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 as required by and in accordance with the Treasury Board Directive on Charging and Special Financial 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 except for the prior year's adjustments described in note 3.
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 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. 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.
Approved by:
Christopher Meyers, CPA, CA
Deputy Chief Financial Officer and
Director General
Financial Management
Immigration, Refugees and Citizenship Canada
Daniel Mills, CPA, CMA
Assistant Deputy Minister, Corporate Management and
Chief Financial Officer
Immigration, Refugees and Citizenship Canada
June 11, 2019
Ottawa, Canada
Statement of authority provided (used) (unaudited) for the year ended March 31
(in thousands of dollars)
| 2019 | 2018 Restated (Note 3) |
|||
|---|---|---|---|---|
| EstimatesLink to footnote 1 | Actual | EstimatesLink to footnote 1 | Actual | |
| Net results | (negative 68,692) | 7,875 | 187,618 | 233,483 |
| Items not requiring use of funds | 3,085 | 2,726 | 4,032 | 3,468 |
| Operating source (use) of funds | (negative 65,607) | 10,601 | 191,650 | 236,951 |
| Items requiring use of funds | ||||
| Net tangible capital assets acquisitions | (negative 20,000) | (negative 96) | (negative 40,612) | (negative 127) |
| Net other assets and liabilities | – | 3,653 | – | (negative 472) |
| Authority provided (used) | (negative 85,607) | 14,158 | 151,038 | 236,352 |
Reconciliation of unused authority (unaudited) as at March 31
(in thousands of dollars)
| 2019 | 2018 Restated (Note 3) |
|
|---|---|---|
| Debit balance in the accumulated net charge against the Fund's authority | 1,311,466 | 1,290,713 |
| Payables charged against the appropriation at year-end | (negative 44,708) | (negative 42,917) |
| Receivables credited to the appropriation at year-end | 6,302 | 11,106 |
| Net authority provided, end of year | 1,273,060 | 1,258,902 |
| Authority limit | – | – |
| Unused authority carried forward | 1,273,060 | 1,258,902 |
Statement of financial position (unaudited) as at March 31
(in thousands of dollars)
| 2019 | 2018 Restated (Note 3) |
|
|---|---|---|
| Assets | ||
| Financial assets | ||
| Accounts receivable (note 4) | 7,282 | 11,926 |
| Inventory held for resale (note 5) | 5,752 | 10,465 |
| Subtotal | 13,034 | 22,391 |
| Non-financial assets | ||
| Prepaid expenses (note 6) | 24,333 | 22,186 |
| Inventory held for consumption (note 5) | 2,394 | 3,041 |
| Tangible capital assets (note 7) | 4,232 | 6,848 |
| Subtotal | 30,959 | 32,075 |
| Total | 43,993 | 54,466 |
| Liabilities | ||
| Accounts payable and accrued liabilities (note 8) | 48,307 | 45,916 |
| Employee future benefits | 2,478 | 2,462 |
| Subtotal | 50,785 | 48,378 |
| Net assets (liabilities) (note 9) | (negative 6,792) | 6,088 |
| Net financial position in the Fund | 43,993 | 54,466 |
Statement of operations and net assets (liabilities) (unaudited) for the year ended March 31
(in thousands of dollars)
| 2019 | 2018 Restated (Note 3) |
|
|---|---|---|
| Revenues | ||
| Fees earned | 376,075 | 639,271 |
| Miscellaneous revenues | 234 | 234 |
| Subtotal | 376,309 | 639,505 |
| Expenses | ||
| Professional and special services | 203,967 | 235,394 |
| Salaries and employee benefits | 77,568 | 70,575 |
| Freight, express and cartage | 22,404 | 35,835 |
| Passport materials | 20,465 | 32,869 |
| Passport operations at missions abroad | 9,666 | 6,402 |
| Printing, stationery and supplies | 7,965 | 5,580 |
| Rentals | 5,778 | 6,400 |
| Accommodation | 4,457 | 4,469 |
| Amortization of tangible capital assets | 2,712 | 3,096 |
| Repair and mainenance | 1,980 | 1,530 |
| Information | 1,470 | 2,788 |
| Travel and relocation | 959 | 562 |
| Provision for employee future benefits | 16 | 372 |
| Postal services and postage | 15 | 68 |
| Utility | 1 | 2 |
| Telecommunications | 1 | 1 |
| Other | 10 | 79 |
| Subtotal | 359,434 | 406,022 |
| Net results | 7,875 | 233,483 |
| Net assets, beginning of year | 6,088 | 8,865 |
| Net financial resources provided and change in the accumulated net charge against the Fund's authority, during the year | (negative 20,753) | (negative 236,260) |
| Transfer of transition payments for implementing salary payments in arrears | (negative 2) | – |
| Net assets (liabilities), end of year (note 9) | (negative 6,792) | 6,088 |
Statement of cash flows (unaudited) for the year ended March 31
(in thousands of dollars)
| 2019 | 2018 Restated (Note 3) |
|
|---|---|---|
| Operating activities | ||
| Net results | 7,875 | 233,483 |
| Items not requiring use of funds | ||
| Amortization of tangible capital assets | 2,712 | 3,096 |
| Provision for employee future benefits | 16 | 372 |
| Transfer of transition payments for implementing salary payments in arrears | (negative 2) | – |
| Net results excluding items not requiring use of funds | 10,601 | 236,951 |
| Variations in statement of financial position | ||
| Decrease in accounts receivable | 4,644 | 2,574 |
| Increase in prepaid expenses | (negative 2,147) | (negative 3,467) |
| Decrease (increase) in inventory held for resale | 4,713 | (negative 1,050) |
| Decrease in inventory held for consumption | 647 | 403 |
| Increase in accounts payable and accrued liabilities | 2,391 | 976 |
| Net financial resources provided by operating activities | 20,849 | 236,387 |
| Capital investing activities | ||
| Acquisition of tangible capital assets | (negative 96) | (negative 127) |
| Net financial resources used by investing activities | (negative 96) | (negative 127) |
| Net financial resources provided and change in the accumulated net charge against the Fund's authority, during the year | 20,753 | 236,260 |
| Accumulated net charge against the Fund's authority, beginning of year | 1,290,713 | 1,054,453 |
| Accumulated net charge against the Fund's authority, end of year (note 9) | 1,311,466 | 1,290,713 |
Notes to the financial statements (unaudited) for the year ended March 31, 2019
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.
The Fund has a continuing non-lapsing authority from Parliament, in the amount of $1, to make payments out of the Consolidated Revenue Fund for working capital and tangible capital acquisitions.
2. Significant accounting policies
Significant accounting policies are as follows:
(a) 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.
(b) Inventories
Inventories of materials and supplies are carried at the lower of cost using the average cost and net realizable value.
(c) 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 they are put into service and are not amortized until then.
(d) Employee future benefits
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.
Severance benefits
The accumulation of severance benefits for voluntary departures ceased for substantially all employees. The remaining obligation for the Fund's 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.
3. Prior year's adjustments
In the context of the modernization initiative, the Passport program is transitioning to the Immigration, Refugees and Citizenship Canada Global Case Management System and the Integrated Payment Revenue Management System for the processing of passport applications. The Fund's contributions to this initiative are recorded as prepaid expenses and are gradually recognized as expenses to reflect the usage of Immigration, Refugees and Citizenship Canada's systems by the Fund.
During fiscal year 2018–2019, a review of the accounting for the Global Case Management System and Integrated Payment Revenue Management System projects was completed. It was then determined that the functionalities related to the processing of passport applications have not yet been fully deployed and a portion of deemed services received by the Fund since fiscal year 2015–2016 for the use of these systems should not have materialized. As such, the Fund corrected the accounting accordingly, resulting in a retroactive restatement of prior years' balances.
As a result of this restatement, the cumulative balance of prepaid expenses has increased by $3.8 million and consequently, the net assets balance at the end of the year increased by $3.8 million in the Statement of operations and net assets (liabilities).
In addition, a reallocation was made between the accumulated surplus and the accumulated net charge against the Fund's authority, beginning of year, in order to properly account for an adjustment made in prior years.
4. Accounts receivable
The following table presents details of the Fund's accounts receivable:
(in thousands of dollars)
| 2019 | 2018 | |
|---|---|---|
| Accounts receivable | ||
| Accounts receivable—Government of Canada | 6,989 | 11,741 |
| Accounts receivable—Outside parties | 293 | 185 |
| Total | 7,282 | 11,926 |
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)
| 2019 | 2018 | |
|---|---|---|
| Inventories | ||
| Inventories held for consumption | 2,394 | 3,041 |
| Inventories held for resale | 5,752 | 10,465 |
| Total | 8,146 | 13,506 |
The inventories held for consumption are mainly composed of prepaid envelopes and informatics hardware. The inventories held for resale are passport booklets.
The cost of consumed inventory recognized as an expense in the Statement of operations and Fund's net assets (liabilities) is $38,554,525 for 2018–2019 ($63,680,681 for 2017–2018).
6. Prepaid expenses
The following table presents details of the Fund's prepaid expenses:
(in thousands of dollars)
| 2019 | 2018 Restated (Note 3) |
|
|---|---|---|
| Prepaid expenses | ||
| Prepaid expenses—Modernization initiative | 24,084 | 21,738 |
| Prepaid expenses—Other | 249 | 448 |
| Total | 24,333 | 22,186 |
In the context of the modernization initiative, the Passport program is transitioning to the Immigration, Refugees and Citizenship Canada Global Case Management System and the Integrated Payment Revenue Management System for the processing of passport applications. The expenses allocated to this initiative are recorded as prepaid expenses in the financial statements of the Fund. The prepaid expenses are gradually recognized as expenses to reflect the usage of Immigration, Refugees and Citizenship Canada's systems by the Fund.
7. 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 at beginning of the year | Aquisitions | Disposals | Balance at end of the year |
|---|---|---|---|---|
| Technology enhancement plan project | 2,906 | – | – | 2,906 |
| Leasehold improvements | 4,353 | – | – | 4,353 |
| Office furniture | 41 | 41 | – | 82 |
| Informatics hardware | 5,124 | – | – | 5,124 |
| Software | 27,047 | 55 | (16) | 27,086 |
| Vehicles | 21 | – | – | 21 |
| Machinery and equipment | 406 | – | – | 406 |
| Total | 39,898 | 96 | (16) |
39,978 |
| Accumulated amortization | Balance at beginning of the year | Amortization | Adjustments | Balance at end of the year |
| Technology enhancement plan project | 2,906 | – | – | 2,906 |
| Leasehold improvements | 4,353 | – | – | 4,353 |
| Office furniture | 26 | 3 | – | 29 |
| Informatics hardware | 4,705 | 366 | – | 5,071 |
| Software | 20,839 | 2,322 | (16) | 23,145 |
| Vehicles | 11 | 2 | – | 13 |
| Machinery and equipment | 210 | 19 | – | 229 |
| Total | 33,050 | 2,712 | (16) |
35,746 |
| Net book value | 2019 | 2018 | ||
| Technology enhancement plan project | – | – | ||
| Leasehold improvements | – | – | ||
| Office furniture | 53 | 15 | ||
| Informatics hardware | 53 | 419 | ||
| Software | 3,941 | 6,208 | ||
| Vehicles | 8 | 10 | ||
| Machinery and equipment | 177 | 196 | ||
| Total | 4,232 | 6,848 | ||
Table notesThe dash means that the amount is 0 or is rounded to 0. | ||||
8. Accounts payable and accrued liabilities
The following table presents details of the Fund's accounts payable and accrued liabilities:
(in thousands of dollars)
| 2019 | 2018 | |
|---|---|---|
| Accounts payable and accrued liabilities | ||
| Accounts payable—Government of Canada | 23,467 | 31,457 |
| Accounts payable—Outside parties | 10,399 | 6,107 |
| Accrued liabilities—Outside parties | 14,307 | 8,029 |
| Contractors' holdbacks—Outside parties | 134 | 323 |
| Total | 48,307 | 45,916 |
9. 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)
| 2019 | 2018 Restated (Note 3) |
|
|---|---|---|
| Net assets (liabilities) | ||
| Accumulated surplus | 1,224,200 | 1,216,327 |
| Accumulated net charge against the Fund's authority, beginning of year | (negative 1,290,713) | (negative 1,054,453) |
| Net financial resources provided and change in the accumulated net charge against the Fund's authority, during the year | (negative 20,753) | (negative 236,260) |
| Accumulated net charge against the Fund's authority, end of year | (negative 1,311,466) | (negative 1,290,713) |
| Contributed capital | 80,474 | 80,474 |
| Net assets (liabilities), end of year | (negative 6,792) | 6,088 |
10. 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)
| 2020 | 49,743 |
|---|---|
| 2021 | 27,346 |
| 2022 | 6,316 |
| 2023 | 6,915 |
| 2024 | 7,582 |
| Total | 97,902 |
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.
Expenses reported as professional and special services in the Statement of operations and net assets (liabilities) include the following transactions with Shared Services Canada and Employment and Social Development Canada:
(in thousands of dollars)
| 2019 | 2018 | |
|---|---|---|
| Related party transactions | ||
| Information technologies services (SSC) | 14,776 | 22,467 |
| Service Delivery, Operations and Internal Services (ESDC) | 152,972 | 181,512 |
| Applications processing (ESDC) | 11,264 | 13,303 |
| Transition and modernization (ESDC) | 2,424 | – |
| e-Passport (ESDC) | 735 | – |
| Total | 182,171 | 217,282 |
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)
| 2019 | 2018 | |
|---|---|---|
| Expenses—Other Government departments | 32,959 | 28,212 |
As part of its operations, the Fund collects Consular fees on behalf of the Global Affairs Canada. These fees are not recorded as revenues in the Statement of operations and net assets (liabilities). In 2018-2019, the Fund collected and remitted to Global Affairs Canada $51,390,875 ($98,831,700 in 2017-2018) in consular fees.