Parks Canada financial statements 2019-2020

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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, 2020, and all information contained in these financial statements rests with the management of the Parks Canada Agency. These financial statements have been prepared by management using the Government of Canada'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; 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 ongoing process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.

A risk-based assessment of the system of ICFR for the year ended March 31, 2020 was completed in accordance with the Treasury Board Policy on Financial Management and the results and action plans are summarized in the annex.

The effectiveness and adequacy of the Agency's system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of the Agency's operations, and by the Audit Committee, which oversees management's responsibilities for maintaining adequate control systems and the quality of financial reporting.

In March 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. The situation is dynamic and the ultimate duration and magnitude of the impact on the economy and the financial effect on Parks Canada is unknown at this time. Adjustments were made for known impacts such as refunds of deferred revenues and an increase of allowance for doubtful accounts.

The financial statements of the Agency have not been audited.

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Statement of financial position (unaudited)

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Statement of operations and net financial position (unaudited)

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Statement of change in net debt (unaudited)

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Statement of cash flows (unaudited)

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

1. Authority and objectives

In December 1998, Parks Canada Agency (the Agency) was established under the Parks Canada Agency Act as a departmental corporation and acts as an agent of Her Majesty in Right of Canada. The Parks Canada Agency is a separate entity listed under Schedule II of the Financial Administration Act and reports to the Minister of Environment and Climate Change.

The Agency's mandate is to protect and present nationally significant examples of Canada's natural and cultural heritage, and foster public understanding, appreciation and enjoyment in ways that ensure the ecological and commemorative integrity of these places for present and future generations. In carrying out its mandate, the Agency delivers the programs set out in the Agency's legislation and authorities.

The authorities for the programs for which Parks Canada is responsible are mainly derived from the Parks Canada Agency Act, the Canada National Parks Act, the Rouge National Urban Park Act, the Historic Sites and Monuments Act, the Canada National Marine Conservation Areas Act, the Saguenay-St. Lawrence Marine Park Act, the Historic Canal Regulations pursuant to the Department of Transport Act, the Heritage Railway Stations Protection Act, the Heritage Lighthouse Protection Act, and the Species at Risk Act.

The programs include:

Heritage Places Establishment:

This program aims to establish heritage places in order to conserve Canada’s natural and cultural heritage for the benefit and enjoyment of present and future generations. This process results in national parks, national marine conservation areas, national historic sites, persons and events, and other designated heritage places, including world heritage sites. Establishment or designation is achieved through feasibility assessments, public nominations, research, consultation and engagement with Indigenous Peoples, stakeholders and the general public, negotiations with other governments and Indigenous organizations, and recommendations from advisory bodies, where required. The Program also supports the Government of Canada’s outcome of “A vibrant Canadian culture and heritage” and Canada’s international biodiversity goals (Canada Target 1).

Heritage Places Conservation:

This program aims to protect and conserve the natural and cultural resources of heritage places managed by Parks Canada, including some World Heritage Sites in Canada, for the benefit and enjoyment of present and future generations. This program also provides financial and professional support and advice to heritage places not administered by Parks Canada, and supports Canada’s international conservation obligations. Conservation of natural and cultural resources includes various knowledge-based approaches, applied science, monitoring and reporting, active management, ecological restoration, species recovery, environmental assessment, fire management, commemorative integrity assessments and statements for national historic sites and compliance activities. The Program supports the Government of Canada’s outcome of “A clean and healthy environment.”

Heritage Places Promotion and Public Support:

This program aims to strengthen awareness and appreciation of Canada's national parks, national historic sites, and national marine conservation areas, and to introduce key audiences, such as youth, new Canadians, low- and middle-income Canadians, and urban Canadians to these places. Promotional activities strengthen awareness of heritage places managed by Parks Canada as well as key visitor experience offers and programs. Promotional activities include advertising, social media promotion, marketing, proactive media, and collaborative efforts with national, regional, and local partners and the tourism trade. Outreach activities introduce Canadians to these places through direct connections, interactive experiences, and learning. Outreach activities include digital products such as online video, television, websites, and social media and also include interactive activities such as activation events and participation in learning and tourism events, community gatherings, festivals, and presence at institutions such as museums and aquariums. Collaborative arrangements and partnerships play an important role in promotions and outreach. This program supports the Government of Canada's outcome of "A vibrant Canadian culture and heritage".

Visitor Experience:

This program provides visitors to national parks, national historic sites, and national marine conservation areas with opportunities to enjoy and appreciate these places in safe and meaningful ways. The program includes a range of activities, such as trip planning, reception, camping, accommodations, visitor safety, visitor services, interpretive activities, merchandise, compliance, and support for visitor facilities. This program supports the Government of Canada's outcome of "A vibrant Canadian culture and heritage".

Heritage Canals, Highways and Townsites Management:

This program involves the management of infrastructure for Canadians and provides opportunities for socio-economic benefits to adjacent communities. This program includes: the operation, maintenance and improvement of the Trans Canada and provincially numbered highways within national parks and a national historic site; water management activities and the management of bridge and dam infrastructure at heritage canals; and the provision of municipal services to certain national park townsites, and the management of related infrastructure. This program supports the Government of Canada’s outcome of “A safe and secure Canada.”

Internal Services:

Internal Services are those groups of related activities and resources that the federal government considers to be services in support of Programs and/or required to meet corporate obligations of an organization. Internal Services refers to the activities and resources of the 10 distinct services that support Program delivery in the organization, regardless of the Internal Services delivery model in a department. These services are: Management and Oversight Services; Communications Services; Legal Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Management Services; Materiel Management Services and Acquisition Management Services.

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2. Summary of significant accounting policies

These financial statements are prepared using the Government of Canada'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:

(a) 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 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 Net Financial Position are the amounts reported in the Future-oriented Statement of Operations included in the 2019-2020 Departmental Plan. Planned results are not presented in the “Government funding and transfers” section of the Statement of Operations and Net Financial Position and in the Statement of Change in Net Debt because these amounts were not included in the 2019-2020 Departmental Plan.

(b) 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.

(c) Amounts due from or to the CRF

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 authorities to discharge its liabilities.

(d) Revenues

Entrance fees, recreational fees, rental and concessions, townsites, staff housing and other operating revenues are recognized based on the goods or services provided in the year by the Agency.

Funds received from external parties for specified purposes are recorded upon receipt as deferred revenue. Revenues are then recognized in the period in which the related expenses are incurred.

Deferred revenue consists of amounts received in advance of the delivery of goods and rendering of services that will be recognized as revenue in a subsequent fiscal year as it is earned.

Other revenues are recognized in the period the event giving rise to the revenues occurred.

Revenues that are non-respendable are not available to discharge the Agency's liabilities. While the 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 as a reduction of the Agency's gross revenues.

(e) Expenses

• Transfer payments are recorded as an expense in the year the transfer is authorized and all eligibility criteria have been met by the recipient.
• Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
• 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 carrying value.

(f) Employee future benefits

• 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 obligation to the Plan. 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.

• Severance benefits:

The accumulation of severance benefits for voluntary departures ceased for applicable employee groups. The remaining obligation for employees who did not withdraw benefits is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

(g) Accounts receivable

Accounts receivable are initially recorded at cost. When necessary, an allowance for valuation is recorded to reduce the carrying value of accounts receivable to amounts that approximate their net recoverable value.

(h) Non-financial assets

The costs of acquiring land, buildings, equipment and other capital property are capitalized as tangible capital assets and, except for land, are amortized to expense over the estimated useful lives of the assets, as described in Note 11. All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. Tangible capital assets do not include immovable assets located on reserves as defined in the Indian Act, works of art and museum collection to which no acquisition cost is attributable; and intangible assets. Acquired lands are recorded at historical cost. Crown lands acquired as a result of Confederation or the subsequent joining of a province or territory are recorded at a nominal value. Donated lands are recorded at their estimated market value at time of acquisition.

Inventories are valued at cost and are comprised of consumable supplies held for future program delivery and are not primarily intended for resale. Inventories that no longer have service potential are valued at the lower of cost or net realizable value.

(i) Contingent liabilities

Contingent liabilities are potential liabilities which may become actual liabilities when one or more future events occur or fail to occur. If the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, a provision is accrued and an expense recorded to other expenses. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

(j) Environmental liabilities

An environmental liability for the remediation of contaminated sites is recognized when all of the following criteria are satisfied: an environmental standard exists, contamination exceeds the environmental standard, the Government is directly responsible or accepts responsibility, it is expected that future economic benefits will be given up and a reasonable estimate of the amount can be made. The liability reflects the Government’s best estimate of the amount required to remediate the sites to the current minimum standard for its use prior to contamination. When the future cash flows required to settle or otherwise extinguish a liability are estimable, predictable and expected to occur over extended future periods, a present value technique is used. The discount rate used reflects the Government’s cost of borrowing, associated with the estimated number of years to complete remediation.

The recorded liabilities are adjusted each year, for present value adjustments, inflation, new obligations, changes in management estimates and actual costs incurred.

If the likelihood of the Government’s responsibility is not determinable, a contingent liability is disclosed in the notes to the consolidated statements.

(k) Transactions involving foreign currencies

Transactions involving foreign currencies are translated in Canadian dollar equivalents using rates of exchange in effect at the time of those transactions.

(l) Measurement uncertainty

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported and disclosed amounts of assets, liabilities, revenues and expenses reported in the financial statements and accompanying notes at March 31. The estimates are based on facts and circumstances, historical experience, general economic conditions and reflect the Government’s best estimate of the related amount at the end of the reporting period. The most significant items where estimates are used are contingent liabilities, environmental liabilities, 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.

Environmental liabilities are subject to measurement uncertainty as discussed in Note 5 due to the evolving technologies used in the estimation of the costs for remediation of contaminated sites, the use of discounted present value of future estimated costs, and the fact that not all sites have had a complete assessment of the extent and nature of remediation. Changes to underlying assumptions, the timing of the expenditures, the technology employed, or the revisions to environmental standards or changes in regulatory requirements could result in significant changes to the environmental liabilities recorded.

(m) Related party transactions

Related party transactions, other than inter-entity transactions, are recorded at the exchange amount. Inter-entity transactions are transactions between commonly controlled entities. Inter-entity transactions, other than restructuring transactions, are recorded on a gross basis and are measured at the carrying amount, except for the following:

1. Services provided on a recovery basis are recognized as revenues and expenses on a gross basis and measured at the exchange amount.
2. Certain services received on a without charge basis are recorded for agency financial statement purposes at the carrying amount.

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3. Parliamentary authorities

The Agency receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Net Financial Position and the Statement of 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

(in thousands of dollars)	2020	2019
Net cost of operations before government funding and transfers	796,139	806,373
Total revenues as per Statement of Operations	172,611	188,141
less: Revenues from donated properties	(27)	(16,738)
Revenues received pursuant to section 20 of the Parks Canada Agency Act	172,584	171,403
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets	(163,730)	(145,419)
Services provided without charge by other government departments	(56,057)	(55,195)
Net loss on disposal of tangible capital assets including adjustments	(3,504)	(14,745)
Decrease (increase) in vacation pay and compensatory leave	1,724	(2,170)
Decrease (increase) in employee future benefits	7	(113)
Increase in environmental liabilities	(19,285)	(18,842)
Refund of prior years' expenditures	2,893	3,362
Increase in New Parks and Historic Sites Account	21,547	17,762
Other	(3,800)	(1,497)
Total items affecting net cost of operations but not affecting authorities	(220,205)	(216,857)
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisitions and improvements to tangible capital assets	731,065	692,696
Salary overpayments	2,358	3,864
Proceeds from disposal of tangible capital assets	(862)	(1,300)
Decrease in lease obligation for tangible capital assets	394	417
Increase (decrease) in inventory	(915)	2,363
Increase (decrease) in prepaid expenses	(389)	984
Transition payments for implementing salary payments in arrears	3	-
Other	103	382
Total items not affecting net cost of operations but affecting authorities	731,757	699,406
Current year authorities used	1,480,275	1,460,325

(b) Authorities provided and used

(in thousands of dollars)	2020	2019
Authorities provided:
Vote 1 - Program expenditures	1,932,377	1,678,280
Vote 5 - New Parks and Historic Sites Account	26,323	44,007
Statutory amounts:
Expenditures equivalent to revenue received pursuant to section 20 of the Parks Canada Agency Act	196,329	196,038
Contributions to employee benefit plans	58,533	63,338
Total authorities	2,213,562	1,981,663
Less:
Authorities available for future years	213,210	500,281
Lapsed authorities	520,077	21,057
Current year authorities used	1,480,275	1,460,325

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4. Accounts payable and accrued liabilities

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

5. Environmental liabilities

The Government’s “Federal Approach to Contaminated Sites” sets out a framework for management of contaminated sites using a risk-based approach. Under this approach the Government has inventoried the contaminated sites identified on federal lands, allowing them to be classified, managed and recorded in a consistent manner. This systematic approach aids in identification of the high risk sites in order to allocate limited resources to those sites which pose the highest risk to human health and the environment.

The Agency has identified 238 sites (234 sites in 2019) where contamination may exist and assessment, remediation and monitoring may be required. Of these, the Agency has identified 89 sites (88 sites in 2019) where action is required and for which a gross liability of $73,092,931 ($58,610,506 in 2019) has been recorded. This liability estimate has been determined based on site assessments performed by environmental experts.

In addition, a statistical model based upon a projection of the number of sites that will proceed to remediation and upon which current and historical costs are applied is used to estimate the liability for a group of sites with no liability. As a result, there are 66 unclassified sites (67 sites in 2019) where a liability estimate of $16,784,810 ($18,282,159 in 2019) has been recorded using this model. Furthermore, there are 6 classified sites with no liability estimates (0 site in 2019) where estimates have been calculated based on professional judgment and comparison with similar sites giving a total liability of $6,300,000 ($0 in 2019).

These three estimates combined, totaling $96,177,741 ($76,892,665 in 2019) represents management’s best estimate of the costs required to remediate sites to the current minimum standard for its use prior to contamination, based on information available at the financial statement date.

For the remaining 77 sites (79 sites in 2019), no liability for remediation has been recognized. Some of these sites are at various stages of testing and evaluation and if remediation is required, liabilities will be reported as soon as a reasonable estimate can be determined. For other sites, the Agency does not expect to give up any future economic benefits (there is likely no significant environmental impact or human health threats). These sites will be re-examined and a liability for remediation will be recognized if future economic benefits will be given up.

The following table presents the total estimated amounts of these liabilities by nature and source, the associated expected recoveries and the total undiscounted future expenditures as at March 31, 2020, and March 31, 2019. When the liability estimate is based on a future cash requirement, the amount is adjusted for inflation using a forecast CPI rate of 2.0% (2.2.% in 2019). Inflation is included in the undiscounted amount. The Government of Canada's cost of borrowing by reference to the actual zero-coupon yield curve for Government of Canada bonds has been used to discount the estimated future expenditures. The March 2020 rates range from 0.45% (1.55% in 2019) for 2 year term to 1.37% (1.92% in 2019) for a 30 or greater year term.

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6. Deferred revenue

Deferred revenue represents the balance at year-end of unearned revenues stemming from amounts received from external parties for fees prior to services being performed. Revenue is recognized in the period in which the service is performed. Details of the transactions related to this account are as follows:

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7. Lease obligations for tangible capital assets

The Agency has entered into agreements to lease commercial and office space under capital leases with a cost of $19,205,164 and accumulated amortization of $8,908,131 as at March 31, 2020 ($19,205,164 and $8,269,377 respectively as at March 31, 2019). The obligations related to the upcoming years include the following:

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8. 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 related 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 2020 expense amounts to $40,551,405 ($44,171,750 in 2019). For Group 1 members, the expense represents approximately 1.01 times (1.01 times in 2019) the employee contributions and, for Group 2 members, approximately 1.00 times (1.00 times in 2019) 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 Consolidated 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, 2018, 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:

(in thousands of dollars)	2020	2019
Accrued benefit obligation - Beginning of year	10,364	10,251
Expense for the year	1,979	1,670
Benefits paid during the year	(1,986)	(1,557)
Accrued benefit obligation - End of year	10,357	10,364

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9. Accounts receivable and advances

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

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10. Inventory

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11. Tangible capital assets