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Annex - Financial Statements

The Department has prepared financial statements in accordance with the Treasury Board Accounting Standard.

  • Statements for the Geomatics Canada Revolving Fund have been posted on the following web site: http://www.nrcan.gc.ca/css/fmb/fmb-e.htm1.
  • Statements for Natural Resources Canada can be found on the following pages.

1An electronic link to the revolving fund financial statements is sufficient for the DPR given that the statements are included in the Public Accounts which are tabled in Parliament before the DPR.


Natural Resources Canada

Statement of Management Responsibility

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 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 judgments 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 department's financial transactions. Financial information submitted to the Public Accounts of Canada and included in the department'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 of 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 department.

The mandate of the Audit and Evaluation Committee of Natural Resources Canada (NRCan), is to review and provide advice to the Deputy Minister on: NRCan Audit and Evaluation Policies; NRCan Annual Internal Audit and Evaluation Plans, Internal Audit, Evaluation and Special Review Reports, including management responses and commitments to implement remedial action; and the implementation in NRCan of the October, 2005 Treasury Board Policy on Internal Audit.

The financial statements of the department have not been audited.


original signed by M. McCuaig-Johnston acting for Cassie J. Doyle
Deputy Minister
Date signed
Ottawa Canada
original signed by Richard S. Tobin
Senior Financial Officer
Date signed
Ottawa Canada


Natural Resources Canada
Statement of Operations (unaudited)
For the year ended March 31, 2007

(in thousands of dollars)
  2007 2006
Expenses (Note 4)
Energy 1,273,151 1,087,505
Earth Sciences 339,872 259,524
Forest 218,918 169,344
Mineral and Metals 118,442 88,636
Total expenses 1,950,383 1,605,009
Revenues (Note 5)
Energy $465,050 $566,722
Earth Sciences 16,466 22,782
Mineral and Metals 8,142 7,990
Forest 2,493 2,777
Total revenues 492,151 600,271
Net cost of operations 1,458,232 1,004,738

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



Natural Resources Canada
Statement of Financial Position (unaudited)
As at March 31, 2007

(in thousands of dollars)
  2007 2006
ASSETS
Financial assets
Accounts receivable and advances (Note 6) 14,985 15,036
Loans receivable (Note 7) 95,555 101,536
Investment (Note 8) 164,159 164,159
Total financial assets 274,699 280,731
Non-financial assets
Prepayments (Note 9) 8,671 12,479
Inventories 10,978 13,151
Tangible capital assets (Note 10) 81,367 87,203
Total non-financial assets 101,016 112,833
Total assets 375,715 393,564
LIABILITIES
Accounts payable and accrued liabilities 431,097 $358,365
Vacation pay and compensatory leave 25,818 26,184
Employee severance benefits (Note 11) 64,858 64,894
Environmental liabilities (Note 14) 387,793 192,148
Capital lease obligations   0
Other liabilities (Note 12) 32,426 26,969
Total liabilities 941,992 668,560
Equity of Canada (566,277) (274,996)
Total 375,715 393,564
Contractual Obligations (Note 15)    

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



Natural Resources Canada
Statement of Equity of Canada (unaudited)
For the year ended March 31, 2007

(in thousands of dollars)
  2007 2006
Equity of Canada, beginning of year (274,996) (397,672)
Net cost of operations (1,458,232) (1,004,738)
Current year appropriations used (Note 3) 1,685,732 1,680,002
Revenue not available for spending (451,906) (554,869)
Change in net position in the Consolidated Revenue Fund (Note 3) (106,931) (40,724)
Services received without charge from other government departments (Note 16) 40,054 43,005
Equity of Canada, end of year (566,277) (274,996)

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



Natural Resources Canada
Statement of Cash Flow (unaudited)
For the year ended March 31, 2007

(in thousands of dollars)
  2007 2006
Operating activities
Net cost of operations 1,458,232 1,004,738
Non-cash items:
Amortization of tangible capital assets (15,465) (17,728)
Gain (loss) on disposal of tangible capital assets (62) (19)
Services provided without charge (40,054) (43,005)
Adjustment to tangible capital assets   334
Variations in Statement of financial position
Decrease (increase) in liabilities (273,433) 139,171
Increase (decrease) in assets other than tangible capital assets (12,014) (11,194)
Cash used by operating activities 1,117,204 1,072,297
Capital investment activities
Acquisitions of tangible capital assets 9,995 12,367
Proceeds from disposal of tangible capital assets (304) (255)
Cash used by capital investment activities 9,691 12,112
Financing activities
Net cash provided by Government of Canada (1,126,895) (1,084,409)

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


Natural Resources Canada
Notes to the Financial Statements (unaudited)
For the year ended March 31, 2007

1. Authority and Objectives

The Department of Natural Resources Canada (NRCan) was created on June 25, 1993 by the merger of the Department of Energy, Mines and Resources and the Department of Forestry. This organizational change was effected by Order in Council, pending the passage of legislation which occurred in 1994. The Department's mandate is primarily based on the Department of Natural Resources Act, the Resources and Technical Surveys Act and the Forestry Act.

NRCan's mandate is to ensure the sustainable development and responsible use of Canada's natural resources. Through innovation and partnership, the department plays a pivotal role in helping shape the enormous contributions of the natural resource sectors and related industries to the high quality of life of Canadians. NRCan fulfills its mandate through four main programs:

  • The Energy Sectors connect Canadians with the latest information about smarter energy use, sources of energy and energy policy.
  • The Earth Sciences Sector provides expertise to access, understand, and use Earth science information to deal with economic, environmental, and social changes. The sector collects studies and shares in disciplines such as geology, geomatics and paleontology to promote the sustainable use of Canada's natural resources.
  • The Canadian Forest Service promotes the development of Canada's forests and the competitiveness of the Canadian forest sector, helping Canadians make sound decisions on the stewardship of our forests.
  • The Minerals and Metals Sector is the federal government's primary source of scientific and technological knowledge and policy advice on Canada's mineral and metal resources and on explosives regulation and technology. The sector engages in innovative research and technology on Canada's mineral and metal resources, promoting their responsible development and use.

This mandate is delivered by the Department's 4,456 full time employees located in offices across Canada.

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:

  1. Parliamentary Appropriations - NRCan is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to NRCan do not parallel financial reporting according to generally accepted accounting principles since appropriations are primarily based on cash flow requirements. Consequently, items recognized in the statement of operations and the statements of financial position are not necessarily the same as those provided through appropriations from Parliament. The Note 3 provides a high-level reconciliation between the bases of reporting.
  2. Consolidation - these financial statements include the accounts of the following sub-entity of NRCan: the Geomatics Canada Revolving Fund. The accounts of the Geomatics Canada Revolving Fund have been consolidated with those of NRCan. NRCan also records an investment in Atomic Energy of Canada Limited (AECL) that is recorded at cost. The results of AECL are not consolidated in these financial statements due to the fact that NRCan is not deemed to control the Crown Corporation.
  3. Net Cash Provided by Government - NRCan operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by NRCan is deposited to the CRF and all cash disbursements made by NRCan are paid from the CRF. The net cash provided by Government is the difference between all cash receipts and all cash disbursements including transactions with other departments of the federal Government made by NRCan during the year.
  4. Change in net position in the Consolidated Revenue Fund 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 NRCan. It results from timing differences between when a transaction affects appropriations and when it is processed through the CRF.
  5. 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.
    • Return on investment in Crown Corporation is recognized in the period in which the income is received.
  6. Expenses - Expenses are recorded on the accrual basis:
    • 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 as the benefits accrue to employees under their respective terms of employment; and
    • Services provided without charge by other government departments for accommodation, the employer's contribution to the health and dental insurance plans, workers compensation, and legal services are recorded as operating expenses at their estimated cost.
  7. Employee future benefits
    1. Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer plan administered by the government of Canada. NRCan'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 department to make contributions for any actuarial deficiencies to the Plan.
    2. Severance benefits: Employees are entitled to severance benefits 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 employee severance benefits for the Government as a whole.
  8. Accounts receivables are stated at amounts expected to be ultimately realized; a provision is made for receivables where recovery is considered uncertain.
  9. Loans with significant concessionary terms are recorded on the Statement of Financial Position at their estimated net present value. A portion of this unamortized discount is brought into income each year to reflect the change in the present value of the loan outstanding. An estimated allowance for uncollectibility is recorded where appropriate.
  10. Repayable contributions are contributions where the recipient is expected to repay the amount advanced. Depending on their nature, they are classified as either unconditionally repayable or conditionally repayable and are accounted for differently.
    1. Unconditionally repayable contributions are contributions that must be repaid without qualification. Normally, these contributions are provided with a low or no interest clause. They are in substance loans with significant concessionary terms and accounted for as such. They are recorded on the statement of financial position as loans at their estimated present value. A portion of this unamortized discount is brought into income each year to reflect the change in the present value of the contributions outstanding. An estimated allowance for un-collectibility is also recorded where appropriate.
    2. Conditionally repayable contributions are contributions that, all or part of which become repayable, if conditions specified in the contribution agreement come into effect. Accordingly, they are not recorded on the Statement of Financial Position until such time as the conditions specified in the agreement are satisfied at which time they are then recorded as a receivable and a reduction in transfer payment expenses. An estimated allowance for un-collectibility is recorded where appropriate.
  11. Contingent liabilities - Contingent liabilities are potential liabilities which 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, the contingency is disclosed in the notes to the financial statements.
  12. 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 department becomes aware of the contamination and is obligated, or likely to be obligated to incur such costs. If the likelihood of NRCan'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 the notes of the financial statements.
  13. Inventories - Inventories consist of parts, material and supplies held for future program delivery and not intended for re-sale. They are valued at cost. If they no longer have service potential, they are valued at the lower of cost or net realizable value.
  14. 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 a foreign currency are translated into Canadian dollars using the rate of exchange in effect on March 31. Gains and losses resulting from foreign currency transactions are included in the statement of operations.
  15. Tangible capital assets - All tangible capital assets and leasehold improvements having an initial cost of $10,000.00 or more ($1,000.00 or more for the Revolving Fund) are recorded at their acquisition cost. The department does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian Reserves and museum collections.

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


    Asset Class Amortization period
    Buildings 15 to 40 years
    Machinery and equipment 1 to 25 year
    Vehicles 3 to 20 years

  16. Measurement uncertainty - The preparation of 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 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 contingent liabilities, environmental liabilities, the liability for employee severance benefits and the useful life of tangible capital assets. Actual results could significantly differ 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 department 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 Department 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:


a) Reconciliation of net cost of operations to current year appropriations used
  2007 2006
(in thousands of dollars)
Net cost of operations 1,458,232 1,004,738
Adjustments for items affecting net cost of operations but not affecting Appropriations:
Add (Less):
NRCan's appropriations
Service provided without charge (40,054) (43,005)
Amortization of tangible capital assets (15,465) (17,728)
Amortization of unamortized discount loans 8,219 6,330
Payments to Department of Justice (1,319) (1,612)
Revenue not available for spending 451,906 554,869
Vacation Pay and Compensatory Leave 365 (1,237)
Adjustments of previous years Inventory (2,174) (1,982)
Adjustments of previous years Accounts Payable 4,130 7,017
Refunds of prior years expenditures 11,927 2,880
Allowance for Environmental Liabilities (195,645) 8,534
Refunds of Program Expenditures 9,266 -
Employee severance benefits 36 (6,405)
Other adjustments (57) 143
  231,135 507,804
Adjustments for items not affecting net cost of operations but affecting Appropriations
Add:
Receivables, Advances, and Prepayments 1,464 5,093
Acquisitions of tangible capital assets 126 12,367
Reductions from prepaid expenses (5,225) -
Expenses to Federation of Canadian Municipalities - 150,000
  (3,635) 167,460
Current year appropriations used 1,685,732 1,680,002


b) Appropriations provided and used
  Appropriations Provided
2007 2006
(in thousands of dollars)
Vote 1 - Operating expenditures 662,547 617,108
Vote 5 - Capital expenditures 3,711 7,701
Vote 10 - Transfer payments 289,501 297,989
Statutory amounts 782,340 885,543
Less:
Appropriations available for future years (14,305) (13,698)
Lapsed appropriations - Operating (21,786) (25,524)
Lapsed appropriations - Capital (562) (2,003)
Lapsed appropriations - Transfer payment (15,714) (87,114)
Current year appropriations used 1,685,732 1,680,002


c) Reconciliation of net cash provided by Government to current year appropriations used
  2007 2006
(in thousands of dollars)
Net cash provided by Government 1,126,895 1,084,409
Revenue not available for spending 451,906 554,869
Change in net position in the Consolidated Revenue Fund
Variation in accounts receivable and advances 51 7,546
Variation in accounts payable and accrued liabilities 72,732 (141,092)
Other adjustments 34,148 174,270
  106,931 40,724
Current year appropriations used 1,685,732 1,680,002

4. Expenses

The following table presents details of expenses by category:


  2007 2006
(in thousands of dollars)
Transfer payments
Other level of government 732,945 650,238
Industry 135,060 120,981
Non-profit organizations 61,141 67,297
Individuals 46,259 22,038
Other countries and international organizations 1,293 916
Total transfer payments 976,698 861,470
Operating expenses
Salary and employee benefits 432,901 441,807
Professional and special services 198,765 133,682
Allowance for environmental liabilities 195,645 8,534
Transportation and communication 35,269 38,945
Utilities, materials and supplies 23,817 23,378
Rentals 22,536 25,709
Acquisition of machine and equipment 21,437 27,574
Amortization 15,465 17,728
Information 8,476 17,201
Repairs and maintenance 7,828 8,685
Environmental studies research 2,538 2,510
Acquisition of land, building and work 1,092 2,955
Other 7,916 (5,169)
Total operating expenses 973,685 743,539
Total Expenses 1,950,383 1,605,009

5. Revenues

The following table presents details of revenues by category:


  2007 2006
(in thousands of dollars)
Sales of goods and services - external parties:
Rights and privileges 396,052 453,375
Services of non-regulatory nature 22,120 26,430
Sales of goods and information products 5,646 8,685
Services of regulatory nature 1,312 957
Lease and use of public property 324 684
Other fees and charges 182 1,272
Interest 47,764 37,441
Amortization of discount loans 8,219 6,330
Fines 7,870 62,383
Environmental Research Fund 2,468 2,500
Return on investment - Other enterprise crown corporation 76 94
Gains on disposal of tangible capital assets 44 98
Other 74 22
Total 492,151 600,271

6. Accounts Receivable and Advances

The following presents details of accounts receivable and advances:


  2007 2006
(in thousands of dollars)
Receivables from other federal government departments and agencies 9,240 5,775
Receivables from external parties 6,832 10,392
Less: Allowance for doubtful accounts on external receivables (1,300) (1,345)
  5,532 9,047
Employee advances 213 214
Total 14,985 15,036

7. Loans Receivable


  2007 2006
(in thousands of dollars)
Loan to Hibernia Interest Assistance 39,978 39,978
Unamortized discount (3,247) (4,871)
Allowance for uncollectibility (999) (999)
Loan balance - Hibernia Interest 35,732 34,108
Loan to Nordion International Inc. 74,000 78,000
Unamortized discounts (30,000) (33,333)
Loan balance - Nordion 44,000 44,667
Loan to Hibernia Development Project 18,400 27,600
Unamortized discounts (4,077) (7,339)
Loan balance - Hibernia 14,323 20,261
Loan to Atomic Energy of Canada Limited 1,500 2,500
Total 95,555 101,536

Hibernia Interest Assistance Loan

Unconditional repayable contribution; interest free; first instalments paid on March 31, 2001. Repayment starts eight years from the first annual instalment; the first repayment date is March 1, 2009. Balance outstanding as of March 31, 2007 is $39,978,000. The estimated present value is $35,732,000 as at March 31, 2007.

Nordion International Inc. (loan)

Interest Free Loan Agreement; to be repaid over 30 semi-annual payments commencing October 1, 2000; fully secured by a financial instrument in Canada's name which guarantees that the loan will be repaid. Balance remaining as of March 31, 2007 is $74,000,000. Due to the concessionary terms of this loan, the estimated present value is $44,000,000 as at March 31, 2007.

Hibernia Development Project (loan)

Interest Free Loan Agreements; repayment in 10 consecutive equal annual instalments commencing June 30, 1999. Currently outstanding is Murphy Atlantic Offshore Oil Co. Ltd. $10,400,000 (estimated present value $8,100,000) and Mobile Canada Hibernia Co. Ltd $8,000,000 (estimated present value $6,200,000).

Loan to Atomic Energy of Canada (AECL)

Interest bearing loan at an average floating rate of 4.2570% (2006-2007); maturing September 2008. NRCan invoices AECL twice per year (May & November). As of March 31, 2007, balance for Heavy Water Inventory loan amounted to $1,500,000.

8. Investment

Investment in Atomic Energy Canada Limited (AECL)

NRCan has purchased common shares of Atomic Energy of Canada Limited, a Crown Corporation, for a total value of $164,159,000.

9. Prepayments


  2007 2006
(in thousands of dollars)
Prepaid transfer payments 5,821 12,143
Prepaid expenses 2,850 336
Total 8,671 12,479

10. Tangible Capital Assets

(in thousands of dollars)


Cost Accumulated amortization 2007 2006
Capital asset class Opening balance Acqui-
sitions
Dispo-
sals and write-offs
Closing balance Opening balance Amorti-
zation
Dispo-
sals and write-offs
Closing balance Net book value Net book value
Land 7,905     7,905       0 7,905 7,905
Buildings 141,782     141,782 102,819 5,684   108,503 33,279 38,963
Machinery and equipment 215,846 8,920 3,043 221,723 180,309 8,606 3,010 185,905 35,818 35,537
Vehicles 12,807 1,075 1,517 12,365 8,009 1,175 1,184 8,000 4,365 4,798
Total 378,340 9,995 4,560 383,775 291,137 15,465 4,194 302,408 81,367 87,203

Amortization expense for the year ended March 31, 2007 is $ 15,465 (2006 - $17,728).

11. Employee Benefits

  1. Pension benefits: NRCan 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 2 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 department contribute to the cost of the plan. The 2006-07 expense amounts to $57,600,000 ($62,800,000 in 2005-06), which represents approximately 2.2 times (2.6 in 2005-06) the contributions by employees.

    The department'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: The department 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, is as follows:
      2007 2006
    (in thousands of dollars)
    Accrued benefit obligation, beginning of year 64,894 58,489
    Expense for the year (30) 6,480
    Benefits paid during the year (6) (75)
    Accrued benefit obligation, end of year 64,858 64,894

12. Other Liabilities


(in thousands of dollars) April 1, 2006 Receipts and other credits Payments and other charges March 31, 2007
Guarantee deposits - Oil and gas 11,571 703,862 (701,372) 14,061
Contractors security deposits 92   (92)  
Shared costs projects 9,250 13,199 (11,284) 11,165
Market development and incentive payments - Alberta 4,778 4,798 (4,785) 4,791
Shared costs agreements - Research 1,278 7,099 (5,968) 2,409
Total 26,969 728,958 (723,501) 32,426

Guarantee deposits - Oil and gas: This account was established to record securities in the form of cash, promissory notes, and bonds which are required to be issued to, and held by the Government of Canada pursuant to an Exploration License in accordance with section 24 of the Canada Petroleum Resources Act. These securities are a performance guarantee that the agreed exploration will be performed in the manner and time frame specified. Interest is not paid on these deposits.

Shared cost projects - This account was established to facilitate the retention and disbursement of moneys received from private organizations and other governments for cost-sharing scientific projects.

Market development and incentive payments - Alberta: This account records money received from the Government of Alberta, to encourage the expansion of natural gas market in Alberta and provinces to the East, in accordance with an agreement between the Government of Canada and the Government of Alberta dated September 1, 1981 and pursuant to section 39 of the Energy Administration Act. The original term of the agreement was from November 1, 1981 to January 31, 1987. As a result of the Western Accord of March 25, 1985, payments from the Government of Alberta terminated as at April 30, 1986, however, payments are being made from the account for selected programs which encourage the use of natural gas for vehicles.

Shared cost agreements - Research: This account was established to facilitate the retention and disbursement of moneys received from private industries and other governments for joint projects or shared-cost research agreements.

13. Equity of Canada

NRCan includes in its revenues and expenses the transactions of certain consolidated accounts established for specified purposes. Legislation required that the revenues of these specified purpose accounts to be earmarked and that related payments and expenses be charged against such revenues. The transactions do not represent liabilities to third parties but are internally restricted for specified purposes. NRCan has one such account entitled Environmental Research Fund. This account was established pursuant to subsection 76(1) of the Canada Petroleum Resources Act. The purpose of the fund is to finance environmental and social studies pertaining to the manner in which, and the terms and conditions under which, exploration development and production activities on frontier land, authorized under this Act or any other Act of Parliament, should be conducted.


  2007 2006
Restricted - Environmental Studies Research Fund (in thousands of dollars)
Opening balance 2,552 2,562
Revenues 2,468 2,500
Expenses (2,538) (2,510)
Closing balance 2,482 2,552
Unrestricted equity (568,759) (277,548)
Total equity of Canada (566,277) (274,996)

14. Contingent liabilities

  1. Contaminated sites
    Liabilities are accrued to record the estimated costs related to the management and remediation of contaminated sites where the department is obligated or likely to be obligated to incur such costs. The department has identified approximately 11 sites (11 sites in 2006) where such action is possible and for which a liability of $387,800,000 ($192,100,000 in 2006) has been recorded. The significant increase in 2007 is primarily a result of the revised assessment of the cost estimate for one of the sites. NRCan'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 by the department in the year in which they become known.
  2. Claims and litigation
    Claims have been made against the department in the normal course of operations. Legal proceedings for claims totaling approximately $720,600,000 ($720,900,000 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.

15. Contractual Obligations

The nature of the department's activities can result in some large mutli-year contracts and obligations whereby the department will be obligated to make future payments when the services/goods are received. Significant contractual obligations that can be reasonably estimated are summarized as follows:


(in thousands of dollars) 2008 2009 2010 2011 2012 and thereafter Total
Transfer Payments 26,700 28,600 28,600 28,600 136,900 249,400

16. Related party transactions

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

  1. Services provided without charge:
    During the year the department received without charge from other departments, accommodations, legal fees and the employer's contribution to the health and dental insurance plans. These services received without charge are as follows:
    Services provided without charge Amount
    (in thousands of dollars)
    2007 2006
    Accommodation provided by Public Works and Government Services Canada 10,909 14,092
    Contributions covering employer's share of employees' insurance premiums and costs paid by Treasury Board Secretariat 27,455 27,132
    Worker's compensation cost provided by Human Resources Canada 252 297
    Legal services provided by Department of Justice 1,438 1,484
    Total 40,054 43,005

    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 and audit services provided by the Office of the Auditor General, are not included as an expense in the department's Statement of Operations.

  2. Payables and receivables outstanding at year-end with related parties:
    Payables and receivables outstanding at year-end with related parties: Amount
    (in thousands of dollars)
    2007 2006
    Accounts payable to other government departments and agencies 10,766 9,227

17. Comparative information

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