2011-2012 Future-oriented Financial Statements

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, 2012, 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.

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, 2010
• 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 from 2011/12, actual results achieved are likely to vary from the forecast information presented, and this variation could be material.

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 appropriations

Veterans Review and Appeal Board is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to Veterans Review and Appeal Board 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 5 to these financial statements provides a high-level 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 Appropriations

Veterans Review and Appeal Board receives funding through annual 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 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:

Reconciliation of net cost of operations to current year appropriations

Category	2011	2012
	(in thousands of dollars)
Net cost of operations
	12,795	13,079
Adjustments for items affecting net cost of operations but not affecting appropriations:
Add (Less):
Services provided without charge	(1,194)	(1,412)
Revenue not available for spending	0	0
(Increase) in employee severance benefits	(46)	(47)
Amortization of tangible capital assets	(83)	(83)
Bad debt expense	0	0
Other	0	0
	11,472	11,537
Adjustment for items not affecting net cost of operations but affecting appropriations:	0	0
Add (Less):
Acquisition if tangible capital assets
	0	0
Appropriations available for use	11,472	11,537

6. Forecasted Expenses

The following table presents details of expenses by category:

Category	2011	2012
	(in thousands of dollars)
Transfer Payments
Individuals	0	0
Non-profit organization	0	0
Other countries and international organizations	0	0
Other	0	0
Total transfer payments	0	0
Operating
Professional and special services	387	161
Salaries and employee benefits	10,489	11,274
Utilities, materials and supplies	79	100
Transportation and communication	1,080	750
Repairs and maintenance	31	70
Accommodations	577	594
Amortization	83	83
Bad debt expense	0	0
Employee severence benefits	46	47
Other	23	0
Total operating expenses	12,795	13,079
Total expenses	12,795	13,079

7. Tangible Capital Assets

Cost (in thousands of dollars)					Accumulated amortization
Capital asset class	Opening balance	Acquisitions	Disposals and write offs	Closing balance	Opening balance	Amortization	Disposals and write offs	Closing balance	2011 Net book value
Land				-				-	-
Buildings				-				-	-
Works and infrastructure				-				-	-
Machinery and equipment	573			573	177	83		260	313
Informatics				-				-	-
Motor vehicles				-				-	-
Leasehold improvements				-				-	-
Assets under construction				-				-	-
Total	573	-	-	573	177	83	-	260	313

8. 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	2011	2012
	(in thousands of dollars)
Accrued benefit obligation, beginning of year	1,238	1,256
Expenses for the year	112	113
Benefits paid during the year	(94)	(94)
Accrued benefit obligation, end of year	1,256	1,275

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:

Category	2011	2012
	(in thousands of dollars)
Accommodations	576	594
Employer's contribution to the health and dental insurance plans	618	757
Legal services	0	61
Workers Compensation	0	0
Total	1,194	1,412

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.

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

(in thousands of dollars)

Category	2011	2012
Operating activities
Net cost of operations	12,795	13,079
Non-cash items:
Amortization of tangible capital assets	83	83
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	1,194	1,412
Variations in Statement of Financial Position
Increase (decrease) in accounts receivable and advances	0	0
Increase (decrease) in prepaid expenses	0	0
Increase in liabilities	-18	-19
Cash used for operating activities	14,054	14,555
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	-14,054	-14,555
Net cash used	0	0
Cash, beginning of year	0	0
Cash, end of year	0	0

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	2011	2012
Expenses (Note 6)
Veterans Review and Appeal Board	12,795	13,079
Total expenses	12,795	13,079
Revenues
Veterans Review and Appeal Board	0	0
Total revenues	0	0
Net cost of operations	-12,795	-13,079

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	2011	2012
Assets
Financial assets
Cash	0	0
Accounts receivable and advances	0	0
Non-financial assets
Prepaid expenses	0	0
Tangible capital assets (Note 7)	395	313
Total assets	395	313
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 (Note 8)	1,256	1,275
Total liabilities	1,256	1,275
Equity (Deficit) of Canada	(861)	(962)
Total Liabilities and Equity	395	313

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