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 restatement described in note 3. 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 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 and
Chief Financial Officer
Immigration, Refugees and Citizenship Canada

May 28, 2018
Ottawa, Canada

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

Reconciliation of unused authority (unaudited) as at March 31

Statement of financial position (unaudited) as at March 31

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

Statement of cash flows (unaudited) for the year ended March 31

Notes to the financial statements (unaudited) for the year ended March 31, 2018

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 transferred 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, 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) Basis of accounting

These financial statements have been prepared in accordance with the significant accounting policies stated below to comply with the requirements of the Treasury Board of Canada Directive on Charging and Special Financial 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) since the revenues from passport service fees are recognized upon receipt of payment and verification of an application for completeness as stated in the Regulations prescribing fees for passport services. In addition, 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:

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

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

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, 2018, all settlements for immediate cash out were completed.

3. Restatement of financial statements

In the context of the modernization initiative, the Passport program is transitioning to the IRCC Global Case Management System (GCMS) and the Integrated Payment Revenue Management System (IPRMS) for the processing of passport applications. The expenses allocated to this initiative are capitalized in the financial statements of IRCC, which owns and presents these systems as capital assets. IRCC charges an annual usage fee to the Fund to account for its use of the systems.

A review of the accounting treatment for the modernization initiative was performed during fiscal year 2017–2018. It was then determined that the expenditures for the modernization initiative should be considered as prepaid expenses in order to adequately present the contribution of the Fund to this initiative, as well as the services received from IRCC. The approach adopted in previous years did not properly reflect the situation and 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 $16.5 million ($10.9 million in 2015–2016). Consequently, the opening balance of net assets increased by $10.9 million and the net assets balance at the end of the year increased by $16.5 million in the Statement of Operations and Change in Net Asset (Liabilities).

An amount of $7.2 million previously reported as an investment in modernization initiative in the Statement of Cash Flows has been restated under the prepaid expenses, while the usage charge of $1.6 million related to this initiative is presented in reduction of prepaid expenses, resulting in a net decrease of $5.6 million in prepaid expenses in 2016–2017.

In addition, an adjustment was made to the opening balance of the Accumulated net charge against the Fund's authority, in order to reflect an initial investment made in the modernization initiative in 2014–2015.

4. Accounts receivable and advances

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

5. Inventories

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

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 $63,680,681 for 2017–2018 ($61,234,359 for 2016–2017).

6. Prepaid Expenses

The following table presents details of the Fund's prepaid expenses:

In the context of the modernization initiative, the Passport program is transitioning to the IRCC Global Case Management System (GCMS) and the Integrated Payment Revenue Management System (IPRMS) 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 IRCC'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:

8. Accounts payable and accrued liabilities

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

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.

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:

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 2017–2018, the Fund collected and remitted to GAC $101,001,725 ($93,085,666 in 2015–2017) in consular fees.

Expenses reported as professional and special services in the Statement of operations and net assets (liabilities) include the following transactions with Shared Services Canada (SSC) and Employment and Social Development Canada (ESDC):

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:

Public Accounts of Canada 2018 Volume III—Bottom of the page Navigation

• Previous page: Optional Services Revolving Fund
• Section 1—Table of contents: Section 1—Financial statements of revolving funds
• Next page: Real Property Services Revolving Fund