Audit Report Template dot

1INTRODUCTION

1.1Context

Accounts receivable are classified as current assets of the Department and are generally created and recovered during the same fiscal period. They include trade accounts receivable (amounts owed by customers for goods or services rendered as part of normal business operations) and non-trade accounts receivable (amounts related to various transactions, such as interest income, refund of overpayments and recoveries).²

As shown in Table 1, on March 31, 2008, the balance of Environment Canada’s accounts receivable was $7.6 million. Accounts receivable from external parties (excluding those with other federal departments and organizations) accounted for $3.3 million of that amount.

 

Table 1 - Breakdown of accounts receivable as at March 31, 2008

	Amount (thousands of dollars)	%
External Cash in Hands of Departments Awaiting Deposit to the Receiver General Other revenue	420 2,917	5.6 38.6
Internal Goods and Services Tax and Harmonized Sales Tax	2,459	32.5
Other Government Department	1,762	23.3
Total	7,558	100.0

Source: Departmental financial system
Close to $80 million were generated in revenue during the 2007–2008 fiscal year. Approximately half of that amount was generated by the Ontario Region. Table 2 shows the types of revenue.

Table 2 – Types of revenue for the 2007-2008 fiscal year

	Amount (thousands of dollars)	%
Sales of Goods and Information Products	43,561	54.40
Services of a Non-Regulatory Nature	17,749	22.17
Services of a Regulatory Nature	5,141	6.42
Lease and Use of Public Property	4,615	5.76
Other revenues	3,811	4.76
Revenue from Joint Project and Cost Sharing Agreements	2,988	3.73
Environmental Damages Fund	649	0.81
Rights and Privileges	616	0.77
Gain on Disposal of Assets and Foreign Exchange Valuations	485	0.61
Found Assets Credited to Revenue	411	0.51
Interest on Overdue Accounts Receivable (net of write offs and cancellations)	33	0.04
Other Fees and Charges	9	0.01
Fines	3	0.00
Total	79,794	100.00

Source: Departmental financial system

Departmental Requirements

The roles and responsibilities of Environment Canada as they pertain to the management of accounts receivable are defined by the Treasury Board of Canada Secretariat Policy on Receivables Management. That policy stipulates that:

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  departments must ensure that all of the government’s receivables are managed fairly, efficiently and effectively to recover such receivables and minimize the loss of risk;
  
• 
  departments must charge interest on overdue accounts;
  
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  departments must take progressive collection actions, which include legal proceedings, if necessary; and
  
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  departments must take action on a timely basis with respect to any write-off of debts when they are not settled in full.
  

In situations where the Department determines that a debt is uncollectible, it is responsible for writing off that debt, and it must comply with the levels of approval required by the Delegation of Financial Signing Authorities that it has set up. The write-offs must appear in the financial statements as expenses in the statement of operations.

Financial Information Strategy

Since the implementation of the Financial Information Strategy in 2001, departments are required to record their revenues on an accrual accounting basis, i.e., when the sale of goods or the provision of services takes place. Previously, departments recorded revenues on a cash basis, i.e., when the deposit was made.

 

Financial System

Accounts receivable are recorded in the accounts receivable module in the MERLIN financial system. The system is used for invoicing, monitoring suspense accounts, entering payments, adjustments and interest, and also for writing off debts, when necessary.