Future-oriented Financial Statements: March 2013

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Management Responsibility for Financial Statements

Management is responsible for these future-oriented financial statements, including the responsibility for the appropriateness of the assumptions on which these statements are prepared. These statements are based on the best information available and assumptions adopted as at December 31, 2012 and reflect the plans described in the Report on Plans and Priorities.

     
______________________   ____________________________

Charlotte Stewart, Chief Financial Officer
Charlottetown, Canada
  John D. Larlee, Chair, Veterans Review and Appeal Board, Charlottetown, Canada

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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.

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2. Underlying Assumptions

These future-oriented statements have been prepared:

  • as at 31 December, 2012
  • 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.

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3. Variations and Changes to the Forecast Financial Information

While every attempt has been made to accurately forecast final results for the remainder of 2012-13 and for 2013-14, 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.

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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 Departmental Net Financial Position 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.

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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

  Estimated
2013
  Planned
2014
(in thousands of dollars)
Authorities requested
Program Expenditures
Statutory amounts


Forecast authorities available

10,278
1,569
  9,995
1,562
11,847

11,557
11,847 11,557
     

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

  Estimated
2013
  Planned
2014
(in thousands of dollars)
Net cost of operations
  13,458   13,221
Adjustments for items affecting net cost of operations but not affecting appropriations:    
Add (Less):    
Services provided without charge (1,618) (1,659)
Revenue not available for spending 0 0
(Increase) in employee severance benefits 21 0
Amortization of tangible capital assets (14) (5)
Bad debt expense 0 0
Other 0 0
  11,847



0
  11,557



0
Adjustment for items not affecting net cost of operations but affecting appropriations:
Add (Less):
Acquisition if tangible capital assets
  0

0

11,847
  0



11,557
Forecasted current year lapse
Forecasted authorities available
       

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6. Accounts Payable and accrued liabilities

The following table presents details of the Board's accounts payable and accrued liabilities:

  Estimated Results
2013
  Planned Results
2014
(in thousands of dollars)
Accounts payable to other government departments and agencies 81 81
Accounts payable to external parties 0 0
Accrued liabilities 217 217
     
Total accounts payable and accrued liabilities 298 298
     

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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.

As part of collective agreement negotiations with certain employee groups, and changes to conditions of employment for executives and certain non-represented employees, the accumulation of severance benefits under the employee severance pay program ceased for these employees commencing in 2012. Employees subject to these changes have been given the option to be immediately paid the full or partial value of benefits earned to date or collect the full or remaining value to benefits on termination from the public service. These changes have been reflected in the calculation of the outstanding severance benefit obligation.

Information about the severance benefits, estimated as at the date of these statements, is as follows:

  Estimated
Results
2013
  Planned
Results
2014
(in thousands of dollars)
Accrued benefit obligation, beginning of year 1,246
264
285
  1,225
200
(200)
Expenses for the year
Benefits paid during the year

Accrued benefit obligation, end of year

1,225
 
1,225
   

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8. 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
2013 2014
Machinery and equipment 68 0 0 68 63 5 0 68 5 0

Total
68 0 0 68 63 5 0 68 5 0

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9. Related party transactions

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:

 

Estimated
Results
2013

 

Planned
Results
2014

(in thousands of dollars)
Accommodations 878

740
0
0
  969

690
0
0
Employer's contribution to the
health and dental insurance plans
Legal services
Workers Compensation

Total

1,618

 

1,659

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.

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10. 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:

 
2013 Total

2014 Total

Operating
   
Professional and special services 350 276
Salaries and employee benefits 11,546 11,227
Utilities, materials and supplies 46 51
     
Transportation and communication 569 629
Repairs and maintenance 40 38
Accommodations 878 969
Amortization 14 5
Other 15 26
Total operating expenses 13,458 13,221

Total expenses

13,458

13,221

Revenues
 
 
Other  
 
Total Revenues 0 0

Net Cost of Operations

13,458

13,221

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

(in thousands of dollars)

  Estimated Results
2013
Planned Results
2014
Liabilities    
Accounts payable and accrued liabilities (Note 6) $            298 $            298
Vacation pay and compensatory leave 188 188
Employee future benefits (Note 7) 1,225 1,225
Total net Liabilities 1,711 1,711
     
Financial assets    
Due from the consolidated Revenue Fund 297 297
Total net Financial Assets 297 297
     
Departmental Net Debt 1,414 1,414
     
Non-financial assets    
Tangible capital assets (Note 8) 0 0
Total non-financial assets 5 5
     
Departmental net financial position $       (1,409) $       (1,414)

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

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Future-oriented Statement of Operations and Departmental Net Financial Position (unaudited) for the year ended March 31

(in thousands of dollars)

  Estimated Results
2013
Planned Results
2014
     
Expenses    
Veterans Review and Appeal Board $             13,458 $             13,221
Total expenses 13,458 13,221
     
Net cost of operations before government funding and transfers 13,458 13,221
     
Government funding and transfers    
Net cash provided by Government 11,847 11,557
Change in due from Consolidated Revenue Fund 0 0
Services provided without charge by other government departments (Note 9) 1,618 1,659
     
Net cost of operations after government funding and transfers (7) 5
     
Departmental net financial position - Beginning of year (1,416) (1,409)
     
Departmental net financial position - End of year $             (1,409) $             (1,414)

Segmented information (Note 10)

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

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Future-oriented Statement of Change in Departmental Net Debt (unaudited) for the year ended March 31

(in thousands of dollars)

  Estimated Results
2013
Planned Results
2014
Net cost of operations after government funding and transfers $              (7) $                 5
Change due to tangible capital assets    
Amortization of tangible capital assets (14) (5)
Total change due to tangible capital assets (14) (5)
     
Net increase (decrease) in departmental net debt (21) 0
     
Departmental net debt - Beginning of year 1,435 1,414
     
Departmental net debt - End of year $           1,414 $           1,414

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

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

(in thousands of dollars)

  Estimated Results
2013
Planned Results
2014
Operating activities    
Net cost of operations before government funding and transfers $           13,458 $           13,221
Non-cash items:
Amortization of tangible capital assets (14) (5)
Services provided without charge (Note 9) (1,618) (1,659)
Variations in Statement of Financial Position
Decrease (increase) in future employee benefits 21 0
Cash used for operating activities 11,847 11,557
 
Capital investment activities
  0 0
Cash used for capital investment activities 0 0
 
Financing activities 0 0
Net cash provided by Government of Canada $           11,847 $           11,557

The accompanying notes form an integral part of these statements.


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