Federal Economic Development Agency for Southern Ontario Financial Statements (Unaudited) as at March 31, 2022

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• Statement of Management Responsibility Including Internal Control over Financial Reporting
  • Statement of Financial Position (Unaudited) as at March 31, 2022
  • Statement of Operations and Departmental Net Financial Position (Unaudited) for the year ended March 31, 2022
  • Statement of Change in Departmental Net Debt (Unaudited) for the year ended March 31, 2022
  • Statement of Cash Flows (Unaudited) for the year ended March 31, 2022
• Notes to the Financial Statements as at March 31, 2022
  • 1. Authority and objectives
  • 2. Summary of significant accounting policies
  • 3. Parliamentary authorities
  • 4. Accounts payable and accrued liabilities
  • 5. Employee future benefits
  • 6. Accounts receivable and advances
  • 7. Loans receivable (repayable contributions)
  • 8. Contractual obligations (transfer payments)
  • 9. Contingent liabilities
  • 10. Tangible capital assets
  • 11. Related party transactions
  • 12. Transfer from/to other government departments
  • 13. Segmented information

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, 2022, and all information contained in these statements rests with the management of the Federal Economic Development Agency for Southern Ontario (FedDev Ontario). These financial statements have been prepared 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 best estimates and judgement, and gives due consideration to materiality. To fulfill its accounting and reporting responsibilities, FedDev Ontario maintains a set of accounts that provides a centralized record of the Agency's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in FedDev Ontario's Departmental Results Report, is consistent with these statements.

Management is also responsible for maintaining an effective system of internal control over financial reporting (ICFR). This provides 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.

FedDev Ontario seeks to ensure the objectivity and integrity of data in its financial statements. This is accomplished 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 the Agency; and through conducting risk-based assessments to ensure 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.

FedDev Ontario is subject to periodic Core Control Audits performed by the Office of the Comptroller General and uses the results of such audits to comply with the Treasury Board Policy on Internal Control.

A Core Control Audit was performed in 2015–16 by the Office of the Comptroller General of Canada (OCG). The Audit Report and related Management Action Plan are posted on the departmental web site at Core Control Audit of the Federal Economic Development Agency for Southern Ontario. In 2022–23, the Agency is working with the Office of the Comptroller General to conduct an assessment of its Core Controls.

The financial statements of FedDev Ontario have not been audited.

Notes to the Financial Statements as at March 31, 2022

1. Authority and objectives

The Federal Economic Development Agency for Southern Ontario (FedDev Ontario) operates under the authority that was established in 2009 as a separate organization under Schedule I.1 of the Financial Administration Act to support economic growth in southern Ontario through the delivery of federal programs and services.

FedDev Ontario's core mandate is to strengthen southern Ontario's economic capacity for innovation, economic development and growth, and to promote a dynamic, inclusive and globally-competitive southern Ontario. In support of this, the Agency will continue to drive economic growth, innovation and community diversification, with a focus on scaling up businesses, building innovation ecosystems and supporting community development in the region.

The Agency is a reliable, long-term and trusted partner to southern Ontario's businesses and communities. It supports the government's overall economic agenda in a manner that responds to the opportunities and challenges of the southern Ontario economy.

FedDev Ontario delivers three ongoing regional funding streams that are designed to support the commercialization of new technologies, business scale-up and expansion, technology adoption and adaptation, and community diversification and development. The Agency's investments target opportunities created by innovation and inclusivity, positioning the region to become a leader in the shift to a green and sustainable economy.

In addition, FedDev Ontario plays an important role as a federal delivery agent for national programs. The Community Futures Program supports rural communities as they develop and sustain their local economies. The Economic Development Initiative supports Francophone and bilingual organizations in Official Language Minority Communities (OLMCs). Other inclusive growth initiatives delivered by FedDev Ontario include the Black Entrepreneurship Program and the Women Entrepreneurship Strategy.

The Agency also delivers targeted and temporary national initiatives in southern Ontario that respond to government priorities. Specifically, the Jobs and Growth Fund (JGF), the Canada Community Revitalization Fund (CCRF), the Aerospace Regional Recovery Initiative (ARRI) and the Tourism Relief Fund (TRF) are being delivered across Canada by regional development agencies (RDAs) to support a successful economic recovery from the COVID-19 pandemic. These are key examples of the RDAs' ability to respond nimbly to emerging priorities and direct funding to effectively address regional needs.

With its headquarters in Waterloo and offices in Toronto, Peterborough and Ottawa, FedDev Ontario has a presence across southern Ontario and facilitates collaboration with a broad range of stakeholders, including post-secondary institutions, not-for-profit organizations, municipal governments, the Ontario government, Indigenous communities and private sector firms. FedDev Ontario plays an important role in convening key regional stakeholders to seek a common vision and to encourage the development of coordinated plans. In addition, through ongoing collaboration and dialogue with other federal departments and agencies, FedDev Ontario reflects the perspectives of southern Ontario in decision-making at the federal level and provides on-the-ground support in implementing key government priorities.

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 the Canadians public sector account standards.

Significant accounting policies are as follows:

1. Parliamentary authorities — FedDev Ontario is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to FedDev Ontario 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 forecast 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 2022–23 Departmental Plan. Forecast 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 2022–23 Departmental Plan.
2. Net Cash Provided by Government — FedDev Ontario operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by FedDev Ontario is deposited to the CRF, and all cash disbursements made by FedDev Ontario are paid from the CRF. The net cash provided by Government is the difference between all cash receipts and all cash disbursements, including transactions between departments of the Government.
3. Amounts due from or to the CRF are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the net amount of cash that FedDev Ontario is entitled to draw from the CRF without further appropriations to discharge its liabilities.

4. Revenues — Revenues that are non-respendable are not available to discharge FedDev Ontario's liabilities. While the President is expected to maintain accounting control, they have no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the entity's gross revenues.

   Other revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenue takes place.

5. Expenses — Expenses are recorded on the accrual basis:

   Transfer payments are recorded as expenses when authorization for the payment exists and the recipient has met the eligibility criteria or the entitlements established for the transfer payment program. In situations where payments do not form part of an existing program, transfer payments are recorded as expenses when the Government announces a decision to make a non-recurring transfer, provided the enabling legislation or authorization for payment receives parliamentary approval prior to the completion of the financial statements. Transfer payments that become repayable as a result of conditions specified in the contribution agreement that have come into being are recorded as a reduction to transfer payment expense and as a receivable.

   Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.

   Services provided without charge by other government departments for accommodation, and employer contributions to the health and dental insurance plans are recorded as operating expenses at their estimated cost.

6. Employee future benefits:
   1. Pension benefits: Eligible employees participate in the Public Service Pension Plan (Public Service Superannuation Act), a multi-employer plan administered by the Government. FedDev Ontario's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. FedDev Ontario's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.
   2. Severance benefits: Employees entitled to severance benefits under labour contracts or conditions of employment earn these benefits as services necessary to earn them are rendered. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.
7. Accounts and loans receivable are initially recorded at cost and where necessary, are discounted to reflect their concessionary terms. Concessionary terms of loans include cases where loans are made on a long-term, low interest or interest-free basis. Transfer payments that are unconditionally repayable are recognized as loans receivable. When necessary, an allowance for valuation is recorded to reduce the carrying value of accounts and loans receivable to amounts that approximate their net recoverable value.
8. 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 if an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

9. Tangible capital assets — All tangible capital assets having an initial cost of $10,000 or more are recorded at their acquisition cost. FedDev Ontario does not capitalize intangibles, works of art, and historical treasures that have cultural, aesthetic, or historical value, assets located on Indian Reserves and museum collections.

   Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:

   Asset class	Amortization period
   Computer hardware	10 years
   Machinery and equipment	10 years
   Vehicles	3 to 7 years

10. 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 allowances for doubtful accounts, 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

FedDev Ontario 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, FedDev Ontario 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:

4. Accounts payable and accrued liabilities

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

5. Employee future benefits

a) Pension benefits

FedDev Ontario'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 Plans benefits and they are indexed to inflation.

Both the employees and FedDev Ontario contribute to the cost of the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to Canada's 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 2021–22 expense amounts to $4,196,648 ($3,740,145 in 2020–21). For Group 1 members, the expense represents approximately 1.01 times (1.01 times in 2020–21) the employee contributions and, for Group 2 members, approximately 1.00 times (1.00 times in 2020–21) the employee contributions.

FedDev Ontario's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.

b) Severance benefits

Severance benefits provided to FedDev Ontario'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, 2022, substantially all settlements for immediate cash out were completed. Severance benefits are unfunded and, consequently, the outstanding obligation will be paid from future authorities. 

6. Accounts receivable and advances

The following table presents details of FedDev Ontario's accounts receivable and advances balances:

7. Loans receivable (repayable contributions)

The following table presents details of FedDev Ontario's unconditional repayable contribution balances:

Unconditionally repayable contributions

Unconditionally repayable contributions relate to contributions made to outside parties that must be repaid without qualification. The repayable contributions portfolio consists of 1,421 non-interest bearing loans issued in the years from 2009 to 2022 with prescribed annual repayment terms. The loans are recorded at face value since loans have been determined to not have significant concessionary terms. An allowance of $224,552,032 ($195,964,506 in 2020–21) has been recorded.

Loans receivable (repayable contributions) are considered a financial asset held on behalf of the Government and are not available to discharge the department's liabilities. As such, the loans receivable (repayable contributions) are presented as a reduction to the entity's gross loans receivable amount of contributions that are repayable.

8. Contractual obligations (transfer payments)

The contractual obligations for transfer payments for 2023 and beyond are related to projects under the Southern Ontario Prosperity Program, Community Futures Program, and the Regional Economic Growth through Innovation Program.

9. Contingent liabilities

In the normal course of its operations, FedDev Ontario becomes involved in various legal actions. Some of these potential liabilities 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 has been identified. As at March 31, 2022, FedDev Ontario has no contingent liabilities based on the legal assessment carried out by Department of Justice of potential liability.

11. Related party transactions

FedDev Ontario is related as a result of common ownership to all government departments, agencies, and Crown corporations. FedDev Ontario enters into transactions with these entities in the normal course of business and on normal trade terms. In addition, FedDev Ontario has an agreement with the Department of Innovation, Science and Economic Development related to the provision of information technology, finance and administration services. During the year, FedDev Ontario received common services that were obtained without charge from other government departments as disclosed below.

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 payroll and cheque issuance services provided by Public Services and Procurement Canada and audit services provided by the Office of the Auditor General are not included in FedDev Ontario's Statement of Operations and Departmental Net Financial Position.