Financial Statements for the period ended March 31, 2017

Statement of Management Responsibility Including Internal Control Over Financial Reporting

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2017, and all information contained in these statements rests with the management of the Canadian Transportation Agency (the Agency). These financial statements have been prepared by management using the Government's accounting policies, which are based on Canadian public sector accounting standards.

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 Agency’s financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the Agency’s Departmental Results Report, is consistent with these financial statements.

Management is also responsible for maintaining an effective system of internal control over financial reporting (ICFR) designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are properly authorized and recorded in accordance with the Financial Administration Act and other applicable legislation, regulations, authorities and policies.

Management seeks to ensure the objectivity and integrity of data in its financial statements through careful selection, training and development of qualified staff; through organizational arrangements that provide appropriate divisions of responsibility and through communication programs aimed at ensuring that regulations, policies, standards, and managerial authorities are understood throughout the Agency and through conducting an annual risk-based assessment of the effectiveness of the system of ICFR.

The system of ICFR is designed to mitigate risks to a reasonable level based on an on-going process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.

The Agency is subject to periodic Core Control Audits performed by the Office of the Comptroller General (OCG) and will use the results of such audits to comply with the Treasury Board Policy on Internal Control.

A Core Control Audit was performed in 2014-2015 by the OCG for transactions completed in 2013-2014. The Audit Report and related Management Action Plan are posted on the Agency's web site at: https://www.otc-cta.gc.ca/eng/corporate-reports

The financial statements of the Agency have not been audited.

Statement of Financial Position (Unaudited) as at March 31 (in dollars)

	2017	2016
Liabilities
Accounts payable and accrued liabilities (note 4)	$2,594,454	$2,459,375
Vacation pay and compensatory leave	1,061,763	953,096
Employee future benefits (note 5)	1,008,661	1,341,819
Total liabilities	4,664,878	4,754,290
Financial assets
Due from Consolidated Revenue Fund	2,015,430	2,200,648
Accounts receivable and advances (note 6)	726,666	323,084
Total gross financial assets	2,742,096	2,523,732
Financial assets held on behalf of Government
Accounts receivable and advances (note 6)	(62,266)	(13,122)
Total financial assets held on behalf of Government	(62,266)	(13,122)
Total net financial assets	2,679,830	2,510,610
Agency net debt	1,985,048	2,243,680
Non-financial assets
Prepaid expenses	100,620	72,688
Inventory	25,655	31,584
Tangible capital assets (note 7)	528,654	704,756
Total non-financial assets	654,929	809,028
Agency net financial position	$(1,330,119)	$(1,434,652)

Contractual obligations ^{(note 8)}

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

Statement of Operations and Agency Net Financial Position (Unaudited) for the Year Ended March 31 (in dollars)

	2017 Planned Results	2017	2016
Expenses
Economic regulation	$13,223,356	$12,254,620	$12,814,318
Adjudication and alternative dispute resolution	10,749,129	10,236,220	11,696,677
Internal services	8,336,706	8,393,538	8,116,182
Total expenses	32,309,191	30,884,378	32,627,177
Revenues
Revenues from fines	130,000	106,500	57,750
Sales of goods and services	-	75	90
Miscellaneous revenues	3,330	2,867	1,998
Revenues earned on behalf of Government	(133,330)	(109,442)	(59,838)
Total revenues	-	-	-
Net cost of operations before government funding and transfers	$32,309,191	$30,884,378	$32,627,177

Government funding and transfers	2017	2016
Net cash provided by Government	$27,149,799	$29,272,223
Change in due from Consolidated Revenue Fund	(185,218)	(1,163,647)
Services provided without charge by other government departments (note 9)	4,024,330	4,119,905
Transfer of the transition payments for implementing salary payments in arrears	-	(8,303)
Net cost of operations after government funding and transfers	(104,533)	406,999
Agency net financial position - Beginning of year	(1,434,652)	(1,027,653)
Agency net financial position - End of year	$(1,330,119)	$(1,434,652)

Segmented information^{(note 10)}

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

Statement of Change in Agency Net Debt (Unaudited) for the Year Ended March 31 (in dollars)

	2017	2016
Net cost of operations after government funding and transfers	$(104,533)	$406,999
Change due to tangible capital assets
Acquisition of tangible capital assets	40,875	199,650
Amortization of tangible capital assets	(216,977)	(326,755)
Proceeds from disposal of tangible capital assets	-	(13)
Net (loss) or gain on disposal of tangible capital assets including adjustments	-	(1,662)
Total change due to tangible capital assets	(176,102)	(128,780)
Change due to inventories	(5,929)	(2,515)
Change due to prepaid expenses	27,932	10,968
Net increase (decrease) in Agency net debt	(258,632)	286,672
Agency net debt - Beginning of year	2,243,680	1,957,008
Agency net debt - End of year	$1,985,048	$2,243,680

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

Statement of Cash Flows (Unaudited) for the Year Ended March 31 (in dollars)

	2017	2016
Operating activities
Net cost of operations before government funding and transfers	$30,884,378	$32,627,177
Non-cash items:
Amortization of tangible capital assets	(216,977)	(326,755)
Gain (loss) on disposal of tangible capital assets	-	(1,662)
Services provided without charge by other government departments (note 9)	(4,024,330)	(4,119,905)
Transition payments for implementing salary payments in arrears	-	8,303
Variations in Statement of Financial Position:
Increase (decrease) in accounts receivable and advances	354,438	(30,928)
Increase (decrease) in prepaid expenses	27,932	10,968
Increase (decrease) in inventory	(5,929)	(2,515)
Decrease (increase) in accounts payable and accrued liabilities	(135,079)	1,049,199
Decrease (increase) in vacation pay and compensatory leave	(108,667)	(230,707)
Decrease (increase) in employee future benefits	333,158	89,411
Cash used in operating activities	27,108,924	29,072,586
Capital investment activities:
Acquisitions of tangible capital assets	40,875	199,650
Proceeds from disposal of tangible capital assets	-	(13)
Cash used in capital investment activities	40,875	199,637
Net cash provided by Government of Canada	$27,149,799	$29,272,223

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

Notes to the Financial Statements (Unaudited) for the Year Ended March 31 (in dollars)

1. Authority and objectives

The Agency was established on July 1st, 1996, under the Canada Transportation Act (the Act), (S.C. 1996, c. 10), as the continuation of the National Transportation Agency. Under the Act and related legislation, it has various powers to help implement the federal government’s transportation policy.

The Agency is an independent, quasi-judicial tribunal and regulator with the powers of a superior court. It makes decisions and determinations on a wide range of matters within the federal transportation system under the authority of Parliament, as set out in the Act and other legislation. The Agency exercises its powers through its Members, which includes the Chair and Chief Executive Officer (CEO), who are appointed by the Governor-in-Council.

The Agency has three core mandates:

• To help ensure that the national transportation system runs efficiently and smoothly in the interests of all Canadians: those who work and invest in it; the producers, shippers, travellers and businesses who rely on it; and the communities where it operates.
• To protect the human right of persons with disabilities to an accessible transportation network.
• To provide consumer protection for air passengers.

To help advance these mandates, the Agency has three tools at its disposal:

• Rule-making: The Agency develops and applies ground rules that establish the rights and responsibilities of transportation service providers and users and that level the playing field among competitors. These rules can take the form of binding regulations or less formal guidelines, codes of practice or interpretation notes.

• Dispute resolution: The Agency resolves disputes that arise between transportation providers on the one hand and their clients and neighbours on the other, using a range of tools from facilitation and mediation to arbitration and adjudication.

• Information provision: The Agency provides information on the transportation system, the rights and responsibilities of transportation providers and users, and its legislation and services.

The Agency's mandate is achieved through three programs:

Program	Expected Result
Economic Regulation	Service providers (air, rail and marine) comply with regulatory requirements. The Canadian National Railway Company (CN) and the Canadian Pacific Railway Company (CP) are provided with the information required to ensure they do not exceed the maximum grain revenue entitlements for the shipment of Western Grain.
Adjudication and Alternative Dispute Resolution	Specialized transportation dispute resolution that is transparent, fair and timely.
Internal Services	Support the needs of programs and other corporate obligations of the Agency.

2. Summary of significant accounting policies

These financial statements have been prepared using the Government's accounting policies stated below, which are based on Canadian public sector accounting standards. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.

Significant accounting policies are as follows:

1. Parliamentary authorities – The Agency is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Agency do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and Agency Net Financial Position and in the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting. The planned results amounts in the “Expenses” and “Revenues” sections of the Statement of Operations and Agency Net Financial Position are the amounts reported in the Future-oriented Statement of Operations included in the 2016-2017 Report on Plans and Priorities. Planned results are not presented in the “Government funding and transfers” section of the Statement of Operations and Agency Net Financial Position and in the Statement of Change in Agency Net Debt because these amounts were not included in the 2016-2017 Report on Plans and Priorities.

2. Net Cash Provided by Government – The Agency operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the Agency is deposited to the CRF, and all cash disbursements made by the Agency 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 Government.

3. Amounts due from or to the CRF are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the net amount of cash that the Agency is entitled to draw from the CRF without further appropriations to discharge its liabilities.

4. Revenues:

   1. Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.

   2. Miscellaneous revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenue takes place.

   3. Revenues that are non-respendable are not available to discharge the Agency's liabilities. While the Chair and CEO is expected to maintain accounting control, he has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the entity's gross revenues.

5. Expenses – Expenses are recorded on the accrual basis:

   1. Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.

   2. Services provided without charge by other government departments for accommodation, employer contributions to the health and dental insurance plans, legal services and workers' compensation are recorded as operating expenses at their estimated cost.

6. Employee future benefits

   1. Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. The Agency's contributions to the Plan are charged to expenses in the year incurred and represent the total Agency obligation to the Plan. The Agency’s responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognised in the financial statements of the Government of Canada, as the Plan’s sponsor.

   2. Severance benefits: Employees entitled to severance benefits under labour contracts or conditions of employment earn these benefits as services necessary to earn them are rendered. 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.

7. Accounts receivables are stated at the lower of cost and net recoverable value. A valuation allowance is recorded for accounts receivable where recovery is considered uncertain.

8. Inventory – Inventory consists of brochures held for future program delivery and not intended for resale. Inventory is valued at cost using the average cost method. If there is no longer any service potential, obsolete inventory is written off.

9. Tangible capital assets – All tangible capital assets having an initial cost of $10,000 or more are recorded at their acquisition cost.

   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
   Machinery and equipment	7 years
   Computer hardware	5 years
   Computer software	3 years
   Furniture	10 years
   Vehicles	7 years

10. Measurement uncertainty – The preparation of these financial statements 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 the liability for employee future 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 authorities

The Agency receives most of its funding through annual Parliamentary authorities. Items recognized in the Statement of Operations and Agency Net Financial Position in one year may be funded through Parliamentary authorities in prior, current or future years. Accordingly, the Agency 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 authorities used

	2017	2016
Net cost of operations before government funding and transfers	$30,884,378	$32,627,177
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets	(216,977)	(326,755)
Gain (loss) on disposal of tangible capital assets	-	(1,662)
Services provided without charge by other government departments	(4,024,330)	(4,119,905)
Decrease (increase) in vacation pay and compensatory leave	(108,667)	(230,707)
Decrease (increase) in employee future benefits	333,158	89,411
Refunds of prior years' expenditures	6,303	280
Total items affecting net cost of operations but not affecting authorities	(4,010,513)	(4,589,338)
Adjustment for items not affecting net cost of operations but affecting authorities:
Acquisitions of tangible capital assets	40,875	199,650
Proceeds from disposal of tangible capital assets	-	(13)
Transition payments for implementing salary payments in arrears	-	8,303
Increase (decrease) in other advances	11,334	-
Increase (decrease) in inventory	(5,929)	(2,515)
Increase (decrease) in prepaid expenses	27,932	10,968
Total items not affecting net cost of operations but affecting authorities	74,212	216,393
Current year authorities used	$26,948,077	$28,254,232

b) Authorities provided and used

	2017	2016
Authorities provided:
Vote 25: Operating expenditures	$25,217,735	$25,840,718
Statutory amounts	3,078,589	3,231,257
Less:
Lapsed: Operating	(1,348,247)	(817,743)
Current year authorities used	$26,948,077	$28,254,232

4. Accounts payable and accrued liabilities

The following table presents details of the Agency’s accounts payable and accrued liabilities:

	2017	2016
Accounts payable - Other government departments and agencies	$72,799	$85,074
Accounts payable - External parties	747,634	771,918
Total accounts payable	820,433	856,992
Accrued liabilities	1,774,021	1,602,383
Total accounts payable and accrued liabilities	$2,594,454	$2,459,375

5. Employee future benefits

a) Pension benefits

The Agency's employees participate in the public service pension plan (the “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/Québec Pension Plan benefits and they are indexed to inflation.

Both the employees and the Agency contribute to the cost of the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to Economic Action Plan 2012, employee contributors have been divided into two groups – Group 1 relates to existing plan members as of December 31, 2012 and Group 2 relates to members joining the Plan as of January 1, 2013. Each group has a distinct contribution rate.

The 2016-2017 expense amounts to $2,144,853 ($2,227,297 in 2015-2016). For Group 1 members, the expense represents approximately 1.12 times (1.25 times in 2015-2016) the employee contributions and, for Group 2 members, approximately 1.08 times (1.24 times in 2015-2016) the employee contributions.

The Agency'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

Severance benefits provided to the Agency’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, 2017, substantially all settlements for immediate cash out were completed. Severance benefits are unfunded and, consequently, the outstanding obligation will be paid from future authorities.

The changes in the obligations during the year were as follows:

	2017	2016
Accrued benefit obligation - Beginning of year	$1,341,819	$1,431,230
Expense for the year	(218,885)	119,281
Benefits paid during the year	(114,273)	(208,692)
Accrued benefit obligation - End of year	$1,008,661	$1,341,819

6. Accounts receivable and advances

The following table presents details of the Agency’s accounts receivable and advances balances:

	2017	2016
Receivables - Other government departments and agencies	$664,400	$309,962
Receivables - External parties	62,266	13,122
Gross accounts receivable	726,666	323,084
Accounts receivable held on behalf of Government	(62,266)	(13,122)
Net accounts receivable	$664,400	$309,962

7. Tangible capital assets

Cost

Capital Asset Class	Opening Balance	Acquisitions	Disposals and Write-offs	Closing Balance
Machinery and equipment	$105,746	$-	$-	$105,746
Computer hardware	1,517,416	40,875	-	1,558,291
Computer software	4,038,405	-	-	4,038,405
Furniture	665,441	-	-	665,441
Vehicles	24,285	-	-	24,285
Total	$6,351,293	$40,875	$-	$6,392,168

Accumulated Amortization

Capital Asset Class	Opening Balance	Amortization	Disposals and Write-offs	Closing Balance
Machinery and equipment	$105,746	$-	$-	$105,746
Computer hardware	1,184,959	119,341	-	1,304,300
Computer software	3,850,626	55,176	-	3,905,802
Furniture	498,268	38,990	-	537,258
Vehicles	6,938	3,470	-	10,408
Total	$5,646,537	$216,977	$-	$5,863,514

Net Book Value

Capital Asset Class	2017	2016
Machinery and equipment	$-	$-
Computer hardware	253,991	332,457
Computer software	132,603	187,779
Furniture	128,183	167,173
Vehicles	13,877	17,347
Total	$528,654	$704,756

8. Contractual obligations

The nature of the Agency’s activities can result in some large multi-year contracts and obligations whereby the Agency 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:

	2018	2019	2020	2021	2022 and thereafter	Total
Professional and special services	$302,756	$42,268	$3,040	$1,000	$1,000	$350,064
Other goods and services	245,007	72,818	8,249	5,175	-	331,249
Software maintenance agreements	90,633	57,789	8,534	8,534	-	165,490
Operating leases and rental of storage	54,069	56,110	53,654	46,738	45,000	255,571
Total	$692,465	$228,985	$73,477	$61,447	$46,000	$1,102,374

9. Related party transactions

The Agency is related, as a result of common ownership, to all government departments, agencies, and Crown corporations. The Agency enters into transactions with these entities in the normal course of business and on normal trade terms. During the year, the Agency received common services which were obtained without charge from other government departments as disclosed below.

a) Common services provided without charge by other government departments

During the year, the Agency received services without charge from certain common service organizations, related to accommodation, the employer's contribution to the health and dental insurance plans, legal services and workers' compensation coverage. These services provided without charge have been recorded in the Statement of Operations and Agency Net Financial Position as follows:

	2017	2016
Accommodation	$2,142,578	$2,316,761
Employer's contribution to the health and dental insurance plans	1,875,710	1,792,623
Worker's compensation	6,042	6,639
Legal services	-	4,152
Total	$4,024,330	$4,119,905

The Government has centralized some of its administrative activities for efficiency, cost-effectiveness purposes and economic delivery of programs to the public. As a result, the Government uses central agencies and common service organizations so that one department performs services for all other departments and agencies without charge. The costs of these services, such as the payroll and cheque issuance services provided by Public Services and Procurement Canada (PSPC) and audit services provided by the Office of the Auditor General are not included in the Agency's Statement of Operations and Agency Net Financial Position.

b) Other transactions with related parties

	2017	2016
Expenses - Other government departments and agencies	$3,941,471	$4,035,397
Revenues - Other government departments and agencies	$-	$-
Total	$3,941,471	$4,035,397

Expenses and revenues disclosed in (b) exclude common services provided without charges, which are already disclosed in (a).

10. Segmented information

Presentation by segment is based on the Agency's program alignment architecture. The presentation by segment is based on the same accounting policies as described in the Summary of significant accounting policies in note 2. The following table presents the expenses incurred and revenues generated for the main programs, by major object of expense and by major type of revenue. The segment results for the period are as follows:

	Economic Regulation	Adjudication and Alternative Dispute Resolution	Internal Services	Total 2017	Total 2016
Operating expenses
Salaries and employee benefits	$10,662,535	$8,203,900	$6,028,730	$24,895,165	$25,758,761
Accommodation	923,454	649,434	569,690	2,142,578	2,316,759
Professional and special services	363,046	630,975	722,990	1,717,011	2,671,394
Rentals	36,730	113,875	471,761	622,366	512,364
Transportation and telecommunication	190,706	227,751	152,721	571,178	471,733
Information	17,872	206,731	140,292	364,895	228,256
Amortization of tangible capital assets	18,105	98,598	100,274	216,977	326,755
Machinery and equipment	6,070	35,682	152,322	194,074	110,322
Utilities, materials and supplies	34,752	59,251	15,699	109,702	132,745
Repair and maintenance	1,018	6,633	35,535	43,186	92,661
Other	332	3,390	3,524	7,246	5,427
Total expenses	12,254,620	10,236,220	8,393,538	30,884,378	32,627,177
Revenues
Revenues from fines	106,500	-	-	106,500	57,750
Sales of goods and services	-	15	60	75	90
Miscellaneous revenues	617	-	2,250	2,867	1,998
Revenues earned on behalf of Government	(107,117)	(15)	(2,310)	(109,442)	(59,838)
Total revenues	-	-	-	-	-
Net cost of operations before government funding and transfers	$12,254,620	$10,236,220	$8,393,538	$30,884,378	$32,627,177