5. Financial statements

Statement of Management Responsibility

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2024, and all information contained in these statements rests with the management of the Canadian Forces Housing Agency (CFHA). These financial statements have been prepared by management in accordance with the accounting policies set out in Note 2 of the statements, on a basis consistent with that of the preceding year.

Management is responsible for the integrity and objectivity of the information in these financial statements. Some of the information in the financial statements is based on management’s best estimates and judgment, and gives due consideration to materiality. To fulfil its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the Agency’s financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the Department of National Defence Departmental Results Report, is consistent with these financial statements.

Management is also responsible for maintaining an effective system of internal control over financial reporting designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded, and that transactions are properly authorized and recorded in accordance with the Financial Administration Act and other applicable legislations, regulations, authorities, and policies.

Management also seeks to ensure the objectivity and integrity of data in its financial statements through careful selection, training, and development of qualified staff; through organizational arrangements that provide appropriate divisions of responsibility; and through communication programs aimed at ensuring that regulations, policies, standards and managerial authorities are understood throughout the Agency.

The CFHA financial statements have not been audited.

Approved by:

Statement of Financial Position (unaudited)

As of March 31, 2024

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

Statement of Operations and Net Financial  Position (unaudited)

For the year ended March 31, 2024

Segmented information (note 11).

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

Statement of Change in Net Debt (unaudited)

For the year ended March 31, 2024

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

Statement of Cash Flow (unaudited)

For the year ended March 31, 2024

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

Notes to the Financial Statement (unaudited)

1. Authority and objectives

The Canadian Forces Housing Agency (CFHA) was established as a provisional Special Operating Agency of the Department of National Defence (DND) in October 1995. In March 2004, it received permanent Special Operating Agency status. DND is granted revenue spending authority from Parliament through the approval of an Appropriation Act. DND funds CFHA’s operating activities from vote-netted revenues generated by shelter charges collected from the housing portfolio and credited to the Defence appropriation. The capital investment program of the Agency is funded through departmental appropriations.

CFHA manages Crown-controlled residential accommodation assets for DND, to ensure that those assets, occupied or available to be occupied, are maintained to a suitable standard. CFHA also develops and implements plans to meet the future residential needs of members of the Canadian Armed Forces (CAF).

The Departmental Results Framework is structured by the following five core responsibilities and internal services:

(a) Strategic housing portfolio planning—DRF 6.4.1

Conduct strategic portfolio planning and program development activities, analyze and determine housing requirements and issue program direction.

(b) Real property housing programs—DRF 6.4.2

Manage housing real property programs including residential housing unit construction, recapitalization, betterment and housing portfolio rationalization and disposal projects.

(c) Housing operations and customer service programs—DRF 6.4.3

Manage housing operations, asset lifecycle, maintenance and repairs programs. Housing operations includes snow removal, grass cutting and janitorial, landscaping, pest control, and utility payments. Lifecycle includes the replacement of major components or assemblies that are at or near the end of their useful life. Repairs are to restore damaged or worn-out property to normal operating conditions.

Provide housing services to CAF members including housing allocation, shelter charge setting and collection, move-in/move-out coordination, customer relations, terms of occupancy and licence agreements and maintenance requests.

(d) Military housing program support, control and coordination—DRF 6.4.4

Manage, control and monitor the military family housing program to achieve expected program outcomes. Includes program support activities such as corporate services, financial management, planning, procurement, human resource services, IT services and infrastructure, governance, performance measurement, reporting relationship and partnership management and advice relating to DND and CAF housing.

(e) Revenues—DRF 6.4.5

Rental revenues generated from shelter charges for residential housing units and miscellaneous recoveries including recoveries for damages.

2. Summary of significant accounting policies

These financial statements have been prepared using the government’s accounting policies stated below, which are based on Canadian Public Sector Accounting Standards.

Significant accounting policies are as follows:

(a) Net voting authority

CFHA receives authority to operate net voting from Parliament with the approval of an Appropriation Act. Net voting is the authority to expend generated revenues to offset related expenditures.

The Agency also receives additional funding from Departmental appropriations to provide DND-directed activities.

(b) Net cash provided by the Government of Canada

The Agency operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the Agency is deposited to the CRF and all cash disbursements made by the Agency 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) Change in net position in the Consolidated Revenue Fund

The change in net position in the Consolidated Revenue Fund is the difference between the net cash provided by government and vote-netted revenues plus additional funding used in a year, excluding the amount of non-respendable revenue recorded by the Agency. It results from timing differences between when a transaction affects vote-netted revenues and when it is processed through the CRF.

(d) Revenues

Revenues from shelter charges are recognized in the accounts based on the services provided in the year.

Other revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues.

(e) Expenses

Expenses are recorded on the accrual basis:

• 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 for the employer’s contribution to the health and dental insurance plans are recorded as operating expenses at their estimated cost.

(f) Employee future benefits

i. Pension benefits

Eligible civilian employees participate in the Public Service Pension Plan (the Plan), a multi-employer plan administered by the Government of Canada. The Department’s contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. The department’s responsibility with regard to the Plan is limited to its contributions.

ii. Severance benefits

Employees are entitled to severance benefits 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.

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 of benefits of termination from the public service.

(g) Accounts receivable

Receivables are stated at amounts expected to be ultimately realized; an allowance for doubtful accounts is made for receivables where recovery is considered uncertain. The allowance for doubtful accounts represents management’s best estimate of probable losses in receivables. The allowance is determined based on an analysis of historic loss experience and an assessment of current condition.

(h) Tangible capital assets

All tangible capital assets, having an initial cost of $10,000 or more are recorded at their acquisition cost.

Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:

(i) Environmental liabilities and asset retirement obligations

An environmental liability for the remediation of contaminated sites is recognized when all of the following criteria are satisfied: an environmental standard exists, contamination exceeds the environmental standard, the government is directly responsible or accepts responsibility, it is expected that future economic benefits will be given up and a reasonable estimate of the amount can be made. The liability reflects the government’s best estimate of the amount required to remediate the sites to the current minimum standard for its use prior to contamination. If the likelihood of the government’s responsibility is not determinable, a contingent liability is disclosed in the notes to the consolidated statements.

An asset retirement obligation is recognized when all of the following criteria are satisfied: there is a legal obligation to incur retirement costs in relation to a tangible capital asset, the past event or transaction giving rise to the retirement liability has occurred, it is expected that future economic benefits will be given up and a reasonable estimate of the amount can be made. The costs to retire an asset are normally capitalized and amortized over the asset’s estimated remaining useful life. An asset retirement obligation may arise in connection with a tangible capital asset that is not recognized or no longer in productive use. In this case, the asset retirement cost would be expensed. The measurement of the liability is the government’s best estimate of the amount required to retire a tangible capital asset. When the future cash flows required to settle or otherwise extinguish a liability are estimable, predictable, and expected to occur over extended future periods, a present value technique is used. The discount rate used reflects the government’s cost of borrowing, associated with the estimated number of years to complete remediation. The recorded liabilities are adjusted each year, for present value adjustments, inflation, new obligations, changes in management estimates and actual costs incurred.

(j) Measurement uncertainty

The preparation of these financial statements 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 the remediation liabilities, the liability for employee future benefits, the allowance for doubtful accounts, 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.

Asset retirement obligations are recognized and measured in accordance with applicable accounting standards. As this was implemented in fiscal year 2022-23, there are inherent uncertainties related to identifying and quantifying obligations, assessing the timing and magnitude of future cash flows, and determining appropriate discount rates. The recorded asset retirement obligations disclosed in Note 5 of these financial statements may be subject to revisions in subsequent periods as additional information becomes available and as the estimation process is refined. Management will continue to evaluate and update measurements as necessary based on new developments and changing circumstances.

(k) Related party transactions

Related party transactions, other than inter-entity transactions, are recorded at the exchange amount. Inter-entity transactions are transactions between commonly controlled entities.

Inter-entity transactions are recorded on a gross basis and are measured at the carrying amount, except for the following:

i) services provided on a recovery basis are recognized as revenues and expenses on a gross basis and measured at the exchange amount.

(ii) certain services received on a without charge basis are recorded for departmental financial statement purposes at the carrying amount.

3. Parliamentary authorities

The Agency receives a portion of its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Departmental Net Financial Position and the Statement of Financial Position in one year may be funded through parliamentary authorities in prior, current or future years.

Accordingly, the Agency 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 tables:

a) Reconciliation of net cost of operations to current year authorities used:

b) Authorities provided and used:

4. Accounts payable and accrued liabilities

The following table presents details of the Agency’s accounts payable and accrued liabilities:

5.  Environmental liabilities and asset retirement obligations

Environmental liabilities and asset obligation include:

(a) Remediation of contaminated sites

The government’s A Federal Approach to Contaminated Sites, sets out a framework for management of contaminated sites using a risk-based approach. Under this approach the government has inventoried the contaminated sites identified on federal lands, allowing them to be classified, managed and recorded in a consistent manner. This systematic approach aids in identification of the high risk sites in order to prioritize allocation of limited resources to those sites which pose the highest risk to the environment and human health.

The Agency has identified approximately 10 units (11 units in 2022–23) where contamination may exist and assessment, remediation and monitoring may be required. The Agency has recorded a gross liability of $969 thousand ($1,039 thousand in 2022–23) for these units. This liability estimate has been determined based on site assessments performed by environmental experts reviewing the results of site assessments, and proposing possible remediation solutions.

No further units have been identified at this time and no liability has been recognized. Liabilities will be reported as soon as a reasonable estimate can be determined.

b) Asset retirement obligation

The Agency has recorded asset retirement obligations for the removal of asbestos and other hazardous materials in buildings.

The changes in asset retirement obligations during the year are as follows:

*Accretion expense is the increase in the carrying amount of an asset retirement obligation due to the passage of time.

The undiscounted future expenditures, adjusted for inflation, for the planned projects comprising the liability are $433,083 thousand ($441,957 thousand as at March 31, 2023).

Key assumptions used in determining the provision are as follows:

The Agency’s ongoing efforts to assess contaminated sites may result in additional environmental liabilities and asset retirement obligations.

6. Employee future benefits

a) Pension benefits

The Agency’s employees participate in the Public Service Pension Plan (the 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% per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Québec Pension Plan benefits and they are indexed to inflation.

Both the employees and the Department contribute to the cost of the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to Economic Action Plan 2012, employee contributors have been divided into two groups - Group 1 related to existing plan members as of December 31, 2012, and Group 2 relates to members joining the Plan as of January 1, 2013. Each group has a distinct contribution rate.

The 2023-24 expense amounts to $2,998 thousand ($2,124 thousand in 2022-23). For Group 1 members, the expense represents approximately 1.02 times (1.02 times in 2022-23) the employee contributions and, for Group 2 members, approximately 1.00 times (1.00 times in 2022-23) the employee contributions.

The Agency’s responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the Consolidated Financial Statements of the Government of Canada, as the Plan’s sponsor.

b) Severance benefits

Severance benefits provided to the Agency’s employees were previously based on an employee’s eligibility, years of service and salary at termination of employment. However, since 2011, the accumulation of severance benefits for voluntary departures progressively ceased for substantially all employees (completed by 2012). Employees subject to these changes were given the option to be paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits upon departure from the public service.

The changes in the obligations during the year were as follows:

7. Accounts receivable

The following table presents details of the Agency’s accounts receivable balances:

8. Tangible capital assets

The following table presents details of the cost of tangible capital assets:

The following table presents details of the amortization of tangible capital assets and its net book value:

Amortization expenses for the year ended March 31, 2024, is $14.537M ($20.260M in 2022-23).

CFHA-managed residential housing assets were transferred from DND at the time of CFHA formation with “0” cost value, instead of the historical cost of the assets and fully amortized value. This is because the residential housing portfolio was more than 50 years old and there was a lack of accurate cost information dating back to that time.

9. Contractual obligations

The nature of the Agency’s activities may result in some large multi-year contracts and obligations whereby the Agency will be obligated to make future payments in order to carry out its transfer payment programs or when the services/goods are received. Significant contractual obligations that can be reasonably estimated are summarized as follows:

10. Related party transactions

The Agency is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations. Related parties also include individuals who are members of key management personnel or close family members of those individuals, and entities controlled by, or under shared control of, a member of key management personnel or a close family member of that individual.

The Agency enters into transactions with these entities in the normal course of business and on normal trade terms. The Agency did not identify any material transactions that occurred at a value different from which would have been arrived at if the parties were unrelated.

(a) Common services provided without charge by other government departments

During the year, the Agency received services without charge from certain common service organizations, related to accommodation, legal services, the employer’s contribution to the health and dental insurance plans and workers’ compensation coverage. These services provided without charge have been recorded in the Agency’s Statement of Operations and Net Financial Position as follows:

The government has centralized some of its administrative activities for efficiency, cost-effectiveness purposes and economic delivery of programs to the public. As a result, the government uses central agencies and common service organizations so that one department performs services for all other departments and agencies without charge. The costs of these services, such as the payroll and cheque issuance services provided by Public Services and Procurement Canada and audit services provided by the Office of the Auditor General are not included in the Agency’s Statement of Operations and Net Financial Position.

(b) Other transactions with related parties

Expenses and revenues disclosed in (b) exclude common services provided without charge, which are already disclosed in (a).

11. Segmented information

The presentation by segment is based on the Departmental Results Framework as stated in Note 1 and is based on the accounting policies as described in the Summary of significant accounting policies in Note 2. The following table presents the expenses incurred and revenues generated for the main result framework, by major object of expense and by major type of revenue. The segment results for the period are as follows: