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.

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 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:

Julie Chassé, CPA, CMA
Deputy Chief Financial Officer and
Director General, Financial Strategy Branch
Immigration, Refugees and Citizenship Canada

Hughes St-Pierre, MA, CPA, CMA
Chief Financial Officer and Comptroller
Immigration, Refugees and Citizenship Canada

June 29, 2020
Ottawa, Canada

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

(in thousands of dollars)

  2020 2019
EstimatesLink to footnote 1 Actual EstimatesLink to footnote 1 Actual
Net results (negative 146,497) (negative 95,383) (negative 68,692) 7,875
Items not requiring use of funds 3,194 2,579 3,085 2,726
Operating source (use) of funds (negative 143,303) (negative 92,804) (negative 65,607) 10,601
Items requiring use of funds
Net tangible capital assets acquisitions (negative 35,521) (negative 1,365) (negative 20,000) (negative 96)
Net other assets and liabilities – (negative 7,139) – 3,653
Authority provided (used) (negative 178,824) (negative 101,308) (negative 85,607) 14,158

Reconciliation of unused authority (unaudited) as at March 31

(in thousands of dollars)

  2020 2019
Debit balance in the accumulated net charge against the Fund's authority 1,220,106 1,311,466
Payables charged against the appropriation at year-end (negative 51,051) (negative 44,708)
Receivables credited to the appropriation at year-end 2,697 6,302
Net authority provided, end of year 1,171,752 1,273,060
Unused authority carried forward 1,171,752 1,273,060

Statement of financial position (unaudited) as at March 31

(in thousands of dollars)

  2020 2019
Assets
Financial assets
Accounts receivable (note 3) 3,003 7,282
Inventory held for resale (note 4) 8,163 5,752
Subtotal 11,166 13,034
Non-financial assets
Prepaid expenses (note 5) 28,548 24,333
Inventory held for consumption (note 4) 4,131 2,394
Tangible capital assets (note 6) 3,183 4,232
Subtotal 35,862 30,959
Total 47,028 43,993
Liabilities
Accounts payable and accrued liabilities (note 7) 55,200 48,307
Employee future benefits 2,643 2,478
Subtotal 57,843 50,785
Net liabilities (note 8) (negative 10,815) (negative 6,792)
Net financial position of the Fund 47,028 43,993

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

(in thousands of dollars)

  2020 2019
Revenues
Fees earned 274,885 367,075
Miscellaneous revenues 236 234
Subtotal 275,121 367,309
Expenses
Professional and special services 215,237 203,768
Salaries and employee benefits 87,341 77,568
Freight, express and cartage 19,375 22,404
Passport materials 17,160 20,465
Passport operations at missions abroad 10,404 9,666
Rentals 6,411 5,977
Accommodation 5,174 4,457
Amortization of tangible capital assets 2,414 2,712
Information 2,392 1,470
Printing, stationery and supplies 2,061 7,965
Repair and maintenance 1,466 1,980
Travel and relocation 851 959
Provision for employee future benefits 165 16
Other 53 27
Total expenses 370,504 359,434
Net results (negative 95,383) 7,875
Net assets, (liabilities), beginning of year (negative 6,792) 6,088
Net financial resources used (provided) and change in the accumulated net charge against the Fund's authority, during the year 91,360 (negative 20,753)
Transfer of transition payments for implementing salary payments in arrears – (negative 2)
Net liabilities, end of year (note 8) (negative 10,815) (negative 6,792)

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

(in thousands of dollars)

  2020 2019
Operating activities
Net results (negative 95,383) 7,875
Items not requiring use of funds
Amortization of tangible capital assets 2,414 2,712
Provision for employee future benefits 165 16
Transfer of transition payments for implementing salary payments in arrears – (negative 2)
Subtotal (negative 92,804) 10,601
Variations in statement of financial position
Decrease in accounts receivable 4,279 4,644
Increase in prepaid expenses (negative 4,215) (negative 2,147)
Decrease (increase) in inventory held for resale (negative 2,411) 4,713
Decrease (increase) in inventory held for consumption (negative 1,737) 647
Increase in accounts payable and accrued liabilities 6,893 2,391
Subtotal (negative 89,995) 20,849
Capital investing activity
Acquisition of tangible capital assets (negative 1,365) (negative 96)
Net financial resources provided (used) and change in the accumulated net charge against the Fund's authority, during the year (negative 91,360) 20,753
Accumulated net charge against the Fund's authority, beginning of year 1,311,466 1,290,713
Accumulated net charge against the Fund's authority, end of year (note 8) 1,220,106 1,311,466

Notes to the financial statements (unaudited) for the year ended March 31, 2020

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 authorizes 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

The financial statements have been prepared in accordance with the reporting requirements of the Receiver General for Canada for revolving funds. The basis of accounting used in these financial statements differs from Canadian generally accepted accounting principles for the public sector because:

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 to 10 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 became ready for productive use 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. Accounts receivable

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

(in thousands of dollars)

  2020 2019
Accounts receivable
Accounts receivable—Government of Canada 2,950 6,989
Accounts receivable—Outside parties 53 293
Total 3,003 7,282

4. 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)

  2020 2019
Inventories
Inventories held for resale 8,163 5,752
Inventories held for consumption 4,131 2,394
Total 12,294 8,146

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

The cost of consumed inventory recognized as an expense in the Statement of operations and Fund's net liabilities is $33,034,341 for 2019–2020 ($38,554,525 for 2018–2019).

5. Prepaid expenses

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

(in thousands of dollars)

  2020 2019
Prepaid expenses
Prepaid expenses—Modernization initiative 27,645 24,084
Prepaid expenses—Other 903 249
Total 28,548 24,333

In the context of the modernization initiative, the Passport program is transitioning to the Immigration, Refugees and Citizenship Canada (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 Immigration, Refugees and Citizenship Canada's (IRCC) systems by the Fund.

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)

Cost Opening balance Acquisitions Disposals Closing balance
Technology enhancement plan project 2,906 – – 2,906
Leasehold improvements 4,353 – – 4,353
Office furniture 82 – – 82
Informatics hardware 5,124 – – 5,124
Software 27,086 – – 27,086
Vehicles 21 – – 21
Machinery and equipment 406 – – 406
Assets under construction – 1,365 – 1,365
Total 39,978 1,365 –
 41,343
Accumulated amortization Opening balance Amortization Adjustments Closing balance
Technology enhancement plan project 2,906 – – 2,906
Leasehold improvements 4,353 – – 4,353
Office furniture 29 7 – 36
Informatics hardware 5,071 53 – 5,124
Software 23,145 2,332 – 25,477
Vehicles 13 2 – 15
Machinery and equipment 229 20 – 249
Total 35,746 2,414 –
 38,160
Net book value 2020 2019
Technology enhancement plan project – –
Leasehold improvements – –
Office furniture 46 53
Informatics hardware – 53
Software 1,609 3,941
Vehicles 6 8
Machinery and equipment 157 177
Assets under construction 1,365 –
Total 3,183 4,232

Table notes

The dash means that the amount is 0 or is rounded to 0.

7. Accounts payable and accrued liabilities

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

(in thousands of dollars)

  2020 2019
Accounts payable and accrued liabilities
Accounts payable—Government of Canada 33,467 23,467
Accounts payable—Outside parties 8,154 10,399
Accrued liabilities—Outside parties 12,765 14,307
Contractors' holdbacks 814 134
Total 55,200 48,307

8. Net liabilities

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

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

The contributed capital represents the value of capital assets financed from capital contributions at the inception of the Fund.

(in thousands of dollars)

  2020 2019
Net liabilities
Accumulated surplus:
Opening balance 1,224,200 1,216,327
Net results (negative 95,383) 7,875
Transfer of the transition payments for implementing salary payments in arrears – (negative 2)
Closing balance 1,128,817 1,224,200
Accumulated net charge against the Fund's authority:
Opening balance (negative 1,311,466) (negative 1,290,713)
Net financial resources used (provided) and change in the accumulated net charge against the Fund's authority, during the year 91,360 (negative 20,753)
Closing balance (negative 1,220,106) (negative 1,311,466)
Contributed capital 80,474 80,474
Net liabilities, end of year (negative 10,815) (negative 6,792)

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)

2021 61,968
2022 31,931
2023 28,040
2024 44,012
2025 44,591
2026 and thereafter 317,088
Total 527,630

10. Contingent liabilities

In the normal course of its operations, the Fund may become 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. Claims and litigations for which the outcome is not determinable and a reasonable estimate can be made by management amount to $500,000 as at March 31, 2020.

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 liabilities include the following transactions with Shared Services Canada (SSC) and Employment and Social Development Canada (ESDC).

(in thousands of dollars)

  2020 2019
Related party transactions
Service delivery, operations and internal services (ESDC) 150,323 152,972
Information technologies services (SSC) 15,753 14,776
Applications processing (ESDC) 11,065 11,264
Transition and modernization (ESDC) 7,135 4,420
e-Passport (ESDC) 1,732 735
Total 186,008 184,167

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

(in thousands of dollars)

  2020 2019
Expenses—Other Government departments 38,205 34,787
Revenues—Other Government departments (negative 3,893) (negative 3,824)

As part of its operations, the Fund collects Consular fees on behalf of the Global Affairs Canada (GAC). These fees are not recorded as revenues in the Statement of operations and net liabilities. In 2019–2020, the Fund collected and remitted to GAC $35,911,550 ($51,390,875 in 2018–2019) in consular fees.

12. Comparative information

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

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