2013–2014 Financial Statements

Table of Contents

Statement of Management Responsibility Including Internal Control over Financial Reporting

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2014, and all information contained in these statements rests with the management of the Military Grievances External Review Committee. These financial statements have been prepared by management using the Government's accounting policies, which are based on Canadian public sector accounting standards.

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 Military Grievances External Review Committee's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the Military Grievances External Review Committee'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 Military Grievances External Review Committee 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 Military Grievances External Review Committee 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 Military Grievances External Review Committee has undertaken a risk-based assessment of the system of ICFR for the year ending March 31, 2014, in accordance with the Treasury Board Policy on Internal Control, and the results and action plan are summarized in the annex.

The financial statements of Military Grievances External Review Committee have not been audited.

Bruno Hamel, Chairperson
Ottawa, Canada
August 14th, 2014
Cynthia Beeman, Chief Financial Officer
Ottawa, Canada
August 14th, 2014

Statement of Financial Position

Statement of Financial Position (Unaudited)
As at March 31
(in dollars)
2014 2013
Departmental net financial position $ (142,518) $ (187,396)
Liabilities
Accounts payable and accrued liabilities (note 4) $368,980 $398,795
Vacation pay and compensatory leave 108,221 116,278
Employee future benefits (note 5) 196,916 307,369
Total liabilities 674,117 822,442
Financial Assets
Due from Consolidated Revenue Fund 356,925 341,675
Accounts receivable and advances (note 6) 9,159 43,194
Total financial assets 366,084 384,869
Departmental net debt 308,033 437,573
Non-financial assets
Tangible capital assets (Note 7) 165,515 250,177

Contractual obligations (Note 8)

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

Bruno Hamel, Chairperson
Ottawa, Canada
August 14th, 2014
Cynthia Beeman, Chief Financial Officer
Ottawa, Canada
August 14th, 2014

Statement of Operations and Departmental Net Financial Position

Statement of Operations and Departmental Net Financial Position (unaudited)
For the Year Ended March 31
(in dollars)
2014 Planned Results 2014 2013
Net cost of operations after government funding and transfers (67,000) (44,878) (27,925)
Departmental net financial position - Beginning of year (196,000) (187,396) (215,321)
Departmental net financial position - End of year  $ (129,000) $ (142,518) $ (187,396)
Expenses
Review of Canadian Forces Grievances $4,506,000 $4,284,985 $4,017,130
Internal Services 2,538,000 1,962,612 2,065,974
Total Expenses 7,044,000 6,247,597 6,083,104
Revenues
Miscellaneous Revenue 0 10 20
Total Revenue 0 10 20
Net cost of operations before government funding and transfers 7,044,000 6,247,587 6,083,084
Government funding and transfers
Net cash provided by Government 6,851,000 5,963,556 5,776,117
Change in due from Consolidated Revenue Fund (29,000) 15,250 23,675
Services provided without charge by other government departments (note 9) 290,000 313,659 311,217
Total Government funding and transfers 7,111,000 6,292,465 6,111,009

Segmented Information (note 10)

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

Statement of Change in Departmental Net Debt

Statement of Change in Departmental Net Debt (Unaudited)
For the Year Ended March 31
(in dollars)
2014 Planned Results 2014 2013
Net increase (decrease) in departmental net debt (62,000) (129,540) 36,512
Departmental net debt - Beginning of year 426,000 437,573 401,061
Departmental net debt - End of year $365,000 $308,033 $437,573
Net cost of operations after government funding and transfers $ (67,000) $ (44,878) $ (27,925)
Change due to tangible capital assets
Acquisition of tangible capital assets 108,000 19,780 136,858
Amortization of tangible capital assets (103,000) (104,442) (72,421)
Total change due to tangible capital assets (5,000) (84,662) 64,437

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

Statement of Cash Flow

Statement of Cash Flow (Unaudited)
For the Year Ended March 31
(in dollars)
2014 2013
Net cash provided by Government of Canada  $5,963,556  $5,776,117
Operating Activities
Net Cost of Operations before government funding and transfers $6,247,587 $6,083,084
Non-cash items
Amortization of tangible capital assets (104,442) (72,421)
Services provided without charges from other government departments (note 9) (313,659) (311,217)
Variation in Statement of Financial Position
Decrease (increase) in accounts payables and accrued liabilities 29,815 3,767
Increase (decrease) in receivables and advances (34,035) (63,792)
Decrease (increase) in future employee benefits 110,453 (2,896)
Decrease (increase) in vacation pay 8,057 2,734
Cash used by operating activities 5,943,776 5,639,259
Capital Investment Activities
Acquisitions of capital assets 19,780 136,858
  19,780 136,858

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

Notes to the Financial Statements (Unaudited)

For the Year Ended March 31
(in dollars)

1. Authority and Objectives

The Military Grievances External Review Committee (the Committee), formerly Canadian Forces Grievance 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 Committee’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 Committee became the Military Grievances External Review Committee (MGERC), through the enactment of Bill C-15 (An Act to amend the National Defence Act and to make consequential amendments to other Acts). The bill received Royal Assent June 19th, 2013.

The Committee operates under the following programs:

  • Review of Canadian Forces Grievances referred by the Chief of the Defence Staff: conduct fair, transparent and timely reviews of grievances referred to The Committee.
  • 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 Committee is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Committee 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 2013-14 Report on Plans and Priorities.
  2. Net cash provided by Government - The Committee operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the Committee is deposited to the CRF and all cash disbursements made by the Committee 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 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 Committee 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.

    Revenues that are non-respendable are not available to discharge the Committee’s liabilities. While the Chairperson is expected to maintain accounting control, he has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the entity’s gross revenues.
  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 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 pension plan administered by the Government. The Committee’s contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. The Committee’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 entitled to severance benefits under labour contracts or conditions of employment earn these benefits as services necessary to earn them are rendered. 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 receivables are stated at the lower of cost and net recoverable value. A valuation allowance is recorded for accounts receivable where recovery is considered uncertain.
  8. 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 Committee 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:


  9. 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 liability for employee future 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.
Amortization of tangible capital assets
Asset Class Amortization Period
Informatics Hardware 3 to 5 years
Informatics Software 3 years
Other Equipment 10 years

3. Parliamentary Authorities

The Committee 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 authorities in prior, current or future years. Accordingly, the Committee 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
2014 2013
Current year authorities used $5,981,005 $5,850,236
Net cost of operations before government funding and transfers $6,247,587 $6,083,084
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets (104,442) (72,421)
Services provided without charge by other government department (313,659) (311,217)
Decrease (increase) in vacation pay and compensatory leave 8,057 2,734
Decrease (increase) in future employee benefits 110,453 (2,896)
Refunds of prior years’ expenditures 13,229 14,094
Total items affecting net cost of operations but not affecting authorities (286,362) (369,706)
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisition of tangible capital assets 19,780 136,858
Total for items not affecting net cost of operations but affecting authorities 19,780 136,858
(b) Authorities provided and used
2014 2013
Current year authorities used $5,981,005 $5,850,236
Authorities provided:
Vote 15 - Operating expenditures $6,436,749 $6,438,397
Statutory amounts 624,630 574,025
Less:
Lapsed: Operating (1,080,374) (1,162,186)

4. Accounts Payable and Accrued Liabilities

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

Accounts payable and accrued liabilities (in dollars)
  2014 2013
Total accounts payable and accrued liabilities  $368,980  $398,795
Accounts payable - Other government departments and agencies $63,891 $6,751
Accounts payable – external parties 100,541 187,451
Total accounts payable  $164,432  $194,202
Accrued liabilities 204,548 204,593

5. Employee Future Benefits

(a) Pension benefits

The Committee’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 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 Committee contribute to the cost of the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to Canada’s Economic Action Plan 2012, employee contributors have been divided into two groups – Group 1 relates 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 2013–2014 expense amounts to $439,177 ($409,854 in 2012-13). For Group 1 members, the expense represents approximately 1.6 times (1.7 times in 2012–2013) the employee contributions and, for Group 2 members, approximately 1.5 times (1.6 times in 2012–2013) the employee contributions.

The Committee’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.

(b) Severance benefits

The Committee provides severance benefits to its employees based on eligibility, years of service and salary at termination of employment. These severance benefits are not pre-funded. Benefits will be paid from future authorities. As of March 31, 2014, the severance benefits accumulated totaled $196,916 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.

Severance benefits (in dollars)
  2014 2013
Accrued benefit obligation, End of year $196,916 $307,369
Accrued benefit obligation, Beginning of year $307,369 $304,473
Benefits paid during the year 110,453 (2,896)

6. Accounts Receivable and Advances

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

Accounts receivable and advances (in dollars)
  2014 2013
Total accounts receivable  $9,159  $43,194
Receivables from other government departments and agencies $8,659 $42,694
Employee advances 500 500

7. Tangible Capital Assets

Tangible Capital Assets (in thousands of dollars)
  Cost Accumulated Amortization Net Book Value
Capital Asset Class Opening Balance Acquisitions Closing Balance Opening balance Amortization Closing Balance 2014 2013
Total $798,311 $19,780 $818,091 $548,134 $104,442 $652,576 $165,515 $250,177
Informatics Hardware $681,343 $19,780 $701,123 $495,235 $80,197 $575,432 $125,691 $186,108
Informatics Software 77,567 0 77,567 36,884 20,305 57,189 20,378 40,683
Other Equipment 39,401 0 39,401 16,015 3,940 19,955 19,446 23,386

8. Contractual Obligations

The nature of the Committee’s activities can result in some large multi-year contracts and obligations whereby the Committee 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:

Contractual Obligations
  2015
Operating Lease* $605,900

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

9. Related Party Transactions

The Committee is related as a result of common ownership to all government departments, agencies, and Crown corporations. The Committee enters into transactions with these entities in the normal course of business and on normal trade terms. During the year, the Committee 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 Committee received services without charge from certain other common service organizations, related to 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:

Common services provided without charge by other government departments (in thousands of dollars)
  2014 2013
Total $313,659 $311,217
Employer’s contribution to the health and dental insurance plans $313,659 $311,217

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

Other transaction with related parties (in thousands of dollars)
  2014 2013
Accounts receivable – Other government departments and agencies $8,659 $42,694
Accounts payable – Other government departments and agencies 63,891 6,751
Expenses – Other government departments and agencies 979,283 941,386

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

10. Segmented Information

The presentation by segment is based on the Committee’s program alignment architecture. 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 programs, by major object of expenses and by major type of revenues. The segment results for the period are as follows:

Segmented information (in thousands of dollars)
Internal Services Review of CF Grievances 2014 Total 2013 Total
Net cost from operations before government funding and transfers $1,962,602 $4,284,985 $6,247,587 $6,083,084
Operating expenses
Salaries and employee benefits plan $1,312,981 $3,273,466 $4,598,447 $4,370,884
Transportation and telecommunication 32,544 66,494 99,038 85,602
Information 55,567 4,846 60,413 55,811
Professional and special services 250,868 419,626 670,494 792,108
Rental of office space and equipment 183,264 421,550 604,814 605,104
Purchased repair maintenance 22,923 21,465 44,388 23,303
Utilities, materials and supplies 9,666 6,845 16,511 15,828
Amortization of tangible capital assets 68,559 35,883 104,442 72,421
Acquisition of non-capital assets 25,824 34,810 60,511 62,335
Other 416 0 416 708
Total Operating Expenses $1,962,612 $4,284,985 $6,247,597 $6,083,104
Revenues
Miscellaneous revenues 10 0 10 20
Total Revenues 10 0 10 20

11. 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 2013-14 (unaudited)

1. Introduction

In support of an effective system of internal control, the Military Grievances External Review Committee annually assesses the performance of its financial controls to ensure:

  • financial arrangements or contracts are entered into only when sufficient funding is available;
  • payments for goods and services are made only when the goods or services are received or the conditions of contracts or other arrangements have been satisfied; and
  • payments have been properly authorized

The Military Grievances External Review Committee will leverage the results of the periodic audit of core controls performed by the Office of the Comptroller General.

2. Assessment results during fiscal year 2013–2014

The Military Grievances External Review Committee reviewed and updated internal control policies for financial reporting, financial risk assessment /management, monitoring and governance.

3. Assessment plan

The Military Grievances External Review Committee will continue to monitor the performance of its system of internal control with a focus on the core controls related to financial transactions.

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