PPP Canada - Annual Report 2017-18

Table of Contents

• Corporate Overview
• Mandate
• History and Corporate Profile
• Business Lines
• 2017-18 Performance Against Objectives
• Management’s Responsibility for Financial Statements
• Independent Auditors’ Report
• Financial Statements
• Notes to the Financial Statements

Corporate Overview

PPP Canada was created in 2008 to promote the adoption of the public-private partnerships (P3) across Canada. Since its creation, PPP Canada has played a key role in establishing P3s as an effective way to ensure performance of infrastructure from design and planning, to long-term maintenance.

In 2017-18, the Government of Canada determined that PPP Canada successfully fulfilled its mandate to improve the delivery of public infrastructure and develop a strong P3 market in Canada. As such, it was announced that PPP Canada would be dissolved and that operations would cease by the end of 2017 with the Corporation being dissolved effective March 31, 2018.

Mandate

PPP Canada’s mandate was to improve the delivery of public infrastructure by achieving better value, timeliness and accountability to taxpayers, through P3s.

History and Corporate Profile

PPP Canada Inc. was a federal parent Crown corporation named in Part I of Schedule III of the Financial Administration Act and was incorporated pursuant to the Canada Business Corporations Act. The Corporation reported to Parliament through the Minister of Infrastructures and Communities.

In 2008, PPP Canada was established to build P3 procurement knowledge and capacity federally, and leverage greater value for money from federal investments in provincial, territorial, municipal and Indigenous communities infrastructure through the P3 Canada Fund. With the appointments of the Chair of the Board of Directors and the Chief Executive Officer, PPP Canada became operational in 2009.

The Corporation’s corporate objects were as follows:

1. Assess public-private partnerships opportunities at the federal level in accordance with criteria established by the Treasury Board;
2. Assess the suitability of public-private partnership projects seeking funding from federal infrastructure programs in accordance with criteria established by or pursuant to Treasury Board authorities;
3. Advise on the execution of public-private partnership projects at the federal level;
4. Manage the Public-Private Partnerships Funds (P3 Canada Fund) in accordance with the policies and authorities established by the Treasury Board;
5. Negotiate, sign and administer agreements to be funded through the P3 Canada Fund in accordance with the policies and authorities established by the Treasury Board;
6. Act as a source of expertise and advice on public-private partnership matters.

Business Lines

To execute its objects, PPP Canada was supported by four business lines.

Knowledge Development and Sharing (KDS)

The development and sharing of knowledge was foundational to achieving value for taxpayers and underpins the success of PPP Canada’s business. A successful P3 procurement requires a strong and knowledgeable public sector with the tools and know-how to effectively deliver Value for Money. PPP Canada therefore, produced an array of knowledge products, primarily aimed at enabling the delivery of the P3 Canada Fund and advancing federal P3s. These include template documentation to lower procurement costs and standardize leading-practices across the country, methodology and leading-practice guides for the development of a strong Procurement Options Analysis (POA) including a robust Value for Money Analysis, as well as sector specific studies, such as the energy-from-waste and water/wastewater sectors.

Advancing Provincial, Territorial, Municipal, and Indigenous communities P3s

PPP Canada had a mandate to work with other levels of government to broaden the use of effective P3s. It achieved this by leveraging and sharing its expertise and managing the P3 Canada Fund, which was designed to incent inexperienced jurisdictions to consider the P3 procurement model by providing up to 25% of eligible costs to provinces, territories, municipalities and Indigenous communities. In ten years, PPP Canada committed over $1.3 billion in investments to 25 projects across the country, resulting in the development of a variety of infrastructure assets from wastewater treatment facilities to light-rail transit systems to social housing.

Advancing Federal P3s

PPP Canada supported federal departments and agencies in considering P3s for the delivery of public infrastructure. Since 2012, PPP Canada has worked with more than 20 federal departments and agencies applying the Federal P3 Screen, and with a number of others on the development of their Procurement Options Analysis and the implementation of a market-tested procurement process.

Corporate Excellence

This business line enabled the above three business lines with a full set of essential corporate services: financial management, treasury stewardship, HR services for the staff cadre, marketing and communications, legal support, IM/IT services, and a full range of administrative services.

2017-18 Performance Against Objectives

Since its creation, PPP Canada played a key role in establishing P3s as an effective way to ensure performance of infrastructure from design and planning, to long-term maintenance. The Corporation committed over $1.3 billion in investments to 25 projects across Canada, facilitated the consideration of P3 procurement at the federal level and developed P3 capacity and tools.

Given the decision to dissolve the Corporation, PPP Canada Management drafted a Transition Management Plan for 2017-18, which included measures for the Corporation to diligently and professionally reduce capacity and wind up all outstanding business matters. The Plan covered the planning period of 2017-18 to 2021-22; however, there were no activities, operating costs or capital costs forecasted for after March 31, 2018. The Plan was approved by the Board of Directors and immediate implementation was recommended.

Objectives

The Transition Management Plan was designed to ensure responsible and significant reduction in corporate capacity and resources in ways that:

• Reflected professional excellence, best practices, and sound stewardship of public resources;
• Maximized benefits to the shareholder with respect to investments made in human capital, intellectual property, and P3 projects;
• Respected relationships with clients, partners, and stakeholders established over the eight years of operation;
• Provided support to staff and facilitate their relocation within the federal sector.

Performance and Activities

Knowledge Development and Sharing (KDS)
In 2017-18, no new knowledge development projects were undertaken and an inventory of KDS products was established and reviewed from an intellectual property perspective, and with respect to any commercial confidentiality concerns. Knowledge products were packaged and shared with designated recipients by the end of the year, with Infrastructure Canada receiving many of the KDS products.

Advancing Provincial, Territorial, Municipal, and Indigenous communities P3s
In 2017-18, no new rounds for applications were announced and no new projects from past rounds were taken to the Board. Additionally, no national P3 outreach work with other levels of government was pursued.

The focus of activities under this business line was related to the management of the P3 Canada Fund portfolio of projects. This portfolio included 25 projects, 23 of which were well advanced and two that were in the procurement stage. The Corporation looked at ways to mitigate associated risks as there were ongoing/future performance-based payment liabilities of approximately $1.3 billion over five years. Key personnel was retained to manage the portfolio and relationships with project proponents while transition of files to Infrastructure Canada was occurring. Project information was compiled for Infrastructure Canada to ensure successful transfer of knowledge to enable continued advice to clients and sound management of the portfolio through regular audits.

See Note 2 of the Notes to the Financial Statements for details of the distribution of the P3 Canada Fund and others assets and liabilities.

Advancing Federal P3s
Strategies were developed with all federal clients to ensure that at the appropriate stage of the projects, PPP Canada’s services would be discontinued.

PPP Canada worked closely with senior management at Public Services and Procurement Canada (PSPC) to effect transfers of PPP Canada staff to PSPC to provide P3 expertise for large-scale, federal P3s that are a priority for the Government.

Additionally, a final meeting of the CFO Community of Interest on P3s, which includes central agencies, was conducted and members were notified of PPP Canada’s exit from this business line and the resulting implications to federal departments and agencies.

Corporate Excellence
In 2017-18, the Corporation carefully managed down the workforce by transferring a majority of staff to other federal entities, while some staff were retained for core financial stewardship, portfolio project management, legal, and human resource management during the transition.

PPP Canada consulted with external employment law and workforce capacity management experts to provide advice on how to best effect employment termination or retention depending on the situation, to ensure that practices were in accord with legal requirements and precedent and best principles and practices.

The Corporation’s tangible capital assets were distributed to other federal entities or were written off. Leasehold improvements were written off and a Lease Amending Agreement was paid to effect the termination of all future lease requirements. Computer software was written off and all remaining equipment, furniture and fixtures were distributed to other federal departments and agencies. See Note 2 of the Notes to the Financial Statements for details of the distribution of tangible capital assets and other assets and liabilities.

Management’s Responsibility for Financial Statements

PPP Canada Inc. management is responsible for the integrity and objectivity of the financial statements and related note disclosures. The financial statements have been prepared in accordance with Canadian Public Sector accounting standards and, consequently, include amounts which are based on the best estimates and judgment of management.
In carrying out its responsibilities, management maintains appropriate financial systems and related internal controls to provide reasonable assurance that financial information is reliable, assets are safeguarded, transactions are properly authorized, and resources are managed efficiently and economically. It also ensures that operations are carried out effectively in the attainment of corporate objectives and that transactions are in accordance with the Canada Business Corporations Act and regulations, Part X of the Financial Administration Act and regulations, any directives issued by the Governor in Council to the Corporation, and the articles and by-laws of the Corporation.
The Board of Directors oversees management’s responsibilities for financial reporting, internal control systems and the controls. The Board of Directors has approved the financial statements.

KPMG LLP and the Auditor General of Canada have audited the financial statements. The auditors have full access to, and meet periodically with, the Audit Committee of the Board to discuss their audit and related matters and report on their audit to the Minister of Infrastructure, Communities and Intergovernmental Affairs.

Independent Auditors’ Report

To the Minister of Infrastructure, Communities and Intergovernmental Affairs

Report on the Financial Statements

We have audited the accompanying financial statements of PPP Canada Inc., which comprise the statement of financial position as at March 29, 2018, and the statement of operations, statement of change in net financial assets and statement of cash flows for the 363 day period then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian public sector accounting standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of PPP Canada Inc. as at March 29, 2018, and the results of its operations, changes in its net financial assets, and its cash flows for the 363 day period then ended in accordance with Canadian public sector accounting standards.

Emphasis of Matter

We draw attention to Note 2 to the financial statements which describes the intended dissolution of PPP Canada Inc. Our opinion is not qualified in respect of this matter.

Report on Other Legal and Regulatory Requirements

As required by the Financial Administration Act, we report that, in our opinion, the accounting principles in Canadian public sector accounting standards have been applied on a basis consistent with that of the preceding year.

Further, in our opinion, the transactions of PPP Canada Inc. that have come to our notice during our audit of the financial statements have, in all significant respects, been in accordance with Part X of the Financial Administration Act and regulations, the Canada Business Corporations Act, the articles and by-laws of PPP Canada Inc., the orders issued by the Governor in Council concerning PPP Canada Inc. and P3 Canada Fund transactions, and the directive issued pursuant to section 89 of the Financial Administration Act.

Financial Statements

Statement of Financial Position

As at March 29, 2018, with comparative figures for March 31, 2017 (in thousands of dollars)

	As at March 29, 2018	As at March 31, 2017
Financial assets:
Cash and cash equivalents (Note 4)	$-	$ 8,594
P3 Canada Fund accrued interest	-	21,030
P3 Canada Fund investments (Note 5)	-	1,244,250
P3 Canada Fund loan receivable (Note 6)	-	2,563
Accounts receivable	-	1,405
Total financial assets	$-	$1,277,842
Liabilities:
Accounts payable and accrued liabilities	$-	$ 1,643
Employee future benefits (Note 9)	-	1,704
Deferred P3 Canada Fund revenue (Note 10 and Note 11)	-	1,267,843
Total liabilities	-	1,271,190
Net financial assets	$-	$ 6,652
Non-financial assets:
Tangible capital assets (Note 8)	-	600
Prepaid expenses	-	149
Total non-financial assets	-	749
Accumulated surplus	$-	$ 7,401

Dissolution of PPP Canada Inc. (Note 2)
Contractual obligations (Note 14)

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

Approved by the Board:

Statement of Operations (in thousands of dollars)

	For the 363 day period ended March 29, 2018 Budget	For the 363 day period ended March 29, 2018 Actual	For the 12 month period ended March 31, 2017 Actual
Operating revenues:
Parliamentary appropriations (Note 11)	$5,900	$5,900	$ 11,800
Fees from federal P3 advice (Note 13)	468	468	2,351
Interest income	49	87	56
Revenue recognition as a result of dissolution (Note 2)		33
	$6,417	$6,488	$ 14,207
Operating expenses:
Salaries	$2,498	$2,405	$5,756
Benefits	726	733	1,699
Professional services	469	446	437
P3 Canada Fund project due diligence	622	622	19
P3 knowledge and best practices	-	-	90
Federal P3 project consultants	167	167	974
Shared administrative services (Note 13)	650	650	650
Rent	1,054	1,070	919
Directors’ fees and expenses	51	54	87
Travel	66	42	170
Amortization of tangible capital assets	600	313	440
Information and communications	222	156	241
Maintenance and equipment	140	192	173
Custodial fees	196	182	203
Other services	198	127	237
Dividend		3,405
Net costs of dissolution (Note 2)	2,800	3,325
	$ 10,459	$13,889	$ 12,095
Operating surplus (deficit)	$ (4,042)	$(7,401)	$2,112
P3 Canada Fund:
Revenue	$284,772	$229,514	$ 167,818
Payments to eligible recipients	(284,772)	(229,514)	(167,818)
Revenue recognition as a result of dissolution (Note 2)	-	1,058,106	-
Distribution of Fund assets to Her Majesty the Queen in Right of Canada (Note 2)	-	(1,058,106)	-
P3 Canada Fund surplus	-	-	-
Annual surplus (deficit)	(4,042)	(7,401)	2,112
Accumulated surplus, beginning of period	7,401	7,401	5,289
Accumulated surplus, end of period	$3,359	$-	$7,401

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

 

Statement of Change in Net Financial Assets (in thousands of dollars)

	For the 363 day period ended March 29, 2018 Budget	For the 363 day period ended March 29, 2018 Actual	For the 12 month period ended March 31, 2017 Actual
Annual surplus (deficit)	$(4,042)	$ (7,401)	$2,112
Tangible capital assets:
Acquisition of tangible capital assets	-	-	(142)
Loss on disposal of tangible capital assets	-	287	2
Amortization of tangible capital assets	600	313	440
	600	600	300
Non-financial assets:
Decrease in prepaid expenses	-	149	31
Increase (decrease) in net financial assets	(3,442)	(6,652)	2,443
Net financial assets, beginning of period	5,033	6,652	4,209
Net financial assets, end of period	$ 1,591	$-	$6,652

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

 

Statement of Cash Flows (in thousands of dollars)

	For the 363 day period ended March 29, 2018 Actual	For the 12 month period ended March 31, 2017 Actual
Cash flow provided by (used in) operating activities:
Annual surplus (deficit)	$(7,401)	$2,112
Items not involving cash:
Amortization of tangible capital assets	313	440
Increase (decrease) in employee future benefits	(1,704)	246
Loss on disposal of tangible capital assets	287	2
Decrease (increase) in accounts receivable and prepaid expenses	1,554	(767)
(Decrease) increase in accounts payable and accrued liabilities	(1,643)	136
	$(8,594)	$2,169
Cash flow provided by (used in) investing activities:
Net purchases and redemptions of investments	$210,927	$152,118
Repayment of P3 Canada Fund loan receivable	$ 2,030	690
Interest received and allocated to deferred P3 Canada Fund revenue	16,557	15,010
	$229,514	$167,818
Cash flow used in capital activities:
Acquisition of tangible capital assets	$ -	$ (142)
Cash flow provided by (used in) financing activities:
Payments to eligible recipients	(229,514)	(167,818)
Increase (decrease) in cash and cash equivalents	(8,594)	2,027
Cash and cash equivalents, beginning of period	8,594	6,567
Cash and cash equivalents, end of period	$-	$ 8,594

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

Notes to the Financial Statements

For the 363 day period ended March 29, 2018
(in thousands of dollars)

1. Description of operations

On February 12, 2008, PPP Canada Inc. (PPP Canada) was incorporated pursuant to the Canada Business Corporations Act. On May 8, 2008, the Governor in Council declared PPP Canada a parent Crown corporation for the purposes of Part X, except Section 90, of the Financial Administration Act. Effective July 8, 2016, the Governor in Council repealed the May 8, 2008, declaration, added PPP Canada Inc. to Schedule III of the Financial Administration Act and made the Minister of Infrastructure, Communities and Intergovernmental Affairs the appropriate minister for the Corporation which will now report to Parliament through said minister.

PPP Canada was created to spearhead the Government of Canada’s efforts to promote the use of public-private partnerships (P3s) within the federal government. PPP Canada also promotes the use of P3s to other levels of government through the use of the P3 Canada Fund which was created to fund the delivery of infrastructure investments through P3s.
PPP Canada’s objects as outlined in its articles of incorporation include:

• Assess P3s at the federal level in accordance with criteria established by the Treasury Board of Canada;
• Assess the suitability of P3 projects seeking funding from federal infrastructure programs in accordance with criteria established by or pursuant to Treasury Board of Canada authorities;
• Advise on the execution of P3s at the federal level;
• Manage the P3 Canada Fund in accordance with the policies and authorities established by the Treasury Board of Canada;
• Negotiate, sign and administer agreements to be funded through the P3 Canada Fund in accordance with the policies and authorities established by the Treasury Board of Canada; and
• Act as a source of expertise and advice on P3 matters.

PPP Canada Inc. was not subject to Income tax under the provisions of the Income Tax Act.
In July 2015, the Corporation was issued a directive (P.C. 2015-1107) pursuant to section 89 of the Financial Administration Act to align its travel, hospitality, conference and event expenditure policies, guidelines and practices with Treasury Board policies, directives and related instruments on travel, hospitality, conference and event expenditures in a manner that is consistent with its legal obligations. PPP Canada has fully implemented the requirements including expanded proactive disclosure on its website.

2. 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).

These financial statements reflect the distribution of all its property and the discharge of all its liabilities as of March 29, 2018. PPP Canada intends to dissolve March 29, 2018.

Distribution of the P3 Canada Fund and others assets and liabilities

As a result of the intent to dissolve PPP Canada Inc. the Statement of Operations includes the recognition of remaining Deferred P3 Canada Fund revenue as well as the distribution of the related assets of the P3 Canada Fund to Her Majesty the Queen in Right of Canada, as well as the other assets and liabilities.
Transfer of assets and liabilities:

Assets / liabilities	Transferred to	Amounts transferred at net book value
P3 Canada Fund accrued interest	Minister of Finance, on behalf of Her Majesty the Queen in Right of Canada	$24,250
P3 Canada Fund investments (Note 5)	Minister of Finance, on behalf of Her Majesty the Queen in Right of Canada	$1,033,323
P3 Canada loan receivable	Minister of Infrastructure, Communities and Intergovernmental Affairs, on behalf of Her Majesty the Queen in Right of Canada	$533
TOTAL		$1,058,106
Cash and cash equivalents	Minister of Finance, on behalf of Her Majesty the Queen in Right of Canada via dividend	$3,405
Accounts payable and accrued liabilities	Minister of Infrastructure, Communities and Intergovernmental Affairs, on behalf of Her Majesty the Queen in Right of Canada	$33

Tangible Capital Assets

All tangible capital assets have been distributed for nil consideration resulting in a loss on disposal of $287    which is reported in Net costs of dissolution in the Statement of Operations and below.

Leasehold improvements were written off for a loss of $76 upon the execution and payment of a Lease Amending Agreement to effect the termination of all future lease requirements.

Computer software was written off for a loss of $40.

All remaining equipment was distributed to other federal departments and agencies for nil consideration or written off for a loss of $52.

All remaining furniture and fixtures were distributed to other federal departments and agencies for nil consideration or written off for a loss of $119. 

PPP had entered into a multi-year agreement for office premises with remaining obligation of $3,328 and executed the Amending Agreement at a cost of $3,193.

Net Costs of dissolution
The following summarizes the net costs of dissolution:
Termination of lease: $3,193
Loss on disposal of Tangible Capital Assets: 287
Severance and retention of employees: 1,415
Incremental shared administrative services for dissolution: 108
Other: 48
Settlement of retirement benefits: (1,726)
Total Net costs of dissolution: $3,325

3. Summary of significant accounting policies

These financial statements have been prepared in accordance with Canadian Public Sector accounting standards. For the purposes of Section PS 1201, Financial Statement Presentation, PPP Canada considers the promotion of P3s at all levels of government as its program. The significant accounting policies used in the preparation of these financial statements are as follows:

1. Revenue recognition
1. Parliamentary appropriations

Parliamentary appropriations for operating purposes and for the purchase of tangible capital assets are without stipulations restricting their use and are recognized as revenue in the Statement of Operations when the appropriations are authorized.

Parliamentary appropriations for the P3 Canada Fund have stipulations, which meet the definition of a liability, restricting their use for payments to recipients and are recorded as deferred P3 Canada Fund revenue which will be recognized as revenue in the Statement of Operations in accordance with accounting policy 3(a)(iv) Deferred P3 Canada Fund revenue.

2. Interest income

Interest income earned on cash and cash equivalents is recognized as revenue in the Statement of Operations using the effective interest rate method.

Interest earned on P3 Canada Fund investments and loan receivable, which meets the definition of a liability, is credited directly to deferred P3 Canada Fund revenue using the effective interest rate method.

3. Fees from federal P3 advice

Revenue earned from federal government departments and agencies is recognized in the Statement of Operations when it is measurable and services rendered.

4. Deferred P3 Canada Fund revenue

Deferred P3 Canada Fund revenue is recognized in the Statement of Operations in the year in which PPP Canada is required to expend funds under the terms and conditions of PPP Canada financial agreements entered into with eligible recipients. Revenue is not recognized for loan agreements since repayment is required.

2. Financial instruments

Cash and cash equivalents, P3 Canada Fund accrued interest, P3 Canada Fund investments and P3 Canada Fund loan receivable are classified in the cost or amortized cost category. Gains and losses on these financial assets are recognized in the Statement of Operations when the financial asset is derecognized due to disposal or impairment. Sales and purchases of investments are recorded on the trade date. Transaction costs related to the acquisition of investments are included in the cost of the related investments. Accounts receivable, and accounts payable and accrued liabilities are classified in the amortized cost category.

1.   Cash and cash equivalents

Cash and cash equivalents are comprised of cash and money market instruments with maturities that are capable of prompt liquidation. Cash equivalents are cashable on demand and are recorded at cost based on the transaction price on the trade date.

2. P3 Canada Fund investments

P3 Canada Fund investments are comprised of cash and money market instruments that are capable of prompt liquidation. P3 Canada Fund investments are recorded at cost based on the transaction price on the trade date.

3. P3 Canada Fund loan receivable

P3 Canada Fund loan receivable is recognized at amortized cost using the effective interest rate method. Valuation allowances are recorded to reflect loans receivable at the lower of cost and net recoverable value where recovery is uncertain.

4. Accounts receivable
Accounts receivable are measured at amortized cost using the effective interest method.
5. Accounts payable and accrued liabilities

Accounts payable and accrued liabilities are measured at amortized cost using the effective interest method. Any gains, losses or interest expense is recorded in the Statement of Operations depending on the nature of the financial liability that gave rise to the gain, loss or expense.

3. Employee future benefits
1. Pension benefits

Eligible employees of PPP Canada are covered by the Public Service Pension Plan, a contributory defined benefit plan established through legislation and sponsored by the Government of Canada. Contributions are required by both the employees and PPP Canada to cover current service cost. Pursuant to legislation currently in place, PPP Canada has no legal or constructive obligation to pay further contributions with respect to any past service or funding deficiencies of the Plan. Consequently, contributions are recognized as an expense in the year when employees have rendered service and represent the total pension obligation of PPP Canada.

2. Severance benefits

As established by the Governor in Council, the Chief Executive Officer (CEO) is entitled to severance benefits, the cost of which is accrued as the employee renders the service necessary to earn them. The projected accrued benefit obligation is determined using a projected benefit method prorated on services which incorporates management’s best estimate of salary, retirement age and discount rate. The majority of this benefit represents an obligation of PPP Canada assumed from the Public Service when the CEO was hired. As a result of dissolution this severance has been paid.

3. Retirement benefits

PPP Canada had provided for extended health care and dental benefits for its eligible retired employees. The plan was unfunded and retirees were required to pay a portion of the premiums consistent with premiums paid by public service employees. PPP Canada had accrued its obligations as the employees render the services necessary to earn these benefits. The cost of these benefits earned by employees had been estimated using the projected benefit method prorated on services. The most recent valuation of these benefits was as at March 31, 2017.

Actuarial gains (losses) on the accrued benefit obligation arise from differences between actual and expected experience and from changes in the actuarial assumptions used to determine the accrued benefit obligation. Actuarial gains (losses) were amortized over the average remaining service period of active employees.

Adjustments arising from plan amendments other than those relating to past service, experience gains and losses, and changes in assumptions were amortized over the expected average remaining service period. Adjustments arising from plan amendments relating to past service were recognized in the period of the plan amendment. PPP Canada has accounted for the gain arising from plan settlement as part of Net Costs of dissolution in Note 2.

4. Sick leave benefits

Effective January 1, 2013, employees of PPP Canada are entitled to non-accumulating, non-vesting sick leave benefits. The CEO is the only employee to maintain a balance for sick leave benefits earned under the previous policy. PPP Canada recognized a liability for the cost of the accrued benefit obligation related to the CEO’s sick leave benefit which is actuarially determined using the projected benefit method prorated on service with estimates for salary increases, retirement age, mortality, incidence rate and discount rate. The majority of this benefit represents an obligation of PPP Canada assumed from the Public Service when the CEO was hired. As a result of dissolution this benefit ceased. 

4. Tangible capital assets

Tangible capital assets are recorded at cost less accumulated amortization. Amortization is provided for over the estimated useful lives of the assets using the following annual basis rates:

Asset	Basis	Rate
Equipment	Straight-line	3 years
Computer software	Straight-line	3 years
Furniture and fixtures	Straight-line	5 years
Leasehold improvements	Straight-line	Lesser of lease term or estimated useful life

Useful life is assessed annually and revisions are made as required.

Amortization commences when the asset is put into use and ceases when it no longer provides any further economic benefit to PPP Canada or when it is no longer in service. As a result of dissolution PPP Canada has written off remaining carrying amounts of the assets and included this in Net costs of Dissolution in Note 2.

5. Measurement uncertainty

The preparation of financial statements in accordance with Canadian Public Sector accounting standards requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of the revenues and expenses during the period. Key areas where management has made estimates and assumptions include those related to the fair value of financial instruments, useful life of tangible capital assets, the liability for employee future benefits, contractual obligations and contingent liabilities. Estimates are based on the best information available at the time of preparation of the financial statements and are reviewed regularly to reflect new information as it becomes available. Where actual results differ from these estimates and assumptions, the impact will be recorded in future periods when the difference becomes known.

6. Budget figures

Budget figures have been provided for comparative purposes from the approved 2017-18 Corporate Plan. The budget is approved by the Treasury Board of Canada and is reflected in the Statement of Operations and the Statement of Change in Net Financial Assets.

4. Cash and cash equivalents

Cash and cash equivalents of $nil (2017 – $8,594) include cash and money market instruments with an average remaining term to maturity after the period end of not more than one month and an average yield of nil (2017 – 0.79%).

	2018	2017
Cash	$ -	$595
Cash equivalents	-	7,999
Cash and cash equivalents	$ -	$8,594

5. P3 Canada Fund investments

P3 Canada Fund appropriations are received by PPP Canada in advance of associated disbursements and are invested in accordance with PPP Canada’s approved investment policy.

P3 Canada Fund investments of $nil (2017 – $1,244,250) include cash, money market instruments with maturities as stated in the table below and are to be used to fund disbursements under the P3 Canada Fund as described in Note 10.

P3 Canada Fund investments	March 29, 2018						March 31, 2017
	Remaining maturities less than 1 year	Remaining maturities more than 1 year less than 5 years			Total		Remaining maturities less than 1 year		Remaining maturities more than 1 year less than 5 years	Total
Bankers acceptance notes, bearer deposit notes and guaranteed investment certificates	$ -	$ -			$ -		$ 261,499		$707,562	$969,061
Obligations of provincial governments/municipal authorities including treasury bills, promissory notes and bonds	-	-			-		275,189		-	275,189
Sub-total money market instruments	$ -	$ -			$ -		$ 536,688		$707,562	$1,244,250
Total P3 Canada Fund investments				$ -						$1,244,250

Continuity of P3 Canada Fund investments	2018	2017
Beginning balance	$1,244,250	$1,396,368
Interest received	16,557	15,010
Payments to eligible recipients	(229,514)	(167,818)
Loan repayments	2,030	690
Distribution to Her Majesty the Queen in Right of Canada, as represented by the Minister of Finance, see Note 2	(1,033,323)
Ending balance	$-	$1,244,250

6. P3 Canada Fund loan receivable

PPP Canada loaned $5,238 to the ’Namgis First Nation in support of their equity investment in the Kokish River Hydroelectric Project. The loan, which had a balance of $533 bears interest at 4.5% representing the Government of Canada 10-year bond rate, as at the date of the advance, plus 225 basis points, compounded semi-annually not in advance. Repayments are made directly to PPP Canada from the Kokish River Hydroelectric Project upon cash distribution to the Class A unit holders. Subsequently, PPP Canada makes a maximum of two $250 payments annually to the ‘Namgis First Nation. The ‘Namgis First Nation loan agreement is secured by a pledge of the Class A units held by ’Namgis. There are no forgiveness clauses attached to the loan and the loan, together with accrued interest, is fully payable by February 2027. 

The loan was distributed to Her Majesty the Queen in Right of Canada, as represented by the Minister of Infrastructure, Communities and Intergovernmental Affairs.

The accrued interest on the loan at March 29, 2018, is $nil (2017 – $81) and is included in P3 Canada Fund accrued interest.

Fair value of financial instruments
PPP Canada’s financial instruments consist of cash and cash equivalents, P3 Canada Fund accrued interest, P3 Canada Fund investments, P3 Canada Fund loan receivable, accounts receivable, and accounts payable and accrued liabilities. The fair value of PPP Canada’s financial instruments with remaining maturities of not more than one year approximates their carrying value due to their short-term nature.

 

8. Tangible capital assets

	Equipment	Computer software	Furniture and fixtures	Leasehold improvements	Total 2017–18	Total 2016–17
Cost
Opening balance	$479	$810	$1,288	$1,044	$3,621	$3,643
Additions	-	-	-	-	-	142
Disposals	(479)	(810)	(1,288)	(1,044)	(3,621)	(164)
Closing balance	$-	$-	$-	$-	$-	$3,621
Accumulated amortization
Opening balance	$359	$719	$1059	$884	$3,021	$2,743
Amortization	68	51	110	84	313	440
Disposals	(427)	(770)	(1169)	(968)	(3,334)	(162)
Closing balance	$-	$-	$-	$-	$-	$3,021
Net book value	$-	$-	$-	$-	$-	$600

9. Employee future benefits

Employee future benefits	2018	2017
Severance benefits	$-	$123
Retirement benefits	-	1,566
Sick leave benefits	-	15
Employee future benefits	$-	$1,704

1. Pension benefits

Eligible employees of PPP Canada are covered by the Public Service Pension Plan, a contributory defined benefit plan established through legislation and sponsored by the Government of Canada. Contributions are required by both the employees and PPP Canada. The President of the Treasury Board of Canada sets the required employer contributions based on a multiple of the employees’ required contribution. The general contribution rate effective at period end was 1.01 (2017 – 1.005), this rate increases to 3.2 (2017 – 7.74) once the employee’s salary exceeds $164,700 (2017 – $163,100). The current year’s contributions by PPP Canada to the Plan were $322 (2017 – $799). The current year’s contributions by employees of PPP Canada to the Plan were $118 (2017 – $552).

The Government of Canada holds a statutory obligation for the payment of benefits relating to the Plan. Pension benefits generally accrue up to a maximum period of 35 years at an annual rate of 2% of pensionable service times the average of the best 5 consecutive years of earnings. The benefits are coordinated with Canada/Québec pension plan benefits and they are indexed to inflation.

2.   Severance benefits

PPP Canada provides severance benefits to its eligible employee based on eligibility, years of service and final salary. These severance benefits are not prefunded by the Government and have been paid.

3. Retirement benefits

PPP Canada provided for extended health care and dental benefits for its eligible retired employees. The plan was unfunded and retirees were required to pay a portion of the premiums consistent with premiums paid by public service employees. One employee retired in 2017. The reconciliation of the accrued benefit obligation is as follows:

Reconciliation of accrued benefit obligation	2018	2017
Accrued benefit obligation opening balance	$1,799	$1,040
Current service cost	114	246
Interest cost	46	25
Actuarial loss (gain) – including settlement (Note 2)	(1,726)	491
Realized unamortized actuarial gain	(233)	-
Benefits paid	-	(3)
Accrued benefit obligation as at March 29	-	1,799
Unamortized actuarial (loss) gain	-	(233)
Accrued benefit liability as at March 29	-	$1,566

The significant actuarial assumptions adopted in estimating the accrued benefit obligation were as follows:

	2018	2017
Discount rate	-	2.40%
Health care costs trend rate	-	6.9%
Dental costs trend rate	-	4.0%
Sensitivity of increase of 1% in health costs trend rate	-	$764
Sensitivity of decrease of 1% in health costs trend rate	-	$539

Actuarial gains (losses) were amortized over the average remaining service period of the active employees covered by the benefit plan which was 14 years in 2017. The gain arising from plan settlement is included as part of Net costs of dissolution in Note 2.

4. Sick leave benefits

Employees do not accumulate sick leave benefit balances, with the exception of the CEO as described in Note 3(c)(iv). Employees of PPP Canada are entitled to non-accumulating, non-vesting sick leave benefits in accordance with the terms and conditions of their employment agreements. PPP Canada recognized a liability for the cost of the accrued benefit obligation related to the CEO’s sick leave benefit which was actuarially determined using the projected benefit method prorated on service with estimates for salary increases, retirement age, mortality, incidence rate and discount rate. The accrued benefit obligation related to the CEO’s sick leave benefit, as at March 31, 2017, used a discount rate of 2%.

10.  Deferred P3 Canada Fund revenue

P3 Canada Fund appropriations received from the Government of Canada are invested in accordance with PPP Canada’s approved investment policy. All amounts are initially deferred and will be recognized as revenue in the year in which PPP Canada is obligated to expend funds under the terms and conditions of PPP Canada’s financial agreements entered into with eligible recipients.

Current year non-repayable payments to recipients made from the P3 Canada Fund of $229,514 were recorded as other transfers in accordance with Appendix B of PS 3410, Government Transfers. 

As a result of the intent to dissolve PPP Canada Inc., the Statement of Operations includes the recognition of remaining Deferred P3 Canada Fund revenue

Changes in the deferred P3 Canada Fund balance are as follows:

	2008–18	2018	2017
Beginning balance	$-	$1,267,843	$1,415,142
P3 Canada Fund appropriations	1,408,500	-	-
Interest received	86,797	16,557	15,010
Increase in accrued interest	24,250	3,220	5,509
Payments to eligible recipients	(461,441)	(229,514)	(167,818)
Revenue recognition as a result of dissolution (Note 2)	(1,058,106)	(1,058,106)
Ending balance	$-	$-	$1,267,843

The P3 Canada Fund consists of:

	2018	2017
P3 Canada Fund accrued interest	$-	$21,030
P3 Canada Fund investments (Note 5)	-	1,244,250
P3 Canada Fund loan receivable (Note 6)	-	2,563
Ending balance	$-	$1,267,843

11. Parliamentary appropriations

To achieve its mission, PPP Canada relies on government funding. This government funding is comprised as follows:

	2018	2017
Operations and program delivery appropriations received	$5,900	$11,800
Parliamentary appropriations recognized as operating revenue	$5,900	$11,800

12. Financial risk management

As PPP Canada has no financial instruments as of March 29, 2018, PPP Canada has no exposures to risks from its use of financial instruments. As of March 31, 2017, PPP Canada had exposure to the following risks from its use of financial instruments: credit risk, market risk and liquidity risk.

The Board of Directors ensures that PPP Canada has identified its major risks and ensures that management monitors and controls them.

1. Credit risk
Credit risk is the risk of financial loss to PPP Canada if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Such risks arise principally from certain financial assets held by PPP Canada consisting of cash and cash equivalents, accounts receivable, P3 Canada Fund accrued interest, P3 Canada Fund investments and P3 Canada Fund loan receivable.

It is management’s opinion that PPP Canada is not exposed to significant credit risk relating to its accounts receivable due to counterparties being primarily related parties and the Government of Canada; and that it is not exposed to significant credit risk relating to its P3 Canada Fund loan receivable as a result of a security pledge (see Note 6).

PPP Canada manages its credit risk surrounding its cash and cash equivalents, P3 Canada Fund accrued interest and P3 Canada Fund investments by dealing solely with reputable banks and financial institutions. PPP Canada utilizes an investment policy to guide its investment decisions including the diversification of its investment portfolio limiting the total investment in any one of the 6 major financial institutions identified in the policy to a maximum of 20% and the requirement that all short-term debt (deposits) have a Dominion Bond Rating Service Ltd. (DBRS) rating of R1 (Mid) or R1 (High). The policy also states that a minimum of 20% of the investment portfolio be held in obligations of the Government of Canada and agent Crown corporations and/or obligations of provincial governments/municipal authorities.

The maximum exposure to credit risk of PPP Canada at March 29, 2018, is $nil (2017 - $1,277,246).


2. Market risk

Market risk is the risk that changes in market prices, such as interest rates, will affect PPP Canada’s annual surplus. The objective of market risk management is to control market risk exposures within acceptable parameters while optimizing the return.

While the fair value of PPP Canada’s interest bearing financial instruments are exposed to market risk as a result of interest rate fluctuations (see Note 7), there is no effect on PPP Canada’s annual surplus.

It is management’s opinion that PPP Canada is not exposed to significant market risk arising from its financial instruments.

3. Liquidity risk

Liquidity risk is the risk that PPP Canada will not be able to meet its financial obligations as they become due.

PPP Canada manages liquidity risk by continually monitoring actual and forecasted cash flows from operations and anticipated investing and financing activities to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to PPP Canada’s reputation. PPP Canada’s objective is to accurately estimate cash requirements, while matching maturities of financial instruments to expected cash outflows, in order to manage within the approved parliamentary appropriations.

13.  Related party transactions

PPP Canada is related, in terms of common ownership, to all Government of Canada departments, agencies and Crown corporations. PPP Canada enters into transactions with government entities in the normal course of business and on normal trade terms applicable to all individuals and enterprises. The following table summarizes the impact of the significant related party transactions on total expenses and revenues and the amounts payable and receivable to related parties at the end of the year. The transactions are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

	2018	2017
Expenses – other government departments, agencies and Crown corporations	$818	$714
Payable – other government departments, agencies and Crown corporations	-	156
Revenues – other government departments, agencies and Crown corporations	468	2,351
Receivable – other government departments, agencies and Crown corporations	-	1,369

See Note 2 Dissolution of PPP Canada Inc. for transactions with related parties outside the normal course of business.

14.  Contractual obligations

PPP had entered into a multi-year agreement for office premises with remaining obligation of $3,328 and executed the Amending Agreement at a cost of $3,193 to terminate all future lease obligations See Note 2.

Contractual obligations related to the P3 Canada Fund were novated to Infrastructure Canada as directed by the Minister of Infrastructure, Communities and Intergovernmental Affairs, on behalf of Her Majesty the Queen in Right of Canada pursuant to P.C. 2017-1329, see Note 2.

Date modified:

2018-08-22