Departmental Results Report for the period ending March 31, 2019

From: Innovation, Science and Economic Development Canada

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, 2019, and all information contained in these statements rests with the management of Innovation, Science and Economic Development Canada. 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 fulfil its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of Innovation, Science and Economic Development Canada's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in Innovation, Science and Economic Development Canada'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 the 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 Innovation, Science and Economic Development Canada; and through 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 the effectiveness of associated key controls and to make necessary adjustments.

A risk-based assessment of the system of ICFR for the year ended March 31, 2019, was completed in accordance with the Policy on Financial Management, and the results and action plans are summarized in Innovation, Science and Economic Development Canada's Management Report on Internal Control over Financial Reporting for the fiscal year ending March 31, 2019.

The effectiveness and adequacy of Innovation, Science and Economic Development Canada's system of internal control is reviewed through the work of internal audit staff, who conduct periodic audits of different areas of Innovation, Science and Economic Development Canada operations, and by the Departmental Audit Committee, which oversees management's responsibilities for maintaining adequate control systems and the quality of financial reporting, and which recommends the financial statements to the deputy head.

The financial statements of Innovation, Science and Economic Development Canada have not been audited.

The printed version was signed by:

Space to insert signature
David McGovern, Acting Deputy Minister
Ottawa, Canada

August 22, 2019
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Date

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Simon Brault, Acting Assistant Deputy Minister/
Chief Financial Officer

August 20, 2019
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Date

Innovation, Science and Economic Development Canada
Consolidated Statement of Financial Position (Unaudited)
As at March 31
(in thousands of dollars)
2019   2018
Liabilities
Accounts payable and accrued liabilities (note 4) $ 769,890   $ 496,595
Vacation pay and compensatory leave 31,403   24,628
Deferred revenue (note 5) 6,543,416   7,289,246
Allowance for loan guarantees (note 12) 256,606   231,372
Employee future benefits (note 6) 20,429   21,340
Other liabilities (note 7) 58,872   64,692
Total gross liabilities 7,680,616   8,127,873
Liabilities held on behalf of Government
Deferred revenue (note 5) (6,470,134)   (7,220,508)
Total liabilities held on behalf of Government (6,470,134)   (7,220,508)
Total net liabilities 1,210,482   907,365
Financial Assets
Due from Consolidated Revenue Fund 711,178   402,967
Accounts receivable and advances (note 8) 53,011   57,623
Loans receivable (note 9) 1,255,328   1,425,229
Total gross financial assets 2,019,517   1,885,819
Financial assets held on behalf of Government
Accounts receivable and advances (note 8) (30,311)   (35,984)
Loans receivable (note 9) (1,255,328)   (1,425,229)
Total financial assets held on behalf of Government (1,285,639)   (1,461,213)
Total net financial assets 733,878   424,606
Departmental net debt 476,604   482,759
Non-financial assets
Prepaid expenses 659   454
Tangible capital assets (note 10) 154,785   145,997
Total non-financial assets 155,444   146,451
Departmental net financial position $ (321,160)   $ (336,308)

Contractual obligations and contractual rights (note 11)
Contingent liabilities and contingent assets (note 12)

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

The printed version was signed by:

Space to insert signature
David McGovern, Acting Deputy Minister
Ottawa, Canada

August 22, 2019
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Date

Space to insert signature
Simon Brault, Acting Assistant Deputy Minister/
Chief Financial Officer

August 20, 2019
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Date

Innovation, Science and Economic Development Canada
Consolidated Statement of Operations and Departmental Net Financial Position (Unaudited)
For the Year Ended March 31
(in thousands of dollars)
2019
Planned Results
  2019   2018
Expenses
People, Skills and Communities
$ 471,744   $ 276,025   $ 221,433
Science, Technology, Research & Communication
1,059,607   843,441   1,106,115
Companies, Investment and Growth
1,294,086   947,603   872,055
Internal Services
235,389   258,176   259,524
Expenses incurred on behalf of government
(3,457)   5,541   (8,632)
Total expenses 3,057,369   2,330,786   2,450,495
Revenues
Radio spectrum licences
1,031,728   1,045,917   1,130,688
Sales of services
342,383   334,505   312,960
Revenue from fines
29,774   11,108   35,795
Interest Revenue
  15,256   13,584
Amortization of discounts
6,105   6,105   6,105
Other revenue
913   1,028   5,668
Revenues earned on behalf of Government
(1,137,876)   (1,179,438)   (1,281,087)
Total revenues 273,027   234,481   223,713
Net cost of operations before government funding and transfers 2,784,342   2,096,305   2,226,782
Government funding and transfers
Net cash provided by Government of Canada
1,727,534   2,205,184
Change in due from the Consolidated Revenue Fund
308,210   3,832
Services provided without charge by other government departments (note 13)
77,059   78,811
Other transfers of assets to other government departments
(1,350)  
Net cost of operations after government funding and transfers (15,148)   (61,045)
Departmental net financial position — Beginning of year (336,308)   (397,353)
Departmental net financial position — End of year $ (321,160)   $ (336,308)

Segmented information (note 14)

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

Innovation, Science and Economic Development Canada
Consolidated Statement of Change in Departmental Net Debt (Unaudited)
For the Year Ended March 31
(in thousands of dollars)
2019   2018
Net cost of operations after government funding and transfers $ (15,148)   $ (61,045)
Change due to tangible capital assets
Acquisition of tangible capital assets
23,479   31,418
Amortization of tangible capital assets
(13,717)   (13,418)
Proceeds from disposition of tangible capital assets
(250)   (267)
Net (loss) gain on disposal of tangible capital assets including adjustments
(723)   (225)
Total change due to tangible capital assets 8,789   17,508
Change due to prepaid expenses 204   (3)
Net increase (decrease) in departmental net debt (6,155)   (43,540)
Departmental net debt — Beginning of year 482,759   526,299
Departmental net debt — End of year $ 476,604   $ 482,759

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

Innovation, Science and Economic Development Canada
Consolidated Statement of Cash Flows (Unaudited)
For the Year Ended March 31
(in thousands of dollars)
2019 2018
Operating activities
Net cost of operations before government funding and transfers
$ 2,096,305 $ 2,226,782
Non-cash items:
Amortization of tangible capital assets
(13,717) (13,418)
Net (loss) gain on disposal of tangible capital assets
8 (174)
Loss on write-offs of tangible capital assets
(21)
Adjustment to tangible capital assets
(731) (30)
Services provided without charge by other government departments (note 13)
(77,059) (78,811)
Variations in Statement of Financial Position:
Increase (decrease) in accounts receivable
1,061 553
Increase (decrease) in prepaid expenses
205 (3)
Decrease (increase) in accounts payable and accrued liabilities
(273,295) 49,748
Decrease (increase) in vacation pay and compensatory leave
(6,775) 492
Decrease (increase) in deferred revenue (4,544) (3,114)
Decrease (increase) in allowance for loan guarantees
(25,234) 10,697
Decrease (increase) in employee future benefits
911 (252)
Decrease (increase) in other liabilities
5,820 (18,416)
Other transfers of assets to other government departments
1,350
Cash used in operating activities 1,704,305 2,174,033
Capital investing activities:
Acquisitions of tangible capital assets
23,479 31,418
Proceeds from disposal of tangible capital assets
(250) (267)
Cash used in capital investing activities 23,229 31,151
Net cash provided by Government of Canada $ 1,727,534 $ 2,205,184

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

Innovation, Science and Economic Development Canada
Notes to the Financial Statements (Unaudited)
For the Year Ended March 31

1. Authority and Objectives

The authorities for the programs for which Innovation, Science and Economic Development Canada (ISED) is responsible are derived from the Department of Industry Act. Many other acts are under the responsibility of the Minister of Innovation, Science and Economic Development, and Treasury Board also defines other specific ISED authorities.

Innovation, Science and Economic Development Canada helps Canadian businesses grow, innovate and export so that they can create good quality jobs and wealth for Canadians through its three core responsibilities, which are mutually reinforcing. It also supports science research and the integration of scientific considerations into investment and policy choices. The Department helps small businesses grow through trade and innovation and promotes increased tourism in Canada. The Department also works to position Canada as a global centre for innovation where growth is clean and inclusive, the middle class prospers through more opportunities for all Canadians, and our companies become global leaders.

Internal Services are groups of activities and resources that are administered to support the needs of programs and other corporate obligations of Innovation, Science and Economic Development Canada. Internal Services include only those activities and resources that apply across Innovation, Science and Economic Development Canada, not those provided specifically to a program.

Innovation, Science and Economic Development Canada's activities are delivered at its headquarters in Ottawa as well as in the regions. There are five regional offices with service points located across Canada and an office for FedNor.

Innovation, Science and Economic Development Canada has a number of transfer payment programs through which it provides grants and contributions to recipients in targeted groups and sectors. Each transfer payment program has specific objectives and expected results that support the achievement of ISED's strategic objectives.

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 the Canadian public sector accounting standards.

Significant accounting policies are as follows:

  1. Parliamentary authorities — Innovation, Science and Economic Development Canada is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to Innovation, Science and Economic Development Canada 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 the Departmental 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 Departmental Net Financial Position are consistent with the amounts reported in the Future-Oriented Statements of Operations included in the 2018–19 Departmental Plan. Planned results are not presented in the "Government funding and transfers" section of the Statement of Operations and Departmental Net Financial Position and in the Statement of Change in Departmental Net Debt because these amounts were not included in the 2018–19 Departmental Plan.
  2. Consolidation — The consolidated financial statements include the accounts of Innovation, Science and Economic Development Canada and the Canadian Intellectual Property Office (CIPO) Revolving Fund. The accounts of this sub-entity have been consolidated with those of Innovation, Science and Economic Development Canada and, as a result, all inter-organizational balances and transactions have been eliminated.
  3. Net cash provided by Government — Innovation, Science and Economic Development Canada operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by ISED is deposited to the CRF and all cash disbursements made by ISED 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.
  4. Amounts due from/to the CRF — These are the result of timing differences at year-end between when a transaction affects Innovation, Science and Economic Development Canada's authorities and when it is processed through the CRF. Amounts due from the CRF represents the net amount of cash that Innovation, Science and Economic Development Canada is entitled to draw from the CRF without further authorities to discharge its liabilities.
  5. Revenues

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

    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 Innovation, Science and Economic Development Canada's liabilities. While the Deputy Head is expected to maintain accounting control, he or she has no authority regarding the disposition of non-respendable revenues. As a result, these are considered to be earned on behalf of the Government of Canada and are therefore presented as a reduction to the entity's gross revenues.

  6. Expenses

    Transfer payments are recorded as expenses when authorization for the payment exists and the recipient has met the eligibility criteria or the entitlements established for the transfer payment program. In situations where payments do not form part of an existing program, transfer payments are recorded as expenses 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. Transfer payments that become repayable as a result of conditions specified in the contribution agreement that have come into being are recorded as a reduction to the transfer payment expense.

    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, the employer's contribution to the health and dental insurance plans, workers' compensation costs, and legal services are recorded as operating expenses at their estimated cost. These exclude the CIPO Revolving Fund, which make payments for these services in their normal course of business.

  7. Employee future benefits

    1. Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. Innovation, Science and Economic Development Canada's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. Innovation, Science and Economic Development Canada'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 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.
  8. Accounts and loans receivable — These are stated at the lower of cost and net recoverable value.

    Transfer payments that are unconditionally repayable are recognized as loans receivable.

    1. When the terms of repayment for unconditionally repayable contributions are above the nominal amount provided, interest is recorded on an accrual basis using the effective interest rate method.
    2. When the terms of repayment for unconditionally repayable contributions are considered concessionary, such as those provided with a low or no interest clause, and when the amount of interest granted is more than 25% of the original contribution amount, the loan is discounted to its estimated present value. An unamortized discount is used to reduce the carrying value of the loans to amounts that approximate their net realizable value. A portion of the discount is recorded as revenue each year, on a straight-line basis, to reflect the change in the present value of the loans outstanding.

      With the adoption of Public Sector Accounting Standard 3450 — Financial Instruments on April 1, 2021, the effective interest rate method of recognizing interest will be used for recording the revenue portion of the discounted loans.

    A valuation allowance is recorded for accounts and loans receivable where recovery is considered uncertain. Write-offs are recorded annually.

  9. Allowances for loan guarantees — An allowance for loan guarantees is recorded for potential losses on loan guarantees when it is likely that a payment will be made in the future to honour a guarantee and when the amount of the loss can be reasonably estimated.

    The allowance for losses on outstanding loan guarantees is based on forecasting models developed by program areas.

  10. Tangible capital assets (Non-financial assets) — All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. Innovation, Science and Economic Development Canada 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.
  11. Contingent liabilities — Contingent liabilities, including the allowance for guarantees, are potential liabilities that may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded, with the exception of sensitive claims referenced in Note 12, where an allowance has been recorded centrally in the Public Accounts of Canada. 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. Contingent assets — Contingent assets are possible assets which may become actual assets when one or more future events occur or fail to occur. If the future even is likely to occur or fail to occur, the contingent asset is disclosed in the notes to the financial statements.
  13. Prepaid expenses (Non-financial asset) — These include prepaid expenses, deferred charges and payments where, pursuant to a contract or contribution agreement, a payment is made before the completion of the work, delivery of the goods or rendering of the service.
  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 at year-end. Gains and losses resulting from foreign currency transactions are included in the Statement of Operations and Departmental Net Financial Position.
  15. 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 contingent liabilities, the liability for employee future benefits and the useful life of tangible capital assets. Actual results could differ significantly from those estimated. Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.
  16. 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 departmental financial statement purposes at the carrying amount.

3. Parliamentary Authorities

Innovation, Science and Economic Development Canada receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Departmental 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, Innovation, Science and Economic Development Canada has different net results of operations for the year on a government-funding basis rather 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
2019 2018
(in thousands of dollars)
Net cost of operations before government funding and transfers $ 2,096,305 $ 2,226,782
Adjustments for items affecting net cost of operations but not affecting authorities:
Repayment of conditionally repayable contributions
83,943 46,975
Services provided without charge by other government departments
(77,059) (78,811)
Provision for loan guarantees
(25,234) 10,697
Amortization of tangible capital assets
(13,717) (13,418)
Decrease (increase) in employee future benefits
911 (252)
Adjustment of previous year's Accounts Payable
13,551 3,508
Refund of prior year's expenditures
2,810 306
Decrease (increase) in vacation pay and compensatory leave
(7,018) 357
Net gain (loss) on tangible capital assets
7 (195)
Year-end accrual of transfer payments
41,300 31,200
Revenue not available for spending
46,126 45,175
Other (6,464) (7,996)
Total items affecting net cost of operations but not affecting authorities
59,156 37,546
Adjustments for items not affecting net cost of operations but affecting authorities:
Increase in loans and advances
144,437 105,394
Revenue available for spending
(50,143) (48,626)
Increase in allowance for vacation and compensatory leave
244 135
Acquisitions of tangible capital assets
23,479 31,418
Other
2,523 3,289
Total items not affecting net cost of operations but affecting authorities
120,540 91,610
Current year authorities used $ 2,276,001 $ 2,355,938
(b) Authorities provided and used
2019 2018
(in thousands of dollars)
Authorities Provided:
Vote 1 — Operating expenditures
$ 434,879 $ 416,543
Vote 5 — Capital expenditures
8,552 17,575
Vote 10 — Grants and contributions
2,520,601 2,225,321
Statutory amounts
296,387 308,885
Total Authorities provided
3,260,419 2,968,324
Less:
Authorities available for future years
136,522 152,603
Lapsed authorities:
Operating expenditures 5,021 6,694
Capital expenditures 989 650
Grants and contributions 841,086 451,639
Other 800 800
Current year authorities used 2,276,001 2,355,938

4. Accounts Payable and Accrued Liabilities

The following table presents details of Innovation, Science and Economic Development Canada's accounts payable and accrued liabilities:

Accounts Payable and Accrued Liabilities
2019 2018
(in thousands of dollars)
Accounts payable to other government departments and agencies
$ 10,566 $ 10,510
Accounts payable to external parties
607,045 299,623
Year-end accrual – pending Budget Implementation Act
107,900 149,200
Accrued salaries and wages
44,323 37,183
Other external payables 56 79
Total accounts payable and accrued liabilities $ 769,890 $ 496,595

5. Deferred Revenue

The majority of Innovation, Science and Economic Development Canada's deferred revenues result from auctions of radio licence frequencies. These revenues are recognized over a 10-year period for previous auctions and a 20-year period for the new licenses arising from more recent spectrum auctions. Another main source of deferred revenues comes from examination requests of intellectual property. These fees are charged in advance and are recognized as revenue once the examination is completed.

The Prime Minister's Awards account was established to record amounts deposited by external parties to be used in support of the Prime Minister's Awards for Teaching Excellence.

Deferred Revenue
2019 2018
(in thousands of dollars)
Opening balance $ 7,289,246 $ 8,214,300
Licence fees received 155,803 164,948
Licence fees earned 906,190 1,093,089
Sub-total (balance of licence fees) (750,387) (928,141)
Fees for trademarks, patents and copyrights received 49,383 47,926
Fees for trademarks, patents and copyrights earned 45,627 44,876
Sub-total (balance of fees for trademarks) 3,756 3,050
Other services of a regulatory nature received 770 700
Other services of a regulatory nature earned 700 453
Sub-total (balance for other services of a regulatory nature) 70 247
Prime Minister's awards received 50 50
Prime Minister's awards disbursed 96
Sub-total (balance for P.M. Awards) 50 (46)
Customer deposits received 47,926 45,386
Customer deposits disbursed 47,245 45,537
Sub-total (balance for customer deposit) 681 (151)
Loan Guarantee Fees received
Loan Guarantee Fees earned 13
Sub-total (balance for Loan Guarantees) - (13)
Gross closing balance 6,543,416 7,289,246
Deferred revenues held on behalf of Government (6,470,134) (7,220,508)
Net closing balance 73,282 $ 68,738

6. Employee Future Benefits

a) Pension benefits

Innovation, Science and Economic Development Canada'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/Quebec Pension Plan benefits and they are indexed to inflation.

Both the employees and Innovation, Science and Economic Development Canada contribute to the cost of the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to Canada's 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 2018–19 expense amounts to $61,337,222 ($59,095,750 in 2017–18). For Group 1 -members, the expense represents approximately 1.01 times (1.01 times in 2017–18 the employee contributions and, for Group 2 members, approximately 1.00 time (1.00 times in 2017–18) the employee contributions.

Innovation, Science and Economic Development Canada'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 Innovation, Science and Economic Development Canada'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:

Employee Future Benefits
2019 2018
(in thousands of dollars)
Accrued benefit obligation — Beginning of year $ 21,340 $ 21,088
Expense for the year 2,485 2,407
Benefits paid during the year (3,396) (2,155)
Accrued benefit obligation — End of year $ 20,429 $ 21,340

7. Other Liabilities

Other liabilities represent amounts received from third parties to be disbursed for a specified purpose. Activity during the year in these accounts is as follows:

Other Liabilities
Opening Balance Receipts Payments Closing Balance
(in thousands of dollars)
Deposits from Spectrum Auctions $ 16,373 $ 8,909 $ 16,373 $ 8,909
Restitutions under the Competition Act 4 4
Cost sharing projects 2,034 205 391 1,848
Securities in Trust, Bankruptcy and Insolvency Act 52 52
Unclaimed dividends and undistributed assets (BIA) 31,644 2,101 894 32,851
Petro Canada Enterprises unclaimed shares 687 687
Canada Business Corporations Act (CBCA) 8,981 587 65 9,503
Winding-up and Restructuring Act 4,917 101 5,018
Total other liabilities $ 64,692 $ 11,903 $ 17,723 $ 58,872

Deposits from Spectrum Auctions — This account was established to record amounts deposited by external parties to be eligible to participate in an auction of spectrum licences.

Restitutions under the Competition Act — This account was established to facilitate judgments rendered under Article 52 of the Competition Act, and to account for monies received in trust for restitution and for subsequent payments.

Cost-sharing Projects — Innovation, Science and Economic Development Canada partners with other governments and external organizations to deliver programs and services that contribute to an innovative economy. The account was established to record amounts deposited by these partners.

Securities in Trust and Income from Securities in Trust, Bankruptcy and Insolvency Act — This account was established to record dividends paid on shares held by a bankrupt stockbroker on behalf of clients. As the shares were not registered in clients' names, dividends are paid to the last registered owner, in this case, the stockbroker. These dividends are forwarded to the Superintendent of Bankruptcy until such time as rightful owners are identified.

Unclaimed Dividends and Undistributed Assets, Bankruptcy and Insolvency Act— This account represents amounts credited to the Receiver General in accordance with the provisions of the Act, pending distribution to creditors.

Petro-Canada Enterprises Inc. unclaimed shares — This account was established to record the liability to shareholders who have not presented their shares for payment in accordance with Section 227 of the Canada Business Corporations Act.

Unclaimed Dividends and Undistributed Assets, Canada Business Corporations Act — This account was established for the purpose of recording liabilities to creditors and shareholders who have not been located. The account is charged when funds are paid to them.

Winding-up and Restructuring Act — This account records deposits credited to the Receiver General as a result of the final winding-up of the operations of a company, in accordance with sections 138 and 139 of the Winding-up and Restructuring Act, pending distribution to the persons entitled thereto.

8. Accounts receivable and advances

The following table presents details of Innovation, Science and Economic Development Canada's accounts receivable and advances balances:

Accounts receivable and advances
2019 2018
(in thousands of dollars)
Receivables from other government departments and agencies $ 14,205 $ 17,411
Accounts receivable from external parties 22,792 34,135
Accrued receivables 24,363 21,992
Employee advances 485 259
Other receivables 8,334 7,233
Subtotal 70,179 81,030
Allowance for doubtful accounts on receivables from external parties (17,168) (23,407)
Gross accounts receivables and advances 53,011 57,623
Accounts receivable held on behalf of Government (30,311) (35,984)
Net accounts receivable $ 22,700 $ 21,639

9. Loans receivable

The following table presents details of the Innovation, Science and Economic Development Canada's loans and unconditionally repayable contributions balances:

Loans receivable
2019 2018
(in thousands of dollars)
Unconditionally repayable contributions $ 1,367,269 $ 1,543,275
Less: Unamortized discount
111,941 118,046
Net unconditionally repayable contributions
1,255,328 1,425,229
Loans on expired loan guarantees 48,891 62,115
Less: Allowance for doubtful loans
48,891 62,115
Net loans on expired loan guarantees
–  – 
Gross loans receivable 1,255,328 1,425,229
Loans held on behalf of Government (1,255,328) (1,425,229)
Net loans receivable $ –  $ – 

Unconditionally repayable contributions — Loans have been made to various recipients under several programs managed by Innovation, Science and Economic Development Canada, including the Strategic Aerospace Defence Initiative (SADI), Technology Partnerships Canada (TPC), the Defence Industries Productivity Program (DIPP) and the Automotive Innovation Fund (AIF). All have different repayment terms and maturity dates that are included in the individual agreement. The unamortized discount is related to unconditionally repayable contributions that have significant concessionary terms and is calculated by applying the 25% rule on an individual loan basis. Discount on loans made on or before March 31, 2018 were calculated using the Government's Consolidated Revenue Lending Rate, posted by the department of Finance. After this date, discounts are recorded using the actual zero-coupon yield curve for Government of Canada bonds, published by the Bank of Canada.

Unconditionally repayable contributions that have payment terms above the nominal loan amount accrue interest revenue quarterly based on their internal rate of return.

Loans may also be established as a result of contribution agreement changes. Under some circumstances, when repayment terms are changed, previously recorded conditionally repayable contributions become unconditionally repayable. Under these circumstances, prior year expenses for the agreements are reversed in-year, and a loan receivable is established.

Loans on expired loan guarantees — These are payments made to lending institutions for loss claims on defaulted loans which have been guaranteed by ISED. These loan guarantees to small business enterprises under the Canada Small Business Financing Act and other loan guarantee programs are made net of recoveries. The allowance is recorded to match the loan amount as these payments represent loans which have already defaulted with lending institutions, therefore their collection is doubtful.

10. Tangible Capital Assets

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

Tangible Capital Assets
Asset Class Amortization Period
Buildings 15 to 30 years
Works and infrastructure 30 years
Machinery and equipment 3 to 10 years
Vehicles 5 to 10 years
Computer hardware 5 to 10 years
Computer software 3 to 10 years
Leasehold improvements Lesser of the remaining term of the lease or useful life of the improvement

Assets under construction are recorded in the applicable capital asset class and are amortized in the year that they become available for use.

Assets under construction
(in thousands of dollars) Cost Accumulated Amortization Net Book Value
Capital asset class Opening balance Acquisitions Adjustments and TransfersFootnote * Disposals and write-offs Closing balance Opening balance Amortization Adjustments and Transfers Disposals and write-offs Closing balance 2019 2018
Land $ 1,441 $ – $ – $ – $ 1,441 $ – $ – $ – $ – $ – $ 1,441 $ 1,441
Buildings 81,260 21 (10,655) 70,626 34,922 1,878 (9,439) 27,361 43,265 46,338
Works and infrastructure 16,266 (823) 15,443 11,852 279 (818) 11,313 4,130 4,414
Machinery and equipment 57,991 1,845 (112) 1,536 58,188 44,640 2,885 (202) 1,499 45,824 12,364 13,351
Vehicles 10,033 948 (18) 654 10,309 8,117 533 (27) 654 7,969 2,340 1,916
Computer hardware 15,840 481 25 242 16,104 13,424 450 234 13,640 2,464 2,416
Computer software 100,339 133 774 14 101,232 58,947 6,590 230 14 65,753 35,479 41,392
Assets under construction 30,247 20,051 (178) 50,120 50,120 30,247
Leasehold Improvements 17,066 5,367 11,699 12,584 1,102 5,169 8,517 3,182 4,482
Total $ 330,483 $ 23,479 $ (10,987) $ 7,813 $ 335,162 $ 184,486 $ 13,717 $ (10,256) $ 7,570 $ 180,377 $ 154,785 $ 145,997

11. Contractual obligations and contractual rights

a) Contractual obligations

The nature of Innovation, Science and Economic Development Canada's activities results in some large multi-year contracts and obligations whereby Innovation, Science and Economic Development Canada is committed to make future payments in order to carry out its transfer payment programs or when the services/goods are received. Significant contractual obligations that can be reasonably estimated are summarized as follows:

Contractual obligations
2020 2021 2022 2023 2024 and
thereafter
Total
(in thousands of dollars)
Transfer payments $ 1,198,615 $ 802,789 $ 554,766 $ 295,053 $ 28,190 $ 2,879,413
Other goods and services 80,493 25,224 22,248 15,645 5,397 149,007
Total $ 1,279,108 $ 828,013 $ 577,014 $ 310,698 $ 33,587 $ 3,028,420

b) Contractual rights

The activities of Innovation, Science and Economic Development Canada sometimes involve the negotiation of contracts or agreements with outside parties that result in the department having rights to both assets and revenues in the future. Major contractual rights for Innovation, Science and Economic Development in the form of interest on loans receivable that will generate revenues in future year and that can be reasonably estimated are summarized as follows:

Contractual rights
2020 2021 2022 2023 2024 and
thereafter
Total
(in thousands of dollars)
Interest revenue $ 14,278 $ 15,016 $ 14,916 $ 14,348 $ 95,162 $ 153,720
Total $ 14,278 $ 15,016 $ 14,916 $ 14,348 $ 95,162 $ 153,720

12. Contingent liabilities and contingent assets

Contingent liabilities arise in the normal course of operations and their ultimate disposition is unknown. They are grouped into two categories as follows:

a) Contingent liabilities

Claims and litigation

Claims have been made against ISED in the normal course of operations. These claims include items with pleading amounts and others for which no amount is specified. While the total amount claimed in these actions is significant, their outcomes are not determinable. ISED only records an allowance for claims and litigations where it is likely that there will be a future payment and where a reasonable estimate of the loss can be made, with the exception of certain unresolved claims where litigation is ongoing. Due to the sensitivity of these latter claims, an allowance has been recorded centrally by the Office of the Comptroller General in the consolidated financial statements of the Government of Canada. Upon resolution in the future, any resulting allowance for these claims will be recorded by the department and could be material.

Guarantees provided by the Department

Innovation, Science and Economic Development Canada has guaranteed the following debts:

Claims and litigation
Authorized Limit Loan Guarantee
Outstanding Balance
(in thousands of dollars)
Canada Small Business Financing Act (CSBFA) $ 2,585,264 $ 945,549
Regional Aircraft Credit Facility 1,500,000 17,148
Total $ 4,085,264 $ 962,697

An allowance of $256,606,003 has been recorded for estimated losses on outstanding loan guarantees ($231,371,833 in 2017–18). The expenses related to loan guarantees are reported under "Other transfers" in note 14 for segmented Statement of Operations information.

Canada Small Business Financing (CSBF) Program — Loans are made directly by approved lenders to small business enterprises, providing for sharing of each individual loan loss, if any, on the basis of 85% government, 15% lender, to an aggregate, per lending institution not exceeding the Minister's contingent liability, as stated in Section 6(2) of the CSBFA.

The authorized limit represents the Crown's maximum liability incurred on the aggregate amount of loans made by the lender starting in April 1999.

The outstanding guarantee for loans made starting in April 1999 is the lesser of the Crown's net liability (authorized limit less claims paid by the Crown) or 85% of the outstanding loan amounts of the lenders.

Regional Aircraft Credit Facility — Innovation, Science and Economic Development Canada has extended loan guarantees on several Air Canada regional jets. Provisioning from the Canada Account Loss Provisioning Pool has been set aside by Finance Canada, manager of the funds. The loan guarantees began in the summer of 2005.

b) Contingent assets

Transfer payments — Conditionally repayable contributions

Under the Defence Industry Productivity Program (DIPP), which ended on December 31, 1996, there are 22 conditionally repayable contribution agreements that remain with potential repayments spanning until July 1, 2025.

Under the Technology Partnerships Canada (TPC) program, which ended on December 31, 2006, there are 69 conditionally repayable contribution agreements that remain with potential repayments spanning until October 31, 2034.

Under the Program for Strategic Industrial Projects (PSIP), which ended on March 31, 2011, there is 1 conditionally repayable contribution agreement that remains with potential repayments spanning until April 30, 2032.

Under the Strategic Aerospace and Defence Initiative (SADI) program, which ended on June 29, 2017, there are still 12 conditionally repayable contribution agreements that remain with potential repayments spanning until April 30, 2041.

Under the Bombardier C-Series Program, there are still 2 conditionally repayable contribution agreements that remain with potential repayments spanning until April 30, 2035.

Under the Strategic Innovation Fund (SIF), launched on July 7, 2017, there are currently 13 conditionally repayable contribution agreement with potential repayments spanning until April 30, 2041.

Due to the varying factors facing each recipient as it relates to their economic and production performances; combined with the fact that contribution agreements are subject to specific program requirements that will vary for each program and influence these factors, the amounts that may become repayable on each contribution agreement cannot be currently estimated.

13. Related Party Transactions

ISED is related as a result of common ownership to all government departments, agencies and Crown Corporations. Related parties also include individuals who are members of key management personnel or close family members of those individuals, and entities controlled by, or under shared control of, a member of key management personnel or a close family member of that individual.

ISED enters into transactions with these entities in the normal course of business and on normal trade terms (see 13c). In addition, ISED received services that were obtained without charge from other Government departments as disclosed below (see 13a).

a) Common services provided without charge by other government departments

During the year, Innovation, Science and Economic Development Canada (excluding CIPO Revolving Fund) received services without charge from certain common service organizations, related to accommodations, legal services, the employer's contribution to the health and dental insurance plans, and workers' compensation coverage. These services provided without charge have been recorded in Innovation, Science and Economic Development Canada's Statement of Operations and Departmental Net Financial Position as follows:

Common services provided without charge by other government departments
2019 2018
(in thousands of dollars)
Accommodation $ 45,288 $ 46,035
Employer's contribution to the health and dental insurance plans 29,850 30,830
Workers' compensation coverage 306 320
Legal services 1,615 1,626
Total $ 77,059 $ 78,811

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, audit services provided by the Office of the Auditor General, and information technology (IT) infrastructure services provided by Shared Services Canada are not included in Innovation, Science and Economic Development Canada's Statement of Operations and Departmental Net Financial Position.

b) Administration of programs on behalf of other government departments

Under a memorandum of understanding signed with the Department of National Defence (DND) on December 11, 1997, Innovation, Science and Economic Development Canada administers a program called Development, Test, and Evaluation and Technical Services Activities. During the year, Innovation, Science and Economic Development Canada incurred expenses of $ 625,258 ($2,686,030 in 2017–18) on behalf of DND. These expenses are reflected in the financial statements of DND and are not recorded in these financial statements.

c) Other transactions with related parties

Other transactions with related parties
2019 2018
(in thousands of dollars)
Expenses – Other government departments and agencies $ 155,011 $ 159,979
Revenues – Other government departments and agencies 50,999 50,509

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

14. Segmented Information

Presentation by segment is based on Innovation, Science and Economic Development Canada's Core responsibility. The presentation by segment is based on the same 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 core responsibilities, by major object of expenses and by major type of revenues. The segment results for the period are as follows:

Expenses incurred and revenues generated for the main core responsibilities
(in thousands of dollars) People, Skills and Communities Science, Technology, Research & Communication Companies, Investment and Growth Internal Services Intradepartmental transactions 2019 Total 2018 Total
Expenses
Transfer payments
Transfers to non-profit organizations
$ 167,903 $ 490,369 $ 62,006 $ – $ – $ 720,278 $ 601,549
Transfers to other levels of Government
333,425 333,425 729,409
Transfer to Industry
82,744 298,014 380,758 292,318
Other transfers
75,040 75,040 44,565
Expenses incurred on behalf of Government
5,376 5,376 630
Total transfer payments 250,647 823,794 440,436 - - 1,514,877 1,668,471
Operating expenses
Salaries and employee benefits
20,270 15,140 370,414 168,286 574,110 557,965
Professional and special services
2,339 2,479 81,290 46,555 (32,484) 100,179 90,422
Accommodation 1,578 1,181 29,447 13,082 45,288 46,035
Furniture and equipment
268 81 8,198 11,432 19,979 20,355
Rental 58 24 13,089 6,600 19,771 16,323
Communication 170 259 11,748 4,381 16,558 11,452
Amortization 39 - 12,207 1,471 13,717 13,418
Travel 436 422 8,674 2,362 11,894 10,681
Equipment repair and maintenance
23 7 4,520 2,452 7,002 6,699
Utilities, materials and supplies
84 54 4,833 656 5,627 5,601
Postage 42 450 1,043 1,535 1,098
Damage and other claims against the crown
72 54 126 268
Other operating expenses
321 (198) 123 1,707
Bad debt expense
71 (236) - (165) 9,262
Expenses incurred on behalf of Government
(71) 236 165 (9,262)
Intradepartmental transactions
(32,484) 32,484
Total operating expenses 25,307 19,647 512,779 258,176 - 815,909 782,024
Total expenses 275,954 843,441 953,215 258,176 - 2,330,786 2,450,495
Revenues
Radio spectrum licences
1,045,917 1,045,917 1,130,688
Sales of services
331,351 35,638 (32,484) 334,505 312,960
Revenue from fines
11,108 11,108 35,795
Interest revenue
5 15,251 15,256 13,584
Amortization of discounts
6,105 6,105 6,105
Other revenue
21 951 56 1,028 5,668
Revenues earned on behalf of Government
(26) (1,176,858) (2,554) (1,179,438) (1,281,087)
Intradepartmental transactions
(32,484) 32,484
Total revenues 233,825 656 234,481 223,713
Net cost from continuing operations $ 275,954 $ 843,441 $ 719,390 $ 257,520 $ – $ 2,096,305 $ 2,226,782

15. Subsequent events

On April 4, 2019, Innovation, Science and Economic Development completed its auction of spectrum licenses in the 600 MHz band, which will raise $3,470 million in revenue over the 20 year term of licenses. Under the terms of the auction, provisional winners needed to pay $694 million, equivalent to 20 percent of the total final payment, by April 26, 2019 and the remaining $2,776 million was received on May 27, 2019. These amounts were received and recorded as deferred revenue in the 2019–20 fiscal year. Revenue will be recognized on a straight-line basis over the 20 year term of the licenses.

16. Comparative Information

Certain comparative figures have been reclassified to conform to the current year's presentation. Specifically, the 2017–18 expenses reported in the Statement of Operations and Departmental Net Financial Position have been reclassified by core responsibility (see Note 1). ISED's core responsibilities are set out in its new Departmental Results Framework, in accordance with the Treasury Board Policy on Results.

Summary of the Assessment of Effectiveness of the System of Internal Control over Financial Reporting and the Action Plan of Innovation, Science and Economic Development Canada
For the fiscal year ending March 31, 2019

Annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting

1. Introduction

This document is attached to Innovation, Science and Economic Development Canada's (ISED) Statement of Management Responsibility Including Internal Control over Financial Reporting for the 2018–19 fiscal year. This annex provides summary information on the measures taken by ISED to maintain an effective system of internal control over financial reporting (ICFR). In particular, it provides summary information on the assessments conducted by ISED as at March 31, 2019, including results and related action plans.

Detailed information on ISED's authority, mandate and core responsibilities can be found in the Departmental Results Report (DRR) and the Departmental Plan (DP).

2. Departmental system of internal control over financial reporting

2.1 Internal Control Management

ISED has a well-established governance and accountability structure to support departmental assessment efforts and oversight of its system of internal control. A departmental internal control framework, approved by the Deputy Head, is in place, which includes:

The DAC provides advice to the Deputy Head on the adequacy and functioning of the department's risk management, control and governance frameworks and processes.

In addition, the Audit and Evaluation Branch (AEB) of ISED renders assurance to the Deputy Head through its internal audit and evaluation services and the support that it provides to the DAC.

2.2 Service arrangements relevant to financial statements

The Department relies on other organizations for the processing of certain transactions that are recorded in its financial statements:

Common Arrangements:

Readers of this Annex may refer to the annexes of the above-noted organizations for a greater understanding of the systems of Internal Control over Financial Reporting related to these specific services.

Specific Arrangements:

ISED provides ICFR support to others and accordingly, reliance is placed by others on certain aspects of ISED's system of internal control over financial reporting, as follows:

3. ISED assessment results during fiscal year 2018–19

ISED has adopted an ongoing, cyclical, risk-based monitoring approach to support testing of internal control over financial reporting. Under this approach, all entity level controls, IT General Controls (ITGC) and business cycle controls (Grants and Contributions, Operating and Revenues) are reassessed at least every three years.

The areas of the departmental system of ICFR which have been reviewed this fiscal year are summarized in this section.

New or significantly amended key controls are summarized in section 3.1.

Based on the ongoing monitoring plan outlined in ISED's Annex for 2017–18, ISED validated reassessments for specified Grants and Contributions programs, Capital Assets, and three Revenue processes. Overall, the key controls in these areas tested positively, with areas for remediation summarized in section 3.2 below.

During this fiscal year, the AEB published three internal audit reports: Integrated Risk Management Final Report; the Canadian Intellectual Property Office — Trademarks Branch; and Campus Custodial Services at the Communications Research Centre. Readers of this Annex may refer to the actual Audit Reports on ISED's website for more details.

In addition, AEB conducted an assessment of a selection of ISED's internal assurance providers' key activities, controls and processes. Given that this was an assessment and not an audit, the report remains unpublished. However, specific findings pertaining to the functions of the Quality Assurance & Internal Control group, which are relevant to this Annex, are presented here for information purposes. AEB assessed strengths in the framework and testing methodology in place to manage and test controls. Certain opportunities for improvement were reported as well, such as the tracking and monitoring of action plans as well as the continuous improvement of business processes through periodic walkthroughs.

3.1 New or significantly amended key controls

Work to document changes to payroll controls in light of the centralization of pay administration at PSPC continued in 2018–19. The process narrative and testing methodology have been drafted and an initial walkthrough was conducted. Given the constantly changing environment of human resources, further updates to the process narrative may be required before the controls are tested in 2019–20. Another walkthrough of the process will be performed prior to testing.

3.2 On-going monitoring programFootnote 1

ISED completed testing of selected grants and contributions as well as specified operating processes, namely capital assets, and three revenue programs. Senior management has received reports on the results of testing and has developed action plans where necessary. For the majority of those tested, the key controls performed as intended.

Testing performed in this fiscal year supports the accountabilities of the Deputy Minister as stated in the Statement of Management Responsibility Including Internal Control over Financial Reporting.

Grants and Contributions

The following grants and contributions programs were tested for internal control compliance: Data and Digital Programming (DDP) and FedNor.

Testing of DDP was completed with some areas requiring remedial measures, mostly due to the amalgamation of two directorates under which various programs were operating under different variations of the same process. Management has taken actions to update the narrative to reflect the actual process in effect. These areas will be re-tested in 2019–20.

Testing of the FedNor process was completed with no issues to report to management.

Testing of the Post-Secondary Institution Strategic Investment Fund (PSI-SIF), which was initially scheduled for this year, was deferred to the next year as the program was extended. Previous year's effectiveness testing was completed with no issues.

Operating

Testing of the capital assets process was completed with no issues to report to management.

Revenue Programs

The following revenue generating organizations were tested for internal control compliance: Corporations Canada (CC), Office of the Superintendent of Bankruptcy (OSB) and Communications Research Centre Canada (CRC). Overall, key revenue controls in these organizations are functioning as intended, with some minor discrepancies observed in the business narrative regarding the description of the process to manage agreements in CRC.

4. ISED action plan

4.1 Progress during fiscal year 2018–19

ISED conducted its ongoing monitoring based on its previous fiscal year's plan and reported results of this monitoring directly to management:

Rotational ongoing monitoring plan for current year
Previous year's rotational ongoing monitoring plan for current year Status
Grants and contributions (DDP, FedNor, and PSI-SIF) DDP and FedNor: completed as planned; PSI-SIF: deferred to next fiscal year.
Operating (Capital Assets) Completed as planned.
Revenues (CC, OSB, CRC) Completed as planned.

New processes and programs were being documented and evaluated throughout the year as follows:

Processes and programs documentation and evaluation
Previous year's new processes/programs Status
Strategic Innovation Fund (SIF) Continuing the design process in 2019–20.
Innovation Supercluster Initiative Continuing the design process in 2019–20.
Connect to Innovate Assessing the feasibility to test the operating effectiveness in 2019–20.
Canadian Intellectual Property Office (CIPO) Assessing the feasibility to test the operating effectiveness in 2019–20
4.2 Action plan for the next fiscal year (2019–20) and subsequent years

The department's focus is on ongoing monitoring, the full assessment cycle having been completed in previous years. Action plans from previous years will be followed-up on to ensure that remedial actions have been taken.

Operating effectiveness testing will be conducted only in those areas subject to reassessment unless significant amendments have been made to key controls where design effectiveness testing may be necessary.

The table below shows the department's rotational ongoing monitoring plan over the next three years. An annual risk-assessment is conducted each year to validate the high risk controls and to adjust the on-going monitoring plan as required.

Rotational On-going monitoring for Internal Control over Financial Reporting
Internal Control over Financial Reporting On-going Monitoring Rotation
(3 year rotation)
2019–20 2020–21 2021–22
Entity level Control environment, risk management, information systems and communication, monitoring No Yes No
ITGC Enterprise systems (CMIS & IFMS) No Yes No
Canada Small Business Financing Program (CSBFP) No Yes No
Business Processes
Grants and contributions
(risk based rotation)
Transfer Payments for Designated Recipients Yes TBD TBD
Data and Digital Programming Yes TBD TBD
Connecting Canadians Yes TBD TBD
FedNor No TBD TBD
Post-Secondary Institution Strategic Investment Fund Yes N/A N/A
Canada Small Business Financing Program No TBD TBD
Operating Operating expenditures Yes TBD TBD
Payroll Yes TBD TBD
Capital assets No TBD TBD
Financial close & reporting No TBD TBD
Master data – vendors/customers No TBD TBD
Special Purpose Accounts Yes TBD TBD
Revenue
(risk based rotation)
Competition Bureau Yes TBD TBD
Corporations Canada No TBD TBD
Communications Research Canada No TBD TBD
Office of the Superintendent of Bankruptcy No TBD TBD
Canada Small Business Financing Program Yes TBD TBD
Spectrum and Telecommunications Yes TBD TBD
Yes Planned for testing
No Not planned for testing
N/A Not applicable - program ending
TBD To be determined - Evaluated during the annual risk assessment
New Processes/Programs to be added based on the yearly risk assessment
Internal Control over Financial Reporting Stage of Testing
2019–20 2020–21 2021–22
Grants & Contributions Strategic Innovation FundFootnote 2 Design effectiveness Operating effectiveness On-going monitoring
Innovation Super Clusters Initiative Design effectiveness Operating effectiveness On-going monitoring
Connect to Innovate Operating effectiveness On-going monitoring On-going monitoring
Revenue Canadian Intellectual Property Office (Revolving Fund) Operating effectiveness On-going monitoring On-going monitoring
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