Consolidated Future-Oriented Statement of Operations for the Year Ending March 31, 2023

National Research Council Canada
Consolidated Future‑Oriented Statement of Operations
For the Year Ending March 31
(in thousands of dollars) Forecast
Results
2021-22
Planned
Results
2022‑23
Expenses
Science and Innovation 1,318,265 1,293,183
Internal Services 155,549 157,148
Total Expenses 1,473,814 1,450,331
Revenues
Research services 72,468 78,584
Technical services 78,631 85,268
Intellectual property, royalties and fees 6,525 7,076
Sales of goods and information products 2,860 2,860
Rentals 6,733 6,733
Grants and contributions 2,342 1,479
Lease inducement revenue 2,548 2,548
Other 2,146 3,009
Revenues earned on behalf of Government (35) (35)
Total Revenues 174,218 187,522
Net cost of operations before government funding and transfers 1,299,596 1,262,809

The accompanying notes form an integral part of the consolidated future‑oriented statement of operations.

National Research Council Canada
Notes to the Consolidated Future‑Oriented Statement of Operations

For the Year Ending March 31, 2023

1. Methodology and Significant Assumptions

The Consolidated Future‑Oriented Statement of Operations has been prepared on the basis of government priorities and the plans of the National Research Council (NRC) as described in the Departmental Plan.

The main assumptions underlying the forecasts are as follows:

  1. Expenses and revenues, including the determination of amounts internal and external to the government, are based on a combination of information obtained through an organization wide business planning process, monthly financial forecasts, and historical information. The forecast results presented for 2021-22 are based on the September 30, 2021 financial update used by NRC for internal forecasting purposes, and the planned results presented for 2022-23 is based on the Annual Reference Level Update (ARLU).

  2. NRC presents financial information on plans and expected performance by Core Responsibility. Expenses related to National Science Library, Research Information Technology Platforms and Special Purpose Real Property and Business Management Support are included in the Science and Innovation Core Responsibility.

    Internal Services refers to the activities and resources of the 10 distinct service categories that support Program delivery in NRC, regardless of the Internal Services delivery model. The 10 service categories are: Management and Oversight Services; Communications Services; Legal Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Services; Materiel Services; and Acquisition Services.

  3. No significant change in foreign exchange rates is expected.

These assumptions are made as at January 19, 2022.

2. Variations and Changes to the Forecast Financial Information

Although every attempt has been made to forecast final results for the remainder of 2021‑22 and for 2022‑23, actual results achieved for both years are likely to vary from the forecast information presented, and this variation could be material.

In preparing this Consolidated Future‑Oriented Statement of Operations, NRC has made estimates and assumptions concerning the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Factors that could lead to material differences between the consolidated future‑oriented statement of operations and the historical consolidated statement of operations include:

  1. This statement is based on approvals received as at January 19, 2022. Subsequent increases or decreases to these approvals would have an impact on spending.
  2. Revenues generated for 2022‑23 are based on targets set by NRC management. Economic conditions may affect both the amount of revenue earned and the collectability of accounts receivables. Variations to revenue earned would have an impact on spending.
  3. Further changes to the operating budget through additional new initiatives, technical adjustments or reductions to program funding.
  4. The timing and amounts of acquisitions and disposals of tangible capital assets may affect gains/losses and amortization expense.
  5. Expenses for 2021-22 and 2022-23 include anticipated payments on expired collective agreements.
  6. During the Construction phase of the Thirty Meter Telescope, NRC records the contribution as capital assets under construction and therefore the contribution is excluded from expenses.

After the Departmental Plan is tabled in Parliament, NRC will not be updating its forecasts for any changes in financial resources made in ensuing supplementary estimates. Variances will be explained in the Departmental Results Report.

3. Summary of Significant Accounting Policies

This Consolidated Future‑Oriented Statement of Operations has been prepared using the Government of Canada’s accounting policies in effect for fiscal year 2021-22 and is 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:

a) Consolidation

This Consolidated Future Oriented Statement of Operations includes both NRC and its portion of the accounts of the Canada France Hawaii Telescope Corporation (CFHT) and TMT International Observatory LLC (TIO). The NRC relationship with CFHT and TIO meets the definition of a government partnership under Canadian public sector accounting standards, which requires that its results be proportionally consolidated within those of NRC. All inter organizational balances and transactions are eliminated as part of the consolidation process. CHFT and TIO audited statements as at December 31, 2020 have been proportionally consolidated with NRC's March 31 future oriented statement of operations.

b) Expenses

  • NRC’s expenses are recorded on an accrual basis.
  • Expenses for NRC’s operations are recorded when goods are received or services are rendered.
  • 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 and agencies for accommodation, employer contributions to the health and dental insurance plans, legal services, workers' compensation are recorded as operating expenses at their estimated cost, when estimable.
  • Contributions are recognized in the year in which the recipient has met the eligibility criteria or fulfilled the terms of a contractual transfer agreement, provided that the transfer is authorized and a reasonable estimate can be made when available.
  • Grants are recognized in the year in which the conditions for payment are met. In the case of grants which do not form part of an existing program, the expense is recognized 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 consolidated statement of operations.
  • Expenses also include provisions to reflect changes in the value of assets, including provisions for bad debt on accounts receivable, provision for valuation on loans, investments and advances and inventory obsolescence or liabilities, including contingent liabilities and environmental liabilities, to the extent the future event is likely to occur and a reasonable estimate can be made.
  • Expenses also include amortization of tangible capital assets, which are capitalized at their acquisition cost. Amortization of tangible capital assets is done on a straight‑line basis over the estimated useful life of the asset.

c) Revenues

Revenues are recognized in the year in which the underlying transaction or event occurred that gave rise to revenue as follows:

  • Research and technical services: Revenues are recognized as services are provided based on percentage‑of‑completion.
  • Licences and fees for intellectual property: Revenues are recognized at the point of time when the customer has a right to use NRC’s intellectual property and the performance obligation is satisfied.
  • Royalties generated from usage or based on customer’s sales from licences: Revenues are recognized over the licence period as performance is satisfied and the right to payment is enforceable.
  • Sales of goods and information products: Revenue is recognized when goods or information products are delivered to the client.
  • Rentals: Revenue is recognized in the period to which the lease or use of property relates.
  • Grants and contributions: Revenue is recognized when the transfer payment is authorized and eligibility criteria are met, except to the extent that transfer stipulations give rise to an obligation that meets the definition of a liability.

Funds received for which NRC has an obligation to other parties for the provision of goods, services or the use of assets in the future are recorded as deferred revenue.

Receipts are deposited to the Consolidated Revenue Fund (CRF). Under the National Research Council Act (NRC Act), money received by NRC through the conduct of its operations is respendable in the current or in subsequent years

Revenues that are non‑respendable are not available to discharge NRC's liabilities. Although the President is expected to maintain accounting control, he has no authority regarding the disposition of non‑respendable revenues. As a result, non‑respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the NRC's gross revenues.

4. Parliamentary Authorities

NRC is financed by the Government of Canada through parliamentary authorities. Financial reporting of authorities provided to NRC differs from financial reporting according to generally accepted accounting principles since authorities are based mainly on cash flow requirements. Items recognized in the Consolidated Future‑Oriented Statement of Operations in one year may be funded through parliamentary authorities in prior, current, or future years. Accordingly, NRC has different net cost of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled in the following tables:

a) Reconciliation of net cost of operations to requested authorities

Reconciliation of net cost of operations to requested authorities
(in thousands of dollars) Forecast
Results
2021‑22
Planned
Results
2022-23
Net cost of operations before government funding and transfers 1,299,596 1,262,809
Adjustments for items affecting net cost of operations but not affecting authorities:
Revenues 174,218 187,522
Amortization of tangible capital assets (53,173) (53,173)

Services provided without charge by other government departments and agencies

(40,719) (40,574)
Bad debt expenses (300) (300)
Portion of accounts of CFHT and TIO (2,420) (2,420)
Loss on disposal of capital assets (250) (250)
Increase in accrued wages and employee benefits (3,962) (7,919)
Other (100) (100)

Total items affecting net cost of operations but not affecting authorities

73,294 82,786
Adjustment for item not affecting net cost of operations but affecting authorities:

Acquisitions of tangible capital assets and additions to assets under construction

125,769 126,865
Requested authorities 1,498,659 1,472,460

b) Authorities requested

Authorities requested
(in thousands of dollars) Forecast
Results
2021‑22
Planned
Results
2022‑23
Authorities requested:
Vote 1 – Operating expenditures 528,635 501,174
Vote 5 – Capital expenditures 137,123 78,478
Vote 10 – Grants and contributions 755,224 641,080
Statutory amounts:

Revenues pursuant to paragraph 5(1)(e) of the National Research Council Act

286,518 316,030
Contributions to employee benefit plans 69,072 69,728
Less:
Revenues available for use in future years (134,030) (134,030)
Lapsed authorities:
Lapsed – Grants and contributions (70,210)
Lapsed - Capital (27,393)
Frozen allotments - Operating (1,280)
Frozen allotments – Grants and contributions (45,000)
Requested authorities 1,498,659 1,472,460