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Government Gouvernement

of Canada

du Canada

Prepared by the

Receiver General for Canada

msmmi

ubiic occounis of conodo

Volume II

Part II

Additional

Information and Analyses

Metropolitan Toronto Reference Library

Canada

TmWic Aecouhl^ of

I ^1^1 (Government Gouvernement B^^B of Canada du Canada

Prepared by the

Receiver General for Canada

public cMcounls of conodo

METROPOLITAN TORONTO LIBRARY

JAN 1,^ 199?

BUmESS & SOCIAL SQIEUOES

Volume II

Part II

Additional

Information and Analyses

I

Canada

©Minister of Supply and Services Canada 1991

Available in Canada through

Associated Bookstores and other booksellers

or by mail from

Canada Communication Group Publishing Ottawa, Canada KIA 0S9

Catalogue No. P51- 1/199 1-2-2E ISBN 0-660-14200-7

Version fi:an9aise est aussi disponible

VOLUME II (PART II)

VuU"' '...

. TABLE OF CONTENTS

.'^ .'V-'--. --xuu

"' '■' - '■ 'i^^: ■■■'-": - Section

* Introduction

1. Financial Statements of Revolving Funds

rt-o >' . a.,^;/* v*!rr*td^ * 2. Financial Statements of Departmental

r . Corporations and Other Entities

3. Supplementary Information Required by the Financial Administration Act

4. Accounts Receivable

5. Professional and Special Services

6. Construction and/or Acquisition

7. Transfer Payments

8. Public Debt Charges

9. Payments of Damage Claims, Ex Gratia Payments, Federal Court Awards and Nugatory Payments

10. Federal-Provincial Shared-Cost Programs

1 1 . Other Government-Wide Information ;

12. Other Miscellaneous Information

13. Index

INTRODUCTION TO THE PUBLIC ACCOUNTS

Nature of the Public Accounts

The Public Accounts is the report of the Government of Canada prepared each fiscal year by the Receiver General as required by Section 64 of the Financial Ad- ministration Act.

The report covers the fiscal year of the Government, which ends on March 31, and is prepared from data contained in the accounts of Canada and from more detailed records maintained in departments and agen- cies. The accounts of Canada is the centralized record of the Government's financial transactions maintained by the Receiver General in which the transactions of all departments and agencies are summarized. Each depart- ment and agency is responsible for reconciling its accounts to the control accounts of the Receiver General, and for maintaining detailed records of the transactions in their accounts.

The report covers the financial transactions of the Government during the year. In certain cases, par- liamentary authority to undertake transactions was provided by legislation approved in earlier years.

Format of the Public Accounts

The Public Accounts is produced in three volumes.

Volume I presents a summary analysis of the finan- cial transactions of the Government while Volume III contains an annual consolidated report on the businesses and activities of all parent Crown corporations together with a listing of all Crown corporations and other cor- porate interests of Canada.

Volume 11 is published in two parts. Part I presents the financial operations of the Government, segregated by ministry while Part II presents additional informa- tion and analyses. The content of Part II is summarized as follows:

financial statements of revolving funds (Section 1);

financial statements of departmental corporations and other entities (Section 2);

supplementary information required by the Finan cial Administration Act (Section 3);

accounts receivable (Section 4);

professional and special services (Section 5);

construction and/or acquisition of land, buildings works, machinery and equipment (Section 6);

transfer payments (Section 7);

public debt charges (Section 8);

payments of damage claims, ex gratia payments Federal Court awards and nugatory payments (Section 9);

federal-provincial shared-cost programs (Section 10);

•other Government-wide information (Section 11) and,

other miscellaneous information (Section 12).

I

SECTION

1

1990-91

PUBLIC ACCOUNTS

Financial Statements of Revolving Funds

:a-i,.,1;- ' ' ^'

CONTENTS

Page

Airports 1.2

Defence Production 1.9

Government Telecommunications Agency 1.11

National Film Board 1.15

Passport Office 1.21

Public Works 1.24

Race Track Supervision 1.30

Staff Development and Training 1.34

Supply 1.38

NOTE TO USER

It would be appreciated if you could complete and return the Reader's Survey inserted at the beginning of this volume

INTRODUCTION TO THE PUBLIC ACCOUNTS

Nature of the Public Accounts

The Public Accounts is the report of the Government of Canada prepared each fiscal year by the Receiver General as required by Section 64 of the Financial Ad- ministration Act.

The report covers the fiscal year of the Government, which ends on March 31, and is prepared from data contained in the accounts of Canada and from more detailed records maintained in departments and agen- cies. The accounts of Canada is the centralized record of the Government's financial transactions maintained by the Receiver General in which the transactions of all departments and agencies are summarized. Each depart- ment and agency is responsible for reconciling its accounts to the control accounts of the Receiver General, and for maintaining detailed records of the transactions in their accounts.

The report covers the financial transactions of the Government during the year. In certain cases, par- liamentary authority to undertake transactions was provided by legislation approved in earlier years.

Format of the Public Accounts

The Public Accounts is produced in three volumes.

Volume I presents a summary analysis of the finan- cial transactions of the Government while Volume III contains an annual consolidated report on the businesses and activities of all parent Crown corporations together with a listing of all Crown corporations and other cor- porate interests of Canada.

Volume II is published in two parts. Part I presents the financial operations of the Government, segregated by ministry while Part II presents additional informa- tion and analyses. The content of Part II is summarized as follows:

financial statements of revolving funds (Section 1);

financial statements of departmental corporations and other entities (Section 2);

supplementary information required by the Finan- cial Administration Act (Section 3);

accounts receivable (Section 4);

professional and special services (Section 5);

construction and/or acquisition of land, buildings, works, machinery and equipment (Section 6);

transfer payments (Section 7);

public debt charges (Section 8);

payments of damage claims, ex gratia payments; Federal Court awards and nugatory payments (Section 9);

federal-provincial shared-cost programs (Section 10);

•other Government-wide information (Section 11) and,

other miscellaneous information (Section 12).

I

V' \^:i

SECTION

1

1990-91

PUBLIC ACCOUNTS

Financial Statements of Revolving Funds

CONTENTS

Page

Airports 1.2

Defence Production 1.9

Government Telecommunications Agency 1.11

National Film Board 1.15

Passport Office 1.21

Public Works 1.24

Race Track Supervision 1.30

Staff Development and Training 1.34

Supply 1.38

NOTE TO USER

It would be appreciated if you could complete and return the Reader's Survey inserted at the beginning of this volume

'i7

PUBLIC ACCOUNTS, 1990-91

Airports Revolving Fund

MANAGEMENT REPORT

The accompanying financial statements of the Airports Revolving Fund have been prepared in accordance with generally accepted accounting principles applied on a basis consistent with that of the preceding year. The primary responsibility for the integrity and objectivity of the data in these financial statements rests with management.

These financial statements were prepared in accordance with the significant accounting policies set out in Note 2. Some of the information included is based on management's best estimates and judgements, which give due consideration to materiality. To meet the reporting requirements, separate accounts are maintained on a decentralized basis for each of the airports funded by the Revolving Fund, under the functional authority of the Director General, Finance, and are submitted to Ottawa Headquarters for review and consolidation.

The airports in the Fund are subject to departmental systems of financial management and internal control and such additional policies, practices and procedures as are necessary to facilitate financial reporting for the Revolving Fund, in accordance with the requirements of the Treasury Board and Receiver General for Canada. Transactions are executed in accordance with prescribed regulations, within parliamentary authorities, and are recorded to maintain accountability of Government funds and to safeguard the assets of the Revolving Fund.

The Revolving Fund was wound up as at March 31, 1991 in accordance with authority provided in 1990-91 Supplementary Estimates, Vote 2c. The net assets and responsibility for the continuation of services of this Fund have been transferred to the Airports activity of the Transport Program.

Approved by:

D. F. SMITH

for the Assistant Deputy Minister Finance and Administration (Senior financial officer)

R. A. QUAIL

A/ Deputy Minister of Transport

August 8, 1991

STATEMENT OF AUTHORITY PROVIDED FOR THE YEAR ENDED MARCH 31, 1991 (in thousands of dollars)

1991

1990

Estimates

Actual

Estimates

Actual

Net (loss) profit for

the year 1,662

Add: items not requiring

use of funds 165,664

(9,660) 160,271

167,163

13,879 159,574

Operating source of funds 167,326

150,611

167,163

173,453

Net capital acquisitions .. (73,092) (79,552) (84,613) (103,011)

Working capital change . . (3,859) (15,903)

Other items 29,236 3,997

Authority provided 94,234 96,436 82,550 58^36

RECONCILIATION OF UNUSED AUTHORITY

MARCH 31, 1991

(in thousands of dollars)

1991

1990

Debit balance in the accumulated net charge

against the Fund's authority account (361,500) (275,563)

Transfer to ANCAFA of contributed capital and

accumulated surplus 1,444,679

1,083,179 (275,563)

Authority provided in Vote 2c to write-off the assets and liabilities 1,444,679

(361,500) (275,563) Add: PAVE charges against the appropriation

account after March 31 59,019 58,009

Less: amounts credited to the appropriation

account after March 31 36,411 24,902

Net authority provided, end of year (338,892) (242,456)

Authority limit 80.000 80,000

Unused authority carried forward 418,892 322,456

Unused authority repealed '" (418.892)

*" 1990-91 Supplementary Estimates C, Vote 2c provided authority to repeal Section 10 of the Revolving Funds Act as of March 31, 1991, thereby eliminating the legal basis for the existence of the Airports Revolving Fund. Therefore, the statutory unused authority is cancelled. See Note 15 for additional information.

/ . 2 FINANCIAL STATEMENTS OF REVOLVING FUNDS

PUBLIC ACCOUNTS, 1990-91

Airports Revolving Fund Continued

UNAUDITED BALANCE SHEET AS AT MARCH 31, 1991 (in thousands of dollars)

ASSETS

1991

1990

(See Note 15)

Current Accounts receivable

Federal Government

Outside parties, net of allowance for

doubtful accounts

Security deposits

Inventory of materials and supplies . . .

Long-term receivables

Deferred charges

Fixed

Less: accumulated amortization

33,770

50,372 12,041 4,884

101,067

4,835

4,050

1,718,223 652,202

1,066,021

LIABILITIES

Current Accounts payable and accrued liabilities

Federal Government

Outside parties

Security deposits

Contractors holdbacks

Current portion of the provision for employee

termination benefits

Long-term Provision for employee termination

benefits

Deferred revenue

EQUITY OF CANADA

Accumulated net charge against the Fund's

authority

Contributed capital

Accumulated surplus

1991

1990

(See Note 15)

49,428

16,276

. vl.^ ;:, -

12,041

579

3,060

81,384

13,360

2,000

15,360

1,175,973

(275,563)

1,262,354

92,438

1,079,229

1,175,973

The accompanying notes are an integral part of the fmancial statements. Approved by:

D. F. SMITH

for the Assistant Deputy Minister

Finance and Administration

R. A. QUAIL

Al Deputy Minister of Transport

FINANCIAL STATEMENTS OF REVOLVING FUNDS 1 . 3

PUBLIC ACCOUNTS, 1990-91

Airports Revolving Fund Continued

UNAUDITED

STATEMENT OF OPERATIONS AND ALLOCATIONS

FOR THE YEAR ENDED MARCH 31, 1991

(in thousands of dollars)

UNAUDITED

STATEMENT OF CONTRIBUTED CAPITAL FOR THE YEAR ENDED MARCH 31, 1991 (in thousands of dollars)

1991

1990

1991

1990

Revenues

Landing fees

Concessions

General terminal fees

Car parking

Rentals

Fuel concession fees

Service fees and miscellaneous

Expenses

Terminal control costs

Interest associated with capital contributed

to the Fund

Salaries and employee benefits

Contract services

Amortization

Purchased goods

Departmental overhead

Royal Canadian Mounted Police security

services (Note 9)

Grants in lieu of taxes

Utilities

Loss on disposal of fixed assets

Loss from operations

Allocations (Note II)

Profit (loss) after allocations

119,682

113,179

102,018

92,699

83,457

81,285

63.537

61,292

53,032

45,139

18,660

13,986

15,823

15,300

456,209

422,880

112,148

(9,660)

UNAUDITED

STATEMENT OF ACCUMULATED SURPLUS FOR THE YEAR ENDED MARCH 31, 1991 (in thousands of dollars)

1991

Balance, beginning of year

Transfer of lump sum payment

Deferred revenue

Prior period adjustment

Fixed assets

Profit/(loss) after allocations ....

Balance, end of year (see Note 15)

100,868

99,242

94,359

93,082

85,714

60,706

49,248

57,693

62,193

39,333

32,288

34,004

30,776

29,347

21,421

25,234

22,147

17,620

17,447

677

580

569,086

517,041

(112,877)

(94,161)

103,217

108,040

13,879

1990

92,438

82,145

2,000

(789)

(3,586)

(9,660)

13,879

Balance, beginning of year

Interest associated with capital contributed to

the Fund

Net transfer of fixed assets (to) from Canada .

Balance, end of year (see Note 15)

1,262,354

1,167,929

99,242

94,359

(906)

66

1,360,690

1,262,354

UNAUDITED

STATEMENT OF CHANGES IN FINANCIAL POSITION

FOR THE YEAR ENDED MARCH 31, 1991

(in thousands of dollars)

83,989

92,438

Operating activities:

Profit /(loss) after allocations

Items not requiring cash: Interest associated with capital contributed

to the Fund

Amortization

Provision for employee termination

benefits

Amortization of deferred charges

Loss on disposal of fixed assets

Changes in current assets and liabilities

Changes in other assets and liabilities:

Long-term receivables

Deferred revenue

Payments on and change in provision for employee termination activities

Net financial resources provided by operating activities

Investing activities: Transfer of lump sum payment

Deferred revenue

Fixed assets purchased

Net financial resources provided by investing

activities

Net financial resources provided, during

the year

Accumulated net charge against the Fund's

authority account, beginning of year

Accumulated net charge against the Fund's authority account, end of year (see Note 15) . . .

1991

(9,660)

1990

13,879

99,242

94,359

57,693

62,193

2.434

2,217

225

225

677

580

150.611

173,453

(3.859)

(15,903)

(998)

(4,835)

27,187

(9,452)

(1.416)

163,489

151,299

2,000

(79,552)

(103.011)

(77,552)

(103,011)

85,937

48.288

275,563

227.275

361.500

275.563

/ . 4 FINANCIAL STATEMENTS OF REVOLVING FUNDS

Airports Revolving Fund Continued

NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 1991

PUBLIC ACCOUNTS, 1990-91

1. Authority and purpose

The Airports Revolving Fund (formerly known as the Self- Supporting Airports and Associated Ground Services Revolving Funds), in accordance with the Revolving Funds Act, is authorized to make operating and capital expenditures out of the Consolidated Revenue Fund for the purpose of operating, maintaining and developing such airports as the Treasury Board may approve. The Fund is also authorized to spend any revenue received from the operation of such airports for this purpose as well as any monies appropriated therefore by Parliament from time to time.

This Fund was originally established in 1969. It has a statu- tory drawing authority of $80 million on the Consolidated Revenue Fund and it operates under terms and conditions approved by the Treasury Board.

Over the years the number of airports in the Fund has varied. At March 31, 1991 there were eight: Halifax, Montreal (Dorval and Mirabel), Ottawa, Pearson, Winnipeg, Calgary, Edmonton and Vancouver.

The Fund ceased operations as at March 31, 1991. 1990-91 Supplementary Estimates C, Vote 2c provided authority to repeal Section 10 of the Revolving Funds Act as of March 31, 1991, thereby eliminating the legal basis for the existence of the Airports Revolving Fund. Therefore, the statutory unused authority is cancelled. See Note 15 for additional information.

2. Summary of significant accounting policies

The financial statements have been prepared in accordance with accounting principles generally accepted in Canada.

(a) Valuation of inventory of materials and supplies

Inventory of materials and supplies, held for repair and maintenance purposes at the airports, is valued at the lower of cost and replacement value. ^

(b) Deferred charges

Payments made by the Fund which give rise to future benefits are recorded as deferred charges and are amor- tized over the years to which the benefits relate.

(c) Fixed assets

Fixed assets purchased by the Fund are recorded at cost. Fixed assets transferred to the Fund prior to April 1, 1979 were recorded at appraised values established by the De- partment of Transport in accordance with Treasury Board Circular 1980-7. Fixed assets transferred to the Fund as at April 1, 1979 were recorded at their amortized value at that date. All subsequent transfers of fixed assets from and to Canada are recorded at net book value at the date of transfer.

Project administration costs, including interest incurred during the construction of new airports, are capitalized and included in airport development costs to the extent that these costs are not readily identifiable with specific fixed assets. Additions, renewals and betterments which extend the economic lives of the assets are capitalized. Maintenance and repairs are charged to operations.

(d) Amortization of fixed assets

Amortization is charged on a straight-line method based on the estimated useful life of the asset.

The amortization rates used within the major classes of assets are as follows:

Terminal and facilities 2.5% to 10.0%

Runways and other paved surfaces 2.5% to 6.7%

Machinery and equipment 4.0% to 20.0%

Airport development costs 4.2%

(e) Deferred revenue

Funds received in advance are recorded as deferred revenue and recognized as revenue over the term of the lease.

(f) Terminal control costs

Terminal control costs are for those air navigational ser- vices associated with the approach, landing and take-off of aircraft at an airport and the control of en route flights while traversing a terminal control area. The costing of terminal control is an estimate of direct and indirect costs including amortization for air traffic services, flight ser- vice stations, technical support services, flight calibration, and meteorological services.

(g) Interest associated with capital contributed to the Fund

Interest is allocated on the capital contributed to the Fund. The interest rate (10.52% in 1990-91, 10.40% in 1989-90) is based on Crown corporation borrowing rates weighted against the net book value of capital acquisitions for the last 20 years. An average of the contributed capital balance less surplus in the accumulated net charge against the Fund's authority balance at the beginning and the end of the year is used to calculate the allocated interest.

(h) Employee benefits

Department of Transport employees operating the airports of the Fund are covered by the Public Service Superan- nuation Act and the Supplementary Retirement Benefits Act. The Government of Canada's portion of their pension cost is included in the employee benefit charge assessed against the Fund. The actual payment of the pension is made from the Public Service Superannuation Retirement Benefits Account.

Termination benefits accrue to Department of Transport employees operating airports of the Fund. Payment of these benefits is made to employees on separation or re- tirement. The cost of these benefits is expensed in the year in which they are earned.

(i) Departmental overhead

Departmental overhead reflects the charges by the Depart- ment of Transport for the estimated costs of technical and administrative services provided to the Fund. Since these expenditures are not readily identifiable with specific ser- vices, the charges are allocated to the Fund as a percentage of direct operating and maintenance expenses.

FINANCIAL STATEMENTS OF REVOLVING FUNDS 1 . 5

PUBLIC ACCOUNTS, 1990-91

Airports Revolving Fund Continued

NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 1991— Continued

•in*n 1

(j) Grants in lieu of taxes

Grants in lieu of taxes, imposed on airports of the Fund, are accrued based on estimated municipal assessments adjusted in accordance with the Municipal Grants Act. Grants are paid by the Department of Public Works and recovered from the Fund.

The grants are not finalized until they have been audited by the Department of Public Works, often several years in arrears. Any adjustments upon finalization are reflected in the accounts in the year of settlement.

(k) Services provided to and received from Government de- partments without charge

The estimated costs for services provided to and received from Government departments without charge are in- cluded in their respective revenue and expense categories and are offset by a corresponding amount which is in- cluded under allocations.

(1) Air transportation tax

Air transportation tax is levied under the Excise Tax Act, Part II. The tax is collected by the Department of National Revenue Customs and Excise which transfers funds equivalent to the tax collections to the Department of Transport.

Sufficient tax proceeds are allocated to the Fund in the Main Estimates to cover the estimated shortfall between site-generated revenue and operating costs, amortization and interest. The air transportation tax allocation is sub- sequently revised to offset non-cash adjustments to terminal control costs and departmental overhead, as well as services without charge.

The air transportation tax allocation is included under allocations.

3. Changes in financial statement presentation

Certain 1990 comparative amounts have been reclassified to conform to the presentation adopted in 1991.

4. Long-term receivables

The long-term receivables include $4.2 million from the country's two major airlines as the portion of unpaid fuel concession fees negotiated as a settlement. Payments due total $579,445 annually from 1991-92 to 1998-99 inclusive and $199,750 in 1999-2000 and are non-interest bearing.

The remaining $1.6 million is due from other airlines. Pay- ments due total $798,888 annually from 1991-92 to 1993-94 inclusive and are non-interest bearing.

5. Changes in treatment of fixed assets

Effective April 1, 1990, the Department raised the capitaliz- ation threshold for fixed assets from $500 to $5,000. This change in accounting policy resulted in a retroactive adjust- ment which reduced the 1991 net book value of fixed assets by $1,026,649.

The 1990 figures were restated on a comparable basis, which resulted in reductions of $3,393,154 to the net book value of fixed assets and of $338,300 to amortization expense.

Changes were also made to the amortization rates of some categories of fixed assets. These changes in accounting esti- mates are accounted for only in 1991 and applicable future periods, ie, no retroactive adjustment was made.

6. Fixed assets and accumulated amortization

Fixed assets, at cost and appraised values

Land and land development costs .

Terminals and facilities

Runways and other paved surfaces

Machinery and equipment

Airport development costs

Construction in progress

Accumulated amortization

Terminals and facilities

Runways and other paved surfaces

Machinery and equipment

Airport development costs

Balance at

Balance

beginning

at end

of year

Acquisitions

Disposals

Transfers

of year

(in thousands of dollars)

120,566

(508)

1,156

121,214

863,790

18

(3,092)

68,761

929.477

547,771

(5,008)

21,778

564,541

89,186

295

(3,033)

12.684

99.132

35,604

35,604

61,306

79,238

(103,160)

37,384

1,718,223

79,551

(11,641)

1,219

652.202

57,693

(8,051)

1,787,352

Balance at

Balance

beginning

at end

of year

Amortization

Disposals

of year

(in thousands of dollars)

367,846

28.995

(1,541)

395300

220,331

20.213

(5,146)

235.398

41,903

6,990

(1.364)

47,529

22,122

1,495

23.617

701.844

1 . 6 FINANCIAL STATEMENTS OF REVOLVING FUNDS

PUBLIC ACCOUNTS, 1990-91

Airports Revolving Fund Continued

NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 199\— Continued

7. Development Agreement Terminal 3, Lester B. Pearson International Airport

In 1987, the Department of Transport entered into a devel- opment agreement under which a developer would construct and operate a third terminal building at Lester B. Pearson International Airport in Toronto. A ground lease and related agreements were executed in 1988. The ground lease is for a term of 40 years and the Developer has the option of renewing the lease for a further term of 20 years. Title to the terminal building passes to the Department of Transport, at no cost, automatically at the end of the 20 year renewal term, or at the end of the 40 year lease term if the Developer does not exercise his option to renew.

The Developer paid $2 million on entering into the lease agreement in April 1988 and a further $28 million on Septem- ber 24, 1990. These payments will be recognized as revenue over the 40 year lease term which commenced on March 31, 1991.

The Department of Transport has agreed to provide, under certain specified conditions, loans to the Developer during the first 15 years of the lease. The principal and accumulated interest on these loans may not exceed $70 million and in any one year no more than $8 million may be loaned. As at March 31, 1991, no such loans had been made.

8. Equity of Canada - .:

(a) Accumulated net charge against the Fund's authority

The accumulated net charge against the Fund's authority represents the net accumulation of all cash transactions made through the Consolidated Revenue Fund, the central account through which all Government receipts and dis- bursements flow. By virtue of the Fund's mandate, it receives credit for all revenues collected and is em- powered to draw funds under statutory authority from the Consolidated Revenue Fund for shortfalls up to the maxi- mum of the authorized limit of $80 million.

A drawdown on the Fund's authority occurs when accumu- lated cash disbursements exceed accumulated cash receipts (credit balance) and bears interest at a rate deter- mined by the Minister of Finance. An accumulated excess of cash receipts over cash disbursements (debit balance) represents an addition to the drawing authority of the Fund.

(b) Contributed capital

Contributed capital primarily includes the amounts repre- senting the values assigned to assets transferred from and to Canada and interest associated with capital contributed to the Fund.

(c) Accumulated surplus

The accumulated surplus account represents the net accu- mulation of surpluses and deficits since the establishment of the Fund.

9. Royal Canadian Mounted Police security services

The RCMP provides security services without charge to the Fund. An enhanced level of service in relation to national security is now being provided in addition to the basic security services previously provided. An estimated amount of $29.3 million (1990 $21.4 million) relating to the basic security service is included as part of the operating expenses of the Fund with a corresponding offset included under allocations.

10. Net other services provided to and received from Government departments without charge

The other services provided to and received from the Depart- ment of Transport and other Government departments without charge are recorded and included under their corresponding revenue and expense categories. These services are sum- marized as follows:

1990-91

1989-90

(in thousands of dollars)

Services received

Crash, fire and rescue Department of National Defence

Provincial sale- tax Supply and Services Canada

Telecommunications equipment main- tenance— Department of Transport . . . ,

Other

Services provided Landing fees State tnd military

aircraft ,

Other

1 1 . Allocations

1,548

2,203

3,598 1,144

1,474

2,886

3,408 1,198

8,493

8,966

(6,432) (956)

(3,273) (836)

(7,388)

(4,109)

1,105

4,857

Certain amounts are allocated to the Fund to offset expenses as follows:

1990-91

1989-90

(in thousands of dollars)

53326

19,439

65,501

16,261

72,765 29347

1,105

81,762 21.421

4,857

103,217

108,040

Air transportation tax paid to the Fund

as provided for in the Main Estimates . . . Increased allocation to offset non-cash

adjustments to terminal control costs

and departmental overhead

Total air transportation tax allocation

RCMP security services received

without charge

Net other services provided to and received

from Government departments

without charge

Total allocations

12. Contractual obligations

As at March 31, 1991, the Fund was committed to expendi- tures totalling approximately $57 million (1990 $76 million) under fixed asset construction and maintenance contracts.

13. Airport transfers

In 1989, Cabinet approved a policy to transfer airports to local management. Later that year, the Department of Trans- port signed letters of intent with regional airport authorities to begin negotiating the transfer of Edmonton, Vancouver, and Calgary International Airports and the Montreal International Airports at Dorval and Mirabel.

FINANCIAL STATEMENTS OF REVOLVING FUNDS 1 . 7

PUBLIC ACCOUNTS, 1990-91

Airports Revolving Fund Concluded

NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 1991— Concluded

No transfers have occurred to date but negotiations are con- tinuing and it is expected that long-term leases to transfer the above airports will be concluded in fiscal year 1991-92.

14. Contingent liabilities

The Department of Transport is a defendant in certain pend- ing and threatened litigations related to the operations of the Fund. The aggregate amount of claims in respect thereof as at March 31, 1991 is approximately $88 million. Settlement, if any, resulting from the resolution of these claims will be accounted for in the year in which the settlement occurs.

On May 16, 1989, virtually all major airlines using Canadian airports filed a suit in the Federal Court of Canada naming Her Majesty the Queen in Right of Canada, the Minister of Trans- port and the Department of Transport as defendants. The airlines' claim of $66 million was for fuel concession fees covering the period 1983 to 1988. The major part of this claim relates to the airports which are included in the Fund. How- ever, an undetermined part of this claim relates to other airports operated by the Federal Government.

In December 1989, the Department of Transport obtained agreement with the country's two major airlines by which the airlines agreed:

(a) to discontinue court action (their portion represented ap- proximately 80% of the total claim);

(b) to pay fuel concession fees from December 1, 1989 until March 31, 1991 or the introduction of the new cost re- covery policy, whichever is sooner; and

(c) to remit a portion of the unpaid fuel concession fees as negotiated.

The Department of Transport agreed to discontinue charging the fee after March 31, 1991. The Department of Justice and Transport are working to fully resolve the fuel concession fee litigation and contractual issues in relation to the other air- lines.

15. Termination of the Airports Revolving Fund

In TB minute no. 815267, the Treasury Board approved:

(a) the inclusion of an item in 1990-91 final Supplementary Estimates to discontinue the Revolving Fund effective March 31, 1991,

(b) the winding up of the Fund, and

(c) the transfer of the net assets and responsibility for the continuation of services to the Airports Activity of the Transport Program.

Supplementary Estimates C, Vote 2c provided authority to repeal Section 10 of the Revolving Funds Act, as of March 31, 1991, thereby eliminating the legal basis for the existence of the Airports Revolving Fund.

The schedule attached provides the balances in the accounts of the Airports Revolving Fund prior to the transfer of the total net assets to the Airports Activity of the Transport Program as of March 31, 1991.

SUPPLEMENTARY FINANCIAL INFORMATION UNAUDITED BALANCE SHEET AS AT MARCH 31, 1991 (before termination) (in thousands of dollars) >

ASSETS 1991

Current Accounts receivable

Federal Government 36,746

Outside parties, net of allowance for

doubtful accounts 56,808

Security deposits 7,495

Inventory of materials and supplies 4,180

105.229

Long-term receivables (Note 4) 5,833

Deferred charges 3,825

Fixed (Note 6) 1,787,352

Less: accumulated amortization 701,844

1,085,508

LIABILITIES

Current Accounts payable and accrued liabilities

Federal Government

Outside parties

Security deposits

Contractors holdbacks

Current portion of the provision for employee

termination benefits

Long-term Provision for employee termination

benefits

Deferred revenue

EQUITY OF CANADA (Note 8)

Accumulated net charge against the Fund's

authority

Contributed capital

Accumulated surplus

1991

46,792

16,370

7,495

160

10,869

81,686

6,343 29.187

35,530

1,200,395

(361,500)

1,360,690

83,989

1.083.179

1.200.395

1 . 8 FINANCIAL STATEMENTS OF REVOLVING FUNDS

Defence Production Revolving Fund

PUBLIC ACCOUNTS, 1990-91

MANAGEMENT REPORT

The accompanying financial statements of the Defence Production Revolving Fund have been prepared by Supply and Services Canada in accordance with Treasury Board policies, the Defence Production Act, and reporting requirements and standards of the Receiver General for Canada.

The statements have been prepared on a basis consistent with that of the preceding year and are consistent with information presented elsewhere in the Public Accounts and with departmental reports. Significant accounting policies used in the preparation of the financial statements are included in the notes to financial statements. Some of the information included in these financial statements is based on management's best estimates and judgements and gives due consideration to materiality.

The primary responsibility for the integrity and objectivity of these statements rests with the Finance and Administration Sector. This responsibility is discharged by the Financial Policy, Accounting and Reporting Systems Directorate which develops and disseminates financial management and accounting policies and issues specific directives necessary to maintain standards of accounting and financial management. Furthermore, the Department maintains internal controls designed to indicate accountability, provide assurance that assets are safeguarded and that reliable financial records are kept. Financial management and internal control systems are augmented by the maintenance of internal audit programs.

Approved by:

J. G. SEGUIN

Director General

Financial Policy, Accounting and Reporting Systems Directorate

S. E. WHITELEY

Assistant Deputy Minister. Finance and Administration

June 21, 1991

DEFENCE PRODUCTION REVOLVING FUND

RECONCILIATION OF UNUSED AUTHORITY MARCH 31, 199 1

f

1991

1990

$ S

(I) (I)

Joint authority limit 100,000,000 100,000,000

Less: authority limit applied to the Defence

Production Loan Account 26,324,007 26,324,007

Net authority available for the Fund's account 73,675,993 73,675,993

Unused authority carried forward 73,675,993 73,675,993

DEFENCE PRODUCTION LOAN ACCOUNT

RECONCILIATION OF UNUSED AUTHORITY MARCH 31, 1991

1991 1990

$ $

(1) (1)

Joint authority limit 100,000,000 100,000,000

Less: authority applied to the Defence

Production Revolving Fund 73,675,993 73,675,993

Net authority available for the loan

account 26,324,007 26,324,007

Net authority used 26,324,007 26,324,007

Unused authority carried forward

* * Joint continuing authority limit for the Defence Production Revolving Fund and Defence Production Loan Account is $100,000,000, as explained in Note 1.

'<>«!. .

STATEMENT OF AUTHORITY PROVIDED FOR THE YEAR ENDED MARCH 31, 1991

STATEMENT OF CHANGES IN FINANCIAL POSITION FOR THE YEAR ENDED MARCH 31, 1991

1991

1990

Estimates Actual Estimates Actual

$ $

Working capital

change (1,600,000)

Other items

Authority provided (1 ,600,000)

S $

(1,850,000) 32,913

(1,850,000) 32,913

Operating activities: Change in current assets and liabilities . . .

Net fmancial resources provided and change in the accumulated net charge against the Fund's authority account, during the year

Accumulated net charge against the Fund's authority account, beginning of year

Accumulated net charge against the Fund's authority account, end of year

1991

1990

$ 32,913

32,913

(32,913)

FINANCIAL STATEMENTS OF REVOLVING FUNDS 1 . 9

..ID..

PUBLIC ACCOUNTS, 1990-91

Defence Production Revolving Fund Concluded , ?<. v ,i; *:»,

NOTES TO THE FINANCIAL STATEMENTS

MARCH 31, 1991 ' ,,

1 . Purpose and authority "^i" '

The Defence Production Revolving Fund has been estab- lished by Section 15 of the Defence Production Act. It was established in 1951 for the purpose of:

(a) financing the stockpiling of defence supplies or strategic materials;

(b) making loans or advances to aid in defence procurement such as working capital loans as advance payments on contracts but not including loans or advance payments for capital purposes; and

(c) permitting initial payments for defence supplies which can be promptly billed to a Government department, agency or an associated government in advance of delivery of goods.

The Adjustment of Accounts Act (S.C. 1980, c. 17) had the effect of creating a separate Defence Production Loan Account for loans or advances authorized under the Defence Production Act, item (b) above.

The Fund and the Defence Production Loan Account have a continuing non-lapsing authority from the Adjustment of Ac- counts Act to make payments out of the Consolidated Revenue Fund, the total of which is not to exceed at any time by more than $100 million the aggregate of amounts received on these two accounts. An amount of $15,408,997, representing net assets assumed by the Fund, was charged to this authority when the Fund became budgetary in 1981. Pursuant to Treasury Board authority, the accumulated surplus in the amount of $455,935 has been transferred to the Fund's authority du