2011–2012 Financial Statements

Table of Contents

1. CFGB Statement of Management Responsibility Including Internal Control over Financial Reporting
2. Statement of Financial Position
3. Statement of Operations and Departmental Net Financial Position
4. Statement of Change in Departmental Net Debt
5. Statement of Cash Flow
6. Notes to the Financial Statements
7. Annex to the Statement of Management Responsibility

Statement of Management Responsibility

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2012 and all information contained in these statements rests with the management of the Canadian Forces Grievance Board. These financial statements have been prepared by management in accordance with Treasury Board accounting policies which are based on Canadian generally accepted accounting principles for the public sector.

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 fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the Canadian Forces Grievance Board's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the Canadian Forces Grievance Board's Departmental Performance Report is consistent with these financial statements.

Management is also responsible for maintaining an effective system of Internal Control over Financial Reporting (ICFR) 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 legislation, regulations, authorities and policies.

Management 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; through communication programs aimed at ensuring that regulations, policies, standards, and managerial authorities are understood throughout the Canadian Forces Grievance Board and through conducting an annual assessment of the effectiveness of the system of ICFR.

The system of ICFR is designed to mitigate risks to a reasonable level based on an on-going process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.

The Canadian Forces Grievance Board will be subject to periodic Core Control Audits performed by the Office of the Comptroller General and will use the results of such audits to adhere to the Treasury Board Policy on Internal Control.

In the interim, the Canadian Forces Grievance Board has undertaken a risk-based assessment of the system of ICFR for the year ending March 31, 2013, in accordance with the Treasury Board Policy on Internal Control, the action plans are summarized in the annex.

The financial statements of the Canadian Forces Grievance Board have not been audited.

Ottawa
August 28, 2012

Statement of Financial Position

Contractual obligations (note 8)

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

Statement of Operations and Departmental Net Financial Position

Segmented information (note 10)

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

Statement of Change in Departmental Net Debt

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

Statement of Cash Flow

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

Notes to the Financial Statements (Unaudited)

1. Authority and Objectives

The Canadian Forces Grievance Board (the Board) is an independent arms-length organization that was created through amendments to the National Defence Act (NDA) approved by Parliament on December 10, 1998, The amendments that were made to the NDA were aimed at modernizing and strengthening the military justice system, making the whole grievance review process simpler and shorter for members of the Canadian Forces. The Board’s mandate is to review grievances in order to render fair and impartial findings and recommendations in a timely and informal manner to the Chief of Defence staff and the grievor.

The Board operates under the following program activities:

• Review of Canadian Forces grievances referred by the Chief of the Defence Staff: conduct fair, transparent and timely reviews of grievances referred to the Board.
• Internal services: support a common government-wide approach to planning, designing, budgeting, reporting and communicating.

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. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.

Significant accounting policies are as follows:

1. Parliamentary authorities – The Board is financed by the Government of Canada through Parliamentary authorities. Financial reporting authorities provided to the Board 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 Statement of Operations and the Departmental Net Financial Position and in the Statement of Financial Position, are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting. The planned results amounts in the Statement of Operations and Departmental Net Financial Position are the amounts reported in the future-oriented financial statements included in the 2011-12 Report on Plans and Priorities.
2. Net Cash Provided by Government - The Board operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the Board is deposited to the CRF and all cash disbursements made by the 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.
3. Amounts due from or to the CRF are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF . Amounts due from the CRF represent the net amount of cash that the Board is entitled to draw from the CRF without further authorities to discharge its liabilities.

4. Revenues:

   Revenues from regulatory fees 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 that gave rise to the revenue takes place.

5. 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 employer contributions to the health and dental insurance plans and legal services are recorded as operating expenses at their estimated cost.

6. Employee future benefits
   1. Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multi-employer plan administered by the Government. The Board’s contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. The Board’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.
   2. Severance Benefits: Employees are entitled to severance benefits under labour contracts or conditions of employment. These benefits are accrued as employees render services necessary to earn them. The obligation relating to the benefits earned by employees is calculated using information derived from results of the actuarially determined liability for employee severance benefits for the Government as a whole.
7. Accounts and loans receivables are stated at the lower of cost and net recoverable value. A valuation allowance is recorded for accounts and loans receivable where recovery is considered uncertain.
8. 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.

9. Tangible capital assets – All tangible assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. The 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:

10. 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 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 Authorities

The Board receives most of its funding through annual Parliamentary authorities. Items recognized in the Statement of Operations and the Departmental Net Financial Position and the Statement of Financial Position in one year may be funded through Parliamentary appropriations in prior, current or future years. Accordingly, the 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 tables:

4. Accounts payable and accrued liabilities

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

5. Employee Benefits

1. Pension benefits

   The Board’s 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 benefits and they are indexed to inflation.

   Both the employees and the Board contribute to the cost of the Plan. The 2011-12 expense amounts to $438,000.00 ($400,711.00 in 2010-11), which represents approximately 1.8 times (1.9 in 2010-11) the contributions by employees.

   The Board’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.

2. Severance benefits

   The Board provides severance benefits to its employees based on eligibility, years of service and at termination of employment. These severance benefits are not pre-funded. Benefits will be paid from future authorities. As of March 31, 2012, the severance benefits that were paid out to the employees totaled $450 thousand dollars.

   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 on termination from the public service. These changes have been reflected in the calculation of the outstanding severance benefit obligation.

6. Accounts receivable and advances

The following table presents details of the Board’s accounts receivable and advances balances:

7. Tangible Capital Assets

8. Contractual obligations

The nature of the Board’s activities can result in some large multi-year contracts and obligations whereby the Board will be obligated to make future payments when the services/goods are received. Significant contractual obligations that can be reasonably estimated are summarized as follows:

* The operating lease is due for renewal at the end of 2015.

9. Related party transactions

The Board is related as a result of common ownership to all government departments, agencies, and Crown corporations. The Board enters into transactions with these entities in the normal course of business and on normal trade terms. During the year, the Board received common services which were obtained without charge from other government departments as disclosed below.

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

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

The Government has centralized some of its administrative activities for efficiency and 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 Works and Government Services Canada and audit services provided by the Office of the Auditor General are not included in the Department’s Statement of Operations and Departmental Net Financial Position.

(b) Other transactions with related parties

10. Segmented information

The presentation by segment is based on the Board’s two program activities, which are Internal Services and the Review of Canadian Forces Grievances. The presentation by segment is based on the same 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 program activities, by major object of expenses and by major type of revenues. The segment results for the period are as follows:

11. Accounting Changes

During 2011, amendments were made to Treasury Board Accounting Standard 1.2 – Departmental and Agency Financial Statements to improve financial reporting by government departments and agencies. The amendments are effective for financial reporting of fiscal years ending March 31, 2012, and later. The significant changes to the Board’s financial statements are described below. These changes have been applied retroactively, and comparative information for 2010-11 has been restated.

Net debt (calculated as liabilities less financial assets) is now presented in the Statement of Financial Position. Accompanying this change, the Board now presents a Statement of Change in Net Debt and no longer presents a Statement of Equity.

Government funding and transfers, as well as the credit related to services provided without charge by other government departments are now recognized in the Statement of Operations and Departmental Net Financial Position below “Net Cost of operations before government funding and transfers”. In previous years, the department recognized these transactions directly in the Statement of Equity of Canada. The effect of this change was to decrease the net cost of operations after government funding and transfers.

12. Comparative information

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

Annex to the Statement of Management Responsibility including Internal Control over Financial Report of the Canadian Forces Grievance Board for fiscal year 2011-12 (unaudited)

1. Introduction

Under the Treasury Board Policy on Internal Control, departments are required to demonstrate the measures they are taking to maintain an effective system of internal control over financial reporting (ICFR). As such, departments are expected to conduct annual assessments of their system of ICFR, establish action plans to address any necessary adjustments, and to attach to their Statements of Management Responsibility a summary of their assessment results and action plan.

The Canadian Forces Grievance Board (CFGB) will use the results of the periodic Core Control Audit performed by the Office of the Comptroller General to adhere to the Treasury Board Policy on Internal Control. Until such audit takes place, the CFGB will proceed with a risk-based assessment of the system of ICFR . Below is a summary of the results of the assessment conducted as at March 31, 2012.

2. Assessment results as of March 31, 2012

Design effectiveness aims to identify and document key controls, to ensure that they are in place and aligned with the risks they aim to mitigate, and that required remediation is addressed appropriately and in a timely manner.

The CFGB is at the early stage of design effectiveness and will continue this work in the next fiscal year.

Operating effectiveness aims to ensure that key controls are working as intended over a defined period, and that required remediation is addressed appropriately and in a timely manner. The testing of operating effectiveness has not started – therefore no assessment results are available at this time

3. Assessment Plan

The CFGB plans to complete the design effectiveness of its entity and business process level controls in 2012-13. Operating effectiveness testing is expected to be completed in 2013-14. After completing effectiveness testing, CFGB will commence ongoing monitoring of the ICFR .