Financial Statements (unaudited) - For the year ended March 31, 2018

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, 2018, 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 Results Report, is consistent with these financial statements.

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

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, 2018 was completed in accordance with the Treasury Board Policy on Financial Management and the results and action plans are summarized in the annex.

The effectiveness and adequacy of 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.

Infrastructure Canada
Statement of Financial Position (Unaudited)
As at March 31
(in thousands of dollars)

N/A	2018	2017
Liabilities:
Construction in Progress - New Champlain Bridge Corridor Project (note 4)	1,419,127	1,213,581
Accounts payable and accrued liabilities (note 5)	580,356	147,457
Contingent liabilities (note 6)	7,000	7,000
Vacation pay and compensatory leave	2,591	1,773
Employee future benefits (note 7)	2,172	1,691
Total gross liabilities	2,011,246	1,371,502
Liabilities held on behalf of Government (note 15)	(33)	N/A-
Total net liabilities	2,011,213	1,371,502
Financial assets:
Due from Consolidated Revenue Fund	499,538	94,980
Accounts receivable and advances (note 8)	84,390	52,478
Loan receivable (note 15)	536	N/A-
Total gross assets	584,464	147,458
Financial assets held on behalf of Government (note 15)	(3,941)	N/A-
Total financial assets	580,523	147,458
Departmental net debt	1,430,690	1,224,045
Non-Financial assets:
Tangible capital assets (note 9)	2,144,924	1,371,707
Total non-financial assets	2,144,924	1,371,707
Departmental net financial position	714,234	147,662

Contractual obligations (note 10)

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)

N/A	2018 Planned Results	2018	2017
Expenses by Strategic Outcome:
Public infrastructure for a More Prosperous Canada	6,449,646	3,717,487	3,154,124
Internal Services	46,685	47,702	38,927
Total expenses	6,496,331	3,765,189	3,193,051
Revenues:
Miscellaneous Revenue (note 11)	N/A-	3,522	114
Revenues earned on behalf of Government	N/A-	(3,522)	(114)
Total revenues	N/A-	N/A-	N/A-
Net cost of operations before government funding and transfers	6,496,331	3,765,189	3,193,051
Government funding and transfers:
Net cash provided by Government (note 15)	N/A-	3,920,431	3,291,011
Change in due from Consolidated Revenue Fund	N/A-	404,558	(87,153)
Services provided without charge by other government departments (note 12)	N/A-	6,796	6,433
Transfer of assets and liabilities from (to) other government departments (note 13)	N/A-	(24)	67,179
Net cost of operations after government funding and transfers	N/A-	(566,572)	(84,419)
Departmental net financial position - Beginning of year	N/A-	147,662	63,243
Departmental net financial position - End of year	N/A-	714,234	147,662

Segmented Information (note 14)

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)

N/A	2018	2017
Net cost of operations after government funding and transfers	(566,572)	(84,419)
Change due to tangible capital assets:
Acquisition of tangible capital assets (note 9)	775,290	664,511
Amortization of tangible capital assets (note 9)	(2,049)	(1,275)
Transfer of assets and liabilities from (to) other government departments (note 13)	(24)	67,179
Proceeds from disposal of tangible capital assets	N/A-	(3)
Net (loss) gain on disposal of tangible capital assets including adjustments (note 9)	N/A-	(153)
Total change due to tangible capital assets	773,217	730,260
Net increase (decrease) in departmental net debt	206,645	645,841
Departmental net debt - Beginning of year	1,224,045	578,204
Departmental net debt - End of year	1,430,690	1,224,045

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)

N/A	2018	2017
Operating activities:
Net cost of operations before government funding and transfers	3,765,189	3,193,051
Non-cash items:
Construction in Progress - New Champlain Bridge Corridor Project (note 9)	205,546	639,149
Net gain (loss) on disposal of tangible capital assets (note 9)	N/A-	(153)
Amortization of tangible capital assets (note 9)	(2,049)	(1,275)
Services provided without charge by other government departments (note 12)	(6,796)	(6,433)
Variations in Statement of Financial Position:
Increase (decrease) in accounts receivable and advances	32,026	45,731
Decrease (increase) in employee future benefits (note 7)	(480)	582
Decrease (increase) in vacation pay and compensatory leave	(818)	(268)
Decrease (increase) in contingent liabilities (note 6)	N/A-	(7,000)
Decrease (increase) in Construction in Progress - New Champlain Bridge Corridor Project (note 4)	(205,546)	(639,149)
Decrease (increase) in accounts payable and accrued liabilities (note 5)	(436,361)	41,417
Cash used in operating activities	3,350,711	3,265,652
Capital investment activities:
Acquisitions of tangible capital assets (note 9)	569,744	25,362
Transfer of asset from (to) another government department note 13)	(24)	N/A-
Proceeds from disposal of tangible capital assets	N/A-	(3)
Cash used in capital investing activities	569,720	25,359
Net cash provided by Government of Canada (note 15)	3,920,431	3,291,011

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

Notes to the Financial Statements (Unaudited)

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.

INFC is funded through annual and statutory 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 Infrastructure and Communities.

Infrastructure Canada works closely with all orders of government and other partners to enable investments in social, green, public transit and other core public infrastructure, as well as trade and transportation infrastructure. Order in Council 2004-325 authorizes the Minister of INFC to enter into transfer payment agreements and contracts related to infrastructure initiatives in Canada.

As per Order in Council P.C. 2014-144 dated February 10, 2014, ministerial responsibility for the Federal Montreal Bridges group, which includes the New Bridge for the St Lawrence Corridor Project^{Footnote 1} and oversight of the Jacques Cartier and Champlain Bridges Incorporated (JCCBI) was transferred from the Minister of Transport to the Minister of Infrastructure and Communities (effective February 13, 2014). The enabling legislation for this project, the New Bridge for the St. Lawrence Act, was enacted on June 19, 2014.

Effective November 4, 2015, responsibility for the Windsor-Detroit Bridge Authority was transferred from the Minister of Transport to the Minister of Infrastructure and Communities. This Crown Corporation is responsible for the procurement process for the design, construction, operation and maintenance for the new publicly-owned Gordie Howe International Bridge between Windsor, Ontario and Detroit, Michigan through a public-private partnership.

Also effective on November 4, 2015, the Minister of Infrastructure and Communities was designated as the Minister responsible for federal matters relating to the Toronto Waterfront Revitalization Initiative.

As per Order in Council P.C. 2017-1007 dated July 4, 2017, the Minister of Infrastructure, Communities and Intergovernmental Affairs was named as the Minister for the purposes of the Canada Infrastructure Bank Act.

As per Order in Council P.C. 2017-1329 dated November 1, 2017, the Governor in Council, on the recommendation of the Minister of Infrastructure, Communities and Intergovernmental Affairs and pursuant to subsection 209.1(3) of the Jobs Growth and Long-term Prosperity Act, approved the dissolution of PPP Canada Inc.

As per Order in Council P.C. 2018-0966 effective June 21, 2018, the Minister’s legal name changed from the “Minister of Infrastructure, Communities and Intergovernmental Affairs” to the “Minister of Infrastructure and Communities”.

Since 2014-15, INFC delivers its mandate under one strategic outcome and internal services in support of its activities as described below.

Public Infrastructure for a More Prosperous Canada:  INFC's key business lines and initiatives are grouped into 6 programs which fall under this strategic outcome.

• Funding for Provincial-Territorial Priorities – providing predictable funding to each province and territory to enhance Canada’s public infrastructure system. (Provincial-Territorial Infrastructure Base Fund)
• Permanent and Flexible Infrastructure Funding – providing predictable and flexible funding for municipalities for their infrastructure priorities (Gas Tax Fund)
• Investments in National Infrastructure Priorities – provides funding to infrastructure projects that advance national priorities (New Building Canada Fund-National Infrastructure Component, Green Infrastructure Fund, Border Infrastructure Fund, Inuvik to Tuktoyaktuk Highway Fund, Public Transit Infrastructure Fund, Clean Water and Wastewater Fund, Asset Management Fund, Capacity Building for Climate Change Challenges Fund, Toronto Waterfront Revitalization Initiative, Smart Cities Challenge and Investing in Canada Infrastructure Program)
• Large-Scale Infrastructure Investments – providing funding for infrastructure projects of national, regional and/or local significance (New Building Canada Fund-Provincial Territorial Infrastructure Component – National and Regional Projects, Building Canada Fund–Major Infrastructure Component, Canada Strategic Infrastructure Fund and Gordie Howe International Bridge project)
• Infrastructure Investments in Small Communities and Rural Areas – providing funding for infrastructure projects in small communities and rural areas (New Building Canada Fund-Provincial Territorial Infrastructure Component-Small Communities Fund and Building Canada Fund-Communities Component)
• New Champlain Bridge Corridor Project - In support of the Government of Canada’s economic and safety priorities, this program ensures the overall delivery of the New Champlain Bridge Corridor Project in Montreal, Quebec.

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 for 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 authorities
   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 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 the amounts reported in the Future-oriented Statement of Operations included in the 2017-2018 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 2017-2018 Departmental Plan.
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
   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 authorities to discharge its liabilities.
4. Revenues
   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 INFC’s liabilities. While the Deputy Head is expected to maintain accounting control, she has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented as a reduction of the entity’s gross revenues.
5. Expenses
   Transfer payments are recorded as an expense 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.
   Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
   Services provided without charge by other government departments for accommodation, employer contributions to the health and dental insurance plans and legal services are recorded as operating expenses at their estimated cost.
   The accrued expenses related to Construction in Progress - New Champlain Bridge Corridor Project are the estimated value of the project assets, provided by the private partner.
6. Employee future benefits:
   1. Pension benefits:  Eligible employees participate in the Public Service Pension Plan (Public Service Superannuation Act), a multiemployer 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.
7. Accounts and loans receivable
   Accounts and loans receivable are initially recorded at cost and where necessary, are discounted to reflect their concessionary terms.  Concessionary terms of loans include cases where loans are made on a long-term, low interest or interest-free basis.  Transfer payments that are unconditionally repayable are recognized as loans receivable.  When necessary, an allowance for valuation is recorded to reduce the carrying value of accounts and loans receivable to amounts that approximate their net recoverable value.
8. Non-financial assets
   The cost of acquiring land, buildings, equipment and other capital property are capitalized as tangible capital assets and, except for land, are amortized to expense over the estimated useful lives of the assets, as described in Note 9.  All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost.  Tangible capital assets do not include immovable assets located on reserves as defined in the Indian Act, works of art, museum collection and Crown land to which no acquisition cost is attributable; and intangible assets.
9. 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.
10. 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 event is likely to occur or fail to occur, the contingent asset is disclosed in the notes to the financial statements.
11. 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 and accompanying notes at March 31. 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 Construction in Progress - New Champlain Bridge Corridor Project asset and liability, the payables at year end, contingent liabilities, the liability for employee future benefits, and the useful life of tangible capital assets. Actual results could significantly differ from those estimated.  Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.
12. 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

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:

1. Reconciliation of net cost of operations to current year authorities used

   Reconciliation of net cost of operations to current year authorities used
   (in thousands of dollars)

   N/A	2018	2017
   Net cost of operations before government funding and transfers	3,765,189	3,193,051
   Adjustments for items affecting net cost of operations but not affecting authorities:
   Refund of previous year's expenditures	1,466	3,634
   Other charges not charged to the authorities	N/A-	6
   Net gain (loss) on disposal of tangible capital assets	N/A-	(153)
   Decrease (increase) contingent liabilities	N/A-	(6,850)
   Adjustment of overpayment to be recovered	(6)	N/A-
   Bad debt expense	(85)	N/A-
   Decrease (increase) in employee future benefits	(480)	582
   Decrease (increase) in vacation pay and compensatory leave	(818)	(268)
   Amortization of tangible capital assets	(2,049)	(1,275)
   Services provided without charge by other government departments	(6,796)	(6,433)
   Total items affecting net cost of operations but not affecting authorities	(8,768)	(10,757)
   Adjustments for items not affecting net cost of operations but affecting authorities:
   Acquisitions of tangible capital assets	569,744	25,362
   Increase (decrease) in prepaid expenses and change in advances	132	111
   Total items not affecting net cost of operations but affecting authorities	569,876	25,473
   Current year authorities used	4,326,297	3,207,766

2. Authorities provided and used

   Authorities provided and used
   (in thousands of dollars)

   N/A	2018	2017
   Authorities:
   Vote 1 - Operating Expenditures	217,145	131,616
   Vote 5 - Capital Expenditures	576,352	122,819
   Vote 10 - Contributions	4,282,963	3,017,422
   Statutory Amounts:
   Employee Benefit Plan	6,124	5,287
   Minister Office Salary and Car Allowance	84	84
   Gas Tax Fund	2,071,933	2,071,933
   Less:
   Authorities available for future years Footnote 2	(2,746,190)	N/A-
   Lapsed : Operating	(76,084)	(74,292)
   Lapsed : Capital	(6,030)	(97,457)
   Lapsed : Contributions	N/A-	(1,969,646)
   Current year authorities used	4,326,297	3,207,766

4. Construction in Progress – New Champlain Bridge Corridor Project

This relates to the Public-Private Partnership (PPP) arrangement for a new bridge crossing the St. Lawrence, as well as a new l’Île-des-Sœurs Bridge, and reconstruction and widening of the federal portion of Autoroute 15.

The Government selected a PPP procurement model following a rigorous financial and technical analysis and independent business case, which concluded that a public-private partnership would be the most cost-effective method to deliver the project within an accelerated timeline.

After a competitive process, Signature on the St. Lawrence Group was awarded the contract and is responsible for the design, construction, financing, operation, maintenance and rehabilitation of the corridor.  The new bridge crossing is expected to be commissioned in December 2018, followed by the completion of the corridor in October 2019. Ownership of the bridge and related corridor remains with federal government, and the private partner will operate the corridor for 30 years following construction.  During the construction period, the private partner will also operate some existing assets in the corridor.

Construction payments to the private partner are based on specific milestones being achieved subject to independent verification.

The Construction in Progress – New Champlain Bridge Corridor Project asset represents the estimated value of the project assets (see note 9); and the liability represents the estimated value of the project’s assets less the payments made to date.

A copy of the project agreement signed between the Government of Canada and Signature on the St. Lawrence Group on June 19, 2015, is available on Infrastructure Canada’s website.

5. Accounts payable and accrued liabilities

The following table presents details of INFC's accounts payable and accrued liabilities:

Accounts payable and accrued liabilities
(in thousands of dollars)

N/A	2018	2017
Accounts Payable - Other government departments and agencies	2,202	3,313
Accounts Payable - External parties	574,530	141,401
Total accounts payable	576,732	144,714
Accrued Liabilities	3,624	2,743
Total accounts payable and accrued liabilities	580,356	147,457

6. Contingent liabilities

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

Claims have been made against INFC in the normal course of operations. While the total amount claimed in these actions is significant, their outcomes are not determinable. INFC 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 $7,000,000 at March 31, 2018.

7. Employee future benefits

1. Pension benefits:

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

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

   The 2017-2018 expense amounts to $4,170,328 ($3,683,404 in 2016-2017). For Group 1 members, the expense represents approximately 1.01 times (1.12 times in 2016-2017) the employee contributions and, for Group 2 members, approximately 1.00 times (1.08 times in 2016-2017) the employee contributions.

   INFC's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the Consolidated Financial Statements of the Government of Canada, as the Plan's sponsor.

2. Severance benefits:

   Severance benefits provided to INFC's employees were previously based on an employee's eligibility, years of service and salary at termination of employment. However, since 2011 the accumulation of severance benefits for voluntary departures progressively ceased for substantially all employees. Employees subject to these changes were given the option to be paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits upon departure from the public service. By March 31, 2017, substantially all settlements for immediate cash out were completed. Severance benefits are unfunded and, consequently, the outstanding obligation will be paid from future authorities.

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

   Severance benefits
   (in thousands of dollars)

   N/A	2018	2017
   Accrued benefit obligation - Beginning of year	1,691	2,273
   Expense for the year	641	(466)
   Benefits paid during year	(161)	(116)
   Accrued benefit obligation - End of year	2,171	1,691

8. Accounts receivable and advances

Accounts receivable and advances
(in thousands of dollars)

N/A	2018	2017
Receivables - Other government departments and agencies	80,789	52,229
Receivables - External parties	3,578	199
Advances - Employees	23	50
Total accounts receivable and advances	84,390	52,478

9. 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:

Asset class	Amorization period
Informatics Software – Purchased and Developed	3 to 7 years
Vehicles (non-military)	5 years
Leasehold Improvements	Term of lease

Assets under construction are recorded in the applicable capital asset class in the year that they are put into service and are not amortized until they are put into service.

Cost 2018
(in thousands of dollars)

Capital asset class	Opening balance2	Acquisitions	Adjustments1	Disposals and write-offs	Closing balance
Land	106,487	1,139	-	-	107,626
Informatics Software - Developed and Purchased	32,594	-	2,539	-	35,133
Leasehold Improvements	4,659	-	1, 399	-	6,058
Motor Vehicles	104	40	(32)	-	112
Engineering Works in Progress of Construction	40,083	18,043	-	-	58,126
Other Construction or Work in Progress	4,782	2,463	-	-	7,245
Work in progress for Software	1,796	1,612	(2,539)	-	869
Buildings in Progress of Construction	822	577	(1,399)	-	-
Subtotal	191,327	23,874	(32)	-	215,169
Cash and Non-cash items: Construction in Progress - New Bridge for the St. Lawrence Corridor Project3	1,,213,581	751,416	-	-	1,964,997
Total	1,404,908	775,290	(32)	-	2,180,166

Accumulated amortization 2018
(in thousands of dollars)

Capital asset class	Opening balance	Amortization	Adjustments	Disposals and write-offs	Closing balance
Land	-	-	-	-	-
Informatics Software - Developed and Purchased	30,688	1,456	-	-	32,144
Motor Vehicles	2,488	575	-	-	3,063
Leasehold Improvements	25	18	(8)	-	35
Buildings in Progress of Construction	-	-	-	-	-
Engineering Works in Progress of Construction	-	-	-	-	-
Work in progress for Software	-	-	-	-	-
Other Construction or Work in Progress	-	-	-	-	-
Subtotal	33,201	2,049	(8)	-	35,242
Cash and Non-cash items: Construction in Progress - New Bridge for the St. Lawrence Corridor Project3	-	-	-	-	-
Total	33,201	2,049	(8)	-	35,242

Net Book Value²
(in thousands of dollars)

Capital asset class	2018	2017
Land	107,626	106,487
Informatics Software - Developed and Purchased	2,989	1,906
Leasehold Improvements	2,995	2,171
Motor Vehicles	77	79
Engineering Works in Progress of Construction	58,126	40,083
Other Construction or Work in Progress	7,245	4,782
Work in progress for Software	869	1,796
Buildings in Progress of Construction	-	822
Subtotal	179,927	158,126
Cash and Non-cash items: Construction in Progress - New Bridge for the St. Lawrence Corridor Project3	1,964,997	1,213,581
Total	2,144,924	1,371,707

1. Adjustments include assets under construction that were transferred to the other categories upon completion, as well as the transfer of a motor vehicle to another government department.
2. Opening balance for 2017-18 may not balance with 2016-17 closing balance due to rounding adjustments.
3. This acquisition includes milestone and acceleration cash payments of $545.9M as well as $205.5M of non-cash items reflected in the Statement of Cash Flows. The non-cash items includes $70.0M in capitalized interest costs.

10. Contractual obligations

The nature of INFC's activities can result in some large multi-year contracts and obligations whereby INFC will be obligated 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
(in thousands of dollars)

	2019	2020	2021	2022	2023 and thereafter	Total
Transfer payments
Public infrastructure for a More Prosperous Canada
Asset Management Fund	16,125	15,838	11,077	383	-	43,423
Border Infrastructure Fund	-	16,874	-	-	-	16,874
Building Canada Fund - Communities Component	29,257	26,118	-	-	-	55,375
Building Canada Fund-Large Urban Centres Component	76,054	49,091	-	-	-	125,145
Building Canada Fund-Major Infrastructure Component	337,592	188,360	79,036	36,158	34,926	676,072
Canada Strategic Infrastructure Fund	24,976	53,182	-	-	-	78,158
Capacity Building for Climate Change Challenges	23,752	25,750	15,070	363	-	64,935
Clean Water and Wastewater Fund	795,885	749,766	13,299	-	-	1,558,950
Green Infrastructure Fund	107,390	51,160	43,078	26,127	26,891	254,646
Investing in Canada Infrastructure Program	351,863	616,710	1,135,776	1,597,906	11,830,286	15,532,541
New Building Canada Fund-National Infrastructure Component	26,421	65,895	77,241	90,524	69,941	330,022
New Building Canada Fund-Provincial-Territorial Infrastructure Component-Small Communities Fund	292,858	355,667	258,667	192,302	182,282	1,281,776
New Building Canada Fund-Provincial-Territorial Infrastructure Component-National and Regional Projects	772,499	484,429	279,769	185,125	61,635	1,783,457
Provincial-Territorial Infrastructure Base Funding Program	80,335	-	-	-	-	80,335
Public Transit Infrastructure Fund	1,083,755	2,006,510	-	-	-	3,090,265
Capital Assets
New Champlain Bridge Corridor Project (Construction) (note 4)	743,173	-	-	-	-	743,173
Purchases
New Champlain Bridge Corridor Project (Operations and Maintenance) (note 4)	4,283	19,914	35,397	37,025	1,333,565	1,430,184
Total transfer payments, capital assets, and purchases	4,766,218	4,725,264	1,948,410	2,165,913	13,539,526	27,145,331

11. Revenue

Revenues consist of a dividend receivable from the dissolution of PPP Canada Inc. and land use rights related to the New Champlain Bridge Corridor Project. This item also includes nominal revenue from Access to Information fees and related charges.

12. 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.

1. 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, legal services, 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:

   Common services provided without charge by other government departments
   (in thousands of dollars)

   	2018	2017
   Employer's contribution to the health and dental insurance plans	3,639	3,295
   Accommodation	3,157	3,138
   Total	6,796	6,433

   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 and audit services provided by the Office of the Auditor General are not included in INFC's Statement of Operations and Departmental Net Financial Position. 

2. Other transactions with related parties

   Other transactions with related parties
   (in thousands of dollars)

   	2018	2017
   Accounts receivable – Other government departments and agencies	80,789	52,229
   Accounts payable – Other government departments and agencies	2,202	3,313
   Expenses – Other government departments and agencies	41,974	22,697

   Expenses disclosed in (b) exclude common services provided without charges, which are already disclosed in (a). Common services include other support services from other government departments, such as providing financial and human resources systems, as well as salary recoveries between departments.

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

13. Transfer of assets and liabilities from another government department

In September 2017, Infrastructure Canada had a change in Deputy Heads resulting in the transfer of the former Deputy Minister's motor vehicle to Indian Affairs and Northern Development.

14. Segmented Information

Presentation by segment is based on INFC's program alignment architecture. The presentation by segment is based on the same accounting policies as described in the Summary of Significant Accounting Policies in Note 2. The following table presents the expenses incurred or the main programs, by major object of expenses and by major type of revenues. The segment results for the period are as follows:

Segmented Information
(in thousands of dollars)

	Public Infrastructure for a More Prosperous Canada Services	Internal Services	2018	2017
Transfer payments
Contributions	3,608,413	-	3,608,413	3,116,204
Total transfer payments	3,608,413	-	3,608,413	3,116,204
Operating expenses
Salaries and employee benefits	30,380	21,752	52,132	44,155
Professional services	30,553	19,308	49,861	39,163
Rentals	1,563	3,481	5,044	4,986
Amortization	9	2,040	2,049	1,275
Repairs	1,909	412	2,321	2,044
Travel and Relocation	161	730	891	589
Informatics Equipment	438	25	463	614
Information	88	296	384	350
Temporary Help	-	183	183	226
Office supplies & furnishings	32	88	120	848
Other	43,941	(613)	43,328	(17,403)
Total operating expenses	109,074	47,702	156,776	76,847
Total expenses	3,717,487	47,702	3,765,189	3,193,051
Revenues
Miscellaneous revenues	3,521	1	3,522	114
Revenues earned on behalf of government	(3,521)	(1)	(3,522)	(114)
Total revenues	-	-	-	-
Net cost from continuing operations	3,717,487	47,702	3,765,189	3,193,051

15. Dissolution of PPP Canada Inc.

On November 1, 2017 the Governor in Council (P.C. 2017-1329), on the recommendation of the Minister of Infrastructure, Communities and Intergovernmental Affairs and pursuant to subsection 209.1(3) of the Jobs Growth and Long-term Prosperity Act, approved that the Minister procure the dissolution of PPP Canada Inc.

Furthermore, Section 209.1 of the Jobs Growth and Long-term Prosperity Act goes on to authorize PPP Canada, with the approval of the Governor in Council, to sell or otherwise dispose of all or substantially all of its assets. As required under the Canada Business Corporations Act (CBCA), in order to dissolve the Corporation must have distributed all of its property and discharged all of its liabilities and the shareholders must have approved the dissolution under subsection 210(3) of the CBCA. (e.g. a corporation that has been active and has dealt with its property and liabilities).

In fiscal year 2017-18 PPP Canada successfully dissolved the Corporation by the March 31, 2018 deadline. As mentioned above to accomplish dissolution, PPP Canada was required to dispose of all of its assets and discharge of all of its liabilities. As a result Infrastructure Canada acquired the following:

• A dividend receivable of $3,405,250;
• A loan receivable of $532,899;
• An accrued interest on the loan receivable of $3,416; and
• A liability of $33,000.

16. Subsequent events

Funding letters for the Gas Tax Fund for a total amount of $2,170,596,375 were signed and provided to recipients. These letters indicate to each recipient the amount of funds to be distributed in 2018-2019.

ANNEX to the Statement of Management Responsibility Including Internal Control over Financial Reporting for the Fiscal Year ending March 31, 2018

1. Introduction

This document provides summary information on the measures taken by Infrastructure Canada (INFC) 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.

Detailed information on Infrastructure Canada's authority, mandate, and program activities can be found in the Departmental Results Report for the 2017 to 2018 Fiscal Year and the Departmental Plan for the 2017 to 2018 Fiscal Year.

2.0 Departmental system of internal control over financial reporting

2.1 Internal control management

Infrastructure Canada 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 management framework, approved by the Deputy Head, is in place and includes:

• Organizational accountability structures as they relate to internal control management to support sound financial management, including roles and responsibilities of senior managers in their areas of responsibility for control management;
• Values and ethics;
• Ongoing communication on statutory requirements, and policies and procedures for sound financial management and control; and
• Assessment results and action plans to the Deputy Head and departmental senior management and, as applicable, the Departmental Audit Committee (DAC).

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. The DAC is composed of three external members and meets up to four times per year (and more frequently as required).

2.2 Service arrangements relevant to financial statements

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

Common Service Arrangements

• Public Services and Procurement Canada (PSPC) centrally administers the payments of salaries and the procurement of goods and services in accordance with INFC's Delegation of Authority and provides accommodation services;
• The Treasury Board Secretariat provides services related to public sector insurance for employees of Infrastructure Canada and centrally administers payment of the employer's share of contributions toward statutory employee benefit plans (i.e., Public Service Pension Plan, Employment Insurance Plan, Canada Pension Plan, Quebec Pension Plan and Public Service Supplementary Death Benefit Plan) on behalf of Infrastructure Canada;
• The Department of Justice Canada provides legal services to Infrastructure Canada; and
• Shared Services Canada (SSC) provides information technology (IT) infrastructure services to Infrastructure Canada in the areas of data centre and network services. The scope and responsibilities are addressed in the interdepartmental arrangement between SSC and Infrastructure Canada.

Readers of this Annex may refer to the Annexes of the above-noted organizations for a greater understanding of the systems of ICFR related to these specific services.

Infrastructure Canada relies on other external service providers and/or departments for the processing of certain transactions or information that are recorded in its financial statements, as follows:

Specific Arrangements

• Innovation, Science and Economic Development Canada (ISED) 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 PSPC; and
• Federal delivery partner (Transport Canada) manages certain contribution programs on behalf of Infrastructure Canada.

3. Departmental assessment results during the 2017 to 2018 fiscal year

The following table summarizes the status of the ongoing monitoring activities according to the current fiscal year's updated rotational plan.

Progress during the 2017 to 2018 fiscal year

Current year's updated rotational ongoing monitoring plan for current year

Key control areas	Status
Transfer Payments – Federal Delivery Partner (FDP)	The transfer payment process managed by the FDP has been reviewed by process owners, documented, walked through, assessed for design effectiveness, and tested for operational effectiveness. Findings have been communicated to stakeholders and remediation actions are underway.
Capital Assets	The capital assets process has been reviewed by process owners, documented and assessed for design effectiveness; and tested for operational effectiveness. Findings have been communicated to stakeholders and remediation actions are underway.
Payroll – Emergency Salary Advance	The payroll sub-process of Emergency Salary Advance has been reviewed by process owners, documented, walked through and assessed for design effectiveness; and tested for operational effectiveness. Findings have been communicated to stakeholders and remediation actions are underway.
Financial Reporting and Financial Close	The financial statement preparation process has been reviewed by process owners, documented and assessed for design effectiveness. Findings have been communicated to stakeholders.
IT General Controls	The IT general controls (logical access and change management) related to IFMS have been tested for operational effectiveness. Findings have been communicated to stakeholders and remediation actions are underway.

In the 2017 to 2018 fiscal year, the department conducted the following work in addition to the progress made in ongoing monitoring:

• Walkthrough of the Transfer payments managed by federal delivery partner business process

The key findings and significant adjustments required from the current year's assessment activities are summarized below.

3.1 New or significantly amended key controls:

The department inherited responsibility for the construction of the New Bridge for the St. Lawrence Corridor (NBSLC) Project in 2013-14, which will result in significant balances in the coming years for accounts like Assets under Construction, Tangible Capital Assets, Accumulated Amortization, and Amortization of Tangible Capital Assets. The Capital Assets business process and key controls were assessed for design and operating effectiveness.

Infrastructure Canada was part of the second wave to implement the new Government of Canada pay system, Phoenix, in April 2016. This new system fundamentally altered the payroll process as it continues to evolve. The Payroll business process and key controls continue to be documented, with an assessment of the design and operating effectiveness of those controls planned for 2018-2019. The Emergency Salary Advance Payroll business sub-process and key controls were assessed for design and operating effectiveness.

3.2 Ongoing monitoring program:

As part of its rotational ongoing monitoring plan, the department completed its reassessment of the financial controls within the business processes of transfer payments (managed by federal delivery partner), financial reporting and financial close, and IT general controls. For the most part, the key controls that were tested performed as intended, with remediation required as follows:

• Control issues were found in the transfer payment area related to the performance of reconciliations between the Program Information Management System and the departmental financial system. A management action plan has been prepared by the process owner and remediation is underway.
• For INFC's financial system hosted by ISED, it was observed that the host had made changes to the financial system without informing INFC. This prevents INFC from monitoring system changes, as required by the MOU with ISED. A management action plan has been prepared by the process owner and remediation is underway.

4. Departmental action plan for the next fiscal year and subsequent years

Infrastructure Canada's rotational ongoing monitoring plan over the next three fiscal years, based on an annual validation of the high-risk processes and controls and related adjustments to the ongoing monitoring plan as required, is shown in the following table.

Rotational Ongoing Risk-Based Monitoring Plan

Key control areas	2018-2019		2019-2020		2020-2021
	DEFootnote 3	OEFootnote 4	DE	OE	DE	OE
Entity-Level Controls	Yes			Yes
IT general controls			Yes			Yes
Business Process Controls
Transfer Payments	Yes			Yes		Yes
Payroll	Yes	Yes		Yes	Yes
Capital Assets		Yes		Yes		Yes
Operating expenses	Yes		Yes			Yes
Financial Reporting and Financial Close		Yes				Yes

In addition to the ongoing monitoring rotational plan, Infrastructure Canada plans to conduct the following assessment work of new processes and key controls in the years indicated.

New Processes to be added based on the yearly risk assessment

Key control areas	2018-2019		2019-2020		2020-2021
	DE	OE	DE	OE	DE	OE
Business Process Controls
Budgeting and Forecasting	Yes			Yes
Cabinet Submission			Yes			Yes

Footnotes

Footnote 1

The project is also commonly referred to as the New Champlain Bridge Corridor Project.

Return to Footnote 1

Footnote 2

The funding profiles for a number of federal infrastructure programs have been updated for Budget 2018 to reflect when the Government expects to receive claims from recipients.  A frozen allotment of $2.7 billion was established for 2017-2018.

Return to Footnote 2

Footnote 3

Design effectiveness

Return to Footnote 3

Footnote 4

Operating effectiveness

Return to Footnote 4