Future-oriented Financial Statements - March 2012

Management Responsibility for Financial Statements

Responsibility for the compilation, content, and presentation of the accompanying future-oriented financial information for the year ending March 31, 2013, rests with departmental management of the Veterans Review and Appeal Board. The future-oriented financial information has been prepared by management in accordance with Treasury Board accounting policies, which are consistent with Canadian generally-accepted accounting principles for the public sector. The future-oriented financial information is submitted for Part III of Estimates (Report on Plans and Priorities) and will be used in the Departmental Performance Report to compare with actual results.

Management is responsible for the integrity and objectivity of the future-oriented financial information and for the process of developing assumptions. Assumptions and estimates are based upon information available and known to management at the time of development, reflect current business and economic conditions, and assume a continuation of current governmental priorities and consistency in departmental mandate and strategic objectives. Much of the future-oriented financial information is based on these assumptions, best estimates, and judgment and gives due consideration to materiality. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. However, as with all such assumptions, there is a measure of uncertainty surrounding them. This uncertainty increases as the forecast horizon extends.

The actual results achieved for the fiscal years covered in the accompanying future-oriented financial information will vary from the information presented and the variations may be material.

John D. Larlee, Chair

Charlottetown, Canada

Heather Parry, Chief Financial Officer

Charlottetown, Canada

Notes to Future-oriented Financial Statements (unaudited)

1. Authority and Objectives

The Veterans Review and Appeal Board was established in 1995 pursuant to the Veterans Review and Appeal Board Act. The Veterans Review and Appeal Board received full departmental status by Order in Council in 2009.

Veterans Review and Appeal Board is a division of the public service named in Schedule I.1 of the Financial Administration Act. The Minister of Veterans Affairs is designated the appropriate Minister for the Veterans Review and Appeal Board in Parliament and at Cabinet.

The Veterans Review and Appeal Board program provides Canada's traditional Veterans, Canadian Forces members and Veterans, Royal Canadian Mounted Police members, qualified civilians and their families with full opportunity to request review and appeal hearings to ensure a fair adjudicative process for disability pension, disability award, and War Veterans Allowance applications.

2. Underlying Assumptions

These future-oriented statements have been prepared:

  • as at 31 December, 2011
  • on the basis of government policies, government priorities, and external environment at the time the future-oriented financial information was finalized.
  • according to the requirements of Treasury Board Accounting Policies which are based on Canadian generally accepted accounting principles for the public sector.
  • on the basis that the resources provided will enable Veterans Review and Appeal Board to deliver the expected results specified in the Report on Plans and Priorities.
  • on the basis of historical costs.

3. Variations and Changes to the Forecast Financial Information

While every attempt has been made to accurately forecast final results for the remainder of 2011-12 and for 2012-13, actual results achieved for both years are likely to vary from the forecast information presented, and this variation could be material.

In preparing these future-oriented financial statements, Veterans Review and Appeal Board 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 future-oriented financial statements and the historical financial statements include:

  1. The timing and amounts of acquisitions and disposals of property, plant and equipment may affect gains/losses and amortization expense.
  2. Implementation of new collective agreements.
  3. Further changes to the operating budget through additional new initiatives or technical adjustments later in the year.

Once the Report on Plans and Priorities is presented, Veterans Review and Appeal Board will not be updating the forecasts for any changes to appropriations or forecast financial information made in ensuing supplementary estimates. Variances will be explained in the Departmental Performance Report.

4. Summary of Significant Accounting Policies

The future-oriented financial information has been prepared in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.

Significant accounting policies are as follows:

(a) Parliamentary authorities

Veterans Review and Appeal Board is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the department 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 Future-oriented Statement of Operations and the Future-oriented Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 5 provides a reconciliation between the bases of reporting.

(b) Net cash provided by Government

Veterans Review and Appeal Board operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by Veterans Review and Appeal Board is deposited to the CRF and all cash disbursements made by Veterans Review and Appeal Board 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) Forecasted expenses are recorded on the accrual basis:

  • Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment.
  • Services provided without charge by other government departments for accommodations, the employer's contribution to the health and dental insurance plans and legal services are recorded as operating expenses at their estimated cost.

(d) Employee future benefits

(i) Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multi-employer plan, administered by the Government of Canada. Veterans Review and Appeal Board contributions to the Plan are charged to expense in the year incurred and represent the total departmental obligation to the plan. Current legislation does not require Veterans Review and Appeal Board to make contributions for any actuarial deficiencies of the Plan.

(ii) Severance benefits: Employees are entitled to severance benefits, as provided for under labour contracts or conditions of employment. These benefits are 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.

(e) 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. Veterans Review and Appeal Board 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
Buildings 25 Years
Works and infrastructure 25 Years
Machinery and equipment 5-15 Years
Informatics 2-5 Years
Motor vehicles 5 Years
Leasehold improvements Lesser of useful life or term of the lease
Assets under construction Once in service, in accordance with asset type

(f) Measurement uncertainty

The preparation of the future-oriented financial information requires management to make estimates and assumptions that affect the reported amounts of all the assets, liabilities, revenues and expenses reported in the future-oriented financial statements. Assumptions are based upon information available and known to management at the time of development, reflect current business and economic conditions, and assume a continuation of current governmental priorities and consistency in departmental mandate and strategic objectives. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. Nonetheless, as with all such estimates and assumptions, there is a measure of uncertainty surrounding them. This uncertainty increases as the forecast horizon extends.

5. Parliamentary Authorities

Veterans Review and Appeal Board receives funding through expenditure authorities provided by Parliament. Items recognized in the Future-oriented Statement of Operations and the Statement of Financial Position in one year may be funded through Parliamentary authorities in prior, current or future years. Accordingly, Veterans Review and Appeal Board 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 table:

(a) Authorities requested

Category Estimated2012 Planned 2013
  (in thousands of dollars)
Authorities requested 11,228 9,933
Program Expenditures 1,604 1,568
Statutory 12,832 11,501
Forecast authorities available 11,501 12,832

Authorities presented reflect current forecast of statutory items, approved initiatives included and expected to be included in Estimates documents and, when reasonable estimates can be made, estimates of amounts to be allocated from Treasury Board central votes.

(b) Reconciliation of net cost of operations to current year appropriations

Category Estimated2012 Planned2013
  (in thousands of dollars)
Net cost of operations
  14,243 13,190
Adjustments for items affecting net cost of operations but not affecting appropriations:    
Add (Less):    
Services provided without charge (1,568) (1,568)
Revenue not available for spending 0 0
(Increase) in employee severance benefits (18) (17)
Amortization of tangible capital assets (83) (80)
Bad debt expense 0 0
Other (22) (24)
Adjustment for items not affecting net cost of operations but affecting appropriations: 12,552 11,501
Add (Less):
Acquisition if tangible capital assets 0 0
  0 0
Forecasted current year lapse 280  
Forecasted authorities available 12,832 11,501

6. Tangible Capital Assets

Cost (in thousands of dollars) Accumulated amortization Net Book Value
Capital asset class Opening balance Acquisitions Disposals and write offs Closing balance Opening balance Amortization Disposals and write offs Closing balance 2012 2013
Land                    
Buildings                    
Works and infrastructure                    
Machinery and equipment 573     573 269 80   349 304 224
Informatics                    
Motor vehicles                    
Leasehold improvements                    
Assets under construction                    
Total 573     573 269 80   349 304 224

7. Employee Benefits

(a) Pension benefits: Veterans Review and Appeal Board 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 five best consecutive years of earnings. The benefits are integrated with Canada/Quebec Pension Plans benefits and they are indexed to inflation.

Veterans Review and Appeal Board responsibility with regards 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: Veterans Review and Appeal Board provides severance benefits to its employees based on eligibility, years of service and final salary. These severance benefits are not pre-funded. Benefits will be paid from future appropriations. Information about the severance benefits, measured as at March 31, is as follows:

Category Estimated Results 2012 Planned Results 2013
  (in thousands of dollars)
Accrued benefit obligation, beginning of year 1,147 1,164
Expenses for the year 133 133
Benefits paid during the year (116) (116)
Accrued benefit obligation, end of year 1,164 1,181

Veterans Review and Appeal Board is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations. Veterans Review and Appeal Board enters into transactions with these entities in the normal course of business and on normal trade terms. Also, during the year, Veterans Review and Appeal Board received services which were obtained without charge from other Government departments as presented in part (a).

(a) Services provided without charge:

During the year Veterans Review and Appeal Board received without charge from other departments, accommodations, legal fees and the employer's contribution to health and dental insurance plans. These services without charge have been recognized on the department's Statement of Operations as follows:

Category Estimated Results 2012 Planned Results 2013
  (in thousands of dollars)
Accommodations 700 700
Employer's contribution to the health and dental insurance plans 793 793
Legal services 75 75
Workers Compensation 0 0
Total 1,568 1,568

The Government has structured some of its administrative activities for efficiency and cost effectiveness purposes so that one department performs these on behalf of all without charge. The costs of these services, which include 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 as an expense in Veterans Review and Appeal Boards' Statement of Operations.

9. Segmented Information

Presentation by segment is based on the Department's program activity architecture. The presentation by segment is based on the same accounting policies as described in the Summary of significant accounting policies in note 4. The following table presents the forecasted expenses incurred and forecasted revenues generated for the main program activities, by major object of expenses and by major type of revenues. The segment results for the period are as follows:

Category 2013 Total 2012 Total
Transfer Payments
Individuals    
Non-profit organization
Other countries and international organizations
Other
Total transfer payments 0 0
Operating
Professional and special services 425 621
Salaries and employee benefits 11,274 11,787
Utilities, materials and supplies 46 92
Transportation and communication 569 811
Repairs and maintenance 40 72
Accommodations 700 700
Amortization 80 83
Bad debt expense 0 0
Other 56 77
Total operating expenses 13,190 14,243
Total expenses 13,190 14,243
Revenues    
Hospital Services    
Meals
Sales of goods and information products
Other
Total Revenues 0 0
Net Cost of Operations 13,190 14,243

Future-oriented Statement of Cash Flows (unaudited) for the year ended March 31

(in thousands of dollars)

Category Estimated Results 2012 Planned Results 2013
Operating activities
Net cost of operations 14,243 13,190
Non-cash items:
Amortization of tangible capital assets (83) (80)
Loss on disposal of tangible capital assets 0 0
Gain on disposal of tangible capital assets 0 0
Adjustments to tangible capital assets 0 0
Services provided without charge (1,568) (1,568)
Variations in Statement of Financial Position
Increase (decrease) in accounts receivable and advances 0 0
Increase (decrease) in prepaid expenses 0 0
Decrease (increase) in liabilities (18) (17)
Cash used for operating activities 12,574 11,525
 
Capital investment activities
Acquisitions of tangible capital assets 0 0
Proceeds from disposal of tangible capital assets 0 0
Cash used for capital investment activities 0 0
 
Financing activities
Net cash provided by Government of Canada 12,574 11,525

The accompanying notes form an integral part of these statements.

Future-oriented Statement of Operations (unaudited) for the year ended March 31

(in thousands of dollars)

Category Estimated Results 2012 Planned Results2013
     
Expenses    
Veterans Review and Appeal Board 14,243 13,190
Total expenses 14,243 13,190
     
Revenues    
Veterans Review and Appeal Board 0 0
Total revenues 0 0
     
Net cost of operations (14,243) (13,190)

Segmented information (Note 9)

The accompanying notes form an integral part of this statement of operations.

Future-oriented Statement of Financial Position (unaudited) at March 31

(in thousands of dollars)

Category Estimated Results2012 Planned Results 2013
Assets    
Financial assets    
Cash 0 0
Accounts receivable and advances 0 0
     
Non-financial assets    
Prepaid expenses 0 0
Tangible capital assets (Note 6) 304 224
Total assets 304 224
     
Liabilities    
Accounts payable and accrued liabilities 0 0
Vacation pay and compensatory leave 0 0
Deferred revenue 0 0
Other liabilities 0 0
Employee severance benefits (Note7) 1,164 1,181
Total liabilities 1,164 1,181
     
Equity (Deficit) of Canada (860) (957)
Total Liabilities and Equity 304 224

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

Future-oriented Statement of Equity of Canada (unaudited) for the year ended March 31

(in thousands of dollars)

Category EstimatedResults 2012 Planned Results 2013
Equity of Canada, beginning of year (759) (860)
Net cost of operations (14,243) (13,190)
Net cash provided by government 12,574 11,525
Change in due from the Consolidated Revenue Fund 0 0
Services received without charge from other government departments (Note 8) 1,568 1,568
Equity of Canada, end of year (860) (957)

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

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