Financial Statements (Unaudited)
For the year ended March 31, 2013

Table of Contents

• Statement of Management Responsibility Including Internal Control Over Financial Reporting
• Statement of Financial Position (Unaudited) as at March 31
• Statement of Operations and Departmental Net Financial Position (Unaudited) for the year ended March 31
• Statement of Change in Departmental Net Debt (Unaudited) for the year ended March 31
• Statement of Cash Flows (Unaudited) for the year ended March 31
• Notes to the Financial Statements (Unaudited) for the year ended March 31
  • Note 1. Authority and objectives
  • Note 2. Summary of significant accounting policies
  • Note 3. Parliamentary authorities
  • Note 4. Accounts payable and accrued liabilities
  • Note 5. Employee future benefits
  • Note 6. Accounts receivable and advances
  • Note 7. Tangible capital assets
  • Note 8. Contractual obligations
  • Note 9. Contingent liabilities
  • Note 10. Related party transactions
  • Note 11. Transfers from/ to other government department
  • Note 12. Segmented information
  • Note 13. Comparative information
• ANNEX to the Statement of Management Responsibility Including Internal Control over Financial Reporting for the Fiscal Year ending March 31, 2013

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, 2013, and all information contained in these statements rests with the management of Infrastructure 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 fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of Infrastructure Canada's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in Infrastructure Canada's Departmental Performance Report, is consistent with these financial statements.

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

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

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

A risk-based assessment of the system of ICFR for the year ended March 31, 2013 was completed in accordance with the Treasury Board Policy on Internal Control and the results and action plans are summarized in the annex.

The effectiveness and adequacy of Infrastructure Canada's system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of Infrastructure Canada's 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 of Infrastructure Canada.

The financial statements of Infrastructure Canada have not been audited.

Statement of Financial Position (Unaudited)
As at March 31

(in thousands of dollars)

	2013	2012
Liabilities
Accounts payable and accrued liabilities (note 4. Accounts payable and accrued liabilities)	407,845	691,249
Vacation pay and compensatory leave	1,287	1,303
Employee future benefits (note 5. Employee future benefits)	1,981	4,244
Total liabilities	411,113	696,796
Financial assets
Due from Consolidated Revenue Fund	398,573	544,862
Accounts receivable and advances (note 6. Accounts receivable and advances)	9,313	178,956
Total financial assets	407,886	723,818
Departmental net debt/ (net financial assets)	3,227	(27,022)
Non-Financial assets
Tangible capital assets (note 7. Tangible Capital Assets)	6,035	5,168
Total non-financial assets	6,035	5,168
Departmental net financial position	2,808	32,190

Contractual obligations (note 8. Contractual obligations)
The accompanying notes form an integral part of these financial statements.

Statement of Operations and Departmental Net Financial Position (Unaudited)
For the year Ended March 31

(in thousands of dollars)

	2013 Planned Results	2013	2012
Expenses
Provinces, territories and municipalities have federal financial support for their infrastructure priorities	2,202,890	2,203,601	2,396,135
Funding for quality, cost-effective public infrastructure that meets the needs of Canadians in a competitive economy, a cleaner environment and liveable communities is provided	2,846,061	1,512,454	1,981,549
Internal Services	37,982	34,155	41,281
Total expenses	5,086,933	3,750,210	4,418,965
Net cost from continuing operations	5,086,933	3,750,210	4,418,965
Transferred operations
Expenses (note 11. Transfers from/ to other government department)	-	-	1,600
Net cost of transferred operations	-	-	1,600
Net cost of operations before government funding and transfers	5,086,933	3,750,210	4,420,565
Government funding
Net cash provided by Government		3,864,363	5,620,199
Change in due from Consolidated Revenue Fund		(146,289)	(1,171,742)
Services provided without charge by other government departments (note 10. Related Party Transactions)		2,754	2,876
Net cost of operations after government funding		29,382	(30,768)
Departmental net financial position – Beginning of year		32,190	1,422
Departmental net financial position – End of year		2,808	32,190

Segmented Information (note 12. Segmented information)
The accompanying notes form an integral part of these financial statements.

Statement of Change in Departmental Net Debt (Unaudited)
For the Year Ended March 31

(in thousands of dollars)

	2013	2012
Net cost of operations after government funding	29,382	(30,768)
Change due to tangible capital assets
Acquisition of tangible capital assets (note 7. Tangible capital assets)	1,630	1,807
Amortization of tangible capital assets (note 7. Tangible capital assets)	(763)	(2,520)
Total change due to tangible capital assets	867	(713)
Total change due to prepaid expenses	-	(4,996)
Net increase (decrease) in departmental net debt/ (net financial assets)	30,249	(36,477)
Departmental net debt/ (net financial assets) – Beginning of year	(27,022)	9,455
Departmental net debt/ (net financial assets) – End of year	3,227	(27,022)

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

Statement of Cash Flows (Unaudited)
For the Year Ended March 31

(in thousands of dollars)

	2013	2012
Operating activities
Net cost of operations before government funding	3,750,210	4,420,565
Non-cash items:
Amortization of tangible capital assets (note 7. Tangible capital assets)	(763)	(2,520)
Services provided without charge by other government departments (note 10. Related party transactions)	(2,754)	(2,876)
Variations in Statement of Financial Position:
Increase (decrease) in receivables and advances (note 6. Accounts receivable and advances)	(169,643)	121,317
Decrease (increase) in accounts payable and accrued liabilities (note 4. Accounts payable and accrued liabilities)	283,404	1,083,000
Decrease (increase) in vacation pay and compensatory leave	16	1,127
Decrease (increase) in employee future benefits (note 5. Employee future benefits)	2,263	2,775
Cash used by operating activities	3,862,733	5,623,388
Capital investment activities:
Acquisitions of tangible capital assets (note 7. Tangible capital assets)	1,630	1,807
Prepaid expenses	-	(4,996)
Cash used in capital investing activities	1,630	(3,189)
Net cash provided by Government of Canada	3,864,363	5,620,199

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

Notes to the Financial Statements (Unaudited)
For the Year Ended March 31

1. Authority and Objectives

The Office of Infrastructure of Canada (INFC) was created in 2002 as a separate organization under Schedule I.1 of the Financial Administration Act. The applied name for this organization is Infrastructure Canada.

The department is funded through annual appropriations received from the Parliament of Canada and is not taxable under the provisions of the Income Tax Act. INFC reports to the Minister of Transport, Infrastructure and Communities.

INFC was established to lead the Government of Canada's effort to address infrastructure challenges through strategic investments in provincial, territorial and municipal assets, engagement in key partnerships, and the development and implementation of sound policies. Order in Council 2004-325 authorizes the Minister to enter into transfer payment agreements and contracts related to infrastructure initiatives in Canada.

INFC delivers its mandate under two strategic outcomes and internal services. INFC outcomes are described below.

Provinces, territories and municipalities have federal financial support for their infrastructure priorities: Provides federal transfers to provincial, territorial and municipal governments for their infrastructure priorities in order to help maintain a high level of quality core public infrastructure across the country. The program activities under this strategic outcome are: Provincial-Territorial Infrastructure Base Fund and Gas Tax Fund.

Funding for quality, cost-effective public infrastructure that meets the needs of Canadians in a competitive economy, a cleaner environment and liveable communities is provided: Provides targeted project-specific investments to address federal/provincial priorities in both large and small communities as well as large strategic investments of national and regional benefit. The program activities under this strategic outcome are: Building Canada Fund-Communities Component, Building Canada Fund-Major Infrastructure Component, Green Infrastructure Fund, Canada Strategic Infrastructure Fund, Municipal Rural Infrastructure Fund, Border Infrastructure Fund and Economic Analysis and Research.

Internal services: Internal Services are groups of activities and resources that are administered to support the needs of programs and other corporate obligations of INFC. Internal Services include only those activities and resources that apply across INFC, not those provided specifically to a program.

2. Summary of Significant Accounting Policies

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

Significant accounting policies are as follows:

1. Parliamentary appropriations – INFC is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to INFC 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 Departmental Net Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3. Parliamentary authorities provides a reconciliation between the bases of reporting. The planned results amounts in the Statement of Operations and Departmental Net Financial Position are the amounts reported in the future-oriented financial statements included in the 2012-13 Report on the Plans and Priorities.
2. Net cash provided by government - INFC operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by INFC is deposited to the CRF and all cash disbursements made by INFC are paid from the CRF. The net cash provided by Government is the difference between all cash receipts and all cash disbursements including transactions between departments of the Government.
3. Amounts due from or to the CRF are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the net amount of cash that INFC is entitled to draw from the CRF without further appropriations to discharge its liabilities.
4. Expenses – Expenses are recorded on an accrual basis.
   1. 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 transfer payment expense and as a receivable.
   2. Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
   3. Services provided without charge by other government departments for accommodation, and employer contributions to the health and dental insurance plans are recorded as operating expenses at their estimated cost.
5. Employee future benefits:
   1. Pension benefits: Eligible employees participate in the Public Service Pension Plan (Public Service Superannuation Act), a multi-employer plan administered by the Government. INFC's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. INFC'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: Employees entitled to severance benefits under labour contracts or conditions of employment earn these benefits as services necessary to earn them are rendered. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.
6. Accounts receivable and advances are stated at the lower of cost and net recoverable value; a valuation allowance is recorded for receivables where recovery is considered uncertain.
7. Tangible capital assets – All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. INFC does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian Reserves; and museum collections. Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:

   Asset class	Amortization period
   Informatics Hardware	5 to 10 years
   Informatics Software – Purchased and Developed	3 to 7 years
   Leasehold Improvements	period of lease

   
   Assets under construction are recorded in the applicable capital asset class in the year that they become available for use and are not amortized until they become available for use.
8. Contingent liabilities – Contingent liabilities 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. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.
9. Measurement uncertainty – The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are the payables at year end, liability for contingent liabilities, employee severance benefits and the useful life of tangible capital assets. Actual results could significantly differ from those estimated. Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.

3. Parliamentary authorities

INFC 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, INFC has different net results of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled in the following tables:

a) Reconciliation of net cost of operations to current year appropriations used

b) Authorities provided and used

4. Accounts payable and accrued liabilities

(in thousands of dollars)

	2013	2012
Accounts Payable – Other government departments and agencies	8,211	247
Accounts Payable – External parties	399,441	690,797
Total accounts payable	407,652	691,044
Accrued Liabilities	193	205
Total accounts payable and accrued liabilities	407,845	691,249

5. Employee future benefits

a) Pension benefits

INFC's employees participate in the Public Service Pension Plan, which is sponsored and administered by the Government. Pension benefits accrue up to a maximum period of 35 years at a rate of 2 percent per year of pensionable service times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Quebec Pension Plans benefits and they are indexed to inflation.

Both the employees and INFC contribute to the cost of the Plan. The 2012-13 expense amounts to $3,426,689 ($3,672,649 in 2011-12), which represents approximately 1.7 times (1.8 in 2011-12) the contributions by employees.

INFC'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

INFC provides severance benefits to its employees based on eligibility, years of service and salary at termination of employment. These severance benefits are not pre-funded. Benefits will be paid from future authorities. Information about the severance benefits, measured as at March 31, is as follows:

1. As part of collective agreement negotiations with certain employee groups, and changes to conditions of employment for executives and certain non-represented employees, the accumulation of severance benefits under the employee severance pay program ceased for these employees commencing in 2012. Employees subject to these changes have been given the option to be immediately paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits on termination from the public service. These changes have been reflected in the calculation of the outstanding severance benefit obligation.

6. Accounts receivable and advances

(in thousands of dollars)

	2013	2012
Receivables – Other government departments and agencies	9,312	178,947
Advances – Employees	1	9
Total accounts receivable and advances	9,313	178,956

7. Tangible capital assets

See the table of Tangible capital assets

8. Contractual obligations

See the table of Contractual obligation

9. Contingent liabilities

Contingent liabilities arise in the normal course of operations and their ultimate disposition is unknown.

a) Claims and litigation

Claims have been made against Infrastructure Canada 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. Infrastructure Canada has recorded an allowance for claims and litigations where it is likely that there will be a future payment and a reasonable estimate of the loss can be made. Claims and litigations for which the outcome is not determinable and a reasonable estimate can be made by management amount to approximately $400,000 (nil in 2011-12) at March 31, 2013.

10. Related party transactions

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

a) Common services provided without charge by other government departments

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

The Government has centralized some of its administrative activities for efficiency and 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 Works and Government Services Canada, are not included as an expense in INFC's Statement of Operations and Departmental Net Financial Position.

b) Other transactions with related parties

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

Other Federal Government departments (FDPs) and agencies administer certain programs on behalf of INFC. Funds are advanced to these FDPs and agencies, namely Transport Canada and the Regional Development Agencies, during the fiscal year. An account receivable is recorded for the unused portion that will be returned to INFC after year end or accounts payable when INFC must provide funds to these FDPs and agencies.

11. Transfers from/ to other government departments

Effective November 15, 2011, INFC transferred responsibility for the delivery of certain information technology services to Shared Services Canada (SSC) in accordance with Order-in-Council numbers 2011-0877 and 2011-1297, including the stewardship responsibility for the assets and liabilities related to the program.

During the transition period from November 15, 2011 to March 31, 2012, INFC continued to administer the transferred activities on behalf of Shared Services Canada. The administered expenses amounted to $1.6 million respectively, for the year. These revenues and expenses are not recorded in these financial statements.

12. Segmented information

See the table of Segmented Information

13. Comparative information

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

ANNEX to the Statement of Management Responsibility Including Internal Control over Financial Reporting for the Fiscal Year ending March 31, 2013

Note to Reader

With the Treasury Board Policy on Internal Control, effective April 1, 2009, departments are now required to demonstrate the measures they are taking to maintain an effective system of internal control over financial reporting (ICFR).

As part of this policy, departments are expected to conduct annual assessments of their system of ICFR, establish action plans to address any necessary adjustments, and to attach to their Statements of Management Responsibility a summary of their assessment results and action plan.

Effective systems of ICFR aim to achieve reliable financial statements and to provide assurances that:

• Transactions are appropriately authorized;
• Financial records are properly maintained;
• Assets are safeguarded from risks such as waste, abuse, loss, fraud and mismanagement; and
• Applicable laws, regulations and policies are complied with.

It is important to note that the system of ICFR is not designed to eliminate all risks, rather to mitigate risk to a reasonable level with controls that are balanced with and proportionate to the risks they aim to mitigate.

The maintenance of an effective system of ICFR is an ongoing process designed to identify, assess effectiveness and adjust as required key risks and associated key controls, as well as to monitor its performance in support of continuous improvement. As a result, the scope, pace and status of those departmental assessments of the effectiveness of their system of ICFR will vary from one organization to the other based on risks and taking into account their unique circumstances.

1. Introduction

This document provides summary information on the measures taken by Infrastructure Canada to maintain an effective system of internal control over financial reporting (ICFR) including information on internal control management and assessment results and related action plans.

1.1 Authority, Mandate and Program Activities

Detailed information on Infrastructure Canada's authority, mandate, and program activities can be found in its Report on Plans and Priorities and Departmental Performance Report.

1.2 Financial highlights

Financial statements (unaudited) of Infrastructure Canada for fiscal-year 2012-2013 can be found at Infrastructure Canada. Additional information can be found in the Public Accounts of Canada.

• Total expenses were $3,750M.
  • 98.7% of total expenses ($3,700M) were spent on Transfer Payments (contributions).
  • Infrastructure Canada has approximately 320 employees, with Salary costs ($37.5M) representing approximately 0.01% of total expenses.
• Financial assets included accounts receivable of $9.3M (0.02% of financial assets)
  • 96.9% of accounts receivable ($9.0M) related to Transfer Payments.
• Tangible capital assets consist mostly of informatics hardware and software.
• Total liabilities were $411.1M.
  • Accounts payable and accrued liabilities represent $407.5M (99.2%) of total liabilities.
• Infrastructure Canada uses two principal information systems that are critical to its operations and financial reporting which are the departmental financial system (SAP-IFMS), which is hosted by another government department, and an internal application to manage its contribution programs. In addition, it uses the various Receiver General systems.

1.3 Service arrangements relevant to financial statements

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

Common Arrangements:

• Public Works and Government Services Canada (PWGSC) centrally administers the payments of salaries and the procurement of some goods and services, and provides accommodation services;
• Government-wide pay and Receiver General central systems administered by PWGSC. The central systems consist of six individual systems: Standard Payment System (SPS), Government Banking System (GBS), Regional Pay System (RPS), Payroll System-General Ledger (PS-GL), Receiver General-General Ledger (RG-GL), and the Central Financial Management Reporting System (CFMRS).
• The Treasury Board Secretariat provides Infrastructure Canada with information used to calculate various accruals and allowances, such as the accrued severance liability and employee benefit plan, and pays the employer's contribution to the health and dental insurance plans.
• The Department of Justice provides legal services to Infrastructure Canada.
• Shared Services Canada (SSC) was created on August 4, 2011 to consolidate, streamline and improve the government's information technology (IT) infrastructure services, specifically email, data centre and network services for 42 federal departments and agencies.

Specific Arrangements:

• Industry Canada is the host of Infrastructure Canada's departmental financial management system, the Integrated Financial Management System (IFMS). The service arrangement also includes system support.
• Infrastructure Canada acquires pay compensation services from PWGSC.
• Federal delivery partners (Transport Canada, Atlantic Canada Opportunities Agency, Western Economic Diversification Canada, Federal Economic Development Agency for Southern Ontario, Economic Development Agency of Canada for the Regions of Quebec, and the Canadian Northern Economic Development Agency) manage certain contribution programs on behalf of Infrastructure Canada.
• Infrastructure Canada's security services are acquired through an arrangement with Citizenship and Immigration Canada.

1.4 Material changes in fiscal-year 2012-2013

Louis Lévesque was appointed Deputy Minister of Transport, Infrastructure and Communities on November 12, 2012 and Marie Lemay was appointed Associate Deputy Minister, Infrastructure effective August 27, 2012.

2. The Department's control environment relevant to ICFR

Infrastructure Canada recognizes the importance of senior management leadership in ensuring that staff at all levels understands their roles in maintaining effective systems of ICFR and are well-equipped to exercise these responsibilities effectively. Infrastructure Canada's focus is to ensure risks are well-managed through a responsive and risk-based control environment that enables continuous improvement and innovation.

2.1 Key positions, roles and responsibilities

Below are Infrastructure Canada's key positions and committees with responsibilities for maintaining and reviewing the effectiveness of its system of ICFR.

Deputy Head

Infrastructure Canada's Deputy Head, as Accounting Officer, assumes overall responsibility and leadership for the measures taken to maintain an effective system of internal control. In this role, the Deputy Head sits as an ex-officio member of the Departmental Audit Committee. In addition, the Deputy Head is the chairperson of the Departmental Management Committee.

Associate Deputy Minister

The Associate Deputy Minister reports directly to the Deputy Head. In this role, the Associate Deputy Minister is the primary support to the Deputy Head in discharging his obligations as Accounting Officer and for ensuring that an effective system of ICFR is in place and functioning as intended. In the Deputy Head's absence, the Associate Deputy Minister is the chairperson of the Departmental Management Committee.

Chief Financial Officer (CFO)

Infrastructure Canada's CFO reports directly to the Deputy Head and provides leadership for the coordination, coherence and focus on the design and maintenance of an effective and integrated system of ICFR, including its annual assessment. The CFO's responsibilities also include management of Infrastructure Canada's Corporate Risk Profile.

Senior Departmental Managers

Infrastructure Canada's senior departmental managers in charge of program delivery are responsible for maintaining and reviewing the effectiveness of the system of ICFR falling within their area of responsibility.

Chief Audit Executive (CAE)

Infrastructure Canada's CAE reports directly to the Deputy Head and provides assurance through periodic internal audits which are instrumental to the maintenance of an effective system of ICFR.

Departmental Audit Committee (DAC)

The DAC is an advisory committee that provides objective views on the departments risk management, control and governance frameworks. It is comprised of four external members. As such, it reviews Infrastructure Canada's Corporate Risk Profile and its system of internal control, including the assessment and action plans relating to the system of ICFR.

Departmental Management Committee (DMC)

As Infrastructure Canada's central decision-making body, the DMC reviews, approves and monitors the Corporate Risk Profile and the departmental system of internal control, including the assessment and action plans relating to the system of ICFR.

2.2 Key measures taken by Infrastructure Canada

Infrastructure Canada's control environment incorporates a series of measures to equip its staff to manage risks through raising awareness, providing appropriate knowledge and tools, as well as developing skills. Key measures include:

• Governance and strategic direction: Departmental Management Committee, Departmental Audit Committee, People Management Committee, Investment Planning Committee, various external stakeholder committees;
• Public service values: Infrastructure Canada's new Code of Conduct, Conflict of Interest and Post-Employment Guidelines, and Fraud Policy were all launched in April 2012. These new policies and codes build on the previous ones by more clearly defining values, and providing practical examples of how they guide actions. In addition, there is a new Values and Ethics Corner on the department's Intranet, a Values and Ethics Champion and an intra-departmental committee promoting values and ethics throughout the department;
• Policies and programs: Program Activity Architecture (PAA); departmental procedures tailored to Infrastructure Canada's control environment; a Delegations of Authority Instrument and Matrix;
• People: Departmental Integrated Business and Human Resources Plan, supported by Integrated Business and Human Resources Plans for each branch;
• Asset Management: Investment Plan; Information Management and Information Technology Steering Committee; Investment Management Committee;
• Risk Management: Corporate Risk Profile, Branch Risk Profiles, Transfer Payment Program Risk Management Frameworks; Chief Risk Officer reporting through the Chief Financial Officer organization;
• Accountability: Annual performance agreements which clearly set out senior management's financial management responsibilities; and
• Internal Audit: a risk-based audit plan.

3. Departmental assessment results during fiscal year 2012-2013

During 2012-13, the Department completed some of the documentation and design effectiveness testing of its key control areas.

3.1 Design effectiveness testing of key controls

In the current year, Infrastructure Canada has completed the documentation surrounding its Entity-Level Controls (ELCs) and commenced its design effectiveness testing. As a result of this work, the department has thus far identified the following remediation required:

• Risk Management: Develop more detailed financial fraud risk assessment questionnaires to better support the overall ICFR annual risk assessment exercise.
• Stewardship: Clarify the roles and responsibilities for departmental financial policies/procedures and increase the frequency of their communication/training to users.
• Stewardship: Establish and document a written, formal process for developing and approving financial management documents such as Financial Status Report and Main Estimates.

The department also completed the documentation surrounding its IT general controls (ITGCs) for its most critical system, IFMS, and commenced its design effectiveness testing. As a result of this work, Infrastructure Canada has thus far identified the following remediation:

• User Access: Develop written procedures for the management of IFMS user access.
• Periodic User Validation: Increase the frequency of IFMS user reviews from annually to quarterly.
• Terminated User Access: Ensure action is taken to deactivate user accounts within 2 business days of the employees' departure dates.
• Change Management: Negotiate with Industry Canada to participate as a user department in their Change Advisory Board meetings when IFMS change management issues are on the agenda.

Lastly, the department completed the documentation of two key business processes — Procure-to-Payment and Financial Statement Preparation. In addition, the department completed the design effectiveness testing of Financial Statement Preparation business process. Remediation of key control deficiencies has started in this control area.

As a result of design effectiveness testing of Financial Statement Preparation, Infrastructure Canada identified the following remediation:

• Notes and financial disclosures: The Contractual Obligations note to the financial statements should be reconciled to the contracting data in IFMS to ensure accuracy and completeness of the Operating fund contractual obligations disclosed.
• Adjusting entries: Journal vouchers should be properly approved before being recorded in the financial system.
• Payables and Receivables: Efforts should be made to improve the level of information provided to the DCFO and/or the Fund Centre Managers responsible for certifying PAYE and RAYE balances, in order to enhance the level of confidence involved in ensuring that estimates are accurate and complete.

3.2 Operating effectiveness testing of key controls

During 2012-2013 Infrastructure Canada has continued to make progress in assessing and improving its key controls. The testing of operating effectiveness of key controls will commence in 2013-2014.

3.3 On-going monitoring of key controls

Infrastructure Canada will begin performing the monitoring of its key controls once it has completed the assessment of the operating effectiveness testing.

4. Departmental Action Plan

4.1 Progress during fiscal year 2012-13

During 2012-13, the Department has continued to make progress in assessing and improving its key controls. Below is a summary of the main progress made by the Department based on the plans identified in the previous fiscal year's annex:

Elements in action plan	2012-13		2013-14	2014-15
	Complete	Advanced	Planned	Ongoing
Documentation
Document, including internal control matrix, the Manage Transfer Payment Business Process		✔
Document, including internal control matrix, the Manage Payroll Business Process			✔
Document, including internal control matrix, the Manage Procure-to-Payment Business Process	✔
Document, including internal control matrix, the Manage Financial Statement Preparation Business Process	✔
Document the assessment of IT general controls		✔
Initiate a fraud risk assessment, including the identification of key controls addressing fraud risks		✔
Assessment of Design Effectiveness
Assess the design effectiveness of Manage Transfer Payments Business Process including process walkthroughs			✔
Assess the design effectiveness of Manage Procure-to-Payment Business Process including process walkthroughs		✔
Assess the design effectiveness of Manage Payroll Business Process including process walkthroughs			✔
Assess the design effectiveness of Manage Financial Statement Preparation Business Process including process walkthroughs		✔
Assess the design effectiveness of IT general controls			✔
Assess the design effectiveness of Entity-level controls			✔
Assessment of Operating Effectiveness
Testing of operating effectiveness for Manage Transfer Payments			✔
Testing of operating effectiveness for Manage Procure-to-Payment			✔
Testing of operating effectiveness for Manage Payroll			✔
Testing of operating effectiveness for Manage Financial Statement Preparation			✔
Test of operating effectiveness of IT general controls			✔
Testing of operating effectiveness for Entity-level controls			✔
On-going Monitoring
On-going monitoring and reporting of the effectiveness of Infrastructure Canada's system of ICFR				✔

4.2 Status and action plan for the next fiscal year and subsequent years

Building on progress to date, the Department is positioned to complete the full assessment of its system of ICFR in 2013-14. At that time, the department will be applying its rotational on-going monitoring plan to reassess control performance on a risk basis across all control areas. The status and action plan for the completion of the identified control areas for the next fiscal year are reflected in the table shown in section 4.1 above.