Financial Statements (unaudited) - For the year ended March 31, 2017

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, 2017, 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, 2017 was completed in accordance with the Treasury Board Policy on Internal Control and the results and action plans are summarized in the annex.

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

The financial statements of Infrastructure Canada have not been audited.

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

N/A	2017	2016
Liabilities:
Construction in Progress - New Champlain Bridge Corridor Project (note 4)	1,213,581	574,432
Accounts payable and accrued liabilities (note 5)	147,457	188,874
Contingent liabilities (note 6)	7,000	N/AN/A-
Vacation pay and compensatory leave	1,773	1,505
Employee future benefits (note 7)	1,691	2,273
Total liabilities	1,371,502	767,084
Financial assets:
Due from Consolidated Revenue Fund	94,980	182,133
Accounts receivable and advances (note 8)	52,478	6,747
Total financial assets	147,458	188,880
Departmental net debt	1,224,045	578,204
Non-Financial assets:
Tangible capital assets (note 9)	1,371,707	641,447
Total non-financial assets	1,371,707	641,447
Departmental net financial position	147,662	63,243

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	2017 Planned Results	2017	2016
Expenses by Strategic Outcome:
Public infrastructure for a More Prosperous Canada (note 15)	3,292,656	3,154,124	3,099,656
Internal Services	29,976	38,927	43,022
Total expenses (note 15)	3,322,632	3,193,051	3,142,678
Revenues:
Miscellaneous Revenue (note 11)	N/A-	114	912
Revenues earned on behalf of Government	N/A-	(114)	(912)
Total revenues	N/A-	N/A-	N/A-
Net cost of operations before government funding and transfers	3,322,632	3,193,051	3,142,678
Government funding and transfers:
Net cash provided by Government (note 15)	N/A	3,291,011	3,103,807
Transfer of assets and liabilities from (to) other government departments (note 13)	N/A	67,179	N/A-
Services provided without charge by other government departments (note 12)	N/A	6,433	6,076
Transfer of the transition payments for implementing salary payments in arrears (note 12)	N/A	N/A-	(8)
Change in due from Consolidated Revenue Fund	N/A	(87,153)	79,230
Net cost of operations after government funding and transfers	N/A	(84,419)	(46,427)
Departmental net financial position - Beginning of year	N/A	63,243	16,816
Departmental net financial position - End of year	N/A	147,662	63,243

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	2017	2016
Net cost of operations after government funding and transfers	(84,419)	(46,427)
Change due to tangible capital assets:
Acquisition of tangible capital assets (note 9)	664,511	623,465
Transfer of assets and liabilities from (to) other government departments (note 13)	67,179	N/A-
Proceeds from disposal of tangible capital assets	(3)	N/A-
Net (loss) gain on disposal of tangible capital assets including adjustments (note 9)	(153)	N/A-
Amortization of tangible capital assets (note 9)	(1,275)	(1,764)
Total change due to tangible capital assets	730,260	621,701
Net increase (decrease) in departmental net debt	645,841	575,274
Departmental net debt - Beginning of year	578,204	2,930
Departmental net debt - End of year	1,224,045	578,204

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	2017	2016
Operating activities:
Net cost of operations before government funding and transfers (note 15)	3,193,051	3,142,678
Non-cash items:
Construction in Progress - New Champlain Bridge Corridor Project (note 9)	639,149	574,432
Transition payments for implementing salary payments in arrears (note 12)	N/A-	8
Net gain (loss) on disposal of tangible capital assets (note 9)	(153)	N/A-
Amortization of tangible capital assets (note 9)	(1,275)	(1,764)
Services provided without charge by other government departments (note 12)	(6,433)	(6,076)
Variations in Statement of Financial Position:
Increase (decrease) in accounts receivable and advances (note 8)	45,731	(41,633)
Decrease (increase) in accounts payable and accrued liabilities (note 5)	41,417	(38,078)
Decrease (increase) in employee future benefits (note 7)	582	(13)
Decrease (increase) in vacation pay and compensatory leave	(268)	(348)
Decrease (increase) in contingent liabilities (note 6)	(7,000)	N/A-
Decrease (increase) in Construction in Progress - New Champlain Bridge Corridor Project (note 4)	(639,149)	(574,432)
Cash used in operating activities	3,265,652	3,054,774
Capital investment activities:
Acquisitions of tangible capital assets (note 9)	25,362	49,033
Proceeds from disposal of tangible capital assets	(3)	N/A-
Cash used in capital investing activities	25,359	49,033
Net cash provided by Government of Canada (note 15)	3,291,011	3,103,807

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. 2016-0679 dated July 8, 2016, the Minister of Infrastructure and Communities was designated as the Minister responsible for PPP Canada Inc.

The 2016 Fall Economic Statement announced plans to establish a new Canada Infrastructure Bank. This commitment was confirmed in Budget 2017, and Infrastructure Canada established the Canada Infrastructure Bank Transition Office. Order in Council P.C. 2017-1007, dated July 4, 2017, named the Minister of Infrastructure and Communities as the Minister for the purposes of the Canada Infrastructure Bank Act.

Budget 2017 also set the foundation for the Smart Cities Challenge, which seeks to improve the quality of life for urban residents, through better city planning and implementation of clean, digitally connected technology including greener buildings, smart roads and energy systems, and advanced digital connections for homes and businesses.

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 and Capacity Building for Climate Change Challenges Fund)
• 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 2016-2017 Report on Plans and Priorities. 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 2016-2017 Report on Plans and Priorities.
2. Net cash provided by government – INFC operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by INFC is deposited to the CRF and all cash disbursements made by INFC are paid from the CRF. The net cash provided by Government is the difference between all cash receipts and all cash disbursements including transactions between departments of the Government.
3. Amounts due from 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. Expenses – Expenses are recorded on an accrual basis.
   1. Transfer payments are recorded as expenses when authorization for the payment exists and the recipient has met the eligibility criteria or the entitlements established for the transfer payment program. In situations where payments do not form part of an existing program, transfer payments are recorded as expenses when the Government announces a decision to make a non-recurring transfer, provided the enabling legislation or authorization for payment receives parliamentary approval prior to the completion of the financial statements.
   2. Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
   3. Services provided without charge by other government departments for accommodation, employer contributions to the health and dental insurance plans and legal services are recorded as operating expenses at their estimated cost.
   4. 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.
5. 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.
6. Accounts receivable and advances are stated at the lower of cost and net recoverable value; a valuation allowance is recorded for receivables where recovery is considered uncertain and a reasonable estimate can be made of the unrecoverable amount.
7. 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.
8. Tangible capital assets – All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:

   Asset class	Amortization period
   Informatics 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 become available for use and are not amortized until they become available for use.

9. Measurement uncertainty – The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are the 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.

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	2017	2016
   Net cost of operations before government funding and transfers (note 15)	3,193,051	3,142,678
   Adjustments for items affecting net cost of operations but not affecting authorities:
   Refund of previous year's expenditures	3,634	7,086
   Decrease (increase) in employee future benefits	582	(13)
   Other charges not charged to the authorities	6	N/A-
   Net gain (loss) on disposal of tangible capital assets	(153)	N/A-
   Decrease (increase) in vacation pay and compensatory leave	(268)	(348)
   Amortization of tangible capital assets	(1,275)	(1,764)
   Services provided without charge by other government departments	(6,433)	(6,076)
   Decrease (increase) contingent liabilities	(6,850)	(150)
   Total items affecting net cost of operations but not affecting authorities (note 15)	(10,757)	(1,265)
   Adjustments for items not affecting net cost of operations but affecting authorities:
   Acquisitions of tangible capital assets	25,362	49,033
   Transition payments for implementing salary payments in arrears	N/A-	8
   Increase (decrease) in prepaid expenses and change in advances	111	(13)
   Total items not affecting net cost of operations but affecting authorities	25,473	49,028
   Current year authorities used	3,207,766	3,190,441

2. Authorities provided and used

   Authorities provided and used
   (in thousands of dollars)

   N/A	2017	2016
   Authorities:
   Vote 1 - Operating Expenditures	131,616	123,741
   Vote 5 - Capital Expenditures	122,819	90,179
   Vote 10 - Contributions	3,017,422	1,569,895
   Statutory Amounts:
   Employee Benefit Plan	5,287	5,186
   Minister Office Salary and Car Allowance	84	82
   Gas Tax Fund	2,071,933	1,973,269
   Less:
   Lapsed : Operating	(74,292)	(64,973)
   Lapsed : Capital	(97,457)	(41,749)
   Lapsed : Contributions	(1,969,646)	(465,189)
   Current year authorities used	3,207,766	3,190,441

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).

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	2017	2016
Accounts Payable - Other government departments and agencies	3,313	40,830
Accounts Payable - External parties	141,401	145,395
Total accounts payable	144,714	186,225
Accrued Liabilities	2,743	2,649
Total accounts payable and accrued liabilities	147,457	188,874

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, 2017.

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 2016-2017 expense amounts to $3,683,404 ($3,574,608 in 2015-2016). For Group 1 members, the expense represents approximately 1.12 times (1.25 times in 2015-2016) the employee contributions and, for Group 2 members, approximately 1.08 times (1.24 times in 2015-2016) the employee contributions.

   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:

   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	2017	2016
   Accrued benefit obligation - Beginning of year	2,273	2,260
   Expense for the year	(466)	77
   Benefits paid during year	(116)	(64)
   Accrued benefit obligation - End of year	1,691	2,273

8. Accounts receivable and advances

Accounts receivable and advances
(in thousands of dollars)

N/A	2017	2016
Receivables - Other government departments and agencies	52,229	6,645
Receivables - External parties	199	101
Advances - Employees	49	1
Total accounts receivable and advances	52,478	6,747

9. Tangible capital assets

Cost 2017
(in thousands of dollars)

Capital asset class	Opening balance	Acquisitions	AdjustmentsFootnote 2	Disposals and write-offs	Closing balance
Land	35,074	4,234	67,179	-	106,487
Informatics Software - Developed and Purchased	31,386	-	1,207	-	32,593
Motor Vehicles	72	32	-	-	104
Leasehold Improvements	4,345	-	895	(580)	4,660
Buildings in Progress of Construction	895	822	(895)	-	822
Engineering Works in Progress of Construction	24,832	15,251	-	-	40,083
Work in progress for Software	1,207	1,796	(1,207)	-	1,796
Other Construction or Work in Progress	1,555	3,227	-	-	4,782
Subtotal	99,366	25,362	67,179	(580)	191,327
Non-cash item: Construction in Progress - New Bridge for the St. Lawrence Corridor ProjectFootnote 3	574,432	639,149	-	-	1,213,581
Total	673,798	664,511	67,179	(580)	1,404,908

Accumulated amortization 2017
(in thousands of dollars)

Capital asset class	Opening balance	Amortization	Adjustments	Disposals and write-offs	Closing balance
Land	-	-	-	-	-
Informatics Software - Developed and Purchased	29,873	815	-	-	30,688
Motor Vehicles	6	19	-	-	25
Leasehold Improvements	2,471	441	-	(424)	2,488
Buildings in Progress of Construction	-	-	-	-	-
Engineering Works in Progress of Construction	-	-	-	-	-
Work in progress for Software	-	-	-	-	-
Other Construction or Work in Progress	-	-	-	-	-
Subtotal	32,350	1,275	-	(424)	33,201
Non-cash item: Construction in Progress - New Bridge for the St. Lawrence Corridor Project	-	-	-	-	-
Total	32,350	1,275	-	(424)	33,201

Net Book Value^{Footnote 4}
(in thousands of dollars)

Capital asset class	2017	2016
Land	106,487	35,074
Informatics Software - Developed and Purchased	1,905	1,513
Motor Vehicles	79	66
Leasehold Improvements	2,172	1,873
Buildings in Progress of Construction	822	895
Engineering Works in Progress of Construction	40,083	24,832
Work in progress for Software	1,796	1,207
Other Construction or Work in Progress	4,782	1,555
Subtotal	158,126	67,015
Non-cash item: Construction in Progress - New Bridge for the St. Lawrence Corridor Project	1,213,581	574,432
Total	1,371,707	641,447

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)

N/A	2018	2019	2020	2021	2022 and thereafter	Total
Transfer payments:
Public infrastructure for a More Prosperous Canada
Public Transit Infrastructure Fund	2,192,483	1,147,688	N/A-	N/A-	N/A-	3,340,171
Clean Water and Wastewater Fund	1,103,732	852,801	23,179	N/A-	N/A-	1,979,712
New Building Canada Fund- Provincial Territorial Infrastructure Component -Small Communities Fund	248,874	339,592	314,865	180,108	346,698	1,430,136
New Building Canada Fund - Provincial Territorial Infrastructure Component -National and Regional Projects	309,622	371,824	181,987	116,006	117,709	1,097,148
Building Canada Fund-Major Infrastructure Component	422,583	219,977	159,105	33,038	N/A-	834,703
Green Infrastructure Fund	113,908	64,744	51,172	28,512	26,682	285,017
Building Canada Fund-Large Urban Centres Component	29,800	29,800	78,780	N/A-	N/A-	138,380
Canada Strategic Infrastructure Fund	104,818	6,427	11,100	N/A-	N/A-	122,345
New Building Canada Fund-National Infrastructure Component	7,285	30,655	24,662	21,935	33,982	118,518
Provincial-Territorial Infrastructure Base Funding Program	78,982	27,700	N/A-	N/A-	N/A-	106,682
Capacity Building for Climate Change Challenges	14,958	22,005	21,451	13,598	2,251	74,261
Building Canada Fund-Communities Component	19,000	19,000	31,135	N/A-	N/A-	69,135
Asset Management Fund	12,170	16,405	15,194	3,929	1,519	49,216
Border Infrastructure Fund	8,714	N/A-	16,874	N/A-	N/A-	25,588
Inuvik to Tuktoyaktuk Highway Program	12,350	N/A-	N/A-	N/A-	N/A-	12,350
Capital Assets:
New Champlain Bridge Corridor Project (Construction) (note 4)	501,237	700,911	122,541	N/A-	N/A-	1,324,689
Purchases:
New Champlain Bridge Corridor Project (Operations and Maintenance) (note 4)	1,931	4,283	19,914	35,397	1,370,562	1,432,087
Total transfer payments, capital assets, and purchases	5,182,444	3,853,811	1,071,958	432,523	1,899,402	12,440,138

11. Revenue

Revenues consist primarily of rental 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)

   N/A	2017	2016
   Employer's contribution to the health and dental insurance plans	3,295	2,909
   Accommodation	3,138	3,166
   Justice	N/A-	1
   Total	6,433	6,076

   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 Works and Government Services 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)

   N/A	2017	2016
   Accounts receivable - Other government departments and agencies	52,229	6,645
   Accounts payable - Other government departments and agencies	3,313	40,830
   Expenses - Other government departments and agencies	22,697	16,225

   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

As per Order in Council P.C. 2015-1237, the Windsor-Detroit Bridge Authority was transferred from the Minister of Transport to the Minister of Infrastructure and Communities, as of November 4, 2015. Following a Memorandum of Understanding (MOU), it was agreed that Transport Canada would continue to assume stewardship of charges including assets and liabilities and present the financial information related to the Windsor-Detroit Bridge Authority during the transition period of November 4, 2015 to March 31, 2016. In accordance with the MOU, the land with a net book value of $67 million was transferred through an interdepartmental transfer during the 2016-2017 fiscal year.

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)

N/A	Public Infrastructure for a More Prosperous Canada	Internal Services	2017	2016
Transfer payments:
Contributions	3,116,204	N/A-	3,116,204	3,071,120
Total transfer payments	3,116,204	N/A-	3,116,204	3,071,120
Operating expenses:
Salaries and employee benefits	24,950	19,205	44,155	41,344
Professional services	24,174	14,989	39,163	47,224
Amortization	9	1,266	1,275	1,764
Rentals	2,069	2,917	4,986	4,807
Temporary Help	144	82	226	176
Information	18	332	350	262
Informatics Equipment	179	435	614	1,327
Travel and Relocation	125	464	589	616
Office supplies & furnishings	13	835	848	131
Repairs	1,887	157	2,044	1,494
Other	(15,648)	(1,755)	(17,403)	(27,587)
Total operating expenses	37,920	38,927	76,847	71,558
Total expenses	3,154,124	38,927	3,193,051	3,142,678
Revenues:
Miscellaneous revenues	113	1	114	912
Revenues earned on behalf of government	(113)	(1)	(114)	(912)
Total revenues	N/A-	N/A-	N/A-	N/A-
Net cost from continuing operations	3,154,124	38,927	3,193,051	3,142,678

15. Change in reported total expenses for 2016

The 2016 total expenses was reported net of revenues in the 2015-16 Statement of Operations and Departmental Net Financial Position. The 2016 total expenses was modified to gross expenses in this year's financial statements.

16. Subsequent events

Funding letters for the Gas Tax Fund for a total amount of $2,071,932,904 were signed and provided to recipients. These letters indicate to each recipient the amount of funds to be distributed in 2017-2018.

ANNEX to the Statement of Management Responsibility Including Internal Control over Financial Reporting for the Fiscal Year ending March 31, 2017

1. Introduction

This document provides summary information on the measures taken by Infrastructure Canada (INFC) to design, assess and 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 its 2016-17 Report on Plans and Priorities and 2016-17 Departmental Results Report.

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 and training on statutory requirements, and policies and procedures for sound financial management and control; and
• At least semi-annual monitoring of and regular updates on internal control management, as well as the provision of related assessment results and action plans to the Deputy Head and departmental senior management as well as 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 the processing of certain transactions that are recorded in its financial statements:

Common Arrangements

• Public Services and Procurement Canada (PSPC) centrally administers the payments of salaries and the procurement of some goods and services in accordance with INFC's Delegation Instrument, and provides accommodation services;
• Government-wide pay and Receiver General central systems are administered by PSPC. The central systems consist of six individual systems: Standard Payment System (SPS), Government Banking System (GBS), Phoenix (government payroll system), Payroll System-General Ledger (PS-GL), Receiver General-General Ledger (RG-GL), and the Central Financial Management Reporting System (CFMRS);
• The Treasury Board Secretariat provides Infrastructure Canada with information used to calculate various accruals and allowances, such as the accrued severance liability and employee benefit plan, and pays the employer's contribution to the health and dental insurance plans;
• The Department of Justice provides legal services to Infrastructure Canada; 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.

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 partners (Transport Canada, Atlantic Canada Opportunities Agency, Western Economic Diversification Canada, Federal Economic Development Agency for Southern Ontario, and the Economic Development Agency of Canada for the Regions of Quebec) manage certain contribution programs on behalf of Infrastructure Canada.

3. Departmental assessment results during fiscal year 2016-2017

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

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.

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, and will require an assessment of the new process and related controls. Design effectiveness testing was expected to occur during 2016-17; however, due to ongoing changes in the payroll process, that testing was postponed.

Ongoing monitoring programs:

As part of its rotational ongoing monitoring plan, the department completed its reassessment of transfer payment controls (managed by INFC), procure-to-payment controls, financial statement preparation controls, entity-level controls and IT general controls. For the most part, the key controls that were tested performed as intended.

• In some cases there was a lack of documented evidence to support the of control operation in the procure-to-payment process. Recommendations were made to ensure that evidence is available to demonstrate consistent control operation. A management action plan has been prepared by control owners and remediation is underway.
• There was inconsistency in the application, or lack of documented evidence to support some Entity Level Controls (e.g. progress on action plans, or lack of documented approval of records of decision). Some of these findings are similar to what were found last year, however, it should be noted that the department has decided to conduct a significantly more in-depth review of governance structure that goes beyond what was expected in the internal control related recommendations last year.

Based on its Multi-year Risk Based Plan, the department performed walkthroughs for business processes that were not scheduled for reassessment: Transfer payments managed by INFC and capital assets. For the most part, the key controls that were tested were designed effectively.

4. Departmental Action Plan

4.1 Progress during fiscal year 2016-17

Infrastructure Canada conducted ongoing monitoring according to the previous fiscal year's rotational plan as shown in the following table.

Progress During Fiscal Year 2016-17
Previous year's rotational ongoing monitoring plan for current year

Key control areas	Status
Entity level controls	Selected entity level controls (ELCs) were assessed during FY 2016-17, including all ELCs with findings requiring action plans in prior years. Findings have been communicated to stakeholders and remediation actions are underway.
Transfer Payments	The transfer payment process managed internally 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.
Transfer Payments - Federal Delivery Partners (FDP)	The transfer payment process managed by FDP has been walked through, and assessed for design effectiveness. Findings have been communicated to stakeholders and remediation actions are underway.
Procure-to-Payment	The procure-to-payment process 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.
Payroll	Infrastructure Canada was part of the second wave of departments to adopt the new government-wide payroll system, Phoenix, in April 2016. Given the ongoing changes to both the system, and related processes, design effectiveness testing was delayed this year. There is evidence of management oversight and monitoring of payroll, however, due to the ongoing evolution of the payroll process, both within the Department, and in interactions with other responsible parties, we were unable to assess the design or operating effectiveness of pay transactions in 2016-17.
Financial Statement Preparation	The financial statement preparation process 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.
IT General Controls	The IT general controls (logical access and change management) have 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.

4.2 Action plan for the next fiscal year and subsequent years

Infrastructure Canada will be applying its rotational on-going monitoring plan to reassess control performance on a risk basis across all control areas.

Given the significant changes to the operating environment of Infrastructure Canada since the last Framework was established, an update to the Multi-year Risk Based Plan is currently underway.

The update, originally anticipated for completion in Q3 of 2016-17, was delayed to incorporate information from new departmental responsibilities included in Budget 2017, as well as the Treasury Board financial management policy reset, that was approved in April 2017.

It is anticipated that the updated multi-year risk based plan will be approved, and implementation thereof to begin, in the late-summer or early-fall of 2017.

Footnotes

Footnote 1

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

Return to Footnote 1

Footnote 2

Adjustments include assets under construction that were transferred to the other categories upon completion, as well as the transfer of land from another government department.

Return to Footnote 2

Footnote 3

This acquisition includes capitalized interest costs of $33.8M. This item has been reflected as a non cash item on the Statement of Cash Flows.

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Footnote 4

Opening balance for 2016-17 may not balance with 2015-16 closing balance due to rounding adjustments.

Return to Footnote 4