Canadian Nuclear Safety Commission (CNSC) Annual Report 2006-2007

In my opinion, these financial statements present fairly, in all material respects, the financial position of the Commission as at March 31, 2007 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles. Further, in my opinion, the Canadian Nuclear Safety Commission has complied, in all significant respects, with the Canadian Nuclear Safety Commission Cost Recovery Fees Regulations pursuant to the Nuclear Safety and Control Act.

[ original signed by Crystal Pace ]

Crystal Pace, CA 
Principal
for the Auditor General of Canada 

Ottawa, Canada
July 25, 2007

Contractual obligations and contingent liabilities (Note 10) 

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

Approved by:

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

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

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

Notes to Financial Statements as at March 31, 2007 

1. Authority and Objectives 

The Canadian Nuclear Safety Commission (CNSC) was established in 1946 by the Atomic Energy Control Act. Prior to May 31, 2000, when the federal Nuclear Safety and Control Act (NSCA) came into effect, the CNSC was known as the Atomic Energy Control Board (AECB). The CNSC is a departmental corporation named in Schedule II to the Financial Administration Act and reports to Parliament through the Minister of Natural Resources.

The NSCA provides comprehensive powers to the CNSC to establish and enforce national standards for nuclear energy in the areas of health, safety and environment. It establishes a basis for implementing Canadian policy and fulfilling Canada's obligations with respect to the non-proliferation of nuclear weapons. The CNSC is empowered to require financial guarantees, order remedial action in hazardous situations and require responsible parties to bear the costs of decontamination and other remedial measures.

The objectives of the CNSC are to: 

• regulate the development, production and use of nuclear energy and the production, possession and use of nuclear substances, prescribed equipment and information in order to: a) prevent unreasonable risk to the environment, to the health and safety of persons and to national security; and b) achieve conformity with measures of control and international obligations to which Canada has agreed; and

• disseminate scientific, technical and regulatory information concerning: a) the activities of the CNSC; b) the development, production, possession, transport and use of nuclear energy and substances; and c) the effects of nuclear energy and substances use on the environment and on the health and safety of persons.

The CNSC also administers the Nuclear Liability Act, including designating nuclear installations and prescribing basic insurance to be carried by the operators of such nuclear installations, and the administration of supplementary insurance coverage premiums for these installations.

Pursuant to the Canadian Nuclear Safety Commission Cost Recovery Fees Regulations, the CNSC recovers costs related to its regulatory activities from users licensed under the Act. These costs include the technical assessment of licence applications, compliance inspections and the development of licence standards.

2. Significant Accounting Policies 

These financial statements have been prepared in accordance with Treasury Board accounting policies and year-end instructions issued by the Office of the Comptroller General, which are consistent with Canadian generally accepted accounting principles for the public sector. The significant accounting policies are as follows:

a) Parliamentary appropriations 
The CNSC is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to the CNSC do not parallel financial reporting according to generally accepted accounting prin­ciples since appropriations are primarily based on cash flow requirements. Consequently, items recognized in the statement of operations and the statement of financial position are not necessarily the same as those provided through appropriations from Parliament. Note 3 provides a high-level reconciliation between the two bases of reporting.

b) Net cash provided by Government 
The CNSC operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the CNSC is deposited to the CRF and all cash disbursements made by the CNSC 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 federal government.

c) Due from the Consolidated Revenue Fund
Due from the Consolidated Revenue Fund represents the amount of cash that the CNSC is entitled to draw from the Consolidated Revenue Fund, without further appropriations, in order to discharge its liabilities.

d) Revenue 
Revenue is recognized in the period in which the underlying transaction or event occurred that gave rise to the revenue. Licence fee revenue is recognized on a straight-line basis over the period to which the fee payment pertains (normally three months or one year). Licence fees received for future year licence periods are recorded as deferred revenue. Revenue from licence fees, special projects and other sources is deposited to the Consolidated Revenue Fund and is not available for use by the CNSC. Legislative authority allows for the respending of amounts received on the disposal of surplus assets.

Certain educational institutions, not-for-profit research institutions wholly owned by educational institutions, publicly funded health care institutions, not-for-profit emergency response organizations and federal government departments are not subject to the Cost Recovery Fees Regulations. CNSC provides licences to these organizations free of charge. The value of licences provided free of charge is calculated on the same basis as licence fees for organizations subject to the Regulations.

e) Vacation pay and compensatory leave 
Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment.

f) Grants and contributions 
Grants are recognized in the year in which the conditions for payment are met. Contributions are recognized in the year in which the recipient has met the eligibility criteria or fulfilled the terms of a contractual transfer agreement.

g) Services provided without charge by other Government departments and agencies
Services provided without charge by other Government departments and agencies are recorded as operating expenses at their estimated cost. These include services such as: accommodation provided by Public Works and Government Services Canada, contributions covering employer's share of employees' insurance premiums and costs paid by the Treasury Board Secretariat, salaries and associated legal costs of services provided by Justice Canada, audit services provided by the Office of the Auditor General, and workers' compensation benefits provided by Human Resources and Social Development Canada.

h) Pension benefits 
All eligible employees participate in the Public Service Pension Plan, a multi-employer plan, administered by the Government of Canada. The CNSC's contributions to the Plan are charged to expenses in the year incurred and represent the total CNSC obligation to the Plan. Current legislation does not require the CNSC to make contributions for any actuarial deficiencies of the Plan.

i) Employee severance benefits 
Employees are entitled to severance benefits, as provided for under their respective terms of employment. The cost of these benefits is accrued as employees render the services necessary to earn them. 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.

j) Accounts receivable 
Accounts receivable are stated at amounts expected to be ultimately realized; a provision is made for receiv­ables where recovery is considered uncertain.

k) Contingent liabilities 
Contingent liabilities are potential liabilities which 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.

l) Tangible capital assets
Tangible capital assets with an acquisition cost of $10,000 or more are recorded at their acquisition cost. Amortization is calculated on a straight-line basis over the estimated useful life of the asset as follows: 

m) Nuclear Liability Reinsurance Account 
The CNSC administers the Nuclear Liability Reinsurance Account on behalf of the federal government. The CNSC receives premiums paid by the operators of nuclear installations for the supplementary insurance coverage and credits these to the Nuclear Liability Reinsurance Account in the Consolidated Revenue Fund. Since the CNSC does not have the risks and rewards of ownership, nor does it have accountability for this account, it does not include any of the associated financial activity or potential liability in its financial state­ments. Financial activity and liability is however reported in Note 11 of these financial statements.

n) Measurement uncertainty 
The preparation of these financial statements in accordance with Treasury Board accounting policies and year-end instructions issued by the Office of the Comptroller General, which are consistent with Canadian generally accepted accounting principles for the public sector, 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 contingent liabilities, the liability for employee severance 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 Appropriations 

The CNSC receives its funding through Parliamentary appropriations. Items recognized in the statement of operations and the statement of financial position in one year may be funded through parliamentary appropriations in prior, current and future years. Accordingly, the CNSC has different net results of operations for the year on a government funding basis than on an accrual accounting basis. These differences are reconciled below.

4. Accounts Receivable

5. Tangible Capital Assets

6. Deferred Revenue 

7. Summary of Expenditures and Revenues by Cost Recovery Fee Category

8. Licences Provided Free of Charge by the CNSC 

The CNSC provides licences free of charge to educational institutions; not-for-profit research institutions wholly owned by educational institutions; publicly funded health care institutions; not-for-profit emergency response organizations; and federal departments. The total value of these licences amounted to $8,604,263 (2006 - $7,189,181).

9. Employee Future Benefits 

a) Pension Benefits 
The CNSC and all eligible employees participate in the Public Service Pension 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 and they are indexed to inflation. The employer's and employees' contributions to the plan were as follows:

The CNSC'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) Employee Severance Benefits 
The CNSC provides severance benefits to its employees based on eligibility, years of service and final salary. This benefit plan is not pre-funded. Benefits will be paid from future appropriations. Information about the severance benefits, measured as at March 31 is as follows:

10. Contractual Obligations and Contingent Liabilities

a) Contractual Obligations 
The nature of the CNSC's activities results in some multi-year contracts and obligations whereby the CNSC will be committed to make some future payments when the services and goods are received. As of March 31, 2007, the CNSC has significant future years' contractual obligations for the following:

b) Contingent Liabilities 
Claims have been made against the CNSC in the normal course of operations. Legal proceedings for claims totaling approximately $55,250,000 (2006 - $55,250,000) were still pending at March 31, 2007. 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 is accrued and an expense recorded in the financial statements.

11. Nuclear Liability Reinsurance Account 

Under the Nuclear Liability Act (NLA), operators of designated nuclear installations are required to possess basic and/or supplementary insurance of $75 million per installation for specified liabilities. The federal government has designated the Nuclear Insurance Association of Canada (NIAC) as the sole provider of third party liability insurance and property insurance for the nuclear industry in Canada. The NIAC provides insurance to nuclear operators under a standard policy.

The policy consists of two types of coverage: Coverage A and Coverage B. Coverage A includes only those risks that are accepted by the insurer, that is, bodily injury and property damage. Coverage B risks include personal injury that is not bodily, for example psychological injury, damage arising from normal emissions and damage due to acts of terrorism. Effective in 2003, the federal government agreed to provide coverage for damage due to acts of terrorism which was previously provided under Coverage A.

The NIAC receives premiums from operators for both coverages, however, premiums for Coverage B risks are remitted to the federal government which reinsures these risks under a Reinsurance Agreement between the NIAC and the federal government. The federal government, through the Reinsurance Agreement also pays the difference (supplementary insurance) between the basic insurance amount set by the CNSC and the full $75 million of liability imposed by the NLA. As of March 31, 2007 the total supplementary insurance coverage is $584,500,000 (2006 - $584,500,000).

All premiums paid by the operators of nuclear installations for the supplementary insurance coverage are credited to a Nuclear Liability Reinsurance Account in the Consolidated Revenue Fund. Premiums received in respect of coverage for damage due to acts of terrorism amount to $280,592 (2006 - $273,154). Claims against the supplementary insurance coverage are payable out of the Consolidated Revenue Fund and charged to the account. There have been no claims against or payments out of the account since its creation.

As explained in Note 2 m), the CNSC administers the Nuclear Liability Reinsurance Account on behalf of the Government of Canada through a specified purpose account consolidated in the Public Accounts of Canada. During the year, the following activity occurred in this account:

12. Related Party Transactions 

The CNSC is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations. The CNSC enters into transactions with these entities in the normal course of business. Certain of these transactions are on normal trade terms applicable to all individuals and enterprises, while others are services provided without charge to the CNSC. All material related party transactions are disclosed below.

a) Services Provided Without Charge
During the year, the CNSC received services that were obtained without charge from other government departments and agencies. These are recorded at their estimated cost in the financial statements as follows: 

b) Payables and receivables outstanding at year-end with related parties 
During the year, the CNSC expensed $21,189,735 (2006 - $21,637,725), which include services provided without charge of $8,629,299 (2006 - $8,195,630) as described above and recognized revenue of $7,257,208 (2006 - $7,920,734) which include accounts receivables in the amount of $955,809 (2006 - $1,097,876).

13. Comparative information 

Comparative figures have been reclassified to conform to the current year's presentation. 

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