement of operations and net assets (liabilities). In 2016–2017, the Fund collected and remitted to GAC $101,001,725 ($93,085,666 in 2015–2016) in consular fees.

The cost reported in the Professional and Special Services line item in the Statement of operations and net assets (liabilities) includes the following transactions with Shared Services Canada (SSC) and Employment and Social Development Canada (ESDC):

(in thousands of dollars)

  2017 2016
Related party transactions
Information technologies services (SSC) 14,685 14,551
Service Delivery, Operations and Internal Services (ESDC) 156,717 159,125
Applications processing (ESDC) 13,639 10,835
Transition and modernization (ESDC) 2,098 6,056
Total 187,139 190,567

The following table presents the total of other transactions with related parties, such as accommodation, legal services and employers' contributions to the health and dental insurance plans:

(in thousands of dollars)

  2017 2016
Expenses–Other Government departments 27,264 25,928

12. 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 processes. 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.

13. Investment in modernization initiative

IRCC's Passport program is shifting from the Integrated Retrieval Information System (IRIS) to the Global Case Management System (GCMS) and Integrated Payment Revenue Management System (IPRMS) for the processing of passport applications. They will provide the foundation for a future online service channel. As its owner, the expenses affected to the Fund related to this initiative are capitalized in IRCC's financial statements. Annually, IRCC charges back the Fund for the use of GCMS and IPRMS. In 2016–2017, expenses paid by the Fund in the amount of $7,240,821 were capitalized in IRCC. During the year, charges totaling $1,643,245 were transferred to the Fund to account for the yearly utilization.

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