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Annex 1 — Financial Statements

Financial Statements of

DEPARTMENT OF FISHERIES AND OCEANS CANADA

Year ended March 31, 2007

Department of Fisheries and Oceans
Management Responsibility for Financial Statements

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2007, and all information contained in these statements rests with departmental management. These financial statements have been prepared by management in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.

Management is responsible for the integrity and objectivity of the information in these financial statements. Some of the information in the financial statements is based on management's best estimates and judgment and gives due consideration to materiality. To fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the DFO's financial transactions. Financial information submitted to the Public Accounts of Canada and included in the DFO's Departmental Performance Report is consistent with these financial statements.

Management maintains a system of financial management and internal control designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are in accordance with the Financial Administration Act, are executed in accordance with prescribed regulations, within parliamentary authorities, and are properly recorded to maintain accountability for Government funds. Management also seeks to ensure 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 regulations, policies, standards and managerial authorities are understood throughout the DFO.

The financial statements of the DFO have not been audited.


Larry Murray, Deputy Minister
Ottawa, Canada
July 24, 2007

 

Cal Hegge

Assistant Deputy Minister,

Human Resources and Corporate Services


 

Department of Fisheries and Oceans Canada

Statement of Operations (unaudited)

For the Year Ended March 31

(in thousands of dollars)

Expenses (Note 4)


2007 2006
Safe and Accessible Waterways      
Canadian Coast Guard Agency 739,523   727,169
Small Craft Harbours 133,713   153,304
Science 71,764   54,043
Sustainable Fisheries and Aquaculture      
Fisheries Management 462,471   393,092
Science 216,710   199,445
Aquaculture 6,199   5,376
Healthy and Productive Aquatic Ecosystems      
Science 88,899   77,488
Habitat Management 79,214   75,996
Oceans Management 28,580   23,802
     
Total Expenses 1,827,073   1,709,715

Revenues (Note 5)


2007 2006
Safe and Accessible Waterways      
Canadian Coast Guard Agency 44,292   52,568
Science 2,801   2,803
Small Craft Harbours 1,950   2,058
Sustainable Fisheries and Aquaculture      
Fisheries Management 47,713   48,475
Science 1,019   241
Aquaculture 43   1
Healthy and Productive Aquatic Ecosystems      
Habitat Management 785   316
Science 224   85
Oceans Management 161   33
     
Total Revenues 98,988   106,580


2007 2006
Net cost of operations   1,728,085   1,603,135

The accompanying notes form an integral part of these financial statements.

Department of Fisheries and Oceans Canada

Statement of Operations (unaudited)

For the Year Ended March 31

(in thousands of dollars)

Assets

Financial assets


2007

2006

(Restated)
Accounts receivable and advances (Note 6) 27,398   19,404
Total financial assets 27,398   19,404

Non-financial assets


2007

2006

(Restated)
Inventory (Note 7) 37,265   31,300
Tangible capital assets (Note 8) 2,303,811   2,325,093
Total non-financial assets 2,341,076   2,356,393
     
2,368,474   2,375,797

Liabilities


2007

2006

(Restated)
Accounts payable and accrued liabilities 243,655   194,105
Vacation pay and compensatory leave 69,130   60,375
Lease obligation for tangible capital assets (Note 9) 178   -
Environmental liabilities (Note 10a) 169,197   169,762
Contingent liabilities (Note 10b) 1,770   200
Deferred revenue (Note 11) 88   187
Other liabilities (Note 12) 17,613   12,868
Employee severance benefits (Note 13) 139,479   133,743
Total liabilities 641,110   571,240
     


2007

2006

(Restated)
Equity of Canada (Note 14) 1,727,364   1,804,557
     
  2,368,474   2,375,797

The accompanying notes form an integral part of these financial statements.

Department of Fisheries and Oceans Canada

Statement of Operations (unaudited)

For the Year Ended March 31

(in thousands of dollars)


2007

2006

(Restated)
       
Equity of Canada, beginning of year   1,804,557   1,923,117
       
Equity adjustment for inventory (Note 7)   -   (74,000)
       
Restated Equity of Canada, beginning of year   1,804,557   1,849,117
       
Net cost of operations   (1,728,085)   (1,603,135)
       
Current year appropriations used (Note 3)   1,648,947   1,494,520
       
Revenue not available for spending   (52,019)   (53,664)
       

Change in net position in the Consolidated Revenue Fund

(Note 3)
  (47,029)   17,884
     
Services provided without charge by other government departments (Note 15)   100,993   99,835
     
Equity of Canada, end of year 1,727,364   1,804,557

The accompanying notes form an integral part of these financial statements.

Department of Fisheries and Oceans Canada

Statement of Operations (unaudited)

For the Year Ended March 31

(in thousands of dollars)

 

Operating activities


    2007   2006
Net cost of operations 1,728,085   1,603,135

Non-cash items


    2007   2006
Amortization of tangible capital assets (Note 8) (172,948)   (170,254)
(Loss) gain on disposal of tangible capital assets (8,812)   2,508
Loss on write-offs and write-downs of tangible capital assets and inventory (20,543)   (12,499)
Services provided without charge by other government departments (100,993)   (99,835)
Other 8,202   606

Variations in Statement of Financial Position


    2007   2006
Increase/(decrease) in accounts receivable and advances 7,994   (6,253)
Increase/(decrease) in inventory 7,421   1,140
(Increase)/decrease in accounts payable and accrued liabilities (49,550)   30,394
(Increase)/decrease in vacation pay and compensatory leave (8,755)   (5,372)
(Increase)/decrease in lease obligation for tangible capital assets (178)   197
(Increase)/decrease in environmental liabilities 565   (10,507)
(Increase)/decrease in contingent liabilities (1,570)   (200)
(Increase)/decrease in deferred revenue 99   77
(Increase)/decrease in other liabilities (4,745)   262
(Increase)/decrease in employee severance benefits (5,736)   (16,207)
Cash used by operating activities 1,378,536   1,317,192

Capital investment activities


    2007   2006
Acquisitions of tangible capital assets 173,528   150,795
Principal obligation of tangible capital lease (178)   -
Proceeds from the disposal of tangible capital assets (1,987)   (9,247)
       
Cash used by investing activities   171,363   141,548

Financing activities


    2007   2006
Net cash provided by Government of Canada 1,549,899   1,458,740

The accompanying notes form an integral part of these financial statements.

Department of Fisheries and Oceans Canada

Notes to Financial Statements (unaudited)

1. Authority and purpose

The Department of Fisheries and Oceans (DFO) was established under the Department of Fisheries and Oceans Act. The DFO reports to Parliament through the Minister of Fisheries and Oceans.

The mandate of the DFO, on behalf of the Government of Canada, is to be responsible for developing and implementing policies and programs in support of Canada's economic, social, ecological and scientific interests in oceans and fresh waters.

The DFO's guiding legislation includes the Oceans Act and the Fisheries Act. The DFO is also one of the three departments responsible for the Species at Risk Act.

The DFO's three strategic outcomes are delivered through nine program activities, which are described below.

Safe and Accessible Waterways

Canadian Coast Guard Agency: Provision of maritime services that contribute to the enhancement and maintenance of maritime safety and commerce, protection of the marine and freshwater environment, as well as oceans and fisheries resource management, security and other government maritime priorities via maritime expertise, Canada's civilian fleet, a broadly distributed shore infrastructure and collaboration with various stakeholders.

Small Craft Harbours: Operation and maintenance of a national system of harbours critical to Canada's commercial fishing industry.

Science: Provision of scientific research, monitoring, advice, products and services and data management in support of Safe and Accessible Waterways.

Sustainable Fisheries and Aquaculture

Fisheries Management: Conservation of Canada's fisheries resources to assure sustainable resource utilization through close collaboration with resource users and stakeholders.

Aquaculture: Creation of the conditions for a vibrant and innovative aquaculture industry that is environmentally and socially responsible, economically viable and internationally competitive.

Science: Provision of scientific research, monitoring, advice, products and services and data management in support of Sustainable Fisheries and Aquaculture.

Healthy and Productive Aquatic Ecosystems

Oceans Management: Conservation and sustainable use of Canada's oceans, in collaboration with others, through integrated oceans management plans which include marine protected areas and marine environmental quality objectives.

Habitat Management: Protection and conservation of freshwater and marine fish habitat, in collaboration with others, through a balanced application of regulatory and non-regulatory activities, including reviewing development proposals, conducting environmental assessments and monitoring compliance and effectiveness.

Science: Provision of scientific research, monitoring, advice, products and services and data management in support of Healthy and Productive Aquatic Ecosystems.

2. Summary of significant accounting policies

The financial statements have been prepared in accordance with Treasury Board accounting policies, which are consistent with Canadian generally accepted accounting principles for the public sector.

Significant accounting policies are as follows:

(a) Parliamentary appropriations - The DFO is financed by the Government of Canada through parliamentary appropriations. Appropriations provided to the DFO do not parallel financial reporting according to Canadian generally accepted accounting principles since appropriations are primarily based on cash flow requirements. Consequently, items recognized in the statements of operations and the statement of financial position are not necessarily the same as those provided through appropriations from Parliament. Note 3 provides a high-level reconciliation between these bases of reporting.

(b) Net cash provided by government - All departments operate within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash receipts are deposited to the CRF and all cash disbursements made by departments are paid from the CRF. The net cash provided by Government is the difference between all cash receipts and all cash disbursements including transactions between departments of the federal government.

(c) Change in net position in the CRF is the difference between the net cash provided by Government and appropriations used in a year, excluding the amount of non-respendable revenue recorded by the DFO. It results from timing differences between when a transaction affects appropriations and when it is processed through the CRF.

(d) Revenues

  • Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.
  • Other revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues.
  • Revenues that have been received but not earned are recorded as deferred revenues; these include donations received for a specified purpose.

(e)Expenses

  • Grants are recognized in the year in which the conditions for payment are met. In the case of grants which do not form part of an existing program, the expense is recognized when the Government announces a decision to make a non-recurring transfer, provided the enabling legislation or authorization for payment receives parliamentary approval prior to the completion of the financial statements.
  • Contributions are recognized in the year in which the recipient has met the eligibility criteria or fulfilled the terms of a contractual transfer agreement.
  • Vacation pay and compensatory leave are expensed by the DFO in the year that the entitlement occurs.
  • Services provided without charge by other government departments for accommodation, the employer's contribution to the health and dental insurance plans, administration costs and commissions paid to provincial workers' compensation boards and legal services are recorded as operating expenses at their estimated cost.

(f)Employee future benefits

  • Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multi-employer plan administered by the Government of Canada. The DFO's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. Current legislation does not require the DFO to make contributions for any actuarial deficiencies of the Plan.
  • Severance benefits: Employees are entitled to severance benefits, as provided for under labour contracts or conditions of employment. These benefits are accrued as employees render the services necessary to earn them. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

(g) Accounts receivable and advances are stated at amounts expected to be ultimately realized; a provision is made for receivables where recovery is considered uncertain.

(h)Contingent liabilities - Contingent liabilities are potential liabilities that 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 recorded. If the likelihood is not determinable or an amount cannot be reasonably estimated, and the case is considered material, the contingency is disclosed in note 10b to these financial statements.

(i)Environmental liabilities - Environmental liabilities reflect the estimated costs related to the management and remediation of environmentally contaminated sites. Based on management's best estimates, a liability is accrued and an expense recorded when the contamination occurs or when the DFO becomes aware of the contamination and is obligated, or is likely to be obligated to incur such costs. If the likelihood of the DFO's obligation to incur these costs is not determinable, or if an amount cannot be reasonably estimated, the costs are disclosed as contingent liabilities in note 10a to these financial statements.

(j)Inventories - Inventories consist of parts, material and supplies held for future program delivery. They are valued at cost. If they no longer have service potential, they are valued at the lower of cost or net realizable value.

(k)Foreign currency transactions - Transactions involving foreign currencies are
translated into Canadian dollar equivalents using rates of exchange in effect
at the time of those transactions. Monetary assets and liabilities denominated in foreign currencies are translated using exchange rates in effect on March 31. Gains and losses resulting from foreign currency transactions are included in the statement of operations
.

(l)Tangible capital assets - All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. The DFO does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian Reserves or museum collections.

Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:


Asset Class Amortization Period
Buildings 10-40 years
Work and infrastructure 5-75 years
Machinery and equipment 3-25 years
Informatics hardware 3-5 years
Informatics purchased and developed software 3 years
Arms and weapons for defense 5-10 years
Other equipment, including furniture 10 years
Ships and boats 5-25 years
Aircraft 15-25 years
Motor vehicles (non-military) 5-20 years
Other vehicles 10 years
Leasehold improvements - buildings *
Leasehold improvements - works and infrastructure *
Assets under capital leases **

* the lesser of the economic life of the improvement or the lease term

** over the period of expected use, i.e., the economic life or lease term

(m)Proceeds associated with the disposal of real property through Public Works and Government Services Canada (PWGSC) are not recorded in the DFO's financial statements. PWGSC is responsible for the accounting and reporting of these proceeds.

(n)Measurement uncertainty - The preparation of these financial statements in accordance with Treasury Board accounting policies, which are consistent with Canadian generally accepted accounting principles for the public sector, requires management to make estimates and assumptions that could affect the reported amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are the allowance for vacation pay and compensatory leave, allowance for bad debts, environmental liabilities, the useful life of tangible capital assets, contingent liabilities and employee severance benefits. Actual results could differ significantly from those estimated. Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.

3. Parliamentary appropriations

The DFO receives most of its funding through annual parliamentary appropriations. Items recognized in the statement of operations and the statement of financial position in one year may be funded through parliamentary appropriations in prior, current or future years. Accordingly, the DFO has different net results of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled in the following tables.

3(a) Reconciliation of net cost of operations to current year appropriations used


2007 2006
(in thousands of dollars)
Net cost of operations 1,728,085 1,603,135
Adjustments for items affecting net cost of operations but not affecting appropriations
Add (less):
Revenue not available for spending 52,019 53,664
Amortization of tangible capital assets (172,948) (170,254)
Vacation pay and compensatory leave (8,755) (5,372)
Employee severance benefits (5,736) (16,207)
(Loss) gain on disposal of tangible capital assets (8,812) 2,508
Loss on write-offs and write-downs of tangible capital assets and inventory (20,543)   (12,499)
Earmarked supplementary fish fines 173 41
Refunds of previous years expenses 5,849 3,702
Variation of inventory 7,421 1,140
Justice Canada fees (6,330) (6,024)
Donation expense (114) (102)
Contingent liabilities (1,570) (200)
Environmental liabilities 565 (10,507)
Lease obligation for tangible capital assets (178) 197
Services provided without charge by other government departments (100,993) (99,835)
Other 8,202 606
Total adjustments for items not affecting appropriations (251,750) (259,142)
Adjustments for items not affecting net cost of operations but affecting appropriations
Add (Less):
Acquisitions of tangible capital assets 173,528 150,795
Principal obligation of tangible capital lease (178) -
Other (738) (268)
Total adjustments for items affecting appropriations 172,612 150,527
Current year appropriations used 1,648,947 1,494,520

3(b) Appropriations provided and used


2007 2006
(in thousands of dollars)
Appropriations provided
Vote 1 - Operating expenditures 1,245,005 1,160,478
Vote 5 - Capital expenditures 218,174 175,293
Vote 10 - Grants and contributions 156,599 119,885
Statutory amounts 117,421 124,078
Loans and advances for the Freshwater Fish Marketing Corporation 50,000 30,000
Less:
Appropriations available for future years (51,283) (30,642)
Lapsed appropriations (86,969) (84,572)
Current year appropriations used 1,648,947 1,494,520

While the appropriations for loans and advances of the Freshwater Fish Marketing Corporation (FFMC) are included in note 3(b), the activities of the FFMC are not reported in these financial statements.

3(c). Reconciliation of net cash provided by Government to current year appropriations used


2007 2006
(in thousands of dollars)
Net cash provided by Government of Canada 1,549,899 1,458,740
Revenue not respendable by the DFO 52,019 53,664
Change in net position in the Consolidated Revenue Fund
Increase)/decrease in accounts receivable and advances (7,994) 6,253
Increase/(decrease) in accounts payable and accrued liabilities 49,550 (30,394)
Increase/(decrease) in other liabilities 4,745 (262)
Increase/(decrease) in deferred revenue (99) (77)
Proceeds from disposal of tangible capital assets 1,987 9,247
Refund of previous years expenses 5,849 3,702
Donation expenses (114) (102)
Earmarked supplementary fish fines 173 41
Justice Canada fees (6,330) (6,024)
Other adjustments (738) (268)
47,029 (17,884)
Current year appropriations used 1,648,947 1,494,520

4. Expenses

The following table presents details of expenses by category.


2007 2006
(in thousands of dollars)
Operating and administration
Personnel and employee benefits 882,615 883,808
Professional and Special Services 227,512 207,741
Amortization 172,948 170,254
Repair and Maintenance 96,035 89,815
Utilities, Material and Supplies 92,246 83,006
Machinery and Equipment 59,777 49,715
Travel and Relocation 52,728 47,771
Rental 28,705 27,602
Loss on write-off and write-downs of tangible capital assets and inventory 20,543 12,499
Telecommunication 18,138 17,946
Damage and other claims against the Crown 17,330 572
Loss on disposal of tangible capital assets 10,137 6,243
Information 5,481 5,361
Other expenses 1,797 26,058
Total operating and administration 1,685,992 1,628,391
Transfer payments
Non-profit organizations 102,000 74,157
Individuals 37,031 5,761
Other level of governments within Canada 1,205 1,021
Other countries and international organizations 745 225
Industry 100 160
Total transfer payments 141,081 81,324
Total expenses 1,827,073 1,709,715

5. Revenues

The following table presents details of revenues by category.


  2007 2006
(in thousands of dollars)
Revenue
Sales of goods and services 90,882 93,676
Post capitalization - tangible capital assets 3,555 699
Other revenue 2,804 3,074
Gains on disposals of tangible capital assets 1,325 8,751
Revenue from earmarked supplementary fish fines 315   256
Return on investment - Haddock loan 107 124
Total revenues 98,988 106,580

6. Accounts receivable and advances

The following table presents details of accounts receivable and advances.


2007 2006
(in thousands of dollars)
Receivables
Receivables from external parties 34,416   34,595
Receivables from other federal government departments and agencies 18,452   9,662
Accrued interest on loans 1,449 1,342
Refunds of program expenses 146 147
Less: Allowance for doubtful accounts on external receivables (27,325) (26,594)
Total receivables 27,138 19,152
Loans and advances
Accountable advances 260 252
Loans 1,471 1,471
Allowance on loans and advances (1,471) (1,471)
Total loans and advances 260 252
Total accounts receivable and advances 27,398 19,404

7. Restatement of prior period

The comparative financial statements of 2005-06 have been restated to decrease inventory and Equity of Canada by $74 million to correct an error. Inventory balances presented in the 2005-06 financial statements were overstated by $74 million. The overstatement was due to a misclassification that resulted in these assets being presented as both inventory and capital assets. There is no effect on the information presented for the current year.

8. Tangible capital assets


(in thousands of dollars) Cost

Opening balance

April 1, 2006
Acquisitions during the year Disposals / write-offs during the year Other (1) Closing balance March 31, 2007
Land 19,703 307 (41) 22 19,991
Buildings 438,000 - (1,112) 27,452 464,340
Works and infrastructure 1,781,649 27 (16,487) 92,440 1,857,629
Machinery and equipment 370,210 5,724 (18,524) 10,150 367,560
Informatics hardware 61,307 1,615 (7,485) 198 55,635
Informatics software 18,670 17 - - 18,687
Arms and weapons for defense 448 - (6) - 442
Other equipment, including furniture 613 - (49) - 564
Ships and boats 1,622,573 963 (18,288) 23,771 1,629,019
Aircraft 40,118   (4,125) 780 36,773
Motor vehicles (non-military) 65,107 7,984 (7,533) 120 65,678
Other vehicles 7,529 270 (340) 52 7,511
Leasehold improvements 535,881 32 (3,094) 3,319 536,138
Engineering work in progress - construction (2) 309,203 150,581 (14,455) (150,260) 295,069
Work-in-progress - software (2) 9,727 5,805 (395) (278) 14,859
Assets under capital leases - 203 - - 203
         
Total 5,280,738 173,528 (91,934) 7,766 5,370,098


(in thousands of dollars) Accumulated amortization Net book value
Accumulated amortization
April 1, 2006

Amortization

for the year
Disposal / write-offs Other (1) Accumulated amortization
March 31, 2006
March 31, 2007 March 31, 2006
Land - - - - -   19,991 19,703
Buildings 264,647 24,206 (544) 590 288,899   175,441 173,353
Works and infrastructure 862,900 66,330 (8,940) 1,166 921,456   936,173 918,749
Machinery and equipment 267,107 14,325 (15,269) - 266,163   101,397 103,103
Informatics hardware 55,875 3,084 (7,436) 56 51,579   4,056 5,432
Informatics software 14,080 4,173   - 18,253   434 4,590
Arms and weapons for defense 401 23 (6) - 418   24 47
Other equipment, including furniture 558 13 (47) - 524   40 55
Ships and boats 1,107,254 32,696 (17,023) - 1,122,927   506,092 515,319
Aircraft 34,061 1,786 (3,735) - 32,112   4,661 6,057
Motor vehicles (non-military) 45,242 5,715 (7,151) - 43,806   21,872 19,865
Other vehicles 6,368 298 (331) - 6,335   1,176 1,161
Leasehold improvements 297,096 20,272 (1,824) (1,756) 313,788   222,350 238,785
Engineering work in progress - construction - - - - -   295,069 309,203
Work-in-progress - software - - - - -   14,859 9,727
Assets under capital leases 56 27 - (56) 27   176 (56)
     
Total 2,955,645 172,948 (62,306) - 3,066,287   2,303,811 2,325,093

Amortization expense for the year ended March 31, 2007, is $172,948 (2006 - $170,254)

  1. The column "other" includes transfer of asset costs from work in progress (WIP) accounts to asset accounts, as well as corrections and reclassifications to asset cost and accumulated amortization accounts.
  2. Some work-in-progress projects have not been re-classified as tangible capital assets though the related assets were placed in service. This will result in overstated work-in-progress, understated asset value by category and understated annual depreciation expense. These amounts were estimated as being an overstatement of work-in-progress of approximately $81 million as of March 31, 2007. 

9. Lease obligation for tangible capital assets

The DFO has entered into agreements to rent information technology equipment under capital lease with a cost of $203,218 and accumulated amortization of $27,096 as at March 31, 2007 (Note 8). The obligations for the upcoming years include the following:


2007 2006
(in thousands of dollars)
Maturing year
2008 45 -
2009 45 -
2010 45 -
2011 45   -
2012 and thereafter 15 -
Total future minimum lease payments 195 -
Less: imputed interest (4.1%) (17) -
Balance of obligations under leased tangible capital assets 178 -

10. Contingent liabilities

(a) Contaminated sites

Liabilities are accrued to record the estimated costs related to the management and remediation of contaminated sites where the DFO is obligated or likely to be obligated to incur such costs. The DFO has identified sites where such action is possible and for which a liability of $169.2 million ($169.8 million in 2005-06) has been recorded. The DFO has estimated additional costs of $217.6 million ($232.4 million in 2005-06) that are not accrued, as these are not considered likely to be incurred at this time.

The DFO's ongoing efforts to assess contaminated sites may result in additional environmental liabilities related to newly identified sites, or changes in the assessments or intended use of existing sites. These liabilities will be accrued in the year in which they become known.

(b) Claims and litigation

Claims have been made against the DFO in the normal course of operations. Legal proceedings for claims totalling approximately $254.4 million ($242.7 million in 2006) were still pending at March 31, 2007. 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 recorded in the financial statements.

11. Deferred revenue

Deferred revenue represents the balance at year-end of unearned revenue stemming from donations, which are restricted to fund the research, development, management and promotion of fisheries- and oceans-related issues. Details of the transactions related to this account are as follows:


Opening balance,

April 1, 2006
Donations received Revenue Recognized

Closing balance,

March 31, 2007
(in thousands of dollars)
Deferred revenue
Restricted donations 187 0 (99) 88

12. Other liabilities

Other liabilities represent funds received by the DFO under regulations, cost-sharing agreements or to fund projects. Details of the transactions related to these accounts are as follows:


Opening balance April 1, 2006 Receipts and other credits Payments and other charges Closing balance> March 31, 2007
(in thousands of dollars)

Federal/provincial cost-

sharing agreements
1,145 543 (1,039) 649

Miscellaneous project

deposits
10,748 21,975 >(16,692) 16,031
Sales of seized assets - Fisheries Act 712 290 (400) 602
Contractors' security deposits 263 401 (333) 331
       
Total 12,868 23,209 (18,464) 17,613

  • Federal/provincial cost-sharing agreements - This account was established to record the deposit of money received from the provinces for cost-shared programs. The funds are disbursed according to agreements.
  • Miscellaneous project deposits - This account was established to record contributions received from organizations and individuals, for the furtherance of research work.
  • Sale of seized assets - This account was established to record the proceeds of sale of seized items by the DFO from a person contravening the Fisheries Act. Money so received is held in the Consolidated Revenue Fund pending final resolution of the case by the Minister of Fisheries and Oceans or the courts.
  • Contractor security deposits - This account was established to record money held to ensure that a contractor's obligations under contracts are carried out, to protect the interests of subcontractors, sub-subcontractors and suppliers, and to protect the Crown against loss should a low bidder fail to enter into a contract.

13. Employee benefits

(a) Pension benefits: The DFO's employees participate in the Public Service Pension Plan, which is sponsored and administered by the Government of Canada. Pension benefits accrue up to a maximum period of 35 years at a rate of two percent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Quebec Pension Plans benefits and they are indexed to inflation.

Both the employees and the DFO contribute to the cost of the Plan. The DFO's 2006-07 expense amounts to $84,544,000 ($90,543,000 in 2005-06), which represents approximately 2.2 times (2.6 in 2005-06) the contributions by employees.

The DFO'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.

(b) Severance benefits: The DFO provides severance benefits to its employees based on eligibility, years of service and final salary. These severance benefits are not pre-funded. Benefits will be paid from future appropriations. Information about the severance benefits, measured as at March 31, are as follows.


2007 2006
  (in thousands of dollars)
   
Accrued benefit obligation, beginning of year 133,743 117,536
Expense for the year 16,977 26,724
Benefits paid during the year (11,241) (10,517)
Accrued benefit obligation, end of year 139,479 133,743

14. Equity of Canada


2007 2006
(in thousands of dollars)
Restricted Equity of Canada, April 1 678 637
Supplementary Fish Fines Account    
Revenues 315 256
Expenses (142) (215)
Restricted Equity of Canada, March 31 851 678
Unrestricted Equity of Canada, March 31 1,726,513 1,803,879
Total Equity of Canada at March 31 1,727,364 1,804,557

Section 79.2 of the Fisheries Act requires that revenues from fines imposed be earmarked and that related payments and expenses be charged against such revenues. The Supplementary Fish Fines Account presents these revenues and expenses and the year-end balance available for future years.

15. Related party transactions

The DFO is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations. The DFO enters into transactions with these entities in the normal course of business and on normal trade terms. Also, during the year, the DFO received services which were obtained without charge from other Government departments as presented in part (a).

(a) Services provided without charge by other government departments

During the year, the DFO received without charge from other departments, accommodation, legal fees and the employer's contribution to the health and dental insurance plans, administration costs and commissions paid to provincial workers' compensation boards. These services without charge have been recognized in the DFO's Statement of Operations as follows:


2007 2006
(in thousands of dollars)
Accommodation provided by Public Works and Government Services Canada 42,328 41,620
Employer's contribution to the health and dental insurance plans provided by Treasury Board Secretariat 54,180 54,282
Administration costs and commissions paid to provincial workers' compensation boards by Social Development Canada. 1,343 1,583
Legal services provided by Justice Canada 3,142 2,350
Total services provided without charge 100,993 99,835

The Government has structured some of its administrative activities for efficiency and cost-effectiveness purposes so that one department performs these on behalf of all without charge. The costs of these services, which include payroll and cheque issuance services provided by Public Works and Government Services Canada, are not included as an expense in the DFO's Statement of Operations.

(b) Payables and receivables outstanding at year-end with related parties are as follows:


2007 2006
(in thousands of dollars)
   
Accounts receivable with other government departments and agencies 18,452 9,662
Accounts payable to other government departments and agencies 31,885 35,335

16. Comparative information

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